Annual Report The Annual Accounts and the Board’s Report for 2013 are attached and are also published on www.gjensidige.no/reporting. The full Annual Report for 2013 will be published on www.gjensidige.no/reporting on 28 March 2014.
The Board has adopted guidelines that define goals and limits for the Company’s commitment to social responsibility, including guidelines for socially responsible investments. The guidelines are available at www.gjensidige.no/konsern.
The main points in the guidelines are that Gjensidige shall: 1. Contribute to a safer society 2. Respect human rights 3. Respect labour rights 4. Combat corruption and financial irregularities 5. Ensure as little negative impact on the environment and climate as possible
Contributing to a safer society Insurance gives customers security by reducing or removing negative financial consequences of damage, injuries and accidents. It is nonetheless better for both the customer and the insurance company to prevent such events occurring. Loss prevention is therefore a natural and important part of Gjensidige’s core activities and social commitment.
tinued in 2013. We also contributed to the development and marketing of educational material on fire prevention for schools. So far, Gjensidige has contributed to teaching more than 100,000 children about fire prevention.
In Sweden, Gjensidige and other insurance companies support the research project ‘Anlagd Brand’ (‘Arson fires’), which focuses on incendiary school fires and on fire protection and prevention. At the turn of 2012/2013, Gjensidige introduced a new communication concept – ‘It is good to be prepared’ – that is intended to support the Group’s involvement in loss prevention work. Loss prevention is also a key element in Gjensidige’s sponsoring strategy. A part of the annual fee paid to the Norwegian Handball Federation is earmarked for measures aimed at preventing injuries in Norwegian handball.
A group policy for ethical investments has been adopted. It states that our investment portfolio shall comply with internationally recognised guidelines for ethical investments in the following areas: • Human rights • Labour standards • The environment • Corruption • Weapons
Five meetings were held in 2013. It was decided to exclude fourteen companies. At year end, a total of 80 companies had been excluded from Gjensidige’s investment portfolio.
Personnel matters and labour rights Gjensidige shall be a health-promoting workplace where all employees are given opportunities for professional development and competence-raising.
Development in the number of employees in recent years: Under Norwegian law, employees of the Group are entitled to be represented on the Company’s governing bodies (see pages 36-37). Employee representatives are elected by and from among the employees.
In addition to the Senior Group Management, the Group had 296 employees in executive positions in 2013. Of these, 38 per cent were women and 62 per cent men.
Competence-raising Good management and continuous competence -raising measures will give Gjensidige important competitive advantages. Our focus on management and employee development is realised through the Gjensidige Customer and Brand School. The school’s training programmes are closely linked to the Group’s strategy and the business areas’ reported needs, and all training measures shall improve the Group’s ability to implement rapid restructuring and development. An important principle is that learning is closely linked to the work situation, so that the participants get to utilise their new expertise and skills during performance of their duties.
In the General Insurance Private segment, the exam for sales personnel also confers approval pursuant to Finance Norway’s (FNO) scheme. The school also holds corresponding in-house exams for claims handlers in the General Insurance Commercial segment to ensure that all employees who are in contact with customers have a high level of expertise. Since it started in spring 2009, a total of 1,400 managers and employees have passed exams at the school.
In all, we spent NOK 15,800 per employee on competence-raising measures in 2013. This figure is not comparable with the figure reported for 2012, when the operations in the Baltics were not included.
Health, safety and the environment (HSE) Systematic work on HSE is fully integrated in the organisation and it is a regular topic at departmental and management meetings. Gjensidige Forsikring in Norway is an Inclusive Workplace (IW) enterprise, which means that we cooperate with the Norwegian Labour and Welfare Administration (NAV) on creating an inclusive workplace. This means that we work on the prevention and follow-up of sickness absence, measures for seniors aimed at encouraging older employees to continue working until retirement age, and making arrangements for employees with disabilities. We also wish to practise the same inclusive principles outside Norway. This means that we focus on presence – as the opposite of absence – diversity and a life phase policy.
In 2013, Stamina Helse was chosen as Gjensidige’s new supplier of corporate health care services.
One of the most important criteria for the agreement was that it was to be a Nordic agreement for Norway, Denmark and Sweden. Separate delivery agreements have been drawn up for each country. The content of these agreements is identical in terms of service deliveries, but they take into account the individual country’s laws,
regulations and rules. In parallel, working environment committees have been established for both Denmark and Sweden. Work has started on preparing an electronic HSE handbook for Denmark in cooperation with representatives of Gjensidige and Alectia – Stamina Helse’s Danish partner.
The work stations of all new employees shall be examined as soon as possible by a physiotherapist or an ergonomist, if practically possible. The purpose of this is to adapt the work station with a view to avoiding repetitive strain injuries and to provide information about the prevention of health problems.
Special adaptation procedures have been adopted for employees who have health problems that are aggravated by computer work or who wish to prevent such problems. The Company has not been notified of any repetitive strain injuries in 2013.
At the end of 2013, absence with a doctor’s certificate was 3.9 per cent in the Norwegian part of the business, compared with 4.2 per cent in 2012. Total sickness absence, which also includes absence without a doctor’s certificate, in the Norwegian part of the business was 4.7 per cent at year-end 2013, compared with 5.1 per cent in 2012. The figures for the Swedish and Danish parts of the business will be implemented in the statistics in the first halfyear 2014.
The response rate in the annual employee satisfaction survey was high in 2013, as in previous years. The results of the survey indicate that the working environment is generally good and that employees are motivated. The survey is followed up at meetings between the HR department and the respective department managers. For each department, one improvement area is defined that it must focus on in particular in the coming year.
Diversity and discrimination Gjensidige Norway continued to pursue the subgoals in the Inclusive Workplace (IW) Agreement in 2013, and integration and diversity are deeply entrenched in the organisation.
Gjensidige Norway cooperates with NAV on job training and pay subsidies for people who have been unemployed, and we have had several employees on job training programmes as part of such schemes in 2013.
All managers are responsible for establishing procedures and processes to prevent and uncover irregularities and fraudulent acts, including corruption. The Group’s Compliance department is tasked with uncovering any corruption and it is responsible for investigating concrete cases where there is suspicion of improper conduct. The Compliance department shall also contribute to establishing and developing procedures and processes that can prevent and uncover such matters. A comprehensive effort was initiated in 2013 to quality assure the Group’s regulations, procedures and preventive activities.
All gifts worth less than NOK 500 from external business connections to employees of Gjensidige shall be registered in a gift register. It is not permitted to accept gifts worth more than NOK 500. Regardless of the gift’s value, it must not be accepted if the employee’s partiality or independence can be placed in doubt.
Procurements over a certain size must be quality -approved by the Corporate Procurement department. The department was involved in 271 procurements in 2012. Most agreements are the result of competitive tendering carried out in accordance with adopted guidelines. All suppliers must sign a self-declaration concerning corporate social responsibility.
based on a description of the procurement process. This has led to better control of the process of entering into agreements and increased professionalism and quality in the processes.
Employees are encouraged to report irregularities and matters they perceive as ethically dubious. Everyone has a duty to report criminal matters, or if life or health is at risk. A poster with instructions on procedures for whistleblowing is easily accessible on our intranet site. Whistleblowing is facilitated through an electronic mailbox for reporting irregularities and a mailbox for reporting ethics-related matters. Whistleblowers are protected by Norwegian law and the Company’s internal regulations, and employees who report such matters shall not be subjected to negative reactions.
The environment and climate The Group’s operations result in minimal pollution of the natural environment.
Gjensidige works continuously to increase the number of ‘paperless customers’ who receive documents electronically. Digital customer communication improves the customer experience and contributes to reducing costs and paper consumption. The total consumption of paper was reduced in 2013. Total floor space was in Norway reduced with 6 per cent which contributes to lower energy consumption and resource use in general.
The main reason for the reduction in floor space was the move to the new head office in Oslo, which is more efficient in its utilisation of floor space.
All Norwegian branch offices that have more than 30 employees are now certified Eco-Lighthouses.
This means that they have well thought-through processes for the handling and reduction of material consumption, waste, energy and transport.
In November 2013, nearly 800 managers and staff moved into the new head office in the centre of Oslo. The office building is the first in Norway to receive an ‘Excellent’ Breeam rating. Breeam is the world’s foremost environmental assessment method and rating system for buildings, with 250,000 buildings rated so far.
The head office is located in Oslo city centre, a short distance from all public transport services. Arrangements have been made to make it easy for employees to cycle to work, and the Company has a number of electric cars that employees can use in connection with meetings or private errands during working hours.
All branch offices of a certain size separate their waste at source. At our Danish head office in Copenhagen, several measures were initiated in 2013 that are intended to reduce energy consumption. Arrangements have also been made at the office in Copenhagen to facilitate cycling to and from work and meetings.
Sickness absence (self-certificate and medical certificate) 5.1% 4.7% 4.0 % 4.0 %
Number of excluded companies 70 80 Not relevant 1 For 2013: Proposed total dividend consisting of dividend based on the result of the year and dividend related to extraordinary distribution of excess capital . 2 2012-numbers applies to the Norwegian operations. 2013-numbers applies to the Group. 3 As from 2013 the number applies to the Group. 2012-numbers have been adjusted accordingly. 4 Comparable numbers for 2012 are not available. 5 Norway only until 2012. Norway and Denmark in 2013.
The Board bases its corporate governance on: – Optimising the Company’s assets in a longterm perspective – Equal treatment of all shareholders – Equal and assured access to reliable, relevant and up-to-date information about the Company’s business
Statement on corporate governance in accordance with the Norwegian Accounting Act The statement on corporate governance follows the structure set out in the Act. 1. The Company complies with the Norwegian
The Board’s statement on corporate governance in Gjensidige Forsikring ASA is available at www.gjensidige. no/konsern.
Core values and social responsibility Gjensidige’s core values lie in its core business operations – a social mission to safeguard life, health and assets through relieving customers of financial risk and providing assistance when there is a risk of loss or a claim has arisen. Gjensidige also displays important social responsibility through contributing its expertise in the prevention of loss. This benefits society as a whole within commercially responsible limits.
On this basis, the Board has adopted guidelines for ethics and social responsibility. Gjensidige’s commitment will be further developed on the basis of the expertise that it accumulates through conducting its core business.
Our internal control systems include the Company’s core values and guidelines for ethics and social responsibility. A dedicated ethics suggestion box has been established for reporting relevant matters. Effective notification procedures have also been established to ensure that whistleblowers are protected and that matters that are raised receive relevant follow-up.
The Company’s financial investments shall comply with generally accepted guidelines for socially responsible investments (SRI). The Company shall not itself invest in individual securities in companies that fail to meet the requirements relating to human rights, labour rights, the environment, corruption or weapons production. When investing in funds managed by others and where the Company does not decide the framework conditions, the Company shall endeavour to ensure that the Company’s criteria are complied with.
Deviations from the Code of Practice: None 2. The business Operations Pursuant to its Article of Associations, Gjensidige can engage in direct and indirect general and life insurance operations, including taking on pure risk insurance with a duration of no more than one year in the area of life insurance, owning companies that engage in general insurance, life insurance, banking, financing and securities activities, taking over risk insurance and reinsurance in general and life insurance to the extent permitted by law, and other related business.
Strategy Gjensidige’s strategy reflects the Company’s belief in customer orientation, a down-to-earth business culture and an analytical approach to pricing and the assessment of insurance risk. In sum, this is intended to give Gjensidige comparative advantages.
Customer orientation Gjensidige makes active, determined efforts to ensure that its customers as far as possible experience «One Gjensidige», regardless of the communication and distribution channel.
Gjensidige has an operational, flat organisational structure. The Company’s corporate culture is characterised by moderation in relation to costs.
Deviations from the Code of Practice: None 3. Equity and dividends Equity The Gjensidige Group’s equity amounted to NOK 26.3 billion (IFRS) at the end of 2013. The capital adequacy was 13.4 per cent (for the Group), and the solvency margin was 421.8 per cent (for Gjensidige Forsikring ASA). Both capital adequacy and the solvency margin have been adjusted to take account of the Board’s dividend proposal for the 2013 financial year. The statutory capital adequacy requirement is eight per cent.
For all the perspectives, the Board has adopted buffers over and above the requirements for control purposes. At the turn of the year, it was the statutory requirement excluding the buffer (stress test) that showed the lowest excess capital.
In addition any future excess capital over and above the capitalisation target will be paid to the owners over time. By capitalisation target is meant capitalisation that is adapted to Gjensidige’s strategic targets and appetite for risk at all times. The Group shall maintain its financial freedom of action, without this being at the expense of capital discipline.
Dividend paid for 2012 Gjensidige paid a dividend of NOK 3.4 billion for the 2012 financial year, corresponding to 80 per cent of the profit after tax expense.
Proposed dividend for 2013 The proposed dividend for the 2013 financial year is NOK 6.4 billion, corresponding to 174 per cent of the profit after tax expense. The Board’s proposal for the distribution of dividend for the 2013 financial year is explained in more detail in the Report of the Board.
Authorisations granted to the Board Gjensidige’s annual general meeting granted the following authorisations to the Board in 2013: – Authorisation to purchase own shares in the market with a total nominal value of up to NOK 1,000,000. The authorisation is valid until the next annual general meeting, no longer, however, than until 30 June 2014. It can only be used for the sale and transfer of shares to employees of the Gjensidige Group as part of the Group’s share savings programme. The minimum and maximum amounts that can be paid per share are NOK 20 and NOK 200, respectively. The purpose of this measure is to promote a good business culture and loyalty by making employees part-owners in the Company. In 2013 the authorisation was used to purchase 204,873 shares. The authorisation was considered as a separate item at the Company’s annual general meeting.
Deviations from the Code of Practice: None 4. Equal treatment of all shareholders The Company has only one class of shares and all shares carry equal rights in the Company.
The Board is authorised to buy back the Company’s own shares. The Board shall ensure that the Company complies with the Public Limited Liability Companies Act sections 3-8 and 3-9 in agreements between the Company and parties mentioned there. On entering into not immaterial agreements between the Company and shareholders, closely-related parties, board members or members of the management or close associates of such members, the Board shall obtain an assessment from an independent third party. The same applies to agreements with group companies that have minority shareholders. This follows from the rules of procedure for the Board, which are available at www.gjensidige.no/konsern.
All board members and members of management shall immediately notify the Board if they, directly or indirectly, have an interest in a transaction or agreement that the Company is considering entering into. This applies even if the board member is deemed to be disqualified from considering the matter on grounds of partiality. These provisions are laid down in the rules of procedure for the Board. The objective is to avoid harming the Company’s reputation in connection with investments where there may be circumstances that can be perceived as an unfortunate close involvement, or a close relationship between the Company and a board member or executive personnel.
The general meeting is open to all shareholders. The annual general meeting shall be held every year before the end of May. The Company’s Articles of Association do not contain provisions that expand on or deviate from the provisions of the Public Limited Liability Companies Act chapter 5.
– The case documents shall be sufficiently detailed to provide a basis for considering the matters raised.
– Shareholders may be represented by proxy. The notice of the meeting will contain more detailed information about the procedure for representation by proxy, including an authorisation 34 I Gjensidige Annual Report 2013
form. In addition, a person will be appointed who can vote by proxy on behalf of shareholders.
More information about the use of proxy and shareholders’ right to have matters considered by the general meeting is provided in the notice of the meeting and at www.gjensidige.no/konsern.
Pursuant to the Articles of Association, the Board may decide that shareholders can attend the general meeting by means of electronic aids, including exercising their rights as shareholders electronically. Members of the Board are present at the general meeting. The Chairman of the Board and the CEO are normally present to answer questions.
Deviations from the Code of Practice: Pursuant to the Code of Practice, the whole Board, the whole nomination committee and the auditor should be present at the general meeting. Based on the matters that have been submitted to the general meeting for consideration, it has not been necessary so far for the whole Board to attend. The Chairman of the Board, the chair of the nomination committee and the Company’s auditor are always present to answer any questions, however.
At present, Gjensidige’s nomination committee consists of five members, including the Chair of the Supervisory Board. All members are independent of the Board and other executive personnel. Three of the members are also members of the Supervisory Board, including the Chair of the Supervisory Board. Pursuant to the rules of procedure for the nomination committee, the members should reflect the interests of the shareholders as a whole, and the Gjensidige Foundation should be represented by two members. This recommendation was followed in 2013.
As of 31 December 2013, the nomination committee consisted of the following members: – Bjørn Iversen (chairman) – Benedikte Bettina Bjørn – Beate Bredesen – Ivar Kvinlaug – John Ove Ottestad
The nomination committee started work on preparing for the election in 2013 already in autumn 2012. A total of 12 meetings were held in the period leading up to the elections, which were held by the general meeting and the Supervisory Board.
The nomination committee shall propose candidates – with the exception of the employee representatives – for – the Supervisory Board – the general meeting’s proposals for the election of a Chair and Deputy Chair of the Supervisory Board
– the Board, including the Chairman of the Board – the Control Committee, including the Chair of the Committee – the Nomination Committee, including the
A reasoned recommendation containing relevant personal details shall be enclosed with the notice of the election meeting to which the nomination is submitted.
when qualified members are nominated for the governing bodies of Gjensidige Forsikring ASA. Shareholders are therefore invited to propose candidates for governing bodies via a request on the Company’s website. The deadline for submitting proposals is normally set at the turn of the year to ensure that proposed candidates are considered at the start of the process.
At present, the Supervisory Board comprises 21 members, 14 elected by the shareholders and seven elected by the employees. Information about the members of the Supervisory Board is available at www.gjensidige.no/konsern.
• Members of the Board should be independent of the Company’s general management.
The Board holds regular physical board meetings and has eight regular meetings a year. Additional meetings may be held depending on matters at hand and the situation. They can be held by phone or electronically using the board portal. In 2013, a total of 15 board meetings were held, 7 of which were extraordinary board meetings. One of the ordinary meetings was a two-day strategy meeting. At the extraordinary meetings, the Board considered, among other things, an on-site inspection by the Norwegian Data Protection Authority and it prepared a new capital strategy for the Company.
auditor’s fee. The committee held seven meetings in 2013, one of which was an extraordinary meeting.
The remuneration committee The remuneration committee shall, within the limits of the Board’s responsibility, strengthen the Board’s follow-up of the remuneration policy vis-à-vis the CEO, the senior management team and key personnel.
The committee shall prepare matters for the Board. It is primarily responsible for • Drafting proposals for and following up compliance with the Group’s guidelines and framework for remuneration
The committee is an advisory body to the Board. It held one meeting in 2013.
The Board carries out an annual self-evaluation that is also submitted to the nomination committee for use as documentation in connection with the committee’s work.
The Board’s impartiality The Group’s rules of procedure for the Board regulate matters concerning board members’ impartiality. A board member is disqualified from participating in considering or deciding matters that are of such great importance to the board member or his/her related parties that the he or she must be deemed to have a direct or indirect personal or financial interest in the matter. The same applies to the CEO. Board members are also disqualified when other special circumstances could undermine trust in their motives for participating in deciding a matter.
Deviations from the Code of Practice: None 10. Risk management and internal control The Board focuses on risk management and internal control, and this is an integral part of the Board’s systematic work. The Board has adopted a policy for risk management and internal control. Among other things, the document describes the main principles for risk management and internal control, in addition to describing the division of responsibility. The document is available at www. gjensidige.no/konsern.
Internal control and the pertaining systems also include the Company’s core values and guidelines for ethics and social responsibility.
Among other things, the CFO is responsible for asset management, risk and capital management, the Actuary function, the planning process and financial performance. The Executive Vice President of Group Staff/general services is responsible for financial reporting, among other things. This organisation is intended to ensure independence between the leading premise setter for profit performance and those who report the results.
Consolidated accounts are prepared every month and reported to the Board on a monthly basis, with comments on and explanations of each business segment. In this connection, Group Accounts cooperates with the Actuary function, Group Performance Management, reinsurance and the controllers in the business areas on quality assurance of figures and comments. The insurance provisions are assessed monthly by the Actuary function and reviewed annually by an external actuary. Accounting items that entail a varying degree of discretionary judgement and assessment are reviewed and documented in advance of the quarterly closing of accounts. Discretionary items are reviewed by the Board’s audit committee at quarterly meetings. The audit committee also considers the interim reports, company accounts and consolidated accounts. The processes are identical for the Group and the parent company. The annual accounts are adopted by the respective general meetings.
In connection with the outsourcing of important work processes, such as payroll and ICT services, the Group obtains statements in accordance with ISA3402 in order to assess the contracting party’s internal control. The purpose of this is to ensure that the contracting party has satisfactory internal control.
The Group is concerned with ensuring that processes relating to financial reporting and financial management are carried out by personnel with the right expertise for the different tasks. Professional updating in the form of self-studies, courses and continuing education takes place on the basis of the needs and complexity of the position in question. The goal is that the Group shall have sufficient expertise and resources at all times to be 40 I Gjensidige Annual Report 2013
The remuneration of individual board members is described on page 131 of the annual report. The amount of the remuneration reflects the Board’s responsibility, expertise, time spent and the complexity of the business. In addition, board members are paid a separate fee for participating in the Board’s audit committee and remuneration committee. As a rule, board members or companies with which they are associated shall not take on specific assignments for the Company in addition to their office as board member. If such assignments nonetheless arise, the whole Board shall be informed of this. No such assignments were carried out in 2013, and no fees have therefore been paid to board members over and above the fee they receive as members of the Board.
Deviations from the Code of Practice: None 12. Remuneration of executive personnel The Group has established a remuneration system that applies to all employees. The system is intended to ensure that Gjensidige attracts and retains employees who perform, develop, learn and share. The remuneration shall be competitive, but the Group shall not be a wage leader. Employees are expected to see the remuneration and benefits offered by the Group as an overall whole. The Group’s remuneration systems shall be open and performance-based, so that they, as far as possible, are perceived as being fair and predictable. The remuneration that is paid shall correspond to the agreed performance.
Guidelines for remuneration and career development shall be linked to achievement of the Group’s strategic and financial goals and core values, and both quantitative and qualitative targets shall be taken into consideration. The measurement criteria shall promote the desired corporate culture and long-term value creation, and, as far as possible, take actual capital costs into account. The remuneration system shall contribute to promoting and providing incentives for good risk management, prevent excessive risk-taking and contribute to avoiding conflicts of interest. A fixed basic salary shall be the main element of the overall remuneration, which also consists of variable pay, insurance policies and payments in kind. Variable pay shall be used to reward achievements that exceed expectations, where both results and behaviour in the form of compliance with core values, brand and management principles will be assessed. Variable pay shall be performance-based without being a risk driver, and it shall reflect the results and contributions of both the Company, the division, the department and the individual employee. Other remuneration elements shall be seen as being attractive by both new and existing employees. There is a ceiling on all variable remuneration.
The remuneration of the CEO is stipulated by the Board on the basis of an overall assessment that takes into account Gjensidige’s remuneration system and the market salary for corresponding positions. The fixed salary is assessed and stipulated annually on the basis of wage growth in society in general and in the financial industry in particular. Variable remuneration linked to Gjensidige’s performance is decided on the basis of the past two years’ performance. Half of the variable remuneration is in the form of a promise of shares in Gjensidige Forsikring ASA, one third of which are allocated in each of the following three years.
Individual variable pay, including holiday pay, may amount to up to 30 per cent of the annual salary. Variable pay is not included in the pension basis.
The guidelines are submitted to the general meeting as a separate item in accordance with the Public Limited Liability Companies Act Section 16-6 a).
The Company has a dedicated IR (investor relations ) function that has a central place in the Company’s management, and that ensures that there is regular contact with the Company’s shareholders, potential investors, analysts and the financial market. The goal is that the Company’s information work shall be in accordance with best practice at all times.
The guidelines are in compliance with the Norwegian Code of Practice for Corporate Governance. The Board will obtain independent valuations and draft a recommendation on whether or not the shareholders should accept the bid. In conversations with the bidder and in its other actions, the Board shall endeavour to safeguard the interests of the Company and the shareholders as a whole. The Board shall ensure that all the Company’s shareholders are treated equally and kept up-to-date about relevant matters relating to the bid. The shareholders must receive information as early as possible, to give them time to consider the bid. Endeavours will otherwise be made to avoid undue disruption of other activities during a takeover process.
The audit committee shall also monitor the auditor ’s independence, including what services other than auditing the auditor has provided. The breakdown between the auditor’s fee and consultancy fees for 2013 is described in Note 17 to the annual report. The Supervisory Board approves the auditor’s fee. Information will be provided about the auditor’s fee broken down by auditing and other services at the meeting.
Supervisory Board Bjørn Iversen, chair Hilde Myrberg, deputy chair Benedikte Bettina Bjørn Knud Daugaard Randi Dille Marit Frogner Geir Holtet John Ove Ottestad Stephen Adler Petersen Jan Skaug Lilly T. Stakkeland Christina Stray Even Søfteland Terje Wold
Nominated by the employees Kjell Johnny Andersen Jon Aniksdal Ellen Kristin Enger Elisabeth Katai Knudsen Lasse Vold Roger Warud Susanne Baden Weltz
Nomination Committee Bjørn Iversen, chair, (Chair Gjensidigestiftelsen) Benedikte Bettina Bjørn Beate Bredesen Ivar Kvinlaug, (Chair of the nomination committee in Gjensidigestiftelsen) John Ove Ottestad
The Group’s general insurance operations achieved a good result in 2013. The profit after tax expense was NOK 3.7 billion, corresponding to NOK 7.34 per share.
The Board proposes a total dividend of NOK 6.4 billion for the 2013 financial year, corresponding to NOK 12.80 per share. Of this amount, NOK 6.80 per share is proposed on the basis of the profit for the year after tax expense and the current dividend policy. The remaining NOK 6.00 per share can be ascribed to the distribution of excess capital in accordance with the new capital strategy that was adopted in autumn 2013.
The Gjensidige Foundation’s share of the total dividend amounts to NOK 4.0 billion. The board of the Gjensidige Foundation has proposed that the dividend relating to underlying operations in 2013, after a deduction of expenses, be distributed to Gjensidige’s general insurance customers in Norway. The dividend relating to the distribution of excess capital will be managed by the Gjensidige Foundation with the purpose of securing a longterm ownership of Gjensidige, making it possible to contribute capital in given situations and supporting a stable customer dividend.
Inge K Hansen (1946) has been Chairman of the Board of Gjensidige since 2008.
He is also Chairman of the Board of NorSun AS, Harding AS and Troms Kraft AS, and Deputy Chairperson of the Board of Hydro.
He is a graduate of the Norwegian School of Economics (NHH). Hansen is up for election to the Board in 2014.
As of 31 December 2013, Hansen held 12,253 shares in Gjensidige Forsikring ASA, including any shares held by closely related parties.
Surveys show that people who have many Gjensidige products are the most satisfied customers. Further development of the loyalty and organisation customer programmes, a new office concept focusing on financial advisory services and the sale of a wide range of products, digitalisation of customer communication, and a number of other measures aimed at retaining customers shall further strengthen the existing good customer relations.
In the Baltic general insurance market, Gjensidige had a market share of 8.0 per cent in 2013 (source: Insurance Supervisory Commission of the Republic of Lithuania; Latvian Insurers Association; Statistics Estonia).
The market share for defined contribution group pension (unit-linked) and individual pension saving (unit-linked) were both 9.3 per cent. The market share for pension contracts transferred was 37.1 per cent for defined contribution group pension and 10.0 per cent for individual pension savings. (Source: Finance Norway, Statistics, third quarter 2013).
Sales centres (outbound call centres) focus on new sales, while the customer centres (incoming call centres) deal with customers who contact Gjensidige on their own initiative to make purchases or changes, or for advice. Gjensidige has 36 local branch offices that offer advisory services in insurance and banking and can pass on queries about pensions and savings.
The customer portals are becoming increasingly important in relation to Gjensidige’s contact with its
customers. Private and commercial customers have a complete overview of their own products and can manage their own customer account, for example by reporting claims. Approximately 16 per cent of sales to private customers in Norway are now initiated at gjensidige.no, and roughly one out of four private customers reports claims online. Customer service staff contribute to an increased proportion of selfservice by actively referring customers to the portal.
Nordic In cooperation with the Nykredit group, general insurance products are distributed in the private market in Denmark. Sales are conducted via call centres at Nykredit and Gjensidige, and via own underwriters in the market. The strategic collaboration on distribution has a considerable potential for Gjensidige.
In Sweden, general insurance products are distributed to private customers both directly by telephone and the internet and through insurance mediators (partners and agents). In the commercial market, distribution mainly takes place through insurance brokers and partners.
Baltics The most important distribution channels in the Baltic states are direct sales and sales through insurance agents and brokers. The importance of online sales as a distribution channel continues to increase in the Baltic market. In order to rationalise operations, priority is given to increasing online sales and sales via the call centres.
Gunnhild H Andersen (1949) has been a member of Gjensidige’s Board as an employee representative since 2008.
She is a customer adviser in Gjensidige, an employee representative in the Finance Sector Union and the senior employee representative for the Claims/ IT department.
Among other things, Andersen has previously held positions as a customer adviser and claims handling consultant in Gjensidige, and has been secretary at AL Gartnerhallen.
The year 2013 Increased customer satisfaction Gjensidige works continuously to improve the customer experience in all channels. Customers’ attitudes to the Company and advisers are measured systematically, and it was pleasing to see that customer satisfaction increased in both the private and the commercial markets in Norway for the second year in a row. Among commercial customers, Gjensidige stands out as a company that displays social responsibility. According to the survey, of the nine biggest general insurance providers in Norway, Gjensidige had the most satisfied customers in the private market. The improvement in this segment was related to the criteria ’meets customer expectations’. Customer satisfaction with claims settlements showed the biggest improvement, and satisfaction with our advisers in the claims departments remained at a stable, high level. External surveys showed an improvement in customer satisfaction in Denmark as well. Gjensidige’s own customer satisfaction survey was expanded to include Denmark in 2013, and from 2014, developments in the Danish market can be monitored in the same way as in Norway.
New partnership agreements In 2013, the agreement with the Norwegian Society of Engineers and Technologists (NITO) was renewed, and a new agreement was entered into with the Norwegian Association of Hunters and Anglers (NJFF). With 118,000 members, NJFF has a great business potential for Gjensidige. In addition, active endeavours were made to further development of the cooperation with the Norwegian Trekking Association, entered into at the end of 2012. Gjensidige has a long-standing tradition for and good experience of partnership agreements. Experience shows that utilisation is high among the members of affiliated organisations, and they are often Gjensidige’s most loyal customers. Good management of partnerships agreements will be given priority also in the time ahead.
Changed distribution agreements In Denmark, the cooperation agreement with the Nykredit group was renegotiated with effect from 1 April 2013. The new agreement entails that Gjensidige will be responsible for conducting more of the direct customer dialogue itself. The change is expected to contribute to increased sales and customer satisfaction in the Danish private market.
Furthermore, an agreement was entered into for the acquisition of Solid Forsäkringar’s motor and home content insurance portfolio in Sweden. The acquisition represents a big boost for the business in Sweden and underpins the growth strategy in this market. Provided that the authorities approve it, the acquisition is expected to be completed in the first quarter 2014.
Awards for the brand initiative Gjensidige launched a new customer portal in Norway and a new visual profile for the Group at the start of 2013, and new customer portals were launched in Denmark and Sweden in the first half-year 2013. Gjensidige won several awards for its brand renewal, including the Farmand Award for ‘Best Norwegian website’, and it won gold in the Norwegian Organization for Visual Communication’s annual Visuelt award for its website. At the start of 2014, Gjensidige won a prize for best new Facebook page in Norway in 2013. The Facebook page ‘Småbarnsliv’ (‘Life with small children ’) was developed in collaboration with a dedicated panel of parents. It targets the important customer group that parents of small children represent.
Sponsorship agreement with the Football Association of Norway In spring 2013, Gjensidige signed a three-year agreement with the Football Association of Norway (NFF) as part-sponsor of the men’s national football team. The agreement will be used for teambuilding and relations-building purposes internally and externally. Together with the rights as the main sponsor of the Norwegian women’s handball team, the agreement with NFF ensures media coverage for Gjensidige throughout the year. Gjensidige won the jury’s main prize at the Norwegian Sponsoring
and Event Association’s annual awards. The jury emphasised Gjensidige’s long-term, comprehensive and commercial approach to sponsorship through its agreements with the Norwegian Handball Association and the Football Association of Norway.
Merger Gjensidiges Arbejdsskadeforsikring On 5 March 2013, Gjensidige was granted a licence to merge Gjensidige Forsikring ASA with Gjensidiges Arbejdsskadeforsikring A/S. The merger was approved by the general meeting on 25 April 2013.
New capital strategy and updated financial targets In October 2013, the Board of Gjensidige adopted a new capital strategy and updated financial targets, including a new dividend policy.
The target return on equity was changed from at least 15 per cent before tax expense to at least 15 per cent after tax expense from and including 2015. The change requires strong capital discipline in the time ahead.
From and including 2014, the target is to distribute high and stable dividends that, over time, amount to at least 70 per cent of the profit after tax expense. In addition any future excess capital over and above the capitalisation target will, over time, be distributed.
Trond Vegard Andersen (1960) has been a member of the Board of Gjensidige since 2009.
underpinning the customer dividend model and contributing to stability of future customer dividends.
The requirements will ensure good risk management in general, and the reporting to the authorities and the market will make a positive contribution to highlighting the Company’s value creation. Gjensidige wishes to make active use of the upcoming legislative amendments to further strengthen overall risk management in the Group.
Norwegian pension legislation Changes in the maximum rates in the Act relating to Defined Contribution Pensions and new ‘cut-off points’ entered into force on 1 January 2014. The rates are in line with what is permitted under the new Act relating to Mandatory Occupational Pensions. For all existing agreements, adaptations to the new cutoff point must be implemented by 1 January 2017. For enterprises that establish a defined contribution pension plan after 1 January 2014, a new cut-off point will apply. It is now also possible for the contributions to apply from the first krone. The changes will probably mean that even more enterprises will convert their defined benefit pension plans into defined contribution plans, rather than waiting for the transitional rules for the new Act on Occupational Pensions to be adopted. This is seen as positive for Gjensidige Pensjonsforsikring AS, which has specialised in defined contribution pensions.
Hans Erik F. Andersson (1950) has been a member of the Board of Gjensidige since 2008.
He is an adviser, Chairman of the Board of Cision AB, and Board member of Skandia Liv Mutual, Sintercast AB and Anticimex International AB.
Gender-neutral tariffs From January 2014, Gjensidige has introduced gender -neutral tariffs in connection with the sale of accident and health policies (disability, life insurance etc.). At the same time, price differentiation has been introduced based on insurance holders’ profession and education.
Statement on the annual accounts Gjensidige reports consolidated financial information pursuant to International Financial Reporting Standards (IFRS).
Dividend 50–80 per cent of the profit for the year after tax 174.4 per cent *
Combined ratio 90-93 per cent 89.2 per cent Cost ratio 15 per cent by 2015 15.3 per cent * Proposed total dividend consisting of dividend based on the profit of the year and dividend related to extraordinary distribution of excess capital .
Per Arne Bjørge (1950) has been a member of the Board of Gjensidige since 2011.
He is Chairman of the Board and general manager of PAB Consulting AS, a board member of the Gjensidige Foundation and of 3D Perception AS, and Chairman of the Board of Borgund Invest AS, Tanux Shipping KS, Tanux Shipping AS, Havskjer AS and Havstål AS.
He is a university college graduate and is a qualified auditor. He has also completed the Administrative Research Institute’s executive management programme, and is a graduate of the Bank Academy.
The tax expense was NOK 903.5 million (1,353.5), corresponding to an effective tax rate of 19.8 per cent (24.0). The effective tax rate was affected by the recognition of an impairment loss on the investment in Storebrand in the first quarter, in addition to realised and unrealised gains from equity investments in the EEA.
The profit after tax expense was NOK 3,670.6 million (4,280.1), corresponding to NOK 7.34 (8.56) per share.
Pension and Savings 49.9 18.3 Retail Bank 191.0 113.0 Financial result from the investment portfolio 3 2,480.9 3,005.1 Amortisation and impairment losses of excess value – intangible assets (161.7) (126.9) Other items (5.5) 16.4 Profit/(loss) for the period before tax expense 4,574.1 5,633.5
Balance sheet and capital base The Group’s balance sheet total at the end of 2013 was NOK 108,946.3 million (94,207.1). This increase was mainly attributable to volume growth in the Retail Bank and Pension and Savings segments. Gjensidige’s equity amounted to NOK 26,287.8 million (25,617.7) as of 31 December 2013.
Cash flow Gjensidige is an insurance company in which investments are part of the operational cash flow and therefore largely affected by strategic decisions. The Company’s ability to self-finance investments is good. The net cash flow from operational activities mainly consists of payments in the form of premiums and net payments/disbursements in connection with sales of investment assets, including lendings from banking operations, plus disbursements in the form of claims settlement costs, purchases of reinsurance, administration expenses and tax.
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. The net cash flow from investment activities was NOK 643.8 million (negative 235.2) in 2013.
For 2013, the net cash flow was mainly affected by the disbursement of loans from the bank that are partly financed by the bank’s borrowings.
He is a senior customer adviser in Gjensidige and the senior employee representative for the Private Division.
As of 31 December 2013, Kristensen held 526 shares in Gjensidige Forsikring ASA, including any shares held by closely related parties.
Earned premiums amounted to NOK 7,799.0 million (7,498.5). The increase was due to higher premiums. The number of customers at the end of the year was roughly on a par with 2012.
Gjensidige’s distribution agreement with Sparebanken Sogn og Fjordane will be terminated with effect from 1 July 2014. The premium volume relating to the agreement amounted to approximately NOK 180 million in 2013, and the customers have their policy agreements directly with Gjensidige. Several measures will be implemented to ensure new sales and to retain existing customers in the region.
Operating expenses amounted to NOK 1,027.0 million (1,007.7), and the cost ratio was 13.2 (13.4).
Earned premiums 7,799.0 7,498.5 Claims incurred etc. (5,466.5) (5,051.7) Operating expenses (1,027.0) (1,007.7) Underwriting result 1,305.5 1,439.1
Run-off gains/(losses) 2 65.0 67.6 1 Large losses = loss event in excess of NOK 10.0 million.
The Swedish commercial organisation was integrated in the segment in 2013, and the sales organisation in Sweden was strengthened during the year.
Earned premiums 7,021.8 6,764.8 Claims incurred etc. (5,207.6) (4,943.1) Operating expenses (821.3) (809.1) Underwriting result 992.9 1,012.6
Claims incurred in excess of NOK 30.0 million per event are charged to the Corporate Centre. 2 Run-off gains/(losses) = changes in estimates from earlier periods 3 Loss ratio = claims incurred etc./earned premiums 4 Cost ratio = operating expenses/earned premiums 5 Combined ratio = loss ratio + cost ratio ment, mainly as a result of an increase in the number of products per customer. The growth was negatively affected by a reduction in the Swedish municipal portfolio, in addition to the loss of two big accident and health schemes with effect from the second and third quarters, respectively, in 2012.
Outlook and priorities Together with even better risk pricing, simplification and automation are intended to ensure a forward -looking and customer-oriented company. Better customer experiences and more efficient service processes will be important elements in supporting the Group’s targets and ensuring good competitiveness in the commercial market. Established companies offering a broad range of products and competition for market shares from individual players mean that there is still pressure on prices in parts of the market.
Strengthening distribution through the implementation of a new, improved distribution agreement with the Nykredit group and through the acquisition of Gouda Travel Insurance were important events in 2013. Continued focus on portfolio restructuring and repricing contributed to even better quality in the portfolios and a satisfactory underlying profitability development.
Profit performance The underwriting result was NOK 342.3 million (519.9) in 2013, corresponding to a combined ratio of 89.7 (82.1). The decline in the underwriting result was largely due to lower run-off gains and a higher proportion of weather-related claims.
Outlook and priorities The Nordic operations shall contribute to economies of scale, diversification of risk and increased competitiveness. The Nordic general insurance markets are relatively consolidated, but Gjensidige expects that it will be possible to grow selectively through a patient, rational approach to new opportunities for growth. With a normalisation of the Danish property market, organic growth is expected to be slightly above market growth. The implementation of new tariffs and steps to achieve a higher proportion of self-service will be prioritised in 2014 as well. Work on integrating and capitalising on business synergies relating to the two above- mentioned bought portfolios and the distribution agreement with Nykredit will also be given priority.
Earned premiums 3,326.4 2,909.7 Claims incurred etc. (2,417.0) (1,883.6) Operating expenses (567.1) (506.1) Underwriting result 342.3 519.9
Targeted efforts to rationalise operations and the restructuring and repricing of portfolios have contributed to improved profitability in 2013.
Gisele Marchand (1958) has been a member of the Board of Gjensidige since 2010.
Marchand has previously been CEO of the Norwegian Public Service Pension Fund, managing director of the Bates Group and has held various management positions with Den norske Bank.
As of 31 December 2013, Marchand held 1,481 shares in Gjensidige Forsikring ASA, including any shares held by closely related parties.
Profit performance The underwriting result amounted to NOK 35.7 million (18.9). The combined ratio was 93.0 (95.7). The improvement in profit performance is largely due to a positive development in earned premiums.
Claims incurred amounted to NOK 342.5 million (292.6). Of the increase NOK 11.7 million was due to changes in the exchange rate. The loss ratio was 67.1 (67.0). Run-off gains were more than halved compared with the year before.
Earned premiums 510.8 436.9 Claims incurred etc. (342.5) (292.6) Operating expenses (132.5) (125.4) Underwriting result 35.7 18.9
Claims incurred in excess of Euro 0.5 million per event are charged to the Corporate Centre. 2 Run-off gains/(losses) = changes in estimates from earlier periods 3 Loss ratio = claims incurred etc./earned premiums 4 Cost ratio = operating expenses/earned premiums 5 Combined ratio = loss ratio + cost ratio 58 I Gjensidige Annual Report 2013
Profit performance The profit before tax expense was NOK 49.9 million (18.3). The positive development was due to an increase in revenues as a result of growth in the customer portfolio combined with a positive market development. At the start of 2013, Gjensidige Pensjonsforsikring took over two external defined contribution portfolios, which led to an increase in assets under management of more than NOK 800 million.
The management income increased to NOK 82.2 million (65.0) as a result of growth in the pension and savings portfolio and positive market development.
Operating expenses amounted to NOK 182.0 million (170.4). The increase in expenses was mainly due to higher distribution costs.
Recognised return on the paid-up policy portfolio 3 4.57% 4.76% Value-adjusted return on the paid-up policy portfolio 4 4.67% 4.77%
Outlook and priorities Pension and Savings is a growth area that helps to make Gjensidige a complete supplier of insurance and pension products. The area contributes to stronger customer relations and loyalty among our general insurance customers.
Net interest income amounted to NOK 546.1 million (442.9), primarily driven by lending growth. Net commission income and other income amounted to NOK 53.3 million (44.8). Customer-related commission income and the gains from the previously written-off loans in the unsecured lending portfolio contributed to an increase in net commission income and other income that was partly offset by a reduction in income from financial instruments.
The net interest margin was 2.42 per cent (2.52). The reduction was due to significant increase in the proportion of secured loans in the portfolio in 2013, partly offset by lower financing costs.
Operating expenses amounted to NOK 341.3 million (306.4). The increase in expenses was primarily driven by volume growth and costs relating to the newly launched car financing product. The cost/income ratio was 56.9 per cent (62.8). The reduction in the cost/income ratio was due to both increased revenues and more efficient operations.
Interest income and related income 1,135.0 949.7 Interest expenses and related expenses (588.9) (506.7) Net interest income 546.1 442.9 Net commission income and other income 53.3 44.8 Total income 599.5 487.7 Operating expenses (341.3) (306.4) Write-downs and losses (67.1) (68.4) Profit/(loss) before tax expense 191.0 113.0
combined with a higher proportion of loans secured by a residential mortgage. The weighted average loan to value was estimated to be 64.4 per cent for the mortgage portfolio.
At the beginning of July 2013, Standard & Poor’s upgraded Gjensidige Bank’s rating from BBB+ to A-, with a ‘negative’ outlook. The upgrade was based on a new assessment of the parent company’s support for the bank. The covered bonds issued by Gjensidige Bank Boligkreditt have an AAA rating.
The improved rating of the bonds issued by Gjensidige Bank Boligkreditt AS is also expected to have a positive effect on margins in the longer term. The bank will continue its work to ensure efficient operations and lower losses on loans.
Direct property investments are made via the wholly owned property company Oslo Areal.
The investment portfolio consists of three parts: a match portfolio, a free portfolio and associated companies. The match portfolio is intended to correspond to the Group’s actuarial provisions. It is invested in fixed-income instruments whose duration is adapted to match the disbursement of the actuarial provisions. The free portfolio consists of various assets. The allocation of assets in this portfolio must be seen in connection with the Group’s capitalisation and pertaining risk capacity, as well as the Group’s ongoing risk management. Associated companies mainly comprised the holdings in Storebrand and SpareBank 1 SR-Bank.
The geographical distribution 1 of the match portfolio is shown in the chart on page 63. At the end of the year, there were no direct bond investments in the PIIGS countries.
The average duration in the portfolio was approximately 1.9 years at the end of the year. The distribution of counterparty risk and credit rating is shown in the charts on page 63. Of the securities without an official rating, 9.7 per cent were issued by Norwegian savings banks, while the remainder were mostly issued by Norwegian power producers and distributors, property companies or government -guaranteed companies.
The geographical distribution 1 of the fixed-income instruments in the free portfolio is shown in the chart on page 63. Bond investments through funds in the PIIGS countries amounted to NOK 347.1 million at the end of the period.
Equity portfolio The total equity exposure at the end of the year (including private equity, but excluding associated companies) was NOK 3.9 billion (2.9). The return on current equities was 18.6 per cent (8.5). This includes the return on derivatives used for hedging purposes. The return on private equity was 10.3 per cent (16.7).
Associated companies Associated companies amounted to NOK 4.8 billion (5.0) at the end of the year. The shareholding in Storebrand was recognised in the amount of NOK 3,306.3 million. The corresponding figure for the investment in SpareBank 1 SR-Bank was NOK 1,423.0 million. The return on associated companies was 4.0 per cent (9.3), which corresponds to NOK 192.7 million (441.5). An impairment loss on the investment in Storebrand was recognised in the amount of NOK 611.0 million in the first quarter. Further the return included a gain of NOK 35.3 million on the subsequent sale of shares in Storebrand. Gjensidige’s estimated share of Storebrand’s profit/loss for the year amounted to a loss of NOK 22.1 million, including the amortisation of excess value. Gjensidige’s estimated share of SpareBank 1 SR-Bank’s profit/loss for the year amounted to NOK 179.0 million, including the amortisation of excess value.
Gunnar Mjåtvedt (1960) has been a member of Gjensidige’s Board as an employee representative since 2007.
He studied mathematics and science subjects at upper secondary school. Mjåtvedt is up for election to the Board in 2014.
As of 31 December 2013, Mjåtvedt held 1,820 shares in Gjensidige Forsikring ASA, including any shares held by closely related parties.
Financial income in Pension and Savings and Retail Bank 57.2 50.8
Risk factors Risk is defined as the possibility of an event affecting the Group’s goal attainment positively or negatively. In order to understand and manage risk, an assessment is therefore carried out of both the probability of the event occurring and its consequences. Through the Group’s risk management and internal control, a structure has been established that systematically identifies, assesses, communicates and manages risk throughout the Group. The risk assessment process is integrated with the Group’s budget and business plan process.
The customers have greater and greater expectations of the employees’ expertise. There is a risk that inadequate or insufficiently adapted expertise will reduce chances of realising commercial and strategic ambitions. There is also competition to attract and retain capable employees. Active and targeted competence-raising measures are therefore carried out at all levels of the organisation, and competence requirements have been defined for different roles. The Gjensidige Customer and Brand School is responsible for competence-raising and management development in Gjensidige. The school offers training of sales personnel, claims handlers and managers based on the Group’s business and brand strategy. Performance-based remuneration models have been introduced for groups of employees, and individual scorecards have also been introduced. Systematic work is being done on the corporate culture and management development, and on firmly establishing requirements and expectations of managers and employees.
Insurance risk The insurance risk relating to large individual losses or events is managed through authorisations and guidelines for ordinary operations. Clear guidelines have been established for what insurance policies can be taken out. The risk of a generally unsatisfactory premium level is monitored on a continuous basis by the product and actuary department, and increasingly precise methods for pricing are being developed.
The Board stipulates annual limits for the Group’s reinsurance programme. The limits are decided on the basis of the need to protect the equity against loss events over and above an amount deemed to be justifiable, and of the need to reduce fluctua64 I Gjensidige Annual Report 2013
tions in earnings. The insurance risk is deemed to be moderate based on the reinsurance coverage the Group has purchased. The reinsurance programme is described in more detail in Note 3 to the consolidated annual accounts.
The Group’s Actuary function carries out calculations and assessments of the actuarial provisions and develops 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 of the provisions being inadequate, but the Group works continuously to improve actuarial methods, and external actuaries are used from time to time to conduct independent reviews of the provisions.
Financial risk Gjensidige had NOK 58.1 billion in financial investments in the insurance operations as of 31 December 2013. The counter entry in the balance sheet consists of the actuarial provisions and equity. The investments mainly consisted of fixed-income investments, property, shares and holdings in associated companies. The value of the investments can be affected by changes in macroeconomic factors.
Operational risk Operational risk is the risk of losses due to weaknesses or faults in processes and systems, errors made by employees, or external events. In order to reduce the risk, emphasis has been placed on having welldefined and clear lines of reporting and a clear division of responsibility in the organisation of the business. Set procedures have been established for conducting risk assessments, and the Board evaluates the annual status as part of the internal control system. An independent Compliance function has been established to help the Group to avoid official sanctions, financial losses or a loss of reputation as a result of failure to comply with laws, regulations and standards. The Compliance function identifies, assesses, advises on, monitors and reports on the Group’s risk of non-compliance with laws, regulations and internal guidelines.
no/konsern. In 2012, Gjensidige won the Norwegian Corporate Governance Board’s award for best corporate governance reporting in Norway.
Employees, corporate social responsibility and the environment Gjensidige’s work on corporate social responsibility is described in a separate statement on pages 22-29 of the annual report. The Board of Gjensidige has adopted guidelines for how to exercise social responsibility. The guidelines and the group policy for ethical investments are available at www.gjensidige. no/konsern.
Gjensidige aims to be a developing and healthpromoting workplace. Systematic work is carried out on development measures for managers and employees, and a number of measures and processes have been established relating to employees’ health, safety and working environment.
Information about the working environment, gender equality, discrimination and the natural environment, cf. the Accounting Act Section 3-3 (ninth to twelfth paragraphs), is provided in the report on corporate social responsibility
Competition remains strong in the Norwegian general insurance market, not least from established financial players that are increasingly focusing on general insurance. Gjensidige’s competitiveness is regarded as good, however. Among other things, this was confirmed by a stable customer development in the Private segment throughout 2013, in addition to a good volume development in the renewal processes in the Commercial and Nordic segments at the start of 2014. Work on maintaining and strengthening the customer base and position in the Norwegian market continues unabated, in parallel with continuously assessing new, profitable opportunities for growth in other geographical areas. Optimal utilisation of partnerships and distribution collaborations has high priority.
The group-wide programmes for analytical pricing, customer and risk selection, and the simplification of processes and products will continue. Investments are continuously being made in forward -looking digital service solutions in order to meet customer needs. Considerable attention is
Mette Rostad (1964) has been a member of the Board of Gjensidige since 2012.
As of 31 December 2013, Rostad held 2,794 shares in Gjensidige Forsikring ASA, including any shares held by closely related parties.
Allocation of the profit before other income and expenses The Group’s profit after tax expense amounted to NOK 3,670.6 million. The Board has adopted a dividend policy that forms the basis for the dividend proposal submitted to the general meeting. The goal for 2013 is that between 50 and 80 per cent of the profit for the year will be distributed as dividend.
Mari Skjærstad (1969) has been a member of the Board of Gjensidige since 2010.
Among other things, Skjærstad has previously been a lawyer with Wikborg Rein and assistant judge at Stjør- and Verdal District Court.
The Board has decided to pay employees of Gjensidige Forsikring ASA a collective bonus corresponding to NOK 22,500, including holiday pay, per full-time employee. The bonus is based on the combined ratio achieved and on the development in the portfolio and in customer satisfaction in 2013.
The Board wishes to thank all employees for their efforts and their contribution to Gjensidige’s good results in 2013.
Income statement .................................................... 142 Statement of financial position .................................143 Statement of changes in equity ................................. 145 Statement of cash flows ............................................146 Accounting policies ................................................... 147
Notes 2 Use of estimates ................................................155 3 Management of insurance and financial risk .......155 4 Premiums and claims etc. in general insurance ...156 5 Intangible assets ................................................158 6 Shares in subsidiaries and associates ..................160 7 Owner-occupied property, plant and equipment 162 8 Financial assets and liabilities .............................163 10 Loans and receivables ........................................168 11 Cash and cash equivalents .................................168 12 Shares and similar interests ................................169 13 Insurance-related liabilities and reinsurers’ share . 171 15 Provisions and other liabilities ............................. 176 18 Salaries and remuneration ................................. 179 19 Net income from investments ............................183 20 Contingent liabilities ..........................................184 21 Related party transactions .................................184 22 Events after the balance sheet date ...................186 24 Solvency margin ................................................188 25 Restricted funds ................................................188 27 Share-based payment .......................................189
Declaration from the Board and the CEO ...............191 Auditor’s report ......................................................... 192 Statement by the Control committee ........................ 194 Statement by the Supervisory board .......................... 195
Claims, loss etc. Claims incurred etc. from general insurance (13,859.6) (12,437.7) Claims incurred etc. from pension (779.7) (574.9) Interest expenses etc. and write-downs and losses from banking operations (656.0) (575.1)
Total items that may be reclassified subsequently to profit or loss 288.8 (58.2)
Goodwill 5 2,562.2 2,267.7 Other intangible assets 5 1,138.2 1,123.3 Deferred tax assets 16 5.0 4.1 Investments in associates 6 4,772.0 5,036.1 Owner-occupied property 7 288.5 90.5 Plant and equipment 7 249.5 163.0 Investment properties 9 4,644.3 4,626.7
Equity Share capital 999.9 999.9 Share premium 1,430.0 1,430.0 Other equity 23,857.9 23,187.8
Provision for liabilities Premium reserve in life insurance 13 3,064.6 2,797.9 Provision for unearned premiums, gross, in general insurance 13 7,984.6 7,343.7 Claims provision, gross 13 31,749.6 29,562.3 Other technical provisions 13 139.9 136.6 Pension liabilities 14 109.8 137.5 Other provisions 15 164.3 134.0
Inge K. Hansen Gunnhild H. Andersen Trond Vegard Andersen Hans-Erik F. Andersson Per Arne Bjørge Kjetil Kristensen Styreleder
Components of other comprehensive income Items that are not reclassified subsequently to profit or loss Remeasurement of the net defined benefit liability/asset 637.3 637.3 Share of other comprehensive income from associates (19.8) (19.8) Tax on items that are not reclassified to profit or loss (178.5) Total items that are not reclassified subsequently to profit or loss 458.9 (19.8) 439.1
Own shares 0.0 (5.3) (5.3) Paid dividend (3,424.5) (3,424.5) Equity-settled share-based payment transactions 6.2 6.2
Cash flow from investing activities Net receipts/payments from sale/acquisition of subsidiaries and associates 628.8 (165.0) Net receipts/payments on sale/acquisition of owner-occupied property, plant and equipment (24.7) (101.3) Dividends from associated companies 39.7 31.1
Effect of exchange rate changes on cash and cash equivalents 44.6 (15.2)
Cash and cash equivalents at the start of the period 2,331.5 3,513.3 Cash and cash equivalents at the end of the period 2,729.4 2,331.5
Specification of cash and cash equivalents Deposits with central banks 875.6 55.2 Cash and deposits with credit institutions 1,853.9 2,276.3
Changes in accounting policies Gjensidige has adopted the following new standards and amendments to standards, including any consequential amendments to other standards, with a date of initial application of 1 January 2013.
IFRS 13 Fair Value Measurements In accordance with the transitional provisions of IFRS 13, Gjensidige has applied the new definition of fair value, the new fair value measurement framework, as set out in the section Definition of fair value in the Accounting policies. The new change had no significant impact on the measurements of Gjensidige's assets and liabilities, but Gjensidige has included new disclosures in the financial statements, which are required under IFRS 13. These new disclosure requirements are not included in the comparative information. However, to the extent that disclosures were required by other standards before the effective date of IFRS 13, Gjensidige has provided the relevant comparative disclosures under those standards.
Under IAS 19 (2011), Gjensidige determines the net interest expense/income on the net defined benefit liability/asset for the period by applying the discount rate used to measure the defined benefit obligation at the beginning of the annual period to the then-net defined benefit liability/asset, taking into account any changes in the net defined benefit liability/asset during the period as a result of contributions and benefit payments. Consequently, the net interest on the net defined benefit liability/asset now comprises
IFRS 12 Disclosure of Interests in Other Entities As a result of IFRS 12, Gjensidige are required to expand disclosures about its interests in subsidiaries for accounting periods starting as from 1 January 2014.
• General insurance Private • General insurance Commercial • General insurance Nordic • General insurance Baltics • Pension and Savings • Retail Bank
Associates Associates are entities in which the Group has a significant, but not a controlling, influence over the financial and operating policies. Normally this will apply when the Group has between 20 and 50 per cent of the voting power of another entity. Associates are accounted for using the equity method, and are recognized initially at cost. The Group’s investment includes goodwill identified on acquisition, net of any accumulated impairment losses. The consolidated financial statements include the Group’s share of income, expenses, and movements in equity, after adjustments to align the accounting policies with those of the Group, from the date that significant influence commences until the date that the significant influence ceases.
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.
Transactions in foreign currencies are translated to the respective functional currencies of the respective Group entities at exchange rates at the date of the transaction.
At the reporting date monetary items are retranslated to the functional currency at exchange rates at that date. Nonmonetary items denominated in foreign currencies that are measured at historical cost, are retranslated using the exchange rates at the date of the transaction. Non-monetary items denominated in foreign currencies that are measured at fair value, are retranslated to the functional currency at the exchange rates at the date when the fair value was determined.
Exchange differences arising on retranslations are recognized in profit or loss, except for differences arising on the retranslation of financial instruments designated as hedge of a net investment in a foreign operation that qualifies for hedge accounting. These are recognized in other comprehensive income.
Intangible assets Goodwill Goodwill acquired in a business combination represents cost price of the acquisition in excess of the Group’s share of the net fair value of identifiable assets, liabilities and contingent liabilities in the acquired entity at the time of acquisition. Goodwill is recognized initially at cost and subsequently measured at cost less accumulated impairment losses.
Goodwill acquired in a business combination is not amortised, but is tested for impairment annually or more frequently, when indications of impairment losses exist.
Amortisation Intangible assets, other than goodwill is amortised on a straightline 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
The amortisation period and amortisation method are reassessed annually. An impairment loss is recognized if the carrying amount of an asset is less than the recoverable amount.
Impairment losses recognized for goodwill will not be reversed in a subsequent period. On disposal of a cash generating unit, the goodwill attributable will be included in the determination of the gain or loss on disposal.
The technical provisions related to the unit linked contracts are determined by the market value of the financial assets. The unit linked contracts portfolio is not exposed to investment risk related to the customer assets since the customers are not guaranteed any return. In addition there is a portfolio of annuity contracts which have an average 3.6 per cent annually guaranteed return on assets.
Gjensidige holds an investment portfolio that is designated at fair value at initial recognition, and that is managed and evaluated regularly at fair value. This is according to the Board of Directors’ approved risk management and investment strategy, and information based on fair value is provided regularly to the Senior Group Management and the Board of Directors.
The banking operation has established a liquidity portfolio which is continuously measured and reported at fair value. The bank has a goal of having low interest rate risk and plans and manages the interest rate risk so that one aggregates fixed-rate positions on both deposits, loans and placements in a model, and then use interest rate swaps to balance out potential remaining risk. Interest rate swaps are measured at fair value, and in order to avoid inconsistent measurement, bonds and certificates with fixed interest-rates issued before 2013 subject to interest rate hedging are measured at fair value. From 2013 the bank uses hedge accounting for new bonds and certificates with fixed interest-rates subject to interest rate hedging.
The category at fair value through profit or loss comprises the classes’ shares and similar interests and bonds and other fixed income assets.
Available for sale Financial assets available for sale are non-derivative financial assets that have been recognized initially in this category, or are not recognized initially in any other category. Subsequent to initial recognition financial assets in this category are measured at fair value, and gain or loss is recognized in other comprehensive income except for impairment losses, which are recognized in profit or loss.
Investments held to maturity are measured at amortised cost using the effective interest method, less any impairment losses.The category investments held to maturity comprises the class bonds held to maturity.
If there is objective evidence that the asset is impaired, impairment loss are calculated as the difference between the carrying
Share-based payment The fair value of share-based payment arrangements allocated to employees is at the time of allocation recognized as personnel costs, with a corresponding increase in equity. Share-based payment arrangements which are recovered immediately are recognized 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 recognized shall be based on the number of equity instruments that eventually vest. Non-vesting conditions are reflected in the measurement of fair value, and no adjustment of the amount charged as expenses is done upon failing to meet such conditions.
Tax Income tax expense comprises the total of current tax and deferred tax.
A total of 204,873 (113,336) own shares at an average share price of NOK 94.68 (75.59) have in 2013 been acquired to be used in Gjensidige's share-based payment arrangements. Of these 151,494 (91,041) shares have been sold to employees, at the same price, but with a discount in the form of a contribution, see note 27. In addition 15,980 shares have been allocated to executive personnel within the share-based remuneration scheme and 43,383 bonus shares have been allocated to employees in the share savings programme in 2013. In 2012 17,251 bonus shares was allocated to employees in Sweden and Denmark from Gjensidige’s own shares. Own shares are reduced by 5,984 through the year (increased by 5,044).
Exchange differences Exchange differences consist of exchange differences that occur when converting foreign subsidiaries, and when converting liabilities that hedge the company’s net investment in foreign subsidiaries.
Other earned equity Other earned equity consists of this year’s and previous year’s retained earnings that are not disposed to other purposes and includes provisions for compulsory funds (natural perils fund, guarantee scheme).
NOK million 2013 1 2012 As at 31 December 1 Proposed dividend for 2013 is not recognized at the reporting time, and it does not have any tax consequences.
The subsidiary Gjensidige Bank offers banking products primarily to private individuals and organisations in the Norwegian market. Gjensidige Bank is mainly exposed to credit and liquidity risk.
Organisation The Board has the overall responsibility for ensuring that the level of risk-taking in the Group is satisfactory relative to the Group’s financial strength and willingness to take risks, and has adopted a risk appetite statement covering the most important types of risks. This entails ensuring that necessary policies, routines and reporting are in place to guarantee satisfactory risk management and compliance with laws and regulations and that the risk management and internal control efforts will be appropriately organized and documented.
The responsibility for all investment management is centralized in the Group’s investment centre. The responsibility for the reserve setting in the insurance companies is correspondingly centralized in the Group’s actuary department. All internal guidelines and requirements for risk taking are based on comprehensive group policies and are subject to approval by the Board in each company where this derives from local legislation. A group-wide credit committee chaired by the CFO has been established to set credit limits for individual issuers of credit together with general guidelines for counterparty risk.
Insurance operations and banking business are subject to capital requirements specified by the authorities. Capital adequacy and solvency positions are reported for the Group and subsidiaries to the financial supervisory authorities. In accordance with capital adequacy rules (BIS rules) as at 31 December 2013 the excess capital was NOK 5,187.1 million, equivalent to a capital adequacy ratio of 13.4 per cent. As associated companies, the stakes in Storebrand and SpareBank 1 SR-Bank are consolidated in the calculation of capital adequacy. The Group’s excess capital above the solvency margin requirements was NOK 9,860.0 million as at 31 December 2013. The stake in Storebrand is consolidated in this calculation.
The solvency margin in Gjensidige Baltic does not include the profit for the year until the completion of the auditing of the financial statement for 2013. In Denmark, an individual solvency calculation was introduced as an adaptation to the upcoming Solvency II regulations. Gjensidige Forsikring ASA and all subsidiaries met all regulatory capital requirements during 2013.
• Capital allocation to lines of business and products • Capital consequences of asset allocation • Requirements for and optimization of reinsurance
Using the internal model, with the definition of internal capital as stated above, the internal capital requirement for the insurance group was set at NOK 11,400 million at the end of 2013, compared to NOK 10,700 million at the end of 2012. Excess capital above the internal capital requirement is NOK 9,500 million.
The necessary capital for the insurance business is allocated to the products in order to set a more correct cost of capital for pricing and assessments of profitability. The excess capital relative to the most binding of the capital requirements inclusive buffer is regarded as a strategic buffer and is available to meet regulatory uncertainty, equalization of dividends and financing growth.
Growth in severity of claims may be driven by the development of consumer price index (CPI), salary increases, social inflation and the price for material and services purchased with claims settlement. In Property insurance the inflation will consist of CPI and an increase in building costs, which in the past has been slightly higher than CPI. For accident and health the insurance policies are divided into two main groups, one with fixed sum insured and another part were the compensation is adjusted by a public/government index (in Norway: "G" - the basic amount for national insurance). This is for instance the case in Workers’ Compensation.
The claims handling procedures also include a clear strategy and routines for purchasing goods and services in an optimal manner. The routines are to use purchase agreements to ensure the quality of our benefits to our customers and to reduce the inflation risk.
Concentration of insurance risk The Gjensidige Group still has its concentration in the Norwegian general insurance market, with operations in other Nordic countries and the Baltic.
Motor, other classes 3,536.7 15.6 % 3,659.6 17.6 % Marine, aviation and transport
Third-party liability 546.2 2.4 % 495.9 2.4 % Other general insurance
Third-party liability 510.0 2.7 % 463.2 2.6 % Other general insurance
Other concentration risk is mainly aggregation of fire risks and within Workers’ Compensation. These risks are assessed by analysing historical events, studying the insurance values exposed, and managed through reinsurance programmes.
The reinsurance programme for the Gjensidige Group, primarily non-proportional reinsurance, is based on calculated exposure, claims history and capitalisation. The limits for the reinsurance programme for each year are set by the Board. In Norway the exposure to natural perils is limited through Gjensidige’s compulsory membership in the Norwegian Natural perils pool. Insurance risk is deemed to be moderate with the reinsurance cover the Group has in place.
Subsidiaries are reinsured by Gjensidige Forsikring ASA and the subsidiaries’ reinsurance exposure is included in the outwards reinsurance programme for the Group.
Sources of uncertainty in the estimation of future claims payments Gjensidige is liable for insured events that occurred during the term of the contract, even if the loss is discovered after the end of the contract term, and claims are paid according to the policy conditions valid at the time of occurrence. As a result, claims are settled over a long period of time, and there is an element of the claims provision that relates to incurred but not reported claims (IBNR).
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 adopts multiple techniques to estimate the required level of provision. This provides a greater understanding of the trends inherent in the experience being
90 | Gjensidige annual report 2013 projected. The projections given by 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.
The duration (average time between the date of loss until the claim is finally settled) differs significantly between the types of risk considered. Long duration will increase the company’s exposure to inflation. In Motor insurance, physical damage, the duration is less than one year, while in Motor bodily injury claims the average duration is almost eight years. In Property insurance the average duration is one to two years, in Workers’ Compensation in Norway the average duration is six years. In Group life insurance the duration differs significantly between death and disability coverage. Workers’ Compensation in Denmark has a particularly long duration due to the annuity part. For the other line of businesses (LOBs) in Gjensidige’s Nordic branches and subsidiaries the duration is in line with the similar LOBs in Norway. In the Baltic the duration is signi­ficantly shorter due to few bodily injury claims.
• Chain ladder methods, which use historical data to estimate the proportions of the paid and incurred to date of the ultimate claim costs.
The methods used will depend on the LOBs and the time period of data available. To the extent that these methods use historical claims development information, they assume that the historical claims development pattern will occur in the future. There are reasons why this may not be the case, which, insofar as they can be identified, have been allowed for by modifying model parameters.
Changes in the composition of the insurance portfolio will also have impact on changes in the frequency and severity of claims. In times when there are changes in the composition of the insurance portfolio, the effect of changes in the frequency and severity of claims will be influenced by the percentage share of the different insurance product types in the total portfolio.
Interest risk is a significant risk factor associated with Workers’ Compensation business in Denmark. This risk is an expression for loss/profit due to changes in market rates. There is both interest and inflation risk associated with the liabilities (technical provisions ). The risk is hedged by use of interest and inflation swaps.
Net of reinsurance Estimated claims cost At the end of the accident year 9,986.1 10,358.5 11,205.3 11,439.3 11,855.3 11,949.1 11,554.7 13,019.1 13,056.7 12,131.4 13,588.7 - Ten years later 9,920.4
Life insurance Insurance risk The purpose of insurance is to meet the desire of the customer (insured party) to safeguard against an unexpected, arbitrary loss deriving from an unforeseen event. In respect of the products offered by Gjensidige Pensjonsforsikring AS, these events are primarily incapacity for work and death with ensuing loss of income for the insured or their surviving dependants, alternatively that the insured should live a long life with the consequent risk that their pension savings will not last their entire lives.
The risk inherent in the individual contract, therefore, is the probability that one of the aforementioned events takes place and the uncertainty attaching to the amount of insurance that the person in question was covered by. Some contracts allow the insured party themselves to choose the sum insured. In other contracts the sum insured is predetermined, either as an entirely fixed sum or relative to some other variable factor. In occupational pension contracts this variable factor will typically be salary and time remaining to retirement, again creating a chance variation in the portfolio’s risk profile.
94 | Gjensidige annual report 2013 to meet its agreed insurance liabilities. This would occur in the event of a longer than anticipated lifespan for those receiving retirement pensions, a higher than anticipated rise in the level of disability among those insured, or a rise in the level of mortality among those insured parties with coverage for dependants. It would also occur if a majority of claimants had agreed pension sums that were higher than the average pension sum in the insurance portfolio.
The insurance risk as at 31 December 2013 is considered to be satisfactory, and efforts are made to alleviate any uncertainty surrounding cases not yet reported through claims provisions. The company has a reinsurance arrangement with Gjensidige Forsikring ASA which provides satisfactory coverage in the event of major fluctuations. Gjensidige Forsikring ASA has a substantial portfolio involving both individual and group personal risk with disability risk, and close collaboration with specialists in this company will make it possible to identify significant changes in disability trends both in society at large and among the insured population.
The number of claims has increased during the last years, and the aggregated claims information is considered to be satisfactory for preparation of a new model for calculation of claims provisions. The model has been supplied with claims data for “comparable products” in Gjensidige Forsikring ASA.
The results from the new model calculations show that the claims provisions for some of the earliest risk years are not sufficient, and the claims provisions were increased in 2012 with NOK 58.8 million; further 18.9 million NOK as at 31 December 2013.
Insurance risk in connection with longevity risk is, as already mentioned, subject to the minimum requirements in the new calculation basis K2013, and the company has performed calculations to estimate the need for increased premium provisions. The calculations show that there is a need for 10 per cent increase in the premium provision, NOK 250 million. This will be financed by reduction of profit for the financial and insurance risks for the company. This has been carried out for the insurance years 2011 and 2012, after approval by the Financial Supervisory Authority of Norway, and will be carried out for 2013 and the next 5 years, according to approval by the Financial Supervisory Authority of Norway. The Financial Supervisory Authority of Norway has required that the owner – the insurance company – shall contribute to at least 20 per cent of the required increase in provisions. For Gjensidige Pensjonsforsikring AS the increase in provisions is required for the portfolio of paid-up policies, and the company’s required contribution is financed when the company gives up its share (20 per cent) of the financial result, and the whole financial result is part of the increase in provisions. The new calculation basis will also be applied for the risk policies in connection with defined contribution occupational pensions, but is not expected to give significant changes in the premium level.
Gjensidige Pensjonsforsikring AS concentrates its business on defined contribution pension schemes in the commercial market, and management of premium reserves for paid-up policies and individual, funded pensions. The bulk of the individual, funded pensions have been transferred to the company, with no additional premiums being paid into the account. Furthermore, there is associated risk coverage for the company-related defined contribution pensions, as well as a small proportion of pure risk insurance policies with disability benefits.
The agreements with companies are, moreover, of a one year duration, such that the risk premium can be amended at each annual renewal. Overall, this provides a sound financial foundation, with limited likelihood that the accumulated premiums and claims provisions will be insufficient to meet future liabilities. Since the portfolio is still not very large, the bulk of the annual risk premium goes into the claims provision. After some time each year’s risk will be assessed with respect to insurance events and anticipated claims patterns. Since these pension schemes are company -related, it is assumed that the time between an insurance event occurring, in this case death, until the company is notified will be relatively short.
There is additionally a minor mortality risk exposure in the paid-up policy population.
Longevity risk The issue of longevity, which will affect only paid-up policyholders out of the company’s future pensioners, primarily retirement pensioners, is inversely proportional to the mortality rate of those insured in relation to the aforementioned surviving dependants’ benefits. In this case the company’s risk is that the pensioners that have agreed lifelong pensions live longer than anticipated. In this case, too, the K2005 basis for mortality rate has been employed, but now with survival probability and safety margins “the other way”. As from 1 January 2014 this risk will be subject to the new calculation basis K2013, with the minimum safety margins set by the Financial Supervisory Authority of Norway in their tariff. The Financial Authority of Norway has used the “Medium projection variant” in Statistics Norway’s population projections, with addition of safety margins both for the mortality rates as at 1 January 2014 and in the assumption of reduced mortality during the whole projection period for the insurance policies. For paid-up policies where the insured party is “young” this will give an assumption of reduced mortality the next 70-80 years. This is assumed by the insurance market participants to be a solid calculation basis. In 2013 Gjensidige Pensjonsforsikring AS recognized a 4.57 per cent (4.76 per cent) return on its paid-up policy portfolio, which provided a net financial income of NOK 33 million (unchanged from 2012). The company has sought and obtained the Financial Supervisory Authority of Norway’s permission to set aside this income for the coming increase in the paid-up policy claims provision that a new basis for calculation will require. This transaction precludes use of the opportunity available in the regulations for modified profit-sharing to keep back up to 20 per cent of net financial income for the owner, and results in a reduction of up to NOK 5.6 million (5.6 million) in the owner’s profit. The calculated risk profit of the year has been added to the provisions from previous years; the sum is NOK 114 million in 2013 (77 million), to meet the challenge of longevity risk in the portfolio of paid-up policies.
Cash flows Figure 6 shows the overall cash flow for the company’s insurance liabilities. In addition, it shows the increase in liabilities ascribable to the aforementioned stress factors, i.e. ten per cent reduced mortality (increased longevity) and disability risk (25 per cent in the first year and 15 per cent in the remaining years).
Gjensidige Forsikring ASA provides a corporate function with regard to reinsurance. Gjensidige Forsikring is acting as reinsurer for group subsidiaries, and their exposure is included in the outward reinsurance covers for the Group. The reinsurance programme for property insurance also includes the cooperating mutual fire insurers. The subsidiaries’ reinsurance programmes generally have a lower retention, as they are smaller entities than Gjensidige Forsikring ASA. The difference between the retention levels of the subsidiaries and Gjensidige Forsikring ASA are held for own account by Gjensidige Forsikring ASA.
Equity price risk is defined as a loss in value resulting from a fall in equity prices. This is analogous to real-estate price risk. See amounts below in the stress test and sensitivity analysis. Interestrate risk is defined as the loss in value resulting from a change in interest rates and is viewed both from the asset-only perspective and in relation to the interest-rate sensitivity of the liabilities. Foreign-exchange risk is defined as the loss resulting from a movement in exchange rates. Credit risk is defined as the loss arising from an issuer defaulting on its obligations or because of increased risk premiums for bonds with credit risk. Liquidity risk is defined as the inability to meet payments at due date, or the need to realize investments at a high cost to meet payments.
Gjensidige Forsikring ASA. This is done in order to improve the efficiency of the investment management and capitalization in the Group.
The table below gives the main overview of the asset allocation for the insurance business at year-end 2013 and 2012. The asset allocation is divided in a match portfolio to cover insurance liabilities, and a free portfolio which can be viewed as the invested equity of the Group. The item associated companies are the stakes in Storebrand and SpareBank 1 SR-Bank ASA. The actual allocation will vary throughout the year and follow movements in the market, tactical allocation and risk situation.
In terms of concentration risk, the main risks for the Group are the investments in Storebrand and SpareBank 1 SR-Bank ASA and the exposure to office properties in the Oslo area. Concentration risk is further analysed under the various market risk factors.
Free portfolio total 20,138.3 34.6 % 17,736.4 31.5 % Investment portfolio total 58,148.2 100.0 % 56,296.0 100.0 %
4 The item includes currency hedging of Gjensidige Sverige, Gjensidige Baltic and Gjensidige Denmark, and loans, paid-in capital in Gjensidige Pensjonskasse, hedge funds and commodities.
Stress testing Stress testing is performed on the value of the investment assets relative to the market, credit, interest rate and foreign-exchange risk as well as to negative scenarios for the insurance activities measured relative to the buffer capital (defined as capital in excess of legal minimum requirements) and reported regularly to the Board.
Stress parameters for asset risk are closely aligned with the recommendations in the Norwegian FSA’s “risikobasert tilsyn” (RBT), with correlation matrices to visualize diversification effects both between asset classes, and market and insurance risk. The only deviation from the recommendations of the Norwegian FSA is that private equity (PE) and commodities are stressed by 25 per cent and their correlation with shares and hedge funds are set to 0.75.
The capital surplus at year end is not representative for the situation throughout the year, as the stress test is taking into account the dividend based on distribution of excess capital at year end. Generally the precise figures will vary along with changes in asset allocation and year-to-date profit. A rule for management actions with escalation to CEO or Board is implemented if total decrease in value/buffer capital is above predefined levels.
Equity price risk In 2013, Gjensidige’s equity portfolio was increased from the previous year. The largest exposures are to Storebrand and SpareBank 1 SR-Bank ASA. The concentration risk is shown in the table below. The majority of the geographic exposure is to Norwegian shares.
Table 13b – Largest private equity funds 2012 NOK million 31.12.2012
In addition to the invested amounts, Gjensidige had committed capital, not invested, amounting to NOK 1,087.0 million as at 31 December 2013.
In the Danish workers’ compensation operations, the long-tail Workers’ Compensation line of business is hedged against changes in the real interest rate through swap agreements. The real interest-rate risk relates to outstanding premium and claims provisions of approximately NOK 4,200 million (discounted value), where a large percentage of the claims are paid out as annuities, the payments of which are linked to the yearly increase in Danish workers compensation awards, determined by the authorities (a function of the wage developments). The risk to the present value of these annuities is hedged through a series of swap agreements stretching out over 40 years and covering inflation and interestrate risk separately so that the net real-interest-rate risk is reduced. The swap agreements are reset once a year and security is provided for outstanding market value between the parties, which reduces the counterparty risk and results in a limited book value. The fixed-income portfolio in the Danish branch is invested with a low duration.
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 the Danish branch.
Table 14 – Maturity profile (number of years) fixed income portfolio
Furthermore, the interest-rate sensitivity of the fixed income portfolio is shown in the table below. This table does not include the amortized cost portfolio, and the effect of the swap agreements in the Danish branch have not been included either because they have a reciprocal effect on the liabilities. The effect on profits and ­equity is the same, and tax effects have been disregarded. The Board of Directors has set a limit of 500 million.
Table 15 – Sensitivity fixed income portfolio NOK million 31.12.2013 31.12.2012 100 bps parallel shift up (298.8) (254.9)
Property price risk Real estate constitutes a significant part of the portfolio of Gjensidige Forsikring. The motivation for investing in real estate is primarily that it enhances the risk-adjusted return of the asset portfolio, through an expected rate of return that lies between bonds and equities, and that there is a modest correlation to both of them.
Sector Speculare IV Fund Class A USD (alle x Ferd) 13.6
The parent company hedges its investments, but not future income, in subsidiaries against foreign-exchange risk. For Gjensidige Baltic, the hedging is performed in EUR while a similar amount of Gjensidige Baltic’s interest-bearing papers are invested in EUR. The results of the hedging are recognized in the income statement while the change of value in the hedged object is recognized in other comprehensive income. In the Danish branch and the subsidiary Nykredit Forsikring, hedge accounting is employed where only the inefficient part of the hedging is recognized in the income statement. This gives a more consistent accounting of hedging and the hedged object. The hedging is carried out with currency forwards, where the amount is adjusted quarterly.
In the opposite case, if there is a ten per cent weakening of NOK against all other currencies, the effects above will be about the same amount, but with an opposite sign.
For investments, risk limits are set for credit risk in several ways. As a point of departure there is a credit lines on designated counterparties. For issuers with an official credit rating from a recognized rating agency, this is generally utilized as a criterion. The list of credit lines is approved by the CFO and employed for all separate mandates and for derivative counterparties. In addition, the board-approved asset allocation sets limits on global bonds, both bonds with high financial strength ratings (investment grade) and other bonds (high yield). Additionally, there is a maximum lines for credit duration measured as a one per cent change in credit spreads that include all fixed income assets in the balance sheet. This limit was NOK 1,500 million in 2013.The Group’s total fixedincome portfolio of NOK 43,019.0 million as at 31 December 2013 (including the amortized cost portfolio, other bonds, certificates and deposits) consisted of NOK 5,317.7 million issued by government sector entities and NOK 37,701.3 million by non-public entities. The majority of the latter category was financial institutions.
The following tables show the allocation of the fixed-income portfolio by rating category at year-end in 2013 and 2012.
The overview of the largest issuers also includes the fixed-income portfolio for GPF and Gjensidige Bank because the individual counterparty risk is monitored at group level. Total fixed-income portfolio is only for general insurance. Exposures also include mortgage bonds and covered bonds for groups that has issued these.
Figure 9b – Potential credit exposure reinsurance per rating category 2012
Liquidity risk For most general insurers, the liquidity risk is quite limited. Premium income is paid up front, and claims are paid out at a later stage. Future payments are not based on contractual payment dates, but rather when claims occur and how long the claims handling lasts. See the expected payout pattern presented in the previous figure. Liquidity risk in Gjensidige Bank is described separately.
GPF has separate strategies for the funds in each portfolio, the unit-linked, paid-up policy, other group policy and company portfolios. GPF does not bear investment risk for the unit-linked portfolio. Both positive and negative returns are passed on in full to the customers. The other portfolios expose the Company’s equity to risk. For the company and other group policy portfolios, little risk is taken, the funds are mainly invested in bank deposits and fixed-income instruments with high creditworthiness. The company portfolio is financed by the Company’s equity and in addition to bank deposits also includes a small trading portfolio to support incoming and/or outgoing capital in the customer portfolios. The other group policy portfolio is funded by premium reserves, claims provisions for unreported and/or unsettled claims and the risk equalization fund. The paid-up policies give a minimum guaranteed interest to the customers at the same time as the customers receive a percentage of any excess return above this amount. Therefore, for the paid-up policy portfolio, the objectives are to be able to offer the customers a competitive return over a period of time at the same time as the risk relative to strain on equity is kept at a targeted low level.
The portfolios are stress tested in accordance with the recommendations from the Finanstilsynet to measure whether the
A large part of the fixed-income portfolio in GPF does not have an official rating. These fixed-income securities are mainly invested in Norwegian banks and financial institutions.
The largest individual exposures per counterparty are included in the Group’s table above.
The bank's risk areas are evaluated continuously, and the strategy for the risk areas is adopted annually by the Board. The bank deploys statistical modelling to calculate capital requirements given the chosen level of confidence for most of the risk categories. The capital requirements are calculated for the risk areas for the entire strategy period in the current strategy plan, showed in the bank's ICAAP document, and capital adequacy is reported to the Board quarterly.
Credit risk Credit risk refers to the risk the bank faces related to a borrower’s failure to repay a loan or credit or to meet their contractual obligation to the bank. The bank's credit risk originates from loans and credits to consumers in Norway. The bank is also exposed to credit risk through the placements within the liquidity reserve.
The bank also has a sizable portfolio of Unsecured Consumer Finance lending. On this portfolio the bank has higher returns proportionate to the level of credit risk in the portfolio. As such a large part of the Credit losses are related to Unsecured Consumer Finance lending portfolio. The bank uses risk based pricing models driven by scores and the portfolio shows a healthy profitability.
Credit risk related to the bank’s liquidity portfolio is assessed as low.
The bank's maximum exposure to credit risk is NOK 27,041.2 million. The bank has no loans exceeding 100 per cent of loan to value ratio.
Gross lendings in default of 30 days amounted to NOK 374.3 million by the end of the year compared to NOK 350.2 million in 2012. The total balance of write-downs of loans in 2013 was NOK 324.4 million versus NOK 299.9 million in 2012. Gross lending in default over 30 days was 1.6 per cent of gross lending as of the end of the year compared to 2.0 per cent in 2012.
Market risk Market risk is the risk of losses associated with unfavourable movements in market prices, which in this context relates to positions and activities in the interest, currency and stock markets.
The bank's finance strategy set by the Board provides guidelines and limits on managing the bank's market risk.
The limit for the interest rate risk under one year is a negative exposure of up to 500 milli years (MY). A limit is also provided for interest rate risks for all time periods plus/minus 300 MY. The bank’s limit for cumulative exposure to interest rate risk is 500 MY. Interest rate risk under three months is measured and reported, but the exposure is not included in the interest risk limits. When the limit is fully utilized, the loss for the bank at one percentage point change in the yield curve will be NOK 5 million. Utilization of this limit is reported monthly to the Board.
Concentration risk Concentration risk is the risk of losses due to the bank having large parts of its lending tied to single borrower or to limited geographic or business areas. The concentration risk is managed using the bank’s risk frameworks.
Operational risk Operational risk refers to the risk loss resulting from human errors, external events or fraud, deficiencies and/ or inadequacies in the bank's internal systems, routines or processes. The bank has its own loss and event database for the evaluation, follow-up and storage of operational incidents.
The bank’s management has regular review of its internal controls. The bank has a complex IT infrastructure that must function at all times. It is therefore particularly focus on risks related to ICT/security.
As at 31 December 2013 the liquidity reserve was NOK 4,258.9 composed of NOK 1,037.5 million in deposits and NOK 3,248.4 million in bonds, securities and money market funds. NOK 1,580.3 million of this were investments in covered bonds issued by Gjensidige Bank Boligkreditt AS (eliminated in the consolidated accounts) that have not been utilised in the swap arrangement with Norges Bank. The liquidity reserve is highly liquid and the liquidity holdings are sufficient to meet due payments for 39 consecutive months. Stress tests have also been completed to demonstrate the bank’s requirements for a liquidity reserve based on future scenarios of recession and/or financial crisis.
Loan approvals and unused drawing rights 3,945.7 37.4 Financial derivatives - net settlement (negative figures yield net payment)
106 | Gjensidige annual report 2013 4. Segment information The group has six reportable segments, as described below, which offers different products and services within different geographical areas. The Group CEO holds regular meetings with its reporting managers concerning performance management, which focuses on future measures to ensure performance and deliveries.
General Insurance Commercial The segment offers general insurance products in the areas of liability, property, agriculture, accident and health, and motor insurance, plus in coastal, aquaculture and transport insurance. In 2013, the Swedish commercial and municipal portfolio and the Norwegian municipal portfolio were moved from General Insurance Nordic to General Insurance Commercial.
General Insurance Nordic The segment comprises the Group’s operations in the Danish private and commercial markets, and the Swedish private market.
Cost As at 1 January 2012 2,650.8 813.0 135.7 830.6 292.6 4,722.7 Additions 37.3 37.3 Additions through business combinations 61.7 29.1 0.7 6.9 98.4 Additions from internal development 109.1 109.1 Disposals (122.3) (63.4) (185.7) Exchange differences (103.1) (40.6) (6.6) (11.8) (16.7) (178.8) As at 31 December 2012 2,487.2 801.5 129.8 901.7 282.8 4,603.0 Uncompleted projects 131.3 131.3 As at 31 December 2012, including uncompleted projects 2,487.2 801.5 129.8 1,033.0 282.8 4,734.2
Cost As at 1 January 2013 2,487.2 801.5 129.8 901.7 282.8 4,603.0 Additions 61.7 61.7 Additions through business combinations 98.7 23.9 12.1 7.0 19.8 161.5 Additions from internal development 112.0 112.0 Disposals/reclassifications (41.6) (104.8) (207.8) (50.0) (404.2) Exchange differences 251.8 99.1 9.4 32.0 33.5 425.8 As at 31 December 2013 2,796.1 924.5 46.5 906.6 286.1 4,959.8 Uncompleted projects 131.8 131.8 As at 31 December 2013, including uncompleted projects 2,796.1 924.5 46.5 1,038.4 286.1 5,091.6
Carrying amount As at 1 January 2013 2,267.7 457.3 39.2 436.2 190.5 3,391.0 As at 31 December 2013 2,562.3 439.9 15.6 512.7 169.9 3,700.4
The group has had a few minor business combinations during 2013. None of the intangible assets have undetermined useful lives.
Subsidiaries/portfolios Oslo Areal 180.4 191.3 Gjensidige Forsikring, Danish branch 1,094.6 960.7 Gjensidige Forsikring, White label 128.7 128.7 Gjensidige's workers'compensation insurance in Denmark 1 105.3 92.5
Nykredit Forsikring 791.2 721.7 Gjensidige Baltic 70.8 62.6 Gjensidige Forsikring, Swedish branch 92.5 83.8 Gjensidige Bank 1.5 1.5 Lokal Forsikring 22.5 22.5 Byggeriets Forsikringsservice 3.5 2.6 Gouda portfolio 2 42.1 Nordisk Forsikrings Service 29.1 1 Merged with Gjensidige Forsikring, Danish branch from 1 January 2013.
Need for impairment app. NOK 5 million No need for impairment Need for impairment app. NOK 442 million Gjensidige's workers' compensation insurance in Denmark 1
NOK million Assets Equity Liabilities Revenues 2 Profit/(loss) Profit/(loss) recognized 2
Storebrand ASA 420,182.0 19,936.0 400,246.0 52,479.0 1,012.0 295.4 2,935.7 SpareBank 1 SR-Bank ASA 141,543.0 12,637.0 128,906.0 3,786.0 1,361.0 141.1 985.2 Bilskadeinstituttet AS 5.2 5.0 0.2 1.5 0.2 0.1 N/A Vervet AS 114.9 18.8 96.1 0.5 N/A FDC A/S 126.7 63.7 62.9 441.6 17.1 4.9 N/A
3 Including impairment loss of NOK 611.0 million and gain on sale of NOK 35.3 million. The sales amount on sale of 4.2 percent was NOK 660.0 million and was received in cash.
Cost As at 1 January 2012 332.1 756.6 1,088.7 Transferred to investment property (208.3) (208.3) Additions 27.4 27.4 Disposals (0.6) (260.8) (261.4) Exchange differences (0.2) (3.9) (4.1)
As at 31 December 2012 123.0 519.3 642.4 Uncompleted projects 0.1 35.2 35.4
As at 31 December 2012, including uncompleted projects 123.1 554.6 677.7
Cost As at 1 January 2013 123.0 519.3 642.4 Transferred from investment property 160.3 160.3 Additions through business combinations 43.3 0.4 43.7 Additions 3.6 47.3 50.8 Disposals (91.1) (91.1) Exchange differences 0.6 9.1 9.6
Market value of land and owner-occupied property 308.3 99.6 Carrying amount of land and owner-occupied property 288.5 90.5
The following financial assets are classified as level three in the valuation hierarchy • Unlisted private equity-investments. The private equity investments that are not organized as funds are valued using cash flow analysis, price multiples and recent market transactions. The private equity investments that are organized as funds are valued based on NAV values (Net Asset Value) as reported by the fund administrators in accordance with IPEV guidelines (International Private Equity and Venture capital Valuation) set out by the Equity Venture Capital Association. The NAV values are estimated by the fund administrators by using the valuation techniques best suited to estimate fair value, given the actual circumstances of each underlying investment. Because of late reporting from the funds, the NAV values from the previous quarterly reporting are used in estimating fair value. These values are then adjusted for known events since the last reporting date. The typical known event is the increase /decrease in value on listed shares owned by a fund.
Financial liabilities Financial derivatives Financial derivatives at fair value through profit or loss 270.7 270.7 49.4 49.4 Financial derivatives subject to hedge accounting 76.3 76.3
Financial liabilities at amortised cost Deposits from and liabilities to customers, bank 15 14,938.3 14,938.3 11,580.5 11,580.5 Interest-bearing liabilities 15 9,771.6 9,822.8 5,355.5 5,380.1 Other liabilities 15 952.2 952.2 978.2 978.2 Liabilities related to direct insurance 15 654.8 654.8 406.0 406.0 Accrued expenses and deferred income 15 384.1 384.1 283.3 283.3
unrealized gains recognized in profit or loss that are attributable to instruments held as at
Shares and similar interests Decrease in value 10% 230.5 Bonds and other fixed income securities Decrease in value 10% 0.1
Reconciliation of financial assets valued based on non-observable market data (level 3) 2012
Sensitivity of financial assets valued based on non-observable market data (level 3) 2012
Gjensidige Forsikring ASA, Danish branch Currency-related contracts - hedging instruments 1,756.7 (65.7) 0.9 Hedging object 1,755.2
Gjensidige Bank ASA, group Interest rate swaps - hedging instruments (21.7) (11.8) Obligation debt - hedging object 11.8
Yield is determined based on a normal required rate of return adjusted for the location of the property, type, technical standard and the contracts. The normal required rate of return is determined from the required rate of return that can be derived from transactions in the market, and expectations of interest level and risk adjustment. The market rent is determined from existing contracts on the property and comparable properties, observations from contractual negotiations, requests for offers and information from realtors and Eiendomsverdi’s database. For the fourth quarter of 2013 parameters used for the portfolio are presented in the table below.
The yield and market rent are the two most significant parameters with regard to the valuation. If the yield increases with 0.25 percentage points, the total property value is reduced by NOK 182.4 million. If the market rent is reduced by ten per cent, total property value is reduced by NOK 395.8 million.
Statement of financial position As at 1 January 4,626.7 5,248.1 Additions 130.9 71.9 Additions through business combinations 300.8 651.0 Disposals (352.7) (1,303.3) Net gains/(losses) from fair value adjustments 81.7 (197.8) Transfers from owner-occupied property (160.7) 167.5 Exchange differences 17.6 (10.7)
Receivables related to direct operations and reinsurance Receivables from policyholders 4,257.4 4,064.4 Receivables related to reinsurance 33.1 48.3
Bonds are securities classified as loans and receivables in accordance with IAS 39.
Deposits with financial institutions 258.6 484.8 Cash and bank deposits 2,470.8 1,846.7
Weighted average rate for interest earned on cash, bank deposits and deposits with financial institutions is approximately 1.9 per cent (2.6). The interest rate is calculated at company level and we are regarding this as directly attributable to group level as well.
118 | Gjensidige annual report 2013 12. Shares and similar interests
Hedge funds Sector Healthcare - A USD 158.2 Goldman Sachs Global Opportunities Offshore Fund 157.5 Goldman Sachs Global Opportunities Offshore S102 152.3 Sector EuroPower Fund Class A EUR 99.1 Balestra Global Ltd. Class B Series 0513 30.2 Omni Macro Fund I Limited Class I-1 29.0 Winton Futures Fund- Lead Series 16.9 Sector Maritime Investment Class A 14.6 Sector Speculare IV Fund Class A USD 11.6 Sector Maritime Investment Class A1 6.8 HORIZON TACTICAL TRAD USD-B (in specie rest verdi) 4.9 Sector Speculare II Fund Class A USD 4.7 Sector Exspec Fund Class A USD (utfisjonert sels.) 2.1 Sector Spesit I Fund Class A USD 1.1
120 | Gjensidige annual report 2013 13. Insurance-related liabilities and reinsurers' share
Insurance-related liabilities, gross Premium reserve in life insurance 3,064.6 2,797.9 Provision for unearned premiums, gross from general insurance 7,984.6 7,343.7
Claims reported and claims handling costs 14,720.3 12,949.6 Claims incurred, but not reported 17,029.4 16,612.7
Claims reported and claims handling costs 608.6 576.7 Claims incurred, but not reported 103.2 77.2
Increase in liabilities Arising from current year claims 15,128.6 (394.8) 14,733.8 13,331.1 (743.0) 12,588.0 - of this paid (7,102.4) 23.6 (7,078.9) (6,128.9) 381.8 (5,747.1) Arising from prior year claims (run-off) (335.6) 36.1 (299.6) (129.4) (196.8) (326.2) Other changes, including effects from discounting (666.6) (666.6) (182.8) (182.8) Exchange differences 924.7 (52.6) 872.0 (391.4) 15.9 (375.5)
Claims reported and claims handling costs 14,720.3 (608.6) 14,111.7 12,949.6 (576.7) 12,372.9 Claims incurred, but not reported 17,029.4 (103.2) 16,926.1 16,612.7 (77.2) 16,535.5
14. Pension Gjensidige Forsikring is required to have an occupational pension plan pursuant to the Norwegian Act relating to Mandatory Occupational Pensions. The Company’s pension plans meet the requirements of the Act.
Defined benefit plan Description of the plan Together with benefits from the National Insurance scheme and any paid-up policies from former employment relationships, the retirement pension amounts to approximately 70 per cent of the final salary, given a full earning period of 30 years. The retirement age is 67, but it is 65 for underwriters.
Risk The risk in the net pension liability is a combination of the pension plan itself, the pension liability, the pension assets and the covariation between liabilities and pension assets.
Interest rate risk The pension assets’ exposure to interest rate risk is deemed to be moderate because the market value-weighted duration is 4.1 years. The portfolio value will fall by approximately NOK 100 million in the event of a parallel shift in the yield curve of plus one per cent. The value will increase correspondingly in the event of a fall in the interest rate.
GAP07 has a shorter life expectancy than K2013. Everything else being equal, this will mean that payment of the minimum requirement for pension assets will be based on a higher life expectancy than the corresponding measurement of the liability. This means that a future increase in pensions will be included in the liability as a result of the payment being based on a longer life expectancy.
Operational risk The management of the pension plans has been transferred to Gjensidige Pensjonskasse. Gjensidige Pensjonskasse has its own employees and makes substantial purchases of services from professional suppliers of pension fund management and asset management services. The pension fund is subject to internal control.
A continued low interest rates in future and changes in EU-based rules might entail an increase in future contributions to the funded pension plan.
The liability to pay a contribution pursuant to the old scheme is recognized as a company-specific defined benefit plan. A contribution still has to be paid in connection with the Company’s own early retirement pensioners who choose the old AFP plan until the pension promise has been fully honoured. The pension promise to former employees who have chosen to retire on a pension before 1 January 2011 will thus be honoured as originally agreed until they have all reached the age of 67. As a result, there will be no reduction or settlement for this group of employees.
Present value of the defined benefit obligation As at 1 January 2,471.5 3,041.0 Current service cost 40.8 56.2 Employers' national insurance contributions of current service cost 5.7 7.9
Present value of the defined benefit obligation 2,501.4 2,471.5 Fair value of plan assets (2,391.6) (2,334.0)
Fair value of plan assets As at 1 January 2,334.0 2,089.4 Interest income 99.2 93.6 Return beyond interest income 43.9 94.5 Contributions by the employer 8.2 167.2 Benefits paid (86.6) (82.6) Employers' national insurance contributions of benefits paid (7.2) (28.0)
Remeasurements of the net defined benefit liability/asset recognized in other comprehensive income Cumulative amount as at 1 January (1,838.6) (2,476.1) Recognized during the period 19.6 637.3 Exchange rate differences (0.4) 0.2
Sensitivity 10% increased mortality (4.1%) (3.9%) 10% decreased mortality 3.1% 3.0% + 1% point discount rate (10.8%) (10.6%) - 1% point discount rate 13.2% 12.9% + 1% point salary adjustment 4.5% 4.5% - 1% point salary adjustment (3.7%) (3.8%) + 1% point social security base amount (1.8%) - 1% point social security base amount 2.0% + 1% point future pension increase 10.8% - 1% point future pension increase (9.2%)
Historical information Present value of the defined benefit obligation 2,501.4 2,471.5 3,041.0 2,783.4 2,765.6 The fair value of the plan assets (2,391.6) (2,334.0) (2,089.4) (2,160.2) (2,080.7)
Shares and similar interests 122.0 122.0 Bonds 64.6 2,140.5 2,205.0 Derivatives 62.2 62.2 Bank 2.4 2.4
Gjensidige annual report 2013 | 125 15. Provisions and other liabilities
Deposits from and liabilities to customers Deposits from and liabilities to customers without maturity date, bank 13,125.2 11,065.7 Deposits from and liabilities to customers with maturity date, bank 1,813.1 514.8
Liabilities related to insurance Liabilities related to direct insurance 470.2 353.4 Liabilities related to reinsurance 184.6 52.6
Accrued expenses and deferred income Liabilities to public authorities 22.8 20.2 Other accrued expenses and deferred income 361.3 263.2
Provisions as at 1 January 57.2 70.0 New provisions 25.8 Reversal of provisions (9.0) (7.0) Provisions used during the year (22.8) (31.6)
Specification of tax expense Tax payable (853.7) (1,253.9) Correction previous years 88.5 27.0 Change in deferred tax (138.4) (126.5)
Deferred tax liabilities and deferred tax assets Deferred tax liabilities and deferred tax assets are offset when there is a legally enforceable right to offset those assets/liabilities and when deferred tax liabilities/deferred tax assets relate to the same fiscal authority. The amounts offset are as follows
Taxable temporary differences Properties 1,750.7 1,542.7 Shares, bonds and other securities 165.7 143.1 Profit and loss account 356.9 555.6 Security provisions etc. 3,347.3 3,095.7
Deferred tax liabilities/(deferred tax assets) 1,335.6 1,263.4 Of this non-assessed deferred tax assets 5.0 4.1
Reconciliation of tax expense Profit before tax 4,574.1 5,633.5 Estimated tax of profit before tax expense (28 %) (1,280.7) (1,577.4)
Tax cost In connection with the conversion of Gjensidige Forsikring BA to a public limited company the Ministry of Finance has consented to an exemption from capital gains taxation on the transfer of business to the newly formed public limited company under certain conditions. The consequences of the tax relief decision have been incorporated into the tax expense and tax liabilities from fourth quarter 2010. The tax relief decision involves greater complexity and discretionary assessments, which entails a greater degree of uncertainty with respect to the tax expense and tax liabilities until all the effects have ultimately been evaluated by the tax authorities.
Operating expenses Depreciation and value adjustments (note 5 and note 7), excl. depreciation properties 325.8 317.5 Employee benefit expenses (note 18) 1,976.1 1,821.4 Fee for customer representatives 5.4 5.8 Software costs 375.1 380.5 Auditor’s fee (incl. VAT) 8.7 10.7 Consultants’ and lawyers’ fees 130.6 121.1 Commissions 572.3 546.6 Other expenses 159.1 148.6
Expenses related to investments Depreciation and value adjustments (note 5 and note 7) 9.0 8.1 Employee benefit expenses (note 18) 15.5 14.2 Software costs 0.5 0.5 Auditor’s fee (incl. VAT) 0.7 0.8 Consultants’ and lawyers’ fees 2.4 2.6 Other expenses 138.6 153.3
Employee benefit expenses Wages and salaries 1,510.3 1,381.2 Social security cost 297.4 289.1 Pension cost - defined contribution plan (note 14 incl. social security cost) 125.9 104.2 Pension cost - defined benefit plan (note 14 incl. social security cost) 46.1 52.5 Stock purchase offering for employees 11.9 8.5
Auditor's fee (incl. VAT) Statutory audit 5.6 6.0 Other non-assurance services 3.4 4.7 Tax consultant services 0.6 0.9
Gjensidige annual report 2013 | 129 18. Salaries and remuneration The average number of employees in the Group was 3,342 (3,127).
The Board, deputies Tore Vågsmyr, staff representative 5 655 Inger-Lise Bratsberg, staff representative (1.1.13 - 29.5.13) 1, 5 1,952
Lotte Kronholm Sjøberg, staff representative (29.5.13 - 31.12.13) 1, 5 46
Control committee Sven Iver Steen, Chairman 162.5 6.0 1,778 Hallvard Strømme 101.5 7.7 Lieslotte Aune Lee 101.5 6.0 Vigdis Myhre Næsseth, Deputy 91.5 5.2
Jørgen Inge Ringdal, Executive Vice President 2,306.4 245.5 191.2 654.7 13.4 4,248 4,540 9,951 2
Martin Danielsen, Executive Vice President 2,232.1 255.5 156.0 480.3 17.9 4,478.3 3.50% 31.01.2021 4,431 4,723 10,683 3
Cecilie Ditlev-Simonsen, Executive Vice President 1,968.7 47.1 154.0 177.6 573 865 1,688 3
Kjetil Kristensen, staff representative 6 276.5 526 Gunnar Mjåtvedt, staff representative 6 358.2 2,486 Per Arne Bjørge 251.3 1.5 10,542 Mette Rostad 1 (29.5.12 - 31.12.12) 80.0 1.5 2,794
Sven Iver Steen, Chairman 160.0 1,778 Hallvard Strømme 100.0 Lieslotte Aune Lee 100.0 Vigdis Myhre Næsseth, Deputy 90.0
Bjørn Iversen, Chairman 143.5 1.5 890 Kirsten Indgjerd Værdal, Deputy Chairman (1.1.12 - 19.4.12) 1 35.5
Net income and gains/(losses) from buildings and other real estate Investment properties Rental income from investment properties, excl. unrealized gains/(losses) 315.8 321.1 Net revaluation investment properties 81.5 26.0 Net gains/(losses) from sale of investment properties 3.7 24.4 Administration expenses related to investment properties (52.5) (86.6)
Net income and gains/(losses) from financial assets at fair value through profit or loss, designated Shares and similar interests Dividend income 72.4 180.2 Unrealized gains/(losses) from shares and similar interests 606.5 56.1 Realized gains/(losses) from shares and similar interests 275.3 191.5
Total net income and gains/(losses) from shares and similar interests 954.2 427.8
Bonds and other fixed-income securities Net interest income/(expenses) from bonds and other fixed-income-securities 341.5 403.0 Unrealized gains/(losses) from bonds and other fixed-income securities 239.6 (113.7) Realized gains/(losses) from bonds and other fixed-income securities (127.9) 277.4
Total net income and gains/(losses) from financial assets at fair value through profit or loss, designated 628.1 1,540.1
Net income and gains/(losses) from financial liabilities at amortised cost Net gains/(losses) from financial liabilities at amortised cost 0.6
Total net income and gains/(losses) from financial liabilities at amortised cost 0.6 Net other financial income/(expenses) 1 8.7 (130.5) Discounting of claims provision classified as interest expense 322.1 (67.8) Change in discount rate claims provision (82.3) (84.3)
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 above five years (five) and seven years (seven) in average including option for of extension.
There are contractual commitments regarding development of investment properties amounting to NOK 232.0 million (312.0). The commitment falls due during the period until December 2014.
Subsidiaries Byggeriet Forsikringsservice A/S Copenhagen Denmark 100.0% Gjensidige Baltic AAS Riga, Latvia 100.0% Gjensidige Bank Holding AS Oslo, Norway 100.0% Gjensidige Norge AS Oslo, Norway 100.0% Gjensidige Pensjon og Sparing Holding AS Oslo, Norway 100.0% Lokal Forsikring AS Oslo, Norway 100.0% Nordisk Forsikrings Service AS Copenhagen Denmark 100.0% Nykredit Forsikring A/S Copenhagen Denmark 100.0% Oslo Areal AS Oslo, Norway 100.0% Samtrygd Eigedom AS Førde, Norway 100.0% Strandtorget Eiendom AS Oslo, Norway 100.0%
1 In addition Gjensidige owns bonds in SpareBank 1 SR-Bank ASA amounting to NOK 96.1 (420.9) million measured at carrying value, Gjensidige Pensjonsforsikring owns bonds in SpareBank 1 SR-Bank ASA amounting to NOK 5.3 million measured at carrying value,
Income and losses The table below shows a summary of contributions/dividends from/to related parties as well as other gains and losses.
Total group contributions and dividends 270.2 1.7 277.7 4.8 1 Group contribution recognized in 2012 was reversed in 2013.
Intercompany balance The table below shows a summary of receivables/liabilities from/to related parties.
Total intercompany non-interest bearing debts and receivables 808.2 4.137.3 224.2 2.140.6
Intercompany interest bearing debts and receivables Oslo Areal AS 2.365.9 2.323.6 Gjensidige Bank Boligkreditt AS (owned by Gjensidige Bank AS) 75.0
Co-operating companies 1 Fire Mutuals 11.4 18.6 1 Cooperating companies are defined as companies with which Gjensidige Forsikring has entered into a long-term strategic alliance.
Other transactions Interest on bank deposits Gjensidige Bank ASA Gjensidigestiftelsen 6.2 7.4
Other intercompany balances Bank deposits Gjensidigestiftelsen Gjensidige Bank ASA 234.0 232.0
Equity NGAAP 18,026.6 20,597.6 Hybrid capital in associates, proportion 387.5 432.8 Effect of guarantee scheme provision and Natural perils fund (2,797.8) (3,011.4) Goodwill (2,562.2) (2,267.7) Deferred tax assets (5.0) (4.1) Other intangible assets (1,138.2) (1,123.3) Investment properties, unrealized gains, proportion (163.6) (92.0) Reinsurance provision, minimum requirement (11.5) (11.5)
Primary capital 13,024.4 16,010.4 Primary capital in other financial institutions (108.5) (108.5)
Assets with 0 % risk weight Assets with 10 % risk weight 260.8 255.5 Assets with 20 % risk weight 7,530.6 7,236.4 Assets with 35 % risk weight 7,004.3 4,744.4 Assets with 50 % risk weight 816.7 1,020.4 Assets with 100 % risk weight 36,094.5 30,354.6 Assets with 150 % risk weight 2,569.7 2,802.5 Net basis of calculation for institutions reporting in accordance with Basel II and which are not distributed according to risk weight 42,702.8 48,434.0
Net primary capital 12,915.9 15,901.9 Proportion of security provision 1,244.2 1,100.7 Proportion of Natural perils fund (up to 25 % of the Natural perils fund is included) 553.9 599.8 Deduction due to discounting effects (106.4)
The fair value at the grant date is measured based on the market price. The amount is recognized as payroll expenses at grant date. No specific company-related or market-related entitlement criteria apply to the shares, but the Company may carry out a reassessment based on breech of expectations in terms of greater negative events and/or developments. The expected allocation is set to 100 per cent. The value of the cash-settled share is adjusted at each reporting period based on the share price at this time. The number of shares is adjusted for dividend paid.
Average remaining life of outstanding bonus shares 1.12 1.09 Weighted average fair value of bonus shares granted 79.30 59.10 Weighted average share price of bonus shares released during the period 111.70
Premiums written, net of reinsurance 18,399.3 17,130.6 Change in gross provision for unearned premiums (322.6) (220.6) Change in provision for unearned premiums, reinsurers' share (3.6) 5.5
Allocated return on investments transferred from the non-technical accounts 651.7 491.8
General insurance claims Gross paid claims 4 (12,360.5) (12,416.0) Paid claims, reinsurers' share 331.6 704.1 Change in gross provision for claims 4 (1,304.8) 288.4 Change in provision for claims, reinsurers' share 45.9 (334.2)
Net income from investments Income from investments in subsidiaries and associates 479.8 515.5 Impairment losses investments in subsidiaries and associates (139.5) Interest income and dividend etc. from financial assets 1,589.9 1,553.7 Net operating income from property 15.6 19.3 Changes in fair value on investments 878.8 (29.3) Realized gain and loss on investments (416.1) 961.0 Administration expenses related to investments, including interest expenses (257.9) (147.4)
Total items that are not reclassified subsequently to profit or loss 32.0 449.2
Items that may be reclassified subsequently to profit or loss Exchange differences from foreign operation 257.6 (56.4) Exchange differences from hedging of foreign operation (233.4) 53.5 Tax on items that may be reclassified to profit or loss 45.4 (15.0)
Reinsurers' share of insurance-related liabilites in general insurance, gross Reinsurers' share of provision for unearned premiums, gross 13 15.5 19.1 Reinsurers' share of claims provision, gross 13 694.6 612.6
Total reinsurers' share of insurance-related liabilites in general insurance, gross 710.1 631.7
Prepaid expenses and earned, not received income Other prepaid expenses and earned, not received income 12.6 5.6
Insurance-related liabilities in general insurance, gross Provision for unearned premiums, gross 4, 13 7,325.1 6,681.0 Claims provision, gross 4, 13, 21 31,046.8 25,205.8 Provision for premium discounts and other profit agreements 68.8 72.6 Security provision 4 2,764.9 2,446.1
Provision for liabilities Pension liabilities 14 87.0 113.9 Current tax 16 663.3 1,332.1 Deferred tax liabilities 16 212.7 199.6 Other provisions 15 161.3 59.1
Liabilities Liabilities related to direct insurance 8 253.9 237.1 Liabilities related to reinsurance 8 184.6 52.1 Financial derivatives 8 321.5 45.3 Accrued dividend 6,400.0 3,425.0 Other liabilities 8, 15 833.8 809.1 Liabilities to subsidiaries and associates 8, 21 153.9 11.0
Accrued expenses and deferred income Other accrued expenses and deferred income 8, 15 237.8 191.5
Cash flow from operating activities Premiums paid, net of reinsurance 18,508.6 16,637.6 Claims paid, net of reinsurance (12,328.2) (11,797.1) Net receipts/payments from financial assets 343.0 (55.0) Net receipts/payments from properties 12.1 807.8 Operating expenses paid, including commissions (2,692.1) (2,717.5) Taxes paid (1,319.8) (771.0) Net other receipts/payments (6.5) (2.5)
Cash flow from investing activities Net receipts/payments from sale/acquisition of subsidiaries and associates 243.7 (150.3) Net receipts/payments on sale/acquisition of owner-occupied property, plant and equipment 15.6 (73.3) Dividends from subsidiaries 174.9 126.8 Dividends from associated companies 39.7 31.1 Group contributions received (19.4) Group contributions paid (113.6)
Cash flow from financing activities Payment of dividend (3,424.5) (2,274.7) Payments regarding intra-group equity transactions 241.5 106.0 Net receipts/payments on sale/acquisition of own shares (5.3) (2.2)
Effect of exchange rate changes on cash and cash equivalents 16.5 (3.0)
Accounting policies Reporting entity Gjensidige Forsikring ASA is a publicly listed company domiciled in Norway. The company’s head office is located at Schweigaardsgate 21, Oslo, Norway. The activities of the company consist of general insurance. The company does business in Norway, Sweden and Denmark.
Presentation of Items of Other Comprehensive Income (amendments to IAS 1) As a result of the amendments to IAS 1, Gjensidige has modified the presentation of items of OCI in its Consolidates statement of comprehensive income and in its Consolidated statement of changes in equity, to present items that would be reclassified to profit of loss in the future separately from those that would never be. Comparative information has been re-presented on the same basis.
IAS 19 Employee Benefits (2011) As a result of IAS 19 (2011), Gjensidige has changed its accounting policy with respect to the basis for determining the income or expense related to its defined benefit plans.
Consequently, the net interest on the net defined benefit liability /asset now comprises
• interest cost on the defined benefit obligation • interest income on plan assets
Segment reporting According to IFRS 8, the operating segments are determined based on the Group’s internal organisational management structure and the internal financial reporting structure to the chief operating decision maker. In Gjensidige Insurance Group the Senior Group Management is responsible for evaluating and following up the performance of the segments and is considered the chief operating decision maker within the meaning of IFRS 8. Gjensidige reports on two operating segments, General insurance Private and General insurance Norway, which are independently managed by managers responsible for the respective segments depending on the products and services offered, distribution and settlement channels, brands and customer profiles. Identification of the segments is based on the existence of segment managers who report directly to the Senior Group Management/CEO and who are responsible for the performance of the segment under their charge. In addition the company comprises a Swedish and Danish branch that is reported as a part of the segment Nordic in the consolidated financial statements.
Recognition of revenue and expenses Premiums Insurance premiums are recognized over the term of the policy. Gross premiums written include all amounts the company has received or is owed for insurance contracts where the insurance period starts before the end of the accounting period. At the end of the period provisions are recorded, and premiums written that relate to subsequent periods are adjusted for in Change in gross provision for unearned premiums in the income statement.
Allocated return on investments The allocated return on investments is calculated based on the average of the technical provisions throughout the year. The average yield on government bonds with three years remaining until maturity is used for the calculation. The Financial Supervisory Authority of Norway has calculated the average technical yield for 2013 and 2012 to be 1.6 per cent and 1.4 per cent respectively. The allocated return on investments is transferred from the nontechnical account to the technical account.
Claims incurred in general insurance Claims incurred consist of gross paid claims less reinsurers’ share, in addition to a change in gross provision for claims, also less reinsurers’ share. Direct and indirect claims processing costs are included in claims incurred. The claims incurred contain run-off gains/losses on previous years’ claims ­provisions.
Net income from investments Financial income consist of interest income on financial investments, dividend received, realized gains related to financial assets, change in fair value of financial assets at fair value through profit or loss, and gains on financial derivatives. Interest income is recognized in profit or loss using the effective interest method.
Foreign currency Foreign currency transactions Transactions in foreign currencies are translated to the respective functional currencies at exchange rates at the date of the transaction.
Foreign branches Foreign branches that have other functional currencies are translated to NOK by translating the income statement at average exchange rates for the period of activity, and by translating the balance sheet at exchange rates at the reporting date. Exchange differences are recognized as a separate component of equity. On disposal of the foreign operation, the cumulative amount of the exchange difference recognized in other comprehensive income relating to that foreign branch is recognized in profit of loss, when the gain or loss on disposal is recognized.
Goodwill acquired in acquisition of portfolios is not amortised, but is tested for impairment annually or more frequently, when indications of impairment losses exist.
Recoverable amount is the greater of the fair value less costs to sell and value in use. In assessing value in use, estimated future cash flows are discounted to present value using a pre-tax discount rate that reflects the time value of money and the risks specific to the asset. For the purpose of impairment testing, assets
150 | Gjensidige annual report 2013 are grouped together into the smallest group of assets generating cash inflows that are largely independent of cash inflows from other assets or groups of assets (cash-generating unit). Goodwill is allocated to the cash-generating unit expecting to benefit from the acquisition.
Impairment losses are recognized in profit or loss if the carrying amount of an asset or cash-generating unit exceeds its estimated recoverable amount. Impairment losses recognized in respect of cash-generating units are allocated­ first to the carrying amount of goodwill and then proportionally to the carrying amount of each asset in the cash-generating unit. Previously recognized impairment losses are reversed if the prerequisites for impairment losses are no longer present. Impairment losses will only be reversed if the recoverable amount does not exceed the amount that would have been the carrying amount at the time of the reversal if the impairment loss had not been recognized.
Restructuring Provision for restructuring are recognized when the company has approved a detailed and formal restructuring plan which has commenced or has been announced. Provisions are not made for future expenses attributed to the operations.
Share-based payment The fair value of share-based payment arrangements allocated to employees is at the time of allocation recognized as personnel costs, with a corresponding increase in equity. Share-based payment arrangements which are recovered immediately are recognized 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 recognized shall be based on the number of equity instruments that eventually vest. Non-vesting conditions are reflected in the measurement of fair value, and no adjustment of the amount recognized as expenses is done upon failing to meet such conditions.
Current and deferred tax Current tax and deferred tax are recognized as an expense or income in the income statement, with the exception of deferred tax on items that are recognized in other comprehensive income, where the tax is recognized in other comprehensive income, or in cases where deferred tax arises as a result of a business combination. For business combinations, deferred tax is calculated on the difference between fair value of the acquired assets and liabilities and their carrying amount. Goodwill is recognized without provision for deferred tax.
Other earned equity Other earned equity consists of this year’s and previous year’s retained earnings that are not disposed to other purposes and includes provisions for compulsory funds (Natural perils fund, guarantee scheme).
Dividend on own shares is deducted in the statement of changes in equity.
Underwriting result Gross premiums written 1,581.2 2,152.7 1,344.7 622.7 722.0 510.0 683.0 249.6 108.0 50.7 61.6 479.2 133.8 1,833.7 9,188.3
Gross premiums earned 1,523.2 2,131.1 1,339.9 645.8 694.2 481.6 686.1 246.3 101.9 51.6 60.1 495.3 112.5 1,833.1 9,062.6 Gross claims incurred (1,309.0) (1,619.6) (1,057.3) (492.8) (564.5) (265.4) (473.5) (181.1) (74.5) (30.3) (19.7) (343.8) (77.4) (1,199.6) (6,651.1) Operating expenses gross (185.6) (382.2) (230.1) (139.1) (91.0) (60.6) (68.1) (25.4) (13.3) (8.0) (9.3) (41.0) (10.7) (291.3) (1,325.6) Underwriting result 28.6 129.4 52.5 13.9 38.7 155.6 144.5 39.7 14.1 13.3 31.1 110.5 24.4 342.2 1,085.9
Gross claims incurred Incurred during the year (1,264.3) (1,658.4) (1,044.3) (493.8) (550.5) (284.7) (510.3) (190.0) (72.1) (41.3) (20.8) (425.0) (85.3) (1,226.0) (6,822.4) Incurred previous years (44.8) 38.8 (13.0) 1.0 (14.0) 19.3 36.8 8.9 (2.4) 11.0 1.0 81.2 7.9 26.4 171.2 Gross claims incurred (1,309.0) (1,619.6) (1,057.3) (492.8) (564.5) (265.4) (473.5) (181.1) (74.5) (30.3) (19.7) (343.8) (77.4) (1,199.6) (6,651.2)
Gross premiums earned 189.4 189.4 788.6 187.2 975.8 260.4 18,642.1 Gross claims incurred (109.0) (0.4) (109.4) (765.9) (129.0) (894.9) (362.8) (13,665.2) Operating expenses gross (29.2) (0.3) (29.5) (96.3) (3.7) (100.0) (2,750.2)
Gross claims incurred Incurred during the year (96.9) (96.9) (766.0) (128.7) (894.7) (338.3) (13,856.2) Incurred previous years (12.1) (0.4) (12.5) 0.1 (0.3) (0.2) (24.5) 190.9
Cost As at 1 January 2012 1,262.0 426.5 61.6 419.1 53.0 2,222.2 Additions 23.9 23.9 Additions from internal development 109.1 109.1 Disposals (57.0) (57.0) Exchange differences (52.0) (18.7) (2.9) (6.0) (3.0) (82.6)
As at 31 December 2012 1,210.0 407.8 58.7 489.0 50.0 2,215.5 Uncompleted projects 116.5 116.5 As at 31 December 2012, including uncompleted projects 1,210.0 407.8 58.7 605.5 50.0 2,332.0
Carrying amount As at 1 January 2012 1,162.0 324.7 42.4 282.9 39.1 1,851.1
Cost As at 1 January 2013 1,210.0 407.8 58.7 489.0 50.0 2,215.5 Additions through merger 92.5 24.5 11.3 8.5 33.3 170.0 Additions 26.8 26.8 Additions through business combinations 40.2 23.9 12.1 14.5 90.6 Additions from internal development 112.0 112.0 Disposals/reclassifications (52.0) (124.3) (50.0) (226.3) Exchange differences 146.0 49.1 5.5 26.6 5.3 232.6
As at 31 December 2013 1,488.7 505.2 35.6 538.6 53.1 2,621.2 Uncompleted projects 111.1 111.1 As at 31 December 2013, including uncompleted projects 1,488.7 505.2 35.6 649.7 53.1 2,732.3
Carrying amount As at 1 January 2013 1,110.0 273.7 32.4 346.6 31.4 1,794.1
Impairment testing of goodwill The carrying amount of goodwill in the company as at 31 December 2013 is NOK 1,388.7 million. See table.
Gouda portfolio 2 42.1 Gjensidige Forsikring, Swedish branch 177.4 160.7 Gjensidige Forsikring, White label 128.7 128.7 1 Merged with Gjensidige Forsikring, Danish branch from 1 January 2013.
Level of combined ratio (CR) The expected CR level is both in the growth period and when estimating the terminal value considered to be from 83.2 to 99.7.
Discount rate The discount rate is before tax, and is composed of a risk-free interest rate, a risk premium and a market beta. The risk-free rate is equivalent to a ten-year interest rate on government bonds in the respective countries where the subsidiaries and branches operate in. In addition a risk premium of 6.0 percentage points in Denmark and Sweden.
Need for impairment app. NOK 68 million No need for impairment No need for impairment Need for impairment app. NOK 91 million Gjensidige Forsikring, Swedish branch No need for impairment No need for impairment No need for impairment No need for impairment
160 | Gjensidige annual report 2013 6. Shares in subsidiaries and associates
NOK million Assets Equity Liabilities Revenues 3 Profit/(loss) Share of stock value
The investment in SpareBank 1 SR-Bank ASA is classified as investments in an associate and is carried at cost. Gjensidige Forsikring ASA owns 10.4 per cent of the equity in the bank, and has not, based solely on the interest held alone, significant influence. However, the company is represented in both the board in SpareBank 1 SR-Bank ASA and the nomination committee. This gives Gjensidige Forsikring ASA significant influence and thus the opportunity to participate in the financial and operational decisions of the bank.
Gjensidige Forsikring ASA also owns bonds issued by SpareBank 1 SR-Bank ASA. The carrying amount of these bonds is NOK 96.1 million.
Gjensidige Forsikring ASA sold 4.2 per cent of its interest in Storebrand ASA for an amount of NOK 660 million. This yielded a gain of NOK 209.6 million in Gjensidige Forsikring ASA's financial statement. In the group, where Storebrand ASA is recognized according to the equity method, the gain amounted to NOK 35.3 million.
162 | Gjensidige annual report 2013 7. Owner-occupied property, plant and equipment
As at 31 December 2012, including uncompleted projects 113.6 513.7 627.3
As at 1 January 2013 113.5 478.5 592.0 Additions through business combinations 0.4 0.4 Additions 3.6 43.1 46.7 Disposals (84.0) (84.0) Exchange differences 5.3 5.3
As at 31 December 2013 117.0 443.2 560.3 Uncompleted projects 136.1 136.1
As at 31 December 2013, including uncompleted projects 117.0 579.3 696.3
Below the different valuation levels and which financial assets /liabilities are included in the respective levels are accounted for.
The valuation process for financial assets classified as level three In consultation with the Investment Performance and Risk Measurement department, the Chief Investment Officer decides which valuation models will be used when valuing financial assets classified as level three in the valuation hierarchy. The models are evaluated as required. The fair value and results of the investments and compliance with the stipulated limits are reported weekly to the Chief Financial Officer and Chief Executive Officer, and monthly to the Board.
Financial assets held to maturity Bonds held to maturity 4,567.0 4,782.6 8,521.2 8,656.8
Financial liabilities Financial derivatives Financial derivatives at fair value through profit or loss 245.2 245.2 45.3 45.3 Financial derivatives subject to hedge accounting 76.3 76.3
Financial liabilities at amortised cost Other liabilities 15 833.8 833.8 809.1 809.1 Liabilities related to direct insurance and reinsurance 438.5 438.5 289.2 289.2 Accrued expenses and deferred income 15 237.8 237.8 191.5 191.5 Liabilities within the group 21 153.9 153.9 11.0 11.0
Financial assets at amortised cost Bonds held to maturity 113.3 4,669.3 4,782.6 Bonds and other fixed income securities classified as loans and receivables 171.2 15,274.3 1.0 15,446.6
unrealized gains recognized in profit or loss that are attributable to instruments held as at 31.12.2013
unrealized gains recognized in profit or loss that are attributable to instruments held as at 31.12.2012
Hedge accounting Net investment in the foreign operation Gjensidige Forsikring utilizes hedge accounting of currency exchange differences of the net investment in the foreign operation.
The net investment is hedged through designated currencyrelated contracts that are renewed every quarter at a principal equal to the value of the investment. In this way, the hedging efficiency is measured per hedging object. The credit risk associated with the hedging derivatives is within the limits of Gjensidige's credit policy.
Gjensidige annual report 2013 | 167 9. Investment properties Gjensidige Forsikring carries investment properties at fair value. Investment properties consist of commercial properties that are rented to tenants outside the Group, or are aquired in accordance with the company's capital management strategy. Properties used by Group companies are classified as owner-occupied property, see note 7. In properties that are both rented to tenants outside the Group and that are used by the Group's own business, the parts held for rent that can be sectioned are classified as investment property.
Financial income and expenses from investment properties are shown in note 19.
There are no loans with collateral in investment properties in 2012 or 2013.
NOK million Market rent reduced by 10% Market rent as at 31.12.2013 Market rent increased by 10% Yield increases by 0.25 percentage point 158.0 171.4 184.9 Yield 7.30 per cent 163.4 177.3 191.2 Yield decreases by 0.25 percentage point 169.3 183.7 198.1
Other receivables Receivables in relation with asset management 243.4 99.2 Intercompany SOS International 31.2 28.2 Other receivables 84.9 58.1
Included in other loans are also NOK 214.9 (180.5) million regarding loans given with regard to sale of subsidiaries.
Deposits with financial institutions 154.0 365.0 Cash and bank deposits 848.2 837.6
Weighted average rate for interest earned on cash, bank deposits and deposits with financial institutions is approximately 1.9 per cent (2.6).
Other foreign shares IShares FTSE/Xinhua A50 China 97.2 ISHARES MSCI EUROPE 77.9 Den Danske Bank 12.9 Frontline 2012 Ltd 9.7 Volvo B 9.5
Private equity investments HitecVision Private Equity V LP 168.1 Northzone V KS 137.7 Norvestor V LP 92.0 Altor Fund II LP 89.6 HitecVision Private Equity IV LP 88.1 Argentum Secondary III 73.0 HitecVision Asset Solution KS 64.8 Argentum Secondary II 59.3 Energy Ventures III LP 51.1 Partners Group European Buyout 2005 (A) LP 48.4 SOS International A/S 46.6 Energy Ventures II B IS 42.8 FSN Capital II LP 42.6 Northzone IV KS 37.3 BaltCap PEF LP 37.2 Viking Venture III DIS 37.1 Verdane Capital VI KS 35.8 Argentum Sec Haniel EQT V IS 34.7 CapMan BO IX LP 33.8 HitecVision VI LP 30.4 Verdane Capital VII KS 29.5 LGT Crown European Private Equity PLC 29.1 Energy Ventures II KS 25.9 Norvestor VI LP 25.6 Nordic Additonal Funding Programme IS 24.8 Norvestor IV LP 24.7 Nordic PEP 1 IS (Altor fund III) 24.0 Northzone VI L.P. 22.4 NeoMed Innovation IV LP 19.0 Viking Venture II AS 18.6 Partners Group Direct Investments 2006 LP 17.5 Energy Ventures IV LP 12.6 Axcel IV 11.1 Verdane Capital V B KS 11.1 Viking Venture II B IS 8.9
Total shares and similar interests owned by Gjensidige Forsikring ASA 6,016.4
Claims reported and claims handling costs 14,252.4 11,395.7 Claims incurred, but not reported 16,794.4 13,810.1
Claims reported and claims handling costs 591.3 550.0 Claims incurred, but not reported 103.2 62.7
Claims and claims handling costs Claims reported and claims handling costs 11,395.7 (550.0) 10,845.8 12,104.8 (817.1) 11,287.7 Claims incurred, but not reported 13,810.1 (62.7) 13,747.4 13,376.3 (143.3) 13,233.0
Claims reported and claims handling costs 14,252.4 (591.3) 13,661.1 11,395.7 (550.0) 10,845.8 Claims incurred, but not reported 16,794.4 (103.2) 16,691.2 13,810.1 (62.7) 13,747.4
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.
The discount rate used is the swap rate, which improves consistency between the valuation of assets and liabilities. Previously, a discount rate determined by Finanstilsynet (the Financial Supervisory Authority) in Denmark was used, but this was changed when Gjensidige Arbejdsskadeforsikring was set under supervision by Norwegian authority in the fourth quarter. The applied swap rate is consistent with market practice for the valuation of liabilities.
Contributions to the defined contribution plan are recognized as an expense in the year the contribution is paid.
Recognition Pension liabilities are valued at the present value of the future pension benefits that, for accounting purposes, are deemed to have been accrued on the reporting date. Future pension benefits are calculated on the basis of the expected salary at the time of retirement. The estimated liability on the reporting date is used when measuring the accrued pension liability. Pension assets are valued at market value (transfer value). The estimated value on the reporting date is used for the valuation of pension assets. The net pension liability is the difference between the present value of the pension liability and the value of the pension assets. A provision is made for employer’s National Insurance contributions during periods when underfunding arise. The net pension liability is shown in the balance sheet on the line for Pension liabilities.
Gjensidige uses GAP07, which is a dynamic mortality model that takes account of the expected development in life expectancy. The assumptions on which the model is based are tested at regular intervals, most recently in summer 2013.
Gjensidige is entitled to change the defined benefit plan. An official report is expected to be presented in 2014. It will be reviewed and considered.
Wage growth Future pension benefits depend on future wage growth and the development of the National Insurance basic amount (G). If wage growth for the Company’s employees is lower than the increase in G, the benefits will be reduced. The Group assumes that wage growth is age-dependent. A younger employee can expect higher annual wage growth than an older employee.
If the administrator of the AFP plan presents such allocation figures, this could result in the plan being recognized as a defined benefit plan. It is difficult, however, to arrive at an allocation key that is acceptable to the Group. An allocation key based on the Group’s share of total annual pay will not be acceptable since such a key is too simple and will not reflect the financial liabilities in a good manner. Given the way the financing structure relating to the AFP plan is organised, invoiced premiums are expected to increase in the years ahead. If, or when, sufficient data are made available for calculations to be made, it cannot be ruled out that the liability that must be recognized will be substantial.
Amount recognized in the balance sheet Present value of unfunded plans 416.3 410.6 Present value of funded plans 2,048.9 2,020.8 Present value of the defined benefit obligation 2,465.1 2,431.3
Fair value of plan assets As at 1 January 2,317.4 2,076.9 Interest income 98.5 93.0 Return beyond interest income 48.7 93.7 Contributions by the employer 6.9 165.1 Benefits paid (86.6) (82.6) Employers' national insurance contributions of benefits paid (6.9) (27.7)
The expense is recognized in the following line in the income statement Insurance-related adm. expenses including provisions for received reinsurance and sales expenses 43.9 49.0
Remeasurements of the net defined benefit liability/asset recognized in other comprehensive income Cumulative amount as at 1 January (1,825.1) (2,447.5) Recognized during the period 19.3 623.8 Exchange rate differences 1.0 (0.4)
Shares and similar interests 121.3 121.3 Bonds 64.2 2,128.4 2,192.6 Derivatives 61.8 61.8 Bank 2.4 2.4
176 | Gjensidige annual report 2013 15. Provisions and other liabilities
Provision as at 31 December 25.4 57.2 1 There has not been any new provisions for restructuring or reorganization projects in 2013. In 2012, a provision of 9.0 million to the Motor and Property Claims was deposited. This provision is reversed as needed restructuring was carried out through natural attrition.
Total tax expense (666.8) (1,273.4) Effective rate of income tax 17.4% 24.7%
Change in deferred tax recognized directly in the balance sheet Pensions 23.5 174.7 Hedge accounting (18.0) 0.3 Exchange differences (0.8) (0.1) Other changes (36.2)
Deferred tax liabilites/(deferred tax assets) as at 31 December 212.7 199.6
Depreciation and value adjustments (note 5 and note 7), excl. depreciation properties 223.6 204.9 Employee benefit expenses (note 18) 1,783.2 1,649.9 Fee for customer representatives 4.6 4.7 Software costs 309.1 326.9 Auditor’s fee (incl. VAT) 5.5 6.1 Consultants’ and lawyers’ fees 107.0 106.6 Commissions 410.5 376.0 Other expenses 1 (93.3) (111.3)
Employee benefit expenses Wages and salaries 1,343.8 1,234.0 Social security cost 267.9 261.4 Pension cost - defined benefit plan (note 14 incl. employers national insurance contribution) 118.3 99.6 Pension cost - defined contribution plan (note 14 incl. employers national insurance contributions) 43.9 49.0 Stock purchase offering for employees 9.3 5.9
Gjensidige annual report 2013 | 179 18. Salaries and remuneration The average number of employees in Gjensidige Forsikring ASA was 2,747 (2,517).
Guidelines for remuneration and career development shall be linked to achievement of the Group’s strategic and financial goals and core values, and both quantitative and qualitative targets shall be taken into consideration. The measurement criteria shall promote the desired corporate culture and long-term value creation, and, as far as possible, take actual capital costs into account.
The remuneration system shall contribute to promoting and providing incentives for good risk management, prevent excessive risk-taking and contribute to avoiding conflicts of interest. A fixed basic salary shall be the main element of the overall remuneration, which also consists of variable pay, pension and payments in kind. Variable pay shall be used to reward performances beyond the expected, where both results and behaviour in form of compliance of with the company values, brand and management principles are to be assessed.
The remuneration committee shall prepare matters for consideration by the Board. It is primarily responsible for
• Considering the management’s proposed ‘Statement on the stipulation of pay and other remuneration for executive personnel’ cf. the Public Limited Liability Companies Act section 6-16a
Guidelines for the upcoming financial year Remuneration of the CEO The CEO’s salary and other benefits are stipulated by the Board on the basis of an overall assessment that takes into account Gjensidige’s remuneration scheme and market salary for corresponding positions.
Variable remuneration relating to Gjensidige’s performance is decided on the basis of the past two years’ performance. Half of the variable remuneration is paid in the form of a promise of shares in Gjensidige Forsikring ASA, one third of which will be released in each of the following three years. Restricted variable remuneration that has not yet been disbursed may be reduced if subsequent results and developments indicate that it was based on incorrect assumptions. The CEO does not receive performancebased benefits over and above the above-mentioned bonus, but may receive payments in kind such as a company car and the coverage of costs for electronic communication. Payments in kind shall be related to the CEO’s function in the Group, and otherwise be in line with market practice.
180 | Gjensidige annual report 2013 ratio, the business unit in question and an evaluation of the person in question’s personal contribution, including an overall assessment relating to compliance with the Group’s vision, values, ethical guidelines and management principles. Half of the variable remuneration is in the form of a promise of shares in Gjensidige Forsikring ASA, one third of which are released in each of the following three years. Restricted variable remuneration that has not yet been disbursed may be reduced if subsequent results and developments indicate that it was based on incorrect assumptions.
The retirement age for members of the senior group management is as a main rule 62, but one member of the group management has a retirement age of 70, in accordance with the national labour legislation. Of the current members of the senior group management, four are members of the closed Norwegian defined -benefit pension scheme. Given the full earnings period, they are entitled to a pension of 70 per cent of final salary. Five members are part of the Company’s defined-contribution pension scheme. The Company continues a previously agreed individual pension agreement for one member of the senior group management.
Hege Yli Melhus, Executive Vice President 2,393.2 341.2 156.0 146.7 142.2 4,114 1,564 7,694 4,510 3
Mats C. Gottschalk, Executive Vice President 2,637.2 373.0 150.0 199.6 4,510 5,014 3,572 3
Inge K. Hansen, Chairman 492.5 12.7 12,253 Trond V. Andersen 251.5 11.1 1,778 Hans-Erik Andersson 8 365.0 6.0 1,778 Mari T. Skjærstad 251.5 6.0 Gisele Marchand 9 332.5 1,481 Gunnhild H. Andersen, staff representative 5 245.0 785
Kjetil Kristensen, staff representative 5, 9 332.5 526 Gunnar Mjåtvedt, staff representative 5, 9 332.5 1,820
Kim Rud-Petersen, Executive Vice President 2,415.8 388.3 144.4 190.4 2,867 2,867 2,983
Tore Vågsmyr, staff representative 6 655 Inger-Lise Bratsberg, staff representative (23.11.12-31.12.12) 1,6 1,952
Bjørn Iversen, Chairman 143.5 1.5 890 Kirsten Indgjerd Værdal, Deputy Chairman (1.1.12-19.4.12) 1 35.5
Net income and gains/(losses) from investments in subsidiaries and associated companies Net income from investments in subsidiaries and associated companies 270.2 515.5 Impairment investments in subsidiaries and associated companies (139.5) Net gains/(losses) from sale of investments in subsidiaries and associated companies 209.6
Net income and gains/(losses) from buildings and other real estate Investment properties Rental income from investment properties, excl. unrealized gains/(losses) 16.5 22.6 Net revaluation investment properties (8.3) 3.0 Net gains/(losses) from sale of investment properties 20.0 Administration expenses related to investment properties (2.9) (4.3)
Net income and gains/(losses) from financial assets at fair value through profit or loss, designated Shares and similar interests Dividend income 72.4 167.5 Unrealized gains/(losses) from shares and similar interests 609.8 56.1 Realized gains/(losses) from shares and similar interests 269.0 158.6
Total net income and gains/(losses) from shares and similar interests 951.1 382.1
Bonds and other fixed-income securities Net interest income/(expenses) from bonds and other fixed-income-securities 301.0 287.3 Unrealized gains/(losses) from bonds and other fixed-income securities 240.1 (136.5) Realized gains/(losses) from bonds and other fixed-income securities (108.9) 290.1
Total net income and gains/(losses) from financial assets at fair value through profit or loss, designated 460.4 1,411.8
Total net income and gains/(losses) from bonds held to maturity 384.0 482.3
Net income and gains/(losses) from loans and receivables Net interest income/(expenses) from loans and receivables 752.8 587.0 Net gains/(losses) from loans and receivables 3.5 (2.0) Net gains/(losses) from changes in exchange rates on loans and receivables 11.9 (2.0)
Specifications Interest income and expenses from financial assets and liabilities not recognized at fair value through profit or loss Interest income from financial assets not recognized at fair value through profit or loss 1,148.9 1,079.3 1 Net other financial income/(expenses) include financial income and expenses not attributable to individual classes of financial assets or liabilities, and financial administration costs.
As part of its ongoing financial management, the Company has undertaken to invest up to NOK 1,100.6 million (1,158.3) in various private equity and real estate investments, over and above amounts recognized in the balance sheet. Investments in private equity and real estate funds totaled NOK 1,823.3 million (1,623.9) at the end of the year.
Subsidiaries Byggeriet Forsikringsservice A/S Copenhagen, Denmark 100.0% Gjensidige Baltic AAS Riga, Latvia 100.0% Gjensidige Bank Holding AS Oslo, Norway 100.0% Gjensidige Norge AS Oslo, Norway 100.0% Gjensidige Pensjon og Sparing Holding AS Oslo, Norway 100.0% Lokal Forsikring AS Oslo, Norway 100.0% Nordisk Forsikrings Service AS Copenhagen, Denmark 100.0% Nykredit Forsikring A/S Copenhagen, Denmark 100.0% Oslo Areal AS Oslo, Norge 100.0% Samtrygd Eigedom AS Førde, Norway 100.0% Strandtorget Eiendom AS Oslo, Norway 100.0%
Associates Bilskadeinstituttet AS Oslo, Norway 29.5% SpareBank1 SR-Bank ASA 1 Stavanger, Norway 10.4% Storebrand ASA Oslo, Norway 20.1% Vervet AS Tromsø, Norway 25.0%
Change in gross provision for claims Gjensidige Baltic AAS 2.2 9.5 Nykredit Forsikring A/S 173.7 18.1
Gjensidige Pensjon og Sparing Holding AS 8.3 9.6 Gjensidige Pensjonsforsikring AS (owned by Gjensidige Pensjon og Sparing Holding AS) 37.9 36.6 Gjensidige Fondene AS (owned by Gjensidige Pensjon og Sparing Holding AS) 0.3 Glitne Invest AS (liquidated in 2012) 0.2 Nordisk Forsikrings Service AS 22.2 Nykredit Forsikring A/S 86.1 75.7 Oslo Areal AS 0.3 1.3 0.2 2.0 Tennant Assuranse AS 17.9 17.7
Loans As at 31 December 2013 employees have loans in Gjensidige Bank amounting to NOK 1,352.2 million (941.7). The loans are offered on normal commercial conditions.
Gjensidige Fondene AS (owned by Gjensidige Pensjon og Sparing Holding AS) 4.8 Glitne Invest AS (received group contribution relates to change in received group contribution for 2011) 4.5
Lokal Forsikring AS 0.0 Oslo Areal AS (given group contribution relates to change in received group contribution for 2011) 75.0 58.1
Gains and losses in connection with sale and liquidation Glitne Invest AS (liquidated in 2012) 237.8 Storebrand ASA 209.6
Claims provision Gjensidige Baltic AAS 23.9 2.2 Nykredit Forsikring A/S 643.1
Equity 16,283.1 19,513.6 Effect of guarantee scheme provision and Natural perils fund (2,797.8) (3,011.4) Goodwill (1,388.7) (1,110.0) Other intangible assets (763.0) (684.0) Reinsurance provision, minimum requirement (11.5) (11.5)
Primary capital 11,322.1 14,696.6 Primary capital in other financial institutions (108.5) (108.5)
Assets with 0% risk weight Assets with 10% risk weight 169.4 177.0 Assets with 20% risk weight 4,697.8 4,047.2 Assets with 35% risk weight 0.2 0.2 Assets with 50% risk weight 711.4 958.3 Assets with 100% risk weight 31,070.3 30,258.0 Assets with 150% risk weight 2,568.9 2,265.2
Weighted reinvestment cost derivatives 61.1 46.6 Primary capital in other financial institutions (108.5) (108.5)
The shareholder list is based on the VPS shareholder registry as of 31 December 2013. A shareholder list showing the owners behind nominee accounts can be found on page 21.
Share-based remuneration for key personnel 6.2 4.0 Share savings programme for employees 3.1 1.8
The number of shares Outstanding 1 January 29,123 27,441 Granted during the period 29,561 27,721 29,123 27,441 Forfeited during the period (9,704) (9,144) Cancelled during the period Exercised during the period Expired during the period Modification dividend during the period 3,514 3,365
The consolidated accounts have been prepared in accordance with the EU-approved International Financial Reporting Standards (IFRS) and interpretations, together with the additional disclosure requirements that derive from the Regulations concerning annual accounts for insurance companies pursuant to the Norwegian Accounting Act and that shall be adopted as per 31 December 2013. The annual accounts for the parent company were submitted in accordance with the Accounting Act and the Regulations concerning annual accounts for insurance companies as per 31 December 2013. The Board’s Report for the Group and the parent company is in accordance with the requirements of the Accounting Act and Norwegian Accounting Standard no. 16 as per 31 December 2013.
Sørkedalsveien 6 Internet www.kpmg.no N-0306 Oslo Enterprise 935 174 627 MVA
Haugesund Knarvik Kristiansand Larvik Mo i Rana Molde Narvik Røros Sandefjord
The Board of Directors and the Group Managing Director’s Responsibility for the Financial Statements The Board of Directors and the Group Managing Director are responsible for the preparation and fair presentation of the parent company financial statements in accordance with the Norwegian Accounting Act and the regulations concerning annual accounts for insurance companies, and for the consolidated financial statements in accordance with International Financial Reporting Standards as adopted by the EU, and in addition, the further disclosure requirements as required by the regulations concerning annual accounts for insurance companies under provisions of the Norwegian Accounting Act, and for such internal control as the Board of Directors and the Group Managing Director determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.
Report on Other Legal and Regulatory Requirements Opinion on the Board of Directors’ report and the statements on Corporate Governance and Corporate Social Responsibility Based on our audit of the financial statements as described above, it is our opinion that the information presented in the Board of Directors’ report and in the statements on Corporate Governance and Corporate Social Responsibility concerning the financial statements, the going concern assumption and the proposal for the allocation of the profit is consistent with the financial statements and complies with the law and regulations.
Arne Frogner State Authorized Public Accountant [Translation has been made for information purposes only]
Gjensidige is a leading Nordic insurance group built by customers, for customers. The Group has been listed on the Oslo Stock Exchange since 2010. For nearly 200 years, we have worked passionately to secure the lives, health and assets of our customers. We have about 3,400 employees and offer insurance products in Norway, Denmark, Sweden and the Baltic states. In Norway, we also offer retail bank, pension and savings. Operating income was NOK 20.9 billion in 2013, while total assets was NOK 108.9 billion.
Gjensidige Forsikring ASA Schweigaardsgate 21, 0191 Oslo P.O.Box 700, Sentrum, 0106 Oslo