The best reputation in the industry Gjensidige has the best reputation among insur - ance companies in Norway, according to RepTrak, and is perceived as Norway’s most sustainable insurance company according to the Sustainable Brand Index.
Customer dividend Our general insurance customers in Norway received customer dividend for the ninth year in a row. Gjensidige distributed NOK 2.2. billion in customer dividend. This corresponds to 14 per cent of insurance premiums in 2017.
Gjensidige Bolighandel We entered the real estate market with an innovative combined home sellers insurance and sales solution that provides more security when buying and selling a home.
About the reporting Gjensidige publishes a web-based annual report on www.gjensidige.no/reporting. The annual report 2018 will not be printed.
New core values We established the new core values ‘Create a sense of security, Apply new thinking, and Go for it’.
Earned premiums, general insurance NOK million 24,052.8 23,398.3 22,441.9 21,272.0 20,386.8
Claims incurred, general insurance NOK million (16,791.1) (16,401.7) (15,515.9) (14,597.5) (14,470.4)
Other claims incurred, losses etc. NOK million (1,833.5) (1,661.8) (1,283.5) (1,275.7) (1,126.4)
Profit/(loss) from discontinued operations NOK million 334.9 459.1 325.4 223.1 182.1
Total equity and liabilities NOK million 156,762.9 149,072.4 135,926.6 129,264.4 113,982.0 1 Defined as alternative performance measure (APM). APMs are described on www.gjensidige.no/reporting in document named APMs Gjensidige Forsikring Group 2018 2 Large losses = loss events in excess of NOK 10.0 million 3 Run-off gains/(losses) = changes in estimates from earlier periods. Reserving is based on best estimate, and expected run-off result over time is zero 4 Investment portfolio includes all investment funds in the Group, except Pension and Retail Bank
Sickness absence (Self-certified and doctor-certified), Gjensidige Forsikring % 3.8 3.9 3.9 4.1 4.7
Turnover of employees, Gjensidige Forsikring % 12.4 15.3 9.7 9.6 8.7
Participation in a training programme Days 5,982 6,960 7,487 5,524 7,400
Employees per country as at 31.12.2018 Employees per business area as at 31.12.2018
We implement measures throughout the Group, but the focus of the measures varies from market to market, since the drivers and needs differ. In Norway, the primary focus is on adjusting the prices of pr oducts where we have not kept up with claims inflation, as well as implementing certain cost-efficiency measures. Profitability has been weaker over time outside Norway. The measures in place to increase efficiency and profitability have had a positive effect, and they will continue unabated into 2019.
We have implemented measures that will better enable us to update tariffs much more quickly than before, so that we can react more quickly to changes in market terms and thus ensure good profitability. We are also in the process of upgrading our IT platform outside Norway, which will enable us to achieve considerable rationalisation benefits over time.
Sale of Gjensidige Bank In summer 2018, we agreed to sell Gjensidige Bank to Nordea, and to enter into a cooperation agreement on distribution in the Norwegian market. Gjensidige Bank has experienced strong development, with solid volume growth and increasing profitability. The development in the financial sector however indicates that we can serve our customers better through a cooperation than through a self-owned bank. There is a lot of enthusiasm about this cooperation both in Gjensidige and in Nordea, and I am confident that this will improve our position in Norway.
Going forward, we will work on measures to further strengthen customer satisfaction and loyalty and to attract new customers. Self-service solutions that require digitalisation, standardisation and automation will have high priority, since we see that customers increasingly request such solutions. We already have world-leading solutions in a number of areas, not least with respect to digital registration and automated claims processing.
In the years to come, we will increasingly see the effect of these initiatives, in the form of greater efficiency, reduced expenses and even more satisfied customers.
Structure and capital We are subject to increasingly complex regulation and stricter requirements to comply with official regulations. Combined with more capital-intensive technology needs, we believe that this will lead to further consolidation in our industry. As a well-capitalised and profitable company, we are well positioned to take part in this development.
Our attractive dividend policy remains unchanged. We will deliver high and stable nominal dividend on a regular basis, of at least 80 per cent1 of our current profit after tax over time.
Our ambition for the future is unchanged, strong and clear. We shall be the most customer-oriented company in the Nordic general insurance industry.
Our customers, be they private or commercial, shall find that we are relevant in their day-to-day lives, and we shall ensure that they are well prepared if something should happen. We will be there to help them if disaster strikes or an accident happens. We shall know the customer best, and care the most – also in 2019.
In 2018, Gjensidige’s business has been organised in seven operational segments: • General Insurance Private • General Insurance Commercial • General Insurance Denmark • General Insurance Sweden • General Insurance Baltic • Retail Bank • Pension
Our vision is to know the customer best and care the most. This vision reflects our view that customer orientation is a competitive advantage. Real customer orientation requires a culture in which advisory services, sales, claims processing, product development and systems development form integral elements. It takes time to develop a culture like this, and it is difficult to copy. Good customer experiences have created a trust in our brand over time of intrinsic value, which we must maintain.
Our response to such threats is to maintain and strengthen the close relationship we have with the customer by providing good customer orientation, and developing new solutions and, if necessary, new business models.
A sustainable company Our activities shall contribute to a sustainable society by supporting the UN Sustainable Development Goals. We shall achieve this by developing resource- saving and sustainable processes and products,
and by operating in an ethically responsible manner that upholds our reputation. Our sustainability work is described in more detail on page 22–49 of the sustainability report.
We will test new technologies and business opportunities ourselves to generate own experience and learning, so that we are equipped to assess disruptive threats and any opportunities that arise as a result.
Alliances will be an important precondition, in addition to structural initiatives, because ecosystems based on real-time behavioural data from multiple parties will become an increasingly important means of meeting customers’ needs.
Our strategic priorities towards 2022 We will maintain our strong and unique position, and improve profitability. We will adjust prices quickly to ensure they are adapted to claims inflation, while at the same time ensuring our competitiveness. We continuously work on major and minor rationalisation measures that generate cost savings and better customer experiences.
We will continue to improve profitability and growth in the markets outside Norway. Important measures in this context include a new IT core system, more sophisticated price models, rationalisation measures and organic growth.
Operational priorities The Board has identified three operational priorities that are vital to the strategy succeeding in the short term and to laying the foundation for long-term development: 1. Digital customer experiences 2. Insightful analysis 3. Dynamic organisational development
Digital customer experiences It shall be easy to buy, own and use our products. This means that we must be able to increasingly offer digital customer experiences. The processing of claims is subject to particularly rapid change. When we enable customers to report a claim digitally, from a mobile phone for example, we can process
the claim report automatically in just a few seconds. This creates good customer experiences, and is a very efficient means of cutting costs if it is done in a controlled manner. We will further develop such solutions, and use market-leading technology.
Dynamic organisational development In order to be able to develop and apply technology that enables us to create good customer experiences, employees from different fields must have the right expertise and cooperate well. This makes great demands of the organisation and management. The management must have broad competence to be able to recognise opportunities, take the right initiatives and lead capable employees in a manner that generates value creation. Job rotation as a means of developing competence across business areas and staff entities is therefore, along with the recruitment and development of employees, an important strategic tool.
We will therefore facilitate participation in such systems, and actively seek national and international alliance partners who can strengthen our position. The right ecosystem design and the right alliance partners will enable us to attract more and better customers, offer more correct prises, reduce claims incurred and develop value-adding products and services that can generate increased profitability and loyalty.
Gjensidige Annual Report 2018 11 2018 Customer orientation was still the top priority in the Private segment in 2018. Various surveys show very high customer satisfaction and this is reflected in unusually high customer loyalty. Good customer experiences are increasingly linked to self-service in digital channels, not least via mobile phones. We lead the field when it comes to using advanced digital solutions that make it easier for customers to buy, own and use our insurance policies. Increased digitalisation of customer processes and better facilitation of self-service solutions were important focuses also in 2018. Continuous work on the tariffs, and improved customer and risk selection, contributed to better quality in the customer portfolio, and volume growth in a market where competition is strong.
Profitability was challenged by a cold winter with a lot of snow, an unusually dry summer and an unex pected increase in claims inflation for car insurance. Significant measures were implemented to improve profitability, including by adjusting prices.
Outlook Competition is strong, both from established banks, insurance companies and smaller niche companies. Gjensidige's competitiveness in the Norwegian private market is still regarded as good.
Measures to further improve customer orientation and retain strong customer loyalty will continue to be important going forward. We will automate more and more processes, and lay the groundwork for digital claim reports, so that customers’ claims can be settled more quickly and correctly. We will develop better data analysis tools and methods, so that we can give customers better and more relevant advice in both staffed and self-service solutions. Over time, we expect this to lead to reduced costs, increased sales efficiency and even greater customer satisfaction. We will also continue the process of adjusting prices to improve profitability.
Commercial The Commercial segment offers a wide range of general insurance products to commercial and agricultural customers, and the public sector in Norway. Sales primarily take place through dedicated distribution channels, and only 20 per cent of the premium volume is brokered business.
During the year, the division has optimised its use of resources, defined focus areas and consolidated its position in the market. Models based on analytics have been further developed to ensure continued efficient distribution, a high activity level and good customer service. Product and tariff developments have been high on the agenda throughout the year to ensure relevance in a market subject to constant change. Significant efforts have been made to adapt digital solutions to customers’ needs to provide a digital boost for Commercial customers and thus secure our position in the market. There is a strong
Source: Finance Norway, based on written premiums 3rd quarter 2018 focus on competence building to ensure relevant customer service and good competitiveness in a professionalised procurement market.
Profitability was challenged in 2018 by a severe winter, an unusually dry summer, multiple flood events and an unexpected increase in claims inflation for car insurance. Significant measures were implemented to improve profitability, including by adjusting prices.
Distribution earned premiums 23.7% Motor 34.4% Building 23.0% Accident and health 6.0% Liability 8.8% Leisure 4.1% Other
The Denmark segment includes the Group’s operations in the Danish private, commercial and municipal markets. Gjensidige has its own distribution channels in these markets as well as distribution through a number of partners and brokers. In Denmark, the Nykredit Group is a key distribution partner. We are a well-established player in the Danish market, and come in fifth in relation to market share.
The Swedish part of the business improved its profitability in 2018 by focusing on repricing and implementing a number of rationalisation measures, including renegotiating partnership agreements and automating processes. We continued to work on improving our internal procedures and processes to improve quality, risk selection and premium levels when renewing policies. The customer centre in Malmø was scaled up to handle all customer service and outbound sales activities for our private customers in Sweden.
Outlook The Swedish market is relatively consolidated and marked by strong competition. Gjensidige will prioritise creating growth and robust profitability through digitalisation, automation of processes and the development of its culture and organisation. We will work on repricing the portfolio, improving our price models and customer relations activities, and concentrate activities around fewer areas, particularly in the Commercial market. Costs will be further reduced once we have implemented the new IT core system.
Gjensidige will seek to strengthen its position in Sweden through organic growth in addition to opportunities for value generating acquisitions.
Outlook There is intense competition in the Baltic states, and the pressure on prices is expected to continue. Gjensidige is well positioned to take part in the attractive growth opportunities in the Baltics. We will focus on increasing customer loyalty in profitable segments by means of competitive tariffs and product packages. Another focus will be acquiring new customers by means of marketing and partnership agreements. Costs still need to be cut, but a competitive position is now starting to take shape that will enable us to participate in the market growth.
Gjensidige will look for opportunities for growth in the Baltics, both organic opportunities and through value generating acquisitions.
The business in brief 2018 Its performance has improved in recent years as a result of its expedient business model and efficient operations. Focus was given to the further development of solutions well-adapted to customer needs in 2018, as in the previous year, which contributed to strong portfolio growth. Close to one third of our small and medium sized enterprise-customers with insurance of the person-coverage in Gjensidige Forsikring were customers in our pensions business as well. This figure is still low given that 70 per cent of our pension customers are general insurance customers, thus indicating a considerable potential for growth.
Outlook The market for defined contribution pensions is growing and Gjensidige is well-positioned to participate in it. The positive growth rate in volume and performance is expected to continue.
We expect to win market shares in the defined- contribution pension market, which does not tie up a lot of capital, thanks to our brand, customer friendly digital solutions and our large portfolio of general insurance customers among small and medium- sized companies. We expect the percentage of general insurance customers who are also pension customers to continue increasing in 2019.
9.2% Gjensidige 31.1% Storebrand 28.3% DNB 14.1% Nordea 9.1% Sparebank1 8.3% Other
* Defined as alternative performance measure (APM). APMs are described on www.gjensidige.no/reporting in document named APMs Gjensidige Bank 2018
In 2018, Gjensidige Forsikring entered into an agreement on selling Gjensidige Bank to Nordea. The sale is expected to take place in the first quarter of 2019. The parties entered into a cooperation agreement on the distribution of banking and insurance services in Norway. The sale of the bank, combined with the mutual distribution agreement will give Gjensidige the opportunity to increase its focus on its core business, while still being able to offer customers a combination of insurance and banking services. Nordea will also distribute Gjensidige’s insurance policies to its customers in Norway.
Retail Bank Gjensidige Bank is a digital bank that offers digital banking services, housing loans, car and consumer financing, banking and saving in funds. The bank cooperates closely with many partners, dealers and agents. Distribution largely takes place online, but also by phone, chat and in Gjensidige’s financial offices.
Outlook Gjensidige Bank will continue to focus on sustainable and profitable growth. Improving customer processes supported by digitalisation will be an important part of the bank’s value proposition.
Financial result from the investment portfolio 1.5 3.7 3.9 820.9 2,002.6 2,152.6
Each quarter, we meet with analysts and investors to discuss results and business operations. A member of Gjensidige’s Investor Relations team usually attends these meetings, possibly together with the CEO and/ or the CFO or another relevant executive from the Company.
Dividend and dividend policy Gjensidige’s goal is to distribute high and stable nominal dividends to shareholders, and a dividend ratio over time of at least 70 per cent of the profit after tax expense over time. After the sale of Gjensidige Bank, the targeted dividend ratio will increase to 80 per cent of the profit after tax expense over time. When determining the size of the dividend, consideration will be given to expected future capital needs. Over time, Gjensidige will also distribute excess capital.
For the 2018 financial year, the Board has proposed that a dividend of NOK 7.10 per share be distributed based on the profit for the year. This corresponds to 95.5 per cent of the Group profit after tax. The proposed dividend is contingent on the approval of the Financial Supervisory Authority because it amounts to more than 100 per cent of the profit for Gjensidige Forsikring ASA in 2018.
The general meeting on 28 March 2019 will vote on the dividend for the 2018 financial year. The approved dividend will be paid to shareholders registered on the date of the general meeting. The Gjensidige share will be traded ex dividend on 29 March 2019, the record date will be 1 April 2019 and the dividend will be disbursed on 9 April 2019.
Customer dividend The Gjensidige Foundation is the largest shareholder in Gjensidige, with a holding of 62.2 per cent. The Foundation passes on its share dividend relating to the profit for the year from Gjensidige, to Gjensidige’s general insurance customers in Norway in the form of customer dividend. Share dividends relating to the distribution of excess capital are retained and managed by the Gjensidige Foundation.
Ownership At year-end 2018, Gjensidige had approximately 35,000 shareholders. The 20 biggest owners represented a total of 85.6 per cent of the shares in the Company.
The Gjensidige Foundation has laid down in its statutes that its ownership interest in Gjensidige shall amount to at least 60 per cent, which shall contribute to predictability and stable ownership.
General Meeting The next ordinary General Meeting will be held at Gjensidige’s offices in Schweigaards gate 21, Oslo, on 28 March 2019 at 17:00 CET.
In 2018, the Board adopted sustainability goals for the areas Gjensidige deemed to be of greatest significance to Gjensidige and the Company’s stakeholders: • Reduce carbon intensity • Socially responsible investments • A safer society
It is also important to Gjensidige to contribute to a safer society, apart from its role as an insurance company, and collaborates with non-profit organisations and the Gjensidige Foundation. Our commitment aims to contribute to a warmer society, ensure integration in the labour market and that children and young people have equal opportunities.
The Board believes that Gjensidige’s ambitions and measures will help to promote four of the 17 UN Sustainable Development Goals in particular. This is explained in Chapter 4 on page 27.
Climate and environmental issues are becoming increasingly important to all our stakeholders. Sustainability is therefore an integral component of our strategy.
• Voted the most sustainable insurance company in Norway by Sustainable Brands.
• BearingPoint assessed the digital maturity of 78 Norwegian companies, and Gjensidige emerged as the most digital insurance company (Digital Leaders Studies).
It is Gjensidige’s ambition that all customers shall receive the right claims settlement as soon as possible. Both factors are important to their perception of quality.
The customers' possibility of obtaining efficient but thorough complaints handling is important to ensure high-quality claims settlement. Gjensidige has established a complaints system whereby customer complaints can be considered at three levels. This is intended to ensure that customers' complaints are assessed independently and thoroughly. We have commented on the status of this in Chapter 5.7 on page 42.
The Board has assessed nine topics as being relevant to the Company’s stakeholders: (see Chapter 5 on page 28 for more information about the grounds) • sustainable claims settlements • loss-reducing measures • sustainable products
Suppliers Good cooperation with our suppliers is decisive if we are to reach our sustainability goals. Compliance with our procurement policy is critical to our goal attainment • Renewable energy • Waste handling • Reuse • Corruption/money laundering • Fair competition • HSE
Investors/owners We communicate with our investors/owners in different arenas, and enable them to make informed decisions. • Investor meetings • Interim presentations • Annual reports • Website • Analysts and capital market days
Good risk selection and the right pricing is decisive for financial strength and profitability. The Board adopts risk management and internal control requirements in Gjensidige, and defines fundamental principles, processes, roles and responsibilities through the ‘Group policy for risk management and internal control’. The management shall ensure that governing documents exist that underpin and supplement these requirements.
The Board receives quarterly reports on the status and development of risk, capital and compliance for the Group. Among other things, the report addresses developments in the most important areas of risk, and measurements and assessments in relation to the adopted risk limits.
The transfer of risk forms the core of insurance. Gjensidige’s underwriting policy sets out the overriding limits and principles for insurance risk. The under writing policy is intended to provide the Company with an overview and control of its risk exposure. It is also intended to ensure that the Company complies with applicable laws and regulations, and that it acts in a way that is generally perceived as fair and reasonable, and that is in line with Gjensidige’s guidelines for ethical business operations. The underwriting policy explicitly states, for example, that the Company shall not enter into insurance contracts that form the basis for the payment of claims or other benefits to states or geographical areas subject to sanctions adopted by the UN or the EU.
Gjensidige uses a partial internal model approved by the Financial Supervisory Authority of Norway for the calculation of risk and capital requirements. The model takes, among other things, weather and climate related losses into consideration. The data that forms the basis for the model is updated annually together with assessments of the effects of climate and weather-related events on the scope of losses.
Nanotechnology is an emerging technology that presents new business opportunities and new risks. For example, nanotechnology makes it possible to create materials with new and unique properties. This can potentially change the risk picture, in certain product areas in particular.
Synthetic biology is the construction of biological components and systems that do not exist in nature, and the simulation of existing biological elements. Technology for growing cells and tissue in laboratories and tailoring them to specific purposes opens up new possibilities in the prevention and treatment of diseases and injuries. This may affect mortality, life expectancy and treatment needs, and could significantly impact the financial aspects of life and health insurance.
These areas may have a significant effect on the insurance market going forward, creating both risks and opportunities. They are included in strategic discussions, with respect to reassurance assessments, strengthened UW analyses, and to see what is insurable in the time ahead.
The insurance premium paid by our customers is affected by the risk of loss. The assets we insure, such as cars, buildings and companies, will contribute to climate and environmental challenges to a varying extent. Sensible risk-pricing will contribute to a favourable environmental profile.
We define sustainability risk as factors with potential consequences for the climate and environment or socio-economic consequences. Work is now underway to incorporate sustainability risk, even more than before, into our insurance policies.
Risk management measures Our stakeholders are increasingly keen to see what contribution Gjensidige makes to achieving the goals of the UN SDGs and the Paris Agreement. This can affect our business, our customers and the society we are part of in the short and long term.
Measures to boost robustness in relevant scenarios • Help to increase knowledge of insurance claims data and climate consequences by sharing claims data relating to weather events.
• Use our expertise and actively cooperate with public bodies to ensure the environmentally friendly development of cities and the country as a whole.
• We shall strengthen our position earlier in the value chain by helping and encouraging our customers to make sustainable low-risk choices, e.g. in connection with the construction of new buildings. This means lower insurance premiums for our customers and favourable consequences for the environment, customers and us.
• We will continue to take a critical approach to entering new customer contracts so that we secure a more sustainable low-risk customer portfolio. The Risk Management report that we have developed differentiates customer feedback based on the challenges and improvement potential of each individual customer. By sharing
our knowledge of loss prevention work, we enable our customers to implement the sustainability measures required to achieve the best terms. The risk management score shall be high, and it shall be synonymous with a sustainable customer portfolio.
We would like to initially assess different initiatives to boost the circular economy, e.g. more repairs, reuse, reduce waste and different measures for reducing transport costs and promoting more climate and environmentally friendly reconstruction.
4. How Gjensidige’s objectives and strategy contribute to the UN Sustainable Development Goals The 17 UN Sustainable Development Goals (SDGs), and the 169 targets are ambitious and call for a global effort to make the world a better place, focusing on the climate and the environment, social conditions and the economy. Through its activities, Gjensidige shall implement measures that promote the UN SDGs, and have a particular focus on the goals that are most relevant to an insurance company.
A brief review of the UN SDG targets that are particularly relevant to Gjensidige follow below, and how we shall strive to ensure they are met.
A more detailed description of which of Gjensidige’s sustainability focus areas support the UN SGDs is presented in Chapter 5 on page 28.
Gjensidige shall also help to achieve financial risk protection, and universal access to quality essential healthcare services.
8 Decent work and economic growth; targets: 8.2, 8.3, 8.4 and 8.8 Gjensidige insures enterprises that are vital to establishing workplaces, entrepreneurship, creativity and innovation, and stimulates the establishment new enterprises and growth of exixting companies, including through access to financial services. Gjensidige is concerned with greater facilitation of the circular economy, and its goal towards 2030 is to progressively improve global resource efficiency in consumption and production, and endeavour to increase awareness of the need for a circular economy, in accordance with the 10-year framework of programmes on sustainable consumption and production. Gjensidige endeavours to ensure that employees and partners respect labour rights and promote safe and secure working environments for all workers, including migrant workers, and those in precarious employment.
13 Climate action; targets: 13.1, 13.2 and 13.3 Gjensidige shall strengthen resilience and adaptive capacity to climate-related hazards and natural disasters, including providing insurance claims data to the authorities to ensure better measures are instigated to combat climate change and planning at the national level. Gjensidige shall work on loss-reducing measures that strengthen individual and institutional capacity on climate change mitigation and early warning, and strengthen their knowledge of and raise awareness about the climate.
Our purchasing policy applies to the whole Group, and requires that deliveries are sustainable. We use our purchasing power to exert influence, and, in continuous dialogue with our most important suppliers, we ensure that sustainable solutions are chosen.
Gjensidige shall help to reduce our customers’ climate footprint. Our claims settlements shall be sustainable by 2030. We will achieve this by means of concrete measures, dialogue with customers and by supporting a circular economy.
What we have achieved: • Circular economy established in our building and motor claims processes in Norway, Sweden and Denmark
New measures • Establish a break-even point for carbon emissions and contribute to reducing carbon emissions.
• Contribute to at least 1,000 media reports on loss prevention per year.
• Start-up of project to analyse the effect of risk checks for our commercial customers.
Reduce our own climate footprint Insurance is a knowledge business that does not directly affect the environment to any extent, however we can help achieve a more sustainable society by reducing our own ‘climate footprint’, and use our market power in relation to our suppliers and in our investments.
We shall keep reducing our climate footprint, and aim to become a climate neutral business by 2030.
Socially responsible investments Gjensidige reserves considerable funds to secure payouts to customers who experience losses. Our investment strategy requires the business to be sustainable and is followed up continuously.
• Investors sign up to CDP. • Implemented ESG assessments in all internal credit analyses.
Have engaged and motivated employees and achieve top quartile results in the employee satisfaction survey.
Sustainable products We monitor the market and wish to offer sustainable products. We develop new products and services that will help change behaviour, and thus reduce greenhouse gas emissions through, among other things, cooperation with our partners.
Digital transformation Digitalisation provides new opportunities and threats. The sharing economy, blockchain and synthetic biology are examples of areas where technology will affect the environment, health and sustainable cities. We are keen to use new technologies in our work on a more sustainable customer dialogue and new products.
Establish market-leading digital advisory and support services that ensure efficient customer services and provide information about sustainable solutions for our customers in all countries we operate in by 2025.
What we have achieved: • Gjensidige voted the best digital insur ance company in a survey carried out by BearingPoint in 2018.
• The percentage of ‘paperless’ customers was 73 per cent at the end of 2018.
We collaborate with non-profit organisations in all the countries we operate in to contribute to: • a warmer society • provide work experience and contribute to the expedient integration of at least four full-time equivalents/persons per year
New measures • Establish cooperation agreements in Sweden and Denmark, and the Baltic states.
All our suppliers must sign a self-declaration on corporate social responsibility. By signing this declaration, they undertake to: • Conduct their business in a way that does not violate internationally recognised principles and guidelines relating to human and labour rights.
• Ensure that manufacturers and subsuppliers of goods and/or services to Gjensidige do not violate internationally recognised principles and guidelines relating to human and labour rights.
All material procurements are ordered electronically. As far as possible, all suppliers shall use electronic invoicing. Documents relating to invitations to tender, negotiations and agreements are stored electronically. Competitive tender procedures are carried out with the help of online portals. The use of electronic tools ensures that all processes are documented and verifiable, and this prevents irregularities.
Gjensidige cooperates with other insurance companies in industry organisations to find, new, sustainable solutions for repairing wet rooms in a manner that is best for the customer and the environment, including by reducing waste and transport.
• We are now carrying out risk checks of new and existing customers in the Norwegian commercial market to uncover risk and encourage measures to improve safety.
sustainability, and thus measure the effect of the sustainability measures initiated going forward.
• Commercial insurance incl. green-blue rebuilding. Example: Rebuild with a green roof and green-blue outdoor areas. This is particularly important in builtup areas as a means of creating natural paths for rain water.
We have increased flood preparedness by deploying pumping equipment in areas prone to flooding before the spring thaw. The intention is to reduce the risk of major losses, and to provide the quickest possible help to as many customers as possible affected by floods.
In 2018, Gjensidige collaborated with the reuse app Tise, and distributed fashionable ‘watch me’ slap wraps, where the focus was on getting young people to use reflective devices. We collaborate with other insurance companies on road safety through the industry organisation Finance Norway.
Fire prevention Together with the Norwegian Fire Protection Association, the Directorate for Civil Protection and Emergency Planning (DSB) and local fire brigades, we organised Røykvarslerdagen – smoke detector
Every year, Gjensidige is represented on a number of councils, committees and boards that work on fire prevention, prevention of water damage and other initiatives for the benefit of Norwegian society.
Health Gjensidige offers sustainable solutions by facilitating, and encouraging, better health. This improves life quality and prevents illnesses and injuries.
Effect of our efforts • In 2018, we sent 566,117 weather warnings to customers (2017: 291,000).
• In 2018, we were awarded the title of most responsible company in Estonia in its ‘Traffic Safety Awards’.
• 70,000 young people used the learner driving app when learning to drive.
• We are part of the Norwegian cooperation group for fire prevention in schools, which runs Brannvettskolen. no. This measure ensures that 20,000 children receive fire prevention training every year.
• Include sustainability in our risk assessments of customers to help them make climate-friendly choices.
Greenhouse gas emissions from our operations are extremely modest. We work continuously to further reduce our emissions, and we report our emissions to the Carbon Disclosure Project.
The use of electricity and district heating does not cause greenhouse gas emissions, which must therefore be calculated on the basis of an assumed energy mix. The production of hydropower does not cause emissions either. We have calculated that our operations in 2018 caused emissions of 4,754 tonnes of CO2 equivalents, (scope 1 and 2), compared with 4,452 tonnes the year before. These figures are higher than prior years, due to a change in the calculation of emissions caused by electricity.
Annual reporting and regular recertification ensure that our offices live up to the highest standards for environmentally friendly operations. At our Copenhagen office, systems and procedures for handling and sorting waste are approved by the City of Copenhagen’s environmental authorities.
Limited use of company cars We have established a company car policy that entails that CO2 emissions from company cars cannot exceed 130 grams per kilometre. At our head office, we have three electric cars that employees can use in connection with meetings and private errands, so that we reduce the use of taxis and private cars.
Effect of our efforts • In 2018, the Group’s energy consumption was 12,671 MWh. Most of our energy consumption is related to lighting, heating and computers. The energy carriers are electricity, which in Norway is almost exclusively based on hydropower; district heating, which is largely based on waste incineration; and fuel oil.
The consumption breaks down as follows: • Electricity: 8,669 MWh • District heating: 1,814 MWh • Fuel oil: 19 MWh
Approximately 63 per cent of the electricity was consumed in Norway. • Gjensidige did not cause illegal emissions or receive fines or other sanctions relating to the environment in 2018.
As a member of the Norwegian Forum for Responsible and Sustainable Investments (NORSIF), we support the work on developing and promoting sustainable investments as a dedicated field in Norway, and share experience and knowledge across the Norwegian finance community.
2. Businesses should make sure that they are not complicit in human rights abuses.
3. Businesses should uphold the freedom of association and the effective recognition of the right to collective bargaining.
4. Businesses should uphold the elimination of all forms of forced and compulsory labour.
9. Businesses should encourage the development and diffusion of environmentally friendly technologies.
The Group’s Chief Investment Officer is responsible for ensuring compliance with the policy and guidelines. We have hired the recognised consultancy firm GES Investment Services to carry out an ethical screening of companies. GES analyses, together with information from other external sources, form the basis for the exclusion of and dialogue with companies in Gjensidige’s investment universe.
When a company is excluded, we will make sure that the company is not part of any portfolios that we manage ourselves, either by not buying securities in the company or by selling any securities we own. Socially responsible management is always a topic when we hire external managers. We only enter into agreements with investment managers who have appropriate guidelines and a satisfactory investment history.
Through Oslo Areal, Gjensidige invests in environmental buildings and locations, in public transport hubs in particular.
Effect of our efforts In 2018, 15 companies were excluded from Gjensidige’s investment portfolio, while 13 previously excluded companies were re-included, some as the result of mergers. At yearend, a total of 91 companies had been excluded. They break down as follows based on the reason for exclusion (a company can be excluded for several reasons): In 2018, we contacted ten external fund managers about 29 companies that were on our list of excluded companies. This dialogue led to a decision to sell a management mandate, a fund manager selling a particular company and a change in an investment. New investment mandates that do not comply with the current SRI policy cannot be entered into.
New measures • Continuous efforts are made to improve existing processes and new measures in the area of socially responsible investments. We can exert the greatest influence through active dialogue on ESG criteria with our external fund managers, and incorporate ESG requirements in the mandates we establish. This dialogue will concern, as well as investments in individual companies and investment mandates, their exercise of ownership, reporting of their impact on the environment and other ESG perspectives in the underlying portfolio and their work on the UN Sustainable Development Goals. As illustrated, this work takes the form of setting criteria for and following up Gjensidige’s direct investments and establishing requirements to be used by external fund managers and following up these mandates. Investments are considered on an ongoing basis that aim to an even greater extent to help solve the current climate challenges through infrastructure investments in renewable energy.
• Oslo Areal actively follows up the ten immediate measures of the property sector’s roadmap towards 2050. Among other things, the Company has assessed uses for the properties’ roofs. Relevant measures include bee hives and solar energy systems.
5.5 Engaged employees What we do Gjensidige shall be an attractive workplace that attracts engaged and motivated employees. In order to be able to give our customers the help they need, our employees undergo thorough training in ethics, data protection, information security, knowledge of our products and management training in our own school. This is intended to enable us to treat customers with trust and respect, provide professional and ethical advice based on necessary qualifications and knowledge of the customer’s situation.
Wage growth for women and men is continuously measured and followed up. Any unexplained differences identified receive special followup.
Notification Reporting procedures are in place for employees who experience discrimination. Gjensidige has an equality and discrimination committee that convenes as necessary. The committee comprises staff from the HR department and employee representatives. It is the Group’s HSE manager who decides when to convene the committee. The committee held one meeting in 2016 , one in 2017 and one in 2018. The topic of these meetings was equal pay for women and men.
The Company management maintains a close dialogue with employee representatives in connection with restructuring processes. The company shall attend to those who are affected in the best possible way. This concerns everything from decisions, information, finding alternative positions in the company, to offering assistance from external advisers and finding new jobs for those who are made redundant.
Gjensidige has a range of measures and a special programme for entities with a high level of sickness absence. Our ‘Focus projects’ have had a great impact, leading to reduced sickness absence and greater employee satisfaction. Gjensidige has measures in place that help to ensure that older employees can continue working until they reach retirement age. The measures vary between countries. Examples of measures include the possibility of reduced working hours and extra holidays.
All our big office buildings are universally designed in order to accommodate employees with disabilities.
The work stations of all new employees are inspected as soon as possible by a physiotherapist or an occupational therapist, if practically possible. The purpose of this is to adapt the work station to avoid repetitive strain injuries, and to provide information about the prevention of health problems.
Special adaptation procedures have been adopted for employees who have or wish to prevent such problems arising.
Working environment issues are integrated in the annual employee satisfaction survey that is conducted among all employees to identify matters that require special attention.
All managers review the survey with their staff in cooperation with the HR department. Each department defines an action plan that is followed up by the respective managers.
General measures that are intended to promote health and a good working environment include: • Arrangements to facilitate cycling to work in the form of bicycle parking and changing rooms
Competenceraising to meet the needs of the future It is important to Gjensidige that everyone has the opportunity to develop in their job. We facilitate work across national borders in all the countries we operate in. This generates new perspectives, learning and a better result for our customers.
Gjensidige has a flat organisational structure and the Company believes that diversity and cooperation are important preconditions for building a good delivery culture and being attractive in the labour market of the future. We have implemented a development model that highlights that most learning – 70 per cent – takes place in connection with day-to-day tasks. The remaining 30 per cent comes from organised tuition and training.
The Gjensidige Customer and Brand School ensures that all employees have the necessary prerequisites for implementing the Group’s customer orientation strategy. The school’s main focus areas are sales, claims settlement and management. It offers courses and programmes that underpin our group strategy and requirements for certification of customer advisers.
Talent development It is important to Gjensidige to attract and retain skilled employees. The People Review enables senior managers to follow up developments in the talent pool for experts and managers. Internal mobility is facilitated for the purpose of broadening the employees ’ range of competence and specialised knowledge.
Gjensidige is highlighted as an attractive employer, both through digital channels and activities at relevant educational institutions, such as stands and presentations to students. In accordance with our employer branding strategy, we have established an internship scheme where students work for us for a whole academic year in order to gain relevant work experience. The work is intended to be relevant for their studies by putting theory into practice. Every year, we organise the Gjensidige Day at Gjensidige’s head office, which offers a varied programme for students.
Cooperation with educational institutions We have established a cooperation with BI Norwegian Business School, and sponsor their master’s programme in Analytics. The cooperation between BI Norwegian Business School and our analytics environment is an important means of showing students the job opportunities that are available in Gjensidige and in the insurance sector in general.
HR analysis It is important to Gjensidige to work in an analytical manner to secure a good factual basis for our HR-related decisions. An analytics team has therefore been established that cooperates with other analytics resources in the Group. In 2018, the analytics team has focused on the following topics: Employee surveys The Group’s annual employee surveys provide important feedback on whether our employees are engaged and motivated in their work. All managers receive feedback from their employees through a structured process. We see that it pays to involve individual employees in establishing measures that will help them to be happier at work.
Effect of our efforts • Employee satisfaction in 2018 shows a figure of 75 per cent, which is higher than the average for financial undertakings in Norway and the Nordic countries in all criteria.
• Gjensidige was fifth among the 60 biggest companies in Norway with respect to gender balance, according to EY’s She index.
• Sickness absence was 4 per cent in the Group in 2018.
• Number of occupational injuries: 2. • In 2018, 84 per cent of the Company’s employees in Norway were covered by collective agreements. In Denmark, 80 per cent of our employees were covered by collective agreements, and in Sweden 100 per cent.
• In 2018, we had 22 students in the internship scheme.
• Follow-up to ensure that all employees have relevant development plans in place based on analyses of Gjensidige’s needs.
Many sustainability elements are incorporated into the terms of our insurance policies, some of which are described below.
• Covering repairs of smashed mobile phone screens promotes reuse rather than a use and throw mentality.
Motor vehicles We have a number of initiatives to promote road safety, and we encourage safe and claim-free driving. Our bonus system rewards customers for safe and claim-free driving. We collaborate with other parties such as Trygg Trafikk in projects focusing on young people. Our liability insurance for motor bikes and cars covers the replacement of safety equipment such as helmets and child seats in the event of collisions. • Gjensidige’s learner driving app enables young people to log their driving practice, and it rewards extensive training.
Environmentally friendly car loans In cooperation with the Norwegian Automobile Federation (NAF), the member organisation for car owners, we have developed an environmentally friendly car loan for hybrid, hydrogen and electric cars. The loan is distributed by NAF and furnished by Gjensidige Bank.
Insurance for farmed animals and plant cultures The health of domestic animals and farmed animals in Norway is in a unique position, and we have the lowest use of antibiotics in Europe. The World Health Organization has highlighted antibiotic resistance as one of the most serious challenges facing the world’s population. Limiting the use of antibiotics is an important health measure, which is supported by the insurance product.
Life and health insurance Customers can use our services without necessarily having sustained a loss that warrants compensation. The services are available 24/7, and make day-to-day life easier for customers. • School robot – AV1 • Online doctor • Braive • Phone line for children and young people, and the
New measures • Develop more green products (1–4 years). • Make information about sustainable choices available.
We focus on making our services and products available in all digital channels. We have good processes for taking advantage of the opportunities digitalisation presents throughout the customer journey, from efficient CRM sales, digital marketing, digital product experiences, e-commerce, to mobile phones and social media.
Sharing economy: Platforms that allow consumers and businesses to exchange goods and services without traditional intermediaries can represent a risk to our business model. We have therefore taken a closer look at the threats and opportunities that the sharing economy entails. In 2018 we cooperated with the car sharing-company Nabobil about insurance for cars rented through their service.
Digital diversity: All user groups should be able to benefit from the services we offer to the market. It should be easy to reach Gjensidige despite different preconditions and disabilities. We therefore work systematically on meeting the requirements set out in the WCAG 2.0 standard, which provides guidelines on the universal design of web content.
• Percentage of digital customers – 73 per cent. • Percentage of digital sales in 2018 is 16.9 per cent
(Private Norway). • Percentage of claims reported online in 2018 is 70 per cent (Private Norway).
• Gjensidige’s ambition is to increase annual digital sales by 20 per cent by 2022.
5.8 A safer society – social commitment What we do Collaborate with non-profit organisations Gjensidige collaborates with the Church City Mission on creating a better and safer local community. This involves making a financial contribution to the Church City Mission, and various activities that engage our employees. In 2018, employees from several of our offices all over the country contributed to the Church City Mission's knitting campaign which it runs before Christmas every year. It aims to create ‘a warmer society’ by raising money for a Christmas celebration for disadvantaged people. In 2018, we held a gift-raising event where employees could donate used items in good condition to those in need, via the Church City Mission. Employees also participate in various activities under the auspices of the Church City Mission, including homework help and chess courses for children.
Gjensidige’s social commitment in Norway must be seen in conjunction with the Gjensidige Foundation, our biggest owner. The Foundation makes substantial donations that are funded by the return on the capital that was freed up in connection with the stock exchange listing of Gjensidige Forsikring in 2010.
Sponsorships Since 1991, we have been the main sponsor of the Norwegian women’s national handball team. Since 2017, we have also been the main partner of the Norwegian Confederation of Sports (NIF) / Olympiatoppen and its 15 individual sports federations, and we have sponsorship agreements with the Norwegian Ice Hockey Association, the Norwegian Swimming Federation and the Norwegian Athletics Association.
• Annual donations to the Church City Mission: NOK 300,000, and NOK 75,000 to the project ‘i arbeid’ and a further NOK 150,000 in connection with the year's TV Telethon.
• Use sponsorship agreements with sports associations to give more children and young people the opportunity to take part in activities.
Personal data shall only be used and stored for as long as this is necessary, and must then be erased, unless special exemptions are authorised by law.
Insurance Distribution Directive (IDD) The IDD safeguards consumer protection by, among other things, ensuring customers receive good information and that our customer advisers have the right expertise.
Ethical and customer-friendly business operations Gjensidige shall have a corporate culture where each individual employee exercises good judgement. Our value creation shall take place in accordance with our ethical guidelines, which are set out in a number of policy documents that are adopted by the Board and managed by the EVP of Group Staff and General Services.
The risk of criminal offences and violations of our Code of Conduct is monitored as part of our internal control system. The Board has chief responsibility for risk management and internal control, and the CEO is responsible for the implementation. Our most important risk areas and internal control are reviewed annually by the Board. Risk management and internal control are described in more detail on pages 47 and 76 and in Note 3.
3. The third level is the Norwegian Financial Services Complaints Board (Finansklagenemnda), which is a joint complaints board for the whole insurance industry that comprises representatives of the consumer authorities, the financial industry and independent experts. Its composition ensures that independent representatives decide the outcome of cases in which the consumer authorities and the financial industry disagree.
Whistleblowers are protected by law and the Company ’s internal regulations, and employees who report such matters shall not be subjected to reprisals. Notifications addressed to the external mailbox are in principle anonymous, unless the whistleblower chooses to give their name. Employees may submit notifications to this mailbox anonymously, as may customers, suppliers and other external stakeholders. Notifications of irregularities or malpractices are dealt with by Gjensidige’s Internal Investigation Unit. The department carries out a preliminary investigation or assessment based on the content of the notification. If the assessment uncovers matters that warrant criticism, the HR department will take over the case, assess it and decide which sanctions to impose. The CEO will decide whether to report employees to the police.
Money laundering and financing of terrorism Gjensidige is obliged to take a risk-based approach to money laundering and financing of terrorism in relation to its customers, based on the customer relationship and the type of products and transactions involved. In practice, this means that we carry out a risk assessment in connection with the sale of insurance to new and existing customers, and with the payment of claims. The risk assessment is comprehensive, and is based on characteristics of the customer, the customer relationship, the product, the transaction and other matters of relevance.
All customers are checked against sanction lists and lists of politically exposed persons. The risk assessment may result in more extensive customer due diligence measures. Customer service staff are subject to clear guidelines for when such measures shall be initiated, and how to handle such a situation. If such measures fail to clarify the situation, the Company will carry out more detailed investigations in order to clarify whether the transaction can be carried out. The investigations are carried out by the Company’s investigation department, which comprises employees who have previously worked in the police force, and have expertise in and experience of investigation. In cases where there is a sufficiently strong suspicion of money laundering or financing of terrorism, Gjensidige will report the matter as a suspicious transaction to the Norwegian National Authority for Investigation and Prosecution of Economic and Environmental Crime (Økokrim). If money laundering or financing of terrorism can be substantiated, the Company will not enter into the insurance contract or settle the claim, to the extent that such sanctions are permitted by law.
The money laundering regulations for banking and investment services deviate slightly from the insurance industry. Separate money laundering instructions have been established for Gjensidige
Risk management • Group policy for risk management and internal control • Information security policy • Underwriting policy
Asset management: • Group policy for SRI – ethical investments • Group instructions for SRI – ethical investments
Money laundering • Group policy for money laundering • Job instructions for the anti-money laundering officer
Bank, as well as clear procedures for uncovering and dealing with suspected money laundering. An anti-money laundering officer has been appointed, who follows up cases that the customer service staff cannot resolve themselves.
Effect of our efforts • The Internal Investigation Unit assessed 48 cases in 2018 (2017: 48) concerning suspicion of malpractices or irregularities. Of these cases, 15 resulted in verbal cautioning or a stronger reaction.
Customer complaints • The Financial Services Complaints Board received 297 complaints from Gjensidige customers in the first nine months of 2018. This equalled 12 per cent of the total numer of complaints to the Board. Gjensidige's market share in 2018 was approximately 25 per cent.
Financial Disclosure) in annual reports (1-2 years). • Group policy for sustainability.
Pay and employee benefits NOK millions 2,982 2,803 2,261 2,432 2,163
CO2 emissions, Scope 1 and 2 2 Tons 5,426 5,354 5,150 5,456 7,277
Employees, proportion men/women 3 Per cent 52/48 52/48 53/47 52/48 50/50
Number of excluded companies Number 91 89 85 80 85 1 Based on the Board’s proposal. 2 Emissions for 2014 deviates from reported emissions in the Annual report for 2014, when Norwegian only emissions were reported. 3 Norway, Denmark and Sweden.
BBB BBB D Best reputation in Norwegian Finance Industry Most sustainable brand in Norwegian insurance industry
Most digital insurance company in Norway Best gender balance among Norwegian companies Most attractive employer in the insurance industry
The Board’s statement on corporate governance is set out below. It complies with the structure adopted by the Norwegian Corporate Governance Board (NUES). The statement also meets the information requirements set out in Section 3-3b of the Accounting Act and Section 5-8a of the Securities Trading Act. It is available at www.gjensidige.no.
The Articles of Association do not contain provisions that deviate from Chapter 5 of the Public Limited Liability Companies Act. The information requirements in the Accounting Act are integrated into the statement below where appropriate. This also applies to information about shareholder matters.
1. Statement on corporate governance This statement is based on the principle of ”comply or explain”. There are no major deviations. However, in line with the requirements of the Code of Practice, we nonetheless include a statement on each point in accordance with the Code of Practice of 17 October 2018. Minor deviations are noted and explained.
The Board sets clear objectives for the business with a view to creating value for shareholders. The objectives take society at large into account; see the separate statement on corporate social responsibility on page 22–49. The objectives are revised and adopted annually. Objectives for the coming year are revised and determined annually towards the end of the current year.
Gjensidige’s solvency and capital needs are, in principle, defined by the rules adopted by the authorities. The standard requirements that have been adopted are based on average figures. The Board wishes solvency and capital requirements to be defined in relation to Gjensidige's actual exposure at all times, and it has therefore invested considerable resources in the Group's own internal model, which provides continuous, qualified information about solvency and capital needs. The model has been approved by the Financial Supervisory Authority of Norway, and it gives the Board a good, relevant basis for making decisions in the areas it covers. The Board has also decided that Gjensidige shall meet the requirements for an A-rating, which also has implications for its final solvency and capital decisions.
The Board also believes that it is expedient for the Board to be authorised to purchase own shares, partly to fulfil the Group’s share savings programme and remuneration schemes for employees, and partly so that shares can be used as a consideration in connection with the acquisition of businesses or for subsequent sale or cancellation. Such authorisation must be decided by the General Meeting and will apply until 30 June the following year.
Deviation: NUES recommends that the grounds for such authorisations should be explained and that they should be limited to defined purposes. The Board fundamentally agrees with NUES, but believes that a certain degree of flexibility is necessary. As long as the authorisations are clearly limited in time and scope, and, in reality, merely adjust and rationalise the undertaking's capital structure, the Board’s management authorisation should include powers to make such decisions rather than having to hold an extraordinary general meeting.
4. Equal treatment of all shareholders Shareholders’ pre-emption rights in connection with an increase in share capital is an important and fundamental right in a good, harmonious shareholder community, and the pre-emption right can only be waived in exceptional circumstances. Waiving of this right will be based on the Company’s and shareholders ’ mutual interests. In such case, there will be full openness about the matter, and the shareholders will receive identical information simultaneously through a stock exchange announcement and subsequently on our website.
Transactions between related parties and group companies must take place on commercial terms, and on the basis of an independent evaluation if the transaction is not immaterial.
However, there are so many shareholders in Gjensidige that it is not possible in practice to hold a physical meeting where they can all participate. A considerable amount of work is therefore put into preparing items, and into facilitating powers of attorney and the possibility to vote without attending the physical meeting. The meeting itself is broadcast in real time.
The Board has noted that NUES recommends that efforts should be made to make it possible to vote for individual candidates to the Board and Nomination Committee. Elections are demanding in financial
Deviation: NUES recommends that efforts should be made to make it possible to vote for individual candidates to the Board and Nomination Committee. Elections are demanding in financial undertakings, partly because of official suitability requirements and partly because of the requirements of the board’s combined expertise. The election is therefore organised such that the General Meeting votes on the Nomination Committee's overall recommendation.
In financial undertakings, the General Meeting elects the chair of the board. One of the board members elected from among the employees therefore takes part in discussions and decisions on the recommendation for chair of the board. This is by our own choice, and it is in accordance with the principle of workplace democracy that generally prevails in Norway.
The Nomination Committee also submits a recommendation for the election of the auditor to ensure that this election is also independent of the
The Nomination Committee is easily accessible to shareholders, and the process is subject to deadlines to ensure that the views of all shareholders are made known before the relevant discussions take place in the Nomination Committee.
8. The Board In the Board's opinion, the composition of the Board safeguards the interests of the shareholders as a whole, and the Company’s needs for competence, capacity and diversity.
At least two of the shareholder-elected members are independent of the Company’s main shareholder. The Company’s main shareholder, the Gjensidige Foundation, assumes that the chair of the board shall be independent of the Gjensidige Foundation and have the same relationship to all shareholders.
The shareholder-elected board members are elected, in accordance with the Articles of Association, for one year at a time. The employee representatives are elected for two years at a time.
9. The work of the Board The Board plans nine pre-arranged board meetings per year, including at least one two-day strategy seminar. Two extraordinary meetings were also held electronically in 2018. Good and efficient procedures have been established for extraordinary board meetings.
In accordance with the Financial Institutions Act, the Company has established four independent control functions that each play a key role within their areas of responsibility – a Risk Management function, a Compliance function, an Actuary function and the Internal Audit function. Those involved are all employees of the Company. The internal auditor – the head of the Internal Audit function – is appointed by the Board, which also decides the auditor's salary, and has a special position as the Board’s most important control officer. The others are appointed by the CEO. The functions are presented in more detail in note 3. The Board emphasises that these functions have a close relationship with the Board through board work and reporting, and, in particular, the work in the board committees.
In the Board's opinion, the control environment is good and functions as intended. The frameworks for the assessment of risk – identification and qualification of risks – are continuously quantified and evaluated. Control activities and the coordination of the different control environments are adopted annually by and in consultation with the Board. The Board’s Audit Committee is responsible for information, communication and risk monitoring.
11. Remuneration of the Board None of the board members have share options or other incentives issued by the Company. Their remuneration is decided by the General Meeting, on the Nomination Committee’s recommendation, and is described in Note 8. Reference is made to the Nomination Committee’s presentation, assessment and proposal, available at www.gjensidige.no.
13. Information and communications The Board has adopted an IR policy for the Company’s reporting of financial and other investor information. It is based on openness and takes into account the requirement for equal treatment of shareholders and other stakeholders in the securities market. The IR policy is published at www.gjensidige.no.
The Board points out that the Gjensidige Foundation owns more than 60 per cent of the shares, and that a takeover bid process would therefore be unusual. However, the Board is prepared to engage in such dialogue out of consideration for the shareholders as a whole, and to take part in value-creating discussions with any parties with interesting value propositions.
Claims incurred were affected by the weather in 2018, with a long, harsh winter, an unusually dry and warm summer, and storms and heavy rainfall in the third quarter. This led to weather-related deviation in frequency claims estimated to NOK 530–660 million compared with historical average levels. The weather conditions also led to an increase in disbursements linked to large losses, compared to the year before, but the level was nonetheless lower than that normally expected. The run-off gains were higher than expected.
The return on financial assets was 1.5 per cent, or NOK 0.8 billion, compared to 3.7 per cent or NOK 2.0 billion the year before.
The business Gjensidige Forsikring ASA (Gjensidige Forsikring) is a general insurance company with operations in the Nordic region and the Baltic states. The Company’s head office is in Oslo in Norway. The object of the business is to safeguard life, health and assets for customers in the private and commercial markets by offering insurance on competitive terms. In Norway, we also offer banking, pension and savings products and services. We build stronger relations by offering customers a broad range of products and services. Gjensidige Forsikring is the parent company of the Gjensidige Group (Gjensidige).
The Gjensidige Insurance Group delivered a profit in 2018 marked by an unusually high number of weather-related claims and high run-off gains. Customer satisfaction increased to a record level, and competitiveness remained good in Norway.
In recent years, user-friendly self-service solutions have become an increasingly important precondition for delivering good customer experiences. Customers increasingly prefer to buy insurance and report claims digitally.
In 2018, we made it easier to buy insurance at gjensidige.no by improving graphic design, a simpler language and making it easier to compare different types of insurance. There was a significant increase in insurance sales through this channel compared with 2017.
We are still finding that many customers start their insurance search online, but go on to buy insurance over the phone. We invest a great deal of work in analysing why the digital purchase process comes to a halt, and in developing measures to make it easier and safer for customers to complete the process online.
Market position Gjensidige was the biggest player in Norwegian non-marine general insurance also in 2018. According to Finance Norway’s statistics, Gjensidige had a market share of 25.8 per cent of a total market of just over NOK 58 billion at the end of the third quarter. The market share increased slightly during the year. Gjensidige prioritises profitability ahead of growth, and the market share development reflects its continued strong competitiveness.
Gisele Marchand (1958) was elected as chair in 2018 and has been a member of the Board of Gjensidige since 2010. She is chair of the renumeration committee and member of the risk committee. She is a board member and chair of the audit committee of Norgesgruppen AS. Further on she is chair in Selvaag Bolig ASA, as well as chair of the renumeration and audit committees. She is also a board member of Eiendomsspar AS, Victoria Eiendom AS, Scatec Solar ASA and Boligbygg Oslo KF. She has previous experience from several Boards, e.g. Norske Skog ASA and Oslo Børs AS.
Marchand has previously been CEO of the law firm Haavind AS, Eksportfinans AS, the Norwegian Public Service Pension Fund, the Bates Group and an EVP of Den norske Bank, where she had the responsibility for private- and commercial customers in Norway. She is a graduate of Copenhagen Business School.
In the Baltic general insurance market, Gjensidige had a market share of 8.3 per cent at the end of the third quarter. (Sources: Insurance Supervisory Commission of the Republic of Lithuania; Latvian Insurers Association; Statistics Estonia, Gjensidige, all third quarter 2018).
The market share for group unit-linked defined contribution pensions was 9.2 per cent. (Finance Norway, third quarter 2018)
The customer portal gjensidige.no plays an increasingly important role in relations with our customers. In the portal, private and commercial customers can see an overview of their insurance policies. They can manage their customer relationship themselves, for example by reporting a claim or keeping track of case processing on the internet. A considerable proportion of sales to private customers in Norway is now initiated at gjensidige.no. Customer surveys show that the proportion of customers who use digital platforms for the whole or part of the purchase process rose throughout 2018. The proportion was 74 per cent in the last quarter, which was up from 58 per cent in the corresponding period in 2017.
Baltics The most important distribution channels in the Baltic states are direct sales via offices, networks, brokers, price comparison services, agents, partners and customer centres. Sales via the internet are increasing, but still make up a small proportion of overall sales. Gjensidige aims to continue to develop cost-efficient, multi-channel distribution models in the Baltic market, with the emphasis on web-based solutions and telephony.
Other Gjensidige is also positioned to deliver products adapted to other distribution channels, both in Norway and in the other Nordic countries. Distribution largely takes place through agents and via business partners such as shops and car dealers that wish to expand their product range with insurance products under their own label (‘white label’).
Gjensidige Pensjonsforsikring cooperates closely with Gjensidige Forsikring on the distribution of pension and accident and health insurance agreements to Norwegian companies and private individuals. At the end of 2018, 70 per cent of customers in Gjensidige Pensjonsforsikring were also customers in Gjensidige Forsikring. Around a third of our small and mediumsized commercial customers who have accident and health cover in Gjensidige Forsikring were also customers in our pension operations. This confirms successful cross sales and a good potential for further growth in our pension operations. Gjensidige Pensjonsforsikring is the only player in the market that that offers funds exclusively managed externally, and it has highly efficient solutions for membership administration and information about pension rights.
Technology and infrastructure Customers’ use of smart phones and the development of new data tools together represent a pressing need for technological changes in the insurance industry.
Good digital user experiences also require our work processes to be standardised and automated to a great extent. Gjensidige has made considerable investments in expertise and technology, which are prerequisites for ensuring market-leading solutions for our customers. Among other things, we have recruited a considerable number of employees with technology expertise, to secure control of strategic knowledge.
We used the introduction of the new General Data Protection Regulation (GDPR) to upgrade procedures and processes for collecting, storing and processing data.
We have developed a joint design system for all digital development in the Company. This facilitates more holistic customer experiences, more efficient development and reuse of solutions. This enables us to scale up and introduce successful solutions more quickly in more business areas.
We were ranked at the most digital insurance company in Norway in the consultancy company BearingPoint’s report ‘Digital leaders in Norway 2019’. This shows that our work in this area has been noticed, but we are also well aware that new, major initiatives will be needed in the years to come.
The year 2018 More extreme weather and poorer motor insurance profitability in Norway The profit in 2018 was affected by extreme weather in Norway. The winter season at the start of the year was relatively cold with a lot of snow, which led to a higher number of collision claims for motor vehicles, an increase in the number of building fires and an increase in the number of buildings wholly or partly damaged by snow on their roofs. The summer was unusually warm and dry, which resulted in increased disbursements to agricultural customers due to crop failures. There were a number of periods of heavy precipitation in autumn, which resulted in a considerable number of water damage claims. We sent almost twice as many weather warnings to customers in 2018 as we did in 2017.
Customer satisfaction, which was already at a very high level, rose to its highest level ever. Market surveys also show that Gjensidige is the first choice for a much larger share of the market than any of its competitors in Norway.
The operations outside of Norway showed continued progress, and the ambition to yield a profit in 2018 in Sweden and the Baltics was achieved. Going forward
Gjensidige Bank sold to Nordea In summer 2018, Gjensidige entered into an agreement to sell Gjensidige Bank to Nordea. The parties agreed, at the same time, to enter into mutual cooperation on the distribution of banking and insurance services in the Norwegian market. The agreed purchase price was NOK 5.5 billion, subject to certain adjustments based on the per formance of the bank until closing of the transaction. The takeover is expected to take place is the first quarter 2019.
Financial targets were met in 2018, with the exception of the combined ratio. The combined ratio adjusted for run-off gains above the expected level, was higher than the target range as a result of higher claims incurred linked to the extreme weather in Norway and weaker profitability of motor insurance in Norway.
Maintained high Maintained 500 million Maintain high Maintained 1 Target communicated at Capital Markets Day 25 November 2014 2 Private Norway
3. We shall increase sales efficiency by 10 per cent, through, among other things, a larger proportion of digital sales and more analytical CRM.
4. We shall increase the percentage of digital claim reports in Norway, and in the longer term, in Denmark, Sweden and the Baltic states to 80 per cent. Better customer analyses and increased digitalisation have been important focus areas in 2018, and will remain so going forward in order to reach these goals.
Business intelligence and analytics The ability to analyse large quantities of customer data, and translate the analyses into insight, is vital to competitiveness in general insurance.
We use advanced data analysis in all areas of the insurance business, including product development, pricing and underwriting, marketing and sales, and claims processing.
Giverholt is Chair in Ortomedic AS and Lillevold og Partners AS. He is a board member of Aars AS, A Wilhelmsen AS, CEK Holding AS, Fredensborg Eiendom AS and GammelNok AS.
We are convinced that our initiatives will help increase customer satisfaction and cost-efficiency.
Satisfied, loyal customers Brand recognition for Gjensidige in the Norwegian market is stable and very high. Half the population would consider Gjensidige when buying insurance. Moreover, Gjensidige has the strongest reputation in the industry and is among the ten companies in Norway with the best reputation regardless of industry, according to Ipsos’ annual survey.
Loyalty among our customers in Denmark was stable in 2018. There is still a potential for developing longer-lasting customer relationships in both the private and commercial markets. This also applies to our business in Sweden and the Baltic states.
Since 2005, Gjensidige has acquired a considerable number of small and medium-sized companies and/or portfolios in the Nordic region and the Baltic states. The acquisition of complementary companies and portfolios enables us to utilise best practice across the Group and increase diversification. Size and scale are expected to be increasingly important going forward to meet increased needs for investments in technology and expertise, and to be able to navigate a future characterised by more extensive regulatory requirements and new ecosystems.
Changed framework conditions Solvency position Gjensidige has applied for approval of a partial internal model (PIM) for calculating the regulatory capital requirement for parts of the business. The model was approved in 2018. The approved model is more conservative than the model Gjensidige originally applied for. Gjensidige has decided to accept the approval, but will continue to make efforts to get Gjensidige’s own version of the partial internal model approved. The internal model, as defined by
Pursuant to the transitional arrangement, life insurance companies can transfer the profit from their customer portfolio to the profit and loss account. The account is written down by 20 per cent each year. Gjensidige Pensjonsforsikring has added NOK 249.8 million to this account, 20 per cent of which is taken to income each year. The figure comprises temporary differences in the customer portfolio from 2017, and the profit for the year from the customer portfolio.
Vibeke Krag (1962) has been a member of the Board of Gjensidige since 2018. She is previously CEO of Codan Forsikring A/S, General Counsel of the Codan Group, Lawyer and Partner at Eversheds LLP, Head of Legal at Forstædernes Bank A/S.
For the investment portfolio, the return on financial assets was 1.5 per cent (3.7), or NOK 820.9 million (2,002.6). The result was negatively affected by the weak development in the stock markets and increasing margins (widening of spreads) for credit, which negatively affected the bond portfolio.
Run-off gains/(losses) 3 2,356.9 1,030.3 1 Large losses in excess of NOK 30.0 million are charged to the Corporate Centre, while claims of less than NOK 30.0 million are charged to the segment in which the large losses occur. As a main rule, the Baltics segment has a retention level of EUR 0.5 million. Large losses allocated to the Corporate Centre amounted to NOK 202.9 million (220.6) for the year as a whole. Accounting items related to written reinsurance and reinstatement premium are also included.
account, are estimated to be between NOK 530 and 660 million. There were also a higher number of large losses than last year, partly driven by the weather conditions. However, the overall level of large losses was still slightly lower than the level expected in the long term.
With the exception of claims provisions relating to the Danish workers’ compensation portfolio and accident and health claims in Swedish third-party liability motor insurance, Gjensidige’s claims provisions are recognised at nominal value (not discounted ). For 2018, the combined ratio on a discounted basis would have been 84.0, compared with 84.8.
Expenses for research and development have not been charged to income in Gjensidige’s consolidated accounts in 2018 or 2017. Nor have such expenses been capitalised during these two financial years.
Balance sheet and capital base The Group’s balance sheet total at year-end 2018 was NOK 156,762.9 million (149,072.4). This increase was mainly attributable to volume growth in the Retail Bank and Pension segments. Equity amounted to NOK 23,845.2 million (23,703.1) as of 31 December 2018.
In the first quarter 2018, the Financial Supervisory Authority of Norway approved Gjensidige’s partial internal model for calculating the regulatory requirement, however with terms that result in a somewhat higher capital requirement than Gjensidige originally applied for. The solvency margin based on the approved partial internal model was 169 per cent, while it would have been 190 per cent based on Gjensidige’s own partial internal model. The solvency margin, corrected for the sale of Gjensidige Bank ASA, was estimated to be 245 per cent. The solvency margin for 2017 based on the standard formula was 138 per cent, while it came to 169 per cent using Gjensidige’s own partial internal model.
The solvency margin has been adjusted for the Board’s dividend proposal of NOK 3.55 billion for the 2018 financial year.
Off-balance sheet commitments and derivatives As part of the Group’s investment activities, an agreement has been entered into for the investment of up to NOK 702.2 million (1,392.5) in loan funds with secured loans and various private equity and property fund investments, in addition to the amounts recognised in the balance sheet. In addition, Oslo Areal has a credit facility of a total of NOK 4 billion, of which NOK 2.5 billion had been used as of 31 December 2018.
The net cash flow from operational activities was negative in the amount of NOK 1,891.7 million (plus 1,718.1) in 2018. The change in the cash flow in 2018 can largely be ascribed to the considerable decline in deposits from customers in banking operations.
Claims incurred amounted to NOK 5,720.7 million (5,226.2). The loss ratio was 65.3 (61.4), negatively impacted by frequency claims and large losses, partly offset by higher run-off gains. The loss ratio for motor increased as a result of the difficult driving conditions during the winter as well as underlying claims inflation driven by structural changes in the
Earned premiums 8,762.5 8,516.5 Claims incurred etc. (5,720.7) (5,226.2) Operating expenses (1,106.9) (1,090.3) Underwriting result3 1,934.8 2,200.0
Norwegian vehicle fleet and the new bonus model, which reduces the threshold for reporting claims. Significant pricing measures were initiated at the start of the year to mitigate the effects of claims inflation. The measures typically take 12-24 months to be fully reflected in the accounts. The expectation of reaching a turning point as regards motor profitability during the first half of 2019 remains unchanged. Property showed an increase in the loss ratio following the harsh and long-lasting winter, with significantly larger amounts of snow in the southern and south-eastern parts of Norway, regions where Gjensidige has a high market share. The loss ratio for property insurance was further impacted by fires and water damage related to the dry summer followed by heavy rainfall and storms towards the end of the third quarter.
General Insurance Commercial The underwriting result was NOK 1,548.2 million (1,634.8). The decrease was mainly driven by an unfavourable underlying frequency claims situation mainly driven by the extraordinary weather conditions in Norway and an increase in large losses, partly offset by a significant increase in run-off gains. The combined ratio was 79.6 (77.6).
Claims incurred amounted to NOK 5,182.8 million (4,825.6), which correspond to a loss ratio of 68.2 (66.1). This increase, despite the significantly higher run-off gains, was primarily driven by motor, property and agriculture lines of business.
The hot and dry weather during the summer resulted in significant damage to agricultural crops in Norway. Damage to crops in Norway related
to drought is to a large extent covered by the Norwegian Government. However, Gjensidige covers part of the damage, over and above compensation from the Government. Gjensidige recorded a claims cost of NOK 80 million relating to crop damage in the third quarter 2018.
Earned premiums 7,603.3 7,300.5 Claims incurred etc. (5,182.8) (4,825.6) Operating expenses (872.3) (840.1) Underwriting result3 1,548.2 1,634.8
Claims incurred amounted to NOK 3,766.2 million (3,863.0). Adjusted for currency effects of NOK 100.0 million, claims incurred decreased significantly compared with the same period in 2017. The loss ratio improved to 76.8 (80.0). driven by higher run-off gains and lower large losses, as well as a somewhat improved underlying frequency claims situation. In particular property and accident and health insurance contributed positively.
Operating expenses increased to NOK 704.0 million (680.3) of which currency effects accounted for NOK 17.7 million. The cost ratio was 14.4 (14.1).
Earned premiums decreased to NOK 1,569.2 million (1,736.1), of which NOK 56.7 million was attributed to currency effects. The decrease was mainly the result of repricing measures in the private insurance lines.
Claims incurred decreased to NOK 1,231.7 million (1,491.9), of which NOK 48.7 million was due to currency effects. The loss ratio improved to 78.5 (85.9), partly driven by higher run-off gains and partly by a better underlying frequency claims contribution from
Earned premiums amounted to NOK 4,904.6 million (4,827.4). Adjusted for currency effects of NOK 125.3 million, earned premiums decreased some what, as a result of pricing and risk selection measures in the commercial portfolio. This was partly offset by growth in the private insurance lines.
Amortisation and impairment losses of excess value – intangible assets (159.0) (153.1)
Earned premiums 1,569.2 1,736.1 Claims incurred etc. (1,231.7) (1,491.9) Operating expenses (259.3) (335.8) Underwriting result3 78.2 (91.6)
Amortisation and impairment losses of excess value – intangible assets (70.2) (71.1)
2 Run-off gains/(losses) = changes in estimates from previous years 3 Defined as alternative performance measure (APM). APMs are described on www.gjensidige.no/reporting in document named APMs Gjensidige Forsikring Group 2018
Operating expenses decreased to NOK 259.3 million (335.8), of which NOK 11.0 million of the decline being due to currency effects. The underlying improvement was due to the integration of Vardia’s operations. The cost ratio improved to 16.5 (19.3).
Earned premiums amounted to NOK 1,078.8 million (1,074.7). Currency effects increased earned premiums by NOK 31.1 million. The decrease, adjusted for currency effects, was the result of portfolio restructuring and repricing. Sales growth initiatives through low-cost channels such as the web, own call centres and new partnerships are expected to gain traction during 2019.
Earned premiums 1,078.8 1,074.7 Claims incurred etc. (675.9) (736.0) Operating expenses (334.4) (345.9) Underwriting result3 68.5 (7.2)
Amortisation and impairment losses of excess value – intangible assets (14.5) (14.5)
Large losses 1 Run-off gains/(losses) 2 24.4 22.0 1 Large losses = loss events in excess of EUR 0.5 million. Claims incurred in excess of this per event are as a rule charged to the Corporate Centre.
Kronhold Sjøberg is up for election to the Board in 2019.
Net financial income, including returns on both the group policy portfolio and the corporate portfolio, amounted to NOK 40.2 million (29.7). The improvement was related to an increased return on financial assets, particularly property, as well as a release of excess longevity results in the fourth quarter.
Administration fees 144.4 134.6 Insurance income 72.6 36.3 Management income etc. 150.5 130.4 Operating expenses (241.0) (227.3) Net operating income 126.5 74.0 Net financial income 40.2 29.7 Profit/(loss) before tax expense 166.6 103.7
Recognised return on the paid-up policy portfolio 3 5.61% 3.75% Value-adjusted return on the paid-up policy portfolio 4 4.30% 4.47%
1 Run-off gains/(losses) = changes in estimates from previous years 2 Defined as alternative performance measure (APM). APMs are described on www.gjensidige.no/reporting in document named APMs Gjensidige Forsikring Group 2018 3 Recognised return on the paid-up policy portfolio = realised return on the portfolio 4 Value-adjusted return on the paid-up policy portfolio = total return on the portfolio
The profit before tax expense decreased to NOK 447.3 million (612.3). Adjusted for non-recurring items in 2017 (impaired portfolio sale and change in probability of default and loss given default) and 2018 (impaired and written-off portfolio sale, termination of the distribution agreement, costs as a consequence of the sale of the bank and a correction of individual loan loss3 provisioning) profit before tax expense amounted to NOK 384.2 million (445.0). The decrease was mainly driven by higher expenses and lower income.
Net commission income and other income amounted to minus NOK 15.7 million (plus 42.9). The decrease was the result of higher acquisition costs driven by business growth and losses on financial instruments.
The cost/income ratio increased to 48.6 per cent (39.8), driven by the decrease in income and increased expenses.
Total write-downs and losses amounted to NOK 70.0 million (10.3). The increase was driven by the non-recurring items mentioned above. Excluding these items, total write-downs and losses amounted to NOK 156.4 million (156.0).
Write-downs and losses were 0.14 per cent (0.02) of average gross lending. Adjusted for non-recurring items, write-downs and losses were 0.32 per cent (0.36) of average gross lending.
3) Following a comprehensive loan-by-loan review of the impaired car loan portfolio, individual write-downs have been adjusted upwards. The increased individual provisions are partly offset by a reduction in group provisions, but the net impact was minus NOK 30.9 million (negative earnings impacts).
Geographic distribution �xed income instruments in free portfolio at the end of 2018 41.8% Norway 2.2% Sweden 2.3% Denmark 38.2% USA 6.7% UK 1.6% Baltics 7.2% Other
Financial assets and properties Return in per cent Result Carrying amount 31.12.
Financial result from the invesment portfolio 1.5 3.7 820.9 2,002.6 52,816.0 54,860.2
At the end of the period, the investment portfolio totalled NOK 52.8 billion (54.9). The financial result as of the fourth quarter was NOK 820.9 million (2,002.6), which corresponds to a return on total assets of 1.5 per cent (3.7).
Match portfolio The match portfolio amounted to NOK 34.5 billion (35.6). The portfolio yielded a return of 2.0 per cent (2.8), excluding changes in the value of the bonds recognised at amortised cost. The lower result compared to the previous year was mainly due to widening of the credit spread on current bonds in the match portfolio. Bonds recognised at amortised cost amounted to NOK 15.7 billion (17.6).
Free portfolio The free portfolio amounted to NOK 18.3 billion (19.3) at the end of the period. The return was 0.6 per cent (5.3).
Fixed-income instruments The fixed-income instruments in the free portfolio amounted to NOK 8.8 billion (9.2), of which money market investments, including cash, accounted for NOK 3.7 billion (4.1). The rest of the portfolio was invested in international bonds (investment grade, high yield and convertible bonds). The total fixedincome portfolio yielded a return of minus 0.2 per cent (2.8). The increase in credit spreads was the main driver of the negative returns.
Equity portfolio The total equity exposure at the end of the period was NOK 3.8 billion (4.8), of which NOK 2.5 billion (3.5) consisted of current equities and NOK 1.3 billion (1.3) of PE funds. The return on current equities was minus 6.4 per cent (plus 15.1). The result was influenced by a non-recurring gain of NOK 57.5 million on the sale of a single stock holding. The negative return was driven by a weak market development for equities in general. MSCI World and emerging market equities declined approximately 8 per cent and 16 per cent respectively during the year. PE funds generated a return of 14.8 per cent (8.4).
Insurance risk The risk in individual insurance contracts is the probability of an insurance event occurring, and uncertainty concerning the size of the subsequent compensation amount. The insurance risk relating to special types of major risks or exposure is managed through authorisations and lines of reporting for ordinary operations. Clear guidelines have been drawn up for what insurance policies can be taken out. The risk of a generally unsatisfactory premium level is monitored on a continuous basis by the product and actuary department, and increasingly precise methods for pricing are being developed.
The statutory actuary function is carried out by the Group’s actuary department. The actuary function is responsible for controlling technical provisions, including that the data used to calculate technical provisions are of sufficient quality. It shall also state an opinion on guidelines for taking out insurance policies and reinsurance schemes in the Group. In order to ensure the actuary function’s independence, employees included in this function are not responsible for calculating the technical provisions. This is done by other employees in the actuary department. The head of the actuary function reports to the CEO.
Through the Board’s adoption of strategic allocations of assets with pertaining risk limits for the different risk types and a dynamic risk management model, limits are set that make it possible to rapidly adjust risk relating to changed macroeconomic assumptions. Price, interest rate and currency risk is also followed up through stress tests, where the buffer capital must be sufficient at all times to be able to withstand sharp falls in both equity and bond prices.
Limits have been defined for the necessary access to liquid assets. They are taken into account in the strategic allocation of assets. The liquidity risk is considered to be very low. The Group is exposed to credit risk through investments in the bond and money market and through lending. The Board has defined limits for the credit operations. Credit losses
have been insignificant to date. Outstanding claims against the Group’s reinsurers may also represent a substantial credit risk. Counterparty risk in the reinsurance market is continuously assessed. The Group’s reinsurers shall at least have an A rating from Standard & Poor’s or an equivalent rating from one of the other reputable rating companies.
An independent Compliance function has been established to help the Group avoid official sanctions, financial losses or a loss of reputation as a result of failure to comply with external and internal regulations. The Compliance function identifies, assesses, advises on, monitors and reports on the Group’s risk of non-compliance with laws, regulations and internal guidelines.
The Risk Management function shall help the Group to manage operational risk in accordance with requirements and expectations adopted by the Board. The Risk Management function identifies, assesses, advises on, monitors and reports on operational risk and undesirable incidents.
Ethical issues are discussed at training courses for new employees and they are also discussed regularly by management groups and at departmental staff meetings. This is intended to reduce the risk of breaches of procedures and guidelines, while also contributing to a good working environment.
Employees have also signed a personal data discipline statement relating to the use of the Group’s information and IT systems.
Gjensidige works actively to combat corruption, and a dedicated anti-corruption programme has been established to reduce the risk of irregularities and corruption. The programme consists of a combination of preventive activities, control and detection activities, and a clear and consistent follow-up and sanctions system.
In the insurance market, Gjensidige faces challenges from both traditional Norwegian financial players and new companies. Increased digitalisation and new business models entail new challenges. Emphasis is therefore placed on Gjensidige’s ability to quickly adapt to consumer demand for new service channels and its ability to utilise modern technology and support systems in an efficient manner.
Strategy and outlook The Group’s annual financial and solvency targets for the period 2019 through 2022, given disposal of the bank, are as follows: • Combined ratio between 86 and 89 per cent (undiscounted) • Corresponding to 90 to 93 per cent given zero run-off gains • Average annual run-off gains of ~NOK 1 billion are still expected through 2022 • Cost ratio <15 per cent • Solvency margin based on the Partial Internal
• Return on equity after tax > 20 per cent • Corresponding to > 16 per cent excluding run-off gains • Underwriting result outside Norway of NOK 750 million in 2022, excluding run-off
Initiatives to further improve profitability and growth outside Norway continue. New, profitable M&A opportunities will be considered in the Nordic region and the Baltic states.
Gjensidige is currently in a blue-print process for a new core system. The investment in a new core system is expected to be handled within the current cost ratio target, and will be made step-by-step, starting with Denmark, then Sweden and finally Norway.
The sale of Gjensidige Bank will, upon closing, have a temporary negative impact on the Group’s return on equity, until the proceeds have been reinvested in value-enhancing opportunities or returned to shareholders. The gain on the sale will be excluded from the basis for calculating the pay-out ratio for regular dividends.
Geopolitical uncertainty, low interest rates and financial challenges in several key economies, reflect an uncertain economic situation. The macroeconomic outlook in the Nordic region and the outlook for Gjensidige’s operations are still regarded as good.
There is always considerable uncertainty associated with the assessment of future developments. However, the Board remains confident in Gjensidige’s ability to deliver solid earnings- and dividend growth over time.
Other components of income and expense as presented in the income statement are not included in the allocation of profit.
Income statement .................................................... 140 Statement of financial position .................................. 141 Statement of changes in equity ..................................143 Statement of cash flows ............................................ 144
Notes 1. Accounting policies ...............................................145 2. Use of estimates ...................................................152 3. Risk and capital management ..............................152 4. Premiums and claims etc. in general insurance ......153 5. Shares in subsidiaries and joint ventures ................154 6. Net income from investments ...............................156 8. Salaries and remuneration ....................................158 11. Goodwill and intangible assets .............................. 166 12. Owner-occupied property, plant and equipment ....168 13. Financial assets and liabilities ................................169 14. Shares and similar interests ...................................173 15. Loans and receivables ........................................... 174 16. Insurance-related liabilities and reinsurers' share ....175 18. Hybrid capital .......................................................177 19. Provisions and other liabilities ................................177 20. Related party transactions ...................................178 21. Contingent liabilities..............................................179 22. Share-based payment ......................................... 180 23. Events after the balance sheet date ...................... 181
Declaration from the Board and the CEO ...................182 Auditor’s report .........................................................183
Notes 2. Use of estimates ................................................... 95 3. Risk and capital management .............................. 96 5. Shares in associates and joint ventures .................110 6. Net income from investments ............................. 111 8. Salaries and remuneration .................................. 113 11. Goodwill and intangible assets ............................ 122 12. Owner-occupied property, plant and equipment ..124 13. Financial assets and liabilities ...............................125 14. Shares and similar interests ................................. 129 15. Loans and receivables ......................................... 130 16. Insurance-related liabilities and reinsurers’ share ...131 19. Provisions and other liabilities .............................. 134 20. Related party transactions ..................................135 22. Share-based payment .........................................137 23. Events after the balance sheet date .................... 138 24. Earnings per share .............................................. 138 25. Discontinued operations ......................................139
Net changes in fair value on investments (incl. property) (502.8) (355.1)
Tax on other comprehensive income that will not be reclassified subsequently to profit or loss 9 12.7 85.1
Total transactions with owners of the company 0.0 8.8 25.2 22.0 (3,431.5) (3,375.6)
Equity as at 31.12.2018 attributable to the owners of the company
Cash and cash equivalents at the start of the year 2,685.2 2,158.7
¹ Including source-deductible tax account 91.7 85.9 hereof source-deductible tax account from discontinued operations 6.2 6.7
Gjensidige Forsikring Group (Gjensidige) as at and for the year ended 31 December 2018 comprise Gjensidige Forsikring ASA and its subsidiaries and Gjensidige’s interests in associates and joint ventures. The activities of Ggjensidige consist of general insurance, pension and banking. Gjensidige does business in Norway,
The accounting policies applied in the consolidated financial statements are described below. The policies are used consistently throughout Gjensidige with the exception of one difference that is permitted in accordance with IFRS 4 about insurance contracts.
Gjensidige implemented IFRS 15 at 1 January 2018. The standard establishes principles to report useful information about the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers. A five-step model to determine how and when revenues are recognised, but it does not apply to recognition of income from insurance contracts, financial assets or leases, which make up substantially all of the Group’s revenue streams, has been used. Other revenue streams, such as revenue from sale of goods, revenue from sale and dissemination of third party services and commission income constitute a negligible part of the revenue. For these revenues, the modified retrospective method of effects from first-time use is recognised on the day of implementation and without restating comparable figures. The new standard has not affected Gjensidige’s financial position, earnings or cash flows.
New standards and interpretations not yet adopted A number of new standards, changes to standards and interpretations have been issued for financial years beginning after 1 January 2018. They have not been applied when preparing these consolidated financial statements. Those that may be relevant to
Impairment provisions according to IFRS 9 shall be measured using an expected loss model, instead of an incurred loss model as in IAS
(less than 12 months) and leases of low-value assets are exempt from the requirements. A lessee shall recognise a right-of-use asset and a lease liability. The interest effect of discounting the lease liability shall be presented separately from the depreciation charge for the right-of-use asset. The depreciation expense will be presented with Gjensidige’s other depreciations, whereas the interest effect of discounting will be presented as a financial item.
Estimated expected amount to be recognised as a lease liability and right-of-use asset at the time of implementation is approximately NOK 1.2 billion. An estimate of the negative effect on equity will be about NOK 40 million.
To determine whether a contract contains a lease, it is considered whether the contract conveys the right to control the use of an identified asset. This is considered to be the case for rental contracts, leases for cars and some office machines, etc. However, the latter group is exempted for recognition due to low value. IT
Gjensidige has recognised its lease liabilities at the present value of the remaining lease payments, discounted using the lessee’s incremental borrowing rate at the date of initial application, as well as the recognition of related right-of-use assets to an amount corresponding to the lease liability. For the largest rental agreements in Norway, Sweden and Denmark, Gjensidige has chosen to recognise the right-of-use asset at the carrying amount as if the standard had been applied since the date of implementation, but discounted using the tenant's incremental borrowing rate at the date of initial application. The difference between this and the lease liability will be recognised directly in equity on 1 January 2019.
In accordance with IAS, 12 paragraph 57A, tax on equity items classified as liability for tax purposes is no longer classified as part of the equity transaction, but as part of the tax expense in income the income statement.
Gjensidige’s current operations, other amendments to standards and interpretation statements will not have a significant effect.
For companies with other functional currencies, balance sheet items are translated at the exchange rate at the balance sheet date, including excess values on acquisition, and profit and loss accounts at an annual average rate. Exchange rate differences are recognised in other comprehensive income.
Nordea on 2 July for the sale of Gjensidige Bank to Nordea,
Gjensidige Bank has been reported as a discontinued operation from the third quarter of 2018 and is no longer a separate segment in Gjensidige Group. The reported segment information therefore does not include amounts for Gjensidige Bank. See separate note 25 for more information.
Correspondingly, the group’s share of recognitions directly to equity in the underlying investment is presented in the Group's equity statement.
Business combinations Business combinations are accounted for by applying the acquisition method. The cost of the business combination is the fair value at the date of exchange of assets acquired, liabilities incurred and equity instruments issued by Gjensidige, in exchange for control of the acquired company, and any expenses directly attributable to the business combination.
If the fair value of net assets in the business combination exceeds the purchase price (negative goodwill), the difference is recognised immediately at the acquisition date.
Group’s business areas. Investment activities include the purchase and sale of assets that are not considered cash equivalents and which are not included in the Group’s primary activities. Financing activities include raising and repaying loans, as well as collecting and servicing equity.
Operating income and operating expenses consist of income and expenses in relation to the business in the different business areas, see below.
Operational lease contracts Leases, where the main part of the risk and return associated with ownership of the asset are not transferred, are classified as operating leases. Lease payments are classified as operating expenses and are recognised on a straight-line basis over the contract period.
Gjensidige intends to and has sufficient resources to complete the development and to use or sell the asset.
The technical provisions related to the unit linked contracts are determined by the market value of the financial assets. The unit linked contracts portfolio is not exposed to investment risk related to the customer assets since the customers are not guaranteed any return. In addition, there is a portfolio of annuity contracts which have an average 3.3 per cent annually guaranteed return on assets.
• the classification reduces a mismatch in measurement or recognition that would have arisen otherwise as a result of different rules for the measurement of assets and liabilities
The category financial liabilities at amortised cost comprises the classes subordinated debt, other liabilities, liabilities related to direct insurance and accrued expenses and deferred income.
regulations and the instruments are included in Gjensidige’s Tier 1 capital for solvency purposes. These regulatory requirements mean that Gjensidige has a unilateral right not to repay interest or the principal to the investors. As a consequence of these terms, the instruments do not meet the requirement for a liability in IAS 32 and are therefore presented on the line perpetual Tier 1 capital under equity. Further, it implies that the interest is not presented under
Correspondingly, seen in isolation, the benefit of the tax deduction for the interest will lead to an increase in other equity and not be presented as a deduction under the line Tax expense, since it is the shareholder who benefits from the tax deduction.
Loans, receivables and investments held to maturity For financial assets that are not measured at fair value, an assessment of whether there is objective evidence that there has been a reduction in the value of a financial asset or group of assets is made on each reporting date. Objective evidence might be information about credit report alerts, defaults, issuer or borrower suffering significant financial difficulties, bankruptcy or observable
Gjensidige annual report 2018 | 93 data indicating that there is a measurable reduction in future cash flows from a group of financial assets, even though the reduction cannot yet be linked to an individual asset.
Dividend from investments is recognised when the Group has an unconditional right to receive the dividend. Proposed dividend is recognised as a liability from the point in time when the General
New information after the balance sheet date of Gjensidige's financial position at the balance sheet date is taken into account in the financial statement. Events after the balance sheet date that do not affect the company's financial position at the balance sheet date, but which will affect the company's financial position in the future, are disclosed if this is material.
(income) are recognised in the income statement and are presented as an operating cost in the income statement. Net interest expense is calculated using the discount rate for the liability at the beginning of the period of the net liability. Net interest expense therefore consists of interest on the obligation and return on the assets.
Assets that meet the criteria to be classified as held for sale are measured at the lower of its carrying amount and fair value less costs to sell.
Since Gjensidige Bank represents a separate and significant business in Gjensidige, which is now sold, Gjensidige Bank is presented as a discontinued operation. See note 25 for further information.
Profit after tax expense from discontinued operations is presented on a separate line in the consolidated income statement.
Comparative figures have been restated. Net cash flows attributable to discontinued operations are presented on separate lines in the consolidated statement of cash flows. Comparative figures have been restated. Assets and liabilities held for sale are presented as separate lines in the statement of financial position.
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 16.
Introduction Gjensidige’s core business is general insurance, and the risk related to non-life and health insurance risk is therefore a major part of the risk Gjensidige is exposed to. Gjensidige is also exposed to life insurance risk through its operations in Gjensidige
Both committees are chaired by the Group CEO. Responsibility for the daily risk management is delegated to the responsible line managers in their respective areas.
All control functions in the second line of defence report directly to the CEO on subject matters.
The third line of defence is the group’s internal audit function, which monitors that the risk management and internal control system.
The Board has established an audit committee and a risk committee consisting of chosen Board members. The audit committee is tasked with preparing the Board’s monitoring of the financial reporting process, the systems for internal control and risk management, as well as the Company’s internal audit function. The risk committee is tasked with preparing the Board’s monitoring of risk and capital matters. While the audit committee has a retrospective perspective, the risk committee has a forward-looking perspective in relation to the company's strategy, risk appetite and risk capacity. The aim is to strengthen and increase the efficiency of the full Board’s discussions. In addition, a remuneration committee assists the Board in remuneration matters.
During the winter season snow and cold weather will cause an increase in the frequency of claims in Motor insurance. In Property insurance, a cold winter will cause an increase in the frequency of claims due to frozen water pipes and increased use of electrical power and open fire places for heating of the houses. Shifts in the level of claims frequency may occur due to e.g. change in customer behaviour and new types of claims. The effect on the profitability of a permanent change in the level of claims frequency will be high. In
Growth in severity of claims may, for example, be driven by the development of consumer price index (CPI) and salary increases.
In Property insurance, the severity of claims will be influenced by inflation and specifically by increased building costs, which in the past has been slightly higher than CPI. For accident and health, the insurance policies are divided into two main groups, one with fixed sum insured and another part where the compensation is adjusted in accordance with a public/government index (in Norway: ‘G’ - the basic amount in the National Insurance Scheme). This is the case in Workers’ Compensation, for instance. The Group writes Workers’
Compensation insurance in Norway and Denmark. The regulation of this line of business is quite different in these countries. In
At the end of the accident year 12,834.5 12,538.2 14,290.3 14,988.7 13,274.1 14,619.8 14,827.8 12,836.3 13,649.9 14,393.5 16,439.4 - Ten years later 11,988.5
At the end of the accident year 12,220.7 11,830.2 13,341.8 13,700.0 12,598.8 13,700.9 14,157.4 12,129.5 12,947.5 13,735.5 15,958.5 - Ten years later 11,381.9
Reserve risk and premium risk are both material risks. Lapse risk contributes only marginally to the total risk exposure for both the
Gjensidige Insurance Group and Gjensidige Forsikring ASA. For reserve risk, most of the claims provisions and related risk exposure
100 | Gjensidige annual report 2018 are related to lines of business exposed to personal injury, where it takes long time to settle claims. A large part of the reserve risk is related to lines of business such as “Workers' compensation insurance”, “Motor vehicle liability insurance” and “Income protection insurance”. For premium risk, the risk exposure is mainly related to “Motor insurance” and “Fire and other damage to property insurance”.
Gjensidige also has a significant part of its general insurance business in Denmark, Sweden and the Baltics.
The Group CEO delegates authority to the respective executive vice presidents for the following departments Analytics, Product and
Gjensidige annual report 2018 | 101 respect to the reorganisations, process changes, etc., that could affect the level of technical provisions. Insurance risk in subsidiaries are followed up by their respective boards.
Gjensidige Forsikring ASA buys reinsurance as protection against the effect of catastrophic events (such as wind storms) and large claims (such as major fires). The reinsurance programme is mainly bought to protect the Group’s equity capital. Gjensidige purchases almost exclusively non-proportional reinsurance contracts with sufficiently high retentions for coverage of relatively few, large claims to be recoverable. Subsidiaries are reinsured by Gjensidige
Forsikring ASA, and the subsidiaries’ reinsurance exposure is included in the reinsurance programme for the Gjensidige
Gjensidige purchases reinsurance to limit any single claim or claim event per insurance product to NOK 100 million. For weather claims the retention is NOK 200 million. For some insurance risks
Gjensidige purchases reinsurance coverage that will reduce the retention level to under 100 million. Decisions concerning the reinsurance programme are based on an analysis of exposure, claims history, Gjensidige’s internal model simulations and
Changes in the composition of the insurance portfolio may have an impact on the effect of the changes in the frequency and severity of claims.
Gjensidige Pensjonsforsikring AS has a relatively large risk appetite within occupational defined contribution plans and collective disability and survivor benefits, moderate risk appetite within individual disability plans and low risk appetite within capitalintensive and complicated products (paid-up defined benefit policies). In order to describe life insurance risk, the most important components are elaborated below, and these are; mortality, longevity, disability, catastrophe, lapse and expense risk.
The risk for the company is that the provisions that shall cover all future claims are insufficient.
Pensjonsforsikring AS has been increasing reserves in order to satisfy the mortality tariff “K2013”. By year end 2018 Gjensidige
Pensjonsforsikring AS to disability risk. Apart from lapse risk, disability risk is one of the major insurance risks for Gjensidige
Reduced future profit would lead to a reduction of eligible capital, but would be counteracted by a lower risk margin (increasing eligible capital) and a lower capital requirement.
Expense risk is the risk of actual expenses being higher than expected. The risk is related to the administration result which is the expected administration income minus the expected expenses for the whole lifetime of the products that fall within the contract boundary. Expense risk is larger in Solvency II aspects, because the contract boundary is longer. For some products, the company cannot increase the administration fee if the expenses increase
102 | Gjensidige annual report 2018 very differently where lapse risk is the dominating risk. This is only the case in Solvency II because future profit is accounted for.
Expense risk is mostly relevant in Solvency II context, but is also a minor contributing factor to risk exposure for Gjensidige
Information on managing insurance risk is described under the section General insurance.
Investments for general insurance and life insurance are managed separately. Financial risk related to general insurance and life insurance is described separately where appropriate.
ASA the equity exposures are mainly investments in Norwegian equity funds and internationally diversified funds, with the majority focusing on developed markets. There are also investments in several private equity funds as well as fund of funds, focusing on the Nordic region.
Gjensidige Forsikring ASA. Gjensidige Forsikring ASA has a 50 per cent share in Oslo Areal AS, which is fully consolidated in the solvency calculations. The Group owns most of its properties through Oslo Areal AS, although a small part of the portfolio is invested in property funds outside Norway. The real estate portfolio managed by Oslo Areal AS consists of investment properties. The real estate portfolio has its largest concentration in offices in the
are exposed to counterparty risk through the investments in securities and derivatives, cash at banks, and through receivables from intermediaries and reinsurance contracts.
Premium income is paid up front, and claims are paid out at a later stage. Future payments are not based on contractual payment dates, but rather on when claims arise and how long the claims handling takes. This will result in a positive net cash flow under normal circumstances. Large net outflows would generally only arise as a result of acquisitions or the recapitalisation of subsidiaries. In the event of a large claim or catastrophic event, the payments will take place sometime after the event, and the reinsurers will cover most of the cost within a short time of the payments having been made to the claimants. In an extreme scenario, reinsurers could fail to honour their obligations after a catastrophic event.
The risk concentration regarding financial investments is defined as risk regarding the accumulation of exposures within the same geographical area, industry sector etc.
ASA sector concentration of fixed-income securities are regulated by the guidelines for credit exposure, which is a part of the Group
Norwegian market. The degree of diversification, both for sector and geographical concentration, is thus dependent of the composition in the fund structure.
The Board has set limits for credit exposure. Credit limits are set for designated counterparties. The limits are based on either the official credit rating of the counterparty or internal analyses. These are monitored and reported monthly at the Group level. Outstanding claims against the Group reinsurers may also represent a significant credit risk. Counterparty risk in the reinsurance is therefore assessed continuously. Group reinsurers must have a minimum Standard & Poor’s rating of A- or equivalent from a well reputed rating agency. The Board has considered the risk of losses on loans, guarantees and other receivables, and it is made adequate provision for this risk in the accounts. The management of credit risk is defined in Gjensidige’s credit policy. A separate limit is defined for credit spread risk.
Insurance Group has implemented a currency hedging strategy with the purpose of minimizing currency risk in surplus capital (according to the rating requirement). This is implemented by adjusting assets in foreign branches and subsidiaries so that surplus capital in foreign currencies is minimized.
As described under insurance risk, inflation risk related to Danish workers' compensation is for the most part hedged through inflation swaps.
transactions on a net basis. The Credit Support Annex (CSA) is a legal document that defines the rules under which collateral is posted or transferred between swap counterparties to mitigate the credit risk arising from derivative positions.
• Inflation: The whole inflation rate curve is changed with one percentage point. It is assumed that technical provisions increase. The effect on the value of inflation swaps and deferred tax is also taken into account. It is assumed that inflation does not affect Gjensidige Pensjonsforsikring AS, Gjensidige Pensjonskasse and Gjensidige Bank.
Operational risk Operational risk is the risk of economic losses and/or loss of reputation due to weaknesses or faults in processes and systems, errors made by employees, or external events. In order to reduce the risk, emphasis has been placed on having well-defined and clear lines of reporting and a clear division of responsibility in the organisation of the business. Set procedures have been established for conducting risk assessments, and the Board evaluates the status annually as part of the Company’s internal control system.
All managers in Gjensidige are responsible for risk within their own area, and shall be able to demonstrate that controls are adequate and functioning. The risk evaluation shall be regularly updated if there are changes or events that trigger the risk situation changes.
Operational risk arising specifically from financial operations is monitored and controlled and described in the investment policy adopted by the Board.
Strategic risk and business risk Strategic risk is the risk of loss due to the inability to establish and implement business plans and strategies, make decisions, allocate resources or respond to changes.
Group management and Board level. Risk assessments are also a part of the acquisition and integration process. The annual strategic risk assessment processes are integrated into the overall planning process in all relevant divisions and subsidiaries.
Capital management Gjensidige shall have a capitalisation that is adapted to the Group's strategic targets and risk appetite at all times. The Group shall maintain its financial flexibility and at the same time exercise a stringent capital discipline that supports the return on equity target.
Supervisory Authorities (FSA) to use a partial internal model to calculate the regulatory solvency capital requirement. The FSA
require the use of the standard formula to calculate storm risk, and the standard formula’s correlation between market and underwriting risk. The approved partial internal model is therefore more conservative than the model Gjensidige applied for. Gjensidige believes that the partial internal model, without the imposed conditions from the FSA, provides a better representation of the risk, and therefore also states figures for its own partial internal model.
Gjensidige is well capitalized and satisfies the target zone, both by the use of the approved partial internal model and by its own partial internal model.
Both assets and liabilities are valued at market value in Solvency II, and in some cases, this deviates from accounting principles.
According to Solvency II principles, technical provisions are the sum of a best estimate and a risk margin. For non-life insurance and health insurance, the best estimate for technical technical provisions can be divided into premium provisions and claims provisions. The tables below show the technical provisions for Gjensidige Forsikring ASA and the Gjensidige Insurance Group in accordance with Solvency II principles and accounting principles
Claims provisions for non-life and health insurance are discounted in Solvency II, while the claims provisions (except claims provisions for workers’ compensation product in Denmark and motor vehicle liability insurance in Sweden) are undiscounted in the accounting figures. From the third quarter of 2018, the claims provision does not include planned run-off gains under Solvency II, as is done in the accounting provisions. All other assumptions for Solvency II
Solvency II principles, for index- and unit-linked insurance, is the inclusion of future profits in Solvency II.
Solvency II principles. The risk margin is calculated as the cost of holding the capital needed to cover the solvency capital requirement through the entire run-off, if all business was terminated.
The regulatory requirement for 2018 is based on the approved partial internal model, while comparative figures from 2017 are based on the standard formula. When presenting the regulatory capital requirements for Gjensidige Forsikring Group, figures for the bank are included where it is relevant.
Forsikring Group are non-life and health insurance risk and market risk. Non-life and health insurance risk is mainly related to uncertainty in insurance result for the next year (premium risk) and the risk of the claims provisions not being sufficient (reserve risk).
In addition to the Solvency Capital Requirement (SCR), there is a defined minimum level of capital. The latter is called Minimum
Distributions from insurance companies must be within profit for the year. If it is desired to distribute more than this, then it has to be approved in advance by the Financial Supervisory Authority.
There is still some uncertainty regarding how the guarantee scheme should be treated under Solvency II. The FSA argues that the guarantee scheme should be considered as a liability under
January 2018, suggests a change in the guarantee scheme that may lead to an increase of about 70 million kroners in the guarantee scheme This can potentially have a negative effect on the capital. Based on this, the uncertainty in eligible own funds with respect to the guarantee scheme is of size NOK (0,1) to 0,5 billion kroners.
However, since no liquidation of the company is expected in the foreseeable future, no deferred tax is recognized related to natural peril fund provision.
EIOPA has suggested several changes in the calculation of the capital requirement and eligible own funds. These changes are not expected to have any major impact on the capital position of
• Insurance risk: For non-life and health insurance business the expected loss is determined as the expected loss given that the combined ratio is above one hundred (calculated by the internal model). For life insurance business, the stress is determined as the loss for death, longevity and disability insurance with probability of 1 in 200 on a quarterly basis (calculated by the standard formula).
The group has six reportable segments, as described below, which offers different products and services within different geographical areas. The Groups reportable segments are identified based on the
In Sweden, the Group offers insurance related to the private, commercial and municipality markets, including insurances related to motor, property, accident and health and liability.
Segment expenses are defined as claims incurred for general insurance and for Pension.
The segment result is defined as the underwriting result for general insurance and the profit before tax expense for Pension.
Savings segment is Pension. Comparable figures are changed accordingly. With effect from 1 January 2018 the former Nordic segment has been divided into two new segments: Denmark and
before tax expense 1 Eliminations etc. consist of internal eliminations and other income and expenses not directly attributable to one single segment and large losses of NOK 202.9 million (220.6). 2 There is no significant income between the segments at this level in 2018 and 2017.
Areal AS as a joint venture (50/50), as each party has rights to its share of the net assets of the arrangement. The parties will make joint investments in the Norwegian real estate market through Oslo
Gjensidige annual report 2018 | 111 6. Net income from investments
Total net income and gains/(losses) from buildings and other real estate 0.2 45.4
Total net income and gains/(losses) from shares and similar interests 112.7 642.4
Total net income and gains/(losses) from bonds and other fixed-income securities 303.3 385.3
Total net income and gains/(losses) from financial assets at fair value through profit or loss, designated upon initial recognition
Total interest expenses from financial assets not recognised at fair value through profit or loss (43.1) (48.8)
1 Net other financial income/(expenses) include financial income and expenses not attributable to individual classes of financial assets or liabili ties, and financial administration costs.
Depreciation and value adjustments (note 11 and note 12), excl. depreciation properties 559.6 541.2
Total auditor's fee (incl. VAT) 5.8 5.0 1 Other expenses include cost allocations to claims and finance.
The Group has established a remuneration system that applies to all employees. The system is meant to secure that Gjensidige attracts and keeps colleagues who performs, develops, learns and shares. The remuneration shall be competitive, but the Group shall not be a wage leader. Employees are expected to see the remuneration and benefits offered by the Group as an overall whole. The Group’s remuneration systems shall be open and performance-based, so that they, as far as possible, are perceived as being fair and predictable. The remuneration that is paid shall correspond to the agreed performance.
114 | Gjensidige annual report 2018 desired expertise and experience who promote the Group’s core values and development.
Group’s vision, values, ethical guidelines and management principles. Half of the variable remuneration is in the form of a promise of shares in Gjensidige Forsikring ASA, one third of which are released in each of the following three years. Restricted variable remuneration that has not yet been disbursed may be reduced if subsequent results and developments indicate that it was based on incorrect assumptions.
The retirement age for some members of the senior group management is 62, the others have a retirement age of 70. Of the current members of the senior group management, six are members of the closed Norwegian defined-benefit pension scheme.
The remuneration of personnel with control and supervisory tasks shall be independent of the performance of the business area they are in charge of.
75,000 per year. Purchases take place quarterly following publication of the results. A discount of 20 per cent of the purchase price is offered, limited upwards to NOK 3,000. For those who keep the shares and are still employed in the Group, one bonus share is awarded for every four share they have owned for more than two years.
Bolighandel AS has been granted a possible bonus of 50 per cent of salary as a one-off compensation in 2020, provided that the goals for the company are achieved. Half of the bonus amount can be paid out, the other half being treated as for other senior employees by half being used for share purchase.
The Board confirms that the guidelines on the remuneration of executive personnel for 2018 set out in last year’s statement have been complied with.
Janne Merethe Flessum, Executive Vice President (1.3.18-31.12.18) 1 2,012.0 217.6 137.8 218.1 207.8 80 69 196 3,819
Account for deferred income tax from technical provisions including security provision 4,228.1 3,459.5
As from 2018 tax-deductible insurance provisions are limited to provisions for probable future costs related to insurance liabilities.
Thus, there are no longer given tax deductions for provisions to
As a transitional mean the amount allocated to the Natural perils capital and the Guarantee scheme provision as at 1.1.2018, for tax purposes may be set aside in a separate account which will only be taxable at the time of winding-up the insurance business. According to IAS 12 Income Taxes, no provision is made for deferred tax related to the Natural perils capital and the Guarantee scheme provision (Norway). Previously, a deferred tax provision related to the Guarantee scheme provision (Norway) was recongised.
Life insurance companies can in the income year 2018, according to the transitional rule, transfer profit from the customer portfolio into a gain and loss account. Gjensidige Pensjonsforsikring has transferred NOK 249.8 million into this account. The amount consists of temporary differences in the customer portfolio from 2017, as well as the profit for the year regarding customer portfolio.
The risk in the net pension liability is a combination of the pension plan itself, the pension liability, pension assets, financing level and the co-variation between pension liabilities and pension assets.
The pension assets’ exposure to credit risk is deemed to be moderate. Most of the pension fund’s fixed-income investments shall be within “investment grade”. If the credit risk on a global basis were to increase by a factor corresponding to the factor used in stress tests for pension funds (equal to a deterioration in relation to the 99.5 percentile), this would lead to a fall of approximately nine per cent in the bond portfolio.
The life expectancy assumptions are based on the K2013BE table as reported by FNO (Finans Norge) AS.
Future pension benefits depend on future wage growth and the development of the National Insurance basic amount (G). If wage growth in the Company is lower than the increase in G, the benefits will be reduced.
Present value of the defined benefit obligation 2,057.2 562.4 2,619.6 2,166.3 577.8 2,744.0
Expected contribution to the defined benefit plan for the next year 1 Future salary increases represent our expected average future salary increase for the industry. Since Gjensidige has a closed plan, average future salary increase for our population is 1.91 per cent (1.55). See explanation under Actuarial assumptions.
As at 31 December 2017, including uncompleted projects 3,820.6 1,416.6 1,594.7 908.4 7,740.2
As at 31 December 2018, including uncompleted projects 3,840.7 1,422.3 1,757.7 903.2 7,923.9
The Group’s intangible assets are either acquired or internally developed. Goodwill, customer relationships, trademarks and parts of other intangible assets are all acquired through business combinations, and are a result of a purchase price allocation of initial cost of the acquisition. Software is developed for use in the insurance business. External and internal assistance used in relation with implementation or substantial upgrade of software, including adjustment of standard systems, are capitalized as intangible assets. Amortisation is included in the accounting line
Board of Directors. The growth in this 5-year period is higher than the long-term growth expectancy. In the period after 2022 a lower annual growth has been used than in the budget period to arrive at a normal level before a terminal value is calculated. The terminal value is calculated in 2027. Gjensidige normally has a ten-year horizon on its models, as the acquired companies are in a growth phase and a shorter period will give a less correct view of expected cash flows. The long-term growth rate beyond the board approved plan, is no higher than the long-term growth in the market for the respective cash generating units.
As far as possible, the management has sought to document the assumptions upon which the models are based through external information. External information is first and foremost used in the assessment of discount rate and exchange rates. When it comes to future cash flows, the management has also considered the degree of historical achievement of budgets. If expected budgeted results are not achieved, the management has conducted a deviation analysis. These deviation analyses are reviewed by the Board of
The expected CR level is both in the growth period and when estimating the terminal value considered to be from 84.3 to 98.8.
The discount rate is before tax, and is composed of a risk-free interest rate, a risk premium and a market beta. The risk-free rate is equivalent to a ten-year interest rate on government bonds in the respective countries where the subsidiaries and branches operate in and in addition a risk premium is added. The risk premium varies so that the discount rate is 7.5 per cent for all companies. This corresponds to the discount rate of the group and is the same as used in 2017. The group’s discount rate represents the group’s assumption of risk, and is the same independent of country.
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.
Value) as reported by the fund administrators in accordance with IPEV guidelines (International Private Equity and Venture
Sensitivity financial assets level three The sensitivity analysis for financial assets that are valued on the basis of non-observable market data shows the effect on profits of realistic and plausible market outcomes. General market downturns or a worsening of the outlook can affect expectations of future cash flows or the applied multiples, which in turn will lead to a reduction in value. A fall in value of ten per cent is deemed to be a realistic and plausible market outcome for shares and similar interests, as well as bonds and other securities with a fixed return that are included in level three of the valuation hierarchy.
Debt in life insurance with investment options 23,909.5 23,909.5 22,565.5 22,565.5
Financial derivatives at fair value through profit or loss 577.9 577.9
Shares and similar interests in life insurance with investment options 20,610.0 17.3 20,627.2
Bonds and other fixed income securities in life insurance with investment options 3,268.1 14.1 3,282.3
Bonds and other fixed income securities in life insurance with investment options 2,515.5 15.6 2,531.2
Bonds and other fixed income securities classified as loans and receivables 22,471.1 4.6 22,475.7
unrealised gains recognised in profit or loss that are attributable to instruments held as at 30.9.2018
Bonds and other fixed income securities Change in value 10% 77.9
unrealised gains recognised in profit or loss that are attributable to instruments held as at 30.9.2017
Total shares and similar interests owned by other group companies 73.5
Total shares and similar interests owned by the Gjensidige Forsikring Group 5,134.9 15. Loans and receivables
Mortgage loans in 2017 consist mainly of loans from the Gjensidige
Bank Group. Primarily this is loans with floating rate to customers in the private segment.
Claims reported and claims handling costs 14,136.9 (781.3) 13,355.5 16,978.8 (586.6) 16,392.1
Claims paid, prior year claims (7,485.8) 635.0 (6,850.7) (7,210.9) 234.3 (6,976.5)
Provisions for unearned premiums in general insurance 1 For own account. 2 According to new Norwegian Financial Reporting Regulations for Life Insurance Companies, claims provision is reclassified to premium reserve. Comparable figures have not been restated.
Gjensidige. The analyses conclude that excess claims reserves related to personal injury in connection with workers compensation and motor TPL in Norway, primarily for the 2008-2014 vintages, are
NOK 1,080 million higher than previously anticipated, adding to the previous excess reserves of approximately NOK 4 billion. The additional excess reserves are released in their entirety in and recognised as run-off gains in the fourth quarter of 2018. The plan for release of the remaining NOK 4 billion in excess reserves, with approximately NOK 1 billion per year through 2022, remains unchanged.
A total of 306,489 (254,863) own shares at an average share price of NOK 131.59 (138.87) have been acquired to be used in
Gjensidige's share-based payment arrangements. Of these 231,493 (191,277) shares have been sold to employees, at the same price, but with a discount in the form of a contribution, see note 22. In addition, 30,010 (33,199) shares have been allocated to executive personnel within the share-based remuneration scheme and 34,688 (36,132) bonus shares have been allocated to employees in the share savings programme. Own shares are increased by 10,298 (reduced by 5,745) through the year.
Operating profit/loss from the compulsory natural perils insurance shall be adjusted against the Natural perils capital. Natural perils capital is capital that can only be used to cover claims for natural damage, but which in an insolvent situation can also be used to cover other obligations. Natural peril is defined as claim in direct relation to natural hazard, such as landslide, storm, flood, storm surge, earthquake or eruption.
NOK 7.10 (7.10) based on profit for the 1 Proposed dividend for 2018 is not recognised at the reporting date, and it does not have any tax consequences.
134 | Gjensidige annual report 2018 19. Provisions and other liabilities
Provision as at 31 December 128.3 117.0 1 In 2018, NOK 91.2 million is allocated to restructuring provision, due to a decision of changes in processes in the group. The processes have been communicated to all entities affected by the changes.
Fire Mutuals and Gjensidige Pensjonskasse 21.6 142.5 20.7 148.7 1 Cooperating companies are defined as companies with which Gjensidige Forsikring has entered into a long-term strategic alliance.
Gjensidige Forsikring ASA is responsible externally for any insurance claim arising from the cooperating mutual fire insurers' fire insurance business, see note 21.
The timing of the outflow of capital is dependent on when the funds are making capital calls from their investors. Average remaining operating time for the funds, based on fair value, is slightly less than four years (four) and slightly less than five years (five) in average including option for of extension.
Gjensidige Forsikring has granted a loan to Oslo Areal amounting to NOK 2.5 billion (1.6) at year end. The loan is interest-bearing and total loan limit is NOK 4.0 billion.
Profit/(loss) for the year for continuing and discontinued operations 3,717.6 4,523.1
Earnings per share from continuing and discontinued operations (NOK), diluted 7.43 9.04
Boligkreditt AS, constitute the segment Retail Bank. An analysis of income and expenses from the discontinued operation can be found in the table on page 11 in the interim report for the fourth quarter. Additional amounts are presented in the table below.
Gjensidige Bank ASA implemented IFRS 9 1 January 2018. The tables below reconcile the carrying amounts of financial assets, from their previous measurement categories in accordance with IAS
39 to their new measurement categories upon transition to IFRS 9.
Please refer to Gjensidige Bank ASA’s annual report for 2018 for further information.
Profit /(loss) after tax expense from discontinued operations (attributable to owners of the company)
Earnings per share from discontinued operations, NOK (basic and diluted) 0.67 0.92
Income from investments in subsidiaries, associates and joint ventures 374.0 83.9
Impairment losses of investments in subsidiaries, associates and joint ventures (76.0) (49.4)
Other comprehensive income that are not reclassified to profit or loss
Tax on items that may be reclassified to profit or loss 9 (0.7) (88.2)
Interest-bearing receivables on subsidiaries and joint ventures 13, 20 2,513.1 1,620.1
Reinsurers' share of provision for unearned premiums, gross 16 39.6 41.4
Effect of exchange rate changes on cash and cash equivalents (11.2) 21.4
Cash and cash equivalents at the start of the year 1,625.0 1,143.0
Regulations for Non-Life Insurance Companies (FOR-2015-12-181775 ). The Norwegian Financial Reporting Regulations for
Insurance Companies is to a great extent based on IFRSs endorsed by EU, and interpretations.
December 2017 amounting to NOK 5.5 million was reclassified from liability to equity as at 1 January 2018.
New standards and interpretations not yet adopted A number of new standards, changes to standards and interpretations have been issued for financial years beginning after 1 January 2018. They have not been applied when preparing these financial statements. Those that may be relevant to Gjensidige are mentioned below. Gjensidige does not plan early implementation of these standards.
IFRS 9 contains three primary measurement categories for financial assets: amortised cost, fair value through other comprehensive income, and fair value through profit or loss. Financial assets will be classified as either at amortised cost, at fair value through other comprehensive income, or at fair value through profit or loss, depending on how they are managed and which contractual cash flow properties they have. IFRS 9 introduces a new requirement in connection with financial liabilities earmarked at fair value, where changes in fair value that can be attributed to the liabilities' credit risk are presented in other comprehensive income rather than over profit or loss.
(less than 12 months) and leases of low-value assets are exempt from the requirements. A lessee shall recognise a right-of-use asset and a lease liability. The interest effect of accounting the lease liability shall be presented separately from the depreciation charge for the right-of-use asset. The depreciation expense will be presented with Gjensidige’s other depreciations, whereas the interest effect of discounting will be presented as a financial item.
Estimated expected amount to be recognised as a lease liability and right-of-use asset at the time of implementation is
146 | Gjensidige annual report 2018 approximately NOK 1.2 billion. An estimate of the negative effect on equity will be about NOK 40 million.
IFRS 17 establishes principles for the recognition, measurement, presentation and disclosure of insurance contracts issued. IFRS 17 is a complex standard that includes some fundamental differences to current accounting for liability measurement and profit recognition. Insurance contracts will be recognised at a riskadjusted present value of the future cash flows plus an amount representing the unearned profit in the group of contracts (the contractual service margin). If a group of contracts is or become loss-making, the loss will be recognised immediately. Insurance revenue, insurance service expenses and insurance finance income or expenses will be presented separately. IFRS 17 is expected to be effective 1 January 2022. The standard is expected to have an effect on the group’s financial statements, significantly changing the measurement and presentation of income and expenses.
Subsidiaries, associated companies and joint ventures are recognised using the cost method.
Gjensidige’s primary activities. Financing activities include raising and repaying loans, as well as collecting and servicing equity.
Equivalent to cash is cash equivalents, e.g. bank deposits. Bank deposits with maturity less than three months ahead are considered cash. Certificates and bonds with a similar short residual maturity are not classified as cash.
Gjensidige has received or is owed for insurance contracts where the insurance period starts before the end of the period (gross premiums written). At the end of the period provisions are recorded, and premiums written that relate to subsequent periods are adjusted for (change in gross provision for unearned premiums).
Earned premiums net of reinsurance are calculated by applying equivalent accrual to premium for ceded reinsurance, which reduces the corresponding gross premiums. Premiums for inward reinsurance are classified as gross premiums written, and are earned according to the insurance period.
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 Gjensidige, 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.
Operational lease contracts Leases where the main part of the risk and return associated with ownership of the asset are not transferred are classified as operating leases. Lease payments are classified as operating expenses and are recognised on a straight-line basis over the contract period.
Reinsurers’ share of insurance-related liabilities in general insurance, gross Reinsurers’ share of insurance-related liabilities in general insurance, gross is classified as an asset in the balance sheet.
Financial assets are derecognised when the contractual rights to cash flows from the financial asset expire, or when Gjensidige transfers the financial asset in a transaction where all or practically all the risk and rewards related to ownership of the assets are transferred.
If there is objective evidence that the asset is impaired, impairment loss is calculated as the difference between the carrying amount of the asset and the present value of estimated future cash flows
Pension liabilities are assessed at the present value of future pension benefits that are recognised as accrued at the reporting date. Future pension benefits are calculated on the basis of expected salary at the retirement date. Pension assets are valued at fair value. Net pension liability is the difference between the present value of future pension benefits and the fair value of the pension assets. Employer's social security cost is recognised during the period under which an underfunding occurs. Net pension liability is shown in the balance sheet on the line Pension liabilities. Any overfunding is recognised to the extent that it is likely that the overfunding can be utilised. An overfunding in a funded plan cannot be offset against an underfunding in an unfunded plan. If there is a net overfunding in the funded plan, it is recognised as Pension assets.
The cost of share-based transactions with employees is recognised as an expense over the average recovery period. For arrangements that are settled in shares, the value of the allocated shares in the period is recognised as a salary expense in the income statement with a corresponding increase in other paid-in equity. For arrangements settled in cash, the value of the options granted is recognised as a salary expense in the income statement with a corresponding increase in other paid-in equity. This applies to
Income tax expense comprises the total of current tax and deferred tax.
Intra-group balances and transactions are eliminated in preparing the consolidated financial statements.
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.
Gjensidige annual report 2018 | 153 4. Premiums and claims etc. in general insurance
Provision for unearned premiums, gross 152.5 458.0 231.8 1,200.0 2,224.7 38.6 3,436.0 243.2 424.7 669.1 320.7
Gjensidige Bank ASA (held for sale) Oslo, Norway 100% 2,366.5 2,366.5
156 | Gjensidige annual report 2018 6. Net income from investments
Net gains/(losses) from sale of investments in subsidiaries, associated companies and joint ventures 0.1
Total net income and gains/(losses) from investments in subsidiaries, associated companies and joint ventures 298.0 34.5
Total net income and gains/(losses) from buildings and other real estate 42.6
Total net income and gains/(losses) from bonds held to maturity 24.3 68.3
Net gains/(losses) from changes in exchange rates on loans and receivables 0.8 40.0
Total net income and gains/(losses) from loans and receivables 700.4 706.0
The average number of employees in the Group was 2,839 (2,899).
Gjensidige Forsikring ASA, 1/3 of which will be released in each of the following three years. Restricted variable remuneration that has not yet been disbursed may be reduced if subsequent results and developments indicate that it was based on incorrect assumptions.
Of the variable remuneration earned in 2018 by the CEO and other employees covered by the Regulations relating to remuneration in financial institutions, 50 per cent of the gross earned variable remuneration will be given in the form of a promise of shares in
Jørgen Inge Ringdal, Executive Vice President 2,726.1 335.1 202.7 702.4 334.3 2,506 2,871 5,274 24,322 2
Mats C. Gottschalk, Executive Vice President 2,991.2 466.0 161.0 460.7 468.2 3,288 3,893 6,786 13,254 3
Lotte Kronholm Sjøberg, staff representative 4 306.0 582 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 per cent at age 67 according to time of earning, then Gjensidige Forsikring's ordinary pension terms will take effect. 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 For staff representatives only remuneration for the current position is stated. 5 Everyone in the senior group management except for one has pension plans, benefit or contribution based. 6 Including bonus shares in the share saving's programme for employees. See note 22 for terms and further description of the scheme. 7 Remuneration includes remuneration as Chairman in the Audit Committee honoured with NOK 148 thousand for 2017. 8 Remuneration includes remuneration in other committees. 9 Hege Yli Melhus Ask has been on leave from 1 January to 31 July. Her remuneration is presented for the whole year. 10 Constituted Executive Vice President for Hege Yli Melhus Ask from 1 January to 31 July.
Account for deferred income from technical provisions including security provision 4,223.7 2,823.4
Change in deferred tax recognised in profit or loss 179.7 299.2
Companies § 3-4 there are not made any provision for deferred tax on Natural perils capital and Guarantee scheme provision
The tax-deductible insurance provisions are significantly reduced in 2018, mainly because the former Security provision has been excluded. A transitional rule allows the company to distribute the taxable income arising from this evenly over the next 10 years, starting 2018. The amount to be distributed is NOK 4,667 million.
Actuarial assumptions are shown in the table. The discount rate is the assumption that has the greatest impact on the value of the pension liability. Wage growth, pension increases and the adjustment of the National Insurance basic amount are based on historical observations and expected future inflation. Wage growth is set at 3.2 per cent (3.1), and is adjusted for age based on a decreasing trend. The year-on-year nominal wage growth 2018/19 is calculated to be 1.91 per cent (1.55). The reason for the low wage growth is that the pension plan is closed to new members and that the average age of employee members is 56.8 years (56.1).
(such as, as a result of interest exemption) will be partly offset by a reduction in overfunding. Interest rate rises lead to a fall in liabilities that, in isolation, can lead to increased overfunding. The risk factors below must therefore be seen in the light of the overfunding.
164 | Gjensidige annual report 2018 the 99.5 percentile), this would lead to a fall of approximately nine per cent in the bond portfolio.
Present value of the defined benefit obligation 2,043.7 559.9 2,603.6 2,149.1 552.2 2,701.3
Net defined benefit obligation/(benefit asset) (155.2) 559.9 404.7 (204.4) 552.2 347.8
166 | Gjensidige annual report 2018 11. Goodwill and intangible assets
As at 31 December 2017, including uncompleted projects 1,943.4 749.9 1,186.8 366.1 4,246.2
The company’s intangible assets are either acquired or internally developed. Goodwill, customer relationships and parts of other intangible assets are all acquired through acquisition of portfolios or mergers, and are a result of a purchase price allocation of initial cost of the acquisition. Software is developed for use in the insurance business. External and internal assistance used in relation developed software is developed for use in the insurance business. External and internal assistance is used in relation with implementation or substantial upgrade of software, including adjustment of standard systems, are capitalized as intangible assets. Amortisation is included in the accounting line Insurancerelated administration expenses including commissions for received reinsurance and sales expenses.
Each of the units above is the smallest identifiable group of assets that generates cash inflows and considered as separate cashgenerating units. The annual assessment of impairment losses was carried out in the third quarter of 2018. There has also been carried out indication assessments during other quarters in order to assess whether there is new evidence that calls for a new impairment assessment.
Recoverable amount for the cash-generating units is determined based on an assessment of value in use. The value in use is based on a discounting of future cash flows, with a relevant discount rate that takes into account maturity and risk.
Board. The growth in this five-year period is higher than the longterm growth expectancy. In the period after 2022 a lower annual growth has been used than in the budget period to arrive at a normal level before a terminal value is calculated. The terminal value is calculated in 2027. Gjensidige normally has a ten-year horizon on its models, as the acquired companies are in a growth phase and a shorter period will give a less correct view of expected cash flows. The long-term growth rate beyond the board approved plan, is no higher than the long-term growth in the market for the respective cash generating units.
The expected CR level is both in the growth period and when estimating the terminal value considered to be from 84.5 to 98.8.
The excess values related to the acquisitions 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. See table.
Gjensidige Forsikring, Swedish branch No need for impairment No need for impairment Need for impairment app. NOK 22 million
168 | Gjensidige annual report 2018 12. Owner-occupied property, plant and equipment
As at 31 December 2018, including uncompleted projects 28.5 502.1 530.5
Owner-occupied property in Gjensidige Forsikring ASA mainly consists of leisure houses and cottages that are not depreciated. There are no restrictions on owner-occupied property, plant and equipment. Owner-occupied property, plant and equipment are not pledged as security for liabilities.
When neither quoted prices in active markets nor observable market data is available, the fair value of financial assets/liabilities is estimated based on valuation techniques which are based on nonobservable market data.
Fair value hedging Gjensidige utilized up to and including 2017 fair value hedge to manage its currency risk in fixed agreements of acquisition of the operations, last regarding the acquisition of Mølholm Forsikring.
Financial derivatives at fair value through profit or loss 577.9 577.9 549.2 549.2
Bonds and other fixed income securities classified as loans and receivables 15 15,341.4 16,112.0 16,496.6 17,708.7
Bonds and other fixed income securities classified as loans and receivables 16,108.1 3.8 16,112.0
Financial derivatives at fair value through profit or loss 869.9 869.9
Reconciliation of financial assets valued based on non-observable market data (level 3) 2018
Amount of net realised/unrealis ed gains recognised in profit or loss that are attributable to instruments held as at
Sensitivity of financial assets valued based on non-observable market data (level 3) 2018
Reconciliation of financial assets valued based on non-observable market data (level 3) 2017
Gjensidige annual report 2018 | 173 14. Shares and similar interests
RBC Funds Lux - Global Equity Focus Fund Equity fund 312.5
Total shares and similar interests owned by Gjensidige Forsikring ASA 5,061.4 15. Loans and receivables
Of other loans NOK 49.0 million (63.1) are loans given to agricultural customers. Included in other loans are also NOK 82.4 million (40.0) regarding loans given with regard to sale of subsidiaries.
Gjensidige annual report 2018 | 175 16. Insurance-related liabilities and reinsurers' share
Claims paid, prior year claims (7,358.6) 331.4 (7,027.1) (6,953.1) 0.2 (6,952.9)
Arising from current year claims 18,269.3 (313.6) 17,955.7 16,967.8 (621.4) 16,346.4
Claims incurred, but not reported 15,176.8 0.0 15,176.8 16,902.2 0.0 16,902.2
The claims provisions shall cover future claims payments. The claims provisions for insurances with annuity payments are converted to present value (discounted), whereas other provisions are undiscounted.
Provision as at 31 December 125.6 107.6 1 In 2018 NOK 86.8 million is allocated to restructuring provision, due to a decision of changes in processes in Norway and Denmark and to closure of offices in Privat Norway. The processes have been communicated to all entities affected by the changes.
Fire mutuals and Gjensidige Pensjonskasse 21.6 142.5 20.7 148.7 1 Cooperating companies are defined as companies with which Gjensidige Forsikring has entered into a long-term strategic alliance.
As at 31 December 2018 employees have loans in Gjensidige Bank amounting to NOK 1,433.9 million (1,287.2). The loans are offered on normal commercial conditions.
As part of its ongoing financial management, Gjensidige has undertaken to invest up to NOK 568.7 million (614.4) in loan funds containing senior secured debt and various private equity and real estate investments, over and above amounts recognised in the balance sheet.
The fair value at the grant date is measured based on the market price. The amount is recognised as payroll expenses at grant date with a corresponding increase in other paid-in equity, both for the part that is settled in equity and for the part that is settled in cash to cover the tax obligations. No specific company-related or marketrelated entitlement criteria apply to the shares, but the Company may carry out a reassessment if subsequent results and development suggest that the bonus was based on incorrect assumptions. The expected allocation is set to 100 per cent. No adjustment is made to the value of the cash-settled share based on the share price at the reporting date. The number of shares is adjusted for dividend paid.
Weighted average share price of bonus shares released during the period 130.55 139.43
Today, the Board and the CEO have considered and approved the Board’s Report and the Annual Accounts for Gjensidige Forsikring ASA, the Group and the parent company, for the calendar year 2018 and as per 31 December 2018.
• The Board’s Report for the Group and the parent company gives a true and fair 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 14 February 2019 The Board of Gjensidige Forsikring ASA
John Giverholt Per-Arne Bjørge Vibeke Krag Board member Board member Board member
Gjensidige is a leading Nordic insurance group listed on the Oslo Stock Exchange. We have about 3,900 employees and offer insurance products in Norway, Denmark, Sweden and the Baltic states. In Norway, we also offer banking, pension and savings. The Group’s operating income was NOK 26 billion in 2018, while total assets were NOK 157 billion.