Today, more than 200 years later, the mutuality principle is more important than ever. No one lives for himself alone. Everyone must do their bit. For the environment, for the sake of balance, for safety, for each other. This is who we are. Mutual, or Gjensidige, as we say in Norwegian. We are Gjensidige.
Key figures and alternative performance measures (APM) 2019 2018 2017 2016 2015 Earned premiums, general insurance NOK Millions 24,650.4 24,052.8 23,398.3 22,441.9 21,272.0 Other operating income NOK Millions 1,051.5 942.0 736.6 677.6 572.9 Net income from investments NOK Millions 3,860.3 830.2 2,002.2 2,152.6 1,488.2 Claims incurred, general insurance NOK Millions (16,978.6) (16,791.1) (16,401.7) (15,515.9) (14,597.5) Claims incurred etc. from pension NOK Millions (616.3) (566.8) (430.6) (391.3) (295.2) Operating expenses, general insurance NOK Millions (3,635.4) (3,655.9) (3,586.5) (3,191.4) (3,217.6) Other operating expenses NOK Millions (578.2) (546.2) (501.6) (470.1) (476.7) Tax expense NOK Millions (1,197.6) (883.5) (1,156.6) (1,363.0) (1,184.5) Profit/(loss) from continuing operations NOK Millions 6,556.1 3,381.6 4,060.2 4,340.5 3,561.6 Profit/(loss) from discontinued operations NOK Millions 37.6 334.9 459.1 325.4 223.1 Profit/(loss) from continuing and discontinued operations NOK Millions 6,593.8 3,716.4 4,519.3 4,665.9 3,784.7 Earnings per share from continuing and discontinued operations NOK 13.19 7.44 9.05 9.34 7.57 Regular dividend per share NOK 7.25 7.10 7.10 6.80 6.40 Special dividend per share NOK 5.00 6.00
Main figures general insurance Underwriting result 1 NOK Millions 4,036.4 3,605.8 3,410.1 3,734.6 3,456.9 Large losses 1 NOK Millions 635.0 954.7 577.4 871.8 880.3 Run-off results 1 NOK Millions 1,363.2 2,356.9 1,030.3 1,023.4 724.8 Combined ratio 1 Per cent 83.6 85.0 85.4 83.4 83.7 Loss ratio 1 Per cent 68.9 69.8 70.1 69.1 68.6 Underlying frequency loss ratio 1 Per cent 71.8 75.6 72.0 69.8 67.9 Cost ratio 1 Per cent 14.7 15.2 15.3 14.2 15.1
Financial position Investment portfolio 2 NOK Millions 59,054.4 52,816.0 54,860.2 53,957.7 57,173.9 Equity NOK Millions 26,192.2 23,845.2 23,703.1 22,326.0 23,330.6 Total equity and liabilities NOK Millions 112,405.9 156,762.9 149,072.4 135,926.6 129,264.4
Return Return on financial assets 1 Per cent 4.1 1.5 3.7 3.9 2.6 Return on equity 1 Per cent 28.2 17.3 21.3 21.4 17.4
The environment Energy consumption MWh 10,172 12,671 12,773 11,988 11,131 CO2-emissions, scope 1 and 2 3 Tonnes CO2e 1,059 5,426 5,354 5,150 5,456 CO2-emissions, scope 3 travel and transport 4 Tonnes CO2e 1,915 1,475 CO2-emissions, scope 3 claims processes 4 Tonnes CO2e 41,782 CO2-intensity 5 Share 1.7
Our ability to create value for our customers, employees, owners and society at large is dependent on our ability to maintain and strengthen this capacity. Technology, customer behaviour and regulations have changed significantly in recent years, and the development will probably continue unabated.
Best today, best tomorrow The core of Gjensidige’s competitive advantage is to offer the best customer experiences in the industry. This requires both a strong customer orientation throughout the organisation and efficient operations, which is reflected in the Company’s strategic platform.
Outside Norway, efforts to strengthen profitability have continued for several years. The trend is positive, but most of the effect of our efforts still lies ahead of us. Price measures have been implemented here, as in Norway, and we have managed to cut costs by rationalising our processes in Denmark, Sweden and the Baltics.
One step ahead with climate accounts We will look back at 2019 as the year when sustainability truly went mainstream, especially relating to the climate. Gjensidige has been calculating and reporting greenhouse gas emissions from its own operations for several years. This year, Gjensidige will lead the way in the general insurance industry by also launching climate accounts for parts of its supply chain. We have started by calculating greenhouse gas emissions based on the consumption of materials in the Motor and Property claims processes. This is the first step on the way towards achieving more sustainable claims settlements with lower climate footprint. This will require new thinking in our own operations, among our suppliers and among our customers. We know that it can take time to change established methods, but I sense great enthusiasm among those involved in the work. I am convinced that we will achieve the targets set by the Board for reduced carbon intensity.
Good. Better. Sustainable. Gjensidige was ranked as one of the most well-liked insurance companies in our biggest market, Norway, again in 2019. According to the Sustainable Brand Index and Ipsos Reputation Survey, we also have the strongest reputation in the insurance industry in terms of corporate social responsibility and sustainability. We aim to maintain this position by cultivating and developing good values, offering our customers even better advice and solutions and contributing to the green transition with sustainable initiatives.
Our goals are based on ambitions to achieve good financial results and as sustainable operations as possible. Strategic priorities are aimed at efficiency in the short run, development in the longer run – with sustainable value creation as a long-term priority.
Who we are Gjensidige’s core activity is to offer general insurance and riskbased accident and health insurance. We also offer pension services that naturally support our core activity in Norway. We will also to an increasing extent, alone or together with others, develop and offer value-adding additional services aimed at making life easier for and increasing our customers’ sense of security and well-being. Gjensidige’s head office is in Oslo, Norway.
The customer in focus Gjensidige’s vision is to know the customer best, and care the most. We aim to be the most customer-oriented general insurance company in the Nordic and Baltic area. This goal shall permeate the Company’s solutions and development agenda and characterise Gjensidige as a brand. The modernday Gjensidige carries on a more than 200-year tradition of helping customers during the most difficult moments of their lives.
Our social mission and responsibility have been key factors in the emergence of the modern welfare society. It is only natural that we continue and further develop our role now that society is facing new, far-reaching challenges. A consequence of this is that helping our customers and society to prevent losses and make sustainable choices will be a key part of our customer orientation.
In order to support these targets, the management has adopted operational targets.
Sustainability targets Gjensidige shall contribute to the attainment of the 17 UN Sustainable Development Goals. The Group shall help to promote five of the goals in particular: Good Health and Wellbeing, Decent Work and Economic Growth, Sustainable Cities and Communities, Responsible Consumption and Production, and Climate Action. The background for this is described in more detail on page 32.
Gjensidige’s sustainability targets (see Value created in 2019 on page 85-97) focus on three areas: a safer society, reduced carbon intensity and socially responsible investments. Some of the targets support more than one focus area. For example, our work on damage prevention contributes towards both a safer society and reduced carbon intensity by reducing the number of losses.
We need committed employees to be able to run an efficient business and achieve our goals. Taking social responsibility and supporting underprivileged people in different ways are important ways of creating social commitment and a meaningful workplace.
Reducing carbon intensity We have ambitious goals of reducing our carbon intensity – meaning greenhouse gas emissions relative to earned premiums – for both our own operations and claims settlements.
Our most important measure to reduce CO2-intensity is damage prevention. When a damage has occurred, our greatest opportunity to reduce our carbon intensity is to motivate customers and suppliers to make more environmentally friendly choices in connection with claims payments. We see great opportunities for encouraging more reuse and promoting the circular economy. We will contribute to this in the way we design our products and through collaboration with suppliers and other partners. Using the resources where they generate the greatest effect is essential, which is why we implement climate accounts as the basis for decisions going forward.
Our operational targets towards 2022 are based on the following priorities:  Maintaining customer satisfaction at a very high level  Maintaining the very high customer loyalty in Norway and increasing loyalty significantly outside Norway.  Increasing sales efficiency, among other things through a larger proportion of digital sales and more analytical CRM. When customers receive more targeted advice and information about products, it saves time for them and our customer advisers. It also increases the likelihood of customers buying a product that meets their need. We will also increase sales efficiency by optimising our channel mix through the use of internal distribution channels and optimal use of our channels.
Gjensidige’s strategy The board has determined Gjensidige’s group strategy for the coming years. The group strategy guides the business strategies of each business segment.
 The growing elderly population challenges the Scandinavian welfare model, but also creates opportunities for new products, services and partnerships.
 Climate risks have consequences for life, health and environment, and will influence products and value propositions.
 EU Sustainable Finance has launched several initiatives that can give rise to new regulation that will affect products, claims settlement (e.g. the choice of material) and investments.
Strategic platform In order to ensure competitiveness, and to succeed with long term value creation, we will have to balance customer orientation with efficient operations. Both must be based on an analytical approach through the entire value chain, and key girders to succeed are a strong brand, technology/ infrastructure that underpins flexibility, and relevant competencies and culture. Sustainable choices and solutions are a fundamental precondition for long term value creation.
Analytics-driven business processes If we are to succeed in maintaining customer orientation and efficient operations, we need good analytics-driven business processes throughout the value chain. This primarily concerns analyses of customer behaviour for the purpose of prediction and increased relevance in our contact with customers – whether in connection with sales, advice or claims settlement – and more automated tariffs and analytics for the purpose of optimal risk selection and pricing and prevention of fraud. The climate and environmental challenges society is facing require us to use our expertise and insight to contribute with analytics and activities to reduce the risk of climate-related damages.
Further developing the Group’s analytical capacity and expertise will be especially important. Not only regarding CRM, dynamic pricing and risk selection, but also with a view to achieving a more comprehensive customer orientation and partner/alliance development when faced with new customer channels and far more open and dynamic business models. The management must have broad expertise to be able to recognise opportunities, make the right choices and lead capable employees in a manner that generates value creation. Job rotation as a means of building expertise across business areas and staff entities, along with the recruitment and development of employees, is an important strategic tool.
A problem-solver for customers The core of Gjensidige’s more than 200-year long success story is that we have always been there for and played an important role in our customers’ lives. Through a fully integrated value chain and direct contact with customers, Gjensidige has gained strong customer insight that has contributed to efficient sales and customer loyalty, and the development of a strong brand.
Learning and development agenda In the period towards 2025, we will engage in continuous development, testing and learning to be able to meet the needs of future customers. We will pay close attention to developments in the markets and explore more innovative concepts. We will position ourselves for the future through new damage-preventing customer concepts and by participating in relevant ecosystems. This will ensure greater relevance in relation to customers and make us more attractive to potential alliance partners.
Segment strategies We shall maintain our strong and unique position in Norway, and ensure continued profitability. We shall adjust our prices quickly, and make sure that they reflect expected claims inflation. We continuously work on major and minor efficiency measures that generate cost savings, better customer experiences and greater competitiveness.
For the Commercial segment the market is expected to remain a relationship-based market where expertise is an important competitive factor. Our overriding goal for the Commercial segment in the upcoming strategy period is to maintain our market-leading position while strengthening customer relationships. We will achieve this by building digital service solutions, refining our role as a damage-preventing problemsolver, exploring new growth industries and developing preparedness strategies for important product areas for the Group.
We will continue to improve profitability and growth in the markets outside Norway. Important drivers will be a new core system and/or more sophisticated price models, a wider product range among our customers, and efficiency measures.
Capital strategy Capital discipline will continue to be given high priority, and our capital strategy will support our attractive dividend policy and contribute to ensuring high and stable nominal dividends on a regular basis.
Gjensidige’s capitalisation must be adapted at all times to the Group’s strategic goals and appetite for risk. The Group shall maintain its financial flexibility, while exercising strict capital discipline that supports the return on equity target and dividend policy.
The Group will make use of all forms of subordinated loans and other external financing, in a responsible and valueoptimising manner and within the limits set by authorities and rating agencies.
Financial capital – secures customers and operations We use financial capital, including equity and capital market financing, to finance the Group’s operations. The Group shall maintain its financial flexibility while exercising strict capital discipline that supports the return on equity target and dividend policy.
• Solvency margin based on approved partial internal model as of 31 Dec. 2019: 206 per cent
Human capital and structural capital We gain engaged, motivated employees who create good customer experiences with relevant products and services. Our systems and processes lead to good risk assessment and pricing, based on relevant data. We share claims data with public authorities to reduce the risk of loss.
• Employee engagement score: 8.0 • Number of course hours: 5,255 • Digital sales Private: 16 per cent • Claims reported online: 73 per cent
Relational capital The focus on relationships shall contribute to customers feeling that they get the help they need and choosing to stay with us. We aim to create local jobs through close cooperation with our suppliers. We work to increase the share of reuse and to reduce waste in connection with claims and settlements.
Customer orientation is an essential part of our service development, and knowing the customer best shall also enable us to offer relevant services. This is at the core of the Group’s strategy. Our most important products are motor insurance, property insurance, and accident and health insurance.
Distribution and sales Gjensidige serves the customers through a combination of telephone, digital solutions and sales offices. This is often called a multi-channel distribution model. Digital touchpoints make up an ever growing share, but the customers still prefer, to a large extent, a combination of digital and telephone touchpoints.
Sales and advisory services in Norway are mostly offered via our own distribution network, but we also use agents and brokers in some cases. We also cooperate with several local mutual fire insurers. Gjensidige has cooperation agreements with several large national trade unions and interest organisations in Norway.
Gjensidige has an integrated business model, where direct contact with the customers is a key element. Sustainability is a key element in all core processes.
Claims settlement Customers shall receive the right amount of compensation as quickly as possible. We facilitate simple reporting of claims, digitally or manually, and automated processing of claims reports to the greatest possible extent.
Our purchasing policy applies to the whole Group and requires that deliveries are sustainable. We use our purchasing power to exert influence, and, in continuous dialogue with our most important suppliers, we seek to ensure that sustainable solutions are chosen.
All procurements over a certain size must be quality-assured by the Corporate Procurement department. Most purchasing agreements are the result of competitive tendering carried out in accordance with adopted guidelines. All our suppliers must sign a self-declaration on corporate social responsibility. By signing this declaration, they undertake to comply with our requirements relating to the environment, social responsibility and corporate governance.
Read more about our follow-up of suppliers in chapter “Our commitment to our suppliers” and climate accounts for claims processes in the chapter “Our climate and environmental commitment”.
Investments Customers pay their insurance premiums in advance. This gives us a considerable amount of capital that needs to be managed in order to cover actuarial liabilities when a loss arises. The investments shall also help the Group to achieve its return on equity target.
The Group’s investment portfolio includes all investment funds in the Group, except investment funds in the Pension segment. Gjensidige’s asset management is based on the 10 UN Global Compact principles.
Creating value for our stakeholders Gjensidige has operations in six different countries, is one of the biggest companies on the Oslo Stock Exchange and has many different stakeholders. Customers, employees, suppliers, investors/owners and society at large are our most important stakeholders. By stakeholder is meant those who influence or are influenced by the Company. We engage in dialogue with our stakeholders as necessary, and the process is illustrated below.
Gjensidige and the stakeholders are placed in the bottom lefthand corner.
The most important focus areas in the table are explained in more detail in the chapter “Value created in 2019”, including why they are considered important, as well as sustainability targets adopted by the Board, the status of measures and, if applicable, their effect.
Gjensidige will also help to achieve financial risk protection, and universal access to quality essential health-care services.
8 Decent Work and Economic Growth, targets 8.2, 8.3, 8.4 and 8.8
Gjensidige insures enterprises that are vital to establishing workplaces, entrepreneurship, creativity and innovation, and stimulates the establishment of new and growth in existing businesses, including through access to financial services.
Gjensidige endeavours to ensure that employees and partners respect labour rights and promote safe and secure working environments for all workers, including migrant workers, and those in precarious employment.
Gjensidige shall also support adaptation to climate change and strengthen society’s resilience to and ability to handle disasters, and develop and implement holistic and comprehensive disaster risk management at all levels.
Gjensidige shall contribute to sustainable management and efficient use of natural resources, and contribute to reducing food waste and overconsumption of resources and materials in its insurance operations. Gjensidige is concerned with greater facilitation of the circular economy, and its goal towards 2030 is to progressively improve global resource efficiency in consumption and production, and endeavour to increase awareness of the need for a circular economy, in accordance with the 10-Year Framework of Programmes on Sustainable Consumption and Production Patterns.
Damage prevention – the most sustainable approach As an insurance company, our social mission is to take over our customers’ risk of losses. Reducing the risk of losses is sustainability in practice. It contributes to protecting lives, health and assets, is good for the climate and the environment, and benefits the economy.
Gjensidige has a long-standing tradition of damage prevention work, and raises awareness of risks in the social debate through press releases and articles, as well as through more direct measures targeting customers to inform them about and collaborate on measures to reduce the risk of loss.
Fire prevention Together with the Norwegian Fire Protection Association, the Directorate for Civil Protection and Emergency Planning (DSB) and local fire brigades, we organise Røykvarslerdagen – the smoke detector awareness day – on 1 December each year. The goal of the campaign is to raise awareness about how important an early warning is in the event of fire. An important message is that people should change the batteries in their smoke detectors on a set date every year.
Various fire prevention measures are initiated in the Baltic states, including new customers receiving smoke detectors. In Latvia, Gjensidige is one of the sponsors of a fire safety conference focusing on commercial customers.
In all the three Baltic countries, we conduct ‘safe home’ campaigns in cooperation with the media and representatives of the fire service, the police, security companies and electricity companies.
The purpose of the campaigns is to raise awareness of damage prevention and to prevent accidents, fires and burglaries.
Risk management for commercial and agriculture Each year Gjensidige carries out risk checks of a great number of commercial customers, including in agriculture, in order to, among other things, uncover whether maintenance is adequate, and to reduce risk of damages resulting from fire, water, weather and other environmental causes. Checking electrical systems using a thermal imaging camera is an important part of the risk check. Our experience shows that 7 of 10 fires are linked to faults in electrical systems. In addition, a follow up is made as to whether customers have satisfactory systems to safeguard employees’ health, working environment and safety. Customers receive feedback about scope for improvement after completed risk check. Risk management is also crucial for the pricing of the insurance contract. Properties are picked out for risk checks in cooperation with customers, We assess the properties and go through the results with the customers, and help them improve internal control in order to ensure necessary focus on damage prevention. Risk checks are important to ensure customer loyalty.
Health Gjensidige offers sustainable solutions by facilitating and encouraging better health. This improves life quality and prevents illnesses and injuries.
Mental health is an important focus area for Gjensidige. An increasing number of young people have mental health challenges that lead to their exclusion from the labour market. By offering lowthreshold services, we can prevent mental health problems at an early stage. Among other things we offer digital self-help programmes for mental health and an online psychologist who provides advice, guidance and help to young people.
In 2019, Gjensidige entered into a Nordic agreement with the fitness chain SATS. Exercise has a number of positive effects on physical and mental health, and is one of the most important preventive measures we have identified. Together, we will develop products and services that contribute to a healthier society.
Our markets Gjensidige is a leading general insurance provider in the Nordic countries and the Baltic states. The Company is the biggest player in the Nordic land-based general insurance market, with a market share somewhat above 25 per cent in 2019 of a total market worth more than NOK 60 billion, according to statistics from Finance Norway. The Company’s operations outside Norway are based on a number of small and medium-sized acquisitions over the past 15 years. Gjensidige is a well-established player in the Danish market, coming in fifth by market share. We are the eighth biggest general insurance company in Sweden by market share. In the Baltic states, Gjensidige is the sixth biggest.
Also in the commercial market, property and motor insurance are the biggest products, in addition to workers compensation insurance and group life insurance for employees. Commercial customers also request a number of insurance policies tailored to their activities.
We have seen a few attempts in recent years to establish nontraditional business models. The number of such initiatives is expected to increase going forward. New regulation and technology may usher in new business models that have the potential to challenge existing models. Our response is to maintain and strengthen the close relationship we have with our customers through good customer orientation, at the same time as we test, learn and develop new products, solutions and business models. Efficient operations are a precondition for creating room and flexibility for investments in future competitiveness.
Gjensidige’s brand and long history contribute to a high degree of loyalty in our home market, and ability to grow outside of Norway. Our operations are organised in six segments, as well as the investment area.
Our insurance segments Gjensidige Forsikring ASA is the parent company of the Gjensidige Group, and its head office is in Oslo, Norway. The Company has general insurance operations in Norway, Denmark, Sweden and the Baltic states, in addition to pension operations in Norway.
Operations outside Norway primarily take place through branches. In the Baltic states Gjensidige has a subsidiary in Lithuania with branches in Estonia and Latvia. In 2019, Gjensidige’s business has been organised in six operational segments:
Our asset management The purpose of the investment portfolio is primarily to cover our actuarial liabilities and to help the Group to achieve its return on equity target. Gjensidige’s risk appetite in asset management is limited, however.
• We are a member of the Norwegian Forum for Responsible and Sustainable Investments (NORSIF), and support the work on developing and promoting sustainable investments as a dedicated field in Norway, and share experience and knowledge across the Norwegian financial community.
Active ownership. We endeavour to influence companies through dialogue where we consider it expedient.
At year-end 2019, there are still large gaps in our greenhouse gas emission data. Fewer than 58 per cent of the companies in Gjensidige’s equity portfolio report their own emissions, and data are not available for a sufficient number of companies in the portfolio. This is especially challenging for bonds and unlisted investments. Gjensidige does not wish to disclose information about a narrow, unrepresentative portion of the portfolio only, and will therefore wait until 75per cent of each respective asset class is covered. For 2019, this only applies to the property portfolio in Oslo Areal.
May arise as a result of natural disasters or long-term developments rendering areas unsuitable for their original use. Property and business owners may also experience negative changes in value.
Good management and control – we are serious about our responsibility
Everything we do shall bear close scrutiny. That is why data protection, ethics and fight against corruption and money laundering is so important to us, as is good corporate governance and equal treatment of owners. To calculate risk correctly is the most important we do, both in terms of profitability, the company’s solidity and our responsibility to society at large.
Gisele Marchand is independent of key employees, main business partners and the major shareholder. Marchand is up for re-election to the Board in 2020. Number of shares in Gjensidige: See Note 8.
He is chair of the board in Ax Innovation AS, Industrivegen 10 Verdal AS, FPS Holding AS and Braxi AS. He is a board member of Gjensidigestiftelsen, Securo AS and Scuti AS. Elnan has founded and built up a number of technology companies, including Securo AS and Hypoxic Technologies AS, which in 2017 became part of the German Wagner Group GmbH, and where he is now general manager. Elnan has previous work experience from Securo AS, Innherred Vekst AS and Accenture and other firms. Elnan has considerable experience as a manager and from establishing and developing technology companies.
Giverholt is Chair of the Board of Ortomedic AS and Lillevold og Partners AS. He is a member of the board of Aars AS, A Wilhelmsen AS, CEK Holding AS, Fredensborg AS, Scatec Solar ASA and GammelNok AS. He has previously been CEO of Ferd AS, and CFO of the same company, Executive Vice President at DNB and Deputy Finance Director at Norsk Hydro.
Vibeke Krag Board member Vibeke Krag (1962) has been a member of Gjensidige’s Board of Directors since 2018. Krag holds a Master’s degree in law (cand.jur.) from the University of Copenhagen, and a Board Leadership Masterclass from Copenhagen Business School.
She is a member of the board of Nykredit A/S, Nykredit Realkredit A/S, Forenet Kredit and Konkurrencerådet (the Danish competition authority, appointed by the Danish government). She is also a member of the Nomination Committee for the University of Copenhagen.In addition, Krag has considerable experience from boards in a number of companies within insurance, finance, energy as well as public boards and committees. Krag has broad experience as a manager, juridical competencies and thorough competencies and experience from insurance.
Hilde Merete Nafstad Board member Hilde Merete Nafstad (1963) has been a member of Gjensidige’s Board of Directors since 2017.
Anne Marie Nyhammer Board member Anne Marie Nyhammer (1964) joined Gjensidige’s Board of Directors as an employee representative in 2016. She is a technical manager at Gjensidige and a union representative.
Nyhammer has previously worked at DnB and with Norsk Hydro/Leirvik Sveis.
Terje Seljeseth Board member Terje Seljeseth (1960) has been a member of Gjensidige’s Board of Directors since 2018.
Lotte Kronholm Sjøberg Board member Lotte Kronholm Sjøber (1972) joined Gjensidige’s Board of Directors as an employee representative in 2015. She is the union representative for Forsikringsforbundet at Gjensidige Forsikring in Denmark.
Data protection (GDPR) Gjensidige processes personal data in accordance with the laws and regulations that regulate our collection, storage and use of such data. The group policy and instructions for the processing of personal data provide more detailed requirements to be implemented throughout the organisation. Gjensidige’s employees are bound by a statutory duty of secrecy about all matters relating to our customers. Data protection training is mandatory for all employees and is also a part of the introductory programme for new employees. Access to personal customer data shall only be granted to employees who need it in the course of their work. The Company shall not obtain other personal data than it needs to serve the individual customer. Personal data shall only be used and stored for as long as this is necessary, and must then be erased, unless special exemptions are authorised by law.
Information security At Gjensidige, information security is about how we work together to minimise the risk associated with data leakages and personal data breaches. The Board and management use Gjensidige’s security policy to define overarching requirements for security management in the Group.
The risk of criminal offences and violations of our Code of Conduct is monitored as part of our internal control system. The Board has chief responsibility for risk management and internal control, and the CEO is responsible for the implementation. Our most important risk areas and internal control are reviewed annually by the Board. Risk management and internal control are described in more detail on pages 44 and 56 and in Note 3.
1. The customer’s case officer. 2. The customer ombudsman (the Company’s internal complaints board). The customer ombudsman service is staffed by highly experienced claims settlement personnel, who can take a fresh look at the case without being influenced by the original case officer’s personal assessment.
The rules are available at gjensidige.no, on the intranet and in e-learning courses, and managers shall contribute to ensuring that employees are aware of the rules. The purpose is to prevent and help to put a stop to activities that may entail a breach of the regulations at an early stage.
Money laundering and financing of terrorism Gjensidige is obliged to take a risk-based approach to money laundering and financing of terrorism in relation to its customers, based on the customer relationship and the type of products and transactions involved. In practice, this means that we carry out a risk assessment in connection with the sale of insurance to new and existing customers, and with the payment of claims. The risk assessment is comprehensive and is based on characteristics of the customer, the customer relationship, the product, the transaction and other matters of relevance.
A solid defence against money laundering is not only necessary because of official instructions. In the insurance business, money laundering often goes hand in hand with insurance fraud. At Gjensidige, we consider the fight against money laundering as a natural part of good risk selection, based on the principle ‘know your customers’. Instructions relating to money laundering have been adopted by the Board, and a risk assessment focusing on money laundering is presented to the senior group management once a year. The importance of combating money laundering is clearly communicated at all levels.
Corporate governance Good corporate governance is important to ensure value creation over time, and to increase people’s trust in the Company. Our statement on corporate governance is based on the Norwegian Code of Practice for Corporate Governance, adopted by the Norwegian Corporate Governance Board (NUES). This section is structured in accordance with the Code of Practice.
2. The business The Articles of Association describe the object of the business and set clear limits for its content. Gjensidige is a financial services group, and is subject to the restrictions and rules set out in the Financial Undertakings Act. Within this framework, Gjensidige primarily operates as a general insurance group in the Nordic countries and the Baltic states. In Norway, the Group is also engaged in life and pension insurance.
The Board sets clear objectives for the business with a view to creating value for shareholders. The objectives take society at large into account; see the separate section on objectives on pages 18-19. The objectives are revised and adopted annually.
Objectives, strategies and the risk profile are also evaluated once a year in connection with the work on strategy in June, or as necessary in connection with major events or structural changes.
3. Equity and dividends The Board has a clearly communicated solvency and dividend policy adapted to the Company’s objectives, strategy and risk profile. It is available at www.gjensidige.no. The policy emphasises an annual cash dividend, and that any excess capital will not be retained by the Company, but will be disbursed to the shareholders over time.
4. Equal treatment of shareholders and transactions with related parties Shareholders’ pre-emption rights in connection with an increase in share capital is an important and fundamental right in a good, harmonious shareholder community, and the preemption right can only be waived in exceptional circumstances. Waiving of this right will be based on the Company’s and shareholders’ mutual interests. In such case, there will be full openness about the matter, and the shareholders will receive identical information simultaneously through a stock exchange announcement and subsequently on our website. This also applies if the Board utilises the authorisations it has been granted. The Board’s transactions in own shares must always comply with the arm’s length principle and be on ordinary market terms. Transactions between related parties and group companies must take place on commercial terms, and on the basis of an independent evaluation if the transaction is not immaterial.
5. Shares and negotiability There are no provisions in the Company’s Articles of Association that limit the right to own, trade or vote for shares in the Company.
The committee members are independent of the shareholderelected board members and executive personnel.
The Nomination Committee’s duties include proposing candidates for the Board and the Nomination Committee and proposing the remuneration of the members of these bodies, as well as the remuneration of the boards working committees. In financial undertakings, the General Meeting elects the Chair of the Board. The Chair is elected from among the shareholder-elected board members. One of the board members elected from among the employees therefore takes part in discussions and decisions on the recommendation for Chair of the Board. This is by our own choice, and it is in accordance with the principle of workplace democracy that generally prevails in Norway.
The Nomination Committee also submits a recommendation for the election of the auditor to ensure that this election is also independent of the Board. The Board’s Audit Committee has a right to state its opinion in that connection.
8. Board of Directors In the Board’s opinion, the composition of the Board safeguards the interests of the shareholders as a whole, and the Company’s needs for competence, capacity and diversity.
At least two of the shareholder-elected members are independent of the Company’s main shareholder. The Company’s main shareholder, Gjensidigestiftelsen, assumes that the Chair of the Board shall be independent of Gjensidigestiftelsen and have the same relationship to all shareholders. No executive personnel or representatives of business associates are members of the Board. The shareholder-elected board members are elected, in accordance with the Articles of Association, for one year at a time. The employee representatives are elected for two years at a time. The Nomination Committee encourages board members to own shares in the Company.
In accordance with the law, the Board has established three board committees comprising board members – the Remuneration Committee, the Audit Committee and the Risk Committee. The committees’ mandates are based on a Group perspective. The board committees are preparatory committees and do not have the power to make decisions. In line with the Code of Practice, the majority of the Audit Committee’s members are independent of the Company. In the Board’s experience, the introduction of board committees has improved its work, and has led to deeper and stronger involvement in the business’s challenges and initiatives.
In accordance with the Financial Undertakings Act, the Company has established four independent control functions that each play a key role within their areas of responsibility – the Risk Management function, the Compliance function, the Actuary function and the Internal Audit function. Those involved are all employees of the Company. The internal auditor – the head of the Internal Audit function – is appointed by the Board, which also decides the auditor’s salary, and has a special position as the Board’s most important control officer. The others are appointed by the CEO. The functions are described in more detail in Note 3. The Board emphasises that these functions have a close relationship with the Board through board work and reporting, and, in particular, the work of the board committees.
The Board has adopted rules of procedure for its work, and works on the basis of an annual plan. Transparency and room for input to the Board are given emphasis. The board members have effective access to material relevant to their board work through the Admincontrol portal.
10. Risk management and internal control The Board complies with the Code of Practice in its work on risk management and internal control. The Company’s most important risk areas and the internal control system are continuously reviewed.
The work on internal control is based on the COSO principles, which comprise three lines of defence. They are the management’s own control measures (first line), the Compliance and Risk Management functions’ control measures (second line) and the Internal Audit (third line). Gjensidige is first and foremost an insurance group. The independent actuary function is therefore an important and necessary part of the Board’s work, and for assessing the actuarial liabilities.
In the Board’s opinion, the control environment is good and functions as intended. The framework for the assessment of risk – identification and qualification of risks – is continuously quantified and evaluated.
None of the board members have share options or other incentives issued by the Company. Reference is made to the Nomination Committee’s presentation, assessment and proposal, available at www.gjensidige.no.
12. Remuneration of executive personnel The Board has adopted guidelines for a remuneration scheme that applies to executive personnel. It is presented to the General Meeting each year, together with a report on any deviations that have taken place since the previous annual general meeting. The statement is available in the case documents at www.gjensidige.no and also in Note 8.
The guidelines help to ensure good alignment between shareholder and employee interests. The remuneration scheme is linked to value creation over time, and is based on quantifiable factors that the employee can influence. A ceiling has been set for performance-based remuneration.
The external auditor plays an important role, and it is his/her task to confirm to the General Meeting that the accounts adopted by the Board are correct. The Board places great emphasis on openness in relation to the external auditor and the audit team, and on ensuring good, efficient cooperation with employees, and that the auditor has the access he/she requires.
Risk – the core of the business Sharing of risk is the basic principle of insurance. When many people are exposed to the same type of risk of financial loss, they can divide the losses between them and in that way equalise the risk. In a modern society, this type of risk pooling takes place through an insurance company that takes over its customers’ risk and compensates the financial losses of those affected. Good risk selection and the right pricing of risk is decisive for insurance companies’ financial strength and profitability.
Management and control of different types of risk Gjensidige has three lines of defence as protection against the negative consequences of risk.
• Insurance risk: risk relating to insurance contracts, which means the risk of lower insurance premiums or higher claims expenses than expected.
• Financial risk: risk of loss relating to changes in macroeconomic conditions and/or changes in financial assets and liabilities as a result of exposure to interest rates, inflation, exchange rates, credit margins, real estate and share prices. Liquidity risk is also part of financial risk, and is defined as the inability to make payments when they fall due or the need to realise investments at a high cost or lower value to make payments.
• Operational risk: the risk of potential incidents or events that may arise and have financial consequences and/or negative consequences for reputation. Operational risk can be due to human error, weaknesses in systems, faults in processes or external events. This also includes the risk of non-compliance with external and internal regulations.
Climate risks (See note 3 for further information on risk management) Physical risks Transition risks Liability risks Increased probability of damage to nature, infrastructure, property and the potential to destroy the basis for business activity
More stringent climate-related requirements and new technology can lead to big changes in demand for a number of products and services, and companies that are unable to adapt to requirements and needs risk losing value.
Climate change can give grounds for lawsuits against decision-makers in countries and companies responsible for major greenhouse gas emissions. Lack of willingness to predict financial losses due to more stringent climaterelated requirements and new technology can also lead to lawsuits from affected investors.
The overriding objective of Gjensidige’s management of strategic and business risk is to ensure that the Group’s risk level is within the approved risk appetite.
The overriding objective of Gjensidige’s insurance risk management is to ensure that the Group’s risk level is within the adopted risk appetite. Gjensidige has a high risk appetite in the core area of general insurance in the Nordic countries and the Baltic states. The risk appetite shall be highest in areas where we have a high level of expertise and access to relevant data. Other business areas shall contribute to the Group’s total growth and profitability, but with limited risk appetite.
The primary purpose of the investment operations is to support the insurance business by securing the value of insurance liabilities against fluctuations in market variables. Free assets are invested to contribute to the Group’s overall profitability goals, with a controlled downside risk.
Daily reports are prepared for the purpose of follow-up and monitoring of Gjensidige’s investments to ensure that they are within the limits at all times. The reporting is carried out by a dedicated department to ensure independent follow-up. Monitoring of risk also takes place through stress tests, where the buffer capital must be sufficient at all times to be able to withstand the risk of a sharp simultaneous fall in the value of all asset classes.
Organisation in the form of well-defined, clear lines of reporting and a clear division of responsibility. Set procedures and processes for carrying out risk assessments throughout the organisation.
The risk assessment process for operational risk and measures are followed up on a continuous basis and reported to the management and Board.
• Cooperating with customers and suppliers/partners on the delivery of sustainable solutions, and monitoring our own carbon footprint through continuous followup.
Gjensidige has a strong focus on damage prevention work to prevent insurance events and reduce the impact on the environment. Gjensidige contributes to increased knowledge about losses and climate-related consequences by sharing claims data relating to weather events, including with Finance Norway, so that a joint Norwegian database can be established to help local authorities plan developments and regulations.
Gjensidige notifies its customers when bad weather is forecast that entails a risk to life, health and assets, and implements damage-reducing measures such as deployment of flood protection equipment in the event of a risk of flooding.
One example of this is a project conducted in cooperation with the Norwegian Computing Centre that aims to analyse and generate greater knowledge about water damage relating to the weather and climate.
Gjensidige has been certified as an EcoLighthouse since 2008 and works continuously on measures to reduce the environmental and climate-related consequences of its own operations. Most of the carbon footprint for Gjensidige’s own operations comes from energy consumption (Scope 2) and air travel by own employees (Scope 3). The climate accounts for Gjensidige’s own operations are described on page 98.
In 2019, Gjensidige has for the first time prepared climate accounts for the consumption of material and energy in the claims process (Scope 1, 2 and 3) and been able to measure carbon intensity. We would like to initially assess different initiatives to boost increased reuse and the circular economy, for example more repairs, reuse, reduced waste and different measures for reducing transport costs and more climate and environmentally friendly reconstruction. The climate accounts for Gjensidige’s claims process are described on page 96.
Physical risks – Threats and opportunities • Threat: ‘If insurance contracts fail to reflect increased climate risk, this can have negative consequences for the underwriting result. Different risks can become so great that they are no longer insurable, so that we lose business and customers must carry the risk themselves.’
In the countries where Gjensidige has operations, more precipitation is expected in the form of rain, and rising sea levels in the long term, which will increase the risk of damage. Higher temperatures will mean less snow and ice. On the one hand, this will lead to fewer losses from freeze and the weight of snow on buildings, and probably less damage to motor vehicles as a result of fewer days of slippery roads due to snow and ice. Changes in the composition and scope of precipitation (less snow, more rain) will probably increase the risk of flooding driven by heavy rain, especially in autumn and winter. Increased temperatures are also expected to lead to increased precipitation, and probably more frequent episodes of heavy rain. Combined with densification and inadequate dimensioning of water and sewage networks, this gives rise to expectations of increased claims payments for damage relating to torrential rain. As regards storms and wind, the consequences of climate change are more uncertain, as different mechanisms pull in opposite directions concerning the intensity, frequency and movement patterns of such weather.
Insurance largely consists of one-year contracts that enable the Company to change prices and coverage as the need arises. In simplified terms, one could say that increased insurance risk as a result of climate change is not necessarily problematic, since increased claims payments will be compensated by higher premiums or changes in coverage. In a longer-term perspective and not least from a societal perspective, significantly higher claims payments as a result of climate change will be problematic, as it may ultimately lead to insurance premiums simply becoming too expensive or to certain areas not being insurable in practice.
Reinsurance limits Gjensidige’s losses relating to major weather-related events. Gjensidige’s internal model is used to assess the effect of different natural disasters and climaterelated losses. Analyses have been conducted that show that Gjensidige’s financial losses in one of 200 years will be limited, even if more conservative assumptions about the frequency of such claims are applied.
A special arrangement in Norway is the Norwegian Natural Perils Pool, which is regulated by the Natural Perils Insurance Act. Membership of the Pool is compulsory for all insurance companies that sell property insurance (fire insurance) in Norway. The Pool is an equalisation mechanism whereby claims and costs are distributed between the member companies in proportion to their share of the market. The following natural perils are covered by the Pool: storms, landslides/avalanches, floods, storm surges, earthquakes and volcanic eruptions. In accordance with the pertaining regulations, each natural disaster claim will only be covered up to a certain amount, which limits Gjensidige’s losses relating to such claims. As of 1 January 2020, the insurance companies’ total liability for an individual natural disaster claim is limited upwards to NOK 16 billion. Because Gjensidige will only be charged corresponding to its share of the market and the
Transition risks – threats and opportunities • Threat: New risks arise as a result of the green transition, and because it is difficult to identify more long-term consequences of the green transition
• Opportunity: We understand the consequences of the green transition and price new risks correctly, and act as a driving force in the green transition.
In the longer term, Gjensidige expects transition risk to impact all segments of insurance. We believe that people’s awareness and attitudes can change, and that this can mean that Gjensidige must adapt its operations accordingly. Sustainable alternatives to all our main products will therefore be developed by 2025. This type of development is expected to be gradual, allowing Gjensidige to adapt its products and services to the market over time. Significant transition risk may arise in the Commercial segment, and probably also on the investment side, but major changes are expected to take place further in the future, and we also expect to have time to adapt to new framework conditions. In the Commercial segment, an analytics process has been initiated to take a closer look at trends and developments for Norwegian business and industry in a ten-year perspective. The purpose of this work is to assess how global trends and industry development will affect insurance needs going forward, including the consequences of climate risk.
Liability risks – threats and opportunities • Threat: ‘Risk of more lawsuits as a consequence of product liability or directors and officers’ liability’ • Opportunity: ‘We understand risks and adapt our terms and conditions to ensure that the insurance risk is acceptable.’
Most important policies and governing documents Governing documents that ensure that Gjensidige as a company acts in accordance with society’s requirements, important stakeholders’ expectations and the Board and management’s ambitions. Selected documents are published in their entirety at www.gjensidige.no, in addition to some internal documents that are relevant to be able to understand Gjensidige’s CSR and sustainability framework.
The Gjensidige Experience Our vision is to know the customer best and care the most. This vision reflects our view that customer orientation is a competitive advantage. Real customer orientation requires a culture in which advisory services, sales, claims processing, product development and systems development form integral elements. It takes time to develop a culture like this, and it is difficult to copy. Good customer experiences have created a trust in our brand over time of intrinsic value. Our ambition is to create the best customer experiences in our industry. That is what we call the Gjensidige experience.
Gjensidige is founded on a genuine customer orientation. The Company was established by and for the customers. This is our history and our present and future competitive advantage. Our commitment to the customer has contributed to fantastic customer experiences and sound results, and forms the basis for the Company’s more than 200-year success story. This is a key characteristic of Gjensidige and a distinctive feature of the organisation and the Company’s culture.
Do you have a problem we can solve? All points of contact between us and our customers shall be refined so that all enquiries and claims, whether great or small, are dealt with in a simple, problem-free way. Analysis of customer data, and alliances with other players, will be key measures to develop market leading solutions to our customers.
In the years ahead, we will endeavour to take customer orientation one step further. Going forward, we will have a stronger focus on delivering products, services and solutions that prevent losses from occurring. New technology and partnerships will enable us to be one step ahead in loss situations. This is an attractive, strong value proposition based on the Company’s customer orientation. Knowing that that damage prevention is the measure with the single greatest climate benefit/effect by far, we see how we can better meet customer needs while at the same time maintaining our role as a responsible member of society. Even with this focus, however, we know that losses will continue to occur, and when they do, Gjensidige will do what we have always done: not only compensate customer’ financial losses, but do so in a way that causes them the least possible inconvenience.
Customer orientation is key to Gjensidige’s strategy, and characterizes all parts of the company’s organisation. Our goal is to create the best customer experiences in the industry.
Sharing is a choice – Gjensidigestiftelsen shares Every year since Gjensidige was listed on Oslo Børs, the general insurance customers in Norway have received a customer dividend. Over the years, they have received almost NOK 19 billion, which corresponds to 11-15 per cent of the premium paid in each year.
We do all we can to create true involvement among our employees, so that we can secure lives, health and assets for our customers in a sustainable manner – every day. A sound, generous and safe company culture shapes solidarity, and provides fertile soil for good ideas and results.
Helge Leiro Baastad (1960) has been CEO of Gjensidige since 2003. He is a member of the board of Finance Norway, Ungt Entreprenørskap, Nykredit Holding A/S and Nykredit Realkredit A/S.
Baastad joined Gjensidige in 1998 as manager of the Private segment, and in 2000, he was appointed Executive Vice President responsible for group marketing and support functions. He has previously held various senior management positions with Jordan AS and Denofa Lilleborg Fabrikker. Baastad holds an MSc EBA degree (siviløkonom) from the Norwegian School of Economics (NHH).
Jostein Amdal (1965) took over as CFO and Executive Vice President for Finance on 1 October 2016.
Sigurd Austin (1971) has been Executive Vice President of the Private segment since 1 September 2018.
He joined Gjensidige in 2003 and has held various senior management positions in the Group. In the last few years, he has been COO of General Insurance Sweden, claims director with responsibility for motor and travel claims, and managed the SME and agriculture segment of the Commercial division for several years.
Bjerklund holds a Master of Marketing and Management from the Norwegian School of Marketing (NMH), and an MBA degree from the Norwegian School of Economics (NHH).
Hellerud joined Gjensidige in 2007 as Head of IR and served as CFO from 2011 to 2016. She has previously held positions at Oslo Børs and as an accountant with Ernst & Young. Hellerud is a state authorised public accountant from the Norwegian School of Economics (NHH) and holds an MBA degree (siviløkonom) from BI Norwegian Business School.
Gottschalk joined Gjensidige in 2011 with responsibility for strategy and M&A. He previously served as head of the Commercial division. He was previously executive director in the Investment Banking Division of Goldman Sachs International, and has held various positions with J.P. Morgan in London.
Gottschalk holds an MSc in Industrial Economics and Technology Management (sivillingeniør) from the Norwegian University of Science and Technology (NTNU) and the University of St. Gallen.
Jørgen Ringdal (1960) has been Executive Vice President of Organisation, HR and Security since 1 March 2018.
School of Economics (NHH) and is a state authorised public accountant.
Kaare Østgaard (1964) has been Executive Vice President of Technology and Infrastructure since 2015. He is also Chair of the Board of Gjensidige Baltic.
Østgaard joined Gjensidige in 2004 as head of strategy and M&A and has held various senior management positions in Gjensidige, most recently as head of Claims and IT. He has previously been Deputy Managing Director and held various executive positions with EVRY (ErgoGroup). Østgaard holds an MBA degree (siviløkonom) from BI Norwegian Business School.
Our core values Our core values shall contribute to forming a common identity and corporate culture throughout the Gjensidige Group. They shall help our employees to work well together, to concentrate their efforts on creating good customer experiences, and on creating innovation and capacity for change.
6 dimensions of diversity; 1. demographic 2. cultural 3. values 4. educational background 5. personality 6. physical ability
Read more about what we achieved in 2019 in the chapter “A safer society”.
Competence strategy The right competence in the right place at the right time is vital to maintaining competitiveness. If Gjensidige is to live up to the ambition of knowing the customer best and caring the most, our employees must reflect the diversity of our customers. We work to ensure that all employees feel a sense of security and the freedom to be who they are, and through this help us to deliver on our core values: create a sense of security, apply new thinking, go for it. We need managers who understand the value of diversity and who integrate diversity management into their day-to-day work.
Competence-building to meet the needs of the future It is important to Gjensidige that everyone has the opportunity to develop in their job. We facilitate work across national borders in all the countries we operate in. This generates new perspectives, learning and a better result for our customers. Gjensidige has a flat organisational structure, and the Company believes that diversity and cooperation are important preconditions for building a good delivery culture and being attractive in the labour market of the future. We have implemented a development model that highlights that most learning – 70 per cent – takes place in connection with day-today tasks. The remaining 30 per cent comes from organised tuition and training. Employees who work in sales and customer advice take part in an extensive course programme leading up to an exam that tests their professional know-how, ethics and the customer dialogue. Advisers targeting the private market are certified in accordance with a national industry scheme for the sale of general insurance. The Gjensidige Customer and Brand School ensures that all employees have the necessary prerequisites for implementing the Group’s customer orientation strategy. The school’s main focus areas are sales, claims settlement and management. It offers courses and programmes that underpin our group strategy and requirements for certification of customer advisers. All new Gjensidige employees take part in an introduction day where the CEO and other key personnel talk about the Company’s strategy, competence-building, culture, brand, ethics and more practical information.
These cooperation agreements are an important means of showing students the job opportunities available in Gjensidige and in the insurance sector in general. In addition, they give skilled members of staff an opportunity to work with academic research groups on various issues of relevance to Gjensidige’s further development.
We are also in the process of completing a management programme at the senior executive level in cooperation with NHH, the Administrative Research Unit AFF and HEC Paris.
Gjensidige has an equality and discrimination committee that convenes as necessary. The committee consists of representatives from the HR department and the trade unions. We have established a collaboration with Seema to increase the focus on and understanding of the importance of diversity and diversity management as a sustainable competitive advantage.
My Voice – monthly measurement of engagement In autumn 2019, the Group started a more dynamic way of following up employees’ job satisfaction and their experience of the work situation. A monthly survey, called My Voice, replaces the annual employee survey. Monthly surveys will ensure relevant results at all times and give us a better chance of understanding and following up how employees experience their work situation ‘here and now’, and how different events and changes affect their job satisfaction. This makes My Voice an even better operational management tool. The increased survey frequency allows us to use the results reported every month to adjust measures as necessary, ensuring the greatest possible improvement effect.
Employee rights (ILO) and cooperation with union representatives The cooperation between Gjensidige’s management and the employees’ trade unions is systematic and good, and it is based on a well-established structure with regular meetings of various committees. Rules have been adopted for what processes and decisions union representatives shall be involved in. Union representatives are paid by the Company.
All of our employees have full freedom of association. Collective bargaining takes place in accordance with the agreement with the trade unions. Gjensidige recognises the International Labour Organization’s (ILO) conventions and supports its promotion of decent work based on social justice and internationally recognised labour rights.
Health, safety and the environment (HSE) Systematic health, safety and environmental work is given high priority in Gjensidige. Our goal is not only to prevent sickness absence and injuries, but also to ensure that Gjensidige is a health-promoting workplace. We therefore work on preventing and following up sickness absence and on making adaptations for employees with disabilities. The work stations of all new employees are inspected in terms of ergonomics as soon as possible by a physiotherapist or an occupational therapist, if practically possible. The purpose of this is to adapt the work station to avoid repetitive strain injuries, and to provide
We have cooperated with non-profit organisations and sports at different levels for many years, in order to contribute to a safer and more sustainable society. Of course, we also work continuously to reduce our carbon footprint, both in-house and when handling claims, in close cooperation with our suppliers. We also have a strong commitment to our owners and creditors.
Cooperation with not-for-profit organisations Gjensidige collaborates with the Church City Mission on creating a better and safer local community. This involves making a financial contribution to the Church City Mission, and various activities that engage our employees. Employees from several of our offices all over the country contribute to the knitting campaign it runs before Christmas every year. It aims to create ‘a warmer society’ by raising money for a Christmas celebration for disadvantaged people.
In Lithuania, we have cooperated with the aid organisation Food Bank, which distributes food to the poor, since 2007. Gjensidige provides free insurance, supports activities and encourages employees to take part in the distribution of food packages. We are a member of the ‘For a Safe Lithuania’ campaign, the purpose of which is to give children from underprivileged families an increased sense of security and self-esteem. In Latvia, we are doing a tour of the biggest schools, teaching children about safety in the home.
Through local community involvement, sponsorships, procurements and return to shareholders and creditors Gjensidige contributes to sustainable value creation. We take responsibility for the climate and environment both as part of our operations and in cooperation with our suppliers.
Gjensidigestiftelsen is the largest financial foundation in Norway and has two main purposes. One is to distribute financial support to socially beneficial causes. Another is to be the largest owner of Gjensidige Forsikring ASA. Both purposes come down to help create a safer society.
Our climate and environmental commitment Insurance is a knowledge business that does not directly affect the environment to a large extent. However, we can contribute to a more sustainable society by reducing our own climate footprint with energy efficient offices and travel for employees and use our market power in relation to our suppliers in claims handling processes and in our investments.
Gjensidige’s climate footprint Read more in the chapter “Reducing carbon intensity”.
We have the ambition to be climate neutral by 2030. As a knowledge company, our CO2 emissions are mainly related to the operation of offices and to travel for employees.
Scope 1: Limited use of company cars We have established a company car policy that entails that CO2 emissions from company cars cannot exceed 130 grams per kilometre. At our head office, we have three electric cars that employees can use in connection with meetings and private errands, so that we reduce the use of taxis and private cars.
Scope 3: Travel and waste We focus on reducing different types of waste, such as paper, office supplies, electrical appliances and household waste.
Reduced travel through increased use of video conferencing will be vital to reducing CO2 emissions from our own operations.
Our purchasing policy applies to the whole Group and requires that deliveries are sustainable. We use our purchasing power to exert influence, and, in continuous dialogue with our most important suppliers, we ensure that sustainable solutions are chosen. Read more about how we cooperate with our suppliers on page 82.
Environmentally friendly motor insurance Repairing damage to and covering losses for cars and other vehicles represent a large shar of Gjensidige’s claims costs. This is an area in which we can influence and achieve sustainable solutions. Increased repairs and reuse of car parts is a topic in every country we operate in. We also cooperate with car dismantlers so that resources made available by demolition are recycled and used in new products. Gjensidige has participated in a pilot project under the auspices of Finance Norway Insurance Services and Norske Biloppsamleres Forening to test the availability of used parts and prices. The purpose of the pilot has been to: • reduce the number of vehicles that are scrapped; • Ensure continued focus on recycling materials in all countries we operate; • contribute to increased employment in garages; • reduce the costs of spare parts by using used parts rather than new parts where expedient (Norway has
Evaluation of the pilot demonstrates a potential for increased use of second-hand spare parts. Efforts are made to further improve availability, cooperation between suppliers, distribution, and development of an improved system for ordering, where the use of spare parts are possible.
The practice of using used parts is more common in Sweden where the conditions are different; people have a different relationship to cars (cheaper to buy), a better distribution network and all cars that are scrapped go to disassembly companies. Our supplier agreements stipulate that the garages must always endeavour to repair or find used parts before they order new parts. The calculation system CABAS is used to manage this process in Sweden. We have also reduced the use of own loss assessment in all countries, which helps to reduce transport costs.
We have a considerable focus on repairs and reusing car parts in Denmark. We have also selected partners who work on repairing damage to windscreens and car windows. This increases the percentage of repairs considerably and reduces material consumption and transport costs.
Gjensidige has also established a cooperation with external partners to realise remaining values from damages. Items we previously discarded are now being taken care of for repair and resale. This applies to, for example, condemned cars, mobile phones, other electrical appliances, and bicycles. We are also looking at cooperation in building damage to see if there can be any residual value in other damage cases such as water or fire damage. In cases where we would usually opt for condemnation, our partners may find value.
Model for calculating the material consumption in claims processes Gjensidige shall make proactive efforts to reduce the carbon intensity of its claims processes. It requires considerable knowledge of the use of materials in the physical claims handling that Gjensidige compensates.
In order to be able to calculate the materials consumed in claims processes, some of which are fairly complex, with many suppliers/partners, models have been devised based on the material consumption for the most common claims (frequency claims). This is in order to be able to convert material consumption per claim to CO2 equivalents. Models have been prepared for three types of frequency claims, which will form the basis for a normalised result in the climate accounts for claims processes (own climate accounts for claims processes Scope 3).
The calculation of total material consumption does not provide an exact figure, but, based on a materiality assessment, we believe it gives the best estimate of current consumption. The material consumption is calculated in kilos/tonnes and converted into carbon equivalents with the help of licensed software for the conversion of material consumption. DEFRA (2019) Greenhouse gas reporting; conversion factors 2019; Departrment for Business, Energy & Industrial Strategy and NVE (2018) National Electricity Disclosure.
Motor Property The assumptions that form the basis for this average calculation of consumption of materials are based on car makes and models with a high market share and frequency damages. The reference damage has been estimated with the damage appraisal system DBS run by the Car Damages Office which is a part of Finance Norway Insurance Operations, and shows the actual use of materials for motor cars. Individual assessments of frequency damages have been carried out in Denmark, Sweden and the Baltics.
Water damage: Plain kitchen cabinet fronts Parquet flooring Repair as a result of water seeping through the floor Waste, corresponding consumption new materials Energy consumed Kilometres driven, repairs
Our commitment to our suppliers Gjensidige’s requirements for procurement processes are set out in the Group procurement policy, which applies to Gjensidige Forsikring ASA and all its subsidiaries. Gjensidige expects manufacturers and suppliers to conduct their business in accordance with the 10 UN Global Compact principles. The principles cover human and labour rights, requirements for the environment and anti-corruption. Read more at www.gjensidige.no/konsern/om-oss
Read more about our efforts in 2019 in the chapter “Reducing carbon intensity”.
All procurements over a certain size must be quality-assured by the Corporate Procurement department. Most purchasing agreements are the result of competitive tendering carried out in accordance with adopted guidelines. All our suppliers must sign a self-declaration on corporate social responsibility. By signing this declaration, they undertake to comply with our requirements relating to the environment, social responsibility and appropriate governance: • Conduct their own business in a way that does not violate internationally recognised principles and guidelines relating to human and labour rights.
• Ensure that their sub-suppliers of goods and/or services to Gjensidige do not violate internationally recognised principles and guidelines relating to human and labour rights.
All procurements shall be as environmentally efficient as possible, meaning that endeavours shall be made to achieve maximum value creation and minimum environmental harm. Suppliers are, to the extent possible, encouraged to make environmentally friendly choices. This applies to all the countries we operate in. There is an increased focus on the circular economy in our claims settlement. This applies to both buildings and motor vehicles. Reuse must never be at the expense of quality and safety, and we make stringent environmental and quality requirements in relation to the choice of materials. This is because quality is sustainable. Companies that provide services in connection with claims payments for damaged buildings in Norway must be certified in Startbank. Startbank is a register of suppliers that is used by purchasers in the fields of building, construction, public administration, insurance and real estate. This ensures that qualified suppliers are law-abiding and that competition takes place on equal terms. All material procurements are ordered electronically. As far as possible, all suppliers shall use electronic invoicing. Competitive tender procedures are carried out with the help of online portals. The use of electronic tools ensures that all processes are documented and verifiable, and this prevents irregularities and reduces the consumption of paper.
Ownership At year-end 2019, Gjensidige had approximately 32,000 shareholders. The 20 biggest owners represented a total of 86.8 per cent of the shares in the Company. Gjensidigestiftelsen has laid down in its statutes that its ownership interest in Gjensidige shall amount to at least 60 per cent, which shall contribute to predictability and stable ownership. The Foundation has expressed willingness to consider a reduced ownership fraction in the event of any acquisitions or capital increases that are in accordance with Gjensidige’s overall strategy. The Foundation manages ownership of Gjensidige on behalf of Gjensidige’s general insurance customers in Norway. It has an ownership policy that focuses on high value creation over time and expects a competitive dividend.
Financial calendar 2020 26 March 2020 Annual General Meeting 22 April 2020 Q1-result to be published 14 July 2020 Q2-result to be published 20 October 2020 Q3-result to be published 4 Caisse de Depot et Placement du Quebec 2.99%
A safer society We are working on a number of measures to achieve our ambition of contributing to a safer society, creating an engaging workplace, developing relevant products that ensure our customers financial security, and other measures to promote corporate social responsibility. Gjensidige’s focus areas
Damage-preventing measures Damage-preventing measures have always been a key element of our corporate social responsibility. Providing guidance to customers is the mainstay of our customer dialogue, and we will help customers to reduce their risk of loss.
• Requirements made of customers in the private and commercial markets to be entitled to discounts.
• Established new sustainability fund for agriculture in cooperation with the Norwegian Farmers’ Union.
New measures going forward • Further develop our concept “the Gjensidige
New measures going forward • Further develop products that support sustainability. Read more below and on page 29
Engaged employees We wish to develop an organisation in which diversity characterises our activities and generates new ideas and perspectives in the work on a more sustainable society. We want our employees to be engaged and motivated, and we encourage them to give feedback on what works well and what areas could be improved, in our employee satisfaction survey.
Further develop our culture for building expertise and generating new ideas and perspectives, to ensure our employees are also relevant in the future. Have engaged and motivated employees and achieve top quarterly results in the employee satisfaction survey.
What we have achieved • The total employee satisfaction score for 2019 was among the top 25 per cent in the financial industry in Peakon’s industry benchmark.
• Gender balance unchanged from 2018. • Considerable increase in the number of elearning sessions conducted, slight decrease in the number of other course days.
New measures going forward • Cooperation with the Norwegian Labour and
Welfare Administration (NAV) to help people who have been excluded from the labour market.
Sustainable operations are a precondition for long-term value creation. Gjensidige has adopted sustainability goals focusing on three areas: a safer society, reduced carbon intensity, and socially responsible investments.
Collaborations with non-profit organisations in all the countries we operate in to contribute to: • a warmer society. • providing work experience and achieving expedient integration of at least four full-time equivalents/persons per year.
What we have achieved • New sponsor of Karsten Warholm. • Agreement with the Norwegian Cancer Society to support our focus on healthcare. • Contributed to providing meals, Christmas presents etc. for disadvantaged people in Norway and the Baltics.
Good corporate governance We are concerned with good risk management because it is essential to an insurance company. It affects everything from product pricing assessment to capital needs. We have established an internal control system that facilitates compliance with laws and regulations. We have a particular focus on data protection compliance (GDPR), corruption and money laundering, and our Code of Conduct.
• S&P ERM: strong rating • Score from MSCI: BBB • CDP score in 2019: C (D in 2018) • Established cooperation with the Norwegian
Computing Centre to look at climate risk in relation to tariffs.
• Evaluate and carry out scenario testing for physical, liability and transition risks (e.g. in the investment portfolio).
Effect of our efforts – damage prevention important to society and to reduce insurance risk
Our most sustainable measure is to help our customers to prevent losses from occurring. In 2019, Gjensidige implemented a considerable number of damage prevention measures, but the direct effect of these measures is difficult to measure. However, we were voted the most sustainable company in the Norwegian financial industry in the Sustainable Brand Index Awards in 2019, and the best financial undertaking in Ipsos’s reputation survey.
In Denmark, we have conducted approximately 2,500 inspections per year over the past four years, and in 2020, we plan to conduct approximately 2,600 inspections, broken down as follows: 1,000 in commercial, 220 in the public sector, 600 in agriculture and 800 in part-time farming. In addition, approximately 2,000 desktop reviews were conducted, including feedback about the status to our customers. Thermal imaging and transient protection of electrical installations are conducted for most properties. Reports without remarks result in a discount in price. We have carried out approximately 3,000 measures since 2015, and contributed grants in the amount of DKK 6.6 million. More extensive electrical inspections have also been carried out based on specific risk indicators and requirements for larger units.
In Sweden, risk checks are largely conducted by holding the brokers accountable. Approximately 30 inspections have been carried out at the premises of our biggest customers, concluding in reports with improvement suggestions to the customer.
In 2019, Gjensidige had the largest share of media coverage among insurance companies in Norway, with a share of 33 per cent. Out of a total of 3,977 news pieces, 1,719 included damage prevention topics or social responsibility topics. The comparable figure for 2018 was 1,995.
Effect of our efforts – Sustainable products and services Our products and services give customers the incentive to prevent and limit losses. Safety measures are rewarded by discounts being given when insurance is taken out. Once a claim has arisen, it must be settled, either in the form of cash compensation or repair of the damage. Many sustainability elements are incorporated into the terms of our insurance policies. Some of them are mentioned below.
Property Gjensidige ensures that demolition and removal after a claims event are carried out in an environmentally sound manner. After a claims event, we cover the upgrade to the applicable technical regulations, which indirectly contributes to less energy consumption and less risk of damage.
We cover alterations/facilitation for wheelchair users following accidents as standard in our home, cabin and household contents policies. We have also implemented a new and improved method to combat grey silverfish that provides more effective protection.
Motor We have a number of initiatives that promote road safety and encourage safe and claim-free driving. Our bonus system rewards customers for safe and claim-free driving. We collaborate with the Norwegian Council for Road Safety (Trygg Trafikk) on projects focusing on young people, and Gjensidige’s learner driving app enables young people to log their driving practice, and it rewards extensive training. The young people under this agreement receive a pay-out when they turn 23 as a reward for claims-free driving.
Liability insurance Customers are given incentives to secure their assets by preventing and limiting losses. We actively follow up sectors that file many liability claims, in order to reduce the number of claims in future. We require that they implement various safety measures before they can take out insurance, to encourage responsible operations.
Some new products in 2019: • Gjensidige’s environmental insurance covers more than ordinary liability insurance. It covers expenses in connection with preventing and limiting losses, and environmental compensation pursuant to the Nature Diversity Act. The Act is intended to safeguard nature, landscapes and biological diversity.
• Drone insurance: Drones can be used more to replace human labour, to enable society to run more efficiently. This also reduces the risk of harm to people in that drones can carry out different types of reconnaissance work, e.g. in connection with fires.
Travel insurance We have developed digital services with an online shop, online claims forms and digital proof of insurance. Ensuring customers’ safety when they are travelling is important, and we offer advice on travel and illness in the Gjensidige app. We take advantage of reuse and repairs where expedient in settlement processes.
Life and health insurance Gjensidige will facilitate and encourage better health to increase the quality of life and prevent illness. Customers can use our services without necessarily having sustained a loss that warrants compensation. The services are available 24/7, and make day-to-day life easier for customers. The work is supported by our cooperation with highly skilled suppliers that offer various services: • No Isolation: Children who cannot attend school because of illness can borrow the classroom robot AV1. The robot is the child’s eyes and ears in the classroom and enables the child to attend classes via a tablet or mobile phone.
• Braive: Braive is a service developed by psychologists that gives customers the tools to master mental health challenges and thereby improve their mental health. The self-help programmes are adapted to the customer’s challenges and needs, and are recommended based on a health check.
• Lifekeys: Online service offering video and phone consultations with authorised psychologists.
Employee satisfaction in 2019 shows an overall engagement score of 8.0 (scale 0-10), which is considered to be very good. Gjensidige is in total score among the 25 percent best in the financial industry in Peakon's benchmark.
There is a strong focus on diversity in Gjensidige, and one of the elements of this work is to achieve a good gender balance overall. In 2019, the total work force included 47 per cent women (unchanged from 2018), and the proportion of women in executive positions was 37.8 per cent at year-end 2019, a decrease of 0.8 percentage points from 2018.
Gjensidige maintains a strong focus on equal pay for equal work. Ratio of women’s salary to men’s in 2019: • Total for all employees: 85.3 per cent. • On the corporate management team: 94.3 per cent • Management level 2: 94.2 per cent in Norway, 85.6 per cent in Denmark, 83 per cent in Sweden and 101.2 per cent in the Baltics.
Attracting and retaining highly competent employees is important to maintain profitability over time. Effect of measures in 2019: • Universum ranked Gjensidige as Norway’s most attractive employer in the insurance industry in 2019. • The Gjensidige Customer and Brand School held 5,500 course days in 2019 (5,982 in 2018).
• E-learning plays an increasingly important role in the school’s programmes. In 2019, a total of 19,592 elearning courses were completed in Norway, Sweden and Denmark.
Freedom of organization is an important principle for Gjensidige. A large proportion of our employees are covered by collective wage agreements. • In 2019, 96 per cent of the Company’s employees in
In 2019, we entered into an agreement with Karsten Warholm, the World Champion hurdler who was named Men’s European Athlete of the Year by European Athletics in 2019. This is Gjensidige’s first individual sponsorship agreement.
Gjensidige is the main sponsor of and organises Baltic hiking events in Latvia and Lithuania, and has sponsored the Žalgiris basketball club in Lithuania since 2010.
Gjensidige has supported the Church City Mission’s work through the ‘neighbourhood initiative’, and employees from all over Norway took part in the knitting campaign for a warmer society.
Gjensidige also cooperates with the City of Oslo to assist in the work integration of refugees, and one person was employed through the scheme in 2019 (one in 2018).
Effect of our efforts – good corporate governance Gjensidige is concerned with protecting the Company’s assets and ensuring correct pricing of risk. Our customer promise is important, and information security was given high priority also in 2019, to ensure that we maintain our customers’ trust, the Group’s reputation and our competitiveness. See the chapters ‘Code of Conduct’ and ‘Risk – the core of our business’ for a description of our activities.
Risk management Considerable attention has been devoted to the possible consequences of climate risk in 2019. Gjensidige entered into cooperation with the Norwegian Computing Centre to obtain new insight into how climate change can affect the risk situation, and the need for new measures to reduce the risk going forward.
Customer complaints The Financial Services Complaints Board received 259 complaints from Gjensidige customers in the first nine months of the year. This accounted for approximately 9 per cent of the complaints received by the Board. The corresponding figure for the same period in 2018 was 297 complaints, or 12 per cent. By comparison, Gjensidige’s market share was approximately 25 per cent. • Of the cases reported to the Financial Services
Complaints Board, the Board found in favour of the customer in whole or in part in 21 per cent of the cases in 2019, compared with 18 per cent in 2018. A high percentage could indicate a high threshold for succeeding with a complaint internally in Gjensidige.
Sustainable claims settlements Our purchasing policy applies to the whole Group and requires deliveries to be sustainable. We use our purchasing power to exert influence, and, in continuous dialogue with our most important suppliers, we ensure that sustainable solutions are chosen.
Gjensidige will help to reduce our customers’ climate footprint. Our claims settlements shall be sustainable by 2030. We will achieve this by means of concrete measures, dialogue with customers and by supporting the circular economy.
What we have achieved: • Implemented climate accounts in claims processes as the basis for decisions, using the model for measuring material consumption as the basis for following up the carbon intensity in claims processes.
• Contributes with 3,183 tonnes of aluminium and 6,487 tonnes of steel for recycling following condemnations
New measures going forward • Increased focus on reuse and the circular economy and reducing waste in cooperation with suppliers. • Further developing our carbon emissions model and contributing to reducing carbon emissions. • Increased focus on reuse and the circular economy in product development and claims processes to reduce carbon intensity.
Reduce our own climate footprint Insurance is a knowledge business that does not directly affect the environment to any extent. However, we can help to achieve a more sustainable society by reducing our own climate footprint and use our market power in relation to our suppliers and in our investments.
We will keep reducing our climate footprint and aim to become a climate neutral business by 2030.
• Reducing workload for employees and environmental impact through less travel.
Digital transformation Digitalisation provides new possibilities and threats. The sharing economy, block-chain and synthetic biology are examples of areas where technology will affect the environment, health and sustainable cities. We are keen to use new technologies in our work to achieve a more sustainable customer dialogue and new products.
Establish market-leading digital advisory and support services that ensure efficient customer services and provide information about sustainable solutions for our customers in all countries we operate in by 2025. Ninety-five per cent of our customers shall be ‘paperless’ by 2025.
What we have achieved: • Gjensidige voted best digital insurance company in a survey carried out by BearingPoint in 2018 and 2019.
Re-use of materials Norway Sweden Denmark Baltics Share of used spare parts motor of total repairs Per cent 1.2 12.5 3.1 38.0
Footprint from waste is relatively small. This is primarily due to condemned cars being sold to recyclers, who recycle usable materials so that they can be used in new products. Gjensidige cooperates with recyclers who do this job.
We have now implemented better sustainability screening of our suppliers and will use the results to ensure that measures are implemented to improve areas identified for improvement, including in relation to the environment, working conditions and satisfactory management and control.
Gjensidige did not cause illegal emissions or receive fines or other sanctions relating to the environment in 2019.
A supplier agreement has been established for the reuse of old computers, which includes the removal of old discs, and approximately 80 per cent of the computers are reused. Mobile phones are reused in the organisation as far as possible, and the rest are safely disposed of.
Scope 1, 2 and 3 (travels) Unit Norway Sweden Denmark Baltics Total
Socially responsible investments We make systematic efforts to ensure that the management of our investments contributes to a more sustainable world.
Gjensidige reserves considerable funds to secure payouts to customers who experience losses. Our investment strategy requires the business to be sustainable and is followed up continuously.
• Investors sign up to CDP. • Implemented ESG assessments in all internal credit analyses. • Energy labelling of all buildings. BREEAM-NOR
strategies for implementing the UN SDGs. • Implementing measurement and reporting of greenhouse gas emissions from the investment portfolio.
Several factors affect the increase in the number of excluded companies. In the second quarter, Gjensidige changed its IT services provider from GES Investment Services to Sustainalytics. Seen in isolation, this led to 30 new companies being excluded and 10 companies being removed from the exclusion list. The remaining decisions on exclusion were made on the basis of company-specific circumstances.
In 2019, we contacted 11 external fund managers about 29 companies that were on our list of excluded companies. This dialogue resulted in a decision to sell three management mandates where our ESG requirements were not met, to sell the companies concerned (by the manager), to change investment mandates to include more stringent ESG requirements and to switch to another equivalent investment mandate with satisfactory guidelines.
Real estate investments are made through the real estate company Oslo Areal, a company that engages in property development in the Oslo area and invests in environmentally friendly buildings near public transport hubs. The company uses the BREEAM NOR environmental classification system for new buildings and complete restorations. In the course of the year the company sold one building without environmental certification. No new buildings were purchased. No properties have been recertified in 2019, but planning has been made of BREEAM In-Use certification of several properties in 2020. Oslo Areal is actively working with follow up of the 10 immediate measures in the property industry’s road map towards 2050. In 2019 a seminar was held in cooperation with Green Building Alliance (Grønn Byggallianse) focusing on the goals in the road map. In addition, the project for alternative use of roofs with bee-hives has been successful, with production of 100 kilos of honey during the year. In the strategy for 2020 concrete targets for energy consumption, waste management and GHG reduction has been adopted, as well as measures to realise the targets.
Financial consequences of climate risk The biggest financial climate risk for Gjensidige’s investment portfolio is assumed to arise in the transition to a low-emission society where climate regulation, more stringent emission requirements, a different cost situation and changes in market preferences can affect the value of investments. At year-end 2019, the sector exposure of Gjensidige’s investment portfolio broke down as follows: Shares, bonds and other investment exposure
The table includes both direct investments in funds shares, derivatives and bonds. These have been classified using the industry classification standard (NACE). Directly owned property through Oslo Areal is included in property operations. Bank deposits are included in financial undertakings. Investments in Private Equity and loan funds are not included in the table.
New measures • Continuous efforts are made to improve existing processes and new measures in the area of socially responsible investments. We can exert the greatest influence through active dialogue on ESG criteria with our external fund managers and incorporate ESG requirements in the mandates we establish. This dialogue will concern, as well as investments in individual companies and investment mandates, their exercise of ownership, reporting of their environmental impact and other ESG perspectives in the underlying portfolio and their work on the UN Sustainable Development Goals. As illustrated, this work takes the form of setting criteria for and following up Gjensidige’s direct investments and establishing requirements to be used by external fund managers and following up these mandates. Investments that to an even greater extent aim to resolve the current climate challenges through infrastructure investments in renewable energy are considered on an ongoing basis.
• Continuous efforts are made to further develop the method for assessing ESG criteria in internal credit analyses.
Gjensidige Forsikring Group recorded a profit before tax expense of NOK 7,753.8 million (4,265.0) for the year. The sale of Gjensidige Bank was completed on 1 March, with proceeds of approximately NOK 5.6 billion and a gain for the Group of NOK 1.6 billion recorded in the first quarter. The profit before tax expense excluding this gain was a record high NOK 6,173.5 million.
The 12-month rolling underlying profitability of the motor insurance line in Norway reached a turning point during the first quarter and continued to improve through the rest of the year to a satisfactory level as a result of effective profitability measures.
The Danish segment recorded a decrease of 1.2 per cent in earned premiums measured in local currency. The underwriting result improved mainly due to a lower underlying frequency loss ratio.
Earned premiums in the Swedish segment were down 9.8 per cent measured in local currency. The underwriting result decreased mainly due to lower earned premiums, partly offset by an improved underlying frequency loss ratio.
Earned premiums in the Baltic segment increased by 1.8 per cent measured in local currency. The underwriting result was lower than the previous year, mainly driven by a higher underlying frequency loss ratio.
The return on financial assets was higher than the previous year, with positive contributions from all asset classes.
At year-end 2019, the remaining capacity to issue Tier 1 loans amounted to between NOK 2.5 and NOK 3.1 billion. It is not Gjensidige’s ambition to fully utilise this capacity, but it will consider the possibilities for issuing further loans contingent on satisfactory market terms. The capacity to issue Tier 2 loans was fully utilised. In addition, other balance sheet and capital optimisation measures will be continuously assessed.
The Norwegian Society of Engineers and Technologists (NITO), which we have cooperated with for many years, decided not to renew its agreement, with effect from 1 January 2019. As expected, this has resulted in the loss of some customers, although limited in that we still have a direct customer relationship with individual customers. Towards the end of 2019, Gjensidige entered into agreements with both the fitness chain SATS and Volkswagen Møller Bilfinans. The agreements underpin Gjensidige’s business model and offer new and exciting opportunities in different geographic locations and segments.
1 Defined as an alternative performance measure (APM). APMs are described at www.gjensidige.no/reporting in a document named APMs Gjensidige Forsikring Group 2019. 2 Large losses in excess of NOK 30.0 million are charged to the Corporate Centre, while claims of less than NOK 30.0 million are charged to the segment in which the large losses occur. As a main rule, the Baltics segment has a retention level of EUR 0.5 million, while the Swedish segment has a retention level of NOK 10 million. Large losses allocated to the Corporate Centre amounted to NOK 163.4 million (202.9) for the year as a whole and NOK 84.9 million (39.5) in the quarter. Accounting items related to reinsurance are also included. 3 The profit before tax expense is presented for the continuing operation (excluding Gjensidige Bank). 4 Large losses = loss events in excess of NOK 10.0 million. Large losses for the quarter were NOK 300.0 million. 5 Underlying frequency loss ratio = claims incurred etc. excluding large losses and run-off gains/(losses) divided by earned premiums
Financial position and capital base The Group’s consolidated statement of financial position at year-end 2019 was NOK 112,405.9 million (156,762.9). This decrease was mainly due to the sale of Gjensidige Bank.
The Group’s equity amounted to NOK 26,192.2 million (23,845.2) at the end of the year. The return on equity was 28.2 per cent (17.3). Excluding the NOK 1.6 billion gain on the sale of Gjensidige Bank, the return on equity was 22.6 per cent. The solvency margins at the end of the year were: • Approved Partial Internal Model1: 206 per cent • Own Partial Internal Model2: 250 per cent
The guarantee scheme provision is treated as a liability in accordance with instructions from the Financial Supervisory Authority of Norway. In Gjensidige’s opinion, special Norwegian provisions that are actually an equity element should be treated as solvency capital. Gjensidige will continue to make endeavours to ensure that the regulations are in line with this view.
Off-balance sheet commitments and derivatives As part of the Group’s investment activities, an agreement has been entered into for the investment of up to NOK 590.5 million (702.2) in loan funds with secured loans and various private equity and property fund investments, in addition to the amounts recognised in the balance sheet. In addition, Oslo Areal has a credit facility of a total of NOK 4 billion, of which NOK 2.4 billion (2.5) had been utilised as of 31 December 2019.
Cash flow Gjensidige is primarily an insurance company in which investments are part of the operational cash flow and therefore largely affected by strategic decisions. The Company’s ability to self-finance investments is good. The net cash flow from operational activities mainly consists of payments in the form of premiums, net payments made/received in connection with sales and purchase from securities, plus payments in the form of claims settlement costs, purchases of reinsurance, administration expenses and tax.
The Gjensidige Group’s financial and solvency targets were reviewed in connection with the annual Own Risk and Solvency Assessment (ORSA) process. A new target range for the solvency margin, based on the Partial Internal Model (both the regulatory approved model and the model with internal calibration) was set at 150-200 per cent. This range supports both rating ambitions and the necessary financial flexibility for the Group. The remaining financial targets remained unchanged.
Metric Target Delivered 2019 Combined ratio 1 86-89 % 2 83.6 %
NOK 12.25 per share, 1 Defined as an alternative performance measure (APM). APMs are described at www.gjensidige.no/reporting in a document named APMs Gjensidige Forsikring Group Q4 2019. 2 Assuming annual run-off gains ~NOK 1 billion through 2022. Corresponds to 9093 per cent given zero run-off gains post 2022. 3 Corresponds to >16 per cent given zero run-off gains post 2022 4 Excluding run-off 5 Excluding gain on sale of Gjensidige Bank 6 Regular dividend divided by net profit adjusted for the gain from the sale of Gjensidige Bank
The combined ratio was 83.6 per cent – significantly better than the target range of 86-89, driven by strong operations in Norway and progress outside Norway. Low large losses and high run-off gains also contributed positively.
Results from operations outside Norway progressed well during the year. Underwriting result excluding run-off gains amounted to NOK 493.8 million in 2019 and is advancing well towards the 2022 target of NOK 750 million.
Customer retention 90 per cent 80 per cent > 90 per cent, Norway > 85 per cent, outside Norway
Sales effectiveness + 8.5 per cent + 10 per cent, Group
Claims cost NOK 212 million Reduce by NOK 500 million, Group
Group customer satisfaction and customer retention in Norway remained at a high level. Retention in Private declined somewhat as a result of the significant pricing measures and the termination of the NITO agreement with effect from 1 January 2019. The development improved during 2019 with due to a strong competitive position and a lower impact from the termination of the NITO agreement. Retention for the Commercial segment remained unchanged despite implementation of significant pricing measures.
Retention outside Norway improved somewhat and efforts to improve this further will continue going forward.
Digital claims reporting increased during the year due to ongoing efforts to improve both the customer experience with the digital solutions as well as effective measures aimed at increasing customers’ motivation to report claims online. The share of claims handled fully automatically increased during the year although the figure at the end of 2019 was somewhat lower than earlier during the year due to seasonality of type of claims.
Costs related to claims processes were reduced by NOK 212 million in 2019 compared with 2018, driven by improvements in procurement, steering and method, insurance fraud and process optimisation.
General insurance Private The underwriting result was NOK 2,025.1 million (1,934.8). Lower run-off gains were more than offset by the improvement in the underlying profitability of the motor insurance line and more favourable weather conditions. The combined ratio was 77.2 (77.9).
Earned premiums increased to NOK 8,872.4 million (8,762.5), mainly due to price increases for motor and property insurance. Price increases were implemented for all main product lines. The number of insured objects within motor and property insurance declined somewhat compared with the same period the previous year, both as a result of the ongoing pricing measures and because of the previously announced termination of the NITO partner agreement with effect from 1 January 2019. The trend improved during the year, however.
Earned premiums 8,872.4 8,762.5 Claims incurred etc. (5,682.6) (5,720.7) Operating expenses (1,164.7) (1,106.9) Underwriting result 2,025.1 1,934.8
General insurance Commercial The underwriting result was NOK 1,729.8 million (1,548.2). Lower run-off gains were more than offset by higher earned premiums and an improved underlying frequency loss ratio, partly due to more favourable weather conditions. The combined ratio was 78.8 (79.6).
Claims incurred amounted to NOK 5,608.6 million (5,182.8). The loss ratio increased to 68.7 (68.2), reflecting significantly lower run-off gains, a 6.1 percentage point improvement in the underlying frequency loss ratio and lower large losses. The underlying frequency loss ratio decreased as a result of effective pricing and re-underwriting measures and improved weather conditions. The improvement in profitability was mainly in the property insurance line.
Loss ratio 1 68.7% 68.2% Underlying frequency loss ratio 1 71.9% 78.0% Cost ratio 1 10.1% 11.5% Combined ratio 1 78.8% 79.6%
1 Defined as an alternative performance measure (APM). APMs are described at www.gjensidige.no/reporting in a document named APMs Gjensidige Forsikring Group 2019.
Claims incurred amounted to NOK 3,642.0 million (3,766.2). The loss ratio improved to 73.4 (76.8), mainly driven by a 3.7 percentage point decrease in the underlying frequency loss ratio. The decrease in the underlying frequency loss ratio reflects improvement in the profitability of private and commercial lines as a result of the ongoing pricing measures.
Operating expenses amounted to NOK 718.8 million (704.0). The cost ratio was broadly stable at 14.5 (14.4), despite the development in earned premiums, due to continued focus on operating efficiency.
Earned premiums 4,960.1 4,904.6 Claims incurred etc. (3,642.0) (3,766.2) Operating expenses (718.8) (704.0) Underwriting result 599.3 434.5
Large losses 1 77.3 55.7 Run-off gains/(losses) 1 174.9 171.0 Earned premiums in local currency (DKK) 1 3,759.6 3,805.8
Earned premiums 1,405.8 1,569.2 Claims incurred etc. (1,058.6) (1,231.7) Operating expenses (271.3) (259.3) Underwriting result 75.9 78.2
General insurance Baltics The underwriting result amounted to NOK 60.9 million (68.5), mainly due to a higher underlying frequency loss ratio. The combined ratio was 94.6 (93.7).
Claims incurred amounted to NOK 728.7 million (675.9). The loss ratio was 64.7 (62.7), reflecting a 2.9 percentage point increase in the underlying frequency loss ratio, due to less favourable weather conditions in the first quarter and margin pressure.
Earned premiums 1,126.9 1,078.8 Claims incurred etc. (728.7) (675.9) Operating expenses (337.3) (334.4) Underwriting result 60.9 68.5
Large losses 1 - - Run-off gains/(losses) 1 35.8 24.4 Earned premiums in local currency (EUR) 1 114.4 112.3
Operating expenses increased to NOK 275.6 million (241.0), driven by increased business volume and an impairment on IT systems.
The year-to-date return on the paid-up policy portfolio was 4.3 per cent (5.6). The decrease was related to non-recurring effects in 2018 following a change in the classification of unrealised gains relating to property investments. The average annual interest guarantee was 3.4 per cent.
Assets under management increased by NOK 6,647.0 million from year end 2018. Total pension assets under management amounted to NOK 37,335.1 million (30,688.2) including the group policy portfolio of NOK 7,204.2 million (6,586.4).
Administration fees 152.3 144.4 Insurance income 111.4 72.6 Management income etc. 167.2 150.5 Operating expenses (275.6) (241.0) Net operating income 155.3 126.5 Net financial income 41.5 40.2 Profit/(loss) before tax expense 196.9 166.6
The distribution of counterparty risk and credit rating is shown in the charts on the next page. Securities without an official credit rating amounted to NOK 8.0 billion (9.0). Of these securities, 4.3 per cent (6.1) were issued by Norwegian savings banks, while the remainder were mostly issued by Norwegian power producers and distributors, property companies, industry and municipalities. Bonds with a coupon linked to the development of the Norwegian consumer price index accounted for 2.5 per cent (6.4) of the match portfolio.
Free portfolio The free portfolio amounted to NOK 25.0 billion (18.3) at the end of the period. The return was 6.0 per cent (0.6). The increase in assets was mainly due to the sale of Gjensidige Bank ASA.
Property portfolio At the end of the period, the exposure to commercial real estate in the portfolio was NOK 4.8 billion (4.6). The property portfolio yielded a return of 8.0 per cent (7.0)
NOK millions 2019 2018 2019 2018 2019 2018 Match portfolio Money market 1.8 1.2 90.5 57.5 4,818.7 4,917.9
Free portfolio total 6.0 0.6 1,354.3 114.4 24,992.4 18,307.1 Financial result from the investment portfolio 7 4.1 1.5 2,306.4 820.9 59,054.4 52,816.0
Solvency position In 2018, Gjensidige received an approval by the Financial Supervisory Authorities (FSA) to use a partial internal model to calculate the regulatory solvency capital requirement. The approved partial internal model is more conservative than the model Gjensidige applied for. The FSA required the use of the standard formula to calculate storm risk, and the standard formula’s correlation between market and underwriting risk. The FSA’s requirements also include somewhat higher capital requirement for market and underwriting risk compared with Gjensidige’s initial application. Gjensidige’s application for changes in calibration of market risk has not been approved by the FSA. Gjensidige believes that the partial internal model, without the imposed conditions from the FSA, provides a better presentation of the risk, and will continue to make efforts to get Gjensidige’s own version of the partial internal model approved.
Own pension account On 9 April 2019, the Storting adopted amendments to the Act relating to Defined Contribution Pensions (own pension account etc.). The new rules entail that all pension capital certificates and active pension earnings for employees in companies with a defined contribution scheme will be accumulated and administered in a single pension account under the employer’s pension scheme, or with a provider chosen by the employee. It has also been decided to dispense with the ‘12-month rule’, which will enable members of defined contribution schemes to take their earned pension capital with them, regardless of how long the employment relationship has lasted.
The Group’s profit for the year after tax expense for continued and discontinued operations amounted to NOK 6,593.8 million. The Board has adopted a dividend policy that forms the basis for the dividend proposal submitted to the general meeting. The Board proposes a dividend of NOK 6,125.0 million for the 2019 financial year. This corresponds to NOK 7.25 per share as a regular dividend and NOK 5.00 per share as a special dividend.
The regular dividend corresponds to a pay-out ratio of 72 per cent of the Group’s profit after tax, adjusted for the gain from the sale of Gjensidige Bank.
 Return on equity after tax > 20 per cent  Corresponding to > 16 per cent excluding run-off gains
Gjensidige’s ambition is to become the most customeroriented general insurance company in the Nordic region. The Group’s priority is to retain its strong and unique position in Norway and to continue improving its profitability and growth outside Norway. Furthermore, the Group will focus on ensuring continued capital discipline, including delivering attractive returns to shareholders. A fundamental prerequisite for long term value creation is sustainable choices and solutions.
There is always considerable uncertainty associated with the assessment of future developments. However, the Board remains confident in Gjensidige’s ability to deliver solid earnings and dividend growth over time.
Notes 2. Use of estimates 124 3. Risk and capital management 125 5. Shares in associates and joint ventures 139 6. Net income from investments 140 8. Salaries and remuneration 142 11. Goodwill and intangible assets 150 12. Owner-occupied and right-of-use property, plant and 13. Financial assets and liabilities 154 14. Shares and similar interests 158 15. Loans and receivables 159 16. Insurance-related liabilities and reinsurers’ share 160 19. Provisions and other liabilities 162 20. Related party transactions 163 22. Share-based payment 164 23. Events after the balance sheet date 165 24. Earnings per share 166
Claims Claims incurred etc. from general insurance (16,978.6) (16,791.1) Claims incurred etc. from pension (616.3) (566.8) Total claims (17,594.9) (17,357.9)
Profit/(loss) attributable to: Owners of the company continuing operations 6,556.1 3,382.7 Owners of the company discontinued operations 37.6 334.9 Non-controlling interests 0.1 (1.2) Total 6,593.8 3,716.4
Earnings per share from continuing operations, NOK (basic and diluted) 24 13.11 6.77
Other comprehensive income Other comprehensive income that will not be reclassified subsequently to profit or loss Remeasurements of the net defined benefit liability/asset 10 (117.1) (50.8) Tax on other comprehensive income that will not be reclassified subsequently to profit or loss 9 29.3 12.7 Total other comprehensive income that will not be reclassified subsequently to profit or loss (87.9) (38.1)
Other comprehensive income that will be reclassified subsequently to profit or loss Exchange differences from foreign operations (67.3) 14.9 Tax on other comprehensive income that will be reclassified subsequently to profit or loss 9 17.1 (0.7) Total other comprehensive income that will be reclassified subsequently to profit or loss (50.2) 14.2
Goodwill 11 3,554.6 3,577.0 Other intangible assets 11 1,124.8 1,288.1 Investments in associates and joint ventures 5 3,318.6 2,959.7 Owner-occupied property, plant and equipment 12 1,264.9 251.9 Pension assets 10 244.3 156.6
Financial liabilities Subordinated debt 13, 18 1,498.4 1,498.0 Financial derivatives 13 641.0 869.9 Liabilities in life insurance with investment options 13 29,989.4 23,909.5 Other financial liabilities 13, 19 2,735.4 2,838.4 Liabilities related to direct insurance and reinsurance 13 709.4 1,174.5
Comprehensive income Profit/(loss) (the controlling interests' share) 47.5 3,670.1 3,717.6 Total other comprehensive income 0.1 14.1 (38.0) (23.8) Comprehensive income 0.1 47.5 14.1 (38.0) 3,670.1 3,693.8
Equity as at 31.12.2018 attributable to the owners of the company 1,000.0 (0.1) 1,430.0 64.7 1,445.3 616.0 (1,974.6) 21,263.3 23,844.7
Transactions with owners of the company Own shares 0.0 (9.2) (9.2) Paid dividend (3,549.9) (3,549.9) Remeasurement of the net defined benefit liability/asset of liquidated companies 4.4 (4.4)
Equity-settled share-based payment transactions 4.8 9.4 Perpetual Tier 1 capital (445.5) (0.6) (446.2) Perpetual Tier 1 capital - interest paid (51.4) (51.4) Total transactions with owners of the company 0.0 4.8 (496.9) 4.4 (3,559.6) (4,047.3)
Equity as at 31.12.2019 attributable to the owners of the company 1,000.0 (0.0) 1,430.0 69.5 1,002.3 565.9 (2,058.1) 24,182.1 26,191.6
Cash flow from operating activities Premiums paid, net of reinsurance 30,499.5 31,022.5 Claims paid, net of reinsurance (19,365.9) (20,168.4) Net payment of loans to customers 827.8 (5,498.6) Net payment of deposits from customers (589.9) (647.0) Payment of interest from customers 279.5 1,612.1 Payment of interest to customers (15.0) (297.2) Net receipts/payments of premium reserve transfers (2,143.7) (1,266.8) Net receipts/payments from financial assets (5,822.9) (984.1) Operating expenses paid, including commissions (4,089.7) (4,586.8) Taxes paid (797.8) (1,281.7) Net other receipts/payments (17.4) 204.3 Net cash flow from operating activities (1,235.7) (1,891.7)
Cash flow from investing activities Net receipts/payments from sale/acquisition of subsidiaries, associates and joint ventures 5,261.9 (34.7) Net receipts/payments on sale/acquisition of owner-occupied property, plant and equipment and intangible assets (438.5) (403.6) Net cash flow from investing activities 4,823.4 (438.3)
Cash flow from financing activities Payment of dividend (3,549.9) (3,549.9) Net receipts/payments on subordinated debt incl. interest (47.5) (41.8) Net receipts/payments on loans to credit institutions (140.9) 6,455.4 Net receipts/payments on other short-term liabilities 52.9 (26.7) Net receipts/payments on interest on funding activities (61.6) (349.7) Net receipts/payments on sale/acquisition of own shares (9.2) (11.0) Repayment of lease liabilities (161.6) Payment of interest related to lease liabilities (32.2) Tier 1 issuance/instalments 74.7 Tier 1 interest payments (52.1) (58.6) Net cash flow from financing activities (4,002.0) 2,492.5
New standards and interpretations not yet adopted A number of new standards, changes to standards and interpretations have been issued for financial years beginning after 1 January 2019. They have not been applied when preparing these consolidated financial statements. Those that may be relevant to Gjensidige are mentioned below. Gjensidige does not plan early implementation of these standards.
Gjensidige is a financial conglomerate that mainly has business within insurance and has therefore decided to make use of this exception.
IFRS 17 Insurance Contracts (2017) IFRS 17 Insurance Contracts was published on May 18, 2017 with effect from 1 January 2021. IFRS 17 establishes the principles for the recognition, measurement, presentation and disclosure of insurance contracts and supersedes IFRS 4 Insurance contracts. The new standard applies to insurance contracts issued, to all reinsurance contracts and to investment contracts with discretionary participating features provided the entity also issues insurance contracts. The standard defines the level of aggregation to be used for measuring the insurance contract liabilities and the related profitability. IFRS 17 requires identifying portfolios of insurance contracts, which comprise contracts that are subject to similar risks and are managed together. Each portfolio of insurance contracts issued shall be divided into three groups: • contracts that are onerous at initial recognition; • contracts that at initial recognition have no significant possibility of becoming onerous subsequently; • and the remaining contracts in the portfolio.
At the end of each subsequent reporting period the carrying amount of a group of insurance contracts is remeasured to be the sum of: • the liability for remaining coverage; which comprises the fulfilment cash flows related to future services and the CSM at that date; • and the liability for incurred claims, which is measured as the fulfilment cash flows related to past services at that date.
IASB has decided to defer the effective date of IFRS 17 by one year to reporting periods beginning on or after January 1 2022. Based on our preliminary assessments and on the basis of Gjensidige’s current operations, other amendments to standards and interpretation statements will not have a significant effect.
Presentation currency The consolidated financial statements are presented in NOK. The mother company and the different branches have respectively Norwegian, Swedish, Danish kroner and Euro as functional currency.
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 in the functional currency of the foreign operation.
Business combinations Business combinations are accounted for by applying the acquisition method. The cost of the business combination is the fair value at the date of exchange of assets acquired, liabilities incurred, and equity instruments issued by Gjensidige, in exchange for control of the acquired company, and any expenses directly attributable to the business combination.
Leases Gjensidige recognises all identifiable lease agreements as a lease liability and a corresponding right-of-use asset, with the following exemptions: • short-term leases (defined as 12 months or less) • low value assets
The lease liability is shown in a separate line in the statement of financial position.
• customer relationships 5–10 years • internally developed software 5–8 years • other intangible assets 1–10 years
Impairment of non-financial assets Indicators of impairment of the carrying amount of tangible and intangible assets are assessed at each reporting date. If such indicators exist, then recoverable amount of an assets or a cash generating unit is estimated. Indicators that are assessed as significant by Gjensidige and might trigger testing for an impairment loss are as follows
Claims provisions are not normally discounted. For contracts with annuity payments over a long horizon, discounting is performed. IFRS 4 permits the use of different policies within Gjensidige in this area.
Provisions for life insurance Technical provisions regarding life insurance in Gjensidige Pensjonsforsikring are premium reserve and additional provision.
Gjensidige Forsikring Group loss was reversed. Reversal of previous losses on impairment is recognised in profit or loss.
When Gjensidige is committed to a plan to sell, which involves loss of control of a subsidiary, all the assets and liabilities fo that subsidiary shall be classified as held for sale when the criteria above is met, regardless of whether Gjensidige will retain a noncontrolling interest in its former subsidiary after the sale.
Assumptions and major sources of estimation uncertainty that have a significant risk of resulting in a material adjustment to the carrying amount of insurance-related liabilities within the next financial year are discussed below.
For long-tail lines, the risk is linked to the fact that the ultimate claim costs must be estimated based on experience and empirical data. For certain lines within accident and health insurances, it may take ten to 15 years before all the claims that occurred in a calendar year are reported to the company. In addition, there will be many instances where information reported in a claim is inadequate to calculate a correct provision. This may be due to ambiguity concerning the causal relationship and uncertainty about the injured party’s future work capacity etc. Many personal injury claims are tried in the court system, and over time the level of compensation for such claims has increased. This will also be of consequence to claims that occurred in prior years and have not yet been settled. The risk linked to provisions for lines related to insurances of the person is thus affected by external conditions. To reduce this risk, the company calculates its claims liability based on various methods and follows up that the registered provisions linked to ongoing claims cases are updated at all times based on the current calculation rules. See note 3 and note 16.
The CEO has an overall responsibility for the risk management of the group. The Group’s capital management committee has an advisory role regarding the assessment and proposal of changes in use of capital. The Group’s Risk Control Committee has an advisory role to the CEO with respect to overall Group Risk situation, and other risk management and internal control matters. Both committees are chaired by the Group CEO. Furthermore, a sustainability council has been established headed by the Chief Sustainability Officer (CSO). This is an interdisciplinary body that ensures a comprehensive and uniform approach to sustainability issues in the group. Relevant issues related to sustainability are addressed from the sustainability committee to the Capital Management Committee or Risk Control Committee respectively.
Responsibility for the daily risk management is delegated to the responsible line managers in their respective areas.
The second line of defence is carried through by centralised control functions for risk management, compliance, actuary and group security; • The risk management function is responsible for monitoring and developing Gjensidige Forsikring Group’s risk management and internal control system. In addition, the function shall have an overview of the risks the Group is or may be exposed to, and what this means for the Group solvency. The risk management function is headed by the Chief Risk Officer (CRO) in Gjensidige Forsikring ASA. The CRO has responsibility for establishing the procedures for performing risk management and reporting risk exposures as well as monitoring Board approved limits.
• The actuarial function is responsible for coordinating the calculation and control of the technical provisions. The responsibility is centralised in the Group‘s Actuary department, which is headed by the Chief Actuary. Even though the actuarial function is organised in the Group’s Actuary department, its responsibilities are limited to controlling activities, and has no responsibility for developing claim provision models and regular claim provision calculations. This ensures independence of the actuarial function.
Group Internal Audit 3rd line Provides independent confirmation and advice on corporate governance, risk management and internal control
General insurance Risk description General insurance covers non-life and health insurance contracts. The Gjensidige Forsikring Group is exposed to general insurance risk in Norway, Sweden, Denmark and the Baltics. Gjensidige’s current risk appetite is large in the core area of general insurance in the Nordic and Baltic countries. The risk appetite is the greatest in areas which Gjensidige has high structural competence and access to data. Other business areas shall contribute to the Group’s total growth and profitability, but with limited risk appetite.
Estimation uncertainty is an inherent character of the claim provisions. Several factors contribute to this uncertainty and include claim frequency and claim severity. An increase in the frequency of claims can be due to seasonal effects and more sustainable effects. During the winter season snow and cold weather will cause an increase in the frequency of claims in Motor insurance. In Property insurance, a cold winter will cause an increase in the frequency of claims due to frozen water pipes and increased use of electrical power and open fireplaces for heating of the houses. Shifts in the level of claims frequency may occur due to e.g. change in customer behaviour and new types of claims. The effect on the profitability of a permanent change in the level of claims frequency will be high. In Motor insurance in Norway, for example, an increase of one percentage point in the level of claims frequency will increase the loss ratio by three to four percentage points based on the current level of claims.
Total disbursed 10,881.9 13,042.3 14,382.3 11,604.0 13,431.6 13,074.1 11,370.7 12,314.9 12,526.5 12,771.5 7,814.4 133,214.2 Claims provision 747.0 835.9 943.9 1,024.3 1,063.6 1,161.8 1,355.8 1,892.1 2,155.1 3,268.9 6,924.3 21,372.6 Prior-year claims provision and loss adjustment provision 6,234.0 Gjensidige Baltic 558.2 Total 28,164.8
Total disbursed 10,871.0 12,584.0 13,470.4 11,397.6 12,736.2 12,952.5 11,366.5 12,192.4 12,071.0 12,637.9 7,600.0 129,879.7 Claims provision 747.0 835.9 943.9 1,024.3 1,063.6 1,156.4 1,355.8 1,730.2 2,040.9 3,044.0 6,807.7 20,749.7 Prior-year claims provision and loss adjustment provision 6,302.4 Gjensidige Baltic 497.3 Total 27,549.4
Gross Estimated claims cost At the end of the accident year 12,547.4 14,742.7 15,933.2 13,436.6 15,330.3 14,901.4 12,790.6 13,847.1 14,863.2 15,996.3 14,738.7 - One year later 12,494.7 14,608.4 16,180.6 13,385.2 15,220.5 14,541.9 12,764.3 14,096.7 14,712.6 16,040.4 - Two years later 12,330.7 14,640.6 16,221.9 13,307.1 15,043.6 14,424.0 12,681.2 14,073.0 14,681.6 - Three years later 12,342.0 14,559.6 16,032.1 13,138.4 14,855.2 14,374.5 12,745.3 14,206.9 - Four years later 12,191.0 14,477.3 15,830.7 12,963.0 14,728.0 14,320.9 12,726.5 - Five years later 12,129.3 14,370.4 15,711.6 12,845.0 14,618.6 14,235.9 - Six years later 12,084.9 14,247.1 15,566.1 12,659.6 14,495.2 - Seven years later 11,946.5 14,132.1 15,399.6 12,628.3 - Eight years later 11,892.8 13,899.3 15,326.3 - Nine years later 11,683.1 13,878.2 - Ten years later 11,628.9
Total disbursed 10,881.9 13,042.3 14,382.3 11,604.0 13,431.6 13,074.1 11,370.7 12,314.9 12,526.5 12,771.5 7,814.4 133,214.2 Claims provision 747.0 835.9 943.9 1,024.3 1,063.6 1,161.8 1,355.8 1,892.1 2,155.1 3,268.9 6,924.3 21,372.6 Prior-year claims provision and loss adjustment provision 6,320.7 Total 27,693.3
Total disbursed 10,871.0 12,584.0 13,470.4 11,397.6 12,736.2 12,952.5 11,366.5 12,192.4 12,071.0 12,637.9 7,600.0 129,879.7 Claims provision 747.0 835.9 943.9 1,024.3 1,063.6 1,156.4 1,355.8 1,730.2 2,040.9 3,044.0 6,807.7 20,749.7 Prior-year claims provision and loss adjustment provision 6,389.2 Total 27,138.8
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. The two tables below show that Gjensidige has a well-diversified portfolio both between countries and between products. The portfolio consists mainly of private insurance and insurance related to small and medium-sized commercial business.
Other motor insurance 5,083.1 19.0% 4,827.5 18.8% Marine, aviation and transport insurance 314.0 1.2% 303.6 1.2%
Fire and other damage to property insurance 8,946.5 33.5% 8,617.8 33.6%
Other motor insurance 4,855.5 19.7% 4,609.3 19.9% Marine, aviation and transport insurance 305.7 1.2% 294.9 1.3%
Assistance 1,129.9 4.6% 1,080.5 4.7% Health insurance 1,486.9 6.0% 1,485.0 6.4% Non-proportional non-
Total 26,737.5 100.0% 25,657.9 100.0% Total Gjensidige Forsikring ASA 24,703.0 92.4% 23,215.8 90.5%
Risk mitigation Insurance risk is mitigated through several arrangements, like for instance reinsurance and hedging of inflation.
Change in CR (1%-point) 276.7 261.0 235.4 223.9 Change in loss frequency (1%-point) 1,924.0 2,087.9 1,883.7 2,049.9
Longevity risk Longevity risk is the risk that actual mortality rates are lower than expected. Lower mortality will result in a higher total of pension payments for guaranteed products. The company cannot charge additional premium for contractual periods previously entered into. The risk for the company is that the provisions that shall cover all future claims are insufficient.
Gjensidige Pensjonsforsikring AS is especially exposed to longevity risk in the paid-up policies, where Gjensidige Pensjonsforsikring AS is liable to pay a defined benefit until death or other agreed time. By the end of 2018, Gjensidige
Disability risk Disability risk is the risk that actual disability is higher than expected and/or the recovery is lower than expected. Higher disability rates, but also lower recovery rates will increase the claim payments. Both individual and collective disability products expose Gjensidige Pensjonsforsikring AS to disability risk. Apart from lapse risk, disability risk is one of the major insurance risks for Gjensidige Pensjonsforsikring AS.
Catastrophe risk Catastrophe risk is defined as the risk of an immediate increase in mortality due to a catastrophic event. Mortality risk is in general low, and the catastrophe scenario for catastrophe risk will have a very small impact on Gjensidige Pensjonsforsikring AS’ portfolio.
Risk exposure Gjensidige Pensjonsforsikring AS offers several disability pension products and for this reason disability risk is a material risk. In addition, longevity risk is a substantial risk because of the portfolio of paid-up policies. In Solvency II context the risk exposure looks very differently where lapse risk is the dominating risk. This is only the case in Solvency II because future profit is accounted for. Expense risk is mostly relevant in Solvency II context, but is also a minor contributing factor to risk exposure for Gjensidige Pensjonsforsikring AS.
Financial risk Risk description Financial risk is the risk of experiencing losses due to changes in macroeconomic conditions and/or changes in financial asset values and liabilities. Gjensidige is exposed to these types of risk through the Group’s investment activities. The risk is managed at the aggregate level and handled through the guidelines for asset management and investment strategies, which have been drawn up for Gjensidige Forsikring ASA and its subsidiaries. The primary purpose of the investments is to support the insurance business by securing the value of insurance liabilities against fluctuations in market variables. Funds beyond this will be
1 The item includes the market value of the interest rate hedge in Denmark. Investments include mortgage, sovereign and corporate bonds, investment grade bond funds and loan funds containing secured debt. 2 The item includes investment grade, emerging market debt (EMD) and current bonds. Investment grade bonds and EMD are investments in internationally diversified funds that are externally managed. 3 Investments in internationally diversified funds that are externally managed. 4 Investments mainly in internationally diversified funds that are externally managed. The equity risk exposure is reduced by NOK 369.9 million due to derivatives. 5 In addition, there is a total return swap with Gjensidige Pensjonskasse reducing the property exposure by NOK 240.0 million. 6 The item includes currency hedging related to Gjensidige Sverige and Gjensidige Denmark, lending, paid-in capital in Gjensidige Pensjonskasse and hedge funds.
Gjensidige Pensjonsforsikring AS manages several portfolios including unit-linked portfolio, paid-up policy portfolio, other group policy portfolio and company portfolio. Gjensidige Pensjonsforsikring AS does not carry investment risk for the unitlinked portfolio. The other portfolios expose the Company’s equity to risk.
The tables below show allocation of the fixed-income portfolio per sector and per rating category at year-end in 2019 and 2018. Investments in fixed-income funds are not included in the tables.
Government bonds 23.8% 20.8% 22.5% 19.1% Corporate bonds 76.2% 79.2% 77.5% 80.9% Collateralised securities 0.0% 0.0% 0.0% 0.0% Total 100.0% 100.0% 100.0% 100.0%
Gjensidige Forsikring Group return on real estate that lies between bonds and equities, with a modest correlation with both of them.
Property risk is material to the Gjensidige Forsikring Group and Gjensidige Forsikring ASA. Gjensidige Forsikring ASA has a 50 per cent share in Oslo Areal AS, which is fully consolidated in the solvency calculations. The Group owns most of its properties through Oslo Areal AS, although a small part of the portfolio is invested in property funds outside Norway. The real estate portfolio managed by Oslo Areal AS consists of investment properties. The real estate portfolio has its largest concentration in offices in the Oslo area, but it also contains property in other major cities in Norway.
Interest rate risk Interest rate risk is the risk related to the value of assets, liabilities and financial instruments due to changes in the term structure of interest rates or interest rate volatility. For both the Gjensidige Forsikring Group and Gjensidige Forsikring ASA the interest rate risk is small as the maturity of the fixed income portfolio is aligned with the insurance obligations. For the Group, there is a further reduction in interest rate risk as the interest rate exposure in the non-life and life insurance business is in opposition to each other.
Figure 5a shows the expected pay-out pattern for the premium and claims provisions for the general insurance operation as at year-end 2019 and 2018, respectively. Approximately one third of the provisions are expected to be paid out within one year.
Figure 5b shows the corresponding pay-out pattern for Gjensidige Forsikring ASA. The average duration for Gjensidige Forsikring ASA is similar to that of the general insurance operation.
Gjensidige Pensjonsforsikring has paid-up defined benefit policies and other products with a guaranteed annual return. The current interest rate level is below the guaranteed interest rate. So far Gjensidige Pensjonsforsikring has had a satisfactory return, but as the investment portfolio matures, re-investment will be performed at today’s interest rate levels, with lower expected returns. A further reduction in interest rates will make it more difficult to find investments with a sufficient return to achieve the annual guaranteed return.
The Gjensidige Forsikring Group and Gjensidige Forsikring ASA are exposed to counterparty risk through the investments in securities and derivatives, cash at banks, and through receivables from intermediaries and reinsurance contracts.
Risk concentration The risk concentration regarding financial investments is defined as risk regarding the accumulation of exposures within the same geographical area, industry sector etc.
Geographical concentration of fixed-income securities in the free portfolio is monitored by using a look-through approach in respect of the fixed-income funds. Fixed-income funds consist of internationally diversified funds in asset classes like investment grade, high yield and convertible bond funds. The money market portfolio mainly consists of Norwegian bonds and certificates, thereby ensuring liquid assets are held in the portfolio.
Hedging exchange rate exposure Gjensidige Forsikring ASA uses financial derivatives to hedge foreign currency risk arising from investments in securities, and the ownership of foreign branches with other functional currency. Currency forwards and currency swaps are the primary instruments used for hedging currency risk. In addition, the Gjensidige Forsikring Group has implemented a currency hedging strategy with the purpose of minimizing currency risk in surplus capital. This is implemented by adjusting assets in foreign branches and subsidiaries so that surplus capital in foreign currencies is minimized.
Counterparty default risk – OTC derivatives The over-the-counter (OTC) derivatives are covered by ISDA Master agreements, which set out standard terms that apply to all the transactions entered between parts. The Master Agreement allows parties to limit their financial exposure under OTC transactions on a net basis. The Credit Support Annex (CSA) is a legal document that defines the rules under which collateral is posted or transferred between swap counterparties to mitigate the credit risk arising from derivative positions. As at 31. December 2019 the collateral pledged for OTC derivatives is NOK 475.6 million.
• Interest rate: It is assumed that the yield curve increases 100 bps. The effect is for assets only, except for liabilities that are discounted in the accounts.
Management of operational risk is described in chapter “Good management and control – we are serious about our responsibility” and subchapter “Risk – the core of the business”.
In 2018, Gjensidige received an approval by the Financial Supervisory Authorities (FSA) to use a partial internal model to calculate the regulatory solvency capital requirement. The approved partial internal model is more conservative than the model Gjensidige applied for. The FSA required the use of the standard formula to calculate storm risk, and the standard formula’s correlation between market and underwriting risk. The FSA’s requirements also include somewhat higher capital requirement for market and underwriting risk compared with Gjensidige’s initial application. Gjensidige’s application for changes in calibration of market risk has not been approved by the FSA. Gjensidige believes that the partial internal model, without the imposed conditions from the FSA, provides a better presentation of the risk, and will continue to make efforts to get Gjensidige’s own version of the partial internal model approved.
• 250 per cent based on Gjensidige’s own partial internal model
The main differences between valuation according to Solvency II principles and accounting principles are: • Intangibles are valued to zero under Solvency II • Held-to-maturity-bonds are valued to market value under
According to Solvency II principles, technical provisions are the sum of a best estimate and a risk margin. For non-life insurance and health insurance, the best estimate for technical provisions can be divided into premium provisions and claims provisions.
The tables below show the technical provisions for Gjensidige Forsikring ASA and the Gjensidige Forsikring Group in accordance with Solvency II principles and accounting principles.
Claims provisions for non-life and health insurance 28,164.8 24,342.4 (3,822.4) 29,355.8 24,683.3 (4,672.5)
Premium provisions for non-life and health insurance 10,601.4 2,857.1 (7,744.3) 10,154.1 2,363.8 (7,790.3)
Technical provisions for life insurance (best estimate) 37,193.6 34,303.6 (2,890.0) 30,495.9 28,110.2 (2,385.7)
Risk margin 2,689.6 2,689.6 1,964.2 1,964.2 Total technical provisions 75,959.8 64,192.7 (11,767.1) 70,005.8 57,121.6 (12,884.2)
Risk margin 1,352.0 1,352.0 1,228.5 1,228.5 Total technical provisions 37,773.6 27,763.5 (10,010.1) 38,244.9 27,290.8 (10,954.1)
Own shares (0.0) (0.1) (0.0) (0.1) Proposed dividend (6,125.0) (3,550.0) (6,125.0) (3,550.0) Subordinated liabilities (insurance) 2,533.5 2,487.5 2,229.0 2,186.0
The tier 2 capital for the Gjensidige Forsikring Group and Gjensidige Forsikring ASA consists of natural perils capital and subordinated liabilities. Natural perils capital can only be used to cover claims related to natural perils but can in an insolvent situation also be used to cover other liabilities. The subordinated liabilities comprise of bonds issued by Gjensidige Forsikring ASA (nominal amount of NOK 1,200 million) and Gjensidige Pensjonsforsiking AS (nominal amount of NOK 300 million). The market value of these bonds is NOK 1,508 million per 31.12.2019.
Tier 1 17,671.3 19,146.7 17,382.6 18,232.4 Of this; Restricted tier 1 capital from insurance 1,026.0 1,010.0 1,026.0 1,010.0
Tier 2 4,183.8 4,518.4 3,879.3 3,667.1 Of this; Natural perils capital 2,676.3 2,491.1 2,676.3 2,491.1
Capital available 21,855.1 23,665.1 21,261.9 21,899.5 Capital charge for nonlife and health uw risk 7,556.4 7,053.1 7,392.2 6,852.0
Diversification (4,960.2) (4,334.4) (3,517.9) (3,332.5) Basic SCR 12,822.6 11,267.6 11,669.5 11,072.5 Operational risk 847.5 822.7 741.8 709.1 Adjustments (riskreducing effect of deferred tax)
The following assumptions apply for 2019: • The equity risk stress is 20 per cent. It includes stress on all equities including hedge funds and private equity.
• Interest rate risk is calculated on a 100 bps change in the interest rates. It includes effect on both assets and liabilities. The interest rate scenario is the strictest of an interest rate increase or decrease.
• The property stress is 10 per cent. • Credit spread risk: 0 per cent loss on government bonds and municipality bonds. 1 per cent increase in the credit spread for other bonds.
• The property stress is 10 per cent • Credit spread risk: 0 per cent loss on government bonds and municipality bonds, 0,4 per cent loss on Danish mortgage bonds and covered bonds, 1,9 per cent loss on loan funds containing secured debt and 3,07 per cent loss on other bonds
• Tax effect: A loss equal to the stress scenario results in a tax benefit that will have a positive effect
Description of the segments General Insurance Private The Private segment offers a wide range of general insurance products and services in the Norwegian private market, both in property and accident and health and leisure.
General Insurance Private 8,872.4 8,762.5 (5,682.6) (5,720.7) (1,164.7) (1,106.9) 2,025.1 1,934.8 General Insurance Commercial 8,164.1 7,603.3 (5,608.6) (5,182.8) (825.7) (872.3) 1,729.8 1,548.2 General Insurance Denmark 4,960.1 4,904.6 (3,642.0) (3,766.2) (718.8) (704.0) 599.3 434.5 General Insurance Sweden 1,405.8 1,569.2 (1,058.6) (1,231.7) (271.3) (259.3) 75.9 78.2 General Insurance Baltics 1,126.9 1,078.8 (728.7) (675.9) (337.3) (334.4) 60.9 68.5 Pension 1,047.2 934.2 (616.3) (566.8) (275.6) (241.0) 41.5 40.2 196.9 166.6 Eliminations etc. 1 125.5 142.1 (258.1) (213.7) (620.3) (684.2) 3,818.7 790.0 3,065.9 34.2 Total 25,702.0 24,994.8 (17,594.9) (17,357.9) (4,213.6) (4,202.1) 3,860.3 830.2 7,753.8 4,265.0 1 Eliminations etc. consist of internal eliminations and other income and expenses not directly attributable to one single segment and large losses of NOK 163.4 million (202.9). 2 There is no significant income between the segments at this level in 2019 and 2018.
Total investments in associates and joint ventures 1,879.2 3,318.6 1,879.2 2,959.7
Malling & Co Eiendomsfond IS 2,505.4 2,432.2 73.3 60.1 56.0 FDC A/S (sold in 2018) 57.5
Total investments in associates and joint ventures 2,505.4 2,432.2 73.3 60.1 56.0 291.7
Income statement - items Operating income 491.1 415.4 Profit/(loss) after tax expense 618.3 468.5
Gjensidige's share of loan 2,401.4 2,513.1 Total receivables on joint ventures 2,401.4 2,513.1
Oslo Areal has entered into contractual commitments to invest about NOK 100.0 million (99.0) in existing and new properties. The commitment falls due during the period until 31 December 2020.
Net income and gains/(losses) from financial assets at fair value through profit or loss, designated upon initial recognition Shares and similar interests Dividend income 6.7 5.1 Unrealised gains/(losses) from shares and similar interests 656.5 (323.9) Realised gains/(losses) from shares and similar interests 284.0 431.5 Total net income and gains/(losses) from shares and similar interests 947.2 112.7
Net income and gains/(losses) from financial liabilities at amortised cost Net interest income/(expenses) from subordinated debt (49.9) (43.0) Total net income and gains/(losses) from financial liabilities at amortised cost (49.9) (43.0)
Specifications Interest income and expenses from financial assets and liabilities not recognised at fair value through profit or loss Total interest income from financial assets not recognised at fair value through profit or loss 851.4 733.9 Total interest expenses from financial assets not recognised at fair value through profit or loss (52.8) (43.1) 1 Net other financial income/(expenses) include financial income and expenses not attributable to individual classes of financial assets or liabilities, and financial administration costs.
Operating expenses Depreciation and value adjustments (note 11 and note 12), excl. depreciation properties 763.1 559.6 Employee benefit expenses (note 8) 2,992.1 2,982.3 ICT costs 420.2 406.2 Consultants’ and lawyers’ fees 138.2 92.9 Commissions 617.1 576.0 Other expenses 1 (717.2) (414.8) Total operating expenses 4,213.6 4,202.1
Auditor's fee (incl. VAT) Statutory audit 4.8 4.4 Other assurance services 0.1 0.1 Other non-assurance services 0.8 1.1 Tax consultant services 0.6 0.2 Total auditor's fee (incl. VAT) 6.3 5.8 1 Other expenses include cost allocations to claims and finance.
• The annual evaluation of and matters concerning salary and other remuneration to the CEO
Remuneration of executive personnel and employees who can materially influence the Group’s risk Remuneration of the senior group management is stipulated by the CEO, in accordance with limits discussed with the remuneration committee and on the basis of guidelines issued by the Board. Correspondingly, the Group’s guidelines are used
The individual variable remuneration may amount to up to 30 per cent of the annual salary including holiday pay. Variable pay is not included in the pension basis.
Catharina Hellerud, Executive Vice President 3,155.4 493.5 175.2 460.5 502.3 2,624 2,999 5,328 21,589 3
Sigurd Austin, Executive Vice President 3,088.9 480.1 188.2 697.3 488.8 3,067 3,122 5,996 16,324 3
Janne Merethe Flessum, Executive Vice President 2,530.2 399.7 169.6 279.6 401.0 1,868 95 1,969 4,349
Aysegul Cin, Executive Vice President 5 2,524.9 560.1 151.5 185.3 360.1 707 707 1,489
Catharina Hellerud, Executive Vice President 3,067.4 342.6 175.6 455.7 341.8 2,652 3,287 5,703 20,047 3
Anne-Mari Kalager, acting Executive Vice President (1.9.18-31.12.18) 1, 12 885.4 20.1 55.4 217.3 20.1
Deferred tax liabilities and deferred tax assets Deferred tax liabilities and deferred tax assets are offset when there is a legally enforceable right to offset those assets/liabilities and when deferred tax liabilities/deferred tax assets relate to the same fiscal authority. Set off is only being done where deferred tax benefits can be utilized by providing group contributions.
Taxable temporary differences Property, plant and equipment and intangible assets 216.8 Shares, bonds and other securities 1,198.3 288.5 Profit and loss account 259.1 325.1 Account for deferred income tax from technical provisions including security provision 3,780.2 4,228.1 Total taxable temporary differences 5,237.6 5,058.5
Deductible temporary differences Property, plant and equipment and intangible assets (14.1) Loans and receivables (14.1) (31.9) Provisions for liabilities (296.9) (310.8) Pension liabilities (326.8) (360.8) Other deductible temporary differences 161.6 53.7 Total deductible temporary differences (476.2) (649.8) Loss carried forward (38.9) (38.9) Net temporary differences 4,722.5 4,369.8
Loss carried forward 2021 2022 2023 2024 2025 Later or no due date 89.8 24.8 Total loss carried forward 89.8 24.8
Change in deferred tax Deferred tax liabilities as at 1 January 1,079.9 1,065.5 Change in deferred tax recognised in profit or loss continuing operations 98.1 35.1 Change in deferred tax discontinued operations (6.8)
Change in deferred tax recognised directly in the balance sheet Adjustment on initial application of IFRS 16 (20.1) Net deferred tax liabilities as at 31 December 1,147.5 1,079.9
Tax recognised in other comprehensive income Deferred tax pensions 29.3 12.7 Tax payable on exchange rate differences 17.1 (0.7) Total tax recognised in other comprehensive income 46.4 12.0
The main result from the tax relief decision mentioned above, is that an increase in taxable gain from sale of shares in Gjensidige held by Gjensidigestiftelsen, leads to an increase in the taxable basis for depreciation in Gjensidige, which in turn give a decrease in tax payable. In February 2015, Gjensidige received a decision from the Central Tax Office for Large Enterprises in connection with the calculation of a tax gain as a result of the conversion of Gjensidige Forsikring BA into a public limited company (ASA) in 2010. The decision means that the tax payable for 2010 is reduced by around NOK 35 million. The tax will be further reduced for the ensuing years, by a total of around NOK 134 million at known tax rates. Gjensidigestiftelsen received a similar decision, and they have appealed the decision on the grounds that there is no basis for the change and that the tax office has based its decision on an incorrect valuation. Gjensidige agrees with Gjensidigestiftelsen’s assessment.
Defined contribution plan Defined contribution pension is a private pension plan that supplements the National Insurance scheme. Benefits from the pension plan come in addition to retirement pension from the National Insurance scheme. The retirement age is 70. 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. The rates are seven per cent of earnings between 0 and 7.1 times the National Insurance basic amount (G) and 20 per cent of earnings between 7.1 and 12 G. Disability pension, spouse/cohabitant pension and child’s pension are also included in the plan subject to more detailed rules.
Actuarial assumptions Actuarial assumptions are shown in the table. The discount rate is the assumption that has the greatest impact on the value of the pension liability. Wage growth, pension increases, and the adjustment of the National Insurance basic amount are based on historical observations and expected future inflation. Wage growth is set at 3.1 per cent (3.2) and is adjusted for age based on a decreasing trend. The year-on-year nominal wage growth 2019/20 is calculated to be 1.55 per cent (1.91). The reason for the low wage growth is that the pension plan is closed to new members and that the average age of employee members is 57.9 years (56.8). The discount rate is based on a yield curve stipulated on the basis of the covered bond yield. The discount rate is based on observed interest approximately ten years ahead. The market’s long-term view of the interest rate level is estimated on the basis of the required real interest rate, inflation and future credit risk. An interpolation has been made in the period between the observed interest and long-term market expectations. A discount curve has thus been calculated for each year in which pensions will be disbursed. The sensitivity analysis is based on only one assumption being changed at a time, while all the others remain constant. This is seldom the case, since several of the assumptions co-vary. The sensitivity analysis has been prepared using the same method as the actuarial calculation of the pension liability in the balance sheet is based on. Risk The risk in the net pension liability is a combination of the pension plan itself, the pension liability, pension assets, financing level and the co-variation between pension liabilities and pension assets. Gjensidige is exposed to financial risk since the pension assets are managed in Gjensidige Pensjonskasse as an investment choice portfolio. The financial risk is related to investments in equities, interest-bearing securities and property. Most of the investments are in securities funds and bonds. The financial risk comprises stock market, interest rate, credit, currency and liquidity risk, whereas the greatest risk factor is interest rate risk. Financial risk in pension assets is estimated using defined stress parameters for each asset class and assumptions about how the development of the different asset classes will co-vary. The pension assets are higher than the calculated pension liabilities. However, the use of pension assets to pay future premiums is limited, and part of the overfunding is expected to be used to increase pension payments. An increase in the liabilities (such as, as a result of interest exemption) will be partly offset by a reduction in overfunding. Interest rate rises lead to a fall in liabilities that, in isolation, can lead to increased overfunding. The risk factors below must therefore be seen in the light of the overfunding. Interest rate risk The pension assets’ exposure to interest rate risk is deemed to be moderate because the market value-weighted duration is approximately 3.6 years. The portfolio value will fall by approximately 3.6 per cent in the event of a parallel shift in the yield curve of plus one percentage point. The pension liability will increase by approximately 12 per cent in the event of a parallel shift in the whole yield curve (fall in interest) of minus one percentage point. The value will fall by approximately 10 per cent in the event of an interest rate increase of one percentage point. Credit risk The pension assets’ exposure to credit risk is deemed to be moderate. Most of the pension fund’s fixed-income investments shall be within “investment grade”. If the credit risk on a global basis were to increase by a factor corresponding to the factor used in stress tests for pension funds (equal to a deterioration in relation to the 99.5 percentile), this would lead to a fall of approximately nine per cent in the bond portfolio. The pension liabilities are exposed to some credit risk because the Norwegian covered bond yield, which forms the basis for determining the discount rate, entails a certain credit risk. Life expectancy and disability The life expectancy assumptions are based on the K2013BE table as reported by FNO (Finans Norge) AS. The rate of disability is based on the IR73 table. This measures long-term disability. The incidence of disability is low compared to many other employers. Gjensidige’s employees could be involved in big disaster-like events such as plane crashes, bus crashes, as spectators at sporting events or through incidents in the workplace. If such an event occurs, the pension liability could significantly increase. Gjensidige has invested in disaster insurance that means that it will receive compensation if such an event occurs. Wage growth Future pension benefits depend on future wage growth and the development of the National Insurance basic amount (G). If wage growth in the Company is lower than the increase in G, the benefits will be reduced. Wage growth will deviate from the path defined by employees getting higher or lower wage growth than what the job indicates. Gjensidige manages employees’ wage growth based on collective agreements and individual agreements. Salary levels can increase strongly from one year to the next. If wage growth is one percentage point higher, it will lead to approximately 3.6 per cent increase in the liability. If wage growth is one percentage point lower, it will lead to approximately 2.7 per cent decrease in the liability. If G is one percentage point higher it will lead to approximately 1.3 per cent decrease in the liability. Minimum requirement for the level of pension assets The pension assets must meet certain minimum requirements defined in Norwegian laws, regulations and in orders issued by the Financial Supervisory Authority of Norway (FSA). If the level of the pension assets falls below a lower limit, Gjensidige will have to pay extra pension contributions to bring them up to the lower limit. On certain conditions, Gjensidige will also be repaid pension assets. Gjensidige Pensjonskasse measures risk based on requirements set by the Financial Supervisory Authority in the form of stress tests. These tests should reflect 99.5 per cent value at risk. The pension fund has a buffer capital utilization of approximately 75 per cent, which indicates that there is no requirement to provide pension funds to improve the pension fund’s solvency.
Settlements 2.1 2.1 Discontinued operations (4.5) (23.7) (28.2) The effect of the asset ceiling (50.9) (50.9) (32.0) (32.0) Foreign currency exchange rate changes (0.2) (0.2) 0.2 0.2 As at 31 December 2,102.7 610.6 2,713.3 2,057.2 562.4 2,619.6
Pension expense recognised in profit or loss Current service cost 25.1 9.8 34.9 25.6 9.4 35.0 Interest cost 59.8 15.1 75.0 55.6 13.3 68.8 Interest income (64.5) (64.5) (60.9) (60.9) Settlement 2.1 2.1 Employers' national insurance contributions 4.8 1.9 6.7 4.9 1.8 6.7 Defined benefit pension cost 25.2 26.8 52.0 25.2 26.5 51.7
Actuarial assumptions Discount rate 2.21% 2.98% Future salary increases 1 3.14% 3.20% Change in social security base amount 3.14% 3.20%
Other specifications Amount recognised as expense for the defined contribution plan 209.0 206.8
Expected contribution to the defined benefit plan for the next year 145.1 1.3 1 Future salary increases represent our expected average future salary increase for the industry. Since Gjensidige has a closed plan, average future salary increase for Gjensidige's population is 1.55 per cent (1.91). See explanation under Actuarial assumptions.
Sensitivity - 1%-point discount rate 12.3% 12.5% + 1%-point discount rate (10.1%) (9.8%) - 1%-point salary adjustment (2.7%) (3.2%) + 1%-point salary adjustment 3.7% 4.0% - 1%-point social security base amount 1.6% 1.8% + 1%-point social security base amount (1.4%) (1.6%) + 1%-point future pension increase 10.3% 12.4% 10% decreased mortality 2.8% 2.7% 10% increased mortality (3.8%) (3.6%)
Shares and similar interests 201.8 201.8 Bonds 2,086.5 2,086.5 Loans, receivables and bank deposits 58.7 58.7 Total 2,347.0 2,347.0
Shares and similar interests 130.6 130.6 Bonds 2,034.4 2,034.4 Derivatives 48.7 48.7 Total 2,213.8 2,213.8
Cost As at 1 January 2018 3,820.6 1,416.6 1,490.8 908.4 7,636.4 Additions 2.1 218.4 12.2 232.8 Additions through business combinations 6.6 6.6 Additions from internal development 24.7 24.7 Disposals/reclassifications (200.6) (14.4) (215.0) Exchange differences 13.5 3.6 0.9 (3.0) 15.0 As at 31 December 2018 3,840.7 1,422.3 1,534.3 903.2 7,700.5 Uncompleted projects 223.4 223.4 As at 31 December 2018, including uncompleted projects 3,840.7 1,422.3 1,757.7 903.2 7,923.9
Carrying amount As at 1 January 2018 3,557.4 361.9 696.4 413.9 5,029.6 As at 31 December 2018 3,577.0 231.5 791.2 265.3 4,865.2
Cost As at 1 January 2019 3,840.7 1,422.3 1,534.3 903.2 7,700.5 Additions 229.3 9.8 239.2 Additions through business combinations 87.4 87.4 Additions from internal development 2.7 2.7 Disposals/reclassifications (507.1) (57.7) (598.6) Exchange differences (24.0) (10.5) (6.0) (12.6) (53.1) As at 31 December 2019 3,816.7 1,465.4 1,253.2 842.7 7,378.0 Uncompleted projects 304.7 304.7 As at 31 December 2019, including uncompleted projects 3,816.7 1,465.4 1,557.9 842.7 7,682.7
The group has not acquired any portfolio or company in 2019.
Nykredit portefølje 1 Denmark 892.2 895.5 Gjensidige Forsikring, Swedish branch Sweden 139.1 144.6
Each of the units above is the smallest identifiable group of assets that generates cash inflows and are considered as separate cash-generating units. The annual assessment of impairment losses was carried out in the third quarter of 2018. An indication assessment was also carried out in the other quarters in order to assess whether new circumstances calls for new impairment testing of goodwill.
The management’s method As far as possible, the management has sought to document the assumptions upon which the models are based through external information. External information is first and foremost used in the assessment of discount rate and exchange rates. When it comes to future cash flows, the management has also considered the degree of historical achievement of budgets. If expected budgeted results are not achieved, the management has conducted a deviation analysis. These deviation analyses are reviewed by the Board of Directors of the respective subsidiaries, as well as the management in Gjensidige Forsikring.
ADB Gjensidige 91.5-94.5 % 92.0 % Gouda portfolio 90.5-100.5 % 90.2 % Gjensidige Forsikring, white label 78,4-82,7 % 82,7 %
Gouda porfolio No need for impairment No need for impairment No need for impairment Need for impairment app. NOK 9 million
Cost As at 1 January 2018 32.2 524.4 556.6 Additions 1.5 28.0 29.5 Disposals (1.4) (32.4) (33.8) Exchange differences (0.3) (0.3) As at 31 December 2018 32.2 519.8 552.0 Uncompleted projects 45.4 45.4 As at 31 December 2018, including uncompleted projects 32.2 565.2 597.5
Cost As at 1 January 2019 32.2 519.8 552.0 Implementation of IFRS 16 1,210.3 13.6 1,223.9 Additions 42.5 32.2 3.6 78.3 Disposals (1.4) (59.0) (104.5) (164.9) Exchange differences (3.2) (1.9) (5.1) As at 31 December 2019 30.9 1,190.5 445.6 17.2 1,684.2 Uncompleted projects 49.9 49.9 As at 31 December 2019, including uncompleted projects 30.9 1,190.5 495.4 17.2 1,734.0
Depreciation and impairment losses As at 1 January 2019 (0.5) (345.1) (345.6) Depreciation (0.1) (159.0) (50.4) (6.6) (216.2) Disposals 0.1 91.4 91.5 Exchange differences (0.1) 1.4 1.2 As at 31 December 2019 (0.6) (159.1) (302.8) (6.6) (469.1)
Owner-occupied property in Gjensidige Forsikring Group mainly consists of leisure houses and cottages, in addition to owneroccupied property in the Baltics.
Lease liability 31 December 2018 Operational lease liability 31 December 2018 1,462.1 Effect of discounting of the lease liability (157.7) Lease liability recognized 1 January 2019 1,304.5
The rental period is calculated based on the duration of the agreement plus any option periods if these with reasonable certainty will be exercised. Joint expenses etc. are not recognised in the lease liability for the rental contracts.
Payment of interest related to lease liabilities is presented as cash flow from financing activities as this is best in accordance with the objective of the rental agreements.
Gjensidige has chosen to recognise deferred tax on the net value of assets and liabilities. This represented a deferred tax asset of NOK 20.1 million. The difference between this and the lease liability, less deferred tax, amounted to NOK 61.4 million and was recognised directly in equity on 1 January 2019.
• Loan funds with secured loans and real estate funds. The funds are valued based on reported NAV values as reported by the fund administrators. Because of late reporting from the funds, the NAV values from the previous quarterly reporting are used in estimating fair value.
Valuation hierarchy 2018 The table shows a valuation hierarchy where financial assets/liabilities are divided into three levels based on the method of valuation.
Perpetual Tier 1 capital ¹ 1,369.4 369.6 999.8 0.7 1,000.5 Subordinated debt 1,947.3 449.8 1,497.5 0.4 1,498.0 Interest-bearing liabilities 23,083.4 23,083.4 0.0 0.0
Wells Fargo Lux Worldwide EM Equity Fund Equity fund 721.7 RBC Funds Lux - Global Equity Focus Fund Equity fund 643.9 Nordea Stabile Aksjer Global 989 851 020 Equity fund 565.8 Sector Healthcare - A USD Hedge fund 322.4 Storebrand Global Indeks B 989 133 241 Equity fund 299.6 AB SICAV I - Global Core Equity Portfolio Equity fund 197.3 INVESTEC GS GLOBAL EQTY-I$ Equity fund 182.1 Incentive Active Value Fund Cl. A EUR Unrestricted Hedge fund 141.0 HitecVision VI LP Private equity fund 114.1 Danske Invest Norske Aksjer Institusjon I 981 582 020 Equity fund 105.7 HitecVision Asset Solution KS Private equity fund 105.1 Storebrand Norge I 981 672 747 Equity fund 103.5 Pareto Aksje Norge 883 610 512 Equity fund 99.8 HitecVision Private Equity V LP Private equity fund 99.7 HitecVision Private Equity IV LP Private equity fund 77.8 Norvestor VII LP Private equity fund 76.2 Invesco Credit Partners LPA Hedge fund 62.5 Argentum Secondary III Private equity fund 53.0 Viking Venture III DIS Private equity fund 52.6 HitecVision VII Private equity fund 45.2 Northzone VII L.P. Private equity fund 36.9
Northzone VIII L.P. Private equity fund 33.4 Other funds 450.5 Total funds 6,314.8 1 Norwegian Private Equity funds organised as internal partnerships doesn't have organisation number.
Shares and similar interests owned by other group companies Shares and similar interests owned by Gjensidige Pensjonsforsikring AS 6.3 Total shares and similar interests owned by other group companies 6.3
Total shares and similar interests owned by the Gjensidige Forsikring Group 6,551.6 15. Loans and receivables
Loans and receivables Bonds classified as loans and receivables 19,951.8 20,299.9 Other loans 11.5 178.1 Total loans and receivables 19,963.3 20,477.9
Bonds are securities classified as loans and receivables in accordance with IAS 39. Receivables in relation with asset management is short-term receivables regarding financial investments.
Claims paid, prior year claims (5,371.0) 119.2 (5,251.8) (7,485.8) 635.0 (6,850.7)
Claims reported and claims handling costs 14,179.3 (613.5) 13,565.8 13,835.4 (374.6) 13,460.8 Claims incurred, but not reported 13,985.6 (2.0) 13,983.6 15,520.4 (163.8) 15,356.6 Total as at 31 December 28,164.8 (615.5) 27,549.4 29,355.8 (538.4) 28,817.4
Own shares In the column for own shares in the statement of changes in equity the nominal value of the company’s holdings of own shares is presented. Amounts paid in that exceeds the nominal value is charged to other equity so that the cost of own shares reduces the Group’s equity. Gains or losses on transactions with own shares are not recognised in the income statement.
A total of 238,679 (306,489) own shares at an average share price of NOK 162.16 (131.59) have been acquired to be used in Gjensidige's share-based payment arrangements. Of these 186,524 (231,493) shares have been sold to employees, at the same price, but with a discount in the form of a contribution, see note 22. In addition, 28,343 (30,010) shares have been allocated to executive personnel within the share-based remuneration scheme and 36,654 (34,688) bonus shares have been allocated to employees in the share savings programme. The number of own shares is reduced by 12,842 (increased by 10,298) through the year.
NOK 5.00 kroner (0.00) based on excess capital distribution 1 2,500.0 1 Proposed dividend for 2019 is not recognised at the reporting date, and it does not have any tax consequences.
Principal, NOK millions 300 1,200 Currency NOK NOK Issue date 23.6.2016 2.10.2014 Maturity date 23.6.2026 3.10.2044 First call date 23.6.2021 2.10.2024 Interest rate NIBOR 3M + 2.90% NIBOR 3M + 1.50%
General terms Regulatory regulation Solvency II Regulatory call Yes Conversion right No 19. Provisions and other liabilities
Other provisions and liabilities Restructuring costs 1 74.4 128.3 Other provisions 2 222.9 190.9 Total other provisions and liabilities 297.3 319.3
Other liabilites Outstanding accounts Fire Mutuals 32.6 27.6 Accounts payable 216.3 186.2 Liabilities to public authorities 272.5 290.3 Motor insurance tax to Norwegian Motor Insurers’ Bureau (TFF) 1,616.5 1,612.6 Other liabilities 597.5 721.7 Total other liabilities 2,735.4 2,838.4
Accrued expenses and deferred income Liabilities to public authorities 38.3 32.2 Accrued personnel cost 319.2 305.6 Other accrued expenses and deferred income 64.4 65.6 Total accrued expenses and deferred income 422.0 403.3
Gjensidige Forsikring Group 20. Related party transactions Overview Gjensidige Forsikring ASA is the Group's parent company. As at 31 December 2019 the following companies are regarded related parties. See note 5 in Gjensidige Forsikring ASA for specification of subsidiaries and joint ventures.
Earned premiums written and gross claims 28.1 50.0 1,157.0 815.3 Administration expenses 325.1 392.5 440.0 473.9 Interest income and expenses 60.4 39.9 Gain and losses on sale and impairment losses on subsidiaries 3,093.3 153.2 76.0
Share-based remuneration for key personnel 4.9 4.3 Share savings programme for employees 8.2 7.2 Total expenses (note 7) 13.1 11.5
The number of bonus shares Outstanding 1 January 99,015 83,946 Granted during the period 46,419 57,405 Forfeited during the period (9,602) (5,076) Released during the period (36,654) (34,688) Cancelled during the period (4,024) (2,572) Outstanding 31 December 95,154 99,015 Exercisable 31 December 0 0
The number of shares Outstanding 1 January 53,940 48,411 59,591 53,965 Granted during the period 25,121 22,518 23,070 20,501 Transferred in/out during the period (14,535) (12,826) 0 0 Exercised during the period (28,343) (25,583) (30,010) (27,340) Cancelled during the period 0 0 (1,264) (1,127) Modification dividend during the period 2,270 2,152 2,553 2,412 Outstanding 31 December 38,453 34,672 53,940 48,411 Exercisable 31 December 0 0 0 0
Weighted average fair value of shares granted 2 143.00 149.10 Weighted average share price of shares released during the period 143.00 147.91 Fair value of shares granted that are to be settled in cash 184.25 135.20 2 The fair value is calculated based on the market value of the share at the time of allocation.
Earnings per share from continuing and discontinued operations (NOK), basis 13.19 7.44 Earnings per share from continuing and discontinued operations (NOK), diluted 13.18 7.43
Earnings per share from continuing operations (NOK), basis 13.11 6.77 Earnings per share from continuing operations (NOK), diluted 13.11 6.76 1 Holdings of own shares are not included in the calculations of the number of shares.
Income statement Profit /(loss) before tax expense 50.1 447.3 Tax expense (12.5) (112.4) Profit /(loss) after tax expense from discontinued operations (attributable to owners of the company) 37.6 334.9
Deposits from and liabilities to customers 23,123.0 Debt through issuance of securities 29,382.4 Subordinated loans 549.8 Other liabilities 459.2 Perpetual Tier 1 capital instrument 444.8 Other equity 3,939.6 Total equity and liabilities 57,898.8
Claims Gross claims 4 (16,662.5) (15,973.9) Claims, reinsurers' share 412.6 324.5 Total claims incurred, net of reinsurance (16,249.9) (15,649.4)
Received commission for ceded reinsurance and profit share 45.2 51.0 Total insurance-related operating expenses (3,499.3) (3,507.6)
Net income from investments Income from investments in subsidiaries, associates and joint ventures 3,093.3 374.0 Impairment losses of investments in subsidiaries, associates and joint ventures (153.2) (76.0) Interest income and dividend etc. from financial assets 1,000.8 1,043.1 Changes in fair value on investments 1,451.6 (494.7) Realised gain and loss on investments (312.8) 143.2 Administration expenses related to investments, including interest expenses (201.6) (166.2) Total net income from investments 6 4,878.1 823.4
Other comprehensive income that may be reclassified to profit or loss Exchange differences from foreign operations (65.1) 3.2 Tax on items that may be reclassified to profit or loss 9 17.1 (0.7) Total other comprehensive income that may be reclassified to profit or loss (48.0) 2.5
Assets Goodwill 2,950.1 1,846.6 Other intangible assets 1,026.0 1,013.0 Total intangible assets 11 3,976.2 2,859.5
Reinsurers' share of insurance-related liabilities in general insurance, gross Reinsurers' share of provision for unearned premiums, gross 16 42.3 39.6 Reinsurers' share of claims provision, gross 16 554.5 473.6 Total reinsurers' share of insurance-related liabilities in general insurance, gross 596.8 513.2
Other assets Plant and equipment 12 189.8 203.7 Cash and cash equivalents 13 1,796.1 1,656.4 Pension assets 10 241.8 155.2 Total other assets 2,227.6 2,015.2
Equity and liabilities Paid in equity Share capital 1,000.0 1,000.0 Own shares (0.0) (0.1) Share premium 1,430.0 1,430.0 Perpetual Tier 1 capital 1,002.3 1,000.5 Other paid-in equity 67.4 58.2 Total paid in equity 3,499.6 3,488.6
Retained equity Funds etc. Natural perils capital 2,676.3 2,491.1 Guarantee scheme provision 676.3 653.9 Other retained earnings 11,459.6 10,655.3 Total retained earnings 14,812.2 13,800.3
Insurance-related liabilities in general insurance, gross Provision for unearned premiums, gross 4, 16 10,003.0 9,399.6 Claims provision, gross 4, 16 27,693.3 28,769.8 Provision for premium discounts and other profit agreements 77.3 75.4 Total insurance-related liabilities in general insurance, gross 37,773.6 38,244.9
Provision for liabilities Pension liabilities 10 608.1 559.9 Current tax 9 984.6 591.3 Deferred tax liabilities 9 1,391.4 1,289.0 Other provisions 19 294.5 316.5 Total provision for liabilities 3,278.5 2,756.7
Adjustment on initial application of IFRS 16 (61.4) (61.4) Merger losses (65.7) (65.7)
Comprehensive income Profit/(loss) before components of other comprehensive income 51.3 7,409.0 7,460.3
Total other comprehensive income (48.0) (87.3) (135.3) Comprehensive income 51.3 (48.0) (87.3) 7,409.0 7,325.1
Statement of cash flows Gjensidige Forsikring ASA NOK millions 1.1.-31.12.2019 1.1.-31.12.2018
Dividends from subsidiaries 123.7 89.9 Group contributions paid (21.9) Net cash flow from investing activities 5,280.8 (264.2)
Effect of exchange rate changes on cash and cash equivalents (5.2) (11.2) Net cash flow 39.2 31.4
The lease liabilities were recognised at the present value of the remaining lease payments, discounted using the lessee’s incremental borrowing rate at the date of initial application, as well as the recognition of related right-of-use assets to an amount corresponding to the lease liability according to the modified retrospective method. For the largest rental agreements in Norway, Sweden and Denmark, Gjensidige has chosen to recognise the right-of-use asset at the carrying amount as if the standard had been applied since the date of implementation but discounted using the tenant's incremental borrowing rate at the date of initial application. The difference between this and the lease liability, less deferred tax, were recognised directly in equity on 1 January 2019.
The implementation effects were as follows: • Right-of-use assets in the statement of financial position increased by MNOK 1,123.3
• Lease liability in the statement of financial position increased by MNOK 1,203.8
• Effect on equity amounted to MNOK 61.4 less deferred tax
New standards and interpretations not yet adopted A number of new standards, changes to standards and interpretations have been issued for financial years beginning after 1 January 2019. They have not been applied when preparing these financial statements. Those that may be relevant to Gjensidige are mentioned below. Gjensidige does not plan early implementation of these standards.
IFRS 9 Financial instruments (2014) IFRS 9 addresses the accounting for financial instruments and is effective for annual periods beginning on or after 1 January 2018. See also the section below about delayed implementation. The standard introduces new requirements for the classification and measurement of financial assets, including a new expected loss model for the recognition of impairment losses, and changed requirements for hedge accounting.
Amendments to IFRS 4 Applying IFRS 9 Financial Instruments with IFRS 4 Insurance Contracts (2016) The amendments to IFRS 4 permit entities that predominantly undertake insurance activities the option to defer the effective date of IFRS 9 until 1 January 2021. The effect of such a deferral is that the entities concerned may continue to report under the existing standard, IAS 39 Financial Instruments.
IFRS 17 requires a general measurement model based on the following “building blocks”: • probability-weighted estimates of future cash flows, an adjustment to reflect the time value of money and the finanscial risks associated with those future cash flows, and a risk adjustment for non-financial risk.
IASB has decided to defer the effective date of IFRS 17 by one year to reporting periods beginning on or after January 1 2022.
Functional and presentation currency Functional currency Functional currency is determined for each the company and the branches in Gjensidige, based on the currency within the primary economic environment where each entity operates. Transactions in the company’s/branches’ accounts are measured in the company’s/branches’ functional currency. Transactions in foreign currency are translated to functional currency based on the day rate at the transaction date. At the end of each reporting period, monetary items in foreign currency are translated at the closing rate, non-monetary items are measured at historical cost translated at the time of the transaction and non-monetary items denominated in foreign currency at fair value are translated at the exchange rates prevailing at the date of calculation of fair value. Exchange rate differences are recognised continuously in the income statement during the accounting period.
Segment reporting The operating segments are determined based on Gjensidige’s internal organisational management structure and the internal financial reporting structure to the chief operating decision maker. In Gjensidige Forsikring 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. Gjensidige reports on two operating segments, General insurance Private and General insurance Commercial, which are independently managed by managers responsible for the respective segments depending on the products and services offered, distribution and settlement channels, brands and customer profiles. Identification of the segments is based on the existence of segment managers who report directly to the Senior Group Management/CEO and who are responsible for the performance of the segment under their charge. In addition, the company comprises a Swedish and Danish branch that is reported as a part of the segment Nordic in the consolidated financial statements.
Operational activities are primary activities within Gjensidige. Investment activities include the purchase and sale of assets that are not considered cash equivalents, and which are not included in Gjensidige’s primary activities. Financing activities include raising and repaying loans, as well as collecting and servicing equity.
Recognition of revenue and expenses Premiums Insurance premiums are recognised over the term of the policy. Gross premiums earned are calculated on the basis of the
Owner-occupied property is defined as property that is used by Gjensidige for conducting its business.
Gjensidige applies a single discount rate to a portfolio of leases with reasonably similar characteristics (for example similar remaining lease term).
The lease liability is included in the accounting line Other liabilities in the statement of financial position.
The right-of-use asset is shown in a separate line in the statement of financial position.
Other intangible assets Other intangible assets which consist of customer relationships, trademarks, internally developed software and other intangible assets that are acquired separately or as a group are recognised at historical cost less accumulated amortisation and accumulated impairment losses. New intangible assets are
• significant negative trends for the industry or economy • other external and internal indicators
Investments held to maturity Investments held to maturity are non-derivative financial assets with payments that are fixed, or which can be determined in addition to a fixed maturity date, in which a business has intentions and ability to hold to maturity with the exception of
Financial liabilities classified as equity Gjensidige has perpetual tier 1 capital accounted for as equity. The instruments are perpetual, but the principal can be repaid on specific dates, for the first time five years after it was issued. The agreed terms meet the requirements in the EU’s CRR/Solvency II regulations and the instruments are included in Gjensidige’s Tier 1 capital for solvency purposes. These regulatory requirements mean that Gjensidige has a unilateral right not to repay interest or the principal to the investors. As a consequence of these terms, the instruments do not meet the requirement for a liability in IAS 32 and are therefore presented on the line perpetual Tier 1 capital under equity. Further, it implies that the interest is not presented under Total interest expenses but as a reduction in other equity.
The period's pension cost (service cost) and net interest expense (income) are recognised in the income statement and are presented as an operating cost in the income statement. Net interest expense is calculated using the discount rate for the liability at the beginning of the period of the net liability. Net interest expense therefore consists of interest on the obligation and return on the assets.
that there will be sufficient taxable income to utilise the asset from the temporary difference, and they are expected to reverse in the foreseeable future.
The shares in Gjensidige Bank was presented on a separate line in the statement of financial position in 2018.
4. Premiums and claims etc. in general insurance For segment information according to IFRS 8 please refer to note 4 in the consolidated financial statements. The information below is worked out based on the requirements in the Norwegian Financial Reporting Regulations for Non-Life Insurance Companies.
Premiums written Gross - direct business and accepted proportional reinsurance 1,078.0 1,267.0 885.0 2,664.0 4,856.0 306.0 8,767.0 833.0 1,130.0 1,283.0 1,487.0
Premiums earned Gross - direct business and accepted proportional reinsurance 1,062.0 1,248.0 876.0 2,695.0 4,666.0 304.0 8,598.0 794.0 1,105.0 1,268.0 1,471.9
Gross - accepted non-proportional reinsurance Reinsurers' share 2.0 94.0 312.0 Net (816.5) (710.4) (534.1) (995.1) (3,540.4) (189.2) (5,821.1) (550.3) (795.8) (1,061.6) (1,134.2)
Premiums written Gross - direct business and accepted proportional reinsurance 24,555.6 Gross – accepted non-proportional reinsurance 4.0 16.9 1.6 125.0 147.4 Reinsurers' share (3.5) (717.1) Net 4.0 16.9 1.6 121.5 23,985.9
Gross claims incurred (20.3) (14.4) (1.2) (69.4) (16,662.5) Incurred during the year (20.3) (14.4) (1.2) (69.4) (17,886.7) Incurred previous years 1,224.2
Provision for unearned premiums, gross 10,003.0 Claims provision, gross 42.9 46.3 1.0 107.6 27,693.3
Subsidiaries Gjensidige Norge AS Oslo, Norway 100% 195.7 0.2 195.7 1.2 Gjensidige Pensjonsforsikring AS Oslo, Norway 100% 681.9 681.9 681.9 681.9 Samtrygd AS Oslo, Norway 100% 1.3 0.1 1.3 0.8 Lokal Forsikring AS Oslo, Norway 100% 31.4 7.8 31.4 11.3
Gjensidige Tech AS (former Gjensidige Bolighandel AS) Oslo, Norway 100% 140.3 2.4 116.2 116.2
Subsidiaries - additional information Gjensidige Norge AS 0.2 0.2 Gjensidige Pensjonsforsikring AS 38,815.6 902.2 37,913.4 1,047.2 148.3 Samtrygd AS 0.1 0.1 Lokal Forsikring AS 7.9 7.8 0.1 Försäkringshuset Amb & Rosèn AB 2.5 2.5 1.2 NAF Forsikringsformidling AS (liquidated 2019) 0.2 Gjensidige Business Services AB 235.5 233.9 1.5 (0.7) ADB Gjensidige 2,208.6 946.1 1,262.5 1,127.1 68.6 Gjensidige Tech AS (former Gjensidige Bolighandel AS) 9.6 8.5 1.1 2.1 (27.6) Ejendomsselskabet Krumtappen 2 A/S 1.4 1.4 (0.0) Vardia Försäkring AB 18.7 15.7 3.0 (0.0) Försäkringsakademin JW AB 16.6 15.8 0.8 0.6 Certes Sak AB 5.5 5.5 0.2 Total subsidiaries 41,322.2 2,139.8 39,182.4 2,176.5 190.7
Subsidiaries - additional information Gjensidige Norge AS 0.1 0.2 Gjensidige Pensjonsforsikring AS 32,370.3 854.0 31,516.3 934.3 125.4 Samtrygd AS 0.1 0.1 Lokal Forsikring AS (group) 7.8 7.8 Nykredit Forsikring A/S 1,717.7 471.0 1,246.7 57.6 155.6 Försäkringshuset Amb & Rosèn AB 0.4 1.3 (1.0) 0.4 NAF Forsikringsformidling AS 22.9 22.9 4.5 Mølholm Forsikring A/S 469.1 213.4 255.6 526.5 26.7 ADB Gjensidige 2,114.0 880.5 1,233.5 1,079.4 49.8 Gjensidige Bolighandel AS 94.6 89.9 4.7 2.0 (26.0) Ejendomsselskabet Krumtappen 2 A/S 1.4 1.4 Vardia Försäkring AB 37.7 16.3 21.4 2.0 Försäkringsakademin JW AB 16.5 15.9 0.6 2.0 Certes Sak AB 5.6 5.6 0.7 Total subsidiaries 36,858.3 2,580.3 34,277.9 2,599.8 341.1
Gjensidige's share of loan 2,401.4 2,513.1 Total receivables from joint ventures 2,401.4 2,513.1
Net income and gains/(losses) from investments in subsidiaries, associated companies and joint ventures Income from investments in subsidiaries, associated companies and joint ventures 0.2 374.0 Impairment investments in subsidiaries, associated companies and joint ventures (153.2) (76.0) Net gains/(losses) from sale of investments in subsidiaries, associated companies and joint ventures 3,093.1 Total net income and gains/(losses) from investments in subsidiaries, associated companies and joint ventures 2,940.1 298.0
Bonds and other fixed-income securities Net interest income/(expenses) from bonds and other fixed-income-securities 271.8 200.7 Unrealised gains/(losses) from bonds and other fixed-income securities 344.1 13.8 Net realised gains/(losses) from bonds and other fixed-income securities 163.9 85.5 Total net income and gains/(losses) from bonds and other fixed-income securities 779.8 300.1
Total net income and gains/(losses) from financial assets at fair value through profit or loss, designated upon initial recognition 1,409.8 (115.9)
Net other financial income/(expenses) 1 (81.1) (64.9) Discounting of claims provision classified as interest expense (33.2) (71.6) Change in discount rate claims provision (198.1) 53.1
Specifications Interest income and expenses from financial assets and liabilities not recognised at fair value through profit or loss Total interest income from financial assets not recognised at fair value through profit or loss 837.9 724.0 Total interest expenses from financial assets not recognised at fair value through profit or loss (39.4) (31.0) Specification of other financially related income and expenses not recognised in net income from investments Net interest from bank deposits and subordinated loan classified as other income and other expenses (25.8) (25.8) 1 Net other financial income/(expenses) include financial income and expenses not attributable to individual classes of financial assets or liabilities, and financial administration costs.
Insurance-related administration expenses incl. commissions for received reinsurance and sales expenses Depreciation and value adjustments (note 11 and note 12), excl. depreciation properties 627.4 405.1 Employee benefit expenses (note 8) 2,751.1 2,746.1 ICT costs 362.4 376.2 Consultants’ and lawyers’ fees 129.9 85.2 Commissions 466.8 408.8 Other expenses 1 (793.2) (462.9) Total insurance-related operating expenses incl. commissions for received reinsurance and sales expenses 3,544.5 3,558.6
Employee benefit expenses Wages and salaries 1,980.1 1,994.0 Social security cost 481.8 472.2 Pension cost - defined contribution plan (note 10) 203.9 197.1 Pension cost - multi-employer plan (AFP) (note 10) 22.7 21.7 Pension cost - defined benefit plan (note 10) 51.0 50.7 Share-based payment (note 22) 11.6 10.3 Total employee benefit expenses 2,751.1 2,746.1
The retirement age of the CEO is 62. It is possible to step down after reaching the age of 60 if the Board or CEO so wishes. The CEO has pension rights pursuant to Gjensidige’s closed definedbenefit pension scheme. Pursuant to the CEO’s employment contract, he is entitled to a pension corresponding to 100 per cent of his annual salary on retirement at the age of 62, which is then reduced in steps to 70 per cent upon reaching the age of 67 at full vesting period.
as the basis for other executive personnel and employees who can materially influence risk.
In Sweden, the general retirement age is 65 years, but is under consideration. In Denmark, the general retirement age is 70 years.
The Board confirms that the guidelines on the remuneration of executive personnel for 2019 set out in last year’s statement have been complied with.
Kim Rud-Petersen, Executive Vice President (1.1.18-31.8.18) 1, 10 1,919.8 273.8 189.9 675.9 253.1 2,079 3,147 4,885 Hege Yli Melhus Ask, Executive Vice President (1.1.18-31.8.18) 1, 9 1,869.8 18.5 110.7 406.1 4.9 1,205 1,567 2,842 3
The Board Inge K. Hansen, Chairman (1.1.18-5.4.18) 1, 8 339.2 3.4 Gisele Marchand, board member (1.1.18-5.4.18), Chairman (5.4.18-
Specification of tax expense Tax payable (1,117.0) (788.7) Correction previous years 74.9 (26.6) Change in deferred tax (111.5) (179.7) Total tax expense (1,153.6) (995.0)
Deductible temporary differences Loans and receivables (14.1) (31.9) Provisions for liabilities (294.5) (308.5) Net pension liabilities (326.8) (360.8) Total deductible temporary differences (635.4) (701.2)
Change in deferred tax Deferred tax liabilities as at 1 January 1,289.0 1,122.5 Change in deferred tax recognised in profit or loss 111.5 179.7
Tax recognised in other comprehensive income Deferred tax pensions 29.1 12.3 Tax payable on exchange rate differences 17.1 (0.7) Total tax recognised in other comprehensive income 46.2 11.7
Tax expense In connection with the conversion of Gjensidige Forsikring BA to a public limited company the Ministry of Finance has consented to an exemption from capital gains taxation on the transfer of business to the newly formed public limited company under certain conditions. The consequences of the tax relief decision, as calculated by the company, have been incorporated into the tax expense and tax liabilities from the fourth quarter 2010. The tax relief decision involves greater complexity related to taxable gains from the assets and liabilities which were transferred, which entails a greater degree of uncertainty with respect to the tax expense and tax liabilities until all the effects have ultimately been evaluated by the tax authorities.
The appeal was processed by the Tax Appeal Board on 27th January 2020 but was not accepted. The decision of the Tax Appeal Board implies a further decrease of tax payable for Gjensidige for 2010 and the ensuing years. The total decrease in tax payable for 2010 and ensuing years is NOK 205 million assuming the decision of the Tax Appeal Board is upheld. For the time being it is not decided whether legal actions will be taken to alter the decision of the Tax Appeal Board.
Gjensidige has not recognised any effect in the accounts related to the decisions mentioned above.
Actuarial assumptions Actuarial assumptions are shown in the table. The discount rate is the assumption that has the greatest impact on the value of the pension liability. Wage growth, pension increases, and the adjustment of the National Insurance basic amount are based on historical observations and expected future inflation. Wage growth is set at 3.1 per cent (3.2) and is adjusted for age based on a decreasing trend. The year-on-year nominal wage growth 2019/20 is calculated to be 1.55 per cent (1.91). The reason for the low wage growth is that the pension plan is closed to new members and that the average age of employee members is 57.9 years (56.8).
Credit risk The pension assets’ exposure to credit risk is deemed to be moderate. Most of the pension fund’s fixed-income investments shall be within “investment grade”. If the credit risk on a global basis were to increase by a factor corresponding to the factor used in stress tests for pension funds (equal to a deterioration in relation to the 99.5 percentile), this would lead to a fall of approximately nine per cent in the bond portfolio.
Gjensidige’s employees could be involved in big disaster-like events such as plane crashes, bus crashes, as spectators at sporting events or through incidents in the workplace. If such an event occurs, the pension liability could significantly increase. Gjensidige has invested in disaster insurance that means that it will receive compensation if such an event occurs.
Gjensidige Pensjonskasse measures risk based on requirements set by the Financial Supervisory Authority in the form of stress tests. These tests should reflect 99.5 per cent value at risk. The pension fund has a buffer capital utilization of approximately 75 per cent, which indicates that there is no requirement to provide pension funds to improve the pension fund’s solvency.
If the administrator of the AFP plan presents such allocation figures, this could result in the plan being recognised as a defined benefit plan. It is difficult, however, to arrive at an allocation key that is acceptable to Gjensidige. An allocation key based on the Gjensidige’s share of total annual pay will not be acceptable since such a key is too simple and will not adequately reflect the financial liabilities.