Interest cost 59.4 15.1 74.5 55.2 13.2 68.4 Actuarial gains and losses 145.0 62.8 207.8 (59.4) 24.6 (34.8) Benefits paid (112.7) (34.5) (147.3) (99.0) (36.7) (135.7) Employers' national insurance contributions of benefits paid (26.4) (6.3) (32.8) (6.7) (6.7)
Settlements 2.1 2.1 Business combinations (4.2) (4.2) The effect of the asset ceiling (50.9) (50.9) (32.0) (32.0) Foreign currency exchange rate changes (0.2) (0.2) 0.2 0.2 As at 31 December 2,082.9 608.1 2,691.0 2,043.7 559.9 2,603.6
Business combinations (4.4) (4.4) As at 31 December 2,324.7 2,324.7 2,198.8 2,198.8
Shares and similar interests 199.9 199.9 Bonds 2,066.6 2,066.6 Loans, receivables and bank deposits 58.1 58.1 Total 2,324.7 2,324.7
Cost As at 1 January 2019 1,946.6 753.2 1,300.7 350.3 4,350.7 Additions through merger 1,123.9 487.5 13.8 329.8 1,955.0 Additions 229.3 229.3 Disposals/reclassifications (26.6) (534.2) (57.1) (617.9) Exchange differences (20.3) (8.3) (6.0) (11.7) (46.3) As at 31 December 2019 3,050.1 1,205.7 1,003.6 611.3 5,870.8 Uncompleted projects 280.6 280.6 As at 31 December 2019, including uncompleted projects 3,050.1 1,205.7 1,284.3 611.3 6,151.4
The company has not acquired any portfolio or company in 2019 but have merged with Nykredit Forsikring A/S and Mølholm Forsikring A/S in 2019. Goodwill in connection with the merged companies are reported as separate portfolios.
Impairment testing goodwill The carrying amount of goodwill in the company as at 31 December 2019 is NOK 2,950.1 million.
Each of the units above is the smallest identifiable group of assets that generates cash inflows and considered as separate cash-generating units. The annual assessment of impairment losses was carried out in the third quarter of 2019. 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.
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 longterm growth rate beyond the board approved plan, is no higher than the long-term growth in the market for the respective cash generating units.
Gjensidige Forsikring, Danish branch 84.4-90.0% 90.0% Nykredit portfolio 85,0-89,0% 89,0% Mølholm portfolio 92,3-94,1% 93,0% Gouda portfolio 90.2-100.5% 90.2% Gjensidige Forsikring, Swedish branch 91.0-97.4% 91.0%
The growth rate in terminal value calculation The growth rate is determined to 2.5 per cent in Scandinavia and the same that was used in 2018.
Depreciation and impairment losses As at 1 January 2018 (265.8) (265.8) Depreciation (44.8) (44.8) Disposals 11.9 11.9 Exchange differences 0.3 0.3 As at 31 December 2018 (298.4) (298.4)
Carrying amount As at 1 January 2018 27.0 236.2 263.2 As at 31 December 2018 28.5 203.7 232.2
Depreciation and impairment losses As at 1 January 2019 (298.4) (298.4) Merger (0.7) (0.7) Depreciation (143.0) (44.4) (6.2) (193.6) Disposals 90.1 90.1 Exchange differences (0.1) 1.1 (0.0) 1.0 As at 31 December 2019 (143.1) (252.3) (6.2) (401.6)
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 according to the modified retrospective approach. However, 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 commencement date but discounted using the lessee’s incremental borrowing rate at the date of initial application. Comparative figures were not adjusted. Transaction costs are not included.
Financial assets held to maturity Bonds held to maturity 105.8 106.1
Loans and receivables Bonds and other fixed income securities classified as loans and receivables 15 14,705.4 15,226.1 15,341.4 16,112.0 Loans 2,410.8 2,410.8 2,687.3 2,687.3 Receivables related to direct operations and reinsurance 6,867.0 6,867.0 6,399.0 6,399.0 Receivables from group companies 20 7.1 7.1 60.5 60.5 Other receivables 975.4 975.4 931.2 931.2 Cash and cash equivalents 1,796.1 1,796.1 1,656.4 1,656.4
Financial liabilities Financial derivatives Financial derivatives at fair value through profit or loss 641.0 641.0 869.9 869.9
Financial liabilities Financial derivatives Financial derivatives at fair value through profit or loss 641.0 641.0
Financial assets Financial derivatives Financial derivatives at fair value through profit or loss 577.9 577.9
Financial assets at fair value through profit or loss, designated upon initial recognition Shares and similar interests 55.0 3,653.8 1,352.5 5,061.4 Bonds and other fixed income securities 9,193.6 12,180.0 778.7 22,152.3
Financial assets at amortised cost Bonds held to maturity 106.1 (0.0) 106.1 Bonds and other fixed income securities classified as loans and receivables 16,108.1 3.8 16,112.0 Loans 2,687.3 2,687.3
Financial liabilities Financial derivatives Financial derivatives at fair value through profit or loss 869.9 869.9
Shares and similar interests 1,352.5 (41.9) 184.8 (189.4) 1,306.1 (42.8) Bonds and other fixed income securities 778.7 89.2 (155.4) (3.9) 708.6 Loans 0.0 (1.7) 3.8 2.2 0.0 Total 2,131.2 47.3 184.8 (346.5) 3.8 (3.8) 2,016.9 (42.8)
14. Shares and similar interests NOK millions Organisation number Type of fund 31.12.2019
Claims and claims handling costs Claims reported and claims handling costs 13,593.0 (473.6) 13,119.4 13,774.4 (698.0) 13,076.4 Claims incurred, but not reported 15,176.8 15,176.8 16,902.2 16,902.2 Total as at 1 January 28,769.8 (473.6) 28,296.2 30,676.6 (698.0) 29,978.6
Increase in liabilities Arising from current year claims 18,395.3 (330.9) 18,064.4 18,269.3 (313.6) 17,955.7 - of this paid (12,865.5) 214.3 (12,651.2) (10,528.5) 211.7 (10,316.8) Arising from prior year claims (run-off) (1,245.7) (81.7) (1,327.4) (2,295.3) (11.0) (2,306.3) Other changes, including effects from discounting 231.4 231.4 13.5 13.5 Exchange differences (96.6) 12.7 (83.9) (7.1) 5.8 (1.3) Total as at 31 December 27,693.4 (554.5) 27,138.9 28,769.8 (473.6) 28,296.2
NOK millions 2019 2018 Discounted claims provision, gross - annuities 5,904.9 5,941.8 Nominal claims provision, gross - annuities 6,203.7 6,573.4
The reason why the claims provisions for annuities are discounted is due to very long cash flows and substantial future interest income. The claims for occupational injuries in Denmark are paid either as annuities or as lump-sum indemnities (which are calculated mainly as discounted annuities). Therefore, it is most expedient to regard the whole portfolio as annuities. For Swedish MTPL personal injuries are paid as lifelong annuities. The discount rate used is the swap rate.
Over the next three years, average annual run-off gains are expected to be around NOK 1,000 million, moving the expected reported combined ratio to the lower end of the 86-89 corridor (undiscounted).
Remeasurement of the net defined benefit liability/asset Remeasurement of the net defined benefit liability/asset consists of the return of plan assets beyond interest income and gains/losses occurring by changing the actuarial assumptions used when calculating pension liability.
Natural perils capital All insurance companies that take out fire insurance in Norway are obliged under Norwegian law to be a member of the Norwegian Natural Perils Pool. Objects in Norway and Svalbard that are insured against fire damage are also insured against natural damage, if the damage to the thing in question is not covered by other insurance. Natural peril is defined as claim in direct relation to natural hazard, such as landslide, storm, flood, storm surge, earthquake or eruption It is the individual insurance company that is the insurer, ie issues insurance certificates, settles and has direct contact with the customers. The Natural Perils Pool administers the equalization between the companies. 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.
The shareholder list is based on the VPS shareholder registry as of 31 December 2019.
Restructuring costs 1 Provision as at 1 January 125.6 107.6 New provisions 11.3 86.8 Provisions used during the year (65.2) (67.8) Exchange rate difference (0.1) (1.0) Provision as at 31 December 71.6 125.6 1 In 2019 NOK 11.3 million is allocated to restructuring provision, due to a decision of changes in processes in Denmark. The processes have been communicated to all entities affected by the changes. 2 Other provisions are various bonus schemes.
Other liabilities Outstanding accounts Fire Mutuals 32.6 27.6 Accounts payable 211.5 179.3 Liabilities to public authorities 266.3 270.8 Motor insurance tax to Norwegian Motor Insurers’ Bureau (TFF) 1,616.5 1,612.6 Lease liabilities 1,060.5 Other liabilities 523.9 675.8 Total other liabilities 3,711.2 2,766.0
Other accrued expenses and deferred income Liabilities to public authorities 30.9 29.7 Accrued personnel costs 303.1 283.7 Other accrued expenses and deferred income 20.2 18.9 Total other accrued expenses and deferred income 354.2 332.3
Overview Gjensidige Forsikring ASA is the Group's parent company. As at 31 December 2019 the following companies are regarded related parties. See note 5 in Gjensidige Forsikring ASA for specification of subsidiaries and joint ventures.
Ultimate parent company Gjensigestiftelsen holds 62.24 per cent of the shares in Gjensidige Forsikring ASA Oslo, Norway
Dividends Gjensidigestiftelsen 3,812.2 2,209.5 Gjensidige Pensjonsforsikring AS - inntektsført, ikke mottatt 100.0 Nykredit Forsikring A/S - mottatt 89.9 Nykredit Forsikring A/S - inntektsført, ikke mottatt 179.1 Mondux Assurance Agentur A/S 5.0 NAF Forsikringsformidling AS 0.2
Fire Mutuals and Gjensidige Pensjonskasse 2 111.0 32.6 111.0 25.3 2 Gjensidige Forsikring ASA is a sponsor of Gjensidige Pensjonskasse and has contributed with funds equivalent to NOK 111.0 million.
As part of its ongoing financial management, Gjensidige has undertaken to invest up to NOK 590.5 million (568.7) 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 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 three years (four) and slightly less than four years (five) in average including option for extension.
22. Share-based payment Description of the share-based payment arrangements As at 31 December 2019, Gjensidige has the following sharebased payment arrangements: Share-based remuneration for executive personnel with settlement in equity and cash (remuneration scheme) Gjensidige has established equity-settled share-based payment for the group management and more explicitly defined executive personnel. As described in the Board’s statement on the stipulation of pay and other remuneration in note 8, half of the variable remuneration is paid in the form of shares in Gjensidige Forsikring ASA, one third of which can be sold in each of the following three years. Of this, rather on the big side 50 per cent is distributed as equity and only just 50 per cent is distributed as cash in order to pay tax liabilities (net of tax settlement). 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 companyrelated or market-related 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.
Equity-settled share savings program for employees Gjensidige has established a share savings programme for employees of the Group with the exception of employees of Gjensidige Baltic. All employees are given an opportunity to save an annual amount of up to NOK 75,000. Saving take the form of fixed deductions from salary that is used to buy shares four times a year. The employees are offered a discount in the form of a contribution of 20 per cent, limited upwards to NOK 3,000 kroner per year, which corresponds to the maximum taxexempt discount. Employees will receive one bonus share for every four shares they have owned for more than two years, provided that they are still employed by the Company or have become retired. No other vesting conditions exists in this arrangement. The fair value at grant date is based on the market price. The discount is recognised as payroll expenses at the time of allocation with a corresponding increase in other paid-in equity. The value of the bonus shares is recognised as payroll expenses over the vesting period, which is two years, with a corresponding increase in other paid-in equity.
Weighted average share price (NOK) 143.00 149.10 163.02 130.55 Expected turnover N/A N/A 10% 10% Expected sale N/A N/A 5% 5% Lock-in period (years) 3 3 2 2 Expected dividend (NOK per share) 1 10.92 4.50 10.92 4.50 1 The expected return is based on the Group's actual profit/loss after tax expense as of the third quarter, grossed up to a full year, plus the maximum distribution of dividend corresponding to 80 per cent (70) of the profit after tax expense. This was carried out as a technical calculation because the Company's forecast for the fourth quarter result was not available at the time the calculations were carried out.
Average remaining life of outstanding bonus shares 1.02 1.02 Weighted average fair value of bonus shares granted 135.53 115.89 Weighted average share price of bonus shares released during the period 163.02 130.55
23. Events after the balance sheet date No significant events have occurred after the balance sheet date.
The consolidated accounts have been prepared in accordance with the EU-approved IFRS standards and pertaining interpretation statements applicable as of 31 December 2019, disclosure requirements that follow from the Norwegian Accounting Act as of 31 December 2019, and more detailed disclosure requirements that follow from the Regulations relating to annual accounts for general insurance companies (Regulations No 1775 of 18 December 2015) issued pursuant to the Accounting Act.
Deloitte. Deloitte AS Dronning Eufemias gate 14 Postboks 221 Sentrum N0-0103 Oslo Norway
Tel.: +47 23 27 90 00 Fax: +47 23 27 90 01 www. de Io itte. no
Report on the Audit of the Financial Statements Opinion We have audited the financial statements of Gjensidige Forsikring ASA, which comprise: • The financial statements of the parent company, which comprise the balance sheet as at 31
Company as at 31 December 2019, and its financial performance and its cash flows for the year then ended in accordance with the Norwegian Accounting Act and accounting standards and practices generally accepted in Norway.
• The accompanying consolidated financial statements give a true and fair view of the financial position of the Group as at 31 December 2019, and its financial performance and its cash flows for the year then ended in accordance with International Financial Reporting Standards as adopted by the EU.
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Measurement of the Groups claims provisions is based on different methods and models, complex calculations and a number of assumptions and estimates related to future developments that are uncertain.
We have involved our own actuaries in the work to assess choice of models and the use of assumptions.
_standardized systems with different degrees of adaptations and changes. A significant part of the IT operations and infrastructure is outsourced to service providers. The IT systems are essential to recording and reporting of transactions and to provide data for significant estimates and calculations as well to as obtain relevant additional information. Refer to note 3 for further information on operational risk in Gjensidige.
We have assessed the design of control activities related to IT operations that are relevant for financial reporting, change management and access controls. For a sample of these controls, we tested if they operated effectively in the reporting period.
Responsibilities of the Board of Directors and the Managing Director for the Financial Statements The Board of Directors and the Managing Director (Management) are responsible for the preparation in accordance with law and regulations, including fair presentation of the financial statements of the Company in accordance with the Norwegian Accounting Act and accounting standards and practices generally accepted in Norway, and for the preparation and fair presentation of the financial statements of the Group in accordance with International Financial Reporting Standards as adopted by the EU, and for such internal control as management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the financial statements, management is responsible for assessing the Company's and the Group's ability to continue as a going concern, disclosing, as applicable, matters related to going concern. The financial statements of the Company use the going concern basis of accounting insofar as it is not likely that the enterprise will cease operations. The financial statements of the Group use the
going concern basis of accounting unless management either intends to liquidate the Group or to cease operations, or has no realistic alternative but to do so.
Auditor's Responsibilities for the Audit of the Financial Statements Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with laws, regulations, and auditing standards and practices generally accepted in Norway, including ISAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.
• conclude on the appropriateness of management's use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Company and the Group's ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor's report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor's report. However, future events or conditions may cause the Company and the Group to cease to continue as a going concern.
From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the financial statements of the current period and are
fka ~~,:?a-{_,,,'I Aase Aa. Lundgaar - State Authorised Pu ic Accountant (Norway)
Abbreviations used: Rskl = Accounting act, NRS = Norwegian Accounting Standards Board, Vphl = Securities Trading Act, Vpf = Regulations to the Securities Trading Act
102-5 Ownership and legal form Commitment to our owners 83 102-6 Markets served Insurance segments 36-40 102-7 Scale of the organization Insurance segments 36-40 102-8 Information on employees and other workers Engaged employees 73-75 102-9 Supply chain Business model 28 102-10 Significant changes to the organization and its supply chain Not applicable (NA)
Sustainability policy states: “Our activities shall be based on the UN safety first-principle for protection of the environment, and work to minimise the impact of our own waste into the environmentt”
Requirements Board’s report Disclosure description Comment Page 5. Stakeholder 102-40 List of stakeholder groups Creating values for our stakeholders 31 102-41 Collective bargaining agreements Engaged employees: ILO and cooperation with union representatives 74 102-42 Identifying and selecting stakeholders Creating values for our stakeholders 31 102-43 Approach to stakeholder engagement Creating values for our stakeholders 31 102-44 Key topics and concerns raised Creating values for our stakeholders 31 6. Reporting practice 102-45 Entities included in the consolidated financial statements Note 5 Gjensidige Forsikring ASA 180 102-46 Defining report content and topic Boundaries Introduction 7 102-47 List of material topics Risk and materiality judgement 31 102-48 Restatements of information NA
102-49 Changes in reporting Introduction 7 102-51 Date of previous report 1.1.2018-31.12.2018 102-52 Reporting cycle Quarterly reporting 102-53 Contact point www.gjensidige.no/group/investor-relations/ircontacts
Economic Performance 201 Rskl §3-3a Economic Performance Statement concerning the annual accounts 98-108 103-1 NRS 16 2.5/2.6 Explanation of the material topic and its Boundary Statement concerning the annual accounts 98-108 103-2 NRS 16 2.5/2.6 The management approach and its components Statement concerning the annual accounts 98-108 103-3 NRS 16 2.5/2.6 Evaluation of the management approach Statement concerning the annual accounts 98-108 201-1 NRS 16 2.5/2.6 Direct economic value generated and distributed Statement concerning the annual accounts 98-108
Threats and opportunities Risk – the core of the business Our climate and environmental commitment Reducing carbon intensity 202 Market presence 103-1 Explanation of the material topic and its Boundary Our markets 36-40 103-2 The management approach and its components Our markets 36-40 103-3 Evaluation of the management approach Our markets 36-40 203 Indirect economic impact Business model 27-30 204 Procurement practices Our engagement for our suppliers 82
Requirements Board’s report Disclosure description Comment Page 103-1 Explanation of the material topic and its Boundary Our engagement for our suppliers 82 103-2 The management approach and its components Our engagement for our suppliers 82 103-3 Evaluation of the management approach Reducing carbon intensity 92-95 205 Rskl §3-3c Anti-corruption 205-2 NRS 16 2.2 Communication and training about anti-corruption policies and procedures
Environmental 301 Materials Management and control of climate risk Our climate and environmental commitment Reducing carbon intensity 302 Energy Management and control of climate risk Our climate and environmental commitment Reducing carbon-intensity 305 Emissions Management and control of climate risk Our climate and environmental commitment Reducing carbon intensity 305-4 GHG emissions and intensity Management and control of climate risk Our climate and environmental commitment Reducing carbon intensity 306 NRS 16 2.10 Effluents and Waste Management and control of climate risk Our climate and environmental commitment Reducing carbon intensity 307 NRS 16 2.10 Environmental Compliance Management and control of climate risk Our climate and environmental commitment Reducing carbon intensity 103-1 Explanation of the material topic and its Boundary
Management and control of climate risk Our climate and environmental commitment 103-3 Evaluation of the management approach Reducing carbon intensity 51-53
Social 402 Labor/Management Relations Engaged employees A safer society 403 Occupational Health and Safety Engaged employees A safer society 404 Training and Education Engaged employees A safer society 405 Diversity and Equal Opportunity Engaged employees A safer society 405-2 Ratio of basic salary and renumeration of women to men A safer society 86-91 406 NRS 16 2.10 Non-discrimination Engaged employees A safer society 407 NRS 16 2.10 Freedom of Association and Collective Bargaining
Our commitment to our suppliers Reducing carbon intensity 103-1 Explanation of the material topic and its Boundary Stakeholder analysis 31 103-2 The management approach and its components Our commitment to our suppliers 73-75 103-3 Evaluation of the management approach Reducing carbon intensity 73-75 415 Public Policy Gjensidige does not give any financial or inkind political contributions, neither directly nor indirectly
NRS 16 2.5.3 Cash flow Statement concerning the annual accounts 101
NRS 16 2.5.2 Financial position and liquidity Statement concerning the annual accounts 100
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