Therefore, these qualities must be further developed to ensure strong competitiveness and value creation going forward. In the short term, we do not expect radical changes in the market or competitive situation. In the long term, there is greater uncertainty, and scenario analyses show a wide range of potential outcomes. Gjensidige must therefore have sufficient flexibility to be able to rapidly seize opportunities and respond to threats.
Our position We shall be the most customer-oriented general insurance company in the Nordic region and the Baltic states.
Financial and operational targets 2019–2022 The Board has adopted financial targets that apply to each year from 2019 up to and including 2022.
Leadership, expertise and culture Gjensidige has demonstrated a willingness and ability to change for more than 200 years. To succeed in the future, diversity, inclusion and trust – both vertically and horizontally – must underpin increased flexibility and our ability to adapt to developments even quicker than before. This requires managers who are able to strike a balance between sound operations and smooth development and the ability to attract, develop and retain relevant expertise at all times, and ensure a flat organisation structure and short decision-making paths. Gjensidige’s core values – create a sense of security, apply new thinking, and go for it – shall drive the organisation.
All subsidiaries will be capitalised in line with the respective statutory requirements, while capital in excess of the requirements will, as far as possible, be retained in the parent company Gjensidige Forsikring ASA.
Product and service development Gjensidige offers a large selection of insurance products that give customers comprehensive protection against financial losses in connection with different claims events. It is very important to us that customers find these products easy to understand, that they provide effective protection against relevant losses and that their coverage and price are adapted to the customers’ risk profile, while also reducing consumption as far as possible. We are introducing more and more automation and standardisation in pricing, so that we can update tariffs more quickly than before. Processes that previously took months can now be completed in the course of a few days.
A focus area during the claims process is to reduce the environmental impact. Where possible, we work to promote reuse of materials and contribute to the circular economy. We have initiated work to measure greenhouse gas emissions from our suppliers’ use of materials and work in connection with repairs. We have defined targets for reducing our carbon intensity and will work with our suppliers to reduce greenhouse gas emissions.
Investors/owners We communicate with our investors/owners in different arenas, and enable them to make informed decisions based on:  Investor meetings  Interim presentations  Interim and annual reports  Website  Analyst and capital markets days
Gjensidige’s activities shall particularly promote five of the SDGs: Good Health and Well-being, Decent Work and Economic Growth, Sustainable Cities and Communities, Responsible Consumption and Production, and Climate Action. A brief review of the SDG targets that are particularly relevant to Gjensidige, and how we shall help to ensure they are met, follow below.
Socially responsible investments Socially responsible investments is a collective term for investment strategies that entail the incorporation of environmental, social and governance criteria (ESG) in investment decisions and in the investor’s role during the investment period. Gjensidige’s investment horizon indicates that an understanding of the connection between sustainable development, risk and return is important in order to succeed.
Bjørge has considerable experience from the finance industry, auditing competencies, as well as good insurance competencies due to his serving at the board of Gjensidige for a number of years.
Per Arne Bjørge is independent of key employees and main business partners.
Kronholm Sjøberg is up for re-election to the Board in 2021.Number of shares in Gjensidige: See Note 8.
Customers can request access to the information stored about them at any time, and they can demand that incorrect information be corrected. Requests for access may be rejected in special cases following a concrete assessment, for example in connection with the investigation of insurance fraud. Our privacy statement is available at gjensidige.no. It describes how we handle personal data.
Insurance Distribution Directive (IDD) The IDD shall safeguard consumer protection by, among other things, ensuring that customers receive correct information and that our customer advisers have the right expertise.
In connection with risk management, the Board adopts annual risk limits in light of the Company’s future plans, financial strength and the capital plan communicated to the shareholders. See Note 3 for more information.
The third line of defence is the Internal Audit function, which is responsible for monitoring and checking the Group’s processes for risk management, internal control and corporate governance. The Internal Audit function reports directly to the Board of Gjensidige Forsikring ASA.
• Climate risk: Climate risk is risk relating to climate change. Climate risk may have an impact on, and is part of, insurance risk, financial risk, operational risk and business and strategic risk.
The underwriting policy adopted by the Board sets out guidelines for the basic principles and responsibility for product and tariff development, risk selection and the stipulation of terms and conditions and pricing of individual risks. The policy for technical provisions adopted by the Board sets out the overriding principles for stipulating such provisions. A retention limit specifies the maximum loss the Gjensidige Insurance Group is willing to take, and stipulates the level of Gjensidige’s reinsurance programme. The maximum retention limit is specified in the capital management policy and is approved by the Board. Reinsurance is purchased to protect the Company against major individual events such as natural disasters and large individual losses.
The effects in terms of both expected claims payments and volatility are expected to materialise gradually over a longer time period and be different for different types of climaterelated natural disaster claims. Gjensidige will make ongoing efforts to analyse and adapt to the changes, including through risk selection, price differentiation and coverage, and considers that increased physical risks also provide opportunities for offering increased risk relief and advisory services to insurance customers.
Transition risk on the investment side can mean a lower return on non-environmentally friendly investments in certain areas. New regulatory requirements may also be introduced. For many years, the Company has had a strategy for excluding companies that violate environmental requirements, and the Company’s investment decisions are increasingly based on concrete assessments of climate risk and other ESG factors.
She has previously served as an investment analyst and portfolio manager with Orkla, corporate finance adviser with Kreditkassen, and as an auditor with Coopers & Lybrand.
General measures that are intended to promote health and a good working environment include: • Arrangements to facilitate cycling to work, including bicycle parking and changing rooms
Our commitment to our owners and creditors Gjensidige shall have an open dialogue with all stakeholders in the capital markets, and follows the The Oslo Stock Exchange’s Code of Practice for IR. The policy for investor relations, adopted by the board, is available at www.gjensidige.no/investor.
Social commitment For many years, Gjensidige has collaborated with various non-profit organisations and sports associations to contribute to a safer society.
• Established research collaboration with Norgeshus to evaluate climate adaptation of residential buildings.
Damage prevention through risk assessments for our customers In 2019, we conducted 3,000 risk checks and 1,000 physical inspections for our commercial customers in Norway (excl. agriculture).
Norway were covered by collective agreements (90 per cent in 2018). In Denmark, 89 per cent of our employees were covered by collective agreements (80 per cent in 2018), and in Sweden 100 per cent.
In 2019, we established a starting point for measuring CO2 equivalents (CO2e) based on our model for estimating consumption of materials in motor and property claims. The biggest climate footprint in our claims processes is driven by motor insurance. The CO2e related to waste is limited, reflecting the fact that our agreements with car dismantlers are conditional on a very high degree of recycling of materials. Furthermore, vehicle condemnations are settled in cash, which means they are not currently within our scope of influence.
It would be preferable to increase the use of used parts. Used parts are most widely used in the Baltics, and least in Norway. Spare parts will never be older than the car to be repaired, and safety is always an absolute precondition
• Gjensidige is making active efforts to improve the measurement and reporting of greenhouse gas emissions in the investment portfolio. Combined with the implementation of scenario analyses, this will give us better insight into climate-related financial risk.
Earned premiums from general insurance increased to NOK 24,650.4 million (24,052.8) for the full year. The underwriting result increased due to price increases, adjustments to terms and conditions, re-underwriting and efficiency measures in addition to more favourable weather conditions in Norway compared to the previous year. The underlying frequency loss ratio improved by 3.8 percentage points. Lower large losses also contributed to the improved results, although they were offset by significantly lower run-off gains. Updated reserve reviews carried out during the fourth quarter of 2018 revealed NOK 1,080 million higher excess claims reserves than previously anticipated. This increase in the excess reserves was released in its entirety in the fourth quarter of 2018, in addition to other run-off gains, resulting in total run-off gains for the full year 2018 of NOK 2,356.9 million. This compared to run-off gains of NOK 1,363.2 million in 2019.
Expenses for research and development have not been charged to income in Gjensidige’s consolidated accounts in 2019 or 2018. Nor have such expenses been capitalised during these two financial years.
Strong reputation Gjensidige has a strong reputation and brand in Norway. For the 28th year in a row, Ipsos has conducted a profile survey that maps the population’s attitudes to large Norwegian companies. Once again, Gjensidige had the best reputation in the financial sector, and came in 6th place overall. We also had the best reputation in the category ‘corporate social responsibility and ethics’ in the financial sector.
The net cash flow from investment activities mainly consists of payments made/received in connection with the acquisition of subsidiaries and associated companies, owner-occupied property, plant and equipment, plus dividend from associated companies and joint ventures. The net cash flow from investment activities in 2019 was NOK 4,823.4 million (negative 438.3). The considerable increase is due to the proceeds from the sale of Gjensidige Bank.
Earned premiums decreased to NOK 1,405.8 million (1,569.2). Measured in local currency, earned premiums decreased by 9.8 per cent, reflecting a reduction in the insurance portfolio following repricing measures for private insurance lines and the termination of two large unprofitable accounts.
The Group has satisfactory capital buffers in relation to internal risk models, statutory solvency requirements and its target rating. The Board considers the Group’s capital situation and financial strength to be strong.
Operating income Earned premiums from general insurance 24,650.4 24,052.8 Earned premiums from pension 880.0 783.8 Other income including eliminations 171.6 158.2 Total operating income 4 25,702.0 24,994.8
Earnings per share from continuing and discontinued operations, NOK (basic and diluted) 24 13.19 7.44
Insurance liabilities Premium reserve in life insurance 6,896.1 6,336.2 Provision for unearned premiums, gross, in general insurance 16 10,499.1 10,051.1 Claims provision, gross 16 28,164.8 29,355.8 Other technical provisions 410.4 353.2
Adjustment due to amendment to IFRS 2 8.5 8.5 Adjustment on initial application of IFRS 9 in the bank (10.4) (10.4)
Amendments to IAS 12: Changes in classification of tax on equity items that are classified as liability for tax purposes In accordance with IAS, 12 paragraph 57A, tax on equity items classified as liability for tax purposes is no longer classified as part of the equity transaction, but as part of the tax expense in the income statement.
A simplified Premium Allocation Approach (PAA) is permitted for the measurement of the liability for the remaining coverage if it provides a measurement that is not materially different from the general model or if the coverage period is one year or less. With the PAA, the liability for remaining coverage corresponds to premiums received at initial recognition less acquisition costs. However, the general model remains applicable for the measurement of incurred claims.
Earned premiums from general insurance Insurance premiums are recognised over the term of the policy. Earned premiums from general insurance consist of gross premiums written and ceded reinsurance premiums.
Profit after tax expense from discontinued operations is presented on a separate line in the consolidated income statement. Comparative figures will be restated. Net cash flows attributable to discontinued operations will be presented on separate lines in the consolidated statement of cash flows. Comparative figures will be restated. Assets and liabilities held for sale will be presented as separate lines in the statement of financial position. Comparative figures will not be restated.
Reinsurance Gjensidige Forsikring ASA buys reinsurance as protection against the effect of catastrophic events (such as windstorms) and large individual claims. The reinsurance programme is mainly bought to protect the Group’s equity capital. Gjensidige purchases almost exclusively non-proportional reinsurance contracts with sufficiently high retentions for coverage of relatively few, large claims to be recoverable. Subsidiaries are reinsured by Gjensidige Forsikring ASA, and the subsidiaries’ reinsurance exposure is included in the reinsurance programme for the Gjensidige Forsikring Group. The maximum retention level per event for the Group, approved by the Board, was NOK 500 million in 2019, increased from NOK 480 million in 2018. The reinsurance program for 2019 is placed within this limit, where the general retention per claim/claim event is NOK 100 million. For catastrophe events such as natural perils the retention is NOK 200 million. For some insurance risks Gjensidige purchases reinsurance coverage that will reduce the retention level to under 100 million. Decisions concerning the reinsurance programme are based on an analysis of exposure, claims history, Gjensidige’s internal model simulations and
Lapse risk Lapse risk is the risk of an increase in lapse rates, i.e. the risk of an increase in customers leaving the company. This is mainly relevant in Solvency II aspects, because Solvency II takes into account expected future profit. Lapse risk reflects the risk of a potential reduction of the expected future profit if customers leave the company. Lapse risk is mainly related to unit-linked products and represents an important risk for the company in Solvency II. However, if a large number of customers choose to leave the company, the effect on the capital position would be limited. Reduced future profit would lead to a reduction of eligible capital but would be counteracted by a lower risk margin (increasing eligible capital) and a lower capital requirement.
Management of insurance risk is described in chapter “Good management and control – we are serious about our responsibility” and subchapter “Risk – the core of the business”.
Total eligible own funds to meet the SCR 21,855.1 23,665.1 21,261.9 21,899.5
Eligible own funds are divided into three capital groups according to Solvency II regulations. Gjensidige has mainly tier 1 capital, which is considered to be capital of best quality. Of the total amount of tier 1 capital, NOK 1,026 million comes from the restricted tier 1 category. This is the market value of bonds issued by Gjensidige Forsikring ASA (nominal amount of NOK 1,000 million).
Remuneration of personnel with supervisory tasks The remuneration of personnel with control and supervisory tasks shall be independent of the performance of the business area they are in charge of.
Present value of the defined benefit obligation As at 1 January 2,057.2 562.4 2,619.6 2,166.3 577.8 2,744.0 Current service cost 25.1 9.8 34.9 25.6 9.4 35.0 Employers' national insurance contributions of current service cost 4.8 1.9 6.7 4.9 1.8 6.7
Gouda portfolio Denmark 87.0 87.3 Vardia portfolio Sweden 62.8 65.3 Mølholm portefølje 1 Denmark 227.3 228.4 ADB Gjensidige Baltikum 433.3 434.9 Gjensidige Forsikring, white label Private 128.7 128.7 1 Merged with Danish branch from 1. January 2019
Financial assets held to maturity Bonds held to maturity 210.7 212.1 391.5 392.5
Financial assets at amortised cost Bonds held to maturity 212.1 212.1 Bonds and other fixed income securities classified as loans and receivables 20,598.9 20,598.9 Loans 2,410.8 2,410.8
The claims provisions shall cover future claims payments. The claims provisions for insurances with annuity payments are converted to present value (discounted), whereas other provisions are undiscounted. The reason why the claims provisions for annuities are discounted is due to very long cash flows and substantial future interest income. The claims for occupational injuries in Denmark are paid either as annuities or as lump-sum indemnities (which are calculated mainly as discounted annuities). Therefore, it is most expedient to regard the whole portfolio as annuities. For Swedish MTPL personal injuries are paid as lifelong annuities. The discount rate used is the swap rate. Over the next three years, average annual run-off gains are expected to be around NOK 1,000 million, moving the expected reported combined ratio to the lower end of the 86-89 corridor (undiscounted).
As part of its ongoing financial management, Gjensidige has undertaken to invest up to NOK 590.5 million (702.2) in loan funds containing senior secured debt and various private equity and real estate investments, over and above amounts recognized in the balance sheet. The timing of the outflow of capital is dependent on when the funds are making capital calls from their investors. Average remaining operating time for the funds, based on fair value, is slightly less than three years (four) and slightly less than four years (five) in average including option for of extension.
Receivables Receivables related to direct operations 13 6,843.3 6,323.5 Receivables related to reinsurance 13 23.7 75.5 Receivables within the group 20 7.1 339.6 Other receivables 13, 15 864.4 820.2 Total receivables 7,738.4 7,558.9
The recognition and measurement principles for Gjensidige’s segment reporting are based on the IFRS principles adopted in the consolidated financial statements.
amounts Gjensidige has received or is owed for insurance contracts where the insurance period starts before the end of the period (gross premiums written). At the end of the period provisions are recorded, and premiums written that relate to subsequent periods are adjusted for (change in gross provision for unearned premiums). Earned premiums net of reinsurance are calculated by applying equivalent accrual to premium for ceded reinsurance, which reduces the corresponding gross premiums. Premiums for inward reinsurance are classified as gross premiums written and are earned according to the insurance period.
The category loans and receivables comprises the classes loans, receivables related to direct operations and reinsurance, other receivables, cash and cash equivalents, bonds and other fixed income securities classified as loans and receivables and receivables within Gjensidige.
Dividend Dividend from investments is recognised when Gjensidige has an unconditional right to receive the dividend. Proposed dividend is recognised as a liability in accordance with the Accounting Act and Regulations on Simplified Application of International Accounting Standards (FOR 2008-01-21 no. 57). This implies that dividend reduces equity in the fiscal year the dividend provision relates to.
The share-based payment arrangements are measured at fair value at the time of allocation and is not changed afterwards. Fair value is accrued over the period during which employees acquire the right to receive the shares. Share-based payment arrangements which are recovered immediately are recognised as expenses at the time of allocation. Vesting conditions are taken into account by adjusting the number of equity instruments included in the measurement of the transaction amount so that, ultimately, the amount recognised shall be based on the number of equity instruments that eventually vest. Non-vesting conditions and possible market conditions are reflected in the measurement of fair value, and no adjustment of the amount recognised as expenses is done upon failing to meet such conditions.
Kaare Østgaard, Executive Vice President 2,881.8 345.2 240.9 825.2 331.6 2,237 2,809 4,830 14,951 3
Amount recognised in the balance sheet Present value of the defined benefit obligation 2,082.9 608.1 2,691.0 2,043.7 559.9 2,603.6 Fair value of plan assets (2,324.7) (2,324.7) (2,198.8) (2,198.8) Net defined benefit obligation/(benefit asset) (241.8) 608.1 366.3 (155.2) 559.9 404.7
Claims reported and claims handling costs 13,843.6 (554.5) 13,289.1 13,593.0 (473.6) 13,119.4 Claims incurred, but not reported 13,849.7 0.0 13,849.7 15,176.8 0.0 15,176.8 Total as at 31 December 27,693.3 (554.5) 27,138.8 28,769.8 (473.6) 28,296.2
ISIN NO0010720378 NO0010771546 Issuer Gjensidige Forsikring ASA Gjensidige Forsikring ASA Principal, NOK millions 1,200 1,000 Currency NOK NOK Issue date 02.10.2014 08.09.2016 Maturity date 03.10.2044 Perpetual First call date 02.10.2024 08.09.2021 Interest rate NIBOR 3M + 1.50% NIBOR 3M + 3.60%
Basis for Opinion We conducted our audit in accordance with laws, regulations, and auditing standards and practices generally accepted in Norway, including International Standards on Auditing (ISAs). Our responsibilities under those standards are further described in the Auditor's Responsibilities for the Audit of the Financial Statements section of our report. We are independent of the Company and the Group as required by laws and regulations, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
We assessed the third party confirmation (ISAE 3402) from several of Gjensidige's service providers to assess whether the service provider had adequate internal controls in areas that are important for Gjensidige's financial reporting.
102-12 External initiatives See appendix 2 102-13 Membership of associations See appendix 2 2. Strategy 102-14 NRS 16 2 Statement from senior decisionmaker Gjensidige’s strategy 22-25 102-15 NRS 16 2.7 Key impacts, risks, and opportunities Threats and opportunities 56-60 3. Ethics and integrity 102-16 Values, principles, standards, and norms of behavior
Anti-corruption 50 103-1 NRS 16 2.2 Explanation of the material topic and its Boundary Anti-corruption 50 103-2 NRS 16 2.2 The management approach and its components Anti-corruption 50 103-3 NRS 16 2.2 Evaluation of the management approach Anti-corruption 50 206 Anti-competitive behavior No fines in 2019 103-1 Explanation of the material topic and its Boundary
Requirements Board’s report Disclosure description Comment Page 103-3 Evaluation of the management approach
NRS 3 Events after the balance sheet date Statement concerning the annual accounts 108
Nr 1. The best financial undertaking in Ipsos’s reputation survey in Norway Nr 1. The most sustainable brand in the Norwegian financial industry