access through business combinations during 2010 generally concerns the acquisition of nykredit Forsikring where the recognised values include customer relations, distribution contracts, databases including damage history and associated companies. the termination of other intangible assets concerns impaired insurance portfolios. none of the intangible assets have undetermined useful lives. in 2010 impairment losses on intangible assets in tennant Forsikring have been recognised, and a technical impairment of goodwill in oslo areal has been conducted.
perspektiv 115gjensidige annual report 2010 resu lts iMpairMeNt testiNg of goodwill the carrying amount of goodwill in the group as at 31 december 2010 is noK 2.580,7. this is primarily related to acquisitions of different subsidiaries /portfolios in the period 2006 to 2010. see table.
1 Fair Forsikring has sold the portfolio and inventory to the danish branch of gjensidige Forsikring.
an impairment loss of goodwill amounting to noK 100.0 million is recognised in tennant Forsikring due to changed business model compared to the original model. the discounting rate used in connection with the impairment of tennant Forsikring during the first quarter of 2010 was 8.4 per cent.
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, and also the management in gjensidige Forsikring.
level of combined ratio (cr) the expected Cr level is considered to be somewhat higher in the growth period than at the point in time when the terminal value is calculated. see table.
Based on an overall assessment the management has nevertheless chosen to use 3.0 per cent as this is considered to be more in keeping with expectations in the market.
we have used an average of the two-year and eight-year risk-free rate. the risk-free rate for assessment of impairment in 2010 is 2.1 per cent for denmark, 2.25 percent for sweden and 8.84 per cent for the Baltic. in addition a risk premium of 5.5 percentage point in denmark and sweden and 6.0 percentage points in the Baltic has been added.
sensitivity analysis key assumptions the excess values associated with the acquisition are based on different key assumptions. if these assumptions change significantly from what they are expected to be in the impairment models, a need for impairment may arise. the models are especially sensitive to deviations from expected Cr.
growth reduced by 2% compared to expected next 3 years cr increases by 2% next 3 years all circumstances occur simultanously gjensidige Forsikring, danish branch no need for impairment no need for impairment no need for impairment no need for impairment gjensidiges arbejdsskadeforsikring no need for impairment no need for impairment no need for impairment no need for impairment gjensidige Baltic no need for impairment no need for impairment no need for impairment no need for impairment gjensidige sweden need for impairment, app. noK 40 million no need for impairment no need for impairment need for impairment, app. noK 70 million gjensidige Forsikring, swedish branch need for impairment, app. noK 80 million no need for impairment no need for impairment need for impairment, app. noK 120 million nykredit Forsikring need for impairment, app. noK 310 million need for impairment, app. noK 60 million need for impairment, app. noK 60 million need for impairment, app. noK 410 million
perspektiv 117gjensidige annual report 2010 resu lts 6 – shares iN associates registered interest cost carrying amount cost carrying amount
Nok million office held 31.12.2010 31.12.2010 31.12.2009 31.12.2009 storebrand asa oslo 24.3 % 4,604.4 3,287.8 4,604.4 2,903.5 spareBank1 sr-Bank stavanger 10.3 % 866.4 958.9 866.4 877.4 Bilskadeinstituttet as oslo 29.5 % 0.3 1.4 0.3 1.4 Forsikring og Finans sandnes as (sold during 2010) n/a n/a 0.1 Forsikringskontoret johansen og torkelsen as (sold during 2010) n/a n/a 0.1 0.2 Fossmark assuranse as (sold during 2010) n/a n/a Vervet as included subordinated loan 1 tromsø 25.0 % 30.3 0.8 30.3 0.3 Botrygt prinsegården as Fetsund 50.0 % 0.3 0.4 0.3 0.4 FdC a/s Ballerup, danmark 33.3 % 13.1 26.4 total shares in associates 5,514.8 4,275.5 5,501.8 3,783.3 additioNal iNforMatioN profit/(loss) share of Nok million assets equity liabilities revenues profit/(loss) recognised 2 stock value for the whole company 2010 storebrand asa 390,414.0 18,417.0 371,997.0 48,241.0 1,480.0 342.2 4,777.9 spareBank1 sr-Bank 134,778.0 9,402.0 125,376.0 3,414.0 1,317.0 142.1 1,180.6 Bilskadeinstituttet as 5.3 4.8 0.5 1.6 0.2 n/a Forsikring og Finans sandnes as (sold during 2010) n/a n/a n/a n/a n/a (0.2) n/a Forsikringskontoret johansen og torkelsen as (sold during 2010) n/a n/a n/a n/a n/a (0.3) n/a Fossmark assuranse as (sold during 2010) n/a n/a n/a n/a n/a (0.1) n/a Vervet as 109.2 13.1 96.1 0.5 (0.4) n/a Botrygt prinsegården as 0.8 0.8 n/a FdC a/s 111.2 53.8 57.4 334.0 12.8 5.0 n/a total shares in associates 525,418.5 27,891.5 497,527.0 51,991.2 2,809.5 488.7 additioNal iNforMatioN profit/(loss) share of Nok million assets equity liabilities revenues profit/(loss) recognised 2 stock value for the whole company 2009 storebrand asa 366,159.0 17,217.0 348,942.0 48,236.0 934.0 252.1 4,330.2 sparebank1 sr-Bank 124,909.0 8,073.0 116,836.0 2,674.0 1,111.0 11.0 1,035.7 Bilskadeinstituttet as 5.3 4.8 0.5 1.6 0.2 n/a Forsikring og Finans sandnes as 0.7 0.4 0.3 2.1 0.1 n/a Forsikringskontoret johansen og torkelsen as 4.0 0.6 3.4 6.7 n/a Fossmark assuranse as 0.7 0.1 0.6 2.0 (0.6) n/a Vervet as 107.6 11.7 95.9 0.8 0.1 n/a Botrygt prinsegården as 0.8 0.8 0.2 n/a total shares in associates 491,187.1 25,308.4 465,878.7 50,923.2 2,044.8 263.3 the investment in spareBank1 sr-Bank is classified as investments in an associate and is carried at cost. gjensidige Forsikring asa owns 16.3 per cent of the primary certificate capital and 10.3 per cent of the equity in the bank, and has not, based solely on the interest held alone, significant influence. However, the company is represented in both the Board of directors of sparebank1 sr-Bank and the nomination committee. this gives gjensidige 2 share of profit/(loss) is adjusted for gjensidige’s net excess values and accounting policies.
Forsikring asa significant influence and thus the opportunity to participate in the financial and operational decissions of the bank.
percentage of votes held is the same as percentage of interest held for all investments.
as at 31 december 2009 365.8 777.6 1,143.4 uncompleted projects 19.3 19.3 as at 31 december 2009, including uncompleted projects 365.8 797.0 1,162.7 depreciation and impairment losses depreciation for the year (9.4) (79.9) (89.3)
exchange differences 1.4 5.9 7.3 as at 31 december 2009 (83.5) (480.8) (564.4)
carrying amount as at 1 january 2009 330.7 324.7 655.4 as at 31 desember 2009 282.2 316.1 598.4 cost as at 1 january 2010 365.8 777.6 1,143.4 transferred to/from investment property (87.9)
there are no restrictions on owner-occupied property, plant and equipment. owner-occupied property, plant and equipment are not pledged as security for liabilities.
perspektiv 119gjensidige annual report 2010 resu lts 8 – iNvestMeNt properties Nok million 2010 2009 statement of financial position as at 1 january 5,509.9 5,618.9 additions 4.1 2.6 additions from subsequent expenditure 146.1 85.2 additions through business combinations 412.0 disposals (256.1) (5.9) net gains/(losses) from fair value adjustments (1.0) (190.9) transfer to/(from) owner-occupied property 87.9 exchange rate differences (2.7)
there are no restrictions with regard to the sale of the investment properties or how income and cash flows generated by the investment properties can be used.
office and education 6.63 % 1,354.1 1,296.1 22,101.0 shopping center 6.33 % 1,298.8 1,228.5 18,790.0 Combined portfolio 6.52 % 1,341.3 1,280.8 21,181.0
Yield decreases by 0.25 percentage point 5,742.5 6,139.3 6,536.1 the adoption of the above parameters implies a significant level of judgement. emphasis is put on this judgement being consistent with that observed in the market and that the judgement is applied consistently from period to period.
Financial assets held to maturity Bonds held to maturity 14,497.5 14,923.7 15,816.0 16,321.2
Financial liabilities at amortised cost deposits from and liabilities to customers, bank 16 9,120.0 9,120.0 6,550.4 6,550.4 liabilities related to direct insurance 16 392.5 392.5 346.4 346.4 accrued expenses and deferred income 16 210.7 210.7 206.3 206.3 gain/(loss) not recognised in profit or loss 440.6 518.6 valuatioN hierarchY 2010 the table shows a valuation hierarchy where financial assets/liabilities measured at fair value through profit or loss are divided into three levels based on the method of valuation.
Quoted prices in active markets level 2 valuation techniques based on observable market data level 3 valuation techniques based on non-observable market data total financial assets Financial derivatives Financial derivatives at fair value through profit or loss 83.2 298.9 382.1 Financial derivatives subject to hedge accounting 154.5 154.5
Financial liabilities at fair value through profit or loss, initial recognition interest-bearing liabilities at fair value through profit or loss 303.8 303.8
fair value Financial assets and liabilities measured at fair value are carried at the amount each asset/liability can be settled to in a transaction carried out at arm’s length distance.
different valuation techniques and methods are used to estimate fair value depending on the type of financial instruments and to which extent they are traded in active markets. instruments are classified in their entirety in one of three valuation levels in a hierarchy on the basis of the lowest level input that is significant to the fair value measurement in its entirety.
Below the different valuation levels and which financial assets/liabilities are included in the respective levels are accounted for.
a financial asset/liability is considered valued based on observable market data if fair value is estimated with reference to prices that are not quoted, but are observable either directly (as prices) or indirectly (derived from prices).
• Bonds, certificates or index bonds that are unlisted, or that are listed but where transactions are not occurring regularly. the unlisted instruments in this category are valued based on observable yield curves and estimated credit spreads where applicable.
• interest-bearing liabilities (banking activities) measured at fair value. these liabilities are valued based on observable credit spreads.
a financial asset/liability is considered valued based on non-observable market data if fair value is estimated without being based on quoted prices in active markets or observable market data. Financial assets/ liabilities valued based on non-observable market data are classified as level three in the valuation hierarchy.
• gjensidige’s investment in gjensidige pensjonskasse. the investment is valued equal to the paid-in equity.
seNsitivitY fiNaNcial assets level three the sensitivity analysis for financial assets valued based on nonobservable market data show the gain/loss of realistic and plausible market scenarios. a decrease in value of ten per cent is considered a realistic and plausible market scenario for both shares and similar interests and for bonds and other fixed income securities that are included in level three in the valuation hierarchy.
amount of net realised/ unrealised gains regocnised in profit or loss that are attributable to instruments held as at 31.12.2010
amount of net realised/ unrealised gains regocnised in profit or loss that are attributable to instruments held as at 31.12.2009
Nok million sensitivity shares and similar interests decrease in value 10 % 177.3
Bonds and other fixed income securities decrease in value 10 % 0.9 total 178.1
Nok million sensitivity shares and similar interests decrease in value 10 % 120.1
Financial assets at fair value through profit or loss, initial recognition shares and similar interests 2,148.6 4,379.1 1,200.9 7,728.6 Bonds and other fixed income securities 9,241.0 6,312.4 9.0 15,562.4 financial liabilities
Financial derivatives at fair value through profit or loss 0.2 0.2
perspektiv 123gjensidige annual report 2010 resu lts 10 – fiNaNcial derivatives aNd hedge accouNtiNg
the principal volume of derivatives is a gross quantity, and is a measure of the extent of derivatives within the different categories of contracts. the principal average is the average gross principal volume throughout the year. the market value of assets and liabilities state the carrying amount of derivatives as at 31 december.
the company’s overall exchange risk is hedged approximately 100 percent using currency futures. the total risk in the equity portfolio has been reduced during the year by investing in options on broad indexes instead of investing in equities. Financial derivates that constitute a part of hedgefunds are not included in the note.
- interest rate futures (irF), which are agreements that secure the buyer a particular interest rate on an amount for a future period. - Bond options, which are agreements giving the right/obligation to purchase or sell bonds at a particular price at or before a future date.
equity-related contracts consist mainly of - equity options, which are agreements giving the right/obligation to buy or sell equities at a certain price at or before a future date. - equity swaps, which are agreements to swap equities at a certain price at a future date.
commodity-related contracts consist mainly of - Commodity options, which are agreements giving the right/obligation to buy or sell commodity futures at a certain price at or before a future date.
these transactions are carried out mainly with banks as counterparties. the credit risk from these activities is considered to be marginal. Both interest-related and currency-related transactions are conducted within established position limits.
hedge accounting gjensidige Forsikring utilizes fair value hedging of the net exposure to foreign currency. the hedging efficiency is measured per hedging object. the hedging derivatives are rolled over continously so that the principal value is approximately similar to that of the hedged object.
Currency-related contracts – hedging instruments 2,366.9 91.4 (0.4) Hedging object 2,366.9 per cent 1q 2q 3q 4q
NYkredit forsikriNg a/s Market value as at 1.12.10 inefficiency recognised Nok million principal asset liability in profit or loss
Currency-related contracts – hedging instruments 2,386.5 63.1 4.3 Hedging object 2,229.7 per cent 1q 2q 3q 4q
the net investment in Fair Forsikring is currency hedged through currency-related contracts that are renewed every quarter at a principal equal to the value of the investment in Fair Forsikring in gjensidige’s consolidated financial statements. the credit risk associated with the hedging derivatives is within the limits of gjensidige’s credit policy.
Mortgage loans 11,016.4 8,904.7 other loans 773.3 461.9 provision for impairment losses (121.8) (21.6) impairment to fair value (31.2) (42.1) subordinated loans 8.3 9.6 loans for consumer goods 2,729.6 2,672.2 Bonds classified as loans and receivables 5,163.1 1,364.7 total loans and other receivables 19,537.8 13,349.5
Nok million 2010 2009 receivables from policy holders 3,540.5 3,373.8 receivables related to reinsurance 44.6 62.0 total receivables related to direct operations and reinsurance 3,585.1 3,435.8
Nok million 2010 2009 assets in life insurance with investment options 4,503.6 2,823.4 total assets in life insurance with investment options 4,503.6 2,823.4
Bonds are securities classified as loans and receivables in accordance with ias 39.
receivables related to reinsurance arise when gjensidige issues claims towards reinsurers in accordance with reinsurance contracts. provision for potentially irrecoverable amounts has been made. note 3 table 21 shows the age distribution of this receivables.
Nok million 2010 2009 earned, not received interest income 59.5 16.0 other prepaid expenses and earned, not received income 25.1 40.9 total prepaid expenses and earned, not received income 84.5 56.9 a considerable amount of receivables in relation with asset management as at 31 december 2010 is short-term receivables in relation with sale of securities.
Cash and bank deposits are cash and bank deposits available for day to day business. deposits with financial instistutions consist of short-term currency deposits and other short-term credit deposits.
13 – shares aNd siMilar iNterests Nok million interest held beyond 10 % 31.12.2010 gjeNsidige forsikriNg asa Norwegian financial shares dnB nor asa 17.6 total Norwegian financial shares 17.6 other Norwegian shares statoil asa 33.2 orkla asa 31.1 norsk Hydro asa 23.3 petroleum geo-services asa 19.9 schibsted asa 11.0 Yara international asa 10.1 telenor asa 10.0 odfjell se 6.1 norwegian air shuttle asa 5.8 renewable energy Corporation asa 5.7 Marine Harvest asa 5.1 aker solutions asa 5.0 total other Norwegian shares 166.1 other foreign shares aBB se 17.0 seadrill ltd 15.9 Øvrige utenlandske aksjer 0.1 total other foreign shares 33.0 equity funds storebrand global indeks i 542.9 Capital intl emerging Mkt-i $ 270.3 Valueinvest lux glB-iC 185.6 dnB nor globalspar ii 0.2 total equity funds 998.9 private equity investments Fsn Capital ii lp 129.3 HitecVision private equity V lp 106.4 HitecVision private equity iV lp 85.6 altor Fund ii lp 83.2 northzone V Ks 61.5 norvestor V lp 55.5 norvestor iV lp 49.1 argentum secondary ii 46.6 partners group european Buyout 2005 (a) lp 46.1 energy Ventures ii Ks 44.3 northzone iV Ks 10.8 % 43.5 energy Ventures iii lp 34.7 partners group direct investments 2006 lp 27.5 Verdane Capital Vi Ks 10.0 % 27.3
Nok million interest held beyond 10 % 31.12.2010 other investments total other investments 111.0 other branches shares and similar interests owned by gjensidige Forsikring asa, danish branch 2.1 total shares and similar interests owned by other branches 2.1 total shares aNd siMilar iNterests owNed BY gjeNsidige forsikriNg asa 3,912.2 other group coMpaNies shares and similar interests owned by gjensidige pensjonsforsikring as 41.6 shares and similar interests owned by gjensidige Bank asa 241.8 shares and similar interests owned by nykredit a/s 5.6 shares and similar interests owned by glitne invest as 31.8 shares and similar interests owned by oslo areal as 49.9 total shares aNd siMilar iNterests owNed BY other group coMpaNies 370.7 total shares aNd siMilar iNterests owNed BY the gjeNsidige iNsuraNce group 4,282.9 short-term insurance contracts, gross provision for unearned premiums, gross 9,078.3 7,671.7
Claims incurred, but not reported 97.0 8.1 total reinsurers' share of claims provision, gross 459.4 226.7 total reinsurers' share of insurance-related liabilities, gross 487.0 239.3 short-term insurance contracts, net of reinsurance provision for unearned premiums 9,050.7 7,659.1
Claims reported and claims handling costs 13,402.6 13,391.1 Claims incurred, but not reported 14,477.3 12,239.4 total claims provision, net of reinsurance 27,879.9 25,630.5 total insurance-related provisions 119.0 69.7 total insurance-related liabilities, net of reinsurance 37,049.6 33,359.4 14 – iNsuraNce-related liaBilities aNd reiNsurers ’ share
share Net of reinsurance 1 claims and claims handling costs Claims reported and claims handling costs 13,609.7 (218.6) 13,391.1 13,246.0 (306.3) 12,939.7
Claims incurred, but not reported 12,247.5 (8.1) 12,239.4 12,315.5 (56.5) 12,259.0
Claims reported and claims handling costs 13,765.0 (362.4) 13,402.6 13,609.7 (218.6) 13,391.1
Claims incurred, but not reported 14,574.4 (97.0) 14,477.3 12,247.5 (8.1) 12,239.4 total as at 31 december 28,339.3 (459.4) 27,879.9 25,857.2 (226.7) 25,630.5 provisions for unearned premiums, gross, short-term insurances as at 1 january 7,671.7 (12.6) 7,659.1 6,760.9 (15.6) 6,745.3 additions through acquisitions 855.7 (0.3) 855.4 increase in the period (17,224.3) 427.0 (16,797.3) (15,148.9) 399.1 (14,749.8)
the claims provisions shall cover future claims payments. the claims provisions for gjensidiges arbejdsskadeforsikring a/s are converted to present value (discounted), whereas other provisions are undiscounted.
the reason why the claims provisions for gjensidiges arbejdsskadeforsikring a/s are discounted is that this portfolio consists exclusively of danish workers’ compensation business with very long payment flows and substantial future interest income.
the claims for occupational injuries in denmark are paid either as annuities or as lump-sum indemnities (which are calculated mainly as discounted annuities). therefore, it is most expedient to regard the whole portfolio as annuities.
the discount rate that is used has been determined by Finanstilsynet (the Financial supervisory authority) in denmark pursuant to danish accounting standards (danish gaap ).
the defined benefit plan is a closed arrangement. new employees become members of the defined contribution plan.
some of gjensidige Forsikring’s branches and subsidiaries have similar defined contribution plans as gjensidige Forsikring.
Contribution to the defined contribution plan is recognised as an expense in the financial year in which the contribution is paid.
amount recognised as expense for the defined contribution plan is noK 81.2 million (69.6).
in the calculation for 2009 a combination of a declining salary and turnover trend, and a higher discount rate, yielded a positive effect on equity of about noK 400 million. in 2010 a combination of a reduced discount rate and salary adjustment yielded a negative effect on equity of more than noK 100 million.
the group expects to contribute noK 119.4 million to the defined benefit plan in 2011 (205.8).
perspektiv 131gjensidige annual report 2010 resu lts 15 – pension (Cont.)
recognised during the period (118.0) 442.7 cumulative amount as at 31 december (2,124.0) (2,005.9)
the discount rate is based on ten years government bonds in norway, adjusted for the duration of the pension liabilities. the discount rate is the assumption that has the largest impact on the value of the pension liability. salary increases, pension increases and change in social security base amount are based on historical observations and expected future inflation. due to an average age of above 50 years on employees in the defined benefit plan the salary increase does not contain a career addition, and determined salary increase can therefore be lower than in the market in general. the decreasing salary trend applied for 2010 gives an average salary increase of 3.5 per cent.
sensitivity +1 %-point discount rate discount rate + 1 %-point salary adjustment adjustment 2010 Change in pension benefits accrued during the year (16.2 %) 22.9 % 20.0 % (15.0 %)
2009 Change in pension benefits accrued during the year (17.7 %) 17.0 % 14.4 % (15.0 %)
historical information present value of the defined benefit obligation 2,783.4 2,765.6 3,100.7 2,746.8 2,177.3 the fair value of the plan assets (2,160.2) (2,080.7) (1,858.1) (1,660.5) (1,357.0)
coNtractual peNsioN (afp) the liability to pay own risk according to the former arrangement is accounted for as a business specific defined benefit plan. own risk are still to be paid until the pension liability is fulfilled for the company’s own early retirees choosing the former aFp plan. pension liability for former employees that have chosen to retire before 1 january 2011 is fulfilled as originally planned until everybody has reached 67 years. Hence there will not be a settlement for this group of employees.
new aFp constitutes a lifelong addition to retirement pension from the national insurance and is estimated based on pensionable salary including the year in which he or she is 61 years. aFp can earliest be applied for from the age of 62 years. Yearly aFp will increase by a higher age of withdrawal.
the transition to new aFp arrangement is accounted for as a negative past service cost of noK 96.6 million and is recognised as income in 2010.
perspektiv 133gjensidige annual report 2010 resu lts 16 – provisioNs aNd other liaBilities
Nok million 2010 2009 other provisions 83.8 100.0 total other provisions for liabilities 138.5 172.1 deposits from and liabilities to customers without maturity date, bank 8,902.8 6,417.3 deposits from and liabilities to customers with maturity date, bank 217.3 133.1 deposits from and liabilities to customers 9,120.0 6,550.4
Cash credit 52.5 36.2 liabilities to credit institutions, bank 513.1 513.1 Certificates and other short-term loan instruments, bank 1,049.8 2,369.3 Bonded debt, bank 3,639.5 1,997.5 total interest-bearing liabilities 5,254.9 4,916.1 outstanding accounts Fire Mutuals 190.2 165.2 accounts payable 100.4 68.0 liabilities in relation with properties 26.5 63.6 liabilities in relation with asset management 200.7 liabilities to public authorities 466.6 359.3 other liabilities 450.7 389.0 total other liabilities 1,234.4 1,245.9 liabilities related to direct insurance 295.8 288.8 liabilities related to reinsurance 96.7 57.6 total liabilities related to insurance 392.5 346.4 liabilities in life insurance with investment options 4,503.6 2,823.4 total liabilities in life insurance with investment options 4,503.6 2,823.4 liabilities to public authorities 22.6 20.9 other accrued expenses and deferred income 188.1 185.4 total accrued expenses and deferred income 210.7 206.3 restructuring costs 1 provision as at 1 january 72.1 8.0 new provisions 25.0 72.1 provisions used during the year (42.4) (8.0) provision as at 31 december 54.7 72.1 1 1 in 2010 it has been decided to make a new provision of noK 25.0 million in association with the ongoing efficiency improvement measures of Commercial functions. these processes have been communicated to all business areas involved. during 2010 noK 42.4 million of the provisions of noK 64.4 million from 2009 has been used.
Net temporary differences 3,905.7 4,213.9 loss carried forward (18.4) (15.8) disparagement of deferred tax assets 3.1 137.0 Net taxable temporary differences 3,890.4 4,335.2 deferred tax liabilities/(deferred tax assets) 1,075.1 1,205.6 of this non-assessed deferred tax assets 199.4 deferred ntax liabilities 1,274.6 1,205.6 reconciliation of tax expense Profit before tax 3,254.0 3,166.5 estimated tax of profit before tax expense (28 %) (911.1) (886.6)
Tax effect of tax rate different from 28 % and change in tax rate 28.1 8.0 disparagement and reversal of loss carried forward in subsidiaries 22.5 dividend received 3.4 (0.1) tax exempted income and expenses 53.2 (17.1) associates 136.9 73.7 impairment loss on goodwill and recognition of negative goodwill (31.1) (22.5) non deductible expenses (17.3) (3.8) one-time effect of tax relief decision 333.0 other permanent differences 28.3 Wealth taxes (36.0) Correction previous years 73.1 0.1 total tax expense (303.6) (861.8) effective rate of income tax 9.3 % 27.2 %
deferred tax liabilities as at 31 december 1,075.1 1,205.6 tax recognised in other comprehensive income pensions 33.1 (124.0) deferred tax on hedge accounting 20.2 (71.8) tax payable on hedge accounting 41.6 (58.4) tax payable on dividend expenses 13.2 total tax recognised in other comprehensive income 108.2 (254.1)
18 – eXpeNses operatiNg eXpeNses Nok million 2010 2009 depreciation and value adjustments (note 5 and note 7), excl. depreciation properties 468.8 399.2 employee benefit expenses (note 19) 1,855.8 1,772.0 Fee for customer representatives 7.1 6.9 software costs 375.2 336.2 total auditor’s fee (incl. Vat) 16.7 15.0 Consultants’ and lawyers’ fees 114.0 109.4 Commissions 655.9 416.4 other expenses 591.8 775.6 total operating expenses 4,085.3 3,830.8 eXpeNses related to iNvestMeNts Nok million 2010 2009 depreciation and value adjustments (note 5 and note 7) 6.5 47.7 employee benefit expenses (note 19) 14.4 14.9 software costs 0.3 0.8 auditor’s fee 1.4 1.8 Consultants’ and lawyers’ fees 4.7 2.1 other expenses 115.0 88.5 total expenses related to investments 142.4 155.9 other specificatioNs Nok million 2010 2009 auditor's fee (incl. vat) statutory audit 9.6 11.2 other non-assurance services 8.3 4.3 tax consultant services 0.1 1.4 total auditor's fee (incl. vat) 18.1 16.8 employee benefit expenses Wages and salaries 1,536.3 1,366.9 social security cost 287.3 243.7 pension cost - defined contribution plan (note 15 incl. employers national insurance contribution) 81.2 69.6 pension cost - defined benefit plan (note 15 incl. employers national insurance contribution) (42.0) 101.9 stock purchase offering for employees allocated in 2010 7.5 total employee benefit expenses 1,870.3 1,782.1 17 – taX (Cont.)
decision-making process the Board of directors has established a remuneration committee composed of three members; the chairman of the Board of directors and two board members.
the remuneration committee shall prepare items of business for the Board of directors and have the main responsibility for: • draft proposals for and monitor the compliance with the group’s guidelines for and constraints on remuneration • annually assess and propose the group Ceo’s remuneration • annually draft a proposal for the group Ceo’s personal scorecard • Be an adviser to the group Ceo with regard to the annual assessment of remuneration of the rest of the executive management • draft proposals for principles and a statement on determining salaries and other remuneration for the executive management, for employees and their elected representatives with job tasks of crucial importance to the enterprise’s risk exposure, and for other employees and elected representatives with supervisory tasks
• assess other important personnel-related matters concerning executive management guideliNes for the coMiNg fiNaNcial Year remuneration of the group ceo the group Ceo’s salary and other financial benefits are determined by the Board of directors on the basis of a comprehensive assessment, where gjensidige’s remuneration scheme and the market pay for equivalent positions are taken into consideration.
the basic salary is assessed annually and determined on the basis of the wage trend in the society in general and the financial sector in particular. the bonus is determined by the Board of directors on the basis of agreed objectives and deliveries and can amount to 50 per cent at most of the regular annual salary, included holiday pay. Variable salary is not included in the pensionable income. in the assessment, consideration is given to the enterprise’s results in the last two years, together with an assessment of the group Ceo’s personal contributions to the group’s core values, development and results. Half of the bonus is given in the form of shares in gjensidige Forsikring asa, one-third of which can be sold in each of the next three years. the restricted bonus may be reduced if subsequent results and developments indicate that it was based on incorrect assumptions. the group Ceo is not given any performance-based benefits in addition to the abovementioned bonus, but can also be given benefits in kind, such as a company car and coverage of expenses for electronic communication. the awarding of benefits in kind shall be contingent upon the group Ceo’s function in the group and must also be in keeping with current market practices.
remuneration of the rest of the executive management the group Ceo determines the financial terms and conditions for the rest of the executive management according to limits that have been discussed with the remuneration committee. gjensidige’s remuneration scheme is used as a basis for these calculations.
the basic salary is assessed annually and determined on the basis of the wage trend in the society in general and the financial sector in particular. the bonuses to the executive management can be paid on the basis of specific performance indicators of defined target areas and discretionary assessments specified in the personal scorecards and derived from the group’s strategies and objectives. in this assessment, consideration is given to a combination of the enterprise’s results in the last two years, the business unit in question and an assessment of personal contributions. Half of the bonus is given in the form of shares in gjensidige Forsikring asa, one-third of which can be sold in each of the next three years. the restricted bonus may be reduced if subsequent results and developments indicate that it was based on incorrect assumptions.
Members of the group management have a retirement age of 62. With
only two exceptions, current members of the group management are members of the closed defined-benefit pension scheme. With a full contribution period, these members are entitled to a pension of 70 per cent. the Company will maintain a previous individual pension agreement for one member of the group management.there are no severance pay agreements for managers who resign their position in gjensidige.
the bonus to employees with supervisory tasks will be based on a discretionary assessment of contributions from the unit in question specified in personal scorecards, plus other personal contributions. Half of the bonus is paid in the form of shares in gjensidige Forsikring asa, one-third of which can be sold in each of the next three years. an upper ceiling of 30 per cent of the annual salary, included holiday pay, is set on the payment of bonuses. Variable salary is not included in the pensionable income. the restricted bonus may be reduced if subsequent results and developments indicate that it was based on incorrect assumptions.
remuneration of elected representatives and other employees with remuneration equivalent to executive management the guidelines apply equivalently to elected representatives with job tasks of crucial importance to the enterprise’s risk exposure and elected representatives with other supervisory tasks. after a specific assessment, these guidelines may also come into force for other employees with equivalent job tasks and remuneration.
Binding guidelines for shares, underwriting rights, etc. for the coming financial year of bonuses earned in 2011 by the group Ceo, executive management, employees with job tasks of crucial importance to the enterprise’s risk exposure and employees with supervisory tasks, a percentage equivalent to 50 per cent of the gross bonus earned will be invested in shares in gjensidige Forsikring asa. up to 1/3 of the shares may be sold in each of the three coming years.
explanation of the executive pay policy in the previous financial year the Board of directors confirms that the guidelines for executive pay for 2010 presented in last year’s statement have been complied with.
Nok thousand fixed salary/fee variable salary calculated value of total benefits other than cash rights earned in the financial year according to defined benefit pension plan 9 loans, advance payments, guarantees. outstanding amount
Bjørn asp, executive Vice president 2,026.1 418.9 199.2 595.5 5,663.9 3,353 3.0-3.1 % 20.07.2033 3
9 everyone in the senior group Management has pension plans, benefit based or contribution based. 10 the person concerned has not received any fees during 2010.
Marianne Brinch van Meenen (28.6.10-31.12.10) 1, 10, employee ingvild sollie andersen (1.1.10-28.6.10) 1, employee 11.0 Knut Bertil Øygard (1.1.10-28.6.10) 1, employee 13.0 control comittee 6 sven iver steen (28.6.10-31.12.10) 1, 10, Chairman 1,482 snorre inge roald 1.1.10-28.6.10) 1, deputy Chairman 147.5
8 For employees only remuneration for the current position is stated. 9 everyone in the senior group Management has pension plans, benefit based or contribution based.
Bjørn asp, executive Vice president 2,014.4 10.5 200.9 562.5 5,704.8 2.6-2.7 % 20.07.2033 3 petter Bøhler, executive Vice president 2,019.3 314.6 190.0 962.6 821.6 2.6 % 20.11.2012 3 trond delbekk, executive Vice president 2,241.2 434.7 207.9 813.1 3 tor Magne lønnum, deputy Ceo 2,782.8 538.2 204.9 964.4 3 jørgen inge ringdal, executive Vice president 2,100.5 322.9 156.8 820.9 479.5 2.6 % 04.06.2019 2
Bjørn Walle, executive Vice president 1,895.2 224.8 234.0 610.6 4 erica Blakstad, executive Vice president 1,866.1 294.8 191.2 1,388.4 3 executive Vice president
Hans erik andersson 250.0 4.3 Karen Marie Hjelmeseter 210.8 2.3 Hans ellef Wettre 195.0 1.5 tor Øwre 319.3 13.3 gunnar Mjåtvedt, employee 185.0 gunnhild H. andersen, employee 185.0 Kjetil Kristensen, employee 185.0 Marianne Bø engebretsen, employee 185.0 the Board of directors, deputies 6
Net income and gains/(losses) from investments in associates net income from associates 488.9 263.3 net gain from sale of associates (0.1) total net income and gains/(losses) from investments in associates 488.7 263.3
Investment properties rental income from investment properties, excl. unrealised gain/(loss) 408.6 384.5 net revaluation investment properties (1.0) (212.4) net gain/(loss) from sale of investment properties 7.0 2.1 administration expenses related to investment properties (80.0) (71.8) total net income and gains/(losses) from investment properties 334.6 102.3 total net income and gains/(losses) from property 390.1 108.2
Shares and similar interests dividend income 89.2 5.7 unrealised gain from shares and similar interests 110.6 471.2 net realised gain/(loss) from sale of shares and similar interests 175.1 (106.7) total net income and gains/(losses) from shares and similar interests 374.9 370.2
gjensidige Forsikring is responsible externally for any insurance claim arising from the cooperating Fire Mutuals’ operations.
22 – related partY traNsactioNs overview of related parties gjensidige Forsikring asa is the group’s parent company. as at 31 december 2010 the following companies are regarded related parties.
registered office interest held ultimate parent company gjensigestiftelsen holds 61,74 per cent of the shares in gjensidige Forsikring asa oslo, norway subsidiaries Fair Forsikring a/s Copenhagen, denmark 100.0 % gjensidiges arbejdsskadeforsikring a/s Copenhagen, denmark 100.0 % gjensidige Baltic riga, latvia 100.0 % gjensidige Bank Holding as Førde, norway 100.0 % gjensidige norge as oslo, norway 100.0 % gjensidige pensjon og sparing Holding as oslo, norway 100.0 % glitne invest as oslo, norway 100.0 % lokal Forsikring as oslo, norway 100.0 % nykredit Forsikring a/s Copenhagen, denmark 100.0 % oslo areal as oslo, norway 100.0 % samtrygd eigedom as Førde, norway 100.0 % strandtorget drift as oslo, norway 100.0 % strandtorget eiendom as oslo, norway 100.0 % tennant Holding aB stockholm, sweden 100.0 %
associates Bilskadeinstituttet as oslo, norway 29.5 % sparebank1 sr-Bank 1 stavanger, norway 10.8 % storebrand asa oslo, norway 24.3 % Vervet as tromsø, norway 25.0 %
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 1,053.2 928.7 total interest expense from financial liabilities not recognised at fair value through profit or loss (43.2) (1.5)
Nok million income expense income expense gross premiums written Fair Forsikring a/s including subsidiaries 68.5 gjensidiges arbejdsskadeforsikring a/s 13.1 gjensidige Baltic 8.4 10.8 gjensidige pensjonsforsikring as (owned by gjensidige pensjon og sparing Holding as) 0.2 0.2 nykredit Forsikring a/s 782.2 tennant Försäkringsaktiebolag aB (owned by tennant Holding aB) 8.3 10.7 change in gross provision for unearned premiums Fair Forsikring a/s including subsidiaries 0.1 gjensidige Baltic 0.3 gross paid claims Fair Forsikring a/s 96.7 gjensidige Baltic 0.7 nykredit Forsikring a/s 374.5 tennant Forsikring nuF (branch of tennant Försäkringsaktiebolag aB) 24.3 change in gross provision for claims Fair Forsikring a/s 76.2 nykredit Forsikring a/s 294.6 tennant Forsikring nuF (filial av tennant Försäkringsaktiebolag aB) 1.6 22.3 commissions gjensidige Bank asa (owned by gjensidige Bank Holding as) 0.9 2.5 administration expenses Fair Forsikring a/s including subsidiaries 1.2 gjensidige Bank asa (owned by gjensidige Bank Holding as) 21.7 9.3 gjensidige investeringsrådgivning asa (owned by gjensidige pensjon og sparing Holding as) 8.3 22.5 gjensidige pensjon og sparing Holding as 10.6 11.8 gjensidige pensjonsforsikring as (owned by gjensidige pensjon og sparing Holding as) 39.5 44.4 glitne invest as 0.1 0.1 Hjelp24 as (owned by glitne invest as) 4.8 5.4 KommuneForsikring nuF (branch of KommuneForsikring as, owned by Fair Forsikring a/s) 23.1 nykredit Forsikring a/s 107.5 tennant Forsikring nuF (branch of tennant Försäkringsaktiebolag aB) 5.0 4.9 tennant Holding aB 6.1 1.1 interest expenses Fair Forsikring a/s 17.7 22 – related partY transaCtions (Cont.)
1 in addition gjensidige owns bonds in spareBank1 sr-Bank amounting to noK 5.0 million.
percentage of votes held is the same as percentage of interest held.
perspektiv 143gjensidige annual report 2010 resu lts 22 – related partY transaCtions (Cont.)
group coNtriButioNs aNd divideNds the table below shows a summary of contributions/dividends from/to subsidiaries.
Nok million received given received given group contributions gjensidige Baltic 21.1 gjensidige Bank asa (owned by gjensidige Bank Holding as) 74.0 gjensidige pensjonsforsikring as (owned by gjensidige pensjon og sparing Holding as) 26.8 75.2 gjensidige investeringsrådgivning asa (owned by gjensidige pensjon og sparing Holding as) 14.6 44.9 glitne invest as 22.3 18.1 gjensidige norge as 0.1 oslo areal as 101.1 73.2 strandtorget eiendom as 0.1 tennant Försäkringsaktiebolag aB 1.0 41.6 dividends Fair Forsikring a/s including subsidiaries 176.3 oslo areal as 104.9 gjensidige norge 6.0 gjensidige nor Forsikring eiendom as (liquidation dividend) 0.2 spareBank 1 sr-Bank 36.2 total group contributions and dividends 292.7 41.4 309.5 194.2 iNtercoMpaNY
Nok million receivables liabilities receivables liabilities within the group Fair Forsikring a/s including subsidiaries 3.5 12.7 gjensidiges arbejdsskadeforsikring a/s 13.0 gjensidige Baltic 3.8 gjensidige norge as 0.1 gjensidige Bank asa (owned by gjensidige Bank Holding as) 0.8 5.3 74.0 gjensidige pensjon og sparing Holding as 1.2 (0.2) gjensidige pensjonsforsikring as (owned by gjensidige pensjon og sparing Holding as) 22.8 10.0 75.2 gjensidige investeringsrådgivning asa (owned by gjensidige pensjon og sparing Holding as) 14.8 9.5 44.9 gjensidigestiftelsen 34.4 glitne invest as 22.2 17.9 Hjelp24 as (owned by glitne invest as) 1.4 1.6 KommuneForsikring nuF (branch of KommuneForsikring as, owned by Fair Forsikring a/s) 7.4 nykredit Forsikring a/s 26.2 oslo areal as 80.0 73.2 tennant Holding aB 11.2 38.7 tennant Försäkringsaktiebolag aB (owned by tennant Holding aB) 13.0 41.2 2.8 tennant assurance aB (owned by tennant Försäkringsaktiebolag aB) 0.9 tennant Forsikring nuF (branch of tennant Försäkringsaktiebolag aB) 1.4 1.6 15.9 samtrygd eigedom as 1.7 total intercompany balances within the group 190.7 57.0 222.7 213.7 cooperating companies 1 and other related parties transferred to gjensidige Forsikring asa’s branch in denmark. the value of the transaction amounts to noK 1.6 billion.
Nok million 2010 2009 equity 23,137.8 21,968.2 administration provision 1,114.1 1,054.1 security provision (2,398.2) (2,467.7)
risk weighted calculation base (B) 85,464.3 81,023.4 Capital ratio (a/B) 16.1 % 18.9 %
24 – capital ratio 23 – eveNts after the BalaNce sheet date no significant events have occurred after the end of 2010.
state street Bank and trust Co. nominee 8,022,600 1.60 % goldman sachs & Co - equity nominee 7,513,210 1.50 % skagen Kon-tiki 6,947,000 1.39 % deutsche Bank ag london nominee 6,000,000 1.20 % state street Bank and trust Co. nominee 5,675,591 1.14 % Morgan stanley & Co internat. plC nominee 5,045,750 1.01 %
eligible employees were permanent employees as at 13 december 2010. there were no requirements with regards to position percentage, whether or not the employees had been at work, reported sick or on leaves of absence etc. the offer was also given to employees who received employment clarification money. there are no other terms attached to the stock purchase offering.
For every tenth share owned continuously until 12 december 2011 the employees will receive 1.5 bonus shares. if the shares are owned continuously until 10 december 2012 a further 1.5 bonus shares will be awarded for every tenth share.
as at 31 december 2010 the participants have invested 55.2 million in the stock purchase offering.
on 8 March 2010, gjensidige signed a contract with the nykredit group (nykredit) relating to the purchase of 100 per cent of the shares in the danish insurance company, nykredit Forsikring a/s (nykredit Forsikring), for dKK 2.5 billion. the voting share is equal to the ownership share.
the acquisition is a result of the group’s intention to increase its market share in denmark. as a result of the acquisition, gjensidige’s market share in general insurance in denmark will increase from about three to about six per cent. the acquired business has 230,000 customers and gross earned premiums in excess of dKK 1.4 billion, and in 2009 it reported a profit after tax of dKK 245 million. through nykredit Forsikring, gjensidige has added 320 employees to its staff. private insurance is of greatest size in nykredit Forsikring: about two-thirds of the total premium volume.
Denne siDen trykkes ikke – er siste siDe på Del 1 av regnskapet
inCOMe stateMent gJensiDige FOrsikring asa nOk million notes 1.1.-31.12.2010 1.1.-31.12.2009 premiums
Allocated return on investments transferred from the non-technical accounts 759.7 729.6 general insurance claims gross paid claims 4 (10,796.8) (9,070.4) Paid claims, reinsurers' share 246.3 130.7 Change in gross provision for claims 4 (1,796.6) (616.6) Change in provision for claims, reinsurers' share 201.1 (101.8) total claims incurred, net of reinsurance (12,146.1) (9,658.1)
Premium discounts and other profit agreements (18.6) 3.0 insurance-related operating expenses insurance-related administration expenses incl. commissions for received reinsurance and sales expenses 4, 18 (2,897.7) (2,425.5)
Change in security provisions etc. Change in provision for insufficient premium level (0.1) Change in security provision 69.3 (5.5)
perspeCtive 149gjensidige AnnUAL RePORT 2010 resu lts nOk million notes 1.1.-31.12.2010 1.1.-31.12.2009 net income from investments income from investments in subsidiaries and associates 292.7 309.5 impairment losses investments in subsidiaries and associates (152.3) (3.7) interest income and dividend etc. from financial assets 1,339.2 1,260.5 net operating income from property 67.5 70.3 Changes in fair value on investments 362.7 808.2 Realised gain and loss on investments 421.5 564.3 Administration expenses related to investments, including interest expenses 20 (169.1) (185.6) total net income from investments 2,162.2 2,823.5
Allocated return on investments transferred to the technical account (759.7) (729.6)
Components of other comprehensive income Actuarial gains and losses on defined benefit plans - employee benefits (122.9) 434.6 exchange differences from foreign operations 4.5 0.4 Tax on components of other comprehensive income 34.6 (121.7)
stateMent OF FinanCial pOsitiOn nOk million notes 31.12.2010 31.12.2009 assets intangible assets
Other assets Plant and equipment 7 289.8 243.9 Cash and cash equivalents 9, 12, 26 775.5 1,143.9 deferred tax assets 17 26.4 16.4 total other assets 1,091.7 1,404.1 prepaid expenses and earned, not received income Other prepaid expenses and earned, not received income 9 11.5 7.8 total prepaid expenses and earned, not received income 11.5 7.8 tOtal assets 56,972.4 52,135.1
perspeCtive 151gjensidige AnnUAL RePORT 2010 resu lts restated 1 nOk million notes 31.12.2010 31.12.2009 eQuity anD liabilities share capital 1,000.0 1,000.0 Own shares (0.1) Premium reserve 1,430.0 1,430.0 Other paid in equity 6.7 total paid in equity 2,436.6 2,430.0 retained equity Funds etc.
Class i capital Class ii capital equity equali- total total certificate sation Other class i retained Other class ii total nOk million capital fund equity capital earnings equity capital equity
Other exchange actuarial Other share Own premium paid-in differ- gains/losses earned total nOk million capital shares reserve equity ences on pension equity equity
Reclassification from equity certificate capital to share capital, premium reserve and other earned equity 1 1 As at 30 september 2009 the equity certificate capital was reduced to nOK 1,000.0 million and equally transferred to premium reserve and equalisation fund. in connection with conversion from limited liability mutual company (BA) to public limited liability company (AsA) the equity certificate capital is converted to share capital.
Components of other comprehensive income exchange differences 0.4 0.4 Actuarial gains and losses on pension 434.6 434.6 Tax on other comprehensive income (121.7) (121.7) total components of other comprehensive income 0.4 434.6 (121.7) 313.3
Accrued dividend (2,350.0) (2,350.0) increase in natural perils fund throuch purchase of portfolio 16.0 16.0 equity-settled share-based payment transactions 6.7 6.7 Tax on items recognised directly in equity 13.2 13.2
Cash flow from investing activities Payments on purchase of subsidiaries and associates (2,670.1) (866.4) Payments on purchase of portfolio (131.9) (135.0) net receipts/payments on owner-occupied property 121.1 net receipts/payments on sale/purchase of plant and equipment (147.9) (95.6) net cash flow from investing activities (2,828.9) (1,097.0)
aCCOunting pOliCies repOrting entity gjensidige Forsikring AsA is a publicly listed company domiciled in norway. The company’s head office is located at drammensveien 288, Oslo, norway. The activities of the company consist of general insurance. The company does business in norway, in sweden from 1 October 2009 and in denmark from 1 january 2010.
basis OF preparatiOn statement of compliance The financial statements have been prepared in accordance with the norwegian Accounting Act and norwegian Financial Reporting Regulations for insurance Companies (FOR 1998-12-16 nr 1241). The norwegian Financial Reporting Regulations for insurance Companies is to a great extent based on iFRss endorsed by eU, and interpretations.
Functional and presentation currency The financial statements are presented in nOK, which is gjensidige Forsikring’s functional currency. All financial information is presented in nOK, unless otherwise stated.
segMent repOrting According to iFRs 8, the operating segments are determined based on the group’s internal organisational management structure and the internal financial reporting structure to the chief operating decision maker. in gjensidige insurance group the senior group Management is responsible for evaluating and following up the performance of the segments and is considered the chief operating decision maker within the meaning of iFRs 8. gjensidige reports on two operating segments, which are independently managed by managers responsible for the respective segments depending on the products and services offered, distribution and settlement channels, brands and customer profiles. identification of the segments is based on the existence of segment managers who report directly to the senior group Management/CeO and who are responsible for the performance of the segment under their charge. Based on this gjensidige reports the following operating segments • general insurance Private norway • general insurance Commercial norway
allocated return on investments The allocated return on investments is calculated based on the average of the technical provisions throughout the year. The average yield on government bonds with three years remaining until maturity is used for the calculation. The Financial supervisory Authority of norway has calculated the average technical yield for 2010 and 2009 to be 2.4 per cent and 4.7 per cent, respectively. The allocated return on investments is transferred from the non-technical account to the technical account.
Claims incurred in general insurance Claims incurred consist of gross paid claims less reinsurers’ share, in addition to a change in gross provision for claims, also less reinsurers’ share. direct and indirect claims processing costs are included in claims incurred. The claims incurred contain run-off gains/losses based on previous years’ claims provisions.
At the reporting date monetary items are retranslated to the functional currency at exchange rates at that date. non-monetary items denominated in foreign currencies that are measured at historical cost, are retranslated using the exchange rates at the date of the transaction. non-monetary items denominated in foreign currencies that are measured at fair value, are retranslated to the functional currency at the exchange rates at the date when the fair value was determined.
Foreign branch Foreign branches that have other functional currencies are translated to nOK by translating the income statement at average exchange rates for the period of activity, and by translating the balance sheet at exchange rates at the reporting date. exchange differences are recognised as a separate component of equity. On disposal of the foreign operation, the cumulative amount of the exchange difference recognised in other comprehensive income relating to that foreign branch is recognised in profit of loss, when the gain or loss on disposal is recognised.
tangible assets Owner-occupied property, plant and equipment recognition and measurement items of owner-occupied property, plant and equipment are measured at cost less accumulated depreciation and accumulated impairment losses. Cost includes expenditures that are directly attributable to the acquisition of the item. in cases where equipment or significant items have different useful lives, they are accounted for as separate components.
subsequent costs subsequent costs are recognised in the asset’s carrying amount when it is probable that the future economic benefits associated with the asset will flow to the group, and the cost of the asset can be measured reliably. if the subsequent cost is a replacement cost for part of an item of owner-occupied property, plant and equipment, the cost is capitalized and the carrying amount of what has been replaced is derecognised. Repairs and maintenances are recognised in profit or loss in the period in which they are incurred.
gjensidige may engage in refurbishment, major upgrades or new property projects. The costs for these are recognised using the same principles as for an acquired asset.
investment properties investment properties are properties held either to earn rental income or for capital appreciation, or for both. These properties are not used in production, deliveries of goods and services, or for administrative purposes.
intangible assets goodwill goodwill acquired in acquisition of portfolios represents cost price of the acquisition in excess of the company’s share of the net fair value of identifiable assets, liabilities and contingent liabilities in the acquired portfolio at the time of acquisition. goodwill is recognised initially at cost and subsequently measured at cost less accumulated impairment losses.
goodwill acquired in acquisition of portfolios is not amortised, but is tested for impairment annually or more frequently, when indications of impairment losses exist.
amortisation intangible assets, other than goodwill is amortised on a straight-line basis over the estimated useful life, from the date that they are available for use. The estimated useful lives for the current and comparative periods are as follows • customer relationships 10 years • trademarks 10 years • internally developed software 5–8 years • other intangible assets 5–10 years
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 the group and might trigger testing for an impairment loss are as follows • significant reduction in earnings in relation to historical or expected future earnings • significant changes in the group’s use of assets or overall strategy for the business • significant negative trends for the industry or economy
Recoverable amount is the greater of the fair value less costs to sell and value in use. in assessing value in use, estimated future cash flows are discounted to present value using a pre-tax discount rate that reflects the time value of money and the risks specific to the asset. For the purpose of impairment testing, assets are grouped together into the smallest group of assets generating cash inflows that are largely independent of cash inflows from other assets or groups of assets (cash-generating unit). goodwill is allocated to the cash-generating unit expecting to benefit from the acquisition.
impairment losses are recognised in profit or loss if the carrying amount of an asset or cash-generating unit exceeds its estimated recoverable amount. impairment losses recognised in respect of cash-generating units are allocated first to the carrying amount of goodwill and then proportionally to the carrying amount of each asset in the cash-generating unit. Previously recognised impairment losses are reversed if the prerequisites for impairment losses are no longer present. impairment losses will only be reversed if the recoverable amount does not exceed the amount that would have been the carrying amount at the time of the reversal if the impairment loss had not been recognised.
teChniCal prOvisiOns provision for unearned premiums, gross The provision for unearned premiums, gross reflects the accrual of premiums written. The provision corresponds to the unearned portions of the premiums written. no deduction is made for any expenses before the premiums written are accrued.
perspeCtive 157gjensidige AnnUAL RePORT 2010 resu lts liabilities at the reporting date, as well as related cash flows, are used to perform the test. This includes both claims incurred before the reporting date (claims provisions) and claims that will occur from the reporting date until the next annual renewal (premium provisions). Any negative discrepancy between the original provision and the liability adequacy test will entail provision for insufficient premium level.
FinanCial instruMents Financial instruments are classified in one of the following categories • at fair value through profit or loss • available for sale • investments held to maturity • loans and receivables • financial derivatives • financial liabilities at amortised cost recognition and derecognition Financial assets and liabilities are recognised when gjensidige becomes a party to the instrument’s contractual terms. initial recognition is at fair value. For instruments that are not derivatives or measured at fair value through profit or loss, transaction expenses that are directly attributable to the acquisition or issuance of the financial asset or the financial liability, are included. normally the initial recognition value will be equal to the transaction price. subsequent to initial recognition the instruments are measured as described below.
The category at fair value through profit or loss comprises the classes shares and similar interests and bonds and other fixed income assets.
available for sale Financial assets available for sale are non-derivative financial assets that have been recognised initially in this category, or are not recognised initially in any other category. subsequent to initial recognition financial assets in this category are measured at fair value, and gain or loss is recognised in other comprehensive income except for impairment losses, which are recognised in profit or loss.
loans and receivables Loans and receivables are non-derivative financial assets with payments that are fixed or determinable. Loans and receivables are measured at amortised cost using the effective interest method, less any impairment losses.
The group uses financial derivatives, amongst other to hedge foreign currency exchanges arising from the ownership of foreign subsidiaries with other functional currency.
The category financial derivatives comprises the classes financial derivatives at fair value through profit or loss.
Definition of fair value Financial assets and liabilities measured at fair value are carried at the amount each asset/liability can be settled to in a transaction carried out at arm’s length distance.
Definition of amortised cost subsequent to initial recognition, investments held to maturity, loans and receivables and financial liabilities that are not measured at fair value are measured at amortised cost using the effective interest method. When calculating effective interest rate, future cash flows are estimated, and all contractual terms of the financial instrument are taken into consideration. Fees paid or received between the parties in the contract and transaction costs that are directly attributable to the transaction, are included as an integral component of determining the effective interest rate.
impairment losses are reversed if the reversal can be related objectively to an event occurring after the impairment loss was recognised.
prOvisiOns Provisions are recognised when the company has a legal or constructive obligation as a result of a past event, it is probable that this will entail the payment or transfer of other assets to settle the obligation, and a reliable estimate can be made of the amount of the obligation.
information about contingent assets are disclosed where an inflow of economic benefits is probable. information about a contingent liability is disclosed unless the possibility of an outflow of resources is remote.
restructuring Provision for restructuring are recognised when the company has ap¬proved a detailed and formal restructuring plan which has commenced or has been announced. Provisions are not made for future expenses attributed to the operations.
The defined contribution plan is a post-employment benefit plan under which gjensidige pays fixed contributions into a separate entity and there is no legal or constructive obligation to pay further amounts. Obligatory contributions are recognised as employee benefit expenses in profit or loss when they are due.
The defined benefit plan is a post-employment benefit plan that entitles employees to contractual future pension benefits. Pension liabilities are determined on the basis of linear earning and using assumptions of length of service, discount rate, future return on plan assets, future growth in wages, pensions and social security benefits from the national insurance, and estimates for mortality and staff turnover, etc.
taX income tax expense comprises the total of current tax and deferred tax.
Current tax Current tax is tax payable on the taxable profit for the year, based on tax rates enacted or substantively enacted at the reporting date, and any adjustment to tax payable in respect of previous years.
Deferred tax deferred tax is determined based on differences between the carrying amount and the amounts used for taxation purposes, of assets and liabilities at the reporting date. deferred tax liabilities are generally recognised for all taxable temporary differences. deferred tax assets are generally recognised for all deductible temporary differences to the extent that it is probable that they can be offset by future taxable income. if deferred tax arises in connection with the initial recognition of a liability or asset acquired in a transaction that is not a business combination, and it does not affect the financial or taxable profit or loss at the time of the transaction, then it will not be recognised.
relateD party transaCtiOns intra-group balances and transactions are eliminated in preparing the consolidated financial statements.
The provider of intra-group services, that are not considered core activities, will as a main rule, allocate its incurred net costs (all costs included) based on a Cost Contribution Arrangement as described in OeCd guidelines chapter 8 and on the basis of paragraph 13-1 in the norwegian Tax Act.
transaCtiOns With aFFiliateD COMpanies The Fire Mutuals operates as agents on behalf of gjensidige Forsikring. For these services commission is paid. For handling the cooperation and to reinsure the Fire Mutuals’ fire insurance gjensidige receives cost refunds. due to the fire policy reinsurance plan, gjensidige Forsikring also manages assets on behalf of the Fire Mutuals. The Fire Mutuals are credited interest for these assets.
in thousand equity certificates/shares 2010 Outstanding 1 january 100,000 share split 400,000 Outstanding 31 december 500,000 in connection with conversion from limited liability mutual (BA) to public limited liability company (AsA) on 28 june 2010 the equity certificate capital is converted to share capital.
preMiuM reserve Premium reserve consists of paid in capital and can be used to cover losses.
eXChange DiFFerenCes exchange differences consist of exchange differences that occur when converting foreign subsidiaries, and when converting liabilities that hedge the company’s net investment in foreign subsidiaries.
aCtuarial gains/lOsses pensiOn Actuarial gains/losses pension consists of gains/losses occurring by changing the actuarial assumptions used when calculating pension liability.
Other earneD eQuity Other earned equity consists of this year’s and previous year’s retained earnings that are not disposed to other purposes.
The preparation of the financial statements under iFRs and the application of the adopted accounting policies require that management make assessments, prepare estimates and apply assumptions that affect the carrying amounts of assets and liabilities, income and expenses. The estimates and the associated assumptions are based on experience and other factors that are assessed as being justifiable based on the underlying conditions. Actual figures may deviate from these estimates. The estimates and associated prerequisites are reviewed regularly. Changes in accounting estimates are recognised in the period the estimates are revised if the change only affects this period, or both in the period the estimates change and in future periods if the changes affect both the existing and future periods.
plant anD eQuipMent, OWner-OCCupieD prOperty anD intangible assets Plant and equipment, owner-occupied property and intangible assets are assessed annually to ensure that the depreciation method and the depreciation period used are in accordance with useful life. The same applies to residual value. impairment losses will be recognised if impairment exists. An ongoing assessment of these assets is made in the same manner as investment properties.
goodwill is tested for impairment annually or more often if there are indications that the amounts may be subject to impairment. The testing for impairment entails determining recoverable amount for the cashgenerating unit. normally recoverable amount will be determined by means of discounted cash flows based on business plans. The business plans are based on prior experience and the expected market development. see note 5 and 7.
insurance products are divided in general into two main categories; lines with short or long settlement periods. The settlement period is defined as the length of time that passes after a loss or injury occurs (date of loss) until the claim is reported and then paid and settled. short-tail lines are e.g. property insurance, while long-tail lines primarily involve accident and health insurances. The uncertainty in short-tail lines of business is linked primarily to the size of the loss.
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 14.
3 – ManageMent OF insuranCe anD FinanCial risk For information about insurance and financial risk please refer to note 3 in the notes to the consolidated financial statements, that covers both gjensidige Forsikring AsA and the gjensidige insurance group.
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 insurance Companies.
Provision for unearned premiums, gross 1,027.1 2,086.9 901.8 1,185.1 92.4 235.2 196.3 71.8 3,709.7 security provision 1,103.3 FSAN 1 minimum requirement 1,103.3
perspeCtive 163gjensidige AnnUAL RePORT 2010 resu lts 4 – preMiuMs anD ClaiMs etC. in general insuranCe (COnt).
Marine anD energy insuranCes inWarD reinsuranCe Other nOk million blue water hull Coastal hull energy total marine and energy insurances pro portional
Provision for unearned premiums, gross 24.8 24.8 1.0 1.0 117.5 6,406.7 prOvisiOn FOr unearneD preMiuMs ClaiMs prOvisiOn nOk million gross net of reinsurance gross net of reinsurance pool arrangements norwegian natural perils fund 117.5 117.5 58.6 58.6 norwegian Occupational injury insurers' Bureau 49.4 49.4 norwegian Motor insurers' Bureau 46.6 46.6 norwegian Pharmapool 3.1 3.1 1 The Financial supervisory Authority of norway.
Cost As at 1 january 2009 245.1 881.2 1,126.3 Additions 155.3 16.2 7.5 179.0 Additions from internal development 20.7 20.7 disposals (0.8) (0.8)
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 Boards of directors of the respective subsidiaries, as well as by the management in gjensidige Forsikring.
level of combined ratio (Cr) The expected CR level is considered to be somewhat higher in the growth period than at the point in time when the terminal value is calculated. see table.
Long-term real BnP growth 2-3 % Long-term expected inflation 2-3 % total nominal growth expectation 4-6 %
in gjensidige Forsikring AsA investments in subsidiaries are accounted for at cost. exchange differences can thus cause changes in value that causes impairment at company level. The table to the right shows the effect on the company’s financial statements.
Tennant Holding Possible need for impairment, app. nOK 40 million gjensidige Baltic no need for impairment gjensidiges Arbejdsskadeforsikring
Carrying amount storebrand AsA Oslo 24.3 % 4,604.4 2,567.4 4,604.4 2,567.4 spareBank 1 sR-Bank stavanger 10.3 % 866.4 866.4 866.4 866.4 Bilskadeinstituttet As Oslo 29.5 % 0.4 0.4 0.3 0.3 Forsikring og Finans sandnes As (sold during 2010) 0.0 0.0 Forsikringskont. johansen og Torkelsen As (sold during 2010) 0.1 0.1 Fossmark Assuranse As sold (sold during 2010) 0.0 0.0 Vervet As including subordinated loan 1 Tromsø 25.0 % 30.8 1.0 30.3 0.5 total shares in associates 5,502.0 3,435.2 5,501.6 3,434.8 1 subordinated loan of nOK 24.0 million is included in cost.
assOCiates - aDDitiOnal inFOrMatiOn nOk million assets equity liabilities revenues 2 profit/(loss)
The investment in spareBank1 sR-Bank is classified as investments in an associate and is carried at cost. gjensidige Forsikring AsA owns 16.3 per cent of the primary certificate capital and 10.3 per cent of the equity in the bank, and has not, based solely on the interest held alone, significant influence. However, the company is represented in both the board of directors of spareBank1 sR-Bank and the nomination committee. This gives gjensidige Forsikring AsA significant influence and thus the opportunity to participate in the financial and operational decissions of the bank.
gjensidige also owns bonds issued by spareBank1 sR-Bank. The carrying amount of these bonds is nOK 5.0 million.
Cost As at 1 january 2009 243.0 499.9 742.9 Additions 1.8 98.7 100.5 disposals (0.9) (3.9) (4.8) exchange differences (0.2) (0.2) as at 31 December 2009 243.9 594.6 838.5 Uncompleted projects 19.3 19.3 as at 31 December 2009, including uncompleted projects 243.9 613.9 857.8
Carrying amount As at 1 january 2010 182.9 243.9 426.7 as at 31 December 2010 112.0 289.8 401.8 depreciation method straight-line straight-line Useful life (years) 10-50 3-5 1 Plant and equipment consist mainly of machinery, vehicles, fixtures and furniture. 2 At the end of the first quarter an impairment loss of nOK 2.2 million on an owner-occupied property was recognised. The new value of the property was determined by using the group’s internal valuation model, cf. note 8 investment properties. The valuation was not based on observeable market prices or recent transactions. The carrying amount of the property before the impairment was nOK 16.8 million.
There are no restrictions on owner-occupied property, plant and equipment. Owner-occupied property, plant and equipment are not pledged as security for liabilities.
The market value of owner-occupied property exceeds the carrying amount as shown below. For plant and equipment there is no material difference between the carrying amount and the market value. some equipment, such as furniture, is fully depreciated, but still in use.
gjensidige Forsikring carries investment properties at fair value. investment properties consist of commercial properties that are rented to tenants outside the gjensidige insurance group, or are aquired in accordance with the company’s capital management strategy. Properties used by group companies are classified as owner-occupied property, see note 7. in properties that are both rented to tenants outside the group and that are used by the group’s own business, the parts held for rent that can be sectioned are classified as investment property.
gjensidige Forsikring owns no investment properties outside of norway. The average rental period is 4.79 years, and the portfolio of investment properties includes offices and shopping centres.
in 2009 and 2010 gjensidige Forsikring’s own valuation model has been used both in the quarterly financial statements and at year-end. in addition, two independent external advisors were brought in to value selected parts of the portfolio at year end, thus ensuring that more than 90 per cent of the carrying amount has been benchmarked against one or two externally assessed values.
For 2010 the following parameters have been used in the valuation of investment property, which yield the following average value per square meter.
The adoption of the above parameters implies a significant level of judge ment. emphasis is put on this judgement being consistent with that observed in the market and that the judgement is applied consistently from period to period.
gjensidige Forsikring has no investment properties for leasing or classified as available for sale.
There are no loans with collateral in investment properties in 2009 or 2010.
Financial assets at fair value through profit or loss, initial recognition
Financial assets held to maturity Bonds held to maturity 13,600.6 14,022.5 14,856.5 15,341.3
Loans and receivables Bonds and other fixed income securities classified as loans and receivables 11 3,903.8 3,926.0 1,364.7 1,379.1
Financial liabilities Financial derivatives Financial derivatives at fair value through profit or loss 10 105.0 105.0 17.7 17.7
Financial liabilities Financial derivatives Financial derivatives at fair value through profit or loss 105.0 105.0 9 – FinanCial assets anD liabilities
The following financial assets/liabilities are classified as level one in the valuation hierarchy • Listed shares • norwegian government/government backed bonds and other fixed income securities • exchange traded funds valuation based on observable market data When quoted prices in active markets are not available, the fair value of financial assets/ liabilities is preferably estimated on the basis of valuation techniques based on observable market data.
A financial asset/liability is considered valued based on non-observable market data if fair value is estimated without being based on quoted prices in active markets or observable market data. Financial assets/ liabilities valued based on non-observable market data are classified as level three in the valuation hierarchy.
The following financial assets are classified as level three in the valuation hierarchy • Unlisted private equity-investments. The private equity investments that are not organized as funds are valued using cash flow analysis, price multiples and recent market transactions. The private equity investments that are organized as funds are valued based on nAV values (net Asset Value) as reported by the fund administrators in accordance with iPeV guidelines (international Private equity and Venture capital Valuation) set out by the equity Venture Capital Association. The nAV values are estimated by the fund administrators by using the valuation techniques best suited to estimate fair value, given the actual circumstances of each underlying investment. Because of late reporting from the funds, the nAV values from the previous quarterly reporting are used in estimating fair value. These values are then adjusted for known events since the last reporting date. The typical known event is the increase/decrease in value on listed shares owned by a fund.
Financial assets Financial derivatives Financial derivatives at fair value through profit or loss 166.9 166.9
Bonds and other fixed income securities reCOnCiliatiOn FinanCial assets valueD baseD On nOn-Observable Market Data (level 3) 2009 nOk million sensitivity shares and similar interests decrease in value 10 % 113.8
Bonds and other fixed income securities decrease in value 10 % 0.9 total 114.7 nOk million as at 1.1.2010 net realised/ unrealised gains recognised in profit or loss purchases sales settlements
transfers into/out of level 3 as at amount of net realised/unrealised gains recognised in profit or loss that are attributable to instruments held as at 31.12.2010
Bonds and other fixed income securities decrease in value 10 % 0.9 total 169.9 9 – FinanCial assets anD liabilities (COnt.)
Market value nOk million principal principal average 2010 asset liability principal principal average 2009 asset liability interest-related contracts interest rate futures 518.9 1,022.2 1,885.4 1,204.4 interest rate swaps 261.6 850.3 (2.6) 350.0 402.9 3.7
Currency-related contracts equity-related contracts 10 – FinanCial Derivatives derivatives are used in accordance with «Regulations on general insurance Companies’ Asset Management» in order to improve the efficiency of capital management and risk management.
in each asset class the individual asset managers use appropriate derivatives, and most of the financial derivatives mentioned below are used regularly.The use of derivatives is restricted by the agreement with the individual manager, and requirements are made for approved product lists and sufficient expertise and systems on the part of the manager. short positions (undertakings to sell securities that the company does not already own, or to purchase securities without having sufficient liquid funds to complete the transaction) are normally not permitted. The manager in each asset class may never expose the company to a greater amount than specified in the management mandate.
- interest rate futures (iRF), which are agreements that secure the buyer a particular interest rate on an amount for a future period. - Bond options, which are agreements giving the right/obligation to purchase or sell bonds at a particular price at or before a future date.
Currency-related contracts consist mainly of - Currency futures, which are agreements to purchase or sell a particular amount of currency at a specified exchange rate at a future date.
Mortgage loans 2.4 2.5 Bonds classified as loans and receivables 3,903.8 1,364.7 Other loans 299.0 373.4 impairment to fair value (31.2) (42.1) subordinated loans 0.6 1.9 Provision for impairment losses (6.2) (7.5)
Other loans are primarily interest-free loans to agricultural customers. The loans are in their entirety intended for installment of fire detection systems with these customers. There is no mortgage attached to the loans, and the terms varies from two years to over 20 years. gjensidige Forsikring has not offered this type of loan to its customers in 2010 or 2009. The default rate is 1.5 per cent at year end, compared to 0.76 per cent in 2009. The discount rate used is 4.66 per cent.
Recognition of impairment losses is done on each loan individually on the basis of objective evidence. impairment assessments are not done on groups of loans.
Weighted average rate for interest earned on cash and bank deposits is approximately 3.1 per cent (2009: app. 3.3 per cent).
Other norwegian shares statoil AsA 33.2 Orkla AsA 31.1 norsk Hydro AsA 23.3 Petroleum geo-services AsA 19.9 schibsted AsA 11.0 Yara international AsA 10.1 Telenor AsA 10.0 Odfjell se 6.1 norwegian Air shuttle AsA 5.8 Renewable energy Corporation AsA 5.7 Marine Harvest AsA 5.1 Aker solutions AsA 5.0 total other norwegian shares 166.1
Other foreign shares ABB se 17.0 seadrill Ltd 15.9 Other foreign shares 0.1 total other foreign shares 33.0 equity funds storebrand global indeks i 542.9 Capital intl emerging Mkt-i $ 270.3 Valueinvest Lux gLB-iC 185.6 dnB nOR globalspar ii 0.2 total equity funds 998.9 private equity investments Fsn Capital ii LP 129.3 HitecVision Private equity V LP 106.4 HitecVision Private equity iV LP 85.6 Altor Fund ii LP 83.2 northzone V Ks 61.5 norvestor V LP 55.5 norvestor iV LP 49.1 Argentum secondary ii 46.6 Partners group european Buyout 2005 (A) LP 46.1 energy Ventures ii Ks 44.3 northzone iV Ks 10,8 % 43.5 energy Ventures iii LP 34.7 Partners group direct investments 2006 LP 27.5 Verdane Capital Vi Ks 10,0 % 27.3 LgT Crown european Private equity PLC 22.7 energy Ventures ii B is 17,4 % 22.3 Viking Venture ii As 21.9 Viking Venture iii dis 20.4 neoMed innovation iV LP 19.6 BaltCap PeF LP 17.5 Teknoinvest Viii Ks 13,9 % 16.5 Convexa Capital Viii As - klasse B 15.9 HitecVision Asset solution Ks 12.1 CapMan BO iX LP 11.0 Teknoinvest Viii B dis 15,7 % 9.2 energy Ventures is 17,5 % 9.0
Fjord invest As 8.9 Verdane Capital V B Ks 8.8 Viking Venture As 8.2 Verdane Capital Vii Ks 6.4 nordic PeP 1 is (Altor fund iii) 12.3 % 5.6 northzone Vi L.P. 5.0 Kapnord Fond As 4.7 Viking Venture ii B is 16.9 % 4.3 Helgeland Vekst As 4.0 Tun Media (Landbrukets Medieselskap As) 3.7 Convexa Capital iV - -B-aksjer 3.1 BTV investeringsfond As 3.0 Convexa Capital iV 2.8 norchip As 2.5 Rogaland Kunnskapsinvest 2.5 norinnova 2.1 Berger eiendom 1.7 Convexa Capital Vi As - klasse B 1.5 såkorninvest sør 1.5 norinnova invest As 1.3 Midvest i A 1.2 Other private equity investments 5.5 total private equity investments 1,127.2 hedgefunds Winton Futures Fund- Lead series 180.0 sector Polaris 144.2 The Winton evolution Fund 112.9 sector euroPower Fund Class A eUR 81.0 sector Healthcare - A Usd 79.3 Winton evolution fund, Class H- euro 67.3 sector speculare iV Fund Class A Usd 42.8 sector exspec Fund Class A Usd 20.5 HORiZOn TACTiCAL TRAd Usd-B 12.6 sector speculare ii Fund Class A Usd 11.4 Russell Alt. strat. Fund ii Total designated inves 4.7 total hedgefunds 756.6 real estate funds CeReP ii 69.6 CeReP iii 63.6 CeReP 25.4 La salle 17.9 total real estate funds 176.4
Other investments gjensidige Pensjonskasse 94.7 % 111.0 total other investments 111.0
perspeCtive 177gjensidige AnnUAL RePORT 2010 resu lts short-term insurance contracts, gross Provision for unearned premiums, gross 6,406.7 5,620.2
Other insurance-related provisions 2,480.4 2,509.3 total insurance-related liabilities, gross 31,858.9 27,290.8 short-term insurance contracts, reinsurers' share Reinsurers' share of provision for unearned premiums, gross 22.2 0.5
Claims reported and claims handling costs 386.1 146.3 Claims incurred, but not reported 26.7 8.1 total reinsurers' share of claims provision, gross 412.8 154.4 total reinsurers’ share of insurance-related liabilities, gross 435.0 154.9 short-term insurance contracts, net of reinsurance Provision for unearned premiums 6,384.5 5,619.8
Claims incurred, but not reported 11,776.3 10,176.4 total claims provision, net of reinsurance 22,559.0 19,006.8
Other insurance-related provisions 2,480.4 2,509.3 total insurance-related liabilities, net of reinsurance 31,423.9 27,135.9 14 – insuranCe-relateD liabilities anD reinsurers’ share
Claims and claims handling costs Claims reported and claims handling costs 8,976.7 (146.3) 8,830.4 8,962.8 (214.9) 8,747.8
Acquisitions through business combinations 2,042.7 (0.4) 2,042.3 260.9 (0.4) 260.5 Claims paid, prior year claims (5,590.2) 135.9 (5,454.3) (4,697.8) 135.9 (4,561.9)
15 – pensiOn gjensidige Forsikring is required to have an occupational pension plan pursuant to the Mandatory Occupational Pension Act. The company’s pension plans meet the requirements of the Act.
DeFineD COntributiOn plan defined contribution plan is a private pension plan which is a supplement to the national insurance. Contributions from the pension plan come in addition to retirement pension from the national insurance. The retirement age is 67 years.
in gjensidige Forsikring the employees are given contributions in accordance with the limits for tax-free contributions, at the time being five per cent of salary from 1 to 6 of the social security base amount and eight per cent from 6 to 12 of the social security base amount.
Amount recognised as expense for the defined contribution plan is nOK 62.4 million (35.2).
Pension liabilities are measured at the present value of future pension benefits that for accounting purposes are considered as accrued at the reporting date. Future pension benefits are calculated on the basis of expected salary at the time of retirement. estimated liability at the reporting date is used when measuring accrued pension liability. Plan assets are measured at fair value. For the valuation of pension funds, estimated value at the reporting date is used. net pension liability is the difference between the present value of the pension liability and the fair value of the plan assets. A provision is recognised for employers ’ national insurance contributions in periods of underfunding. net pension liability is presented in the balance sheet under the line Pension liabilities.
The company expects to contribute nOK 114.2 million to the defined benefit plan in 2011 (192.3).
Fair value of plan assets As at 1 january 1,953.3 1,754.2 expected return on plan assets 113.4 100.7 Actuarial gains and losses 0.7 (15.2) Contributions by the employer 111.2 192.3 Benefits paid (137.7) (78.7)
historical information Present value of the defined benefit obligation 2,626.4 2,528.4 2,894.7 2,553.1 2,096.0
The fair value of the plan assets 2,040.8 1,953.3 1,754.2 1,568.5 1,295.9 Deficit in the plan 585.6 575.2 1,140.5 984.6 800.1 15 – pensiOn (COnt.)
COntraCtual pensiOn (aFp) The liability to pay own risk according to the former arrangement is accounted for as a business specific defined benefit plan. Own risk are still to be paid until the pension liability is fulfilled for the company’s own early retirees choosing the former AFP plan. Pension liability for former employees that have chosen to retire before 1 january 2011 is fulfilled as originally planned until everybody has reached 67 years. Hence there will not be a settlement for this group of employees.
The transition to new AFP arrangement is accounted for as a negative past service cost of nOK 87.7 million and is recognised as income in 2010.
Other provisions 7.6 4.7 total other provisions for liabilities 62.3 69.1
Outstanding accounts Fire Mutuals 190.2 165.2 Accounts payable 78.0 40.7 Liabilities in relation with properties 11.1 24.3 Liabilities in relation with asset management 200.7 Liabilities to public authorities 431.6 344.7
nOk million 2010 2009 reconciliation of tax expense Profit before tax 2,831.0 3,429.8 estimated tax of profit before tax expense (28 %) (792.7) (960.4)
Change in deferred tax recognised directly in the balance sheet Pensions (36.4) 121.7 Portfolios acquired 3.7 exchange differences 2.8 (0.1)
perspeCtive 183gjensidige AnnUAL RePORT 2010 resu lts 18 – eXpenses insuranCe-relateD aDMinistratiOn eXpenses inCl. COMMissiOns FOr reCeiveD reinsuranCe anD sales eXpenses nOk million 2010 2009 depreciation and value adjustments (note 5 and 7), excl. depreciation properties 215.6 106.9 employee benefit expenses 1,310.3 1,087.1 Fee for customer representatives 6.3 4.5 software costs 301.2 282.8 Total auditor’s fee (incl. VAT) 9.0 4.2 Consultants’ and lawyers’ fees 67.2 61.8
Other speCiFiCatiOns nOk million 2010 2009 administration expenses related to financial assets, excl. interest expenses, incl. administration expenses properties depreciation and value adjustments (note 5 and note 7) 6.5 26.4 Other expenses 78.1 96.9 total administration expenses related to financial assets, excl. interest expenses, incl. administration expenses properties 84.6 123.2 employee benefit expenses Wages and salaries 1,071.2 800.1 social security cost 214.7 166.4 Pension cost – defined benefit plan (note 15 incl. employers national insurance) 62.4 35.2 Pension cost – defined contribution plan (note 15 incl. employers national insurance) (44.7) 85.4 stock purchase offering for employees allocated in 2010 6.7 total employee benefit expenses 1,310.3 1,087.1 auditor's fee (incl. vat) statutory audit 2.3 1.7
Technical accounting support and legal consultancy 0.1 Other non-assurance services 6.6 2.3 Tax consultant services 0.1 0.2 total auditor's fee (incl. vat) 9.0 4.2
The remuneration committee shall prepare items of business for the Board of directors and have the main responsibility for: • draft proposals for and monitor the compliance with the group’s guidelines for and constraints on remuneration • Annually assess and propose the group CeO’s remuneration • Annually draft a proposal for the group CeO’s personal scorecard • Be an adviser to the group CeO with regard to the annual assessment of remuneration of the rest of the executive management • draft proposals for principles and a statement on determining salaries and other remuneration for the executive management, for employees and their elected representatives with job tasks of crucial importance to the enterprise’s risk exposure, and for other employees and elected representatives with supervisory tasks
• Assess other important personnel-related matters concerning executive management guiDelines FOr the COMing FinanCial year remuneration of the group CeO The group CeO’s salary and other financial benefits are determined by the Board of directors on the basis of a comprehensive assessment, where gjensidige’s remuneration scheme and the market pay for equivalent positions are taken into consideration.
remuneration of the rest of the executive management The group CeO determines the financial terms and conditions for the rest of the executive management according to limits that have been discussed with the remuneration committee. gjensidige’s remuneration scheme is used as a basis for these calculations.
The total remuneration is determined by the need to offer competitive terms and conditions in the various business areas and shall help attract and retain managers who promote the group’s growth and profitability.
The basic salary is assessed annually and determined on the basis of the wage trend in the society in general and the financial sector in particular. The bonuses to the executive management can be paid on the basis of specific performance indicators of defined target areas and discretionary assessments specified in the personal scorecards and derived from the group’s strategies and objectives. in this assessment, consideration is given to a combination of the enterprise’s results in the last two years, the business unit in question and an assessment of personal contributions. Half of the bonus is given in the form of shares in gjensidige Forsikring AsA, one-third of which can be sold in each of the next three years. The restricted bonus may be reduced if subsequent results and developments indicate that it was based on incorrect assumptions.
After consultation with the remuneration committee, the group CeO may make exceptions for the remuneration of special positions if it is necessary in order to offer competitive terms. Awarding of benefits in kind to executive management shall be contingent upon their function in the group and also in keeping with marketing practices.
remuneration of employees with job tasks of crucial importance to the enterprise’s risk exposure The bonuses to employees with job tasks of crucial importance to the enterprise’s risk exposure can be paid on the basis of specific performance indicators of defined target areas and discretionary assessments specified in the personal scorecards and derived from the group’s strategies and objectives. in this assessment, consideration is given to a combination of the enterprise’s results in the last two years, the business unit in question and an assessment of personal contributions. Half of the bonus is given in the form of shares in gjensidige Forsikring AsA, one-third of which can be sold in each of the next three years. The restricted bonus may be reduced if subsequent results and developments indicate that it was based on incorrect assumptions. An upper ceiling of 30 per cent of the annual salary, included holiday pay, is set on the payment of bonuses. Variable salary is not included in the pensionable income. After consultation with the remuneration committee, the group CeO can make exceptions for the remuneration of special positions if it is necessary in order to provide competitive terms.
The awarding of pensions and benefits in kind complies with the group’s general scheme.
remuneration of employees with supervisory tasks Remuneration of employees with supervisory tasks shall be independent of the results in the operations they supervise.
remuneration of elected representatives and other employees with remuneration equivalent to executive management The guidelines apply equivalently to elected representatives with job tasks of crucial importance to the enterprise’s risk exposure and elected representatives with other supervisory tasks. After a specific assessment, these guidelines may also come into force for other employees with equivalent job tasks and remuneration.
On an equivalent basis with the other employees in gjensidige, the group CeO and executive management will be entitled to take part in any share subscription schemes that exist for the employees.
Calculated value of total benefits other than cash rights earned in the financial year according to defined benefit pension plan 9 loans, advance payments, guarantees. outstanding amount number of shares held interest rate 7 applicable conditions and installment plan retirement conditions
Tor Magne Lønnum, deputy CeO 2,913.7 1,397.0 218.1 663.9 4,213 3 jørgen inge Ringdal, executive Vice President 2,145.5 435.8 194.5 705.5 3,835 2
Petter Bøhler (1.1.10-22.3.10) 1, executive Vice President 445.3 123.0 46.0 105.8 547.5 3.0 % 20.11.2012 3
Per gunnar skorge (24.3.10-31.12.10) 1 3.0 Marianne Bø engebretsen (28.6.10-31.12.10) 1, 11, employee
Control comittee 6 sven iver steen (28.6.10-31.12.10) 1, 10, Chairman 1,482 snorre inge Roald 1.1.10-28.6.10) 1, deputy Chairman 147.5
perspeCtive 187gjensidige AnnUAL RePORT 2010 resu lts key ManageMent persOnell COMpensatiOn 2009 nOk thousand Fixed salary/fee variable salary
Tor Magne Lønnum, deputy CeO 2,782.8 538.2 204.9 964.4 3 jørgen inge Ringdal, executive Vice President 2,100.5 322.9 156.8 820.9 479.5 2.6 % 04.06.2019 2
Bjørn Walle, executive Vice President 1,895.2 224.8 234.0 610.6 4 erica Blakstad, executive Vice President 1,866.1 294.8 191.2 1,388.4 3 executive Vice President board of Directors 6 inge K. Hansen, Chairman 380.0 1.5
Hans erik Andersson 250.0 4.3 Karen Marie Hjelmeseter 210.8 2.3 Hans ellef Wettre 195.0 1.5 Tor Øwre 319.3 13.3 gunnar Mjåtvedt, employee 185.0 gunnhild H. Andersen, employee 185.0 Kjetil Kristensen, employee 185.0 Marianne Bø engebretsen, employee 185.0 the board of Directors, deputies 6
Marit Tønsberg, Chairman 115.2 0.6 snorre inge Roald, deputy Chairman 68.7 3.7 Tove Melgård 80.5 4.0 supervisoy board 5
in addition 43 representatives from the company/Fire Mutuals/organisations/employees. 5 1 The stated remuneration applies to the period the individual in question has held the position/office. 2 Age 62, 100 per cent salary reducing gradually to 70 percent at age 67 according to time of earning. 3 Age 62, 70 per cent salary until age 67 according to time of earning, then gjensidige Forsikring’s ordinary pension terms will take effect. 4 Age 60, 70 per cent salary until age 67 according to time of earning, then gjensidige Forsikring’s ordinary pension terms will take effect. 5 Annual fee of nOK three thousand, in addition to a per meeting fee. There were two ordinary meetings during 2009. The fees have been of nOK three thousand and three thousand five hundred respectively. 6 The fee includes a fee for subsidiaries. 7 The interest rate is 2.6 nominal, unless other is stated.
Owner-occupied properties Rental income from owner-occupied properties 10.8 17.6 net gain/(loss) from sale of owner-occupied properties 55.0 2.4 Administration expenses related to owner-occupied properties (10.1) (14.1) impairment owner-occupied properties (2.2) total net income and gains/(losses) from owner-occupied properties 53.4 5.8 total net income and gains/(losses) from from buildings and real estate 113.9 35.7 net income and gains/(losses) from investments in subsidiaries and associates net income from associates 292.7 309.5 impairment investments in subsidiaries and associates (152.2) (3.7) net gain/(loss) from sale of associates (0.1) total net income and gains/(losses) from investments in subsidiaries and associates 140.4 305.9 net income and gain/(loss) from bonds held to maturity net interest income from bonds held to maturity 756.4 804.9 Unrealised gain/(loss) from bonds held to maturity (11.8) (22.8) net gain/(loss) from changes in exchange rates on bonds held to maturity (32.9) total net income and gains/(losses) from bonds held to maturity 744.6 749.2 net income and gains/(losses) from loans and receivables net interest income/(expenses) from loans and receivables 134.5 31.4 net gain/(loss) from loans and receivables 19.7 16.4 net gain/(loss) from changes in exchange rates on loans and receivables (88.1) (86.8) total net income and gains/(losses) from loans and receivables 66.1 (39.1)
net income and gains/(losses) from financial assets at fair value through profit or loss, designated Shares and similar interests dividend income 78.6 2.4 Unrealised gain/(loss) from shares and similar interests 108.4 424.0 net realised gain/(loss) from shares and similar interests 174.6 (128.9) total net income and gains/(losses) from shares and similar interests 361.6 297.5
Bonds and other fixed-income securities net interest income/(expenses) from bonds and other fixed-income-securities 284.1 322.5 Unrealised gain/(loss) from bonds and other fixed-income securities 73.4 (27.7) net realised gain/(loss) from bonds and other fixed-income securities 287.5 (400.0) total net income and gains/(losses) from bonds and other fixed-income securities 645.0 (105.2)
Derivatives net interest income/(expenses) from derivatives 1.2 32.0 Unrealised gain/(loss) from derivatives 185.9 581.6 net realised gain/(loss) from derivatives 21.0 1,010.3 total net income and gains/(losses) from derivatives 208.1 1,624.0 total net income and gains/(losses) from financial assets at fair value through profit or loss, designated 1,214.7 1,816.3 net income and gains/(losses) from financial liabilities at amortised cost net gain/(loss) from changes in exchange rates on financial liabilities at amortised cost 5.4 total net income and gains/(losses) from financial liabilities at amortised cost 5.4 net other financial income/(expenses) 1 (117.5) (49.8)
OvervieW OF relateD parties gjensidige Forsikring AsA is the group’s parent company. As at 31 december 2010 the following companies are regarded related parties.
Other related parties Fire Mutuals All over the country, norway gjensidige Pensjonskasse Oslo, norway 94.7 %
Percentage of votes held is the same as percentage of interest held.
gjensidigestiftelsen has covered part of the expenses related to the stock exchange listing of gjensidige Forsikring AsA. expenses related to the conversion of gjensidige Forsikring BA to a public limited company are evenly divided between gjensidigestiftelsen and gjensidige Forsikring. The expenses are charged gjensidige Forsikring and invoiced gjensidigestiftelsen. At year end the intercompany account was nOK 34.4 million.
purChase anD sale OF assets As per 1 january 2010, gjensidige Forsikring AsA has acquired all of the assets and liabilities of Fair Forsikring A/s, excluding shares in the subsidiaries Fair invest A/s and KommuneForsikring A/s, and all of the assets and liabilities from KommuneForsikring A/s. The insurance business in Fair Forsikring A/s and KommuneForsikring A/s is liquidated, and as a result of the transaction transferred to gjensidige Forsikring AsA’s branch in denmark. The value of the transaction amounts to nOK 1.6 billion.
As per 1 October 2010, the danish branch of gjensidige Forsikring acquired the commercial and change-of-ownership portfolios from nykredit Forsikring A/s (nykredit Forsikring). After this transaction, only the private insurance portfolio remains in nykredit Forsikring. The transaction was conducted at fair value and amounts to dKK 545.0 million.
nOk million income expenses income expenses gross premiums written Fair Forsikring A/s including subsidiaries 68.5 gjensidiges Arbejdsskadeforsikring A/s 13.1 gjensidige Baltic 8.4 10.8 gjensidige Pensjonsforsikring As (owned by gjensidige Pensjon og sparing Holding As) 0.2 0.2 nykredit Forsikring A/s 782.2 Tennant Försäkringsaktiebolag AB (owned by Tennant Holding AB) 8.3 10.7
Change in gross provision for claims Fair Forsikring A/s 76.2 nykredit Forsikring A/s 294.6 Tennant Forsikring nUF (branch of Tennant Försäkringsaktiebolag AB) 1.6 22.3
Commissions gjensidige Bank AsA (owned by gjensidige Bank Holding As) 0.9 2.5 administration expenses Fair Forsikring A/s including subsidiaries 1.2 gjensidige Bank AsA (owned by gjensidige Bank Holding As) 21.7 9.3 gjensidige investeringsrådgivning AsA (owned by gjensidige Pensjon og sparing Holding As) 8.3 22.5 gjensidige Pensjon og sparing Holding As 10.6 11.8 gjensidige Pensjonsforsikring As (owned by gjensidige Pensjon og sparing Holding As) 39.5 44.4 glitne invest As 0.1 0.1 Hjelp24 As (owned by glitne invest As) 4.8 5.4 KommuneForsikring nUF (branch of KommuneForsikring As, owned by Fair Forsikring A/s) 23.1 nykredit Forsikring A/s 107.5
Tennant Forsikring nUF (branch of Tennant Försäkringsaktiebolag AB) 5.0 4.9 Tennant Holding AB 6.1 1.1 interest expenses Fair Forsikring A/s 17.7
perspeCtive 191gjensidige AnnUAL RePORT 2010 resu lts grOup COntributiOns anD DiviDenDs The table below shows a summary of contributions/dividends from/to subsidiaries.
nOk million received given received given group contributions gjensidige Baltic 21.1 gjensidige Bank AsA (owned by gjensidige Bank Holding As) 74.0 gjensidige Pensjonsforsikring As (owned by gjensidige Pensjon og sparing Holding As) 26.8 75.2 gjensidige investeringsrådgivning AsA (owned by gjensidige Pensjon og sparing Holding As) 14.6 44.9 glitne invest As 22.3 18.1 gjensidige norge As 0.1 Oslo Areal As 101.1 73.2 strandtorget eiendom As 0.1 Tennant Försäkringsaktiebolag AB 1.0 41.6
Dividends Fair Forsikring A/s including subsidiaries 176.3 Oslo Areal As 104.9 gjensidige norge 6.0 gjensidige nOR Forsikring eiendom As (liquidation dividend) 0.2 spareBank 1 sR-Bank 36.2 total group contributions and dividends 292.7 41.4 309.5 194.2 interCOMpany balanCe The table below shows a summary of receivables/liabilities from/to subsidiaries, associates and related parties.
KommuneForsikring nUF (branch of KommuneForsikring As, owned by Fair Forsikring A/s) 7.4 nykredit Forsikring A/s 26.2 Oslo Areal As 80.0 73.2 Tennant Holding AB 11.2 38.7 Tennant Försäkringsaktiebolag AB (owned by Tennant Holding AB) 13.0 41.2 2.8 Tennant Assurance AB (owned by Tennant Försäkringsaktiebolag AB) 0.9 Tennant Forsikring nUF (branch of Tennant Försäkringsaktiebolag AB) 1.4 1.6 15.9 samtrygd eigedom As 1.7 total intercompany balances within the group 190.7 57.0 222.7 213.7
deferred tax assets (26.4) (16.4) Other intangible assets (659.1) (235.2) investment properties, unrealised gains, proportion (209.3) (278.1) Reinsurance provision, minimum requirement (6.4) (5.6)
45 % of investment properties, unrealised gains, proportion 94.2 125.2 additional capital 94.2 125.2 primary capital 14,040.7 15,430.7 Primary capital in other financial institutions (108.6) (108.6)
Weighted reinvestment cost derivatives 119.5 32.8 Primary capital in other financial institutions (108.6) (108.6)
perspeCtive 193gjensidige AnnUAL RePORT 2010 resu lts 25 – sOlvenCy Margin nOk million 2010 2009 net primary capital 13,932.0 15,322.1 Proportion of security provision 1,105.6 1,207.5 Proportion of natural perils fund (up to 25 % of the natural perils fund is included) 653.9 597.5 solvency margin capital 15,691.6 17,127.0
28 – share-baseD payMent in connection with the stock-exchange listing of gjensidige Forsikring AsA on 10 december 2010 all employees in the group except for the employees in gjensidige Baltic were given the opportunity to buy shares in the company.
personnel costs nOk million note 2010 stock purchase offering for employees allocated in 2010 18 6.7
Today, the Board of Directors and the CEO have considered and approved the Annual Report and the annual accounts for Gjensidige Forsikring ASA, the Group and the parent company, for the calendar year 2010 and as per 31 December 2010 (Annual Report 2010).
To the best of our knowledge: o the annual accounts for 2010 for the Group and the parent company have been prepared in accordance with current accounting standards o the information in the accounts gives a true picture of the Group’s and the parent company’s assets, liabilities and financial position and results as a whole as per 31 December 2010 o the Annual Report for the Group and the parent company gives a true summary of: - the development, results and position of the Group and the parent company - the most important risk and uncertainty factors that the Group and parent company are currently facing.
17 March 2011 The Board of Directors of Gjensidige Forsikring ASA
The control committee has, in accordance with its standing instructions and together with the auditor, actuary, executive vice president group staff and general services, and chief accountant reviewed the Board of directors’ report and the financial statements for the year 2010 and the auditor’s report for gjensidige Forsikring AsA and gjensidige insurance group.
perspeCtive 199gjensidige AnnUAL RePORT 2010 resu lts stateMent by the supervisOry bOarD
The Supervisory Board’s Statement on the Board of Directors’ Report and the annual parent company accounts and consolidated accounts for Gjensidige Forsikring ASA for 2010
At the meeting of 30 March 2011 the Supervisory Board reviewed the Board of Directors’ report and the annual parent company accounts and consolidated accounts for 2010 for Gjensidige Forsikring ASA, including the proposal for the distribution of the annual profit.
The Supervisory Board recommends that the general meeting approves the submitted company accounts as Gjensidige Forsikring ASA’s annual accounts for 2010.
Oslo 30 March 2011 Bjørn S. Iversen Chairman of the Supervisory Board