March Gjensidige entered into an agreement concerning the acquisition of Nykredit Forsikring in Denmark.
Gjensidige applied for listing on Oslo Børs (the Oslo Stock Exchange).
FINANCIAL CALENDAR 2010 27 April General meeting 12 May Q1-result Silent period starting 14 April 11 August Q2-result Silent period starting 14 July 10 November Q3-result Silent period starting 13 October
during the last decade, gjensidige was transformed from a group of co-operating mutual companies and mutual fire insurers into a modern general insurance group.
general insurance operations are and will continue to be the core of gjensidige. in order to support the norwegian general insurance operations, banking, health and pension and savings products are also offered in the norwegian market. these are relation-building products that help improve customer loyalty.
starting in 2006, the operations were expanded to also include general insurance in denmark, sweden and the Baltic states. these foreign investments shall mainly contribute to the norwegian general insurance operations through economies of scale. the acquisition of nykredit Forsikring in denmark in the spring of 2010 was a significant expansion of our nordic operations and has turned gjensidige into a major player in denmark with a market share of around six per cent. this acquisition also signifies a breakthrough for our nordic and Baltic strategy. about 25 per cent of the general insurance revenues now come from foreign operations.
We can only ensure satisfied customers in the future as well through continued simplification and improvement. this makes great demands on continued innovation with regard to places where we may meet the customers. this is where our continuing efforts to promote customer orientation and our efforts to create the right gjensidige experience are important.
a dizzying technological development is going on all around us. a few years ago, who could have foreseen the exciting opportunities that are offered through new mobile platforms for interaction between us and our customers? e-readers such as ipad and its competitors are sold in substantial quantities in norway as well. this is an example of how rapidly and intensively our customers adapt to new trends and change their customer behaviour.
gjensidige’s employees are distinguished by a high level of expertise, the ability to implement changes and a stamina that earns them much respect. there is every reason to thank the individual employee for the efforts that have been made and that have created the overall profit for 2010. in connection with the stock exchange listing, nearly fifty per cent of the employees in norway, sweden and denmark became shareholders in the company. this testifies to their loyalty and their great faith in the Company.
the academy has overall responsibility for both management and employee development. after train ing and an examination, 460 of the group’s salespersons and advisers were approved or authorised in various roles. gjensidige shall arrange matters as favourably as possible, but regardless of his/her position and role, the individual employee must take independent responsibility for developing his/her own knowledge and improving the skills that are required.
the group has ambitious return and profitability requirements, which will require a focused further development and further modernisation of the whole gjensidige group. We must have standardised processes and comprehensive solutions that apply across national boundaries and in all of our business areas. the group must emerge as one gjensidige both in norway and abroad.
gjensidige has targeted a clear objective of achieving a combined ratio between 90 and 93 starting in 2011. this objective requires a continued strong awareness associated with developing cost-effective solutions in all of our business areas.
gjensidige will be an active participant in the ongoing structural changes that will occur in the nordic general insurance market in the coming years. one necessary condition for participating actively is access to necessary capital. the stock-exchange listing has given the group a security that can be used in acquisitions or in other ways of financing profitable growth.
gjensidige is a sound norwegian financial group and one of the leading players in general insurance in the nordic countries. gjensidige offers general insurance products in norway, sweden, denmark and the three Baltic states. in addition, it offers banking for private persons, pensions and savings products and health care services in norway.
gjensidige is one of norway’s best-known brands. Both the company logo and the Watchman have a high recognition factor. the roots of the general insurance operations can be traced back to the 1820s, while the Watchman has been the trademark for insurance business for more than 75 years. 2007 and 2008 saw the launch of the Watchman logo in the other countries where gjensidige offers insurance products. the group’s health care service has been branded Hjelp24.
gjensidige annual report 2010 5 perspective th is is gjen sidige the gjensidige experience gjensidige is one of the strongest brands in norway in any business sector. gjensidige shall develop this brand strength further as the brand becomes a more significant nordic and Baltic player. through its brand building, gjensidige shall develop a clear, business-oriented brand position in the Baltic states, sweden and denmark as well as in norway.
gjensidige has wanted to optimise the connection between the Company’s business development and its brand management. the core of this work has been combining the Company’s strategic choices and customer orientation with the brand building of the Company. the development of the gjensidige experience is a key factor in these efforts.
gjensidige has established a common framework for the group’s customer orientation – the gjensidige experience, with the four organisational principles: • We keep our promises • We always provide quality • We make the complicated simple • We ensure that the customer is satisfied these four principles shall provide clear guidelines for the organisation and act as guiding principles for gjensidige’s customer-oriented value added and development.
preserving security the roots of today’s gjensidige group can be traced back to the inner parts of eastern norway in the years around 1820, when lands private Brandassuranceforening was founded as the first mutual fire insurer. By 1920, the number of mutual fire insurers had increased to 260. the group’s life insurance business can be traced back to the establishment of Christiania almindelige gjensidige Forsørgelsesanstalt in 1847.
the Company offered insurance directly to the market. at the same time, the insurance cover and range of products were expanded. the new products were also sold through the mutual fire insurers and gave them the possibility of covering the entire need for insurance in their local markets.
gjensidige had evolved into a financial group with a full range of general and life insurance, pension and other financial services as well as online internet banking services.
gjensidige annual report 2010 9 perspective th is is gjen sidige gjensidige Forsikring Ba was converted into a public limited company (asa). at the same time, the gjensidige Foundation was converted into a financial foundation and became the owner of all of the shares in the group. gjensidige Forsikring asa was listed on the stock exchange in december. the gjensidige Foundation sold nearly 40 per cent of its shares..
the group acquired Falck and became active in the norwegian health service market.
gjensidige nor was divided into two cooperating groups, the general insurance group, gjensidige nor Forsikring and the stockexchange -listed banking and life insurance company, gjensidige nor asa.
the cooperative agree ment between gjensidige and dnB nor was terminated. gjensidige expanded its geographical area to include denmark, sweden and the Baltic states.
restated earned premiums, general insurance noK million 17,063.3 15,660.4 15,481.9 14,848.0 13,188.6 other operating income noK million 1,727.5 1,010.3 989.5 481.5 320.2 net income from investments noK million 2,748.2 2,788.0 (258.7) 2,809.6 3,689.6
operating expenses, general insurance noK million (2,810.4) (2,771.5) (2,638.3) (2,598.9) (2,487.1)
Combined ratio, net of reinsurance 3 per cent 95.3% 94.8% 94.4% 96.3% 94.9%
restated provisions for unearned premiums, gross noK million 9,078.3 7,671.7 6,760.9 6,060.2 5,737.9
Claims provisions, gross noK million 28,339.3 25,857.2 25,561.5 23,147.1 17,556.7 total equity and liabilities noK million 84,106.8 74,868.9 65,551.4 58,159.9 47,112.7 solvency margin capital 7 noK million 15,471.1 17,081.4 15,409.3 13,423.5 14,760.3
NOK million solvency margin capital = net subordinated capital including share of security provisions (based on the company accounts for gjensidige Forsikring asa)
Combined ratio, net of reinsurance = loss ratio, net of reinsurance + Cost ratio, net of reinsurance return on equity = profit before tax expense / average equity for the period.
gjensidige annual report 2010 11 perspective th is is gjen sidige sickness absence, gjensidige Forsikring per cent 5.2 5.0 6.1 5.7 5.0 turnover of employees, gjensidige Forsikring per cent 11.6 11.4 12.6 19.6 10.0 average age, gjensidige Forsikring Year 44.4 44.6 45.1 45.7 45.9 average amount spent on skills development per employee noK 10,420 10,000 5,400 9,300 10,000 participation in a training programme days 6,200 3,231 4,756 2,485 2,500 deFinitions: 1. underwriting-result, general insurance = earned premiums, net of reinsurance - claims incurred etc – operating expenses 2. run-off result, general insurance = change in estimates from earlier periods 3. Combined ratio, net of reinsurance = claims ratio, net of reinsurance + cost ratio, net of reinsurance 4. loss ratio, net of reinsurance = claims incurred etc. / earned premium, net of reinsurance 5. Cost ratio, net of reinsurance = operating expenses / earned premium, net of reinsurance 6. investment portfolio = includes all investment funds in the group, except pension and savings and online retail banking 7. solvency margin capital = net subordinated capital including share of security provisions (based on the company accounts for gjensidige Forsikring asa in accordance with ngaap) 8. solvency margin is calculated at company level according to regulations from the Financial supervisory authority of norway. 9. Capital adequacy ratio = net subordinated capital / risk-weighted calculation basis (based on the consolidated accounts in accordance with ngaap). 10. return on financial assets = net financial income as a percentage of the average financial assets including property (excluding pensions and savings and online retail banking) 11. return on equity = profit before tax / average equity for the period non-FinAnciAl key Figures
the group’s focus on the relation-building support areas of banking, pension and savings, and health services shall strengthen the group’s competi tiveness and help develop gjensidige as a customer-centric player. the group’s substantial customer base represents a unique opportunity to succeed with profitable growth through the cross sale of new services to insurance customers. a diversified product portfolio will allow gjensidige to capitalise to a greater extent on the value of its existing customer base and distribution platform.
through growth in general insurance in the nordic countries and the Baltics, the group shall achieve economies of scale in the form of synergies that contribute to long-term value creation, increased competitiveness through the addition of new customers and greater risk diversification through a larger and more diversified portfolio. the cost synergies are especially achieved in the areas tArgets And strAtegy gjensidige’s overarching goal is to be a leading, profitable, customer-oriented general insurance company in the nordic market. general insurance operations are the group’s core operations.
of reinsurance, development and management of insurance products, common guidelines for underwriting, more efficient capital allocation and common iCt solutions.
in addition to organic growth, gjensidige will also attempt to grow in the coming years through the acquisition of other businesses that support the group’s growth strategy within its range of products and services and its geographical area, provided that the transactions support the group’s long-term return on equity requirements of 15 per cent before tax.
gjensidige is and shall be an attractive workplace that attracts, challenges and develops motivated and competent employees and managers. this will be achieved through a strong concentration on management and employee development, the development of good, fair reward models and a systematic effort to further develop the skills in the organisation.
gjensidige annual report 2010 13 perspective th is is gjen sidige
Combined ratio of 95.3 per cent in 2010 adjusted goal effective starting in 2011
Claims incurred reduction of noK 400 to 500 million (inflation adjusted) as of 2011 reduction from 2007-level delivered operating expences reduction of noK 300 to 400 million (inflation adjusted) as of 2011 reduction from 2007-level delivered pension And sAvings profitability goal of achieving break-even during 2011 an important criterion for achieving the goal is further growth in assets under management assets under management annual doubling goal for the period 2008-2010 increased by 104.5 per cent in 2010 online retAil BAnking profitability goal of achieving break-even during 2010 delivered
gjensidige annual report 2010 15 perspective o perAtio n s operAtions the operations in gjensidige are divided into seven business areas: general insurance private, Commercial, nordic and Baltic, pension and savings, online retail banking and Health care services. in addition to the seven business areas, the asset management function manages the group’s investment portfolio.
1 The distribution is based on earned premiums, net of reinsurance, excluding other income and elimination
geogrAphicAl expAnsion • expansion of the general insurance operations into denmark, sweden and the three Baltic states • established position through seven acquisitions in the period 2006-2010 • the private and commercial market in sweden and denmark • insurance to municipalities and municipal operations in norway, sweden and denmark • general insurance in all three of the Baltic states generAl insurAnce norWAy • general insurance is gjensidige’s core business • a complete supplier of general insurance products to private customers in norway and a full range of products in general insurance and insurances of the person to norwegian business and commerce
operaTions the business area private norway offers a broad range of insurance products and services: • accident and health (disability and accident insurances, sickness and treatment insurances, child insurances)
gjensidige also offers banking, savings and investment products to its private customers and is enjoying good customer growth in these product areas.
solid brand position gjensidige is positively distinguished from other companies by having the highest percentage among both its own customers and in the market in general, who think the Company fits the descriptions “reliable ” and “has satisfied and loyal customers” (source: Competitor and Brand survey 2010. synovate). For a player in a trust-based business sector, this is a very attractive position in which to be.
customer programme contributes to loyalty at year-end 2010, gjensidige had 859,500 private and agricultural customers. about 316,000 of these customers were included in the customer programme gjensidige Fordel, where the customers earn a number of benefits in addition to a customer discount based on their overall relationship with gjensidige.
in 2010, gjensidige renewed the agreements with the norwegian Farmers union, Ys, nito and tekna. the results are long-term agreements that provide a good basis for a further improved position in the organisational market in the coming years.
DisTribuTion channels gjensidige has a multi-channel strategy where products and services are distributed by phone, internetbased solutions and our local offices. the customer gets uniform service regardless of the channel.
insurance and financial offices gjensidige currently has in excess of 50 insurance offices distributed throughout the country. the insurance offices are responsible for functions where local knowledge, a one-on-one relationship and personal contact are appropriate. all of the insurance offices offer the full range of products from the group, but with different degrees of local specialist expertise. in 21 places where the customer base is sufficient, financial offices have been established with specialist expertise in the whole range of services.
loss ratio, net of reinsurance 2 76.1% 76.5% 73.3% 74.5% Cost ratio, net of reinsurance 3 14.4% 16.5% 16.9% 17.8% Combined ratio, net of reinsurance 4 90.5% 93.0% 90.2% 92.3%
gjensidige.no the Financial portal, gjensidige.no, is becoming a more and more important channel for gjensidige’s contact with private customers. the number of selfservice customers has undergone a steady growth in 2010, and more and more customers complete their purchases and service over the internet.
Agents and car dealers as a supplement to gjensidige’s own channels, products are distributed through agents, including banks, a large number of car dealers, estate agencies and other agencies.
Claims incurred, net of reinsurance came to noK 6,296.7 million in 2010, compared with noK 6,007.4 million in 2009. the loss ratio came to 76.1 in 2010, compared with 76.5 the previous year. Claims incurred for 2010 were affected by the frost at the beginning of the year, whereas claims incurred for 2009 were affected by a substantial bolstering of the actuarial reserves for the child insurance product.
the cost ratio came to 14.4 for 2010, a reduction of 2.1 percentage points relative to the previous year. nominally, the expenses were reduced by noK 101.9 million in 2010 relative to 2009. the reduction came as a result of the efficiency improvement efforts.
obJecTives anD sTraTeGies the business area shall support the group’s Cr objective of 90-93 starting in 2011: • the operations shall be made more efficient, and both claims incurred and operating expenses shall be further reduced.
gjensidige shall be the leading company when it comes to customer orientation: • differentiation through extreme customer orientation • the quality of service shall be increased at all points of contact with the customer • the products shall be further simplified and improved in order to improve the customer orientation.
* losses exceeding noK ten million ** rub-off gain/loss = actuarial gains and losses from earlier periods
Based on gross premiums written 2010 total non-marine insurance excluding insurances of the person.
product groups, privAte norWAy MArket shAres, privAte norWAy source: Customer satisfaction survey, self-initiated custumer analysis, conducted by norsk Kundebarometer/Bi.
operaTions gjensidige offers norwegian business and commerce a broad range of insurance solutions for: • accident and death (occupational injury insurance mandated by law, insurance in the event of other illnesses and accidents on the job and during leisure time, group life, treatment guarantee and travel insurance)
• property (including assets and operating losses) • liability (public liability, property damage liability, product liability and recall, directors’ and officers’ liability, crime insurance, legal expenses)
• Marine/cargo (coastal and fishing boat, building risk, aquaculture, insurance of goods under transport)
Market leader gjensidige is the market leader in the commercial segment, and at year-end 2010 it had a market share in the commercial segment of 29.8 per cent. this is somewhat lower (0.8 percentage points) than at year-end 2009.
the total market in the commercial segment decreased during 2010. the declining market is a result of considerable price competition between the major established players and many new minor players. in this situation, gjensidige has a responsibility as the market leader and will continue to consistently focus on profitability.
at year-end 2010, gjensidige had about 90,000 commercial customers. each company had an average of about 2.4 insurance products.
corporate customers/Brokers (kkM) KKM is a national relationship channel with brokers and norway’s largest enterprises. KKM has a high level of marketing and professional expertise with a strong focus on risk assessment and risk management. the service and servicing concept is based on relations with customers and brokers, a high level of professional expertise and often solutions that are specially adapted to meet the customers’ needs.
insurance offices Medium-sized and large corporate customers are served through gjensidige’s insurance offices, which are staffed with specialists in commercial insurance.
generAl insurAnce coMMerciAl norWAy in 2010, gjensidige has consolidated its position as the biggest player in the commercial market, with a market share of 29,8 per cent at year-end 2010. the Company’s solutions in insurance, pensions and health care provide security for life, health and business assets.
Gross premiums written 4,670.3 5,003.8 5,120.0 5,464.7 earned premiums, net of reinsurance 4,418.5 4,737.3 4,909.7 5,072.7 Claims incurred etc. (3,602.6) (3,819.0) (4,219.7) (4,331.4)
definitions: 1 underwriting result = earned premiums, net of reinsurance - claims incured etc. - operating expenses 2 loss ratio, net of reinurance = claims incurred / earned premiums, net of reinsurance 3 Cost ratio, net of reinurance = operating expenses / earned premiums, net of reinsurance 4 Combined ratio, net of reinurance = loss ratio, net of reinsurance + cost ratio, net of reinsurance
TarGeT areas in 2010 profitability also in 2010, the main focus has been on underlying profitability and quality requirements in the portfolio. some segments in the marine business have been completely discontinued. price adjustments have been implemented based on overall and customer-specific profitability. new security measures have been introduced for vulnerable individual business sectors, such as goldsmiths and watchmakers.
distribution of the full range of products distribution of savings and pension insurance through the traditional sales channels has been successful, with good profits in all sales channels. this model ensures a comprehensive service of our customers.
restructuring in the autumn of 2010, a major restructuring was carried out in order to improve both customer service and profitability in the commercial market. new organisation of sales and customer service will be operative during the first quarter of 2011.
the level of large losses* was somewhat lower in 2010 compared to 2009, and came to noK 189.5 million. (193.1). the run-off gain** in 2010 was somewhat higher compared with the run-off gain in 2009.
the trend with a high number of frequent claims in recent years makes further price increases necessary in some business sectors, but to a lesser extent than those that have already been implemented.
the combined ratio for 2010 was 94.4 per cent, compared with 93.6 in 2009. the underwriting result came to noK 245.8 million in 2010, compared with noK 305.0 million in the previous year.
obJecTives anD sTraTeGies the business area shall support the group’s Cr objective of 90-93 starting in 2011 through a continued focus on profitability and growth: • rebalancing the portfolio.
• improvement of pricing and rating. • stronger focus on the profitable sMe segment. • utilise the customer database to identify growth areas, including cross sales of pension and health products.
Further development of the distribution model: • improvement of processes and rationalisation.
• Further differentiation of the distribution model among different customer segments. efforts will be made to develop solutions that give increased access to self-service solutions on the internet.
Focus on customer orientation: • the quality of service shall be increased at all points of contact with the customer. • gjensidige shall be the market leader in customer service and customer satisfaction.
use of technology to automate internal and external processes provides new opportunities for cost cutting and forms of cooperation; e.g. with regard to the transfer of information from customer to service provider. it is expected that through increased accessibility of self-service solutions on the internet, the customers, especially those in small businesses, will transfer more of their transactions with the Company over to the internet.
generAl insurAnce nordic operaTions the majority of the nordic business is operated through swedish and danish branches of the parent company, gjensidige Forsikring asa. the exception is the business in the danish workinjury insurance company, which is organised as a separate company, gjensidiges arbejdsskadeforsikring, and nykredit Forsikring. it is an objective that the business in nykredit Forsikring in the long run is to be transferred to the danish branch. in addition, the group’s white label business is operated through the swedish subsidiary, tennant Försäkringsaktiebolag.
in connection with the acquisition of nykredit Forsikring, a long-term distribution agreement with the nykredit group was also signed. nykredit is one of denmark’s largest financial groups, with an extensive distribution network with 70 branch offices and the two estate agency chains, nybolig and estate, comprising about 310 offices in addition to a telephone-based customer centre.
nykredit distri butes general insurance on behalf of gjensidige to both the private and commercial markets.
sweden in sweden, general insurance products are distributed to private persons both directly by phone and internet and through insurance mediators (partners and agents). For the commercial market, the distribution is mainly through insurance brokers and partners
Gross premiums written 3,812.4 2,657.3 2,155.5 1,810.4 earned premiums, net of reinsurance 3,906.1 2,403.5 2,068.4 1,685.3 Claims incurred, net of reinsurance (3,252.0) (1,833.0) (1,604.4) (1,376.8)
amortisation – other intangible assets (226.5) (109.9) (85.3) (85.7) loss ratio, net of reinsurance 2 83.3% 76.3% 77.6% 81.7% Cost ratio, net of reinsurance 3 18.7% 17.4% 17.0% 21.4% Combined ratio, net of reinsurance 4 102.0% 93.6% 94.5% 103.1%
definitions: 1. underwriting result = earned premiums, net of reinsurance - claims incurred, etc. - operating expenses 2. loss ratio, net of reinsurance = claims incurred etc./earned premiums, net of reinsurance.
DoubleD MarKeT share anD siGnificanT increase in The DisTribuTion sysTeM effective 29 april 2010, gjensidige acquired the danish insurance company nykredit Forsikring for noK 2.7 billion. on the date of acquisition, the enterprise had 230,000 customers, gross earned premiums in excess of dKK 1.4 billion and about 320 employees. the acquisition increased gjensidige’s market share in the danish market from about 2.8 per cent to about 5.8 per cent (the danish insurance association, market shares as per 4th quarter 2009, last available statistics).
annual synergies of noK 226 million have been identified and will take full effect starting in 2014. these synergies mainly involve distribution, it, reinsurance, coordination of staff and support functions and implementation of gjensidige’s group functions. the integration efforts were initiated immediately after the acquisition, and they have already yielded significant results. at year-end 2010, more than 40 per cent of these synergies had already been exploited, primarily in connection with reinsurance, cutbacks of 120 employees and integration of it systems. the implementation costs are estimated at about noK 172 million and will accrue in the period to the end of 2012.
the above-mentioned agreements give gjensidige the largest distribution system and make it the sales leader for change-of-ownership insurance.
the cost ratio was 18.7 for 2010, an increase of 1.3 percentage points compared with the previous year. nominal expenses increased by noK 313.9 million in 2010 relative to 2009. the increase in the nominal expenses is mainly attributed to the acquisition of nykredit Forsikring, including integration costs of noK 52.5 million, growth in the commercial segment in sweden and an increased share of partner-distributed business in the norwegian white label business. efficiency improvement measures have been implemented in the swedish operations to reduce future costs.
the combined ratio for 2010 was 102.0 per cent, compared with 93.6 in 2009. the underwriting profit came to noK negative 77.4 million in 2010 compared with noK 152.9 million the previous year.
• realization of synergies in connection with the acquired business from nykredit will make an important contribution to a reduced cost level in the nordic operations.
operaTions gjensidige’s efforts in the Baltic market are conducted through its subsidiary, gjensidige Baltic. the target customers are persons with medium to high incomes in the private market and small and medium-sized enterprises in the commercial market.
gjensidige’s Baltic operations provide insurance products to the private and commercial markets in latvia, lithuania and estonia in the following main categories: • Motor vehicles • property • person • liability • other
A significant player in the Baltics the Baltic insurance market is in an early development phase, and a significant share of the market is still uninsured. Motor vehicle insurance is the largest insurance product in these markets.
the Baltic insurance markets were hard hit by the recession of recent years. also in 2010, the total market in the three countries continued to decline by 12.2 per cent (source: insurance supervision authorities of latvia and lithuania; estonia statistics ). the decline was greatest in latvia and more moderate in lithuania and estonia. However, in the market in lithuania, the decline ceased and was replaced by a slight recovery in the middle of 2010.
distribution channels gjensidige has a total of 98 offices in the Baltics and is represented in 73 different cities. the most important distribution channels are direct sales and sales via insurance agents and brokers. sales over the internet are also becoming a more important distribution channel in the Baltic market.
cosT savinG Measures have yielDeD profiTs in a DeManDinG year the insurance markets in the Baltic states have undergone a period of rapidly declining insurance volumes and prices as a result of the financial crisis. the declines have been greatest in latvia, as a result of which the extent of gjensidige’s business in estonia and lithuania has increased relative to its business in latvia.
definitions: 1. underwriting result = earned premiums, net of reinsurance - claims incurred, etc. - operating expenses 2. loss ratio, net of reinsurance = claims incurred etc./earned premiums, net of reinsurance. 3. Cost ratio, net of reinsurance = operating expenses/earned premiums, net of reinsurance 4. Combined ratio, net of reinsurance = loss ratio, net of reinsurance + cost ratio, net of reinsurance gjensidige has business in all three of the Baltic states. this business has remained profitable throughout a period with shrinking markets. expectations for gdp growth in the Baltic states in 2011 give exciting prospects for further growth.
gjensidige annual report 2010 23 perspective o perAtio n s gjensidige’s Baltic business has shown a strong capability of implementing measures relating to claims incurred and operating expenses in step with the declining premium volume. these measures have yielded increased profits, and gjensidige has posted underwriting profits in its Baltic business in 2008, 2009 and 2010.
there has been a relatively good growth in premiums in Building and personal insurances, which has meant that these products have increased in scope relative to Car insurance. the slowest growth in premiums was in Motor Vehicle insurance, the sector that has also had to tolerate the biggest decline in the market. However, Car insurance is still clearly the most important product and ac counts for about 63.2 per cent of the total premium volume.
obJecTives anD sTraTeGies the business area shall support the group’s Cr target of 90-93 starting in 2011: • improving the efficiency of the operations and achieving synergies among the Baltic states.
• Focus on balancing the trend in costs with the trend in the premium level.
one of gjensidige’s objectives is to become one of the leading insurance companies in the Baltics. • Main focus on profitable organic growth • utilise the potential that can be derived from the continued relative immaturity of the Baltic insurance market.
streamlining distribution: • develop new products and continue the efforts to adapt those products to a market with less purchasing power.
after some difficult years, there is growth again in the Baltic markets, and it is expected that the economy will gradually right itself in the coming years. in the insurance market, moderate growth is expected in 2011.
Based on gross premiums written 2010 Based on gross premiums written 2010 insurance supervisory Commission of the republic og lithuania, latvian insurance association, estonian statistics, gjensidige Baltic reports, swedbank Varakindlustus interim report 4q, with manual corrections
(ips), fund pensions (management of the old individual pension agreement [ipa] schemes), livrente link (annuity link) and Fondskonto link (Fund account link)
• individual disability pension savings • active management – customised investment solutions for institutional customers • the Vekter Funds – combination funds (equity funds and fixed income funds) adapted to the customer’s investment horizon, ability to save and desired risk
revieW of The year gjensidige offers two alternatives for the management of a defined-contribution pension for its commercial customers: combined and active management. it also offers a fully currency hedged variant of the combined solution. the average return for the three risk profiles in combined management was 10.3 per cent in 2010. the corresponding figure for active management was 8.5 per cent.
Management income 22.4 11.2 14.7 9.4 net financial income 14.5 48.2 6.3 5.7 other income 14.1 17.0 2.4 4.2 other expenses (47.1) (76.3) (70.8) (66.0)
assets under management pension, addition in the period assets under management savings, addition in the period assets under management pension in the period 6,674.1 4,370.3 2,040.5 597.0 assets under management savings in the period 5,697.2 1,680.6 806.0 613.0 profit margin savings in per cent 2 0.61 0.90 2.07 1.54 definitions: 1 underwriting result = earned premiums, net of reinsurance - claims incurred, etc. - operating expenses 2 profit margin savings, in per cent = management income in savings/average assets under management in savings pension And sAvings gjensidige offers a broad range of pension, investment and savings products for both the private and commercial markets. among others, the products include occupational pension insurance, the management of paid-up policies, individual pension savings and fund savings.
gjensidige annual report 2010 25 perspective o perAtio n s in 2010, the pension profiles achieved an average return of 9.4 per cent.
the book return on the paid-up policy portfolio was 5.29 per cent in 2010, whereas the valueadjusted return was 5.1 per cent. the average interest-rate guarantee for the paid-up policy portfolio was 3.5 per cent.
the management income in the savings operations came to noK 22.4 million in 2010, compared with noK 11.2 million in 2009. the increase in revenues is due to increased sales and growth in the savings portfolio. the profit margin for savings ended up at 0.61 per cent in 2010, compared with 0.9 per cent in 2009. this decline is attributed to a more rapid growth in assets under management to institutional customers. For the paid-up policy portfolio, realised profit in addition to guaranteed interest and the increase in additional provisions was divided between the owner and the customers in a ratio of 20/80. the owner’s portion of the profit-sharing in 2010 came to noK 9.9 million. other financial income is the return on equity.
Asset under management total assets increased by noK 6,320.4 million in 2010 and amounted to noK 12,371.3 million at year-end. assets under management in the savings business amounted to noK 5,697.2 million. assets under management in the pension business amounted to noK 6,674.1 million, of which the collective portfolio amounted to noK 2,146.0.
obJecTives anD sTraTeGies the business area has the objective of achieving an operating profit in 2011: • pension and savings should be profitable on its own • an important success factor for profitability is substantial growth in assets under management.
pensions and savings shall function as a support area to the norwegian general insurance operations: • the concentration on pensions and savings shall help increase the range of products for existing general insurance customers in norway and thereby help improve customer relations and increase loyalty.
Based on gross premiums written 2010 source: Finance norway as at 30 september 2010.
through association with the groups brand, customer base and distribution system, the bank differentiates itself from other players in the market. in marketing, the bank has mainly focused on communication with the group’s own customers through direct marketing but has also utilised general marketing channels.
key figures interest income, etc. 782.6 323.3 392.9 75.8 interest costs, etc. (375.6) (265.8) (347.6) (64.6) net interest and credit commission income 407.0 57.5 45.4 11.3 net financial income and other income 37.5 16.5 11.2 6.1 operating expenses (302.1) (147.2) (134.8) (126.5) losses on loans/guarantees (109.4) (3.0) (6.8) (6.7)
gjensidige annual report 2010 27 perspective o perAtio n s siMplificaTion anD proDucT DevelopMenT for increaseD cusToMer saTisfacTion the consumer loan, personlån (private loan), was launched as a new product in april 2010. this is a further development of the consumer loan portfolio that gjensidige Bank purchased in the autumn of 2009, which continues to be offered under the gjensidige brand.
the bank’s business in oslo related to consumer finance was moved to gjensidige Forsikring’s head office at sollerud. Furthermore, all customer service functions in the bank are concentrated and located in Førde.
resulTs net interest and credit commission income amounted to noK 407.0 million in 2010, com pared with noK 57.5 million in 2009. the increase is attributed to an increased volume and higher margins. the net interest income relative to average total assets was 2.88 per cent in 2010, compared with 0.63 per cent in the previous year.
losses on loans and/or guarantees amounted to noK 109.4 million in 2010, compared with noK 3.0 million in 2009. Collective impairment losses constituted noK 27.6 million of this amount. the increase in collective impairment losses is attributed to estimated expected losses in the consumer loan portfolio. the loss situation is in accordance with expectations and is normal for the portfolio.
the profit/loss before tax was a profit of noK 33.1 million in 2010, compared with a loss of noK 76.3 million in 2009. the improvement in earnings is attributed to increased income and better profit margins in the consumer loan portfolio.
deposit-to-loan ratio the deposit-to-loan ratio at year-end 2010 was 64.6 per cent, which was considered satisfactory. at year-end 2009, the deposit-to-loan ratio was 56.6 per cent. a new high-interest product has been well-received by our customers and has made a positive contribution to the increase in deposits in 2010.
capital adequacy the capital adequacy was 16.1 per cent at yearend 2010, compared with 17.8 per cent at the end of the previous year. the bank’s lower limit for capital adequacy is twelve per cent.
obJecTives anD sTraTeGies the business area must be profitable on its own: • profitable growth . • the bank shall support the group’s long term target for return on equity of 15 per cent before tax
Banking shall function as a support area to the norwegian general insurance operations: • the bank shall help strengthen relationships with existing insurance customers in the private and agricultural segment and attract new customer groups to the group: • in addition, concentration on banking shall protect the group’s markets shares against competition from bank insurance.
ouTlooK gjensidige has established 21 financial offices throughout the country that offer a broad range of financial services, including banking services. this effort has given the bank substantially increased sales power. the bank will prioritise improving the efficiency of and further developing service models for the sale of banking services through the distribution system of gjensidige Forsikring.
deposits and lendings at the end of 2010 development in the number of customers with active use of the bank.
net interest income in per cent = net interest income and credit commission income / average assets under management
personal security alarm services Hjelp24 respons is norway’s largest provider of personal security alarm services and operates a round-the-clock alarm centre with many important services, such as a casualty clinic referral service for several dozen municipalities, psychological services and/or a crisis team, a health visitor phone and referral to and follow-up of health services for gjensidige’s norwegian insurance activities (Helpline).
Work environment surveys Hjelp 24 Consulting is a leading professional institution that provides work environment surveys and consultancy services related to the development and improvement of the work environment in businesses.
gjensidige annual report 2010 29 perspective o perAtio n s continuing operation. the existing large customer contracts have been clarified now, and there are no large customer agreements that have not been clarified at the start of 2011.
resulTs Health care services had operating income of noK 544.7 million in 2010, compared with noK 509.1 million in 2009. the increase in operating income in 2010 came mainly as a result of acquisitions conducted in 2010. the organic development was approximately level, which was attributed to tough price competition related to public tendering. this resulted in lower prices and margins on renegotiated contracts, but also the loss of individual government contracts where the price reduction was too great to allow the provision of services under the new terms.
this business area shall function as a support area for the norwegian general insurance operations: • the efforts in this area shall help increase the range of products for existing general insurance customers in norway and thereby help improve customer relations and increase loyalty.
ouTlooK Many factors may promote increased demand for health care services in the coming years: • the demographic trend indicates that the number of persons in norway over age 67 will increase significantly in the coming years.
• the authorities have targeted a reduction in the absence due to illness.
• in recent years, the average waiting period (measured in number of days) at public hospitals has increased every year. the authorities have signalled that private institutions may be made use of when necessary in order to reduce the waiting period and prevent failure to meet deadlines.
• there has also been a substantial growth in recent years in the number of persons with private health insurance.
the trend indicates that in all probability private health services will play an increasingly important role in the norwegian health system in the coming years.
in connection with updating the group’s strategy, the Board of directors has requested that the management assess whether the health care services segment should remain a wholly-owned part of the group’s broad-based activities in norway.
fraMeWorKs for The asseT ManaGeMenT the group’s investments are made primarily to cover the actuarial provisions, but the group is in a capital situation that allows it to invest on the basis of the maximum return given the group’s risk tolerance for its equity. in the strategic allocations, efforts are made to acquire a diversified portfolio in order to achieve a return in keeping with the group’s financial objectives.
the Board of directors sets the maximum and minimum limits per asset class once a year, as well as limits for interest rate, liquidity and currency risk. the group’s credit risk associated with investment portfolios and liquidity portfolios is managed through the specification of limits by the credit committee on the basis of the group’s credit policy. the asset allocation and individual investments must be kept within these limits at all times. in addition, the Board of directors specifies a minimum return that shall be achieved with a given degree of probability. the actual asset allocation will vary throughout the year – within the given degrees of freedom – so as to utilise the market opportunities and active management of the various asset classes.
The invesTMenT porTfolio the group’s investment portfolio amounted to noK 52,347.0 million at year-end 2010, compared with noK 50,669.1 million at year-end 2009. the investment portfolio includes all investment funds in the group, except for gjensidige Bank and gjensidige pensjon og sparing.
the percentage of bonds held to maturity was 26.8 per cent as the percentage of the total investment portfolio at year-end 2010 compared with 29.9 per cent at year-end 2009.
gjensidige annual report 2010 31 perspective o perAtio n s an overview of the maturity structure of the fixedincome portfolio is presented in note 3, table 13.
equity and investments in associated companies at year-end 2010, equity exposure was noK 6,775.8 million and consisted of shares of storebrand, equity certificates in spareBank 1 sr-Bank, short-term investments, and fund investments in private equity. at year-end 2009, the equity portfolio amounted to noK 5,608.5 million.
the group’s investments in associated companies amounted to noK 4,275.5 million at year-end 2010 and mainly consisted of the investments in storebrand and spareBank 1 sr-Bank, recognised at noK 3,287.8 million and noK 958.9 million respectively. investments in associated companies are recognised in accordance with the equity method.
in oslo, but also include shopping centres and office properties in other norwegian cities as well as two office buildings in Copenhagen, denmark. in addition, a small portion of the portfolio was invested in international real estate funds.
the exposure to the ten biggest real estate investments as per 31 december 2010 and 31 december 2009 is included in note 3, table 15.
an overview of the five biggest hedge-fund exposures as per 31 december 2010 and 31 dec ember 2009 is included in note 3, tables 16a and 16b.
the fixed-income portfolio the return for the fixed-income portfolio ended up at 4.5 per cent in 2010, compared with 6.6 per cent in 2009. this does not include changes in value for the hold-to-maturity portfolio and the loans and receivables portfolio.
a profit of noK 488.7 million from associated companies was recognised in 2010, 342.2 million of which comes from the investment in storebrand and 142.1 million from the investment in spareBank 1 sr-Bank.
the equity portfolio: 10 per cent drop in share prices 1 (250.0) (182.5) (86.9) the fixed-income portfolio 100 bp parallel shift up 2 (274.1) (347.2) (295.7) the real estate portfolio: 10 per cent drop in market rent (372.9) (409.7) (426.0) the real est. portf.: 25 bp increase in required rate of return (221.5) (210.2) (214.0)
1 storebrand and spareBank1 sr-Bank are recognised as associated companies. since a ten per cent drop in the share price will not result in impairment in the balance sheet, the items have been excluded from the sensitivity calculation.
2 does not include the fixed asset portfolio or the effect of the swap agreements in gjensidiges arbejdsskadeforsikring (has the opposite effect on liabilities).
Sh ar es effect on equity of possible scenarios: Asset AllocAtion At yeAr-endreturn By Asset clAsses developMent in Asset AllocAtion
Market shares non-marine insurance norway (Fno) % 27.9 28.4 30.1 31.0 gross premium written total norway noK million 13,289.2 13,039.1 13,130.6 13,375.3 earned premiums, net of reinsurance total norway noK million 12,697.9 12,593.5 12,821.1 12,802.5 loss ratio, net of reinsurance 6 cost ratio, net of reinsurance 7 combined ratio 8
gjensidige annual report 2010 33 perspective o perAtio n s key Figures pension And sAvings assets under management pension, addition in the period noK million 2,303.8 2,329.8 1,443.4 544.0 assets under management savings, addition in the period noK million 4,016.6 874.6 193.0 425.2 assets under management pension at the end of the period noK million 6,674.1 4,370.3 2,040.5 597.0 of which the group policy portfolio noK million 2,146.0 1,514.6 620.1 assets under management savings at the end of the period noK million 5,697.2 1,680.6 806.0 613.0 profit margin savings in per cent 9 % 0.61 0.90 2.07 1.54 recognised return on paid-up policies portfolio 10 % 5.29 5.97 (3.20)
Value adjusted return on paid-up policies portfolio 11 % 5.10 7.08 (3.20)
number of customers (pension), addition in the period number 14,813 17,988 17,462 9,833 number of customers (savings), addition in the period number (2,191) 310 1,240 3,184 number of customers (pension), at the end of the period number 66,468 51,655 33,667 16,205 number of customers (savings), at the end of the period number 5,479 7,670 7,360 6,120
gjensidige annual report 2010 35 perspective saTisfieD eMployees in the autumn of 2010, the whole group took a personnel satisfaction survey (pss) devised by the company, sensus, which is a part of gjensidige’s subsidiary Hjelp24. the results have been compared with a group of 75 norwegian companies with a total of 17,000 employees. among the results, it is worth noting: • the response percentage was 91 for the group, which is very high.
• With the exception of gjensidige denmark, where the restructuring in the autumn of 2010 has clearly affected the results, the score for the group is good.
• the employees are satisfied with the management in the group. a result of 78 (on a scale of 1-100) is well above the average in the basis for comparison.
By year-end 2010, all of gjensidige’s investment advisers were certified in accordance with the certification scheme for financial advisers. this is a more extensive scheme that requires training roughly equivalent to a half year of full-time study.
status and measures will be regularly reviewed by the group management and management teams for all areas. Continuous efforts are being made at all levels to promote prevention, follow-up, measures and education and training.
indoor air quality and ergonomics are target areas for preventing musculo-skeletal disorders and injuries. in general, gjensidige has enjoyed a positive trend in absence due to illness, which indicates that the initiated measures have been effective.
personnel, Hse and Manager Manuals are distributed electronically and updated and/or revised regularly.
recruitment out of the ordinary gjensidige has chosen to recruit salespersons and advisers in blocks. in 2010, two rounds of recruitment were carried out, in which a total of just under 40 people were hired. the Company has good experience with this recruitment method, and the feedback from the applicants has also been good.
More employees in denmark in the spring of 2010, gjensidige acquired the dan ish company, nykredit Forsikring. at the same time as the acquisition, a strategic distribution agreement was signed with nykredit, which ensures gjensidige access to more than one million nykredit customers.
the merger of the two organisations com menced immediately under the name of “project Fellowship ” and was completed in the course of a few months. unfortunately, this project also entailed that the group had to dismiss employees from both organisations.
project Fellowship involves the establishment of a common it and service platform for all of the employees. Most important of all, employees and managers have taken the initiative in the project and formed an organisation with the focus on customer service and profitable growth.
coMpeTence enTerprise of The year gjensidige was awarded the Competence award for 2010 by Hr norway, which is a member organisation for all those who work with human resources and management in norway.
in addition, emphasis is given to gjensidige’s concentration on block recruiting, gjensidige’s
in 2010, 567 employees took courses at gjensidige’s Customer and Brand school. 5,600 course days were held, and over 700 examinations were given.
in the spring of 2010, the gjensidige school made a strong contribution to gjensidige’s receiving
those who so desire are entitled to flexible working hours and other arrangements. gjensidige also has an occupational pension scheme that is one of the best in norway. together with the age limit, these measures constitute a comprehensive package.
oslo district Court found in favour of the employee when they heard the case in april 2010, but the Company appealed. in december, the Borgarting Court of appeal handed down a judgment in gjensidige’s favour. the employee and the Finance sector union of norway have appealed to the supreme Court. the employee will remain in her position until the judgment is final and conclusive.
the issue became relevant when the rules concerning coordination of pension and income from employment for the age group between 67 and 70 were gradually amended starting in 2008. this is also an issue related to the introduction of a new pension reform.
We safeguard life, health and assets and relieve our customers of risk. We replace whatever can be replaced when the customer’s house catches fire or a car is involved in a collision. We prefer to help the customer to avoid fires and other accidents.
gjensidige has gotten involved in research, awareness campaigns and education and training. We also think there is a need for upgrading the highway network and that this is a task to which the government authorities ought to provide more funding.
We handed out 18,600 reflective vests and 60,000 reflectors to day care facilities and school children. this advertising campaign was organised as a collective voluntary effort among the Company ’s employees and has generated considerable enthusiasm.
We support the eu project, prologue, which is supposed to look into the possibility of conducting a larger survey of europeans’ driving behaviour. the norwegian part of the project was conducted by the norwegian institute of transport economics. increased insight into the causes of dangerous driving behaviour will hopefully lead to more measures to prevent this behaviour that are also more precise.
gjensidige also assists the university of oslo and the norwegian institute of transport economics in a research project that is supposed to measure the effects of being over age 65.
each year, house fires claim between 60 and 70 lives in norway and are a major source of stress even when no lives are lost. Fire prevention has been an important task in gjensidige throughout the Company’s entire history.
in 2010, gjensidige conducted aksjon Boligbrann (a nationwide information campaign to help prevent fires in the home) in collaboration with the norwegian Fire protection association, the directorate for Civil protection and emergency planning (dsB) and local fire brigades. this is an annual campaign
WAter dAMAge does not claim lives, but it causes substantial damage to society. gjensidige actively cooperates with government authorities, researchers and trade organisations in norway and the nordic countries on damage prevention measures. one example of this is that for many years we have been involved in influencing the Building regulations to promote greater damage prevention. among other things, this has resulted in the specification of mandatory requirements in new Building regulations in 2010 that equipment and pipes connected to water mains in rooms without a watertight floor shall be protected against water damage, e.g. with an automatic water shut-off valve.
polluting eMissions from gjensidige’s activities are modest. all of our offices with more than 30 employees shall be certified as “environmental lighthouses”. at year-end 2010, four of our offices were “environmental lighthouses”, and seven more are expected to be certified in 2011.
the Working environMent at gjensidige shall help promote good health. the absence due to illness should be lower than 4 per cent. there is a good gender balance in the Company as a whole, with 54.4 per cent men and 45.6 per cent women. the percentage of women in management is lower, but increasing. in 2010, two out of eight members of the group management were women.
Co2-emission in tonnes 3,023 3,028 2,872 2,877 square meters in use 73,839 66,964 66,482 63,616 offices certified as eco lighthouses 2 4 5-7 11 paper consumption in tonnes 342 248 308 223
Control Continued suppliers Fair competition/ anti corruption Control Continued taxes and fees - Vat registered, no illegal labour
gjensidige annual report 2010 41 perspective in june 2010, the gjensidige Foundation was converted from a general foundation to a financial foundation. this was a consequence of gjensidige Forsikring’s simultaneous conversion to a public limited company (asa). up to year-end 2010, the gjensidige Foundation owned all of the shares in gjensidige Forsikring. in connection with the stock exchange listing of gjensidige Forsikring on 10 december 2010, the foundation conducted a selldown, and gjensidige Forsikring attracted about 52,300 new shareholders. the foundation owned at year-end about 61.7 per cent of the shares in gjensidige, and it is stipulated in the articles of association that its ownership shall be long-term and that it has the goal of owning at least 60 per cent.
the gjensidige Foundation’s financial goals involve distributing a dividend to gjensidige Forsikring’s general insurance customers and managing the investment income from the sell-down of shares in gjensidige Forsikring.
the foundation’s socially beneficial objective involves promoting security and health both locally and nationally by helping to fund various causes. this shall occur in accordance with the foundation’s basic values, which are “prevention – development – generate activities - development of society”. the funds that are distributed by the foundation shall mainly go to activities and projects that improve and safeguard the everyday lives of the general public or of selected target groups. We are looking for projects that will help promote change and for the dedicated souls who will see these projects through to completion. it is important that these projects be based on a good idea or a good proposal that will benefit and bring happiness to many people over a period of time. importance is also attached to innovation and implementation capabilities.
the gjensidige FoundAtion the gjensidige Foundation is a unique foundation. it is the largest in norway, and it plays two important roles. one of these roles is relatively new and involves the foundation’s performance in its capacity as an important financial institution, while the other role is the continuance of gjensidige Forsikring’s long tradition as an important contributor to various socially beneficial objectives.
business anD risK ManaGeMenT anD folloW-up personal scorecards have been prepared for the group’s employees. these set out key performance indicators, targets and measures that affect the group’s earnings, value creation and risk situation. in addition to the scorecards, budgets, various financial and non-financial measurement criteria, authorisations and trend analyses are also used in the management of the group. the assessments of risk are closely linked to the business follow-up so that the managers of the individual areas are clearly aware that they are responsible for achieving goals within an acceptable level of risk.
a dedicated internet portal has been developed, where the Company’s management information has been collected and made available.
the strategic plan and the more detailed business plans are important premises for the scorecards. it is strongly emphasised that the indicators shall be balanced and cover financial, operational and organisational factors, including the individual’s need for skills development. these indicators are included in internal reports to the Board of directors and the management each month and provide a basis for decisions regarding measures and responsibilities related to an effective achievement of targets. this monthly reporting is based on a budget approved by the Board of directors.
return on equity is the Company’s key profitability measure. equity and return requirements have been assigned to various parts of the business. any earnings over and above the Company’s required rate of return are a measure of real value creation.
the Cro’s responsibilities include ensuring an adequate risk management and internal control system, optimising capitalisation and capital use, ensuring that the asset allocation meets the group’s specified requirements, having an overview of the total risk situation in the group and providing information about any factors that the group’s risk management committee ought to be aware of.
in 2008, gjensidige established a risk management committee that focuses on the overall risk situation for the group. this committee is chaired by the group Ceo and acts as an advisory and explanatory body with regard to the management of essential risk factors in the group. the Cro is responsible for seeing that the risk and capital situation and the need for measures are sufficiently clarified and brought to the attention of the risk management committee. this committee is also the supervisory steering committee for the group’s solvency ii project.
gjensidige annual report 2010 45 perspective go vern An ce solvency ii will help improve the measurement of risk and capital requirements for insurance companies, and it will strengthen risk management in general. therefore, gjensidige welcomes the new regulations, which are expected to enter into force on 1 january 2013, and the Company thinks this will give companies a greater incentive to measure and manage all risks in a consistent manner. this kind of discipline is good for long-term profitability and economic growth in the insurance markets. the development of solvency ii is being closely followed up, and active efforts are being made to prepare for the upcoming regulations in a separate project that reports directly to the group Ceo.
although the external attention with regard to solvency ii has mainly been focused on the changes in the capital requirement, both the authorities and gjensidige think that this is an enterprise risk Management (erM) project. therefore, in addition to the potential impacts on business mentioned above, the most important focus areas in the group’s efforts to adapt to solvency ii are: • Meeting the requirements for gaining approval for using the Company’s own capital adequacy assessment (internal model) as a basis for the statutory capital requirements as well.
• improving general group routines for risk management. • Meeting the extensive new reporting requirements specified in solvency ii in an efficient way the group established solvency ii as a separate project area in 2009 on the strength of a gap analysis conducted in the previous year, and since then it has worked systematically to close the gap that was apparent relative to the coming requirements.
the internal model, better risk management and the enhanced requirements for external reporting that come under solvency ii make great demands on the scope, quality and accessibility of data. thus, an important part of the project is data processing and its documentation. Few industries are as “data-intensive” as insurance, and these efforts also have positive impacts on other areas in the group.
Financial and non-financial targets have been set, which guide the group’s operations. these targets are disclosed at least once a year in connection with the annual report and otherwise as soon as possible if revised or new targets are approved by the Board of directors. gjensidige does not disclose specific guiding for the group’s future financial earnings.
DiviDenDs anD DiviDenD policy the Board of directors has approved a dividend policy that will form the basis for the dividend proposals that are submitted to the general meeting. gjensidige shall have a dividend policy that ensures competitive dividends relative to comparable investments.
in addition to paying a cash dividend, gjensidige will also evaluate the buyback of shares as a means of increasing the total shareholder return.
For the 2010 financial year, the Board of directors of gjensidige Forsikring asa has recommended that dividends equivalent to 80 per cent of the profit after tax be distributed. this yields dividends totalling noK 2,350 million, which comes to noK 4.70 per share.
as per 31 december 2010, gjensidige had just under 50,000 shareholders 20 lArgest shAreholders As At 31 deceMBer 20101 nr shareholder number of shares stake 5 goldman sachs clearing account 8,138,964 1.63 6 thornburg investment Management 7,947,240 1.59 8 eton park Capital Management 6,000,000 1.20 10 Credit suisse prime Brokerage (Custody) 4,855,813 0.97 12 odin Fund Management 4,000,000 0.80 15 dnB nor as Marketmaker 2,448,337 0.49 17 dnB nor asset Management 2,014,500 0.40 18 Vital Forsikring asa 1,998,200 0.40 19 Barclays Capital as principal 1,967,336 0.39 20 people’s Bank of China 1,830,735 0.37 total number of shares 500,000,000 100.00 1) the list of shareholders is based on an analysis of the register of shareholders in the norwegian Central securities depository (Vps) performed by rd:ir. this analysis provides a survey of the shareholders who are behind the various nominee accounts. there is no guarantee that the list is complete. a list of the 20 largest shareholders as specified in the register of shareholders in Vps is presented in note 27 on page 145.
at year-end, gjensidige Forsikring owned 26,983 of its own shares, and the number of outstanding shares was 499,973,017.
shAreholdes, geogrAphicAl distriBution1 norway: 59.5% great Britain: 20.1% europe, other: 6.4% usa: 13.9% other: 0.0% 1 the distribution is based on the shareholders’ address in the Vps owner registry as at 31 december 2010, and comprises only the shares which at that date had been sold by the gjensidige Foundation, representing 38,3% of shares issued.
auThorisaTion according to the resolution of the general meeting on 24 august 2010, the Company’s Board of directors is authorised to purchase the Company’s own shares up to the next ordinary general meeting, but no later than 30 june 2011. the minimum and maximum amounts that may be paid per share are noK 20 and noK 100 respectively.
two authorisations have been given. First, an authorisation has been given to acquire the Company’s own shares with an aggregate nominal value of up to noK 3,000,000 with the aim of transferring shares to employees in the gjensidige group as part of the group’s share ownership programme approved by the Board. this authorisation was employed in connection with an equity offering to the Company’s employees in denmark and sweden. second, authorisation has been given to acquire shares at a nominal value of up to noK 50,000,000. this authorisation may be used for no other purpose than cancellation by means of a capital reduction, cf. section 12-1 of the act relating to norwegian public limited Companies, or prior to this date as compensation in the purchase of operations. use of this authorisation requires that a binding agreement has been entered into with the gjensidige Foundation, which ensures a reduction of shares without changing the percentage of the gjensidige Foundation’s ownership. the authorisation has not been used.
General MeeTinG the general meeting is the supreme body in gjensidige. the structure of the bodies under the general meeting mirrors the structure of financial institutions in norway with a supervisory board, a Board of directors with working committees, a control committee and a nomination committee.
corporAte governAnce according to the Board of directors, corporate governance shall be based on: • optimising the Company’s assets in a long-term perspective • equal treatment • equal and secure access to reliable, relevant and up-to-date information about the Company’s business • an independent Board of directors that takes the overall interests of the shareholders into consideration • safeguarding aligned interests between the owners, the Board of directors and the management the gjensidige Foundation is the Company’s majority shareholder and has formulated a value-creating ownership policy with an objective of a normal market return stipulated in the articles of association. the majority owner represents a historically long continuity of ownership, where the norwegian-based customers of gjensidige Forsikring asa have a controlling interest. the customers also receive customer dividends based on the size of the customer relationship based on the dividends that the gjensidige Foundation receives as a shareholder.
With this point of departure, the Board of directors has established guidelines for ethics and social responsibility. gjensidige’s commitment to this premise shall be further developed on the basis of the expertise that has been developed by conducting our core business operations. in this way, the society reaps the greatest possible benefit from the group’s contributions to society.
the internal control and the systems encompass the Company’s core values and guidelines for ethics and social responsibility.
the efforts to promote social responsibility are described in greater detail on pages 38 to 40 of the annual report. the guidelines are available at www. gjensidige.com. Quantitative goals have been specified for socially responsible operations with regard to owners, customers, employees and the environment. objectives and the achievement of objectives are presented in the table on page 41 of the annual report.
the Board of directors’ account is based on the norwegian Code of practice for Corporate governance of 21 october 2010. as the account reveals, gjensidige has arranged its operations in accordance with the code on all points.
the working environment, equal opportunity and integration are described in greater detail in the report of the Board of directors.
the Company’s financial investments shall comply with international rules for socially responsible investment (sri). Companies that do not meet the requirements in connection with human rights, employee rights, the environment, corruption or weapons production shall be excluded.
operaTions in accordance with the articles of association, gjensidige can conduct direct and indirect general and life insurance operations, take on pure risk insurance of one year’s duration at most in life insurance, own companies that conduct general insurance, life insurance, banking, financing and securities operations, take on risk insurance and reinsurance in life insurance to the extent permitted by law and other business that is naturally related to these activities.
eQuiTy anD DiviDenDs equity the gjensidige group’s equity amounted to noK 23,137.8 billion (iFrs) at year-end 2010. the group’s capital requirements must be determined on the basis of various perspectives. the Board attaches considerable importance to the following perspectives: - legal requirements from the authorities (capital adequacy and solvency margin) - the rating companies’ requirements for subordinated loan capital in order to maintain the targeted rating - requirements for subordinated loan capital based on internal risk models - the group’s capital requirements in order to achieve objectives and strategies
gjensidige annual report 2010 49 perspective go vern An ce the group currently has excess capital, relative to statutory requirements, risk profile and the objective of gaining an a-rating from s&p it supports the approved dividend policy, gives freedom of action and, among other things, covers the uncertainty in connection with the impacts on capital of the new solvency regulations (solvency ii) and the marketing opportunities that are triggered as a result of the stricter capital requirements. therefore, the Board of directors has no plans for an extraordinary dividend to the shareholders at present.
dividends the Board of directors has approved a dividend policy that forms the basis for the dividend proposals that are submitted to the general meeting.
When the Board of directors proposes new authorisations at the annual general meeting, these shall be limited in the same way as the previous ones to specified objectives and apply for the time period up to the next ordinary general meeting.
When non-immaterial agreements are entered into among the Company and shareholders, shareholders parent company, Board members or members of the management or parties closely related to them, the Board will obtain the assessment of an independent third party. the same applies to agreements with companies in the group that have minority shareholders. this is pursuant to the rules of procedure that are accessible on www.gjensidige.com.
General MeeTinG the general meeting is the supreme body in gjensidige.
the general meeting is open and accessible to all shareholders. an ordinary general meeting shall be held each year before the end of May.
- the agenda papers shall be comprehensive enough to provide the basis for making a decision on the business that is discussed.
- the managing director and the chairmen of the Board of directors, the supervisory board, the nomination committee and the auditor are obligated to be present unless it is clearly unnecessary or they have a valid reason for absence.
pursuant to the articles of association, the Board of directors may decide that shareholders shall be able to attend the general meeting with the aid of electronic means, including exercising their right as shareholders by electronic means. this kind of decision requires preparation and so such an arrangement cannot be introduced in connection with the upcoming annual general meeting.
at present, the nomination committee of gjensidige is composed of five members, including the chair of the supervisory board. all of the members are independent of the Board of directors and the other executive management. Four of the members are also members of the supervisory board, including the chair of the supervisory board. information concerning the nomination committee ’s members is available on the internet at www.gjensidige.com.
the nomination committee shall propose candidates – with the exception of the employees’ representatives – for: - the supervisory board - the general meeting’s proposals concerning the election of a chair and deputy chair, - the supervisory board’s election of a chair and deputy chair - the Board of directors, including the Chairman of the Board - the control committee, including the committee’s chair, - the nomination committee and the committee’s chair - an auditor.
the nomination committee shall recommend all remuneration that shall be determined by the general meeting or the supervisory board, including remuneration to the members of the nomination committee, which is determined by the general meeting, and it shall make a recommendation as to whether the proposed remuneration to the auditor shall be approved.
the Board of directors will propose a supplement to the nomination committee ’s rules of procedure that will be approved by the general meeting. it is proposed that a deadline be set for submitting proposals to the nomination committee. this shall ensure that all of the shareholders have the possibility of submitting proposals that can be considered by the nomination committee prior to an election.
gjensidige annual report 2010 51 perspective go vern An ce supervisory boarD anD boarD of DirecTors, coMposiTion anD inDepenDence the supervisory board’s composition the supervisory board of gjensidige is composed of 21 members or a higher number divisible by three. the employees’ representatives are elected for two-year terms; the remaining representatives are elected for one-year terms. the chair of the supervisory board and the deputy chair are elected by the supervisory board for one-year terms.
at present, the supervisory board is composed of 21 members, 14 of whom were elected by the shareholders and seven of whom are elected by the employees. the supervisory board’s members are listed at www.gjensidige.com.
the Board of directors of gjensidige shall have a broad composition. in the nomination committee’s rules of procedure, the general meeting provides the following guidelines for the nomination committee’s work: - the nomination committee shall emphasise that all of the proposed candidates should have the necessary experience, qualifications and capacity to satisfactorily discharge the offices in question.
- emphasis shall be given to safeguarding the overall interests of the shareholders.
in the current Board, 43 per cent of the shareholder-elected members are women. a more detailed presentation of the Board members may be found on pages 60 to 70 in the annual report and on the Company’s website, www. gjensidige.com. the annual report also specifies the individual Board member’s attendance at Board meetings in 2010.
The WorK of The boarD the work of the Board of directors follows a fixed annual plan and is administered in accordance with established rules of procedure. the rules of procedure are available at www.gjensidige.com. Furthermore, the Board of directors has specified rules of procedure for the managing director that regulate the internal division of responsibility and tasks.
in matters in which the Chairman of the Board is or has been actively involved, some other Board member shall chair the Board’s discussion of the matter.
the Board of directors has established two working committees – a compensation committee and an audit committee. the committees’ tasks and the
requirements for their composition are regulated in greater detail in the rules of procedure. all of the members of the two committees are independent of the business and its daily management. a list of the members of the two committees may be found at www.gjensidige.com.
the Board of directors conducts an annual review of the group’s most important areas of risk and the internal control.
in addition, the internal audit function provides a further independent level of control and reports directly to the Board of directors. - the Compliance function is an independent function that identifies, assesses, gives advice on, monitors and reports the group’s compliance risk. assessment of the compliance risk is included in the group’s annual processes for risk assessment.
- the department for risk and Capital Management is responsible for monitoring the total risk situation and the framework for risk management, including internal control and the measurement and aggregation of risk.
no one on the Board of directors performs any special tasks for the Company, but in 2010 certain Board members, together with other elected representatives in gjensidige, participated in a separate task force that worked on the conversion to a public limited company. remuneration is provided for this in accordance with the principles and rates determined by the supervisory board.
the individual Board member’s remuneration is presented on page 137of the annual report.
the following principles apply: the group’s remuneration schemes shall be open and performance-based so that they are perceived as fair and predictable to the greatest possible extent. there should be accordance between agreed performance and the remuneration that is given. remuneration and career development shall be tied to achieving the group’s expressed strategic and financial objectives and core values, where both quantitative and qualitative objectives are included in the assessment.
the measurement criteria shall promote long-term economic growth and take the actual capital costs into consideration as much as possible.
the following decision-making process has been established: the Board of directors has established a compensation committee that is composed of three members, the Chairman of the Board and two Board members.
gjensidige has compiled all relevant owner information about the group at www.gjensidige.com. this is the most important tool for providing equivalent, up-to-date, relevant information to everyone. a financial calendar with dates for publication of financial information and notification of general meetings and meetings of the supervisory board is also published on this web page.
the guidelines are in accordance with the norwegian Code of practice for Corporate governance. the Board of directors will obtain an independent valuation and draft a recommendation as to whether or not the shareholders should accept the offer.
- the auditor attends Board meetings when the annual accounts are considered. - at least one meeting is held annually between the Board of directors and the auditor, where the managing director and other executive management are not present.
- the elected auditor shall attend meetings of the Company’s control committee at least twice a year. according to current practice, the external auditor attends all of the meetings of the control committee.
1 helGe l. baasTaD Group ceo Baastad was appointed Chief executive officer (“Ceo”) of the group in 2003. Mr. Baastad joined gjensidige in 1998 as executive director and has held various executive positions within the group, including executive Vice president of gjensidige. He has been a member of the group management since 2001. Before joining gjensidige, he held various executive positions at jordan as from 1987 to 1998 and at denofa and lilleborg Fabrikker, a unit of orkla asa, from 1984 to 1987. Baastad is member of several boards, including Finance norway and jordan as. in addition he is Chairman of the Board of gjensidige Bank Holding as, gjensidige pensjon og sparing Holding as and gjensidige pensjonsforsikring as. Mr. Baastad is a graduate of the norwegian school of economics and Business administration (nHH).
5 TronD DelbeKK executive vice president, commercial delbekk was appointed executive Vice president, Commercial in 2010. Mr. delbekk joined gjensidige in 1997 and has held various executive positions within the group, latest execitive group MAnAgeMent gjensidige’s group management of nine persons has an average of 11 years of experience in the industry. Five of these senior managers have been in the group management for the last eight years. in this period, gjensidige has evolved into a financial group with operations in norway, sweden, denmark and the Baltic states.
Vice president private. Mr. delbekk has been a member of the group management since 2001. He has held senior positions in banking at nordea and sparebanken nor, and is currently a board member of integrasjonspartner as, solid gruppen as, solid prosjekt as and solid entreprenør. Mr. delbekk holds a Bachelor of economics as well as a Master’s degree in Management from the norwegian school of Management (Bi )
7 MarTin Danielsen executive vice president, product and price danielsen was appointed executive Vice president, product and price in 2009. He joined gjensidige in 2006 and has been a member of the group management since 2009. Mr. danielsen has held several positions within the group, including deputy Ceo of gjensidige pensjon og sparing. Before joining gjensidige, Mr. danielsen held positions in companies such as McKinsey, Bearingpoint, storebrand and if. Mr. danielsen holds a Bachelor of science in Business administration from the university of Bath, and a norwegian law degree (cand.jur.) from the university of oslo.
8 KiM ruD-peTersen executive vice president, international General insurance rud-petersen was appointed executive Vice president, international general insurance in 2010. He came from a position as head of the Commercial in the danish business. Mr. rud-petersen was appointed sales director of KommuneForsikring in 2005. prior to this, he held positions in Codan and aon. rud-petersen is a member of the Board of directors in Compass Human resources group a/s, deputy Chairman of the Board of gjensidiges arbejdsskadesforsikring a/s and chairman at the Board in nykredit Forsikring a/s as well as tennant Forsikring and gjensidige Baltic. rud- petersen holds a Bachelor of insurance as well as a MBa from iuM Monaco.
Bjørn iversen, Chairman (Chairman of the Board of the gjensidige Foundation) jan eyolf Brustad, (Chairman of the nomination committee in the gjensidige Foundation) john ove ottestad Benedikte Bettina Bjørn Kirsten i. Værdal representatives for the employees’ members of the supervisory board who participate in the nomination committee’s work of nominating the chairman and a deputy chairman of the Board of directors. jon aniksdal elisabeth Katai Knudsen sven iver steen, Chairman Hallvard strømme lise lotte aune lee
neT of reinsurance premiums and claims can be reported “net of reinsurance”; i.e. a deduction is made for the reinsurer’s portion.
Gross preMiuMs WriTTen gross premiums written include the amounts the Company has received or is owed as payment for insurance contracts when the insurance period has started.
ifrs stands for international Financial reporting standards and is an international accounting standard that is in effect in the eea . gjensidige has reported its consolidated accounts in accordance with iFrs since 2007.
cosT raTio expresses the ratio of the total insurance-related operating expenses to the earned premiums.
earneD preMiuMs the sum of premiums from all insurance contracts in a given period (the consideration period). if the contract period for an insurance policy deviates from the consideration period, only the portion of the premium that coincides with the consideration period will be included. earned premiums are calculated on the basis of the date when the premium is recognised as earned in the income statement, regardless of when the premium is paid.
reinsurance reinsurance is a contract between an insurance company and a reinsurer, where the insurance company transfers a portion of an insurance policy to the reinsurer. this is a method of risk moderation in order to protect equity.
loss raTio the loss ratio expresses the ratio of claims incurred to the earned premiums.
capiTal aDeQuacy Capital adequacy is an expression for creditworthiness and expresses the insurance company’s ability to handle its insurance liabilities. Capital adequacy is calculated as solvency margin capital as a percentage of solvency margin requirements. solvency margin capital should exceed the solvency margin requirement.
solvency MarGin reQuireMenTs insurance companies must meet a solvency margin requirement that is an expression of the risk associated with the insurance liabilities. the requirement that must be met is calculated on the basis of the company’s insurance liabilities.
the return on the financial investments was adequate in 2010, with a return on financial assets of 5.2 per cent.
operatioNs gjensidige Forsikring asa, (gjensidige Forsikring) has its head office in oslo. the purpose of the business is to meet the security needs of its policyholders by offering competitive insurance products and other related services. gjensidige Forsikring is the parent company in the gjensidige group (gjensidige).
the group’s core business operations are in general insurance, and about 76.1 per cent of these operations, measured in gross premiums written for 2010, are tied to norway. gjensidige is the largest norwegian-owned general insurance player in the norwegian, danish, swedish and Baltic insurance markets.
in the private market, which in norway also includes the agricultural market, the group offers insurance products related to the motor vehicle, housing, personal, agricultural and other insurance products, such as travel and leisure insurance. in the commercial market, which also includes municipalities and municipal operations, the group offers insurance products related to motor vehicle, property, personal, liability and marine/transport.
in norway, gjensidige also offers products in pensions and savings to private and commercial customers, as well as banking services for private customers. Furthermore, the group offers health services through Hjelp24 as (Hjelp24).
Hjelp24 offers products and services in corporate health care services, personal security alarm services, private hospital and specialist services and work environment surveys.
gjensidige’s business model is based on an integrated value chain from provision of financial services and products through distribution and ownership to customer relations. this facilitates the streamlining of all processes and deliveries, which in turn helps promote high efficiency and low cost ratios. together with a strong brand and a customer base of almost one million customers, this gives gjensidige a sound position in the norwegian general insurance market.
in order to further develop the norwegian core business operations, priority is given to offering the customers a broad range of products in general insurance and insurances of the person. gjensidige is currently a complete supplier of these products to norwegian private and commercial customers. a further development and expansion of the loyalty and organisation customer programmes are important in order to broaden the depth and breadth of existing customer relations. this helps increase the number of satisfied customers and reduce the loss of business, and it supports the sale of banking, pensions and savings products to insurance customers. the group’s own data shows that customers who enter into a customer programme in the private and agricultural market are customers with gjensidige for an average of a little over 12 years, whereas other customers stay with gjensidige for an average of a little over five years.
to be able to meet the various customer groups’ desires and to be able to better handle new sales, renewals and cross-sales activities. the group invests substantial funds in the development of technology-based and cost-effective distribution channels, e.g. telephone-based sales and customer centres and an integrated internet portal. new sales will be conducted through these distribution channels to a greater extent than before.
on Friday, 10 december 2010, gjensidige Forsikring was listed on oslo Børs (the oslo stock exchange). the purpose of the stock exchange listing is to give the group greater freedom of action and opportunities to participate in the structural changes that affect the financial industry in the nordic region. the listing has given the group a security that can be used for possible acquisitions or to finance the strategy for growth in the group’s range of products and geographical scope in some other way, in addition to placing a value on gjensidige.
Board of directors the Board of directors has nine members, of which three are elected by and amongs the employees. the composition of the Board of directors shall be in accordance with the general requirements (expertise, gender and location) stated in the companys articles of association. in 2010 19 board meetings were held.
the group should have a capitalisation that ensures an a rating. gjensidige has substantial capital buffers relative to internal risk models, statutory capital adequacy requirements and an a rating. the group’s a rating was last confirmed by standard & poor’s in august 2010.
the sound capitalisation has been crucial in the formulation of the Board of directors’ dividend policy. the target is to distribute from 50 to 80 per cent of the group’s profit after tax for the year as dividends. the dividend policy and the Board of directors’ proposed dividend for the 2010 financial year are commented in greater detail in the section on the allocation of profit.
the target for the health service operations is an eBita level between six and eight per cent. in 2010, the health service operations achieved an eBita of 5.0 per cent. this was adequate in a year where our income has been significantly affected by the loss of some major contracts.
Market positioN gjensidige was the leading non-marine general insurance player in norway in 2010 with a market share of 27.9 per cent in an overall market of noK 42,956 million. (source: Finance norway, Fno.) Compared with 2009, the market share decreased by 0.5 percentage points (from 28.4 per cent in 2009). this change was mainly attributed to increasing competition, both from established financial groups with a new and broader range of products and from foreign insurance players. in the private segment the Company had a market share of 25.4 per cent. in the commercial segment, also including insurances to the agricultural market, the market share amounted to 33.4 per cent. in the agricultural market considered in isolation, the market share was 71.3 per cent in an overall market of noK 1.200 million.
in the Baltic general insurance market, gjensidige had a market share of 6.9 per cent in 2010 (source: insurance supervision authorities of latvia, lithuania, estonia; estonia statistics; gjensidige Baltic reports; swedbank Varakindlustus interim Q4 report), which is just under the targeted level of a ten per cent market share.
in a three to five year perspective, gjensidige has a goal of becoming the third-largest general insurance company in the nordic countries, measured in earned premiums. at year-end 2010, the group was the fourth largest player (source: gjensidige’s own calculations).
and it will be an instrument for ensuring customer loyalty and encouraging customers to choose more products.
in the municipal market, the distribution takes place either directly or by brokers and is largely based on competitive tenders.
on 8 March 2010, gjensidige signed an agreement on the acquisition of nykredit Forsikring from the nykredit group, and the acquisition was carried out at the end of april 2010. at the same time, gjensidige and the nykredit group entered into a long-term strategic partnership, which entails that the nykredit group shall sell and distribute gjensidige’s general insurance products in the danish market. increased volume in combination with the strategic distribution agreement improved gjensidige’s competitive strength in the danish market. at the same time, the acquisition helps gjensidige achieve further cost synergies through economies of scale. annual cost synergies before tax of about noK 230 million have been identified and are expected to be fully achieved by 2014. these synergies mainly involve distribution, iCt, reinsurance, coordination of shared functions and implementation of gjensidige’s group functions. integration costs were estimated at about dKK 170 million and will mainly be charged to the accounts in the period from 2010 to 2012.
during 2010, further efforts were made with implemented measures that were supposed to help achieve the revised target for the combined ratio of between 90 and 93 starting in 2011. the main efforts with regard to sales were measures that are expected to increase the market power over a period of time. among other things, this includes a separate customer and brand school for training and instruction of salespersons and sales managers, which was started up in 2009. this school is meant to help give gjensidige a leading position in the development of concepts for the sale of services through a modern sales culture and high professionalism in the dialogue with customers. gjensidige’s Customer and Brand school has also developed training programmes for claims managers and claims staff and is part of the gjensidige academy, which was established in 2010. in addition, we are working on new insurance rate models to ensure correct pricing of insurance risk. in june 2010, a new home insurance rate was adopted, which is expected to make the Company more competitive in the various customer segments by yielding a price that is more adapted to individual risk.
in addition, administrative operating expenses shall be reduced by between noK 300 and 400 million (from the 2007 level, adjusted for inflation) starting in 2011. this shall mainly occur as a result of efficiency improvement of the staff and support functions that have taken place in recent years, e.g. through the introduction of staff and support functions that cover all of the nordic operations and through staff cutbacks. this programme was also completed as planned by year-end 2010.
long-term agreements with the labour organisations tekna and the norwegian society of engineers and technologists (nito) were renewed in the autumn of 2010. in january 2011, the agreement with the Confederation of Vocational unions (Ys) was renewed with a time frame of eight years. the agreements represent 206,000 customers out of a potential membership of 330,000 members, and the business volume comes to noK 1.9 billion.
in the Commercial business area, a major restructuring effort has been initiated in order to improve the business management, develop the organisation and modernise the distribution so as to increase our competence and competitiveness in the market. Multi-channel service will be introduced, where several channels will serve the segment together through centralised control of the activities aimed at the customers, and there will be efficient interaction. the objective is to share and preserve customer data and expertise in the Company to a greater extent. Core competence in analysis, underwriting, risk assessment and pricing models will simultaneously be improved in order to ensure profitability in the commercial segment.
gjensidige aims to apply for approval of an internal model in order to calculate the regulatory capital requirements under solvency ii. since 2004, gjensidige has developed a so-called asset liability Management (alM) model that is used in capital management. this model will be further developed in both scope and areas of use. Based on the information that exists about solvency ii, it is assumed that the new regulations will result in requirements for higher capitalisation. at the same time, the requirements for good risk management will be made more stringent, and the requirements for reporting to the authorities and the market may help make the Company’s value creation more apparent. gjensidige is trying to utilise the forthcoming amendments to the act in a constructive way in order to further improve the comprehensive risk management in the group.
Combined ratio was 95.3 per cent compared with 94.8 in 2009. Combined ratio for 2010 was affected by the harsh winter, but the underlying insurance operations reported an adequate profit. the sound profit from the group’s investment operations is the most substantial contribution to the good profit for the year.
earned premiums, net of reinsurance from the pension operations increased by noK 116.3 million in 2009 to noK 335.8 million in 2010. the growth was mainly attributed to growth in the portfolio. net interest and credit commission income for the banking operations amounted to noK 407.0 million in 2010, compared with noK 57.5 million in 2009. this increase was attributed to a higher volume, acquisition of the loan portfolio and an infusion of equity. For the health service operations, the operating income for 2010 was affected by tough competition related to public procurement. this has resulted in lower prices and margins on renegotiated contracts, but also the loss of individual contracts, where the price reduction was so great that it was not feasible to provide services under the new terms.
Net income from investments the group’s net income from investments was noK 2,748.2 million in 2010, compared with noK 2,788.0 million in the previous year. at year-end 2010, the value of the group’s investment portfolio was noK 52,347.0 million. 4.8 per cent of the investment portfolio was invested in shares, 8.2 per cent in shares in associated companies, 15.9 per cent in money market instruments, 22.2 per cent in short-term bonds, 26.8 per cent in bonds held to maturity, 7.5 per cent in bonds classified as loans and receivables, 12.4 per cent in property and 2.2 per cent in hedge funds and other financial assets.
the real estate portfolio gave positive earnings of noK 359.2 million in 2010, compared with noK 5.8 million in 2009. the current rental income in the real estate portfolio amounted to noK 422.7 million in 2010. the average return requirement in the real estate portfolio was 6.5 per cent at year-end, whereas it was 6.75 per cent for the first three quarters. the total value of the portfolio decreased by noK 3.2 million in 2010. the equivalent figure for 2009 was noK 213.6 million. in the international real estate funds, there was a negative return of noK 36.3 million in 2010, compared with a negative return of noK 106.6 million the previous year.
the return on financial assets was 5.2 per cent in 2010. the return on financial assets was calculated as the net financial income and expenses (excluding financial income in gjensidige Bank and gjensidige pensjon og sparing) as a percentage of the investment portfolio (which includes all investment funds in the group with the exception of funds in gjensidige Bank and gjensidige pensjon og sparing). the corresponding figure for 2009 was a return on financial assets of 5.5 per cent.
Both in 2009 and 2010, an effort has been made to develop the settlement processes further. the goal is to improve the level of customer satisfaction while simultaneously reducing the Company’s total claims payments. this will be achieved, for example, by contacting customers more quickly after a loss or injury, while reducing the processing time considerably through improved internal processes.
interest expenses and losses on loans and guarantees from banking operations amounted to noK 484.9 million in 2010, compared with noK 268.8 million in 2009. the trend was mainly attributed to a larger portfolio.
the efficiency improvement efforts in the staff and support areas as well as in distribution and in the settlement organisation have yielded profits. in the two norwegian segments, private and Commercial, the nominal operating expenses were reduced by noK 101.9 million and noK 43.3 million respectively in 2010. the nominal operating expenses increased somewhat in the nordic countries segment. Most of the increase was attributed to the acquisition of nykredit Forsikring, but also to growth in the swedish operations and an increased share of the partner-distributed business in the norwegian white label business. in the Baltic segment, the nominal operating expenses were reduced by noK 74.8 million. the cost level in the Baltic operations has rapidly adapted to the decline in earned premiums as a result of the sharp decline in the total market, with a cost ratio of 29.8 for 2010, compared with 31.9 for 2009.
the pensions and savings operations had total operating expenses of noK 156.7 million in 2010, noK 109.6 million of which were related to the insurance operations. the equivalent figures for 2009 were noK 179.0 million and noK 102.7 million respectively. operating expenses for the banking operations amounted to noK 302.1 million in 2010, compared with noK 147.2 million in 2009. the equivalent figures for the health segment were noK 517.3 million and noK 476.5 million respectively.
depreciation and impairment losses of excess value were related to intangible assets, including acquired assets related to customer relations and brands in business combinations, together with the value of internally developed it systems. depreciation and impairment losses amounted to noK 254.3 million in 2010, compared with noK 216.7 million in 2009. some of the depreciation and impairment losses in 2010 were attributed to the impairment loss of goodwill of noK 100 million in the nordic countries segment. after the acquisition of tennant in 2007, the norwegian branch was streamlined as a white label business for gjensidige. the changes during 2009 and particularly in the beginning of 2010 entail that the original business model has been considerably adjusted, and the value at the date of acquisition has been reduced. in 2009, a net impairment loss of goodwill of noK 93.0 million was conducted for the Baltic operations and likewise noK 22.5 million in the nordic operations.
gjensidige’s consolidated accounts were not charged with expenses for research and development in 2010 or 2009, nor were these expenses capitalised during the two financial years. the parent company has continued its collaboration with the norwegian Computing Centre and sFi (statistics for innovation), where climate and price elasticity projects are being implemented.
Marchand was elected member of gjensidige’s Board of directors in 2010. Ms. Marchand is president and Ceo of eksportfinans asa, and has previously held various positions, e.g. as Ceo of statens pensjonskasse . she is currently a board member of oslo Børs Vps Holding asa, oslo Børs as, norske skogindustrier asa, the norwegian refugee Council, Fornebu utvikling asa and gieK Kredittforsikring as and chairperson of the audit committee for scandinavian property development asa. Ms. Marchand has previously been the chairperson of Kommunekreditt as and a board member of innovasjon norge and edB Business partner asa. Ms. Marchand holds a Master of science in Business and economics from Copenhagen Business school (Handelshøy skolen i København). Marchand has been present at 7 board meetings.
Balance sheet and capital base the group had a balance sheet total at year-end 2010 of noK 84,106.8 million compared with noK 74,868.9 million in 2009. this growth is mainly attributed to growth in the pension and savings and online retail banking segments. gjensidige’s equity amounted to noK 23,137.8 million as of 31 december 2010, compared with noK 21,968.2 million at the end of the previous year. this was equivalent to an increase in equity of 5.3 per cent in 2010.
to increase the efficiency of the investment management and risk management, the group enters into financial derivative contracts on a regular basis. these contracts are described in greater detail in the notes to the financial statements.
cash flow net cash flow from operational activities consists primarily of receipts in the form of premiums and consideration for the sale of investment assets and payments in the form of claim settlement costs, the purchase of reinsurance, administrative expenses and taxes.
earned premiums, net of reinsurance were noK 8,279.4 million in 2010, an increase of 5.4 per cent from the previous year. the trend in earned premiums in 2010 reflects the effect of implemented premium increases. new premium guNNar Mjåtvedt Board member
Mjåtvedt was appointed as an employee representative to the Board of directors of gjensidige in 2007. He is gjensidige’s senior employee representative. Mr. Mjåtvedt’s background is in sales and management, and he has nearly 20 years’ experience in the insurance sector. Mjaatvedt has been present at 19 board meetings.
the cost ratio was 14.4 for 2010, a reduction of 2.1 percentage points compared with the previous year. nominally, expenses were reduced by noK 101.9 million in 2010 relative to 2009. this reduction came as a result of the efficiency improvement efforts.
commercial Norway the commercial segment offers general insurance products in liability, property, insurances of the person and motor vehicle, as well as within marine/transport.
Claims incurred came to noK 3,602.6 million in 2010, compared with noK 3,819.0 million in 2009. For 2010, the loss ratio was 81.5 and 80.6 in 2009. Claims incurred are affected by the frost in the beginning of the year. the level of major claims was somewhat lower in 2010 than in 2009, and amounted to noK 189.5 million (193.1). at the same time the run-off gain was somewhat higher in 2010 compared with 2009.
Combined ratio for 2010 was 94.4 per cent, compared with 93.6 in 2009. the underwriting result came to noK 245.8 million in 2010, compared with noK 305.0 million in the previous year.
Nordic countries the business area, nordic, includes the group’s operations in the danish and swedish private and commercial markets. this area also includes general insurance products to municipalities and municipal operations in scandinavia. in addition, the area includes the group’s white label business, where the private market in norway is the main target group.
earned premiums, net of reinsurance came to noK 3,906.1 million in 2010, an increase of 62.5 per cent from the previous year. this increase came primarily as a result of the acquisition of nykredit Forsikring, which is included in the data starting on 1 May 2010, in addition to growth in the danish and swedish commercial business.
the cost ratio was 18.7 for 2010, an increase of 1.4 percentage points over the previous year. nominally, expenses increased by noK 313.9 million in 2010 relative to 2009. the increase in the nominal expenses is mainly at-
Mari t. skjærstad Board member skjærstad was elected member of gjensidige’s Board of directors in 2010. Ms. skjærstad is a partner at the law firm johnsrud, sanderud & skjærstad as, and the chairperson of the Board of directors of Furnes-Hamjern sCC as, Hedmark trafikk FKF, Boligpartner as, ervod production & distribution as and the norwegian association of public transport. she is also a board member of amongst others Mesta as, scana industrier asa and norfund. Ms. skjærstad holds a law degree. skjærstad has been present at 8 board meetings.
perspektiv 69gjensidige annual report 2010 resu lts tributed to the acquisition of nykredit Forsikring, including integration costs of noK 52.5 million, growth in the commercial segment in sweden and an increased share of partner-distributed business in the norwegian white label business. efficiency improvement measures have been implemented in the swedish operations to reduce future costs. the work with cost efficiency measures in denmark is according to plan.
Combined ratio for 2010 was 102.0 per cent, compared with 93.6 in 2009. the underwriting result was a loss of noK 77.4 million in 2010, compared with a profit of noK 152.9 million in the previous year.
the cost ratio was 29.8 for 2010, a decrease of 2.1 percentage points relative to the previous year. nominal expenses decreased by noK 74.8 million in 2010 relative to 2009, equivalent to 35.4 per cent. during 2009 and 2010, a number of cost-cutting measures were implemented, and this, together with the lower volume of business, helped reduce operating expenses. gjensidige Baltic has one of the best cost ratios in the Baltic market.
Combined ratio for 2010 was 96.2 per cent, compared with 93.9 in 2009. the loss and cost ratios were still among the best in the industry in the Baltic. underwriting profit came to noK 17.4 million in 2010, compared with noK 40.5 million the previous year.
For the paid-up policy portfolio, realised profit in addition to guaranteed interest and provisions for additional capital was divided between the owner and the customers in a ratio of 20/80. the owner’s portion of the profit-sharing in 2010 came to noK 9.9 million. other financial income is the return on equity.
Claims incurred totalled noK 258.1 million in 2010 and noK 121.5 million in 2009. in 2010, noK 0.4 million were allocated to the risk equalisation fund, whereas the equivalent figure for 2009 was noK 2.0 million.
raNdi B. sætershageN Board member sætershagen was elected member of gjensidige’s Board of directors in 2005, and has been the deputy chairperson of the Board of directors since 2008. Ms. sætershagen works as a consultant and temporary manager in various businesses through her own company. she has formerly held positions as managing director of swix sport as, and Vp sales and marketing of norsk tipping as. Ms. sætershagen is a board member in the Board of directors of gjensidigestiftelsen, elsikkerhet norge as, Briskeby eiendom 1 as, Briskeby gressbane as, Hamar sportsanlegg as, Børstad idrettsanlegg as, Briskeby Bolig og Hotel as and posten norge as. she is also a partner at the firm alloc Kvalitetsgulv ans. she holds a Master of science in Business and economics from the norwegian school of Management (Bi). sætershagen has been present at 19 board meetings.
net interest and credit commission income amounted to noK 407.0 million in 2010, compared with noK 57.5 million in 2009. the increase is attributed to an increased volume, higher margins and higher interest rates. the net interest income relative to average total assets was 2.88 per cent in 2010, compared with 0.63 per cent in the previous year.
operating expenses amounted to noK 302.1 million in 2010, compared with noK 147.2 million in 2009. the cost increase is mainly attributed to a higher cost base as a result of the consumer loan portfolio that was acquired in december 2009.
the profit before tax expense was a profit of noK 33.1 million in 2010, compared with a loss of noK 76.3 million in 2009. the improvement in earnings is mainly due to the acquisition of the consumer loan portfolio the autumn 2009.
deposit-to-loan ratio the deposit-to-loan ratio at year-end 2010 was 64.6 per cent, which was considered satisfactory. at year-end 2009, the deposit-to-loan ratio was 56.6 per cent. a new high-interest product has been well-received by the customers and has helped boost the increase in deposits in 2010.
Health-related services had operating income of noK 544.7 million in 2010, compared with noK 509.1 million in 2009. the increase in operating income in 2010 was mainly a result of acquisitions carried out in 2010. the organic development was nearly flat, which is attributed to tough price competition related to public tenders. this has resulted in lower prices and margins on renegotiated contracts, but also the loss of individual government contracts, where the price reduction was too great for it to be feasible to offer services under the new terms.
eBita for 2010 came to noK 27.3 million, compared with noK 32.7 million in 2009. this yielded an eBita margin for 2010 of 5.0 per cent, compared with 6.4 per cent in 2009. the decline in the margin was mainly attributed to the loss of government contracts, where it takes some time to adapt the costs to the new level of income.
risk factors risk is defined as the possibility that an event can affect the group’s achievement of its objectives. thus, in order to understand and manage risk, we assess both the probability that the event will occur and the consequences of that event. through the group’s risk management and internal control, a structure is established that identifies, assesses, calls attention to and manages risk throughout the whole group in a systematic way.
the risk assessment process is integrated in the group’s plan and business processes. risk management is based on specified objectives and strategies and on the limits for risk exposure that have been specified by the Board of directors. the primary responsibility for good risk management and internal control is vested in the group Ceo and all managers and employees in the operational units, who do the work in keeping with the authorisations, rules of procedure and guidelines that are incumbent on each individual. a risk management function has been established at the group level, which is responsible for monitoring the group’s system for risk management and which tor Øwre Board member
perspektiv 71gjensidige annual report 2010 resu lts should have an overview of the risks to which the group is or can be exposed. the risk management function shall ensure that the group management and the Board of directors are sufficiently informed about the group’s risk profile at all times. a compliance function and internal audit are established that both are parts of the supervising of the group’s risk management and internal control. the group has a moderate risk profile, and in the opinion of the Board of directors no single event could seriously damage the Company’s financial position.
strategic risk gjensidige’s strategy, viewed in the light of results, fluctuations in markets and competition and changes in the regulatory framework, is monitored on a continuous basis. Factors that have been identified as critical to the Company’s capacity to achieve its targets are subjected to special monitoring. to ensure that gjensidige remains at the forefront of all developments in insurance, the group manages strategic risk by means of continuous monitoring of competitors and the market, product development and planning processes.
Customers are increasingly demanding more expertise on the part of the employees. there is a risk of insufficient or outdated expertise reducing the chances of realising commercial and strategic aims. there is also competition to attract and hold on to capable employees. Hence, we are actively focusing our efforts on competence building at all levels of the organisation, and competency requirements for various roles have been specified. as previously mentioned, gjensidige has concentrated all training of salespersons, claims handlers and managers in the gjensidige academy. this gives both an efficient utilisation of the training resources and increased attention to the question of what is best practice in gjensidige. performance-based reward models have been introduced for groups of employees, and individual personal scorecards have been introduced. a focused effort is being made to further develop corporate culture and management and to firmly establish requirements and expectations for managers and employees.
insurance risk the insurance risk related to major individual losses or events is managed via the authorisations and lines of reporting for ordinary operations. Clear guidelines have been established for the type of insurance available. the risk that the general premium level is not adequate is monitored regularly in the product and actuary department, and better methods are being developed to set correct prices.
financial risk gjensidige had financial investments worth noK 52.3 billion (insurance operations ) as per 31 december 2010. these consist mainly of interest-bearing investments, property, equities and strategic and financial holdings in associated companies, and they are exposed to changes in macroeconomic factors.
the strategic allocation of assets and dynamic risk management model established by the Board of directors provide the necessary framework for rapid adaptation of risk to changes in macroeconomic conditions. the monitoring of price, interest rate and foreign currency risk is partly conducted through stress tests, where the buffer capital must remain at a sufficient level to withstand significant simultaneous drops in share prices and bond prices at any given time. For further information on interest rate risk and stress tests, cf. note 3 in the consolidated annual accounts.
the Board of directors has assessed the risk of losses on loans, guarantees and other receivables, and the necessary provisions have been made in the accounts.
For a further description of the Company’s risk management, cf. note 3 in the consolidated annual accounts and a separate chapter on pages www. gjensidige.com.
corporate goverNaNce good corporate governance is a priority for the Board of directors. the Board of directors has decided to base the group’s corporate governance on the norwegian Code of practice for Corporate governance dated 21 october 2010 and has adapted the Code of practice in all areas.
an explanatory account of how gjensidige meets the Code of practice is provided in a separate document that is included in the annual report and that is available on the group’s website, www.gjensidige.com.
the Board of directors regards the practicing of socially responsible activities and high ethical standards as necessary conditions for gaining the trust of the world at large and achieving commercial success in the long run.
the Board of directors has established guidelines that specify targets and limits for the Company’s socially responsible involvement. the guidelines are available at www.gjensidige.com.
the group’s operations result in minimal pollution of the environment. the group’s environmental measures focus on energy economising, reducing travel through increased use of video conferencing, standardised printers and copiers that print on both sides of the paper, and responsible waste management. to reduce paper consumption and achieve environmental benefits, an effort is also being made to implement measures to increase the use of electronic insurance documents.
gjensidige’s head office at sollerud was already certified as an environmental lighthouse in 2008, and in 2009 and 2010 several other offices have been awarded the same status. the efforts to certify the group’s offices will be completed in the spring of 2011. at that time, all of our offices with over 30 employees will be certified as environmental lighthouses. gjensidige is working continuously to acquire knowledge about climate change and the consequences that it may entail. the purchase of carbon offsets has been one of the measures taken in the Company’s environmental efforts. the Board of directors is not aware of any products containing pCBs in gjensidige’s buildings and real estate.
targets and the achievement of goals, plus a more detailed description of gjensidige’s efforts related to social responsibility are presented in tables and descriptions on pages 38 to 41 of the annual report.
perspektiv 73gjensidige annual report 2010 resu lts huMaN resources demographics and equal opportunity at year-end 2010, the group had a total of 3,917 employees. in the norwegian general insurance operations, there were 2,041 employees as per 31 december 2010.
the gender distribution in gjensidige Forsikring was 54.4 per cent men and 45.6 per cent women at year-end 2010. the percentage of men increased somewhat relative to 2009 (53.7 per cent men). in 2010, 225 new employees were hired in addition to employees in acquired businesses. among the new employees, 125 were men and 100 were women, with an average age of 33.3. during the same period, 236 employees (120 women and 116 men, average age 44.5) left the Company, which gives a staff turnover rate of 11.6 per cent.
staff level gjensidige Norge gjensidige group the average age in the parent company was 44.4 (44.6 in 2009), and the average seniority was 12.2 years (12.4 in 2009).
at year-end 2010, there were two women among the nine members of the group management. at year-end 2009, there were no women in the group management. on the Board of directors, the percentage of women was 40 at year-end 2010 (4 out of 10), compared with 33 per cent (4 out of 12) in 2009. among the representatives who were not elected by employees, the percentage of women was 43 per cent (3 out of 7). out of a total of 217 managers, 35.0 per cent were women, which is a slight decline from 2009 (35.8 per cent female managers).
the questions are based on a nordic standard, and comparison figures are utilised for norway. the whole group participated, and the Board of directors is satisfied with the high participation with a total response percentage of over 90. the employee satisfaction survey shows that the employees score higher for the most part than the reference group. the employees are generally quite satisfied with the management, and the social environment is assessed to be very good. the work intensity is perceived to be higher in gjensidige than the average for other companies in equivalent surveys.
the ongoing work on the findings from the survey involves both managers and employees, and action plans have been set up with binding delivery dates for all areas and departments.
there has been a considerable increase in in-house training activity, and the number of course-days in 2010 came to over 6,200 (3,231 in 2009). this increase is mainly attributed to the activity at gjensidige’s Customer and Brand school, where new salespersons in both the private and Commercial areas have attended along with existing salespersons and claims handlers. the curriculum has focused on vocational, systems and communications topics, and both new and existing salespersons have taken the certification test that Finance norway (Fno) requires of everyone who sells insurance in the private market. all in all, gjensidige now has over 700 certified salespersons in the private area, and the theoretical and practical certification of existing salespersons gave us a substantial boost in 2010.
gjensidige has launched minute courses, which are simple courses that only take a couple of minutes to complete and that deal with topics where professionals see that the employee can improve with a little simple training. over 20 courses have been developed, and the attendance has been good. in addition, the learning portal that is employed for training for marketing campaigns has
Management development plays an important role in helping to ensure a modifiable and highly competitive firm, and it shall be closely associated with the business’s needs and perceived as useful and easy to put into practical use.
Correct skills development and good management shall be one of gjensidige’s most important competitive advantages. in 2010, the management programme leading Culture has been the organisation’s most important implementation tool for the above-mentioned gjensidigeexperience. all managers in the group have completed the programme, followed up by training in work processes in the various departments where the employees have participated.
in collaboration with the norwegian school of Management, gjensidige Forsikring has evaluated the employees’ perception of gjensidige’s educational and training measures. the results show that the education and training that have been initiated have had a significant effect on the quality of the work and the job effort, inner motivation and increased well-being.
systematic health, safety and environment (hse) systematic Health, safety and environment work is well-integrated in the organisation. a continuous focus on topics such as follow-up of absence due to illness with all follow-up in writing, development and integration of new systems and further development of electronic manuals helps reduce the absence due to illness. the cooperation with the corporate health services and the norwegian labour and Welfare administration (naV) has been further improved during 2010.
diversity and discrimination in 2010, gjensidige continued to pursue all three of the sub-goals in the inclusive Working life (ia) agreement, and integration and diversity are deeply rooted in the organisational culture. there is a balanced gender composition in the group, with 54.4 per cent men and 45.6 per cent women. the management team is composed of 65 per cent men and 35 per cent women.
With regard to equal opportunity and inclusive workforce, there are efforts to ensure that all employees are given the same opportunities for personal and professional development and will be treated equally regardless of gender, age, ethnic origin and functionality. Hiring and Hse routines shall ensure that the anti-discrimination and accessibility act is complied with.
pay statistics are being drawn up in order to call attention to any pay disparities on the basis of gender, age, ethnic origin or impaired functionality for the same work or work of equivalent value, and measures are implemented to equalise any disparities that may be found.
gjensidige cooperates with the norwegian labour and Welfare administration (naV) on job training and pay supplements for people who have been unemployed, and the group has had several employees in job training programmes through these schemes.
those who so desire are entitled to flexible working hours and other arrangements. gjensidige also has an occupational pension scheme and insurance schemes that are among the best in norway. together with these measures, the age limit constitutes a comprehensive package.
outlook the competition in the norwegian general insurance market became even tougher in 2010, and this trend is expected to continue. the small insurance companies have gradually increased their market shares, partly by establishing themselves in niches in the market and partly through aggressive pricing. in addition, many of the established financial institutions have started general insurance companies. these companies have not previously provided general insurance, but have associated operations and distribution channels. However, the measures that were implemented in 2009 and 2010 entail that gjensidige is well positioned to meet this competition. nevertheless, growth in the premium volume in gjensidige’s norwegian general insurance operations in 2011 is mainly expected to come from implemented and planned premium measures. it is expected that it will mainly be the danish and swedish general insurance operations that will contribute to growth in 2011. the economic outlook for the Baltic states is still negative, and a further decline is expected in the total market for general insurance. in lithuania, however, the trend is more positive.
the stock exchange listing has given the group greater freedom of action and opportunities to participate in the structural changes that affect the financial industry in the nordic region. through the listing, the group has been able to establish a security that can be used for possible acquisitions or finance the strategy for growth in the group’s range of products and geographical range in some other way, in addition to placing a value on gjensidige.
gjensidige has substantial capital buffers, with regard to both internal risk models and statutory capital adequacy requirements. the Board of directors considers the group’s capital situation and financial strength to be good.
eveNts after the BalaNce sheet date no significant events have occurred after year-end 2010.
allocatioN of profit Before other coMpoNeNts of coMpreheNsive iNcoMe the group’s profit for the year after tax amounted to noK 2,950.4 million. the Board of directors has approved a dividend policy that forms the basis for the dividend proposals that are submitted to the general meeting. gjensidige shall have a competitive dividend policy relative to comparable investments. in determining the size of the annual dividend, consideration shall be given to the group’s capital requirements, including capital adequacy requirements, together with targets and strategic plans. unless the capital requirements suggest otherwise, the Board of directors’ goal is that between 50 and 80 per cent of the profit for the year after tax will be distributed as dividends. the Board of directors recommends that noK 2,350 million be paid in dividends for the 2010 financial year, equivalent to 80.0 per cent of the group’s profit for the year.
the Board of directors would like to thank the employees for their efforts and their contribution to the Company’s profit in 2010. the Board of directors has decided to give each employee a bonus of noK 10,000.
the Board of directors of gjensidige Forsikring asa inge K. Hansen randi B. sætershagen gunnhild H. andersen trond Vegard andersen Hans-erik F. andersson Chairman of the Board
perspektiv 77gjensidige annual report 2010 resu lts fiNaNcial stateMeNts aNd Notes 2010 gjeNsidige iNsuraNce group page
Consolidated income statement ............................................................ 78 Consolidated statement of comprehensive income .............................. 79 Consolidated statement of financial position ....................................... 80 Consolidated statement of changes in equity....................................... 81 Consolidated statement of cash flows .................................................. 82 accounting policies ................................................................................. 83
operating expenses operating expenses from general insurance (2,810.4) (2,771.5) operating expenses from pension (109.6) (102.7) operating expenses from banking operation (302.1) (147.3) operating expenses from health care services (517.3) (476.5) other operating expenses (91.5) (116.1) amortisation and impairment losses of excess value - intangible assets (254.3) (216.7) total operating expenses 18 (4,085.3) (3,830.8)
profit/(loss) for the year before tax expense 4 3,254.0 3,166.5 profit/(loss) for the Year 2,950.4 2,304.8 earnings per share, Nok (basic and diluted) (restated for 2009) 29 5,90 4,61
perspektiv 79gjensidige annual report 2010 resu lts coNsolidated stateMeNt of coMpreheNsive iNcoMe Nok million 1.1.-31.12.2010 1.1.-31.12.2009 profit/(loss) for the year 2,950.4 2,304.8 components of other comprehensive income exchange differences (19.4) (102.5) share of other comprehensive income of associates 17.6 (8.6) actuarial gains and losses on pension (118.0) 442.7 tax on other comprehensive income (28.5) (254.1) total components of other comprehensive income (148.4) 77.5 total coMpreheNsive iNcoMe for the Year 2,802.0 2,382.3
perspektiv 81gjensidige annual report 2010 resu lts coNsolidated stateMeNt of chaNges iN eQuitY
1.1.-31.12.2009 profit/(loss) for the year 2,304.8 2,304.8 components of other comprehensive income exchange differences (102.5) (102.5)
share of other comprehensive income of associates (8.6) (8.6) actuarial gains and losses on pension 442.7 442.7 tax on other comprehensive income (254.1) (254.1) total components of other comprehensive income (102.5) 442.7 (262.7) 77.5 total comprehensive income for the year (102.5) 442.7 2,042.1 2,382.3 1.1.-31.12.2010 profit/(loss) for the year 2,950.4 2,950.4 components of other comprehensive income exchange differences (19.4) (19.4)
share of other comprehensive income of associates 17.6 17.6 actuarial gains and losses on pension (118.0) (118.0)
Net receipts/payments from investments shares and other equity participations (468.2) (956.2) Bonds and other fixed-income securities 3,929.8 (1,523.9) Financial derivatives and other financial instruments 416.6 (672.0) investment property (128.8) (5.7)
cash flow from investing activities payments on purchase of subsidiaries (2,702.0) net receipts/payments on sale/purchase of owner-occupied property 0.2 net receipts/payments on sale/purchase of plant and equipment (214.8) (174.7) Net cash flow from investing activities (2,916.6) (174.7)
Cash and cash equivalents at the start of the period 3,103.5 3,011.6 Merged, acquired and disposed companies 72.2 2.8 adjusted holdings at the beginning of the period 3,175.7 3,014.5 cash and cash equivalents at the end of the period 2,889.9 3,103.5
perspektiv 83gjensidige annual report 2010 resu lts accouNtiNg policies reportiNg eNtitY gjensidige Forsikring asa is a publicly listed company domiciled in norway. the company’s head office is located at drammensveien 288, oslo, norway. the consolidated financial statements of the gjensidige insurance group (the group) as at and for the year ended 31 december 2010 comprise gjensidige Forsikring asa and its subsidiaries and the group’s interests in associates. the activities of the group consist of general insurance, pension and savings, online retail banking and health care services. the group does business in norway, sweden, denmark, latvia, lithuania and estonia.
gjensidigestiftelsen has controlling interest of gjensidige Forsikring asa and is thus obligated to prepare consolidated financial statements. the consolidated financial statements can be obtained by contacting gjensidigestiftelsen at drammensveien 288, oslo, norway.
the accounting policies applied in the consolidated financial statements are described below. the policies are used consistently throughout the entire group with the exception of one difference that is permitted in accordance with iFrs 4 about insurance contracts. see description under the section Claims provision, gross.
Basis of preparatioN statement of compliance the consolidated financial statements have been prepared in accordance with iFrss endorsed by eu, and interpretations that should be adopted as of 31 december 2010, and additional disclosure requirements in accordance with the norwegian Financial reporting regulations for insurance Companies (For 1998-12-16 nr 1241) pursuant to the norwegian accounting act.
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 seven operating segments, 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. Based on this gjensidige reports the following operating segments • general insurance private norway • general insurance Commercial norway • general insurance nordic • general insurance Baltic • pension and savings • online retail banking • Health care services the recognition and measurement principles for gjensidige’s segment reporting are based on the iFrs principles adopted in the consolidated financial statements.
coNsolidatioN policies subsidiaries subsidiaries are entities in which gjensidige Forsikring has a controlling influence, which will apply to companies where gjensidige Forsikring owns more than 50 per cent of the voting shares, either directly or indirectly through subsidiaries. the subsidiaries are included in the consolidated financial statements from the date that control commences until the date that control ceases. the accounting policies of the subsidiaries have been changed when necessary, to align them with the policies adopted by the group.
if the fair value, after a reassessment of the group’s share in the net fair value of identifiable assets, liabilities and contingent liabilities exceeds the cost of the business combination, the excess amount is recognised immediately in profit or loss.
earned premiums from general insurance insurance premiums are recognised over the term of the policy. earned premiums from general insurance consist of gross premiums written and ceded reinsurance premiums.
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.
earned premiums from pension earned premiums from pension consist of earned risk premium and administration expenses in relation to the insurance contracts.
operating income from health care services the contracts vary between fixed-price contracts which to a great extent are invoiced in advance, and task contracts which are invoiced after completed assignment/time used. the part of the income that is invoiced in advance is accrued over the period the invoice applies to.
From operating income, value added tax, discounts, bonuses and invoiced freight expenses are deducted.
claims incurred Claims incurred consist of gross paid claims less reinsurers’ share, in addition to a change in provision for claims, gross, also less reinsurers’ share. direct and indirect claims processing costs are included in claims incurred. the claims incurred contain run-off gains/losses based on previous years’ claims provisions.
operating expenses operating expenses consist of salaries and administration and sales costs.
Net income from investments Financial income consist of interest income on financial investments, dividend received, realised 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 recognised in profit or loss using the effective interest method.
foreigN curreNcY foreign currency transactions every company in the group determines its functional currency, and transactions in the entities’ financial statements are measured in the functional currency of the subsidiary.
at the reporting date monetary items are retranslated to the functional currency at exchange rates at that date. non-monetary items denominated in foreign currencies that are measured at historical cost, are retranslated using the exchange rates at the date of the transac-
perspektiv 85gjensidige annual report 2010 resu lts tion. 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 recognised 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 recognised in other comprehensive income.
foreign operations Foreign operations 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 recognised as a separate component of equity. on disposal of the foreign operation, the cumulative amount of the exchange difference recognised in other comprehensive income relating to that foreign operation is recognised in profit of loss, when the gain or loss on disposal is recognised.
goodwill arising on the acquisition of a foreign operation and fair value adjustments of the carrying amount of assets and liabilities arising on the acquisition of the foreign operation are treated as assets and liabilities of the foreign operation.
taNgiBle assets owner-occupied property, plant and equipment recognition and measurement items of owner-occupied property, plant and equipment are measured at cost less accumulated depreciation and accumulated impairment losses. Cost includes expenditures that are directly attributable to the acquisition of the item. in cases where equipment or significant items have different useful lives, they are accounted for as separate components.
subsequent costs subsequent costs are recognised in the asset’s carrying amount when it is probable that the future economic benefits associated with the asset will flow to the group, and the cost of the asset can be measured reliably. if the subsequent cost is a replacement cost for part of an item of owner-occupied property, plant and equipment, the cost is capitalized and the carrying amount of what has been replaced is derecognised. repairs and maintenances are recognised in profit or loss in the period in which they are incurred.
depreciation each component of owner-occupied property, plant and equipment are depreciated using the straight-line method over estimated useful life. land is not depreciated. the estimated useful lives for the current and comparative periods are as follows • owner-occupied property 10-50 years • plant and equipment 3-5 years depreciation method, expected useful life and residual values are reassessed annually. an impairment loss is recognised if the carrying amount of an asset is less than the recoverable amount.
investment properties investment properties are properties held either to earn rental income or for capital appreciation, or for both. these properties are not used in production, deliveries of goods and services, or for administrative purposes.
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 recognised 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.
other intangible assets other intangible assets which consist of customer relationships,
amortisation intangible assets, other then goodwill is amortised on a straight-line basis over the estimated useful life, from the date that they are available for use. the estimated useful lives for the current and comparative periods are as follows • customer relationships 10 years • trademarks 10 years • internally developed software 5–8 years • other intangible assets 5–10 years the amortisation period and amortisation method are reassessed annually. an impairment loss is recognised if the carrying amount of an asset is less than the recoverable amount.
techNical provisioNs provision for unearned premiums, gross the provision for unearned premiums, gross reflects the accrual of premiums written. the provision corresponds to the unearned portions of the premiums written. no deduction is made for any expenses before the premiums written are accrued.
in the case of group life insurance for the commercial market, the provision for unearned premiums, gross also includes provisions for fully paid whole-life cover (after the payment of disability capital).
Claims provisions are not normally discounted. For contracts in denmark with annuity payments over a long horizon, discounting is performed. iFrs 4 permits the use of different policies within the group in this area.
reinsurers’ share of insurance-related liabilities in general insurance, gross reinsurers’ share of insurance-related liabilities in general insurance, gross is classified as an asset in the balance sheet. reinsurers’ share of provision for unearned premiums, gross and reinsurers’ share of claims provision, gross are included in reinsurers’ share of insurancerelated liabilities in general insurance, gross. the reinsurers’ share is less expected losses on claims based on objective evidence of impairment losses.
the category investments held to maturity comprises the class bonds held to maturity.
loans and receivables loans and receivables are non-derivative financial assets with payments that are fixed or determinable. loans and receivables are measured at amortised cost using the effective interest method, less any impairment losses.
interest-free loans are issued to finance fire alarm systems within agriculture for loss prevention purposes. these loans are repaid using the discount granted on the main policy when the alarm system is installed.
financial derivatives Financial derivatives are used in the management of exposure to equities, bonds and foreign exchange in order to achieve the desired level of risk and return. the instruments are used both for trading purposes and for hedging of other balance sheet items. any trading of financial derivatives is subject to strict limitations.
the group uses financial derivatives, amongst other to hedge foreign currency exchanges arising from the ownership of foreign subsidiaries with other functional currency.
Hedge accounting is applied on the largest subsidiaries. gains and losses on the hedging instrument relating to the effective portion of the hedge are recognised in other comprehensive income, while any gains or losses relating to the ineffective portion are recognised in profit or loss. if subsidiaries are disposed of, the cumulative value of such gains and losses recognised in other comprehensive income is transferred to profit or loss. Where hedge accounting is not implemented, this implies a divergent treatment of the hedged object and the hedge instrument used.
financial liabilities at amortised cost Financial liabilites are measured at amortised cost using the effective interest method. When the time horizon of the financial liability’s due time is quite near in time the nominal interest rate is used when measuring amortised cost.
definition of amortised cost subsequent to initial recognition, investments held to maturity, loans and receivables and financial liabilities that are not measured at fair value are measured at amortised cost using the effective interest method. When calculating effective interest rate, future cash flows are estimated, and all contractual terms of the financial instrument are taken into consideration. Fees paid or received between the parties in the contract and transaction costs that are directly attributable to the transaction, are included as an integral component of determining the effective interest rate.
divideNd dividend from investments is recognised when the group has an unconditional right to receive the dividend. proposed dividend is recognised as a liability from the point in time when the general Meeting approves the payment of the dividend.
the defined contribution plan is a post-employment benefit plan under which gjensidige pays fixed contributions into a separate entity and there is no legal or constructive obligation to pay further amounts. obligatory contributions are recognised as employee benefit expenses in profit or loss when they are due.
the defined benefit plan is a post-employment benefit plan that entitles employees to contractual future pension benefits. pension liabilities are determined on the basis of linear earning and using assumptions of length of service, discount rate, future return on plan assets, future growth in wages, pensions and social security benefits from the national insurance, and estimates for mortality and staff turnover, etc.
plan assets are measured at fair value, and are deducted from pension liabilities in the net pension liabilities in the balance sheet. any surplus is recognised if it is likely that the surplus can be used.
any actuarial gains and losses related to defined benefit plan is recognised in other comprehensive income.
share-based payment transactions in which the company receives goods or services as payment for the company’s own equity instruments is recognised as share-based payment transactions with settlement in equity, regardless of how the company has acquired the equity instruments. share-based payment arrangements settled by one of the shareholders in the ultimate mother company is also recognised as a share-based payment transaction with settlement in equity.
deferred tax deferred tax is determined based on differences between the carrying amount and the amounts used for taxation purposes, of assets and liabilities at the reporting date. deferred tax liabilities are generally recognised for all taxable temporary differences. deferred tax assets are generally recognised for all deductible temporary differences to the extent that it is probable that they can be offset by future taxable income. if deferred tax arises in connection with the initial recognition of a liability or asset acquired in a transaction that is not a business combination, and it does not affect the financial or taxable profit or loss at the time of the transaction, then it will not be recognised.
current and deferred tax Current tax and deferred tax are recognised as an expense or income in the income statement, with the exception of deferred tax on items that are recognised in other comprehensive income, where the tax is recognised 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 recognised without provision for deferred tax.
the provider of intra-group services, that are not considered core activities, will as a main rule, allocate its incurred net costs (all costs included) based on a Cost Contribution arrangement as described in oeCd guidelines chapter 8 and on the basis of paragraph 13-1 in the norwegian tax act.
identified functions that are categorized as core activities will be charged out with a reasonable mark up or alternatively at market price if identifiable, comparable prices exist.
traNsactioNs with affiliated coMpaNies the Fire Mutuals operates as agents on behalf of gjensidige Forsikring. For these services commission is paid. For handling the cooperation and to reinsure the Fire Mutuals’ fire insurance gjensidige receives cost refunds. due to the fire policy reinsurance plan, gjensidige Forsikring also manages assets on behalf of the Fire Mutuals. the Fire Mutuals are credited interest for these assets.
share capital at the end of the year the share capital consisted of 500 million ordinary shares with a nominal value of noK 2, according to the statutes. all issued shares are fully paid in.
in thousand equity certificates/shares 2010 in thousand equity certificates/shares 100,000 share split 400,000 outstanding 31 december 500,000 in connection with conversion from limited liability mutual (Ba) to public limited liability company (asa) on 28 june 2010 the equity certificate capital is converted to share capital.
in the column for own shares the nominal value of the company’s holdings of own shares is presented. amounts paid in that exceeds the nominal value is charged to other equity so that the cost of own shares reduces the group’s equity.
other earNed eQuitY other earned equity consists of this year’s and previous year’s retained earnings that are not disposed to other purposes.
the accounting policies that are used by gjensidige in which the assessments, estimates and prerequisites may deviate significantly from the actual results are discussed below.
fiNaNcial assets aNd liaBilities the fair value of financial assets and liabilities that are not traded in an active market (such as unlisted shares) is determined by means of generally accepted valuation methods. these valuation methods are based primarily on the market conditions at the reporting date. see note 9.
loaNs aNd receivaBles For financial assets that are not measured at fair value, it is assessed whether there is objective evidence that there has been a reduction in the value of a financial asset or a group of financial assets on each reporting date. see note 11.
peNsioN the present value of pension liabilities is calculated on the basis of actuarial and financial assumptions. any change in the assumptions affects the estimated liability. Changes in the discount rate is the assumption most significant to the value of the pension liability. the discount rate and other assumptions are normally reviewed once a year when the actuarial calculations are performed unless there have been significant changes during the year. see note 15.
3 – MaNageMeNt of iNsuraNce aNd fiNaNcial risk overview Management of risk is an integrated part of the daily operations in gjensidige. identification, assessment, management and control of the risk exposure as well as analyses of the effects of potential strategic decisions on the level of risk-taking is an essential part of the operations to ensure that the level of risk-taking is in keeping with the approved risk appetite and to enhance value creation.
an overall management of risks ensures that risks are assessed and handled in a consistent way throughout the group. risk management in gjensidige has two main objectives. First, the risk exposure should not exceed capacity. secondly, but equally important, a comprehensive risk management should help create value for customers and owners. through a strong risk management process, risks are identified, analysed, measured and managed not only with the purpose of reducing uncertainty and avoiding extreme losses, but also to maximize the return relative to the risk.
general insurance constitutes the major part of the operations and risks of the group, through gjensidige Forsikring in norway and its branches and subsidiaries in sweden, denmark and the Baltic. gjensidige also offers pension, investment and savings products through the subsidiaries gjensidige pensjonsforsikring (gpF) and gjensidige investeringsrådgivning (gir). in addition, gjensidige offers banking services through gjensidige Bank and various health care services in norway and sweden through Hjelp24.
in the areas of pension, savings and investment advice, there will be insurance and financial risk in the subsidiary gjensidige pensjonsforsikring (gpF). Within the commercial market gpF offers defined-contribution occupational pensions with related risk coverage such as disability insurance, disability pension and child and spouse pensions. in addition gpF manages funds related to paid-up policy portfolios. Within the private market gpF offers life and pension products and pure risk products such as disability pension. Mortality and disability risks are the two main insurance risks within gpF, whereas the greatest financial risk is related to the guaranteed return for the paid-up policies.
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.
in addition to insurance operations and banking business, the group has a leading position in corporate health care services through its subsidiary Hjelp24 as which offers personal security alarm services, private hospital and specialist services and work environment surveys. the health operations have been established to strengthen the group’s competitive position as a complete supplier in the fields of safety and personal health care. the main risk for Hjelp24 is more or less the same business risk that is found in any other service provider, i.e. generating enough business volume to cover fixed costs with sufficient margins.
capital MaNageMeNt the core function of insurance is the transfer of risk, and the group is exposed to risk in both its insurance and investment operations. identification, measurement and management of risk are essential parts of the operations. risk and capital are and must be interlinked. any insurance company must adapt its risk exposure to its capital base. on the other hand, solvency capital - or equity - has a cost. a key objective of capital management is to balance these two aspects. gjensidige’s overall capital management objectives are firstly to ensure that the capitalization of the group can sustain an adverse outcome without creating a financially distressed situation and secondly that the group’s capital is used in the most efficient way.
gjensidige’s minimum capitalization is determined on the basis of the strictest of three criteria: regulatory requirements, rating requirements and internal risk-based requirements. the group has a very strong capitalization position from all three of these perspectives.
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 the calculations of excess capital, consideration was given to an assumed dividend of noK 2,350 million for the 2010 financial year, which reduces the excess capital equivalently from all three perspectives.
in accordance with capital adequacy rules (Bis rules) as at 31 december 2010 the excess capital was noK 6,894.1 million, equivalent to a capital adequacy ratio of 16.1 per cent. as associates, the stakes in storebrand and spareBank1 sr-Bank are consolidated in the calculation of capital adequacy. the group’s excess capital above the solvency margin requirements was noK 9,373.5 million as at 31 december 2010.
table 1 – capital in excess of legal requirements Nok million 2010 2009 requirement gjensidige Forsikring 11,066.5 8,794.6 Capital adequacy (8%) gjensidige arbejdsskadeforsik. 140.2 217.6 individual solvency test nykredit Forsikring 1,188.0 n/a individual solvency test tennant Forsäkring 268.9 241.2 traffic light Model gjensidige Baltikum 100.2 88.1 solvency i requirement (100%) gjensidige Bank 617.9 634.4 Capital adequacy (8%) gjensidige pensjon og sparing 239.1 243.3 Capital adequacy (8%)
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 2010. in denmark, an individual solvency calculation was introduced as an adaptation to the upcoming solvency ii regulations. in 2010, nykredit Forsikring a/s was acquired. in 2010 operations in Fair Forsikring a/s and KommuneForsikring a/s were transferred to a branch of gjensidige Forsikring asa, whereas gjensidiges arbejdsskadeforsikring a/s and nykredit Forsikring a/s continues as separate companies. the operations in gjensidige sverige were transferred to a branch of gjensidige Forsikring asa 1 october 2009, whereas tennant Forsäkringsaktiebolag aB, which has the group’s white label business, will continue as a separate company owned by the holding company, tennant Holding aB. in sweden, a so-called traffic-light calculation is introduced in order to adapt to the upcoming solvency ii regulations. gjensidige Forsikring and all subsidiaries met all regulatory capital requirements during 2010.
figure 4 - excess capital from different perspectives 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 is regarded as an additional buffer and is available to finance the group’s strategic growth targets.
experience shows that the larger the portfolio of similar insurance contracts, the smaller the relative variability around the expected outcome will be. in addition, a more diversified portfolio is less likely to be affected by a change in any subset of the portfolio. gjensidige has developed its insurance underwriting policy to diversify the types of insurance risks accepted and within each of these categories to achieve a sufficiently large population of risks to reduce the variability of the expected outcome.
Factors that aggravate insurance risk include lack of risk diversification in terms of type and amount of risk, geographical location and type of industry covered. unexpected rise in inflation rate will also have negative effect on claims and benefit payments. gjensidige writes general insurance in norway, sweden, denmark and the Baltic. general insurance in these countries have a lot of similarities. the description of risks related to the insurance business is, with a few exceptions, common for the group. in case of significant deviations between the countries, these are commented separately.
the severity of claims is affected by several factors. in some loBs, with relatively few claims, the severity may be heavily influenced by large claims. the number of incurred large claims varies significantly from one year to another. this is typically for the commercial market. in most loBs the underlying development of the severity of claims is influenced by inflation.
Factors that affects the average claim may be 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 group writes Workers’ Compensation in norway and denmark. the regulation for this loB is quite different in these countries. in norway Workers’ Compensation covers both accident and diseases, in denmark diseases are covered by a governmental body. the compensation in norway is exclusively restricted to lump sums, in denmark the compensation is both lump sums and annuity payments. annuity payments are calculated according to assumptions about mortality, interest rate and retirement age. For bodily injuries the severity of claims is also influenced by court awards, which tend to increase the compensation more than the general inflation. this is also a significant factor, due to the long period typically required to settle these cases.
premiums, deductibles and elements in the conditions may be changed at the yearly renewal of policies. Furthermore gjensidige has the right to reject the payment of a fraudulent claim. the Company has the right to terminate individual policies in cases of insurance fraud, and in some instances legislation or policy conditions give gjensidige the right to terminate individual policies in cases where special reasons indicate that such termination is reasonable. in cases where a claim has been paid, gjensidige is entitled to pursue any third parties liable for the damage, for payment of some or all costs (recourse claim). the underwriting policy and guidelines in all companies are within the common acceptance of risk level.
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. the percentage share of premiums written in the nordic countries has increased compared to 2009 after the purchase of nykredit Forsikring in 2010.
Nok million gross premiums written per cent of total gross premiums writte per cent of total group eliminations are regarding internal reinsurance.
Fire and other damage to property table 3b - gross premiums written per line of business for gjensidige forsikring asa 2010 and 2009
the reinsurance programme for the gjensidige group, mainly non-proportional reinsurance, is based on calculated exposure, claims history, and capital structure. the limits for the reinsurance programme for each year are set out by the Board of directors. reinsurance is a group function, administered in gjensidige Forsikring asa; this also includes fire insurance for the cooperating mutual fire insurers. in norway the exposure to natural perils disaster is limited through gjensidige’s compulsory membership in the norwegian natural perils pool; the pool has its own reinsurance programme on behalf of its members, which further reduces the risk exposure. insurance risks are deemed to be moderate with the reinsurance cover the group has in place.
other concentration risk is mainly aggregation of fire risks and personal risk in Workers’ Compensation. these risks are measured by analyzing historical events, studying the insurance values exposed, and managed by reinsurance programmes.
perspektiv 97gjensidige annual report 2010 resu lts inflation. Mortality rates are from tables approved by the supervisory authorities.
the estimated cost of claims includes expenses to be incurred in settling claims, net of the expected recourse amount and other recoveries. gjensidige takes all reasonable steps to ensure that it has appropriate information regarding its claims exposure. However, given the uncertainty in establishing claims provisions, it is likely that the final outcome will prove to be different from the original liabilities established. the liabilities in the financial statements related to these contracts comprise a provision for iBnr, a provision for reported claims not yet paid (rBns) and a provision for unexpired risks at the balance sheet date. the amount for bodily injury claims is particularly sensitive to the level of court awards and to the development of legal precedence on matters of contract and tort.
the estimation of iBnr is generally subject to a greater degree of uncertainty than the estimation of the cost of settling claims already notified (rBns), where information about the claim is available. iBnr claims may not be apparent to the insured until many years after the event that gave rise to the claims.
figure 5 – average duration per insurance product process used to decide on assumptions the risks associated with insurance contracts are complex and subject to a number of variables that complicate quantitative sensitivity analysis.
the key statistical methods used are • Chain ladder methods, which use historical data to estimate the paid and incurred to date proportions of the ultimate claim costs. • expected loss ratio methods (Bornhuetter-Ferguson), which uses gjensidige’s expectation of the loss ratio for a class of business. • log-linear methods, which use exposure data and historical data to estimate the pattern of late reported claims, to estimate the iBnr provisions.
the methods used will depend on the loB and the time period of claims 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. such reasons include • economical, legal and social trends and social inflation (e.g. a shift in court awards)
• Changes in the mix of insurance contracts incepted • the impact of large losses iBnr provisions and provisions for reported claims are initially estimated at a gross level, and a separate calculation is carried out to estimate the size of reinsurance recoveries. gjensidige purchases almost exclusively excess of loss reinsurance contracts with sufficiently high retentions for only relatively few, large claims to be recoverable.
sensitivity analysis – underwriting risk underwriting risk is the risk that an insurer does not charge premiums appropriate for the insurance contracts. the pricing processes for the different insurance products involve estimates of future frequency and severity of claims, based on statistics from internal and external sources. even if the underwriting criteria are adequate and the premium calculations are performed on a good statistical basis, the claims cost may deviate from the expected level, – due to large claims, natural catastrophes etc.
gjensidige Forsikring asa and its subsidiaries have detailed underwriting guidelines. to ensure good quality in the assessment and quantification of insured risks, risk types and limits for sums insured that may be accepted are defined. this is done to ensure control of the risk exposure in the insurance portfolio.
table 4 below shows the impact on profit or loss for the year and thereby on equity at year-end, of changes in Combined ratio (Cr). tax impact is not included in the calculations. Cr is the key measure of profitability in the general insurance business. the calculations show the effect of a change of one per cent in Cr for each segment. an increase in Cr can be caused by an increase in the loss frequency and/ or an increase in the severity. in some loBs there is a risk that the loss frequency and the severity of claims are correlated so that an increase in the underlying insurance risk may affect both the frequency and severity of claims.
table 4 -sensitivity analysis insurance Nok million 2010 2009 change in cr (1 %-point) private norway 82.8 78.6 Commercial norway 44.2 47.4 total gjensidige forsikring asa 127.0 125.9 pension and savings 3.4 1.2
Nok million 2010 2009 change in loss frequency (1 %-point) private norway 807.9 860.9
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.
table 5 – sensitivity analysis claims provision chaNge iN iNflatioN (+/- 1 %-poiNt) Nok million 2010 2009 private norway 382.0 445.6 Commercial norway 413.7 405.7 total gjensidige forsikring asa 795.7 851.3
Net of reiNsuraNce estimated claims cost at the end of the accident year 8,882.6 10,177.0 10,599.8 11,388.2 11,745.1 12,241.1 12,426.6 12,028.5 13,275.3 - seven years later 9,008.2 10,132.8 - eight years later 8,925.9 prior-year claims provision 2,480.9 gjensidige Baltic 175.0 Claims handling expenses 1,257.8 total 27,879.9 the claims provision in gjensidige Baltic as at 31 december 2010 is shown separately.
in those particular portfolios well known methods for calculating the probability are used along with the theory for calculating which insurance premium is necessary to meet the future liabilities. additionally for a large portfolio technical insurance provision methods will also be used to secure a good estimate of the future liabilities. For smaller portfolios during the start up period it will be sufficient, and necessary due to little data, to make use of simplified provision methods with a conservative estimate.
the largest insurance risk that gpF faces is if the actual pension payments exceed the amount that is reserved to cover the committed insurance liabilities. this would occur if the disablement among the insured parties is higher than provided for, if the mortality rate rises amongst the insured parties that have dependants covered or if the retirement pensioners live longer than expected. this will also occur if the majority of those disabled have pre-agreed pension payments that are higher than the average pension payments in the insurance portfolio. it is in the nature of insurance that the events which the insured party has covered themselves for hit randomly, both in respect of who is affected and which cover is agreed, and this will give variations within a probability interval from year to year.
For the insurance business to be able to operate with a sufficient degree of security the portfolio should be both of a certain size and be sufficiently homogeneous in relation to the spread of risk between the best and the worst risk and between the smallest and greatest risk. the bigger the portfolio is and the more homogeneous the particular risk is, the greater the probability will be to meet the future liabilities.
the mortality risk in the products is mainly related to the surviving relative’s payments associated with defined contribution schemes, resulting in a spouse, cohabitant or child pension. the surviving relative’s pension is mainly associated with payments into a contribution plan above the statutory two per cent minimum contribution for compulsory occupational pensions. there is also an exposure against the surviving relative’s payments in the paid-up pension schemes, but by a clearly lesser extent measured by the insured amount for each insured party. the surviving relative’s payments under defined contribution schemes mostly have a limited payment period, whilst the surviving relative’s payments under paid-up pension schemes receive payments for as long as the pension recipient lives (for life).
table 7a – Number of members and contracts 2010 Number of members Number of contracts
Compulsory occupational pensions 52,886 13,388 other defined contribution pensions 21,845 4,670 total 74,731 18,058 other defined contribution pensions 29 % 26 %
the disability risk is related to the contribution exemption from agreed annual contributions for individual members as well as the disability pension. since the contribution exemption is a compulsory cover under compulsory occupational pension schemes, the largest part of this cover will numerically be in relation to pension contributions based on two per cent of salary. Correspondingly, pension arrangements above the minimum statutory requirements have a larger cover. disability pensions are attached to both defined contribution schemes as well as paid-up pension schemes. the risk premium for the disability risk is based on an internal risk tariff prepared in co-operation with gjensidige Forsikring and is based on both national claim figures (national insurance) and our own claim figures, primarily in gjensidige Forsikring.
the agreements with companies are also of a one year disposition such that the risk premium can be modified at each annual renewal. overall, this gives a robust premium basis with limited probability that the accumulated premium and allotted claim provisions will not be sufficient to cover future liabilities. since the portfolio is still of a limited size most of the annual risk premium is put aside into the claim provision. each year’s risk will be evaluated after some time in relation to reported insurance cases and expected reporting patterns. since these are business related pension schemes it is assumed that the time from when an insurance case occurs, in this case a death, to the case being reported to the Company will be minimal.
in addition there is minor mortality risk coverage within the paid-up policy portfolio.
the liabilities for the paid-up policy portfolio are long-term and the main part of the liabilities stretches over a period of 50 to 60 years. the figure below shows the undiscounted expected liabilities in the paid-up policy portfolio, based on the current portfolio, in intervals of five years.
the number of insured parties whom receive some form of disability benefit, either disability pension and/or exemption from agreed contributions, is still very modest compared to the number of insured parties. the simplified provision methods are therefore also used here due to the fact that most of the year’s risk premium is put aside for claim provision. each year’s risk will be evaluated after some time in relation to reported insurance cases and expected reporting patterns. since most of this particular disability risk is related to business related pension schemes it is assumed that the time from when an insurance case occurs, in this case a disability which has lasted longer than 12 months, to the case being reported to the Company will be minimal.
For insurance policies where the customer has reported a disability claim and disability pension or exemption from agreed contributions is accepted, the Company will have a claim provision to cover the present value of future liabilities until the end of the agreed period (retirement age) or until the person recovers from the disability status. the calculation of the latter probability is difficult, and in practice the claims provision is reduced by a “reactivation amount”. sensitivity in the disability claims provisions will be related to this assumption. in this context the assumptions on mortality rates have less influence.
the maximum retention level is set by the Board of directors, and the reinsurance department is responsible for purchasing and follow-up of reinsurance activities.
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. Credit risk is managed both via credit lines for named counterparties, from lines based on official credit ratings and from diversification requirements on mandates for corporate bonds. Credit risk in relation to reinsurance is handled through minimum rating requirements for gjensidige’s reinsurance companies and close follow-up of receivables.
Bonds held to maturity 1 the item primarily consists of the discounting effects of insurance obligations in denmark, mismatches between interest rate and inflation adjustments on the liability side in denmark versus interest rate and inflation hedging, and currency hedging of gjensidige sverige and gjensidige Baltic. Carrying amount corresponds to the market value of interest rate and inflation swaps in denmark.
gjensidige’s investment strategy is determined annually by the Board of directors. Here the Board of directors sets upper and lower limits per asset class, the overall risk tolerance related to the financial results and specific limits for interest rate, liquidity and foreign-exchange risk. the asset allocation must be within these limits at all times. the main goal of the asset allocation is to optimize the balance between expected financial income and risks. the starting point is the insurance operations’ need to balance expected future outflows against inflows from investments, while other funds in the insurance operations are invested to optimize return on equity in a well-diversified manner given the approved willingness to take risks.
the trend in the financial results is measured continuously relative to the targets and risk limits set by the Board of directors. in the event of a significant negative development in the financial results, the limit for investments in risky assets will be lowered. the development in the financial results measured against the risk limit is reported regularly to group management and the Board of directors.
stress testiNg stress testing is performed on the value of the investment assets relative to the market, credit 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 of directors. the purpose of the stress test is not to analyze the effect on profit or loss or on recognised equity, but rather the effect on the capital buffer.
Nok million scenario 2010 2009 assets/risk equities 20% drop in value (500.1) (365.0) interest rate risk 100 bps1 change in inter. (274.1) (347.2) property 12% drop in value (773.4) (723.7) Hedgefund 12% drop in value (90.8) (63.9) Currency 10 % change towards noK (87.2) (25.4) Fixed income portfolio - Rating underwriting result 3 percentage points weaker Cr
Nok million 31.12.2010 31.12.2009 10 per cent drop in equity prices (250.0) (182.5)
Nok million 31.12.2009 fund HitecVision private equity iV lp 79.1 Fsn Capital ii lp 76.9 altor Fund ii lp 54.5 northzone V Ks 53.1 norvestor iV lp 51.8 total five largest 315.4 total private equity 817.7 in addition to the invested amounts, gjensidige had committed capital, not invested, amounting to noK 581 million as at 31 december 2010.
table 13 – Maturity profile (number of years) fixed income portfolio
Nok million 31.12.2010 31.12.2009 100 bps parallell shift up (274.1) (347.2)
figure 7b - payout pattern for insurance liabilities, gjensidige forsikring asa 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.
Winton Futures Fund-lead series 180.0 sector polaris 144.2 the Winton evolution Fund 112.9 sector europower Fund Class a eur 81.0 sector Healthcare - a usd 79.3 total five largest hedgefunds 597.4 total hedgefunds 756.6 table 16b – largest hedge funds 2009
a ten per cent strengthening of noK against all other currencies will have a positive effect on equity of about noK 97.7 million. since the conversion effect related to subsidiaries is recognised in other comprehensive income, whereas the currency hedging for gjensidige Baltic and tennant is recognised in the income statement, the effect on profit or loss will be positive and amount to noK 87.2 million (noK 16.9 million for 2009).
Nok credit risk gjensidige is exposed to credit risk, i.e. the risk that a counterparty is not able or willing to settle its liability at due date or the risk that the credit spreads will increase (credit risk premium). the group is primarily exposed to credit risk in the investments in the insurance companies, and through receivables from the insurance customers and reinsurers. Credit risk in gjensidige Bank will be covered in a separate section.
For investments, risk limits are set for credit risk in several ways. as a point of departure there is a credit limit on designated counterparties. For issuers with an official credit rating from a recognised rating agency, this is generally utilized as a criterion. the list of credit limits is approved by the deputy Ceo and employed for all separate mandates and for derivative counterparties. in addition, the board-approved asset
perspektiv 107gjensidige annual report 2010 resu lts allocation sets limits on global bonds, both bonds with high financial strength ratings (investment grade) and other bonds (high yield). the group’s total fixed-income portfolio of noK 37,611.4 million as at 31 december 2010 (including the amortized cost portfolio, other bonds, certificates and deposits) consisted of noK 7,559.9 million issued by government sector entities and noK 30,051.5 million by non-public entities. the majority of the latter category was financial institutions. the percentage issued by government sector entities increased from the level in 2009. the distribution is shown in the table below.
Nok million 31.12.2010 31.12.2009 rating aaa 11,079.4 8,642.9 aa 5,513.9 6,457.8 a 9,548.0 10,393.8 BBB 2,276.6 2,815.0 BB 403.4 729.1 B 323.5 590.3 CCC or lower 365.0 196.7 not rated 8,101.6 8,033.3 total 37,611.4 37,859.0 table 19b – fixed-income portfolio per rating category, internal rating included
Nok million 31.12.2010 31.12.2009 rating aaa 11,286.2 9,076.3 aa 6,545.6 7,016.4 a 11,435.0 12,350.4 BBB 5,421.8 6,068.3 BB 403.4 729.1 B 323.5 590.3 CCC or lower 365.0 196.7 not rated 1,830.9 1,831.5 total 37,611.4 37,859.0 a large part of the norwegian fixed-income portfolio consists of issuers without a rating from an official rating company. However, the asset managers and brokerages conduct their own internal rating, assigning rating categories in the same way as the rating companies. For completeness, the second table includes the allocation also using the internal rating of gjensidige’s main asset manager, storebrand Kapitalforvaltning. the following tables show the largest issuers as at 31 december 2010 and 31 december 2009 respectively table 20a – ten largest issuers 2010
Nok million 31.12.2010 issuer den norske stat 2,499.2 nykredit totalkredit 1,779.8 realkredit danmark 1,508.6 dnB nor Bank 1,406.0 danske Bank 1,367.3 nordea Kredit 953.5 statkraft 937.3 Barclays Bank plc 734.5 oslo kommune 621.1 uBs ag jersey Branch 573.6 total ten largest issuers 12,380.8 total fixed income portfolio 37,611.4 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 the group level. total fixed-income portfolio is only for general insurance.
Nok million direct inurance reinsurance installments not due 3,020.0 31.6 <35 days 282.2 1.2 35-90 days 102.6 > 90 days 135.7 11.8 total 3,540.5 44.6 installments not due 2,871.9 1.9 <35 days 289.8 30.9 35-90 days 90.8 8.1 > 90 days 92.1 21.0 total 3,344.6 62.0 reinsurance is used to manage insurance risk. this does not, however, discharge gjensidige from any liability as primary insurer. if a reinsurer fails to pay a claim for any reason, gjensidige remains liable for the
payment to the policyholder. the creditworthiness of reinsurers is considered by reviewing their financial strength prior to finalization of any contract. as a general requirement, all reinsurers need to be rated ‘a-‘or better by s&p (or the equivalent from other rating agencies) when entering into the contract with gjensidige. the figure shows the breakdown of the purchased reinsurance capacity for 2010 and 2009; i.e. the rating of the reinsurers that would have been drawn in if the losses had occurred.
figure 8a – potential credit exposure reinsurance per rating category 2010 figure 8b – potential credit exposure reinsurance per rating category 2009 the following table provide an overview of the breakdown of reinsurance receivables and the reinsurers’ share of outstanding claims per rating category. the exposure in the not-rated category primarily relates to run-off business and is broken down among a large number of counterparties. in many cases the companies are now in run-off and do not have a rating anymore.
MaNageMeNt of fiNaNcial risk – gjeNsidige peNsjoNsforsikriNg gjensidige pensjonsforsikring (gpF) has a separate capital management strategy approved by the Board of directors, which specifies targets and limits for and the organization of the capital management activities. a separate investment committee with representatives from gpF, gjensidige investeringsrådgivning (gir) and the group’s investment and capital management departments gives advice to the Ceo on matters pertaining to management and risk management. investment, including entering into contracts for new external mandates, is centralized in the group’s investment department.
perspektiv 109gjensidige annual report 2010 resu lts savings operations have most of their balance in defined-contribution products, but the paid-up policy portfolio is growing. therefore, gpF is also exposed to the types of risk mentioned above and has its own investment strategy approved by the Board of directors, which sets the limits for exposure. the portfolios are stress tested in the same way as for the insurance operations (cf. the section above) to measure whether the buffer capital can tolerate a given decline in value. the paid-up policy portfolio amounted to noK 1,902.4 million as at 31 december 2010 with an average guaranteed interest rate of 3.6 per cent. the other group policy portfolio amounted to noK 254.0 million , whereas the company portfolio had noK 299.8 million in financial assets.
Money market 14.9 349.9 Bank deposits 340.4 442.8 Bonds held to maturity 587.3 637.7 loans and receivables 1,249.6 Current bonds 214.8 201.6 equities 39.5 148.5 Hedgefunds 0.3 other 9.8 the accounting interest-rate risk in gpF’s assets is extremely limited because bonds (classified as bonds held to maturity and loans and receivables) and the remaining fixed-income instruments are of short duration.
gpF is exposed to equity price risk through its investment in equities. the following table shows the effect of a ten per cent drop in the stock market and a one percentage point increase in the interest rate level of equity in gpF. the calculations do not take tax effects into consideration or that a share of the return normally is allocated to the customers.
Nok million 31.12.2010 31.12.2009 100 bps parallell shift up (11.5) (9.0) 10 % drop in equity prices (3.9) (14.2)
table 26 – fixed-income portfolio per rating, gjensidige pensjonsforsikring Nok million 2010 2009 rating aaa 488.0 99.3 aa 158.0 73.0 a 866.0 590.8 BBB 20.0 121.0 BB 37.0 15.6 B 58.0 0.3 CCC or lower 10.0 0.1 not rated 780.0 732.0 total 2,417.0 1,632.0 the largest individual exposures per counterparty are included in the group’s table above.
Fixed-rate periods in assets and liabilities, through fixed-rate products on the bank’s loans, constitute interest rate risk, and are included in the limits stated above.
the bank measures the market risk by using Value at risk analysis in the bank’s total risk model, where one uses a confidence interval of 99.95 per cent. a confidence interval of 99.95 per cent implies that there is only a 0.05 per cent probability that the bank has not set aside enough capital to cover an unexpected loss. as at 31 december the capital provision for interest rate risk was noK 5.2 million and noK 4.3 million in 2009.
liquidity risk liquidity risk is the risk of the bank not being able to meet payments at due date, and/or finance an increase in assets, without substantial extra costs arising, in form of fall in prices on assets being subject to realizing, or in form of expensive financing.
perspektiv 111gjensidige annual report 2010 resu lts lion is placed in short term deposits and noK 951.1million is placed in bonds, certificates and monetary funds. noK 162.4 million is placed in bonds where gjensidige Bank Boligkreditt as is prioritized (eliminated in the consolidated financial statement) and not included in the trade with norges Bank (norwegian Central Bank). the liquidity reserve is mainly realizable within days and the reserve is sufficient to cover maturity of debt for 19 months. the table below shows the maturity structure.
table 29b –liquidity profile banking operations 2009 table 29a –liquidity profile banking operations 2010
the group has seven 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 is the group’s core activity. general insurance is divided into four segments, mainly based on the customer’s geographical placement. other operational segments deliver products and services mainly to customers in norway.
general insurance Baltic the Baltic insurance market is in an early development phase and a significant share of the market is still uninsured. Motor insurances are the most widespread insurance product in these markets. gjensidige Baltic has operations in each of the three Baltic states.
online retail banking gjensidige Bank is a nationwide internet bank aimed at the private, affinity group and agricultural markets in norway. the bank offers traditional banking products adapted to electronic distribution.
health care services under the brand Hjelp24, a variety of health care services are offered. the service offering includes corporate health care services, personal security alarm services, private hospital and specialist services, and work environment surveys. the services are offered to private, commercial and public customers.
descriptioN of the segMeNts iNcoMe aNd eXpeNses, assets aNd liaBilities segment income is defined as earned premiums, net of reinsurance, for general insurance, earned premiums, net of reinsurance, management income and other income for pension and savings, interest and credit commission income and other income for online retail banking, and operating income for Health care services.
segment expenses are defined as claims incurred for general insurance and for pension and savings, interest expenses etc. for online retail banking, operating expenses for all segments, and net income for investments for pension and savings as well as online retail banking.
segment assets for the general insurance segments in norway consist of assets that can be directly attributable to the general insurance products, mainly receivables and reinsurers’ share of insurance-related liabilities. For the other segments segment assets consist of total assets.
segment liabilities for the general insurance segments in norway consist of liabilities that can be directly attributable to the general insurance products, mainly insurance-related and reinsurers’ share of insurance-related liabilities. For the other segments segment liabilities consist of total liabilities.
etc. 1 total segment income segment income - group 2 - Claims, interest expenses, loss etc. (6,296.7) (3,602.6) (3,252.0) (305.3) (258.1) (484.9) (14,199.6)
segment result/profit/(loss) before tax expense 788.2 245.8 (77.4) 17.4 (27.9) 33.1 27.3 2,247.5 3,254.0 impairment loss goodwill (100.0) (100.0)
Nordic Baltic pension and savings online retail banking health care services eliminations
segment result/profit/(loss) before tax expense 552.4 305.0 152.9 40.5 (107.8) (76.3) 32.7 2,267.0 3,166.5 impairment loss goodwill (22.5) (107.7) (130.2)
Nok million goodwill 1 customer relationship trademarks internally developed software other intangible assets total cost as at 1 january 2009 1,797.1 531.3 169.3 612.2 983.2 4,093.0 reclassifications 30.9 10.0 3.0 (43.9) 0.0 additions 2.5 43.1 45.6 additions through business combinations 13.2 13.2 additions from internal development 20.7 3.0 23.7 disposals (0.8) (31.8) (32.6)
as at 31 december 2009 1,662.2 495.0 155.8 648.7 907.0 3,868.7 uncompleted projects 84.4 84.4 as at 31 december 2009, including uncompleted projects 1,662.2 495.0 155.8 733.0 907.0 3,953.1 amortisation and impairment losses as at 1 january 2009 (33.7) (106.5) (71.9) (206.1) (927.5) (1,345.8) reclassifications (16.0) 4.4 (2.9) 14.6 0.0 amortisation recognised during the period (22.5) (53.6) (12.6) (118.9) (21.0) (228.6) disposals 0.3 31.8 32.1 impairment losses recognised in profit or loss during the period (107.7) (107.7) exchange differences 9.4 19.2 9.9 10.5 2.5 51.5 as at 31 december 2009 (154.7) (156.9) (70.3) (317.1) (899.6) (1,598.5)
as at 31 december 2010 2,867.6 855.7 146.0 789.7 266.3 4,925.3 uncompleted projects 76.4 76.4 as at 31 december 2010, including uncompleted projects 2,867.6 855.7 146.0 866.0 266.3 5,001.6 amortisation and impairment losses as at 1 january 2010 (154.7) (156.9) (70.3) (317.1) (899.6) (1,598.5) amortisation recognised during the period (73.2) (11.4) (136.1) (33.9) (254.6) disposals (26.0) 897.1 871.1 impairment losses recognised in profit or loss during the period (111.0) (0.6) (111.6) exchange differences 4.8 9.1 3.7 3.8 0.9 22.3 as at 31 december 2010 (286.9) (221.1) (78.0) (450.1) (35.4) (1,071.4)
goodwill, customer relationships, trademarks and parts of other intangible assets are all acquired through business combinations, and are a result of a purchase price allocation of initial cost of the acquisition. internally developed software is developed for use in the insurance business. external and internal assistance is used in relation with implementation or substantial upgrade, including adjustment of standard systems, are capitalized as intangible assets. amortization is included in the accounting line Operating expenses for the different segments.