Today, more than 200 years later, the mutuality principle is more important than ever. No one lives for himself alone. Everyone must do their bit. For the environment, for safety, for each other. This is who we are. Mutual, or Gjensidige, as we say in Norwegian. WWee aarree GGjjeennssiiddiiggee..
The report is published in digital format only and is available at www.gjensidige.no.
The requirements of the Board’s report are covered in various chapters throughout the integrated report. For complete overview, see “Appendix 1 - GRI Content Index and the Board’s report”.
BBeesstt rreeppuuttaattiioonn iinn tthhee iinndduussttrryy In 2020, Gjensidige was ranked top in the Norwegian financial industry, both in the Norwegian Customer Survey, which measures customer satisfaction, and in the Ipsos profile survey, which measures reputation. We also received the Stockman award from the Norwegian Society of Financial Analysts for our investor communication, and our sustainability reporting was ranked best in the industry by The Governance Group.
DDiiggiittaall iinnnnoovvaattiioonn We entered into a research partnership with the Norwegian School of Economics’ (NHH) Digital Innovation for Growth (DIG) centre. The partnership will be an important platform for understanding how we can use technology to create added value for customers. We also established an interdisciplinary innovation council to boost the company’s innovation culture, and a dedicated innovation lab at the head office.
Gjensidige used the opportunity to draw attention to the following: a safer society, sustainable claims settlements and responsible investments.
1100 yyeeaarrss ssiinnccee IIPPOO 10 December 2020 Gjensidige celebrated that 10 years had passed since the initial public offering on the Oslo Stock Exchange. In the course of the 10 years the Gjensidige share yielded a total return of 549 per cent. The occasion was marked with a donation of NOK 350,000 to the Red Cross.
DDeennmmaarrkk ffiirrsstt ttoo ssttaarrtt uussiinngg nneeww ccoorree ssyysstteemm The new core system IDIT was developed in Denmark. Completion and testing were nearly finished towards the end of the year, which means the system can be taken into use for the first products in early 2021.
KKeeyy ffiigguurreess aanndd aalltteerrnnaattiivvee ppeerrffoorrmmaannccee mmeeaassuurreess 1 Defined as an alternative performance measure (APM). APMs are described at www.gjensidige.no/reporting in a document named APMs Gjensidige Forsikring Group 2020.
SSiinnccee IIPPOO 1100..1122..22001100 1 Dividend reinvested 2 Equally weighted average in local currency for Tryg, Topdanmark, Sampo and Alm. Brand
Net income from investments NOK Millions 1,318.5 3,860.3 830.2 2,002.2 2,152.6
Profit/(loss) from continuing and discontinued operations NOK Millions 4,953.9 6,593.8 3,716.4 4,519.3 4,665.9
CO2-emissions, scope 1 and 23, 11 Tonnes CO2e 1,860 5,124 5,426 5,354 5,150
For more than 200 years, Gjensidige’s social mission has been to create a sense of security. I am happy that the company managed to fulfil its mission in such an excellent manner given the unusual situation in 2020. In addition, our financial result was very strong.
Gjensidige is the biggest general insurance company in Norway, and among the leading insurers in the Nordic region. We safeguard life, health and assets for people, businesses and organisations in the Nordic countries. We compensate losses when they arise and use our expertise to prevent loss.
In addition, we share our damage prevention know-how and expertise with the authorities and society at large.
NNeeww ttyyppeess ooff rriisskk Climate change increasingly exposes us to other types of risk than before. As a general insurer, we are affected by different forms of climate risk, not least relating to compensation for losses caused by weather-related events. We are affected by risk when society shifts towards a greener lifestyle. This gives rise to uncertainty relating to investments and customer behaviour, but also creates new opportunities. The trend will impact both insurance and investments. As an asset manager, we must also deal with the possibility of companies being held liable for not contributing to the green transition.
Gjensidige must also share its knowledge about the consequences of climate change with the public authorities, and help to ensure that society is better equipped for the future. Gjensidige supports several UN initiatives to ensure transparency and help to achieve sustainable development.
The contributions we make in our own business are in the form of measures to make our core processes more sustainable by supporting recycling and the circular economy, but also by safeguarding labour rights in our own organisation and in our partners’ organisations.
SSttrraatteeggiicc ppllaattffoorrmm Gjensidige strikes a balance between customer orientation and efficient operations, based on an analytical approach, to ensure longterm value creation. Key success factors are our strong brand, technology and infrastructure, and relevant expertise and culture. Sustainable choices and solutions are a fundamental precondition.
SSttrraatteeggyy ttoowwaarrddss 22002255 Looking towards 2025, we expect today’s market participants and business models to continue to dominate. We will nonetheless monitor developments closely and prepare for the threats and opportunities that result from changes in our surroundings.
A key part of our strategy is to develop the Company into becoming a problem-solver for customers, by offering a wider range of products and services than before. Internally in the organisation, this requires continuous improvement of our operations as well as training and development. At the same time, we will look for partners and alliances that can enhance our value proposition.
We seek opportunities for increased scale in general insurance in the Nordic region and the Baltics, and a broader range of services in the financial sector in Norway. Profitability will be prioritised over growth, and Gjensidige will continue to be one of the most cost-efficient participants in the general insurance market. Capital discipline will be given high priority and help the Group to maintain its financial flexibility and deliver on the return on equity target and dividend policy.
DDiivviiddeenndd aallssoo iinn 22002200 The shutdown of society in connection with the pandemic caused great uncertainty about economic developments. The authorities encouraged banks and insurance companies to withhold their dividend payments. I am very pleased that the situation changed on Gjensidige’s part, enabling the payment of dividend also in 2020. The result in 2020 was the best ever in the Group’s history, and the Board proposes a dividend of NOK 3,700 million for the 2020 financial year, corresponding to NOK 7,40 per share. On 4 February 2021, a dividend of NOK 1,200 million was paid based on the profit for 2019. That corresponded to NOK 2.40 per share and represented the distribution of excess capital.
We will continue to develop solutions that simplify and improve the process of becoming and being a Gjensidige customer.
AA ssuussttaaiinnaabbllee pprroobblleemm--ssoollvveerr Our strategy dictates that Gjensidige shall not only compensate losses that have arisen, but increasingly help customers to prevent losses from occurring. In 2020, we launched a number of additional services that contribute to this end. For example, we acquired an ownership interest in Mimiro, a digital ecosystem developed for the agricultural industry. Mimiro offers agricultural customers services that can optimise production and prevent a number of losses.
IImmpprroovveemmeenntt aanndd ddeevveellooppmmeenntt ccoonnttiinnuuee uunnaabbaatteedd ggooiinngg ffoorrwwaarrdd Next year, we will continue to develop solutions that simplify and improve the process of becoming and being a Gjensidige customer. This will, not least, require digitalisation, automation and rationalisation. I also look forward to seeing the results of our many exciting sustainability initiatives. There is a strong commitment to this important issue in our Company, and together with suppliers and customers, we will contribute to the green transition also in the years ahead.
By keeping our promises, delivering quality, making complicated things simple and ensuring that each and every customer is satisfied, we create the Gjensidige Experience time after time – so that people keep choosing us.
Our goals are based on a desire to achieve good financial results and as sustainable operations as possible. When it comes to strategy we have our mind on efficiency in the short term, development in the medium term – and sustainable value creation in the long term.
Our core values shall contribute to forming a common identity and corporate culture throughout the Gjensidige Group. They shall help our employees to work well together, to concentrate their efforts on creating good customer experiences, and on creating innovation and capacity for change.
SSuussttaaiinnaabbiilliittyy ggooaallss Gjensidige’s board’s adopted goals for sustainability focus on three themes. Some of the goals support more than one focus area. For example, our work on damage prevention contributes towards both a safer society and reduced carbon intensity by reducing the number of losses.
• We shall take social responsibility and support underprivileged people in different ways.
RReedduucciinngg ccaarrbboonn iinntteennssiittyy • By buying carbon offsets, we shall be climate-neutral in our own operations from and including 2020. Our long-term goal of climate neutrality will be achieved by continuously reducing direct and indirect emissions, among other things related to energy consumption and travel.
• Our biggest indirect emissions are in the claims processes. This means that cooperating with and motivating customers and suppliers to make more climate and environmentally friendly choices in connection with claims process and encouraging more recycling and increased emphasis on the circular economy are our greatest opportunities to reduce our carbon intensity.
The Board has adopted sustainability goals and financial targets that will help Gjensidige to achieve its mission, vision and desired position and meet its obligations to the Company’s stakeholders. The management has also adopted operational targets to support them.
IInnddiiccaattoorrss ooff tthhee ssttaattuuss ooff GGjjeennssiiddiiggee’’ss wwoorrkk oonn ssuussttaaiinnaabbiilliittyy Gjensidige has adopted both qualitative and quantitative goals for its sustainability work. Quarterly reporting has been established to ensure an overall overview of the status. As far as possible, we measure the potential effect of measures and follow up new measures. Our sustainability goals will be further developed in accordance with the EU guidelines for sustainable economic activity. Key indicators for goal attainment are summarised below: A safer society Reducing carbon intensity Responsible investments
• Share of security discount of total portfolio (damage prevention measures).
• Contribute to at least 1000 media reports annually on damage prevention.
Share of follow-up of asset managers investing in companies on the exclusion list.
• Claims straight-through processing (Norway) • 95 per cent digital customers.
• Provide work practice and contribute to good integration for minimum 4 FTE/persons.
• Annual reduction of carbon emissions from own operations and climate neutral from 2020 by purchasing carbon offsets.
Combined Ratio: See table on next page. Annual reduction in customer complaints.
CCuussttoommeerr ssaattiissffaaccttiioonn ((CCSSII)):: contributes to Gjensidige being the most customer-oriented general insurance company in the Nordic region and the Baltics. Requires good value propositions to customers, customer-friendly solutions and efficient claims settlements.
DDiiggiittaall ccllaaiimmss rreeppoorrttiinngg aanndd ssttrraaiigghhtt--tthhrroouugghh ccllaaiimmss pprroocceessssiinngg:: contribute to good customer experiences, cost efficiency and lower carbon intensity. Require standardisation, digital claims forms and algorithms in our core system.
The 17 SDGs 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.
33 GGoooodd HHeeaalltthh aanndd WWeellll--bbeeiinngg Gjensidige’s main aim is to contribute to financial risk protection. Gjensidige will help to halve the number of deaths and injuries caused by road traffic accidents.
Gjensidige has accident and health policies and additional services that promote general access to quality essential health-care services and disability coverage that ensures financial security.
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 workers in precarious employment.
1111 SSuussttaaiinnaabbllee CCiittiieess aanndd CCoommmmuunniittiieess Gjensidige shall, by 2030, join forces with the public authorities to help significantly reduce the number of people affected by disasters, including water-related disasters, and help to reduce the direct financial losses that follow from such disasters.
Gjensidige shall work on loss reduction 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.
GGlloobbaall mmeeggaattrreennddss ttoowwaarrddss 22003300 Global megatrends relating to demographics, health, digitalisation and climate and environmental change give rise to changes for the insurance industry that we need to understand.
• Increased urbanisation leads to more people moving to densely populated areas, and new technology and new ways of owning and using a car will gradually lead to changing insurance needs.
• New technology creates large amounts of data, and new digital tools provide increased behavioural insight.
• The EU has a range of initiatives that will impact products and services, claims settlements (for example the choice of materials) and investments.
Our trend analysis points to a number of relatively certain trends towards 2030. These form the basis for the strategy work in Gjensidige and are summarized in the table below.
However, the future does also hold several more uncertain trends. Gjensidige systematically follows developments in critically uncertain and disruptive trends through a set of scenarios, which are based on the extent to which Nordic non-life insurance is significantly challenged by new players, and the extent to which the market has the ability and opportunity to utilise real-time data and predictive technology.
During the strategy period, we will pay particular attention to and be prepared for the development of new business models, for example relating to open platforms and sharing of data, vertical integration and more comprehensive risk relief.
The Board has adopted Gjensidige’s corporate strategy for the years ahead. The strategy sets outs guidelines for the brand strategy, sustainability strategy, HR strategy, technology strategy and the different segments’ business strategies. The corporate strategy follows from the mission ‘We safeguard lives, health and assets in a sustainable manner’ and the overriding vision ‘To know the customer best and care the most’, as well as the position we seek as the most customer-oriented company in the insurance industry. Gjensidige has defined the Nordic region and the Baltics as its geographical catchment area, and we aim for continued growth in general insurance in this area, in addition to a broad range of services in the financial sector in Norway.
Covid-19 has affected the world, both through the direct health consequences of the pandemic and, not least, through the indirect economic and psychological consequences of invasive measures such as social distancing. We believe that the pandemic primarily will accelerate existing trends rather than introducing new trends. In particular, we see that our own employees have improved their digital skills, and we expect our customers’ digital user habits to accelerate.
Given the increased uncertainty going forward, we expect our customers to seek solutions that create a sense of security, both financially and personally. In the long term, this will generate new opportunities in the development of products and services.
Socio-cultural and economic trends, including demographic change and customer behaviour Environment, economy, politics and regulatory changes
• The growing elderly population challenges the Scandinavian welfare model. Simultaneously, urbanization continues, and a larger part of the population will live close to large cities and densely populated areas.
• Customers seek new ways of getting access to cars; new ownership models, rental and carsharing.
• Increased and more complex health challenges. • Increased costs for compliance with legal requirements and regulations, especially data protection and sustainability (climate, environment, health, diversity, etc.).
Factors that summarise continuous improvement in accordance with the strategic platform: • Customer needs set the premise for all product and service development and shall foster high customer satisfaction and customer renewal. Solutions will be developed based on the customer perspective, with the focus on simplification and increased value for the customer. The customer dialogue combines digital solutions and efficient omni-channel distribution.
• Analytics-driven business processes throughout the value chain are decisive for our customer orientation and correct risk pricing. Examples include automated tariffs and customer behaviour prediction analyses in connection with customer advice and claims settlements. Analytical insight will also contribute to activities aimed at reducing the risk of climate-related damages.
• Customer orientation shall be a clearly differentiating advantage of the Gjensidige brand.
• Investing in a modern, flexible technology platform that includes a new core system and next generation tariffs and analytical CRM are crucial focus areas for Gjensidige going forward.
• To succeed in the future, organisations must be founded on diversity, inclusion and trust. We need managers with the ability to attract, develop and retain relevant expertise at all times, and ensure a flat organisation structure and short decision-making paths. Job rotation will be an important means of building expertise across the Company, combined with the recruitment and development of employees. Gjensidige’s core values – create a sense of security, apply new thinking, and go for it – shall drive the organisation.
Chapter 1 – This is us - Gjensidige’s strategy in product and claims processes, which also contributes to reuse and circular economy. The investment portfolio shall be managed responsibly in accordance with the UN Global Compact principles, monitored in accordance with recognised sustainability requirements and comply with the UN Principles for Responsible Investment (UN PRI).
Looking towards 2025, we expect the business model and market participants to remain more or less the same. Gjensidige has different positions and preconditions for further growth and development in the segments. We will implement best practices across segments where natural and expedient. Profitability will be prioritised over growth.
Going forward, Gjensidige must safeguard and consolidate its current business model, market position and profitability level, at the same time as the Group develops its strategic flexibility and manoeuvrability to be able to meet future challenges and possibilities. We must create room for development, testing and learning. This must take place through continuous improvement and more efficient operations.
Further into the period, we must increasingly position ourselves through new customer concepts that help to prevent loss and solve customer problems. We will do this alone, together with partners or by participating in relevant ecosystems. This will ensure greater relevance in relation to our customers and make us more attractive to potential alliance partners.
SSeeggmmeenntt--wwiissee ssttrraatteeggiieess We will maintain our strong and unique position in Norway and ensure that pricing is adapted to risk development. We continuously work on big and small measures that generate cost savings, better customer experiences and greater competitiveness.
Chapter 1 – This is us - Gjensidige’s strategy this by building digital service solutions, refining our role as a damagepreventing problem-solver, exploring new growth industries and developing preparedness to be able to meet future customer needs.
We will continue to improve profitability and growth in the markets outside Norway. Important drivers will be a new core system and more sophisticated price models, a wider product range among our customers, and rationalisation measures.
In Denmark, the focus will be on stringent profitability control, further development of business processes and a continued strong position in the Danish market. Important measures for achieving this aim will be the new core system, a targeted brand strategy and product and service development, particularly aimed at property and health insurance. In order to promote increased profitability and a stronger position in the Swedish market, we will move towards becoming a fully digital insurance provider. In the Baltics, the focus on rationalisation, simplification and digitalisation of the customer journey will continue in order to promote profitable growth going forward.
CCaappiittaall ssttrraatteeggyy Our capital strategy will underpin our attractive dividend policy and contribute to ensuring high and stable nominal dividends on a regular basis. Gjensidige’s capitalisation must be adapted at all times to the Group’s strategic goals and appetite for risk. The Group shall maintain its financial flexibility while exercising strict capital discipline that supports the return on equity target and dividend policy.
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 it. Good customer experiences over time have created strong trust in Gjensidige as a brand. Our ambition is to create the best customer experiences in our industry. We call this the Gjensidige Experience.
Our point of departure is strong. We have very satisfied customers and high customer loyalty, especially in Norway, where we have the strongest reputation in the financial sector and one of the strongest regardless of sector. Satisfaction with the Company and our advisers is measured on a continuous basis, and improvement measures are initiated based on feedback from the customers. Gjensidige has defined clear goals for customer satisfaction. The level of goal attainment influences the payment of bonuses to executive personnel and collective bonuses to all employees.
New technology and partnerships will enable us to be one step ahead in loss situations. This is an attractive, strong value proposition based on the Company’s customer orientation. When we know that damage prevention is the measure with the single greatest climate benefit/impact by far, we see how we can better meet customer needs while at the same time maintaining our role as a responsible member of society.
Even with this focus, however, we know that losses will continue to occur, and when they do, Gjensidige will do what we have always done: not only compensate customer’ financial losses, but do so in a way that causes them the least possible inconvenience.
Members of the Foundation’s General Meeting and Board are elected by and from among Gjensidige’s customers. This gives customers a chance to influence the Gjensidige Foundation’s substantial distribution of donations to contribute to a safer society. Since 2010, the Foundation has distributed NOK 2.7 billion to projects that promote security and health.
CCuussttoommeerr ddiivviiddeenndd –– aa uunniiqquuee aaddvvaannttaaggee ffoorr oouurr NNoorrwweeggiiaann ggeenneerraall iinnssuurraannccee ccuussttoommeerrss
We have built relevant expertise and efficient systems over a long period.
Gjensidige has an integrated business model in which direct customer contact is an essential element. Sustainability is integrated in all core processes and is based on the UN Principles for Sustainable Insurance. We conduct our business within the framework of our strategy, Code of Conduct and compliance, and aim to create value for all our stakeholders. Each element of the core processes is described below, with a reference to the SDGs safeguarded in each process.
Financial capital – secures customers and operations • Claims payments • Pay, tax and fees • Dividend to owners and indirectly to customers
Gjensidige’s business includes the development and delivery of financial services and products, a high degree of direct distribution, service and customer dialogue, and efficient claims settlements. A digital, analytical approach characterises activities throughout the value chain.
Gjensidige offers a wide range of insurance products to both private individuals and businesses. This gives customers comprehensive protection against financial losses in connection with different claims events. It is very important to us that customers find these products easy to understand, that they provide effective protection against relevant losses and that their coverage and price are adapted to the customers’ risk profile. As far as possible, we shall also contribute to reduced use of resources. We are introducing more and more automation and standardisation in this work, enabling us to update tariffs more quickly and assess risk better than before. Read more about products and services in the section ‘Sustainable products and services’.
Customers shall receive the right amount of compensation as quickly as possible. We help and guide customers once a claims event has occurred, and endeavour to make it easy to report a claim either digitally or manually. We work continuously to improve the claims processes so as to safeguard customers’ need for information, help and compensation in the best way possible.
The claims processes are an important part of the work to reduce our environmental impact. Where possible, we work to promote reuse of materials and contribute to the circular economy. We measure greenhouse gas emissions from our suppliers’ use of materials and labour in connection with repairs. We have defined targets for reducing our carbon intensity and will work with our suppliers to further reduce greenhouse gas emissions.
Gjensidige is a leading general insurance provider in the Nordic countries and the Baltic states. The Company is the biggest player in the Norwegian land-based general insurance market, with a market share of just below 26 per cent in 2020, of a total market worth more than NOK 66 billion, according to statistics from Finance Norway. Gjensidige is a well-established player in the Danish market and has a market position which provides economies of scale. Gjensidige’s market share in Sweden is lower than in the other markets, and the Company is in a challenger position in relation to the big, established players. In the Baltics, Gjensidige is well-positioned for further growth. The Company’s operations outside Norway are based on a number of small and medium-sized acquisitions over the past 15 years.
Gjensidige is a leading general insurance provider in the Nordic countries and the Baltic states. The Nordic general insurance markets are attractive, with high entry barriers, but also characterised by considerable competition. The Baltic general insurance market is somewhat less developed, with a potential for strong growth as the standard of living continues to improve.
Based on the most recent years’ profitability levels in our insurance markets, the Nordic markets have been attractive. The high level of prosperity in the Nordic region means that people have substantial assets to insure. For private customers, the biggest products are motor insurance, home insurance and risk-based accident and health insurance. Travel, leisure craft and valuables also represent a significant volume of insurance. The Baltics stand out from Gjensidige’s other insurance segments in that motor insurance makes up a substantial part of the market. The Baltic region is also characterised by lower customer loyalty and a larger proportion of short-term contracts, which in turn affects the competitive dynamics and creates a price-sensitive market. This trend was further enhanced through 2020 due to Covid-19.
The Scandinavian welfare model entails universal access to public health services and comprehensive social security schemes. Private accident and health insurance serves as a supplement to these schemes.
The map shows Gjensidige’s position in our various markets, based on market shares.
CONTENT 3 About this report 4 The year that passed 6 Key figures and alternative performance measures 11 Chair letter 14 CEO letter Chapter 1 – This is us 18 Our mission and vision 19 Our core values 20 Gjensidige’s targets 24 How Gjensidige contributes to the UN Sustainable Development Goals 26 Gjensidige’s strategy 32 Customer promise 35 Our business model 39 Our markets 42 Our insurance segments Chapter 2 – Creating added value in Gjensidige Chapter 3 – Value created in 2020 Chapter 4 – Financial statements and notes 282 Declaration from the Board and CEO 283 Auditor’s report 288 Independent Auditor’s report Appendix 290 GRI Content Index and Board of Directors Report 296 Selected governing documents 297 Description of ratings and whom we support 298 Statement on equality 304 Certificates and guarantees 310 Climate accounts own operations
The Nordic general insurance market is characterised by high customer loyalty to companies with well-established brands and strong partnership structures. A high degree of direct distribution combined with high customer loyalty and efficient operations lead to low cost ratios and create high entry barriers for new players.
In most of the countries, the private market consists of four or five large players and a number of small or medium-sized companies. The commercial market is generally more concentrated than the private market. Size and scale are increasingly important in order to succeed in the insurance industry. This is driven by the need for meeting increased regulatory complexity, creating room for strategic investments and investments in technology, attracting and retaining the best qualified candidates, increased diversification and positioning to be the preferred alliance partner.
In the Baltics, we have a subsidiary in Lithuania with branches in Estonia and Latvia. The business is organised into six operational segments: GGeenneerraall IInnssuurraannccee PPrriivvaattee:: MMaarrkkeett lleeaaddeerr iinn tthhee pprriivvaattee mmaarrkkeett The Private segment provides a wide range of general insurance products and services to private individuals in Norway, and handles sales, customer service and claims settlement.
GGeenneerraall IInnssuurraannccee SSwweeddeenn:: CChhaalllleennggeerr iinn aa mmaattuurree mmaarrkkeett The Sweden segment includes the Group’s general insurance operations in the Swedish private, commercial and municipal markets. The segment handles sales, customer service and claims settlement. Approximately 50 per cent of earned premiums come from the private market, while the other half comes from the commercial market.
PPeennssiioonn:: WWeellll ppoossiittiioonneedd iinn aa ggrroowwiinngg mmaarrkkeett The Pension segment offers defined contribution occupational pension schemes for businesses, in addition to individual pension savings agreements and disability pension. Pension is a priority area that helps to ensure that Gjensidige can be a complete supplier of insurance and pension products to private and commercial customers. The business contributes to stronger customer relations and loyalty among our general insurance customers. ‘Individual pension account’ will be launched in the market in 2021, and Gjensidige is well under way with the preparations for the scheme.
Changes in the climate and environment give rise to new types of risk, new needs and new responsibilities. When we make adaptations to the Company’s operations and the services and products we offer, it is out of consideration for the needs of our stakeholders – and for the sake of our common future.
SSttaakkeehhoollddeerr ddiiaalloogguuee The stakeholder dialogue is based on needs, and we communicate with our stakeholders in different arenas such as customer meetings, customer surveys, employee surveys, competitive tenders and supplier follow-up, and investor meetings.
RRiisskk aanndd mmaatteerriiaalliittyy aasssseessssmmeenntt The assessment of relevant topics is based on what topics the stakeholders consider important and the consequences for Gjensidige if we fail to meet their expectations of our climate and environmental work, social factors, corporate governance and finances. A number of topics have been considered through our stakeholder dialogue, and they concur with our sustainability focus areas: a safer society, reducing carbon intensity and responsible investments.
Security (S) Financial safety and security are closely connected and are regarded as most important to our stakeholders.
Engaged employees (S) Engaged, motivated employees are decisive for value creation in the short and long term.
Climate and environmental change will affect insurance directly through the likelihood of increased claims incurred (physical damage) and greater uncertainty relating to the future return on investments, and customer preferences.
In the same way that our stakeholders have expectations of us when it comes to sustainability, we follow up our investments to make sure that the companies we invest in give due consideration to sustainability.
Our core competence is a structured approach to understanding risk, reducing risk and relieving customers of risk. That requires good management and control systems.
Insurance is about the distribution of risk. Given Gjensidige’s size, product mix and geographical presence, we achieve considerable diversification. Purchases of reinsurance also help to ensure we stand together when large losses occur. That way, we create a sense of security throughout the value chain.
The overall objective for the management of strategic and / or business risk is to ensure that the risk level in the Group is within the approved risk appetite.
• Risk management is done by identifying, assessing and managing the significant strategic and business risks. The starting point for this identification is strategic objectives.
• As part of the Company’s strategy process, global trends and scenarios are identified and assessed to analyse how these could affect the risk picture, including the competitive situation and framework conditions. A special "emerging risk" process is also carried out, where the purpose is to identify and monitor potentially emerging risks.
The risk assessments are carried out annually with a quarterly follow-up and reporting to management and the board.
• The underwriting policy adopted by the Board sets out guidelines for the basic principles and responsibility for product and tariff development, risk selection and the stipulation of terms and conditions and pricing of individual risks.
• The policy for technical provisions adopted by the Board sets out the overriding principles for stipulating such provisions.
• A retention limit specifies the maximum loss the Gjensidige Insurance Group is willing to take and stipulates the level of Gjensidige’s reinsurance programme. Reinsurance is purchased to protect the Company against major individual events such as natural disasters and large individual losses.
• Reporting of results and prognoses, as well as separate risk reporting, regularly takes place to the management and Board. The Chief Actuary prepares reports on the technical provisions.
• The primary purpose of the investments made is to support the insurance business by securing the value of insurance liabilities against fluctuations in market variables.
• Some investments are also made to help to achieve the Group’s overall profitability goals, with a controlled downside risk.
• The match portfolio, which is intended to correspond to the Group’s technical provisions, is invested in fixed-income instruments whose duration and currency are adapted to match the technical provisions.
The risk that potential events or circumstances may arise and have a financial consequence and / or loss of reputation. Operational risk may be due to: • Human error. • Weaknesses in systems and processes that have financial consequences and/or negative consequences for reputation.
The overall objective of the management of operational risk is to ensure that the risk level in the group is within the approved risk appetite.
Risk management is done by Identifying, assessing and managing the significant operational risks where the starting point is key objectives, deliveries and significant processes. The risks are identified, assessed and managed by managers and professionals in accordance with the established risk matrix and treatment rules.
Factors that affect risk and our culture of risk management include: • Values, ethical attitudes and standards • Organisation in the form of well-defined, clear lines of reporting and a clear division of responsibility, governing documents and routine descriptions.
NNaattuurraall ddiissaasstteerr ddaammaaggeess With the help of weather data, we send text messages to customers who are likely to be affected by bad weather. The messages are based on official weather data and our customer data, so that we avoid distributing false alarms. Every year, we receive feedback from grateful customers who have had time to secure their assets thanks to these messages.
FFiirree pprreevveennttiioonn Together with the Norwegian Fire Protection Association, the Directorate for Civil Protection and Emergency Planning (DSB) and local fire brigades, we organise Røykvarslerdagen – the smoke detector awareness day – on 1 December each year. The goal of the campaign is to raise awareness about how important an early warning is in the event of fire. In Denmark, we cooperate with industry associations to raise awareness of fire risk in general and in modular buildings in particular.
We also check whether customers have satisfactory systems for attending to their employees’ health, safety and working environment. After the risk check, customers receive feedback on areas for improvement. Risk assessments are also decisive to the pricing of insurance. We select properties for risk checks in cooperation with our customers, perform surveys, review the result with customers, and help customers to establish better internal control procedures to ensure the necessary focus on damage prevention. Risk checks are important to ensure customer loyalty.
We collaborate with the Norwegian Council for Road Safety (Trygg Trafikk) on awareness-raising campaigns in upper secondary schools several places in Norway. #ErDuSikker? is a traffic safety competition for upper secondary schools. We collaborate with other insurance companies on road safety through the industry organisation Finance Norway. In Estonia, Gjensidige contributes to improving road safety through an annual campaign that encourages pedestrians to wear reflectors.
HHeeaalltthh Gjensidige offers sustainable solutions by facilitating and encouraging better health. This improves life quality and prevents illnesses and injuries.
Mental health is an important focus area for Gjensidige. An increasing number of young people have mental health challenges that lead to their exclusion from the labour market. By offering low-threshold services, we can prevent mental health problems at an early stage. Among other things, we offer digital self-help programmes for mental health and an online psychologist who provides advice, guidance and help to young people. During the coronavirus pandemic, we also developed and launched damage prevention services to address the mental health needs of all our Norwegian general insurance customers, including a self-help programme and a medical helpline that includes a psychologist.
RReesseeaarrcchh ccoollllaabboorraattiioonnss In order to ensure that our products and customer service maintain a high international level at all times, we collaborate with research institutions on innovation. In the period from 2015 to 2022, we are participating in a research collaboration with, among others, the University of Oslo, the University of Bergen and the Norwegian Computing Centre on several projects that we expect to give us new insight into topics relating to the processing of large data volumes (big data). Examples include risk pricing, forecast and trend analyses and insurance fraud.
WWeellll pprreeppaarreedd –– ddiiggiittaall aaddvviiccee oonn ddaammaaggee pprreevveennttiioonn Gjensidige has a dedicated web page called gjensidige.no/godtforberedt, which produces about 500 articles that are distributed to around 1.5 million readers with a very high relevance score. The web page gets several million page views and tens of thousands of positive feedback messages from the public on the advice they find there.
• EEyyrr: Online Doctor is a service whereby customers can receive medical assistance on their mobile phone without having to visit their regular GP.
• LLiiffeekkeeyyss: Online service offering video and phone consultations with authorised psychologists.
The terms and conditions for commercial property and housing associations have been expanded to include an environmental dividend in the event of loss. If the customer chooses to rebuild the building to become BREEAM-NOR certified to a ‘Very Good’ standard or better, they achieve an environmental dividend, for example five per cent extra claims payment.
Gjensidige offers a wide range of products in the main categories, accident and health, property and motor insurance. Product development takes place at the central level, in close cooperation with frontline customer staff, to ensure that the products we offer are relevant. Many sustainability elements are built into the terms of our insurance policies. Some of them are mentioned below.
GGrreeeenneerr hhoouusseehhoolldd ccoonntteenntt aanndd ttrraavveell iinnssuurraannccee ffoorr yyoouunngg ppeeooppllee The terms and conditions of our Innbo UNG (household contents) and Reise UNG (travel) insurance policies have been altered. Gjensidige now compensates for the emissions that follow from losses incurred under these policies by buying UN Gold Standard carbon offsets corresponding to the estimated carbon emissions emitted in the claims process. The project is described in ‘Value created in 2020’.
TTrraavveell iinnssuurraannccee We have developed digital services with an online shop, online claims forms and digital proof of insurance. Ensuring customers’ safety when they are travelling is important, and we offer advice on travel and illness in the Gjensidige app. We take advantage of reuse and repairs where expedient in settlement processes.
Customers can have a video consultation with a doctor by means of an app on their mobile phone. This solution saves customers time and transport expenses.
SSppoonnssoorrsshhiippss Gjensidige is a proud sponsor of sports, and, through our cooperation agreements, we want to highlight the joy and many positive aspects of doing sports. By doing so, we hope to motivate people to be physically active. We sponsor both elite and recreational sport, and work with organisations that have a good reputation and the same values as we have. The sponsorship agreements establish projects with different objectives. They are intended to benefit society, promote health or create activity and recruitment among young people. Sponsorship is important to Gjensidige because it also creates valuable profiling and positive associations with the Company, in addition to strengthening the internal culture and pride among our staff.
CCoollllaabboorraattiioonn wwiitthh nnoonn--pprrooffiitt oorrggaanniissaattiioonnss Gjensidige collaborates with the Church City Mission on creating a better and safer local community. This involves making a financial contribution to the Church City Mission, and various activities that engage our employees. Employees from several of our offices all over the country contribute to the knitting campaign it runs before Christmas every year. It aims to create ‘a warmer society’ by raising money for a Christmas celebration for disadvantaged people.
Through involvement in the local community and sponsorships, Gjensidige and its employees participate in various activities for the purpose of contributing to a warmer society and supporting those who need help with activities and money. The Gjensidige Foundation contributes expertise and financial support to enable people to create a good life for themselves in a safe society.
We help our customers and partners to understand the consequences of climate and environmental challenges. We make continuous efforts to reduce our own climate footprint, both in our own organisation and in connection with claims settlements. We do this in close collaboration with our suppliers.
Chapter 2 – Creating added value in Gjensidige - Our climate and environmental commitment
GGjjeennssiiddiiggee’’ss cclliimmaattee ffoooottpprriinntt It is Gjensidige’s ambition to be climate-neutral by 2030, and we started buying carbon offsets from and including 2020. As a knowledge-based company, our carbon emissions are largely related to the running of offices and employee travel.
EEnnvviirroonnmmeennttaall aanndd eenneerrggyy--eeffffiicciieenntt ooppeerraattiioonnss SSccooppee 11:: LLiimmiitteedd uussee ooff ccoommppaannyy ccaarrss We have established a company car policy that entails that carbon 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. Our premises are located close to public transport and employees are encouraged not to drive to work.
CCeerrttiiffiieedd EEccoo--LLiigghhtthhoouussee In order to ensure that we impact the environment as little as possible, all our 11 Norwegian offices that have more than 30 employees are certified EcoLighthouses. Eco-Lighthouse is a national
Insurance is a knowledge business that does not directly affect the environment to any extent. However, we can help to achieve a more sustainable society by reducing our own climate footprint, using energy efficient buildings and limiting the amount of travel by our employees, and use our market power in relation to our suppliers in the claims processes and in our investments. Our most important contribution is damage prevention.
Chapter 2 – Creating added value in Gjensidige - Our climate and environmental commitment environmental certification scheme run by the Eco-Lighthouse Foundation. The foundation was established by key organisations in the private and public sector.
The offices that are certified Eco-Lighthouses use an environmental management system for the handling and reduction of material consumption, waste, energy consumption and transport. An annual environmental report is prepared that documents the status of implemented environmental measures and action plans for the coming year. The offices must be recertified every three years. It is an extensive process that is carried out by an environmental team at the office in question in cooperation with an external adviser certified by the Eco-Lighthouse Foundation. Annual reporting and regular recertification ensure that our offices live up to the highest standards for environmentally friendly operations.
Our purchasing policy applies to the whole Group and requires deliveries to be sustainable. We use our purchasing power to exert influence, and engage in continuous dialogue with our most important suppliers to ensure that they choose sustainable solutions. Read more about how we cooperate with our suppliers in the section ‘We create value in partnership with our suppliers’.
• Gjensidige has signed the UN Environmental Principles for Finance and the Principles for Sustainable Insurance (UN PSI), and will contribute to increased transparency and relevant information.
• Use of materials in claims processes is calculated for frequency motor and property claims to highlight carbon emissions in Scope 3.
• The corporate management bonus programme is linked to attainment of sustainability goals, including the development in carbon intensity.
PPhhyyssiiccaall rriisskkss:: Changes in value arising from physical damage/injury as a result of climate change, both acute and chronic. May arise as a result of natural disasters or longterm developments rendering areas unsuitable for their original use. Property and business owners may also experience negative changes in value.
TTrraannssiittiioonn rriisskkss:: Financial risk arising from the transition to a low-emission society. Sectors with high greenhouse gas emissions may face challenges relating to policies and regulation, for example from higher emission costs. At the same time, support may be granted for competing technologies. This will represent a risk for owners of fossil energy, among others.
LLiiaabbiilliittyy rriisskkss:: Financial risk relating to financial liability/claims for compensation for losses due to climate change. An underlying company that is held accountable for its negative environmental impact, for example through a climate lawsuit, may face major claims for compensation, which may negatively affect the value of the
FFoollllooww--uupp ooff cclliimmaattee rriisskk The Board reviews climate-related issues as part of the corporate strategy, and a dedicated sustainability strategy is being drawn up, specifying how the goals are to be achieved. Climate risk is also integrated in the own risk and solvency assessment (ORSA), and capital needs are reported to the Board in a five-year perspective.
FFrroomm ggooaallss aaddoopptteedd bbyy tthhee BBooaarrdd ttoo ccoonnccrreettee mmeeaassuurreess RReessppoonnssiibbiilliittyy ffoorr cclliimmaattee rriisskk
22.. GGjjeennssiiddiiggee’’ss cclliimmaattee ssttrraatteeggyy Insurance largely consists of one-year contracts that enable the Company to change prices and coverage as the need arises. In simplified terms, one could say that increased insurance risk as a result of climate change is not necessarily negative for insurance companies, since increased claims payments will be compensated by higher premiums or changes in coverage.
• More knowledge about consequences is very important to be able to put a price on risk. In cooperation with the Norwegian Computing Centre, Gjensidige has therefore combined recognised climate models with claims data, and started work on assessing climate consequences in the short, medium and long term.
• Climate risk will increase the need for expertise in the investment community, and knowledge about any transition risks in the investment portfolio. Climate risk is a key issue in the cooperation with fund managers.
aa.. CClliimmaattee--rreellaatteedd tthhrreeaattss aanndd ooppppoorrttuunniittiieess We believe that climate risk will have a widespread impact and affect the economy in many ways in all the geographical areas we operate in. This will affect our stakeholders and their need for products, but climate risk will probably affect different products and risk types differently in terms of both time and scope.
Climate change will lead to both threats and opportunities in the short, medium and long term. The greatest uncertainty is associated with transition risks, because they lie further ahead in time and the consequences of technological development and consumer behaviour are difficult to predict at present.
The assessment is based on RCP 8.5 – 2 degrees of global warming, and is explained below in the form of a letter and numerical code. ‘M’ refers to market risk, ‘I’ to insurance risk and ‘O’ to operational risk. The colour describes the type of climate risk.
CClliimmaattee rriisskk ppeerr pprroodduucctt ggrroouupp,, wwiitthh eexxppeecctteedd eeffffeecctt aanndd ttiimmee ppeerrssppeeccttiivvee
IInnssuurraannccee rriisskk Insurance risk is affected by all three aspects of climate risk. Physical risks are the most obvious, as properties and assets are exposed to weather-related events. Most sectors will see major changes as a result of technological development and new regulation and requirements for climate and environmental measures. New knowhow and new ideas will create new business models that will contribute to a zero-emission society. We will use our know-how and expertise to innovate, offer new products and implement new, relevant risk coverage.
II66: Agriculture: increased risk of losses as a result of flooding, landslides and drought. Increased frequency of claims relating to crop and animal diseases as a result of new diseases and migrating species. A warmer climate will extend the growth period and have a positive effect on crops in the Nordic region.
MMaarrkkeett rriisskk Transition risks are considered most important to the investment portfolio as a result of consequences of more stringent regulation and carbon emission requirements, a different cost situation and marketrelated changes, all of which will affect the return on investments. The IPCC scenarios (RCP 2.6, 4.5 and 8.5) indicate different degrees of transition risks, but physical risks will also be significant in RCP 8.5.
MM22: Regulation, transition risks: More stringent emission requirements entail an increased risk of loss in the value of investments that fail to meet the requirements, and a corresponding increase in the value of investments that quickly adapt to the requirements. A substantial proportion of Gjensidige’s investments is currently in renewable energy, and we are cautious about entering sectors exposed to climate risk.
MM33: Technological development. Gjensidige sees both opportunities and threats relating to which companies and business models are able to utilise technology.
OO22: Method for pricing, underwriting and provisions: Changes in the frequency and size of claims must be integrated in price models to ensure correct pricing.
The no-action scenario is recommended by the Norwegian authorities as the basis for calculations, and also provides a good indication of the consequences we must expect if the measures fail to have the desired effect. The effect of floods as a result of increased precipitation and less snow will change gradually up until 2100 and is estimated as follows: • Reduced spring flood: 50 per cent • Increased autumn flood: up to 60 per cent
Scenario up until 2100 – Norwegian Computing Centre The project with the Norwegian Computing Centre has looked specifically at projections of water damage due to external factors. Natural damage, as defined in the Natural Damage Act (such as floods and storm surges), is not included because the pricing and distribution of such claims are subject to special regulation.
CONTENT 3 About this report 4 The year that passed 6 Key figures and alternative performance measures 11 Chair letter 14 CEO letter Chapter 1 – This is us Chapter 2 – Creating added value in Gjensidige 49 Creating value for our stakeholders We create a sense of security 53 A safer society because we understand risk 54 Risk strategy and risk management 58 Damage prevention – the most sustainable approach 62 Sustainable products and services 64 Our social commitment Climate and the environment 67 Our climate and environmental commitment 70 Climate-related financial disclosures (TCFD) 81 We create value in partnership with our suppliers Our engaged employees 84 Engaged employees 89 Senior group management Responsible investments 95 Our asset management Responsible risk management and control 102 Risk understanding and corporate governance lead to long-term value 103 Gjensidige’s Board of Directors comprises broad expertise 109 Ethical operations 114 Corporate governance 120 Our commitment to our owners and creditors Chapter 3 – Value created in 2020 Chapter 4 – Financial statements and notes 282 Declaration from the Board and CEO 283 Auditor’s report 288 Independent Auditor’s report
significant in the investment portfolio, but our exposure to the industries that are expected to be hit the hardest is currently limited.
MMaannaaggeemmeenntt ooff cclliimmaattee rriisskk Gjensidige has joined forces with the Norwegian Computing Centre to be able to understand the consequences of expected climate change. The results of the work are integrated in tariffs to be able to put a correct price on risk going forward. By sharing weather-related claims data, Gjensidige also contributes to increasing knowledge about the long-term development in claims resulting from climate change. Gjensidige shall guide its customers into taking the environment, weather events and social factors into account both before and after a loss, for example in connection with the reinstatement of buildings . This means lower insurance premiums for our customers and beneficial consequences for the environment, customers and Gjensidige.
• Weather-related events have always served as important input in the risk pricing process, in connection with both tariff development and underwriting in the commercial market.
• We monitor all products on an ongoing basis to ensure profitability and consider the need for repricing.
• The actuary conducts an independent assessment to ensure sufficient provisions.
• Close monitoring of developments in weather-related events to ensure correct pricing of risk.
• Reinsurance limits Gjensidige’s losses relating to major weatherrelated events. Gjensidige’s internal model is used to assess the effect of different natural disasters and climate-related losses. Analyses have been conducted that show that Gjensidige’s financial losses resulting from what are known as 1-in-200-year events will be limited, even if more conservative assumptions about the frequency of such claims are applied.
• Gjensidige’s strategy entails including ESG and climate risk in all our decisions and investment analyses. Read more about how Gjensidige follows up its investment strategy in ‘Our asset management’.
• We have reinsurance coverage although our liability in damages relating to lack of climate action is limited as a result of maximum amount limits.
Insurance is a knowledge business that does not directly affect the environment to any extent. However, we can help to achieve a more sustainable society by reducing our own climate footprint and use our market power in relation to our suppliers and in our investments.
MMooddeell ffoorr ccaallccuullaattiinngg tthhee mmaatteerriiaall ccoonnssuummppttiioonn iinn ccllaaiimmss pprroocceesssseess Gjensidige shall make proactive efforts to reduce the carbon intensity of its claims processes. That requires in-depth insight into material consumption in physical insurance claims where Gjensidige compensates losses.
In order to be able to calculate the materials consumed in claims processes, some of which are fairly complex and involve many suppliers and partners, models have been devised based on the material consumption for the most common claims (frequency claims), for the purpose of converting material consumption into CO2 equivalents (CO2e). Models have been prepared for three types of frequency claims, which will form the basis for a normalised result in the climate accounts for claims processes (separate accounts for claims process Scope 3).
The calculation of total material consumption does not provide an exact figure, but, based on a materiality assessment, we believe it gives the best estimate of current consumption. The material consumption is calculated in kilos/tonnes and converted into CO2e with the help of licensed software for the conversion of material consumption. DEFRA (2020). Greenhouse gas reporting: Conversion factors 2020. Department for Business, Energy & Industrial Strategy, and NVE Electricity disclosure 2020. The Norwegian Directorate of Water Resources and Energy. The material consumption models shall be evaluated annually to ensure that they continue to provide the best estimate of material consumption in claims processes.
Water damage: • Plain kitchen cabinets fronts • Parquet flooring • Repair as a result of water seeping through the floor • Waste corresponding to consumption of new materials • Energy consumption • Kilometres driven in connection with repairs
All our suppliers must sign a self-declaration on corporate social responsibility that requires compliance with the 10 UN Global Compact principles. By signing this declaration, they undertake to comply with our requirements relating to the environment, CSR and management and control: • Conduct their own business in a way that does not violate internationally recognised principles and guidelines relating to human and labour rights.
Gjensidige’s requirements for procurement processes are set out in the Group procurement policy, which applies to Gjensidige Forsikring ASA and all its subsidiaries. Gjensidige expects manufacturers and suppliers to conduct their business in accordance with the 10 UN Global Compact principles. The principles cover human rights, labour rights, the environment and anticorruption. Read more at www.gjensidige.no/group/about-us
Companies that provide services in connection with claims payments for damaged buildings in Norway must be certified in Startbank. Startbank is a register of suppliers that is used by purchasers in the fields of building, construction, public administration, insurance and real estate. This ensures that qualified suppliers are law-abiding and that competition takes place on equal terms. All material procurements are ordered electronically. As far as possible, all suppliers shall use electronic invoicing.
Gjensidige Business Services was established to achieve further professionalisation of our ICT procurements and to create a model that simplified ownership and pricing of IT systems used by several entities in the Group.
We do everything we can to create genuine engagement among our employees, so that we can safeguard our customers’ lives, health and assets in a sustainable manner – every single day. A sound, generous and secure corporate culture creates a sense of community, and provides fertile ground for good ideas and results.
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 at our own school. Gjensidige treats customers with trust and respect and provides professional and ethically sound advice based on necessary qualifications and knowledge of the customer’s situation.
CCoommppeetteennccee ssttrraatteeggyy The right competence in the right place at the right time is vital to maintaining competitiveness. To be able to live up to our vision, our employees must reflect the diversity of our customers.
CCoommppeetteennccee--bbuuiillddiinngg ttoo mmeeeett tthhee nneeeeddss ooff tthhee ffuuttuurree It is important to Gjensidige that everyone has the opportunity to develop in their job. We facilitate work across different roles and positions, 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 productive work place 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. Employees who work in sales and customer advice take part in an extensive course programme leading up to an exam that tests their professional know-how, ethics and the customer dialogue. Advisers targeting the private market are certified in accordance with a national industry scheme for the sale of general insurance. The Gjensidige Customer and Brand School ensures that all employees have the necessary prerequisites for implementing the Group’s customer orientation strategy. The school’s main focus areas
Our commitment to the customer has created good customer experiences and sound results. This is a key characteristic of Gjensidige and a distinctive feature of the organisation and the Company’s culture.
We make efforts to highlight Gjensidige as an attractive employer, through both 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 part-time (20 per cent of a full-time position) 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.
CCooooppeerraattiioonn wwiitthh eedduuccaattiioonnaall iinnssttiittuuttiioonnss We have entered into a strategic partnership agreement with BI Norwegian Business School that gives us exposure to students and the possibility of participating in different events in BI’s locations all over the country. Through Advisory Councils for relevant master’s degree programmes, we contribute relevant insight to enable the programmes to better meet the business sector’s future need for expertise. Gjensidige has also entered into an agreement with the Norwegian School of Economics (NHH) to be a strategic partner for NHH’s research programme ‘Digital Innovation for Growth’, which starts in autumn 2020. The agreement includes an obligation to provide staff who can contribute their expertise.
These cooperation agreements are an important means of showing students the job opportunities available in Gjensidige and in the insurance sector in general. In addition, they give skilled members of staff an opportunity to work with academic research groups on various issues of relevance to Gjensidige’s further development. The agreements entail greater access to continuing education for employees.
GGeennddeerr eeqquuaalliittyy Gjensidige focuses on the gender balance and increasing the percentage of women in senior positions. There is zero tolerance of all forms of discrimination. Wage growth for women and men is continuously measured and followed up. Any unexplained differences that are identified receive special follow-up.
We have established a diversity and inclusion committee that convenes as needed, and at least once a year. The committee comprises representatives of the HR department and the trade unions.
We have established a collaboration with Seema to increase our understanding of the importance of diversity and diversity management as a sustainable competitive advantage.
Employee engagement is included in the follow-up and performance evaluation of all managers, including the senior group management.
PPeeooppllee RReevviieeww Two People Review sessions are conducted per year in which the senior management is evaluated in terms of how well they succeed with management, competence building, diversity (including gender equality and equal pay) and strategy staff planning. Financial targets
Under Norwegian law, employees of the Group are entitled to be represented on the Company’s governing bodies. Employee representatives are elected by and from among the employees. The company management maintains a close dialogue with union 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.
Chapter 2 – Creating added value in Gjensidige - Engaged employees 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, at the same time as each department conducts an HSE risk assessment.
IInncclluussiivvee WWoorrkkppllaaccee eenntteerrpprriissee Gjensidige shall be an inclusive workplace for all employees. We are an Inclusive Workplace enterprise and cooperate with the Norwegian Labour and Welfare Administration (NAV) on job training for people who, for various reasons, have been unemployed. NAV pays subsidies for employees who suffer from chronic illnesses but who still manage to work. 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.
WWhhiissttlleebblloowwiinngg Reporting procedures are in place for employees who experience discrimination. The notifications received are considered by the diversity and discrimination committee.
Jostein Amdal (1965) took over as CFO and Executive Vice President of Finance on 1 October 2016.
Amdal joined Gjensidige as Finance Director in 2002, and has since served as Chief Risk Officer and Head of Capital Management and M&A. Before joining Gjensidige, he held various management positions with If, Storebrand and Kværner. Amdal holds holds a degree based on a four year-program in economics and business administration consisting of three years at bachelor/undergraduate level and one year at master/graduate Level (siviløkonom) as well as a graduate programme in economics and business administration (høyere avdeling), both from the Norwegian School of Economics (NHH).
Bjerklund joined Gjensidige in 2003 and has held various senior management positions in the Group. In the last few years, he has been COO of General Insurance Sweden, claims director with responsibility for motor and travel claims, and managed the SME and agriculture segment of the Commercial division for several years. Bjerklund holds a Master of Marketing and Management from the Norwegian School of Marketing (NMH), and an MBA degree from the Norwegian School of Economics (NHH).
Aysegül Cin (1981) has been Executive Vice President of the Swedish segment since 1 September 2018.
Cin joined Gjensidige in 2006 as a trainee. She has previously held several roles and senior positions in the Group in the Private, Corporate Development, Strategy and M&A and Claims divisions, and most recently as Director of CRM and Digital Channels in the Commercial division.
Cin holds an MSc in Industrial Economics and Technology Management (sivilingeniør) from the Norwegian University of Science and Technology (NTNU) and Karlsruhe University in Germany.
Janne Flessum (1971) has been Executive Vice President of Communication and Shared Services since 1 March 2018.
She joined Gjensidige as Head of Investor Relations in 2011, and took over responsibility for M&A and Capital Management in 2016. She has previously served as an investment analyst and portfolio manager with Orkla, corporate finance adviser with Kreditkassen, and as an auditor with Coopers & Lybrand.
Catharina Hellerud (1968) has been Executive Vice President of Analytics, Product and Price since 2016. She is also Chair of the Board of Gjensidige Pensjonsforsikring.
He came from the position Head of Commercial. Gottschalk joined Gjensidige in 2011 with responsibility for strategy and M&A. He was previously executive director in the Investment Banking Division of Goldman Sachs International, and has held various positions with J.P. Morgan in London.
Ringdal joined Gjensidige in 1996 and has held various executive positions in the Group, including as EVP of Group Staff/Shared Services and Finance. He has previously held senior management positions with Norges Bank and KPMG, among others.
Ringdal holds a degree from the Norwegian School of Economics (NHH) based on a four year-program in economics and business administration consisting of three years at bachelor/undergraduate level and one year at master/graduate level (siviløkonom) and is a state authorised public accountant.
Tor Erik Silset (1976) has been Executive Vice President of Technology and Infrastructure since 1 June 2020.
Silset joined Gjensidige in 2005 from Deloitte Consulting. He has previously held a range of different roles and management positions in the Private and Commercial divisions and in Finance and Group Performance Management at group level, most recently as head of property/liability insurance in the Nordic region and national manager for Analysis, Product and Price in Denmark.
Our asset management shall primarily cover technical liabilities in the general insurance and pension operations, at the same time as we take moderate risk to contribute to attaining the Group’s return targets. Pension operations aim to help customers get the pension they want. Investments are made in accordance with the UN Principles for Responsible Investments (UN PRI), so that they can contribute to a better society and climate.
RReessppoonnssiibbllee iinnvveessttmmeennttss Responsible investments is a collective term for investment strategies that entail the incorporation of sustainability issues, which includes environmental, social and governance criteria, in decisions made before investments are made and in the investor’s role during the investment period. Gjensidige’s investment horizon indicates that an understanding of the connection between sustainable development, risk and return is important in order to succeed.
The purpose of the investment portfolio is primarily to cover our actuarial liabilities and to help the Group to achieve its return on equity target. Gjensidige’s risk appetite in asset management is limited, however.
Chapter 2 – Creating added value in Gjensidige - Our asset management
There are several different approaches to responsible investments, and this section describes Gjensidige’s approach in more detail. Gjensidige believes that companies that incorporate sustainability into their practices have better prospects of profitability because they have a better understanding of risk management and market developments than other companies.
• Our asset management is based on the 10 UN Global Compact principles, which promote human rights, labour standards, the environment and anti-corruption work. The work is enshrined in Gjensidige’s group policy for responsible investments and pertaining instructions, which is available at Gjensidige.no.
• Endorsed the UN Principles for Responsible Investment (UN PRI) in 2020, affirming our commitment to act in the best interest of our stakeholders in a long-term perspective. The endorsement reflects our support for recognition of the importance of sustainability.
• The Carbon Disclosure Project (CDP) as an Investor Signatory to encourage companies to improve their reporting of their environmental impact and the strategies and measures they use to reduce carbon emissions.
The Group’s Chief Investment Officer (CIO) is responsible for ensuring compliance with the policy and guidelines. Gjensidige demands that all investments comply with conventions on human rights, environmental harm and economic crime. Sustainalytics is engaged as a consultant to conduct ethical screening of companies. Sustainalytics’ findings, together with information from other external 1 Internal rating – rating made by Gjensidige. 96% of this portfolio is rated as Investment Grade
One member of the capital management team is responsible for reviewing and compiling all information from the external consultant and other external sources in connection with preparation of Gjensidige’s exclusion list. This employee proposes a recommendation to the CIO and the Chief Risk Officer (CRO), who together make a final decision on whether to exclude companies or take them off the exclusion list. Companies that commit serious or systematic violations of Gjensidige’s ethical guidelines and fail to take satisfactory steps to correct their conduct shall be placed on the list of excluded companies.
When a company has been excluded, it must be immediately removed from the internally managed portfolio, unless the company has substantiated a plan to rectify the circumstances leading to exclusion. If excluded companies are part of externally managed portfolios, we will enter into dialogue with the manager about exclusion and/or follow-up of the company. We only enter into agreements with investment managers who have appropriate guidelines and an investment history based on sustainability. This is a highly important criteria in the selection of external managers.
This must be seen in light of the structure of the investment portfolio, where the majority of the funds are under external management and only a small proportion are direct investments. The SRI work is summed up by the table below.
The work carried out is proportionate to the share of our investments that largely entail following up external fund managers, bond investments in the match portfolio and real estate investments in Oslo Areal.
AAccttiivvee oowwnneerrsshhiipp Sustainability is a part of all credit analyses that form the basis for investments in corporate bonds, and in the ongoing dialogue with companies and the dialogue prior to share issues.
Proponent for changing investment mandates and individual investments that are not in accordance with Gjensidige’s investment policy.
CClliimmaattee rriisskk aanndd eemmiissssiioonnss iinn iinnvveessttmmeenntt aaccttiivviittiieess Financial climate risk is considered to be the risk associated with unanticipated effects of climate changes that leads to changes in valuations of financial assets.
The Task Force on Climate-related Financial Disclosures (TCFD) has identified three risk categories. The biggest financial climate risk for Gjensidige’s investment portfolio is assumed to arise in the transition to a low-emission society where climate regulation, more stringent emission requirements, a relative change in cost between old and new technologies and changes in market preferences can affect the value of investments. Details concerning these assessments are described in the section Climate-related financial disclosures (TCFD). Through the year, Gjensidige has also made use of external tools such as the Paris Agreement Capital Transition Assessment (PACTA) to gain a better understanding of and quantify climate risk in our investment portfolio.
The portfolios are divided into the group policy portfolio, which is intended to cover actuarial liabilities where GPF carries the financial risk; the unit-linked portfolio, where customers carry the financial risk; and the corporate portfolio, consisting of the company’s equity and subordinated loans.
The follow-up of investment managers follows internal Gjensidige guidelines. Any breaches of the exclusion list by investment managers who are only used in GPF’s customer portfolios and not Gjensidige’s own portfolios will be followed up by GPF.
The Board is elected by an independent Nomination Committee and has overall responsibility for ensuring that the Group is managed responsibly, including responsibility for finances, the environment, social conditions and compliance with laws and regulations. This entails ensuring that the work on risk management and internal control is organised, documented and reported on in an expedient manner. The Board has appointed three sub-committees, and all board members are dedicated to one of these committees. The board committees are preparatory and are tasked with exploring matters in depth and enabling the Board to monitor the financial reporting process and the systems for internal control and risk management. In addition, a remuneration committee assists the Board on matters relating to remuneration.
The remuneration of executive personnel is linked to value creation over time, reflects responsibilities and expertise and is based on measureable outcomes. This is described in more detail in Note 8 to the accounts and in the section ‘Corporate governance’.
Risk management is at the core of our business. We have a robust framework and procedures to ensure that we only take on risks we understand, to an extent we can handle. Our Code of Conduct shall ensure that we stay well within the norms the society expects of us.
Marchand is a board member and Chair of the Audit Committee in Norgesgruppen ASA and Chair of the Board of Norgesgruppen Finans Holding AS. Furthermore, she is a member of the Board of Selvaag Bolig ASA, where she is also a member of the Remuneration Committee and Chair of the Audit Committee. She is a board member of Eiendomsspar AS, Victoria Eiendom AS, Scatec Solar ASA, where she is also a member of the Audit Committee, and Chair of the Board of Boligbygg Oslo KF. She is a member of Entra Eiendom AS’s Nomination Committee. She has also previously been a member of a number of other boards, including Norske Skog ASA and Oslo Børs AS.
Marchand has extensive management experience from the financial sector, in addition to insurance expertise through many years on Gjensidige Forsikring’s Board. Marchand also has broad expertise in sustainable development from several different sectors.
Gisele Marchand is independent of key employees, main business partners and the main shareholder.
EEiivviinndd EEllnnaann –– BBooaarrdd mmeemmbbeerr Eivind Elnan (1974) has been a member of Gjensidige’s Board of Directors since 2017. He holds an MSc in Industrial Economics and Technology Management (sivilingeniør) from the Norwegian University of Science and Technology (NTNU).
Elnan is Chair of the Board of AX Innovasjon AS, Industrivegen 10 Verdal AS and FPS Holding AS. Elnan is also a member of the board of the Gjensidige Foundation.
TToorr MMaaggnnee LLøønnnnuumm –– BBooaarrdd mmeemmbbeerr Tor Magne Lønnum (1967) was elected to the Board for the first time in 2020.
Lønnum is a registered public accountant from BI Norwegian Business School, and holds the exam for state-authorised public accountants from the Norwegian School of Economics (NHH), as well as an Executive Master of Business and Administration from the University of Bristol and Ecole Nationale des Ponts et Chaussées. Lønnum is a member of the board of Recover Nordic. He is currently CFO of Falck A/S.
Lønnum has experience as Chair of the Board of Lindorff, and a board member of TGS Nopec Geophysical Company ASA, Bakkafrost and SR Bank. He has previous experience as CFO of Aimia Inc., Tryg as and Tryg Forsikring as. Lønnum also has experience as Manager in KPMG as, CFO and EVP for Strategy and Group Development of Gjensidige NOR Forsikring and as CFO of Gjensidige Forsikring ASA.
Tor Magne Lønnum is independent of key employees, main business partners and the main shareholder.
He is Chair of the Board of Catenda AS, Mimiro AS, Dogu-SalesScreen AS, Inspera AS and NewGenerationCommunication AS and a member of the board of NTE ASA and Amedia AS.
Sellæg has broad experience of startups, digital initiatives, innovation and internationalisation, including services such as WiMP/Tidal, E24, Min Sky and Appear.in/Whereby. He has held various positions at Schibsted, including as CEO of Aftenposten Multimedia AS, CEO of Aspiro AB, and Chief Product Officer and EVP Markets at Telenor Group ASA. In 2017, he was one of the three entrepreneurs who started Spring Capital Polaris, where he is currently partner and investor.
Gunnar Robert Sellæg represents the Gjensidige Foundation and is independent of key employees and main business partners.
VViibbeekkee KKrraagg –– BBooaarrdd mmeemmbbeerr Vibeke Krag (1962) has been a member of Gjensidige’s Board of Directors since 2018.
Krag has a master’s degree in law (cand.jur.) from the University of Copenhagen, and a Board Leadership Masterclass from Copenhagen Business School.
Vibeke Krag is independent of key employees, main business partners and the main shareholder.
She works as a certified insurance adviser in accident and health insurance at Gjensidige Forsikring.
Enger has worked in Gjensidige Forsikring since 1986. She is also Gjensidige Forsikring’s chief union representative.
Nafstad is VP of Finance and Control at Equinor. She has previously held several senior positions at Equinor (formerly Statoil), Norsk Hydro, Saga Petroleum and the Ministry of Petroleum and Energy.
Hilde Merete Nafstad is independent of key employees and main business partners.
RRuubbeenn PPeetttteerrsseenn –– BBooaarrdd mmeemmbbeerr Ruben Petersen (1988) was elected employee representative to Gjensidige’s Board of Directors in 2020.
He has worked in Gjensidige Forsikring since 2013. He is the main employee representative for the Private division and chief safety representative at Gjensidige Forsikring.
He has also been CEO of FINN.no and held various technology positions at Aftenposten AS and Telenor Media AS.
SSeebbaassttiiaann BBuuuurr GGaabbee KKrriissttiiaannsseenn –– BBooaarrdd mmeemmbbeerr Sebastian Buur Gabe Kristiansen (1987) joined Gjensidige’s Board of Directors as an employee representative in 2020.
AArreeaass ssuubbjjeecctt ttoo ssttrriicctt ffoollllooww--uupp ooff ccoommpplliiaannccee DDaattaa pprrootteeccttiioonn ((GGDDPPRR)) Gjensidige processes personal data in accordance with the provisions of the Personal Data Act and the General Data Protection Regulation (GDPR). The group policy and instructions for the processing of personal data set out detailed requirements and principles for ensuring compliance with the statutory requirements. Gjensidige’s employees are bound by a statutory duty of secrecy about all matters relating to our customers. Data protection training is mandatory for all employees and is also a part of the introductory programme for new employees. Access to personal data shall only be granted to employees who need it in the course of their work. The Company shall not obtain other personal data than it needs for the specific purposes for which they are processed. Personal data shall only be used and stored for as long as this is necessary for the purposes, and must then be erased, unless special requirements for storage are authorised by law.
The respective EVPs have overriding responsibility for the processing of personal data and internal control relating thereto. Other managers are responsible for ensuring that employees who have access to personal data have the competence and other qualifications required to comply with the applicable personal data regulations and the Company’s internal guidelines for data protection.
Customers and others Gjensidige processes personal data about can request access to the information stored about them at any time, and they can demand that incorrect information be corrected. Requests
Chapter 2 – Creating added value in Gjensidige - Ethical operations for access may be rejected in special cases following a concrete assessment, for example in connection with the investigation of insurance fraud. Our privacy statement is available at gjensidige.no. It describes how we handle personal data.
Based on the security policy adopted by the Board, an information security management system has been established pursuant to ISO/IEC27001/2, which regulates requirements of information security at Gjensidige. The security requirements are published in both Norwegian and English on the Group’s intranet pages and are accessible to all employees. Group Security is also coordinates work on Gjensidige’s security culture and crisis preparedness work. The department is organised under Group Risk Management and Control.
IT Security is organised as a dedicated department under Technology and Infrastructure and has executive responsibility for all technical security measures, access control and security monitoring of systems and infrastructure.
Active membership of the Information Security Forum (ISF) and Nordic Financial CERT helps to ensure updated expertise and capacity to be able to monitor cyber risk in general and the financial sector in particular.
GGoooodd bbuussiinneessss pprraaccttiiccee Gjensidige is subject to laws and regulations that set out requirements for consumer protection, and is concerned with safeguarding consumer interests through, among other things, information and advice to customers, the expertise of our employees and a good product development process.
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 in the section ‘Risk strategy and risk management’ and in Note 3.
NNoottiiffiiccaattiioonn cchhaannnneell Gjensidige shall have a low threshold for reporting unpleasant matters. Employees who wish to raise such matters can contact their manager, the HR department, their HSE manager, an employee representative or the safety delegate. Everyone has a duty to report criminal matters, or situations where life or health is at risk. A poster with instructions on procedures for whistleblowing is easily accessible on our intranet site.
AAnnttii--ccoorrrruuppttiioonn Gjensidige does not accept any forms of corruption. Corruption is in breach of our Code of Conduct and can have major consequences for both our employees and the Company. We therefore focus on awareness-raising and preventive activities. Gjensidige has been and shall continue to be a company in which everything we do must stand up to public scrutiny.
For Gjensidige, the risk of corruption will largely be related to the Company’s sale of insurance and investment advice to the private and public sector, entering into agreements and the procurement of goods and services. Our definition of corruption follows from the Norwegian Penal Code: ‘... any person who for himself/herself or others demands, receives or accepts an offer of an improper advantage in connection with the conduct of a position, an office or performance of an assignment, or gives or offers any person an improper advantage in connection with the conduct of a position, an office or performance of an assignment.’
The work on combating corruption requires clearly defined rules and active enforcement of the rules.
Gjensidige’s internal regulations state that the Company has zero tolerance for corruption and anything resembling corruption. The regulations consist of instructions and a group policy adopted by the Board. The group policy for corporate social responsibility, the group policy on the Code of Conduct, the group policy on specific ethical guidelines relating to hospitality activities and guidelines on welfare measures, seminars and gifts are also relevant in this context.
Gjensidige does not allow giving or receiving bribes or facilitation payments. The same applies to gifts that can be regarded as improper. The rules apply to managers and employees at all levels of the Company, also in countries where Norwegian law does not apply. Special rules have been stipulated for employees with responsibility for relations with customers and suppliers.
OOuurr aannttii--ccoorrrruuppttiioonn pprrooggrraammmmee ccoonnssiissttss ooff tthhrreeee mmaaiinn eelleemmeennttss:: 1. Preventive activities 2. Control and detection 3. Follow-up and sanctions
Control and detection include audits, compliance activities, notification/whistleblowing, reporting and internal investigation. Follow-up and sanctions take place in accordance with policies and instructions, and are decided by HR and, ultimately, the CEO. The programme gives a detailed description of what is meant by corruption, examples of acceptable and unacceptable behaviour, and assignments intended to contribute to reflection on difficult situations.
It is not permitted to accept gifts worth more than NOK 500. Regardless of the gift’s value, it must not be accepted if it means that the employee’s impartiality or independence can be placed in doubt. All gifts and hospitality activities must be registered in the Company’s gift and hospitality register.
The rules are available at gjensidige.no, on the intranet and in elearning courses, and managers shall contribute to ensuring that employees are aware of the rules. The purpose is to prevent and help to put a stop to activities that may entail a breach of the regulations at an early stage.
All customers are checked regularly against sanction lists and lists of politically exposed persons. The risk assessment may result in more extensive customer due diligence measures. Clear guidelines have been drawn up for when such measures shall be initiated, and how to handle a situation when it arises. If measures fail to clarify the situation, the Company will carry out further 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 suspicion of money laundering or financing of terrorism, and control measures have failed to clarify the suspicion, 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 a suspicion of money laundering or financing of terrorism cannot be clarified, the Company will not enter into the insurance contract or settle the claim, to the extent that such sanctions are permitted by law.
A solid defence against money laundering is not only necessary because it is regulated by law. In the insurance business, money laundering often goes hand in hand with insurance fraud. At Gjensidige, we consider the fight against money laundering as a natural part of good risk selection, based on the principle ‘know your customers’. The money laundering policy has been adopted by the Board, and a risk assessment focusing on money laundering is presented to the Board and the senior group management once a year. The importance of combating money laundering is clearly communicated at all levels.
Chapter 2 – Creating added value in Gjensidige - Corporate governance 11.. SSttaatteemmeenntt oonn ccoorrppoorraattee ggoovveerrnnaannccee 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 the surrounding world into account, including sustainability. The objectives are described in the section ‘Gjensidige’s goals’. They are revised and adopted on an annual basis.
The Board works on strategic priorities throughout the year, and tests the assumptions on which Gjensidige’s corporate strategy and underlying strategies are based, for the purpose of necessary adjustment. This takes place in connection with the Board’s strategy seminar in June, and towards the end of the year.
The Board believes 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 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.
Furthermore, the Board believes it is expedient for the Board to be given limited authority to increase the share capital through subscription for new shares. Such authorisation must be decided by the General Meeting and will apply until 30 June the following year.
Reference is made to the items to be considered by the General Meeting for more information and for the conditions that are set.
Deviation: The Code of Practice recommends that the grounds for such authorisations should be explained and that they should be limited to defined purposes. The Board fundamentally agrees with this, 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.
44.. EEqquuaall ttrreeaattmmeenntt ooff sshhaarreehhoollddeerrss aanndd ttrraannssaaccttiioonnss wwiitthh rreellaatteedd ppaarrttiieess 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. This also applies if the Board utilises the authorisations it has been granted. The Board’s transactions in own shares must always comply with the arm’s length principle and be on ordinary market terms. Transactions between related parties and group companies must take place on commercial terms, and on the basis of an independent evaluation if the transaction is not immaterial.
Because there are so many shareholders in Gjensidige, 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 facilitating powers of attorney and the possibility to vote without attending the physical meeting. The meeting is streamed live on the Company’s website.
Prior to the meeting, the shareholders have ample opportunity to contact the Company to clarify matters or to get help to raise items at the meeting. More information is available on our website.
Because of the coronavirus pandemic, the meeting in 2020 was held without the possibility of physical attendance by shareholders, in line with the official infection control advice that prevailed at the time.
Chapter 2 – Creating added value in Gjensidige - Corporate governance remuneration of the Board’s select committees. In financial undertakings, the General Meeting elects the Chair of the Board. The Chair is elected from among the shareholder-elected board members. One of the board members elected from among the employees therefore takes part in discussions and decisions on the recommendation for Chair of the Board. This is by our own choice, and it is in accordance with the principle of workplace democracy that generally prevails in Norway.
88.. BBooaarrdd ooff DDiirreeccttoorrss 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. No executive personnel or representatives of business associates are members of the Board. The shareholder-elected board members are elected by the General Meeting, and in accordance with the Articles of Association, for one year at a time. The employee representatives are elected for two years at a time. The Nomination Committee encourages board members to own shares in the Company.
In accordance with the law, the Board has established three board committees made up of the Company’s board members – the Remuneration Committee, the Audit Committee and the Risk Committee. The committees’ mandates are based on a Group perspective. The board committees are preparatory committees and do not have the power to make decisions. In line with the Code of Practice, the majority of the Audit Committee’s members are independent of the Company. In the Board’s experience, the introduction of board committees has improved its work, and has led to deeper and stronger involvement in the business’s challenges and initiatives.
In accordance with the Financial Undertakings Act, the Company has established four independent control functions that each play a key role within their areas of responsibility – the Risk Management function, the Compliance function, the Actuary function and the Internal Audit function. Those involved are all employees of the Company. The internal auditor – the head of the Internal Audit function – is appointed by the Board, which also decides the auditor’s salary, and has a special position as the Board’s most important
The Board carries out an annual self-evaluation, with or without external help. The Nomination Committee has access to the evaluation. It also holds discussions with the Board and the Company’s management on their work and the expertise needed to meet the challenges that are expected to arise in the longer term.
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.
Chapter 2 – Creating added value in Gjensidige - Corporate governance 1111.. RReemmuunneerraattiioonn ooff tthhee BBooaarrdd The Board’s remuneration is decided by the General Meeting on the Nomination Committee’s recommendation, and is described in Note 8.
None of the board members have share options or other incentives issued by the Company. Reference is made to the Nomination Committee’s presentation, assessment and proposal, which are available on the Company’s website www.gjensidige.no.
1133.. IInnffoorrmmaattiioonn aanndd ccoommmmuunniiccaattiioonnss 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 IR policy also regulates the Company’s contact with shareholders.
1144.. CCoorrppoorraattee ttaakkeeoovveerrss Guidelines have been adopted for how the Board shall respond to any takeover bids. The guidelines are in accordance with the Code of Practice.
1155.. TThhee eexxtteerrnnaall aauuddiittoorr The external auditor submits his/her plan for the performance of the audit each year. The plan is initially discussed by the Board’s Audit Committee, and is also seen in conjunction with other internal control and risk management plans. The plan is considered at a board meeting with the external auditor in attendance. The external auditor plays an important role, and it is his/her task to confirm to the General Meeting that the accounts adopted by the Board are correct. The Board places great emphasis on openness in relation to the external auditor and the audit team, and on ensuring good, efficient cooperation with employees, and that the auditor has the access he/she requires.
It is primarily the Audit Committee and the Company’s management that are in continuous contact with the external auditor. The Nomination Committee is tasked with evaluating the external auditor’s overall contribution, and recommending election or re-election. The Nomination Committee occasionally proposes changing the external auditor, irrespective of the auditor’s contribution, in part to ensure new impulses and assessments, and in part to subject the audit to competitive tender.
Each quarter, we meet with investors and analysts to discuss our 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.
The award is an important recognition of our work and motivates us to continue our dedication to focus on communicating clear, correct and relevant information to the financial market.
The board of Gjensidige Forsikring ASA decided to postpone the annual general meeting in 2020, originally scheduled for March 26. The postponement was based on a letter from the Ministry of Finance to Finanstilsynet (The financial supervisory authority of Norway) where they expressed an expectation that all financial institutions refrained the distribution of dividends to the great uncertainty regarding the economic development in light of the Covid-19 situation was reduced. This despite Gjensidige's very strong financial position at the time. The General Meeting was held virtually on 25 May. The board was authorized to pay out dividends when conditions again allowed, and a dividend of NOK 6,125.0 million was paid out in September. This comprised of NOK 3,625.0 million based on the profit for 2019, and NOK 2,500.0 million representing the distribution of excess capital. The Gjensidige Foundation's share of the dividend amounted to NOK 3.8 billion.
The Board proposes a dividend of NOK 3,700.0 million based on the profit for 2020, corresponding to NOK 7.40 per share. This corresponds to a pay-out ratio of 75 percent of profit after tax expense. The dividend for the 2020 financial year will be adopted by the General Meeting on 24 March 2021. The adopted dividend will be distributed to those registered as shareholders on the date of the meeting. The Gjensidige share will be traded ex dividend on 25 March 2021, the settlement date will be 26 March 2021 and the dividend will be disbursed on 7 April 2021.
In addition, the board has approved the distribution of excess capital of NOK 1,200.0 million. This corresponds to NOK 2.40 per share. This decision is in line with the authorization the board received from the 1 As of 31 Dec. 2020, excl. Gjensidigestiftelsen
The Gjensidige Foundation’s share of the proposed and declared dividend amounts to NOK 3.0 billion. Pursuant to the Foundation’s statutes, the dividend relating to the profit for the year will be passed on to Gjensidige’s general insurance customers in Norway. The customer dividend will be adopted by the Foundation’s General Meeting in the second quarter of 2021.
The foundation manages ownership of Gjensidige on behalf of Gjensidige’s general insurance customers in Norway. It has an ownership policy that focuses on high value creation over time, and expects a competitive dividend.
Chapter 2 – Creating added value in Gjensidige - Our commitment to our owners and creditors 20 largest shareholders 31 December 2020 1 Per cent 6 State Street Corporation 1.11 7 Svenska Handelsbanken Group 1.08 8 The Vanguard Group, Inc 1.00 14 BNP Paribas Group 0.61 16 DNB Asset Mgt 0.54 17 APG Asset Mgt 0.44 18 Arctic Asset Mgt 0.43 19 UBS Group AG 0.40 20 Government of China 0.34 1 The list of shareholders is based on an analysis of the register of shareholders in the Norwegian Central Depository (VPS) as at 31 December 2020, carried out by Orient Capital Ltd. The analysis maps the owners behind the nominee accounts. There is no guarantee that the list is correct.
Chapter 2 – Creating added value in Gjensidige - Our commitment to our owners and creditors
Our role as a sustainable, damage preventing problem solver means we do everything we can to prevent different types of damages relating to life and health, assets, the environment, and society at large. We do this through damage prevention measures, by developing sustainable products and services – and by engaging ourselves in important matters.
CChhaapptteerr 33 –– VVaalluuee ccrreeaatteedd iinn 22002200 -- RReessuullttss ooff oouurr ccoommmmiittmmeenntt ttoo aa ssaaffeerr ssoocciieettyy
• Contribute to at least 1,000 media reports on damage prevention each year.
• Climate risk analysed and used as basis for new damage prevention initiatives. • Shared claims data with the public authorities. • Risk reduction measures included in the risk pricing.
Effect of risk reduction discounts for the Norwegian portfolio: NOK 1.4 million (8 per cent on average).
• Sponsored the Zero Conference 2020. • First allocations for damage prevention measures from the sustainability fund for agriculture. • A total of 1,450 reports related to damage prevention in Norway and 1,197 in
We work on a number of measures to achieve our goal of becoming a damage-preventing problemsolver that contributes to a safer society. We grant discounts to customers who implement damage prevention measures and to ensure that customers have access to products and services that provide financial security. A safer society is also about taking care of people who are left out of society, and Gjensidige has long contributed to this aim by supporting various social causes, especially those targeting children and young people.
By the end of 2025, we will have arrangements in place to enable customers to make sustainable choices in motor, property, leisure and accident and health insurance.
• Established greener household content and travel insurance with climate compensation for young people.
CCoonnttrriibbuutteedd ccoonnssiiddeerraabbllee ffuunnddss ttoo ssoocciieettyy aanndd eennhhaanncceedd iinnvveessttmmeenntt iinn mmeennttaall hheeaalltthh
• Earmarked NOK 25 million for the prevention of mental health problems among young people over a period of 3–5 years.
• Made donations to charitable causes and sponsored activities for children and young people.
• Enhanced follow-up to ensure our suppliers meet labour rights requirements. • Considerable tax contribution in all countries we operate in.
• Conducted slightly fewer physical inspections as a result of Covid-19.
2 Grants for damage prevention in Denmark past five years: NOK 8.7 million.
3 The sustainability fund has financed electrical inspections with thermal imaging for farmers and members of the Norwegian Farmers’ Union in the amount of approx. NOK 1 million.
EEffffeecctt ooff oouurr eeffffoorrttss –– SSuussttaaiinnaabbiilliittyy ooff pprroodduuccttss aanndd sseerrvviicceess Many sustainability elements are already built into the terms of our insurance policies. This is described in the section ‘Creating added value in Gjensidige – sustainable products and services’. Some of the new products and services that were developed/launched in 2020 are mentioned below.
• The insurance terms of our Innbo UNG (household contents) and Reise UNG (travel) policies have been altered so that Gjensidige now compensates for emissions that follow from claims compensated under the policies. Carbon offsets are documented in the appendix ‘Climate certificate Gjensidige 2020_Young content and travel’
• The Braive self-help psychologist service has been launched for commercial customers, and 5,500 employees had access to the service in 2020. Some two-thirds of those who used the service blamed stress at work and Covid-19. In 2020 the number of private customers who used Braive was 3,436.
• Gjensidige renewed its agreement with the Norwegian Handball Federation and will be the main sponsor of the national women’s handball team for four more years. The first agreement was signed in 1991, which means that 2021 marks our 30th anniversary as sponsor.
• Renewed our sponsorship agreement with the top division in women’s football in Denmark, and launched the “Drømmelaget” (“Dream team”).
We have set ambitious goals for our sustainability work and are working on measures to reduce our own climate footprint and ensure more sustainable claims settlements. Collaboration with suppliers to ensure increased reuse and promote the circular economy is key. Automation of claims settlements will help to ensure efficient and good customer experiences.
• We will keep reducing our climate footprint, and it is our ambition to become a climate neutral business by 2030.
• Reduction in greenhouse gas emissions from our own operations. Carbon intensity reduced from 0.29 in 2019 to 0.08 in 2020.
• Compensated for emissions by purchasing Golden Standard carbon offsets. • Signed TCFD (Task Force on Climate-related Financial Disclosures).
• By the end of 2025, we will have arrangements in place to enable customers to make sustainable choices in motor, property, leisure and accident and health insurance.
• Our claims settlements shall be sustainable by 2030. We will ensure this through concrete measures and customer dialogue to achieve reductions in green-house gas emissions, climate adaptation and the circular economy.
• By January 2025, we will provide information about sustainable solutions to customers in all the countries we operate in.
• Eighty per cent digital (paperless) customers. In Norway • Eighty per cent digital claims reports in Norway. • Initiated video surveys of properties to reduce the need for travel. • Initiated more sensor technology pilots to reduce the risk of damage to buildings.
CChhaapptteerr 33 –– VVaalluuee ccrreeaatteedd iinn 22002200 -- RReessuullttss ooff oouurr ccoommmmiittmmeenntt ttoo tthhee cclliimmaattee aanndd eennvviirroonnmmeenntt
• A 78 per cent reduction in air travel, mainly as a consequence of Covid-19.
• Carbon offsets purchased to compensate for greenhouse gas emissions from our own operations in 2020. See the appendix ‘Carbon offsets and certificates of origin for 2020’.
EEffffeecctt ooff oouurr eeffffoorrttss -- SSuussttaaiinnaabbllee ccllaaiimmss sseettttlleemmeennttss Sustainable claims settlements are about ensuring the highest possible repair rate, more recycling of materials and promoting the circular economy. This is essential in our follow-up of the suppliers we use to repair damage. At the same time, we are concerned with ensuring that all suppliers safeguard their employees’ health, safety, and environment, and comply with labour rights requirements. The most important measures in 2020 are described below: Emissions per employee 1
% Scope 1 Direct emissions 131.8 126.0 5 Scope 2 Energy
• Decrease in the number of scrapped cars in 2020 compared with 2019. This results in lower consumption of plastics, steel, and aluminium, all of which have high carbon conversion factors, something which in itself explains a decrease in CO2-equivalents of 10,727 tonnes.
• A change in the DEFRA code for aluminium leads to a carbon emissions-decrease of 29 per cent.
• The share of reuse in motor claims is relatively unchanged from 2019, but several pilots have been initiated to increase the share in 2021.
• New requirements for environmentally certified materials in connection with damage to property in Denmark.
• Several new initiatives implemented as dedicated projects to increase the proportion of repairs, retain residual value and reuse, as well as handling/recycling objects that cannot be repaired in an environmentally acceptable manner. For example, initiated pilot project for bicycle repairs in partnership with Panter Verdisikring and Oslo Prison.
• Consumption of materials related to property claims increased, but calculated carbon emissions decreased. This was due to a change in the claims mix, with less fire, which is relatively less carbon-intensive, and more water damage.
• Slight increase in high-frequency motor claims of 0.4 per cent. • Reduced the number of scrapped cars by 4 per cent, which makes a big contribution to reducing carbon emissions in the climate accounts for claims.
SSccooppee 33 iinn tthhee ccllaaiimmss pprroocceesssseess –– ccaarrbboonn eemmiissssiioonnss ppeerr ccoouunnttrryy aanndd pprroodduucctt
Reuse of materials Norway Sweden Denmark 2020 2019 2020 2019 2020 2019 Share of car repairs with used spare parts
• Scrapped cars are sold to professional car breakers who decompose and resell car parts and materials such as steel and aluminium, which are then used as input in new products. For example: • 3,265 tonnes of aluminium resold to partners • 6,523 tonnes of steel resold to partners • Waste from water and fire damage handled with the help of our partners, subject to stringent environmental requirements.
• All new suppliers shall sign a self-declaration of compliance with the 10 UN Global Compact principles for responsible business.
• All material procurements are made locally. This means that, as far as possible, our partners/suppliers are available in the area where a need has arisen, or a loss occurred. No suppliers have been excluded based on screening, but everyone receives feedback on areas for improvement based on scores for ESG status reporting.
• Initiate pilot projects to increase the proportion of car window repairs and the use of smart repair methods.
• Further develop the product areas to promote more sustainable claims settlements.
• Project in cooperation with suppliers in Denmark, focusing on less demolition and thereby less waste and fewer materials for reconstruction.
Further develop our culture for building expertise and generating new ideas and perspectives, to ensure our employees are also relevant in the future.
• Sickness absence has been stable throughout the pandemic, and the management has made active efforts to safeguard our employees’ health and safety.
• Increased employee engagement, and total score among the top ten per cent in the industry benchmark to our supplier Peakon.
• Partnership with NHH, BI and AFF to meet future need for expertise. • Comprehensive training programme, 65 per cent online, to ensure competence development during the pandemic.
The strange year that was 2020 provides opportunity for learning about management, cooperation and workplace requirements. We at Gjensidige will take these lessons with us, actively test and learn more and use the experience gained to design a new normal for working at Gjensidige.
HHeeaalltthh,, ssaaffeettyy aanndd tthhee eennvviirroonnmmeenntt ((HHSSEE)) Gjensidige gives high priority to health, safety and working environment issues. Some of the most important HSE measures implemented in 2020 include: • Internal programme ‘Fokus’ has been performed to boost the working environment and reduce sickness absence at the Private
• HSE survey conducted in the Nordic region in December 2020. High score for employees’ satisfaction with the company’s health, safety and environmental work.
• Offer of digital ergonomic home workstation assessment. • Low-threshold psychosocial support available through the occupational health service. • Offer of webinars on distance management and mental health.
• We have a response rate of 89, which is high. Gjensidige’s engagement score has been stable and high throughout the year. At the end of November 2020, we had a score of 8.5, on a scale from 0 to 10, an improvement of 0.3 percentage points from February, before the pan-demic, and an increase of 0.6 percentage points from November 2019.
• Gjensidige is in the top 10 per cent in the finance industry benchmark to our supplier Peakon. In 2020, we achieved the highest engagement score Gjensidige has recorded in recent years, with increases across all the divisions.
• NHH’s new Digital Innovation for Growth (DIG) centre is a research collaboration where Gjensidige is one of the strategic partners.
• Partnership with NHH and AFF to ensure relevant, up-to-date management development to match future needs.
OOuurr lleeaarrnniinngg pphhiilloossoopphhyy Seventy per cent through practical application at work, 20 per cent through social learning, 10 per cent through traditional courses. Some examples of learning initiatives: • A total of 451 new advisers authorised as sellers of accident and health insurance, in accordance with Finance Norway’s guidelines.
• In Denmark, 70 managers and 40 super-users have completed an extensive change management programme that includes the use of gamification to ensure successful implementation of the new core system.
• Established and received good feedback on Scandinavian mentor programme for managers and talents.
• For the third year running, we recruited employees for an internal executive education programme for insurance specialists. Many good applicants from both Norway and Denmark.
EEqquuaalliittyy aanndd ddiivveerrssiittyy wwoorrkk Gjensidige aims to develop a broad diversity among its employees and utilise this to create added business value. By drawing on each other’s knowledge, skills, competencies and experience as a source of development and innovation, we can improve our ability to develop and deliver the services and products customers need and ask for. Diversity and an inclusive corporate culture shall help Gjensidige to become a more attractive, socially responsible employer for different stakeholders.
• In the course of the year, we have certified two diversity managers under the auspices of Seema and Standard Norge.
• We have further formalised our cooperation with NAV through the project ‘Vi inkluderer’ (‘We include’), as part of the national initiative to promote inclusion. The following are examples of some of our culture-building activities: webinar on gender and sexuality competence-raising initiative (‘Rosa Kompetanse’),
LLaabboouurr rriigghhttss ((IILLOO)) aanndd ccooooppeerraattiioonn wwiitthh uunniioonn rreepprreesseennttaattiivveess Freedom of association is an important principle for Gjensidige. A large proportion of our employees are covered by collective agreements.
Responsible investments are about striking a balance between the environment, social responsibility and profitability in our asset management. We make systematic efforts to ensure that our investments are managed properly and sustainably.
CONTENT 3 About this report 4 The year that passed 6 Key figures and alternative performance measures 11 Chair letter 14 CEO letter Chapter 1 – This is us Chapter 2 – Creating added value in Gjensidige Chapter 3 – Value created in 2020
We implement ESG assessments in our analyses and exercise active ownership in dialogue with companies, external investment managers and other investors.
EEffffeecctt ooff oouurr eeffffoorrttss In 2020, it was decided to exclude 12 companies from Gjensidige’s investment portfolio, while 8 previously excluded companies were removed from the exclusion list. One of the companies that was taken off the list was due to mergers and acquisitions. The remaining companies were removed from the list due to changes in behaviour following pressure from investors, authorities and other stakeholders. At year-end 2020, a total of 107 companies had been excluded and one placed on the observation list, compared with 103 excluded companies at the start of the year. They break down as follows based on the reason for exclusion (a company can be excluded for several reasons): NNuummbbeerr ooff eexxcclluussiioonnss bbaasseedd oonn rreeaassoonnss
Real estate investments are made through the real estate company Oslo Areal, a company that engages in property development and management in the Oslo area and invests in environmentally friendly buildings near public transport hubs. The company uses the BREEAMNOR environmental classification system for new buildings and complete restorations. No properties were sold or bought during the year. Grenseveien 78 achieved BREEAM-NOR Excellent certification in 2020. Work has been carried out to achieve BREEAM In-Use certification for two more buildings in 2020, and an additional three or four in 2021. Oslo Areal actively follows up the portfolio, and, because few people have occupied the buildings in 2020 due to Covid-19, energy consumption has been considerably reduced. The possibility of installing solar panels on our buildings has been looked into, and will be considered in one or two buildings in 2021. Some of the properties have undergone an energy efficiency test to identify potential energy saving measures, and this work will continue in 2021. We are part of an Enova project on regional reuse networks, the goal of which is to map and create a marketplace for second-hand material in connection with renovation or demolition. The strategy outlines specific targets for energy consumption, renovation and greenhouse gas reduction, with pertaining measures to attain the targets. They will be followed up and updated.
Weighted carbon intensity, equities: tonnes of CO2e per NOK 1 mill. in sales revenue (compared with benchmark) 1
Carbon footprint Property: tonnes in total / kg of CO2e per m2 2
External managers with companies on Gjensidige’s exclusion list / proportion followed up followed up 1 The figures are as of 30 Sept. and apply to listed shares. The figures indicate average carbon intensity (WACI). Scope 1–2
We consider the oil and gas industry and parts of the power supply sector to be associated with the greatest risk. Oil and gas-related activities account for 1.1 per cent of the investment portfolio. The exposure to oil and gas-related activities is primarily related to unlisted equity investments, where the sector makes up approx. 30 per cent of the exposure. In the electric utilities category, which makes up 9.9 per cent of the portfolio, Gjensidige is largely invested in bonds in Norwegian hydropower plants. We consider the climate risk associated with these investments to be considerably lower than in the rest of the power supply sector. These considerations are confirmed by the results of the scenario analyses, where the exposure to Norwegian power producers contribute to a positive climate risk. Transition risk will also depend on how quickly alternative backstop technologies, legislation and regulations develop. In the short term, the EU Green Deal and the actions and requirements associated with
The table includes investments in funds, shares, derivatives and bonds. These have been classified using the industry classification standard (NACE). Directly owned property through Oslo Areal is included in property operations. Bank deposits are included in financial undertakings.
The physical risk associated with Gjensidige’s investments mainly concerns properties in Oslo Areal. More specifically 19 properties, all in a central location in Oslo and Stavanger, which make up a considerable proportion of the investment portfolio. Although the properties are concentrated in the same geographical area, the physical risk is deemed to be low. The property investments are considered to be equipped to withstand transition risk, as a result of strict energy requirements and other regulations. The remaining part of the investment portfolio is deemed to be well diversified and does not entail any concentrated risk over and above systematic risk.
CCaarrbboonn eemmiissssiioonnss ffrroomm iinnvveessttmmeenntt aaccttiivviittiieess The 2020 report will be the first time Gjensidige reports on the carbon intensity of listed shares and property in the investment portfolio. The carbon intensity of equities is reported as the weighted average carbon intensity, in line with the TCFD’s recommendations. To enable reporting, estimates from S&P Trucost Ltd have been used in addition to reported data, to increase the coverage. The carbon footprint of equities compared with the global benchmark index is shown in the table above. A coverage of at least 75 per cent is recommended for carbon footprinting, and the portfolio has a coverage of 96 per cent. As we start to gain a historical basis, the portfolio’s carbon footprint will help us to assess whether the investment portfolio supports the Group’s goal of reducing carbon emissions.
• Gjensidige Pensjonsforsikring is working on new pension products with a more clearly defined ESG profile, which is considered especially important in light of the introduction of the ‘own pension account’ scheme.
• Oslo Areal is part of an Enova project on regional reuse networks, the goal of which is to map and create a marketplace for secondhand material in connection with renovation or demolition.
Gjensidige has sophisticated risk models for the purpose of ensuring correct risk pricing. We have increased our focus on climate risk and devised scenarios for the future risk of damage in collaboration with Norwegian Computing Center. We are also concerned with ethical operations and work actively to combat corruption and money laundering. On a daily basis, we make sure that we attend to systems and privacy protection for our customers and employees.
• We have gathered and strengthened our second-line functions to ensure clearer independence and increased efficiency.
• Gjensidige makes information available to the public authorities, so that they can make use of this knowledge in connection with the planning and zoning of new developments, as well as mitigating measures in built-up areas.
• Gjensidige has updated tariffs based on the results of the scenario, and continuously monitors physical risk to ensure correct risk pricing for our customers.
• The social impact of established and new products and services is described in the section ‘Our products and services’.
NNaattuurraall ppeerriill ccllaaiimmss iinn NNoorrwwaayy iinn aaccccoorrddaannccee wwiitthh mmaarrkkeett sshhaarree ffrroomm tthhee NNoorrwweeggiiaann NNaattuurraall PPeerriillss PPooooll
Main findings from the project with the Norwegian Computing Centre: • Loss projections based on climate model data up until 2100 show that total claims payments will increase in most of the country. While some counties will see a gradual increase throughout the period, others will have a relatively flat or negative development up until 2050, followed by an increase.
• In the former counties of Hedmark, Buskerud, Vestfold, Telemark and Vest-Agder, an increase in total claims payments of approximately 50 per cent is expected towards the end of the century.
CCuussttoommeerr ccoommppllaaiinnttss iinn aann uunnuussuuaall yyeeaarr • The Customer Ombudsman saw an increase in complaints of 7.7 per cent from the year before, as a result of a rise in travel insurance claims relating to Covid-19.
• In the Private division, there was an increase in complaints of 7.6 per cent. As many as 81 per cent of the complaints were considered within two weeks, compared with 82 per cent in 2019.
• All new employees must confirm that they have familiarised themselves with the Code of Conduct and carry out necessary training.
WWhhiissttlleebblloowwiinngg Gjensidige has several notification channels for employees and external parties: • All employees are encouraged to notify their immediate superior or the unit responsible for the matter the report concerns, as well as through the external notification channel.
AAnnttii--ccoorrrruuppttiioonn • Our anti-corruption program now includes a comprehensive description that has been made available to all employees. The programme is revised on an annual basis.
Ethics Number of cases of harassment and discrimination reported via the notification channel
Anti-money laundering Proportion of court cases relating to money laundering 0 0
Number of incidents reported to the authorities – Økokrim 24 10
Personal data Number of incidents reported to the authorities 52 57
Number of external audits 2 4 1 Proportion of purchases with an underlying framework agreement that has a requirement for a declaration of social responsibility.
Gjensidige achieved strong results in a year characterised by the Covid-19 pandemic. The company met all financial targets except for a slight shortcoming on the return on equity.
SSttaatteemmeenntt ccoonncceerrnniinngg tthhee aannnnuuaall aaccccoouunnttss Gjensidige reports consolidated financial information pursuant to International Financial Reporting Standards (IFRS). In accordance with the requirements of Norwegian accounting legislation, the Board confirms that the requirements for the going concern assumption have been met and that the annual accounts have been prepared on this basis. The preparation of the accounts and application of the chosen accounting principles involve using assessments and estimates and necessitate the application of assumptions that affect the carrying amount of assets and liabilities, income and expenses. The estimates and the pertaining assumptions are based on experience and other factors. The uncertainty associated with this means that the actual figures may deviate from the estimates. Insurance liabilities in particular are associated with this type of uncertainty.
Gjensidige Forsikring Group recorded a profit before tax expense of NOK 6,341.7 million (7,753.8) for the period. The corresponding result for 2019 included a gain on the sale of Gjensidige Bank of NOK 1.6 billion.
The profit from general insurance operations measured by the underwriting result was NOK 5,075.6 million (4,036.4), corresponding to a combined ratio of 81.3 (83.6).
The landslide at Gjerdrum in Norway in December, defined as a natural peril event, incurred a large loss of NOK 180.4 million net of reinsurance, of which NOK 150.4 million was allocated to the Corporate Centre and the rest to the Private and Commercial segments. The reinstatement premium on the reinsurance programme amounted to NOK 24.7 million, recorded in the Corporate Centre. The net effect of the event on the Group’s combined ratio was 0.7 percentage points.
Earned premiums in the Commercial segment increased by 9.4 per cent. Strong growth combined with an improved underlying frequency loss ratio resulted in an increased underwriting result.
Earned premiums in the Swedish segment were up 3.0 per cent measured in local currency. The underwriting result was stable.
The Pension segment generated a lower profit for the period, driven by lower insurance income and higher operating expenses.
Thanks to the impressive effort of our highly skilled employees, we ensured good operations and a high level of customer service throughout the year.
GGoooodd ccooooppeerraattiioonn wwiitthh ppaarrttnneerrss Gjensidige has many years’ experience of partnership agreements. Distribution in cooperation with our partners is an important part of the business model in all the Group’s geographic locations and segments. Our partnership agreements are usually structured so that the customer dialogue takes place directly with Gjensidige. Gjensidige works closely with its strategic partners, and good management of partnership agreements will be given priority also in the time ahead.
CChhaapptteerr 33 –– VVaalluuee ccrreeaatteedd iinn 22002200 -- FFiinnaanncciiaall rreessuulltt partners in the Danish banking sector, and we will continue our efforts to identify attractive partners that can further strengthen our position in Denmark.
The Gjerdrum land slide is a strong reminder of the importance of continuous efforts to analyse climate effects and gain a deeper understanding of such risk to mitigate the significant impacts on human lives and properties. We expect enhanced focus on risk assessment going forward, both from property developers and regulators. And we will continue to co-operate with the municipalities by sharing our knowledge on damage prevention.
FFiinnaanncciiaall ppoossiittiioonn aanndd ccaappiittaall bbaassee The Group’s equity amounted to NOK 25,284.5 million (26,192.2) at the end of the year. The return on equity for the year was 19.2 per cent (28.2). The solvency margins at the end of the year were: • Approved Partial Internal Model : 198.0 per cent • Own Partial Internal Model : 247.5 per cent
The solvency margins are calculated net of the NOK 4,900.0 million kroner in dividends proposed or declared by the Board.
CCaasshh ffllooww Gjensidige is primarily an insurance company in which investments are part of the operational cash flow and therefore largely affected by strategic decisions. The Company’s ability to self-finance investments is good. The net cash flow from operational activities mainly consists of payments in the form of premiums, net payments made/received in connection with buying and selling securities, plus payments in the form of claims settlement costs, purchases of reinsurance, administration expenses and tax. The net cash flow from operational activities was NOK 7,350.8 million (negative 1,235.7) in 2020. The positive cash flow in 2020 can be explained by incoming premiums exceeding the Group’s payments. The negative cash flow in 2019 can largely be explained by the settlement of financial assets.
The net cash flow from investment activities mainly consists of payments made/received in connection with the acquisition of subsidiaries and associated companies, owner-occupied property, plant and equipment, plus dividend from associated companies and joint ventures. The net cash flow from investment activities in 2020 was minus NOK 513.2 million (4,823.4). The decrease is due to proceeds from the sale of Gjensidige Bank in 2019.
The net cash flow from financing activities mainly consists of payments made/received in connection with external debt financing and the payment of dividend to shareholders. The net cash flow from financing activities in 2020 was minus NOK 6,454.7 million (minus 4,002.0). The negative cash flow in 2020 and 2019 is due to the payment of dividend.
Gjensidige met financial targets on all metrics except for a slight shortcoming on the return on equity.
The cost ratio was 14.5 per cent. Adjusted for the Baltics segment, it was 13.9 per cent.
Return on equity was 19.2 per cent, reflecting the strong results in addition to the weak financial result in the first quarter in combination with a very high solvency ratio through much of the year.
Sales effectiveness + 10 per cent + 10 per cent, Group
Sales effectiveness was up 10 per cent, compared with our baseline year 2017. The improvement reflects higher sales in the Private segment, but there was higher sales effectiveness also in the other segments.
Costs related to claims processes were reduced further, to a total of NOK 483 million kroner, particularly driven by improvements in insurance fraud and process optimisation.
Earned premiums increased to NOK 9,433.6 million (8,872.4). Adjusted for the transfer of a product insurance portfolio to the Danish segment, the increase was 6.7 per cent. Price increases for motor and property insurance, as well as accident and health insurance were the main drivers of the increase in earned premiums. Gjensidige maintained a strong position in the market. Competitiveness remains good and the number of customers increased.
The Covid-19 situation had a positive impact on claims, estimated at approximately NOK 240 million, corresponding to 2.5 percentage points on the loss ratio. This was primarily related to less driving and low travel activity. The travel insurance line was significantly impacted by higher claims in the first quarter, but reinsurance coverage limited net claims incurred.
Operating expenses amounted to NOK 1,225.5 million (1,164.7). The cost ratio was 13.0 (13.1).
GGeenneerraall IInnssuurraannccee CCoommmmeerrcciiaall The underwriting result was NOK 2,096.6 million (1,729.8). The increase was mainly due to significantly higher earned premiums and an improved underlying frequency loss ratio. The combined ratio was 76.5 (78.8).
Earned premiums amounted to NOK 5,910.2 million (4,960.1). Measured in local currency, earned premiums increased by 9.4 per cent, mainly due to portfolio growth and solid renewals in the commercial lines. Adjusted for the discontinuation of a quota share reinsurance contract and a product portfolio that was relocated from Private back to the Danish segment, the underlying growth in local currency was 5.3 per cent. Lower demand for travel insurance had a significant negative impact on premium growth.
Earned premiums increased to NOK 1,592.0 million (1,405.8). Measured in local currency, earned premiums increased by 3.0 per cent, reflecting price and volume growth in the commercial lines, partly offset by lower volumes in the private lines.
GGeenneerraall IInnssuurraannccee BBaallttiiccss The underwriting result increased to NOK 67.7 million (60.9), mainly driven by currency effects. The combined ratio was 94.2 (94.6).
Earned premiums amounted to NOK 1,175.7 million (1,126.9). Measured in local currency, earned premiums decreased by 4.2 per cent, reflecting lower volume in the travel and general third-party liability insurance lines and lower prices for motor insurance due to fierce competition. This was reinforced by the Covid-19 situation.
Claims incurred amounted to NOK 767.2 million (728.7). The loss ratio increased to 65.3 (64.7), due to lower run-off gains partly offset by a 1.5 percentage point improvement in the underlying frequency loss ratio. The latter was mainly due to favourable weather conditions in the first quarter. The Covid-19 situation had a positive impact on claims estimated at approximately NOK 20 million, corresponding to 1.8 percentage point on the loss ratio. This was primarily related to motor and travel claims.
Operating expenses amounted to NOK 340.7 million (337.3). The cost ratio was 29.0 (29.9), the decrease reflecting cost saving initiatives.
Management income increased to NOK 182.4 million (167.2) as a result of increased assets under management.
The recognised return on the paid-up policy portfolio was 3.5 per cent (4.3). The average annual interest guarantee was 3.4 per cent.
2 Recognised return on the paid-up policy portfolio = realised return on the portfolio.
3 Value-adjusted return on the paid-up policy portfolio = total return on the portfolio.
The Covid-19 pandemic led to a significant downturn in the financial markets towards the end of the first quarter, resulting in a broad decline in most asset classes. Significant intervention by central banks and fiscal policy measures drove the market recovery during the rest of the year.
At the end of the period, the investment portfolio totalled NOK 58.9 billion (59.1). The financial result for the year was NOK 1,341.7 million (2,306.4), which corresponds to a return on total assets of 2.2 per cent (4.1).
The reinvestment rate for new investments in the portfolio of bonds held at amortised cost was approximately 3.0 per cent on average for the year, while the reinvestment rate in the fourth quarter was approximately 2.0 per cent. The running yield on the portfolio of bonds held at amortised cost was 3.4 per cent at the end of the period. The average duration of the match portfolio was 3.4 years. The average term to maturity for the corresponding insurance liabilities was 4.0 years.
The distribution of counterparty risk and credit rating is shown in the charts on the next page. Securities without an official credit rating amounted to NOK 7.7 billion (8.0). Of these securities, 11.9 per cent (4.3) were issued by Norwegian savings banks, while the remainder were mostly issued by Norwegian power producers and distributors, property companies, industry and municipalities. Bonds with a coupon linked to the development of the Norwegian consumer price index accounted for 2.4 per cent (2.5) of the match portfolio. The geographical distribution of the match portfolio is shown in the chart above.
The free portfolio amounted to NOK 22.5 billion (25.0) at the end of the year. The return was 3.6 per cent (6.0), reflecting market developments, as well as a general de-risking of the portfolio in the first quarter, followed by some re-risking thereafter.
The fixed-income instruments in the free portfolio amounted to NOK 12.3 billion (14.2), of which fixed income – short duration investments accounted for NOK 5.0 billion (6.8). The rest of the portfolio was invested in Norwegian government bonds and international bonds (investment grade, high yield and convertible bonds). The total fixed-income portfolio yielded a return of 4.2 per cent (4.4).
The total equity holding at the end of the period was NOK 3.6 billion (4.3), of which NOK 2.4 billion (3.0) consisted of current equities and NOK 1.2 billion (1.2) of PE funds. The return on current equities was 0.6 per cent (15.6). The weak performance was mainly driven by market turbulence and de-risking in the first quarter. PE funds yielded a return of minus 7.7 per cent (plus 6.9), mainly driven by weak performance of funds with exposure to the oil sector.
EEvveennttss aafftteerr tthhee bbaallaannccee sshheeeett ddaattee At a board meeting on 21 January 2021, it was decided to pay a dividend of NOK 2.40 per share, in total NOK 1.2 billion, based on the authorisation granted to the Board. The dividend is related to the 2019 accounts and constitutes the payment of excess capital. The payment was made on 4 February 2021.
Other than that, no significant events have occurred after the balance sheet date.
In 2018, Gjensidige was granted approval by the Financial Supervisory Authority to use a partial internal model to calculate regulatory capital requirements. The model that was approved was more conservative than the model Gjensidige originally applied for. The Financial Supervisory Authority set as a condition that the standard formula would be used to calculate the risk of storms, and the standard formula’s correlation between market and insurance risk. In addition, the Authority’s conditions entail somewhat higher capital requirements for market risk and insurance risk than Gjensidige originally applied for. The complaint submitted by Gjensidige Forsikring ASA and the Gjensidige Forsikring Group concerning the Authority’s decision on the calibration of market risk was partially upheld in the third quarter 2020. The change means a reduction of the total solvency capital requirement of approximately NOK 0.2 billion, based on the solvency capital requirement on 30 September 2020. Gjensidige believes that the partial internal model, without the conditions imposed by the Financial Supervisory Authority, provides a better representation of risk and will continue working for approval of Gjensidige’s own version of the partial internal model.
Gjensidige has started work on implementing the new accounting standard IFRS 17 Insurance Contracts, which is expected to enter into force on 1 January 2023. The standard will affect the Group’s accounts by introducing material changes to the measurement and presentation of income and expenses. For further information, see Note 1 on accounting principles.
AAllllooccaattiioonn ooff tthhee pprrooffiitt bbeeffoorree ootthheerr iinnccoommee aanndd eexxppeennsseess The Group’s profit from continued and discontinued operations amounted to NOK 4,953.9 million. The Board has adopted a dividend policy that forms the basis for the dividend proposal submitted to the General Meeting. The Board proposes a dividend of NOK 3,700 million for the 2020 financial year. This corresponds to NOK 7.40 per share, based on the profit for 2020. On 4 February 2021, a dividend of NOK 1,200 million was paid based on the profit for 2019. That corresponded to NOK 2.40 per share and represented the distribution of excess capital.
The ordinary dividend corresponds to a pay-out ratio of 75 per cent of the Group’s profit after tax.
It is proposed that the parent company’s profit before other components of income and expense of NOK 4,489.7 million be allocated as follows: NOK millions
The Board has decided to pay employees of Gjensidige Forsikring ASA a collective bonus corresponding to NOK 30,000, including holiday pay, per full-time employee. The bonus is based on the underwriting result, market share development and customer satisfaction. In addition, the Board has, on a discretionary basis, considered development in the organisation, engagement, expertise and the Company’s profit for the year seen in relation to the dividend policy. The Board wishes to thank each individual employee for their contribution to Gjensidige’s results in 2020.
• Return on equity after tax > 20 per cent • Corresponding to > 16 per cent excluding run-off gains
Gjensidige’s ambition is to become the most customer-oriented general insurance company in the Nordic region. The Group’s priority is to retain its strong and unique position in Norway and to continue improving its profitability outside Norway. Furthermore, the Group will focus on ensuring continued capital discipline, including delivering attractive returns to shareholders. A fundamental prerequisite for long term value creation is sustainable choices and solutions. The top three priorities are contributing to a safer society, reduced CO2 emissions and responsible investments.
The Covid-19 pandemic outbreak had a significant impact on the financial result in the first quarter of 2020, while the impact on Gjensidige’s insurance operations so far has been slightly positive, reflecting lower activity. In general, although restrictions and recommendations affect daily life, we expect stable activity in our markets and claims at normal levels. However, with the ongoing travel restrictions, we expect a lower level of claims for travel insurance in the near future.
A key strategic priority for the next few years is maintaining and cultivating the direct customer relationship. Gjensidige aims to achieve greater relevance and create sales opportunities by offering customers a broader value proposition than ever before – in terms of both services and products, alone or in partnership with other providers. The goal is to become an even better and more relevant partner for customers – a problem-solver with a stronger focus on claims prevention – and thereby further strengthening the customer relationship.
The Group has high capital buffers in relation to internal risk models, statutory solvency requirements and its target rating. The Board considers the Group’s capital situation and financial strength to be very strong.
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Operating income Earned premiums from general insurance 27,160.5 24,650.4 Earned premiums from pension 913.8 880.0 Other income including eliminations 185.6 171.6 Total operating income 4 28,259.9 25,702.0
Net income from investments Results from investments in associates and joint ventures 5 338.8 309.2 Interest income and dividend etc. from financial assets 1,006.4 1,043.4 Net changes in fair value on investments (incl. property) (279.7) 1,453.7 Net realised gain and loss on investments 469.6 1,282.9 Interest expenses and expenses related to investments (216.7) (228.8) Total net income from investments 6 1,318.5 3,860.3
Earnings per share from continuing operations, NOK (basic and diluted) 24 9.91 13.11
Other comprehensive income that will be reclassified subsequently to profit or loss Exchange differences from foreign operations 436.3 (67.3) Tax on other comprehensive income that will be reclassified subsequently to profit or loss 9 (67.2) 17.1 Total other comprehensive income that will be reclassified subsequently to profit or loss 369.1 (50.2)
Comprehensive income attributable to: Owners of the company continuing operations 5,237.3 6,418.0 Owners of the company discontinued operations 37.6 Non-controlling interests 0.1 0.1 Total 5,237.4 6,455.7
Financial assets Interest-bearing receivables from joint ventures 5, 13 2,365.6 2,401.4 Financial derivatives 13 1,294.3 934.1 Shares and similar interests 13, 14 5,526.1 6,551.6 Bonds and other securities with fixed income 13 30,968.9 30,992.4 Bonds held to maturity 13 151.9 210.7 Loans and receivables 13, 15 20,934.7 19,963.3 Assets in life insurance with investment options 13 34,586.4 29,989.4 Receivables related to direct operations and reinsurance 13 7,702.7 7,097.6 Other receivables 13, 15 565.0 1,192.0 Cash and cash equivalents 13 2,861.1 2,419.5
Other assets Deferred tax assets 9 20.7 21.2 Reinsurers' share of insurance-related liabilities in general insurance, gross 16 1,062.0 1,072.5 Prepaid expenses and earned, not received income 118.3 53.2
Equity Share capital 1,000.0 1,000.0 Share premium 1,430.0 1,430.0 Natural perils capital 2,612.9 2,676.3 Guarantee scheme provision 715.5 676.3 Other equity 19,525.4 20,409.0 Total equity attributable to owners of the company 25,283.8 26,191.6 Non-controlling interests 0.7 0.6 Total equity 17 25,284.5 26,192.2
Comprehensive income Profit/(loss) (the controlling interests' share) 53.9 6,539.8 6,593.7 Total other comprehensive income (0.0) (50.1) (87.9) (138.1) Comprehensive income (0.0) 53.9 (50.1) (87.9) 6,539.8 6,455.6
Transactions with owners of the company Own shares 0.0 (9.2) (9.2) Dividend (3,549.9) (3,549.9) Remeasurement of the net defined benefit liability/asset of liquidated companies 4.4 (4.4)
Equity as at 31.12.2029 attributable to the owners of the company 1,000.0 (0.0) 1,430.0 69.5 1,002.3 565.9 (2,058.1) 24,182.1 26,191.6
Transactions with owners of the company Own shares 0.0 (13.1) (13.0) Dividend (6,124.9) (6,124.9) Equity-settled share-based payment transactions 13.3 13.3 Perpetual Tier 1 capital 0.6 (0.6) Perpetual Tier 1 capital - interest paid (46.5) (46.5) Total transactions with owners of the company 0.0 13.3 (45.8) (6,138.6) (6,171.0)
Cash flow from investing activities Net receipts/payments from sale/acquisition of subsidiaries, associates and joint ventures 5,261.9 Net receipts/payments on sale/acquisition of owner-occupied property, plant and equipment and intangible assets (513.2) (438.5) Net cash flow from investing activities (513.2) 4,823.4
Specification of cash and cash equivalents Cash and deposits with credit institutions ¹ 2,861.1 2,419.5 Total cash and cash equivalents 2,861.1 2,419.5
Cash flow from discontinued operations Net cash flow from operating activities (7.0) Net cash flow from investing activities (318.8) Net cash flow from financing activities (150.8) Total cash flow from discontinued operations (476.6)
Notes 1. Accounting policies Reporting entity Gjensidige Forsikring ASA is a publicly listed company domiciled in Norway. The company’s head office is located at Schweigaardsgate 21, Oslo, Norway. The consolidated financial statements of the Gjensidige Forsikring Group (Gjensidige) as at and for the year ended 31 December 2020 comprise Gjensidige Forsikring ASA and its subsidiaries and Gjensidige’s interests in associates and joint ventures. The activities of Gjensidige consist of general insurance and pension. Gjensidige does business in Norway, Sweden, Denmark, Latvia, Lithuania and Estonia.
IFRS 9 Financial instruments (2014) in the insurance operations IFRS 9 addresses the accounting for financial instruments and is effective for annual periods beginning on or after 1 January 2018. See also the section below about delayed implementation. The standard introduces new requirements for the classification and measurement of financial assets, including a new expected loss model for the recognition of impairment losses, and changed requirements for hedge accounting.
Amendments to IFRS 4 Applying IFRS 9 Financial Instruments with IFRS 4 Insurance Contracts (2016) The amendments to IFRS 4 permit entities that predominantly undertake insurance activities the option to defer the effective date of IFRS 9 until 1 January 2023. The effect of such a deferral is that the entities concerned may continue to report under the existing standard, IAS 39 Financial Instruments. In addition, the insurance sector of a financial conglomerate is allowed to defer the application of IFRS 9 until 1 January 2023, where all of the following conditions are met: • no financial instruments are transferred between the insurance sector and any other sector of the financial conglomerate other than financial instruments that are measured at fair value with changes in fair value recognised through the profit of loss account by both sectors involved in such transfers; • the financial conglomerate states in the consolidated financial statements which insurance entities in the group are applying IAS 39; • disclosures requested by IFRS 7 are provided separately for the insurance sector applying IAS 39 and for the rest of the group applying IFRS 9.
Segment reporting The operating segments are determined based on Gjensidige’s internal organisational management structure and the internal financial reporting structure to the chief operating decision maker. In Gjensidige Forsikring Group, the Senior Group Management is responsible for evaluating and following up the performance of the segments and is considered the chief operating decision maker. Gjensidige reports on six operating segments, which are independently managed by managers responsible for the respective segments depending on the products and services offered, distribution and settlement channels, brands and customer profiles. Identification of the segments is based on the existence of segment managers who report directly to the Senior Group Management/CEO and who are responsible for the performance of the segment under their charge.
Joint ventures are defined as companies where there exists a contractual agreement giving joint control together with one or more parties. Joint control is the contractually agreed sharing of control of an arrangement, which exists only when decisions about the relevant activities require the unanimous consent of the parties sharing control. A joint venture is a joint arrangement whereby the parties that have joint control of the arrangement have rights to the net assets of the arrangement. The Group’s joint venture has investment properties that are accounted for at fair value.
The Group's share of earnings from investments in associates and joint ventures is presented on a separate line in the income statement. Changes in other income and expenses in these investments are included in other income and expenses. Correspondingly, the group’s share of recognitions directly to equity in the underlying investment is presented in the Group's equity statement.
The purchase price allocation of the business combination changes if there is new information about the fair value applicable per date for acquisition of control. The allocation can be changed up to 12 months after the acquisition date (if the purchase price allocation that was completed at the acquisition date was preliminary). Non-controlling interests are calculated on the non-controlling interests of identifiable assets and liabilities or at fair value.
Goodwill is calculated as the sum of the purchase price and book value of non-controlling interest and fair value of previously owned interests, less the net value of identifiable assets and liabilities calculated at the acquisition date.
Operating expenses Operating expenses consist of salaries and administration and sales costs.
Intangible assets Goodwill Goodwill acquired in a business combination represents cost price of the acquisition in excess of Gjensidige’s share of the net fair value of identifiable assets, liabilities and contingent liabilities in the acquired entity at the time of acquisition. Goodwill is recognised initially at cost and subsequently measured at cost less accumulated impairment losses.
Impairment losses are recognised in profit or loss if the carrying amount of an asset or cash-generating unit exceeds its estimated recoverable amount. Impairment losses recognised in respect of cash-generating units are allocated first to the carrying amount of goodwill and then proportionally to the carrying amount of each asset in the cash-generating unit. Previously recognised impairment losses are for assets except for goodwill, reversed if the prerequisites for impairment losses are no longer present. Impairment losses will only be reversed if the recoverable amount does not exceed the amount that would have been the carrying amount at the time of the reversal if the impairment loss had not been recognised.
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 3.4 per cent annually guaranteed return on assets.
Reinsurers’ share of insurance-related liabilities in general insurance, gross Reinsurers’ share of insurance-related liabilities in general insurance, gross is classified as an asset in the balance sheet. Reinsurers’ share of provision for unearned premiums, gross and reinsurers’ share of claims provision, gross are included in reinsurers’ share of insurance-related liabilities in general insurance, gross. The reinsurers’ share is less expected losses on claims based on objective evidence of impairment losses.
• at fair value through profit or loss • investments held to maturity • loans and receivables • financial derivatives • financial liabilities at amortised cost • financial liabilities classified as equity
The category at fair value through profit or loss comprise the classes shares and similar interests, bonds and other fixed income securities, loans, interest-bearing liabilities and liabilities in life insurance with investment options.
The category financial liabilities at amortised cost comprises subordinated debt, interest-bearing liabilities, other financial liabilities and liabilities related to direct insurance reinsurance.
Different valuation techniques and methods are used to estimate fair value depending on the type of financial instruments and to which extent they are traded in active markets. For financial instruments traded in active markets, listed market prices or traders' prices are used, while for financial instruments not traded in an active market, fair value is determined using appropriate valuation methods.
Gjensidige Forsikring Group groups with respect to impairment. Assets with similar credit risk characteristics are grouped together.
Provisions Provisions are recognised when Gjensidige has a legal or constructive obligation as a result of a past event, it is probable that this will entail the payment or transfer of other assets to settle the obligation, and a reliable estimate can be made of the amount of the obligation.
Events after the balance sheet date 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.
Pensions 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, which is only applicable for Gjensidige’s obligation to withhold an amount for the employees’ tax liability and transfer this amount in cash to the tax authorities on behalf of the employee, 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. . Employers' social security costs are calculated based on the fair value of the shares on each balance sheet date. The amount is recognised in the income statement over the expected vesting period and accrued according to IAS 37.
Deferred tax liabilities are recognised for temporary differences resulting from investments in subsidiaries and associates, except in cases where Gjensidige is able to control the reversal of temporary differences, and it is probable that the temporary difference will not be reversed in foreseeable future. Deferred tax assets that arise from deductible temporary differences for such investments are only recognised to the extent that it is probable that there will be sufficient taxable income to utilise the asset from the temporary difference, and they are expected to reverse in the foreseeable future.
Gjensidige Forsikring Group 2. Use of estimates The preparation of the financial statements under IFRS and the application of the adopted accounting policies require that management make assessments, prepare estimates and apply assumptions that affect the carrying amounts of assets and liabilities, income and expenses. The estimates and the associated assumptions are based on experience and other factors that are assessed as being justifiable based on the underlying conditions. Actual figures may deviate from these estimates. The estimates and associated prerequisites are reviewed regularly. Changes in accounting estimates are recognised in the period the estimates are revised if the change only affects this period, or both in the period the estimates change and in future periods if the changes affect both the existing and future periods.
In this note, the effects of Covid-19 will be described first. Then the business structure and the risk management system are presented. Thereafter the different risks and management of these risks will be described. Finally, the capital requirement for these risks and the capital management will be described.
Risk management system The risk management system is organised with three lines and is an integral part of corporate governance.
The Group’s capital management committee is a body for monitoring and allocating capital for the entire group and has an advisory role regarding the assessment and proposal of changes in use of capital. The Group’s Risk Control Committee is a body for the Groups risk management and internal control and shall assist in monitoring the group's risk situation, risk management and internal control. Both committees are chaired by the Group CEO. Furthermore, a sustainability council has been established headed by the Chief Sustainability Officer (CSO). This is an interdisciplinary body that ensures a comprehensive and uniform approach to sustainability issues in the group. Relevant issues related to sustainability are addressed from the sustainability committee to the Capital Management Committee or Risk Control Committee respectively.
All employees must within their areas contribute to the achievement of corporate goals and to risk management in line with established guidelines. There are established procedures and guidelines that must be followed, and risk management and internal control is therefore performed as a part of the employee’s daily work. Some functions such as risk-, compliance- and security coordinators, anti-money laundry officer and quality functions reviewing distribution and claims handling are organized as a part of first line management in order to assist with the maintenance of that line’s responsibility for risk management and internal control. Handling of nonconformities is part of risk management and shall take place in accordance with established routines.
The various control functions in the second line are organized under the Chief Risk Officer (CRO) in Gjensidige Forsikring ASA.
The second line is carried through by centralised control functions for risk management, compliance, actuary issues and group security; • The risk management function is responsible for maintaining and further developing the group's risk management system so that the system always is satisfactory and in accordance with regulatory requirements and the board's guidelines. The function should also organize and maintain a comprehensive and ongoing process for risk assessment and follow-up, have an overview of the most material risks the Group is or may be exposed to, and what this means for the Group solvency. The risk management function is headed by the CRO in Gjensidige Forsikring ASA. The CRO has the overall responsibility for establishing the procedures for performing risk management and reporting risk exposures as well as monitoring Board approved limits. CRO has a professional and independent reporting line to the CEO and the Board.
• The actuarial function is responsible for coordinating the calculation and control of the technical provisions, but it has no responsibility for developing technical claim provision models or regular technical claim provision calculations. The function’s responsibilities are limited to controlling activities, and the function must be independent of the operational activities with a separate reporting line. The head of the actuary function has a professional and independent reporting line to the CEO and the Board.
Real independence is ensured by the CEO appointing the head of the second line functions and determines their remuneration. Managers of second line functions cannot be removed without the consent of the board. Their salary shall not be based on Gjensidige Forsikring ASA's result. The responsibility for all investment management is centralized in the group's Investment Center organized under the CFO. A group-wide credit committee headed by the CFO has been established to set credit limits for individual issuers and general guidelines for counterparty risk. The function for monitoring and reporting financial returns and compliance with limits in financial management reports to the CRO to ensure independent follow-up.
General insurance Risk description General insurance covers non-life and health insurance contracts. The Gjensidige Forsikring Group is exposed to general insurance risk in Norway, Sweden, Denmark and the Baltics. Gjensidige’s current risk appetite is large in the core area of general insurance in the Nordic and Baltic countries. The risk appetite is the greatest in areas which Gjensidige has high structural competence and access to relevant data. Other business areas shall contribute to the Group’s total growth and profitability, but with limited risk appetite.
Reserve risk Reserve risk is the risk that the current claims provisions are not sufficient to cover the development of already incurred claims and related expenses. Reserve risk reflects the emergence of uncertainty related to: • Actual claims' size (for reported, but not yet settled claims, i.e. RBNS) being higher than expected,
• “Expected loss ratio” methods (e.g. “BornhuetterFerguson ”), which use Gjensidige’s expectation of the loss ratio for a line of business in the estimation of future claims payments.
The estimation of IBNR is generally subject to a greater degree of uncertainty than the estimation of the cost of settling claims already notified (RBNS), where information about the claim is available. There may be cases where certain claims may not be apparent to the insured until many years after the event that gave rise to the claims. Estimation uncertainty is an inherent character of the claim provisions. Several factors contribute to this uncertainty and include claim frequency and claim severity. An increase in the frequency of claims can be due to seasonal effects and more sustainable effects. During the winter season snow and cold weather will cause an increase in the frequency of claims in Motor insurance. In Property insurance, a cold winter will cause an increase in the frequency of claims due to frozen water pipes and increased use of electrical power and open fireplaces for heating of the houses. Shifts in the level of claims frequency may occur due to e.g. change in customer behaviour and new types of claims. The effect on the profitability of a permanent change in the level of claims frequency will be high. In Motor insurance in Norway, for example, an increase of one percentage point in the level of claims frequency will increase the loss ratio by three to four percentage points based on the current level of claims.
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 Norway Workers’ Compensation covers both accident and diseases, while in Denmark diseases are covered by a governmental body. The compensation in Norway is exclusively in the form of lump sums, while in Denmark the compensation consists of both lump sums and annuity payments. Annuity payments are calculated on the basis of assumptions about mortality, interest rate and retirement age. For bodily injuries, the severity of claims is also influenced by court awards, which tend to increase the compensation more than the general inflation. This is also a significant factor, due to the long period typically required to settle these cases.
Gross Estimated claims cost At the end of the accident year 15,014.3 16,268.2 13,974.3 15,938.8 15,554.0 13,425.5 14,653.9 16,090.4 17,100.5 15,871.7 17,525.8 - One year later 14,879.7 16,519.1 13,895.0 15,812.1 15,233.9 13,402.1 14,906.3 15,936.1 17,131.3 16,145.8 - Two years later 14,912.9 16,560.5 13,806.0 15,623.3 15,094.6 13,304.6 14,869.0 15,914.5 17,176.2 - Three years later 14,825.0 16,361.4 13,632.7 15,432.3 15,047.0 13,375.3 15,005.5 15,795.8 - Four years later 14,740.6 16,156.0 13,459.5 15,298.0 14,994.4 13,351.1 14,919.8 - Five years later 14,633.0 16,036.9 13,334.6 15,191.3 14,903.3 13,298.7 - Six years later 14,508.7 15,892.1 13,142.1 15,061.5 14,834.3 - Seven years later 14,391.9 15,728.9 13,113.8 15,016.8 - Eight years later 14,157.8 15,653.9 13,021.8 - Nine years later 14,136.3 15,607.7 - Ten years later 14,070.4
Net of reinsurance Estimated claims cost At the end of the accident year 14,510.1 15,222.3 13,764.6 15,157.8 15,421.7 13,424.0 14,405.3 15,537.4 16,813.4 15,515.4 17,187.0 - One year later 14,405.7 15,406.9 13,679.5 14,984.8 15,057.2 13,400.9 14,656.0 15,373.0 16,759.6 15,762.5 - Two years later 14,436.9 15,509.9 13,606.2 14,894.9 14,942.0 13,296.7 14,619.0 15,297.1 16,791.5 - Three years later 14,350.0 15,381.2 13,427.2 14,700.8 14,892.1 13,366.1 14,715.7 15,185.8 - Four years later 14,264.7 15,172.3 13,244.4 14,582.0 14,839.6 13,342.1 14,634.4 - Five years later 14,152.7 15,053.1 13,118.6 14,475.3 14,748.5 13,289.9 - Six years later 14,028.4 14,907.8 12,928.7 14,345.5 14,679.0 - Seven years later 13,911.7 14,763.5 12,899.6 14,300.8 - Eight years later 13,690.0 14,688.5 12,806.0 - Nine years later 13,668.5 14,642.3 - Ten years later 13,602.6
Gross Estimated claims cost At the end of the accident year 15,014.3 16,268.2 13,675.8 15,628.8 15,179.2 13,053.9 14,132.4 15,170.7 16,296.7 15,006.7 16,762.3 - One year later 14,879.7 16,519.1 13,618.3 15,522.1 14,829.3 13,028.4 14,392.4 15,017.5 16,336.8 15,285.9 - Two years later 14,912.9 16,560.5 13,537.2 15,340.4 14,707.8 12,938.9 14,369.7 14,993.0 16,391.5 - Three years later 14,825.0 16,361.4 13,365.8 15,153.5 14,659.5 13,006.7 14,515.7 14,876.6 - Four years later 14,740.6 16,156.0 13,188.7 15,024.7 14,608.4 12,984.7 14,430.9 - Five years later 14,633.0 16,036.9 13,071.3 14,919.9 14,520.8 12,941.5 - Six years later 14,508.7 15,892.1 12,887.0 14,793.2 14,447.0 - Seven years later 14,391.9 15,728.9 12,857.1 14,748.2 - Eight years later 14,157.8 15,653.9 12,763.0 - Nine years later 14,136.3 15,607.7 - Ten years later 14,070.4
Total disbursed 13,326.3 14,744.0 11,883.7 13,821.9 13,487.1 11,880.7 12,903.7 13,242.7 14,141.5 12,090.1 9,484.2 141,005.8 Claims provision 744.1 863.7 879.3 926.3 959.9 1,060.8 1,527.1 1,633.9 2,250.0 3,195.8 7,278.2 21,319.1 Prior-year claims provision and loss adjustment provision 6,778.2 Total 28,097.3
Net of reinsurance Estimated claims cost At the end of the accident year 14,510.1 15,222.3 13,469.0 14,848.0 15,054.3 13,053.9 13,886.9 14,643.4 16,016.6 14,675.8 16,402.7 - One year later 14,405.7 15,406.9 13,405.0 14,694.9 14,697.7 13,028.2 14,145.4 14,490.2 15,978.3 14,935.1 - Two years later 14,436.9 15,509.9 13,339.3 14,612.1 14,580.6 12,934.4 14,122.8 14,420.3 16,021.1 - Three years later 14,350.0 15,381.2 13,162.3 14,422.1 14,532.4 13,002.2 14,228.6 14,311.3 - Four years later 14,264.7 15,172.3 12,979.5 14,308.9 14,481.3 12,980.2 14,147.8 - Five years later 14,152.7 15,053.1 12,862.2 14,204.0 14,393.6 12,937.0 - Six years later 14,028.4 14,907.8 12,677.9 14,077.4 14,319.8 - Seven years later 13,911.7 14,763.5 12,648.0 14,032.3 - Eight years later 13,690.0 14,688.5 12,553.9 - Nine years later 13,668.5 14,642.3 - Ten years later 13,602.6
Total disbursed 12,858.5 13,778.6 11,674.6 13,106.0 13,359.9 11,876.2 12,691.9 12,697.6 13,834.7 11,789.2 9,436.1 137,103.4 Claims provision 744.1 863.7 879.3 926.3 959.9 1,060.8 1,455.8 1,613.7 2,186.4 3,145.9 6,966.6 20,802.5 Prior-year claims provision and loss adjustment provision 6,778.2 Total 27,580.7
The duration (average time between the date of loss until the claim is finally settled) differs significantly between the types of risk under consideration. Long duration will increase the company’s exposure to inflation. The figure below shows the duration of different products.
Premium risk originates from the following factors: • Uncertainty in premium rates • Uncertainty in claim severity • Uncertainty in claim frequency • Uncertainty in timing of claims payments • Uncertainty in operating and claims handling expenses
Gjensidige has developed governing documents for insurance risk. The purpose is to diversify the types of insurance risks, and within each of these categories achieve a sufficiently large population of risks to reduce the fluctuation in the expected outcome. There are detailed guidelines that ensure that the risks underwritten are within Gjensidige’s risk appetite.
Table 2a – Gross premiums written per line of business, Gjensidige Forsikring Group
Other motor insurance 5,517.3 18.8% 5,083.1 19.0% Marine, aviation and transport insurance 342.0 1.2% 314.0 1.2%
Fire and other damage to property insurance 9,976.0 34.1% 8,946.5 33.5%
Hedging of inflation rate for Danish workers’ compensation Gjensidige is exposed to the risk of increased inflation on most of its technical provisions. Increased inflation will result in higher future claim payments than earlier expected. A large part of this inflation risk is related to Danish workers' compensation, which is hedged through inflation swaps.
Change in CR (1%-point) 280.7 276.7 259.8 235.4 Change in loss frequency (1%-point) 2,275.6 2,068.2 2,254.1 2,047.5
Life insurance Risk description The Gjensidige Forsikring Group is exposed to life insurance risk through products sold in Gjensidige Pensjonsforsikring AS. 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 capital-intensive 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.
Mortality risk Mortality risk is the risk that actual mortality rates are higher than expected. It is defined as a permanent increase in mortality rates for all ages. Higher mortality rates will result in higher claim payments to the surviving spouse or children. Mortality risk in Gjensidige Pensjonsforsikring AS is low as there is a limited amount of policies covering mortality risk. In addition, mortality rates are low, so increased mortality will have limited impact. This means that increased mortality is not the dominant risk for Gjensidige Pensjonsforsikring AS, but the risk of decreased mortality; longevity risk.
Lapse risk Lapse risk is the risk of an increase in lapse rates, i.e. the risk of an increase in customers leaving the company. This is mainly relevant in Solvency II aspects, because Solvency II takes into account expected future profit. Lapse risk reflects the risk of a potential reduction of the expected future profit if customers
Financial risk Risk description Financial risk is the risk of experiencing losses due to changes in macroeconomic conditions and/or changes in financial asset values and liabilities. Gjensidige is exposed to these types of risk through the Group’s investment activities. The risk is managed at the aggregate level and handled through the guidelines for asset management and investment strategies, which have been drawn up for Gjensidige Forsikring ASA and its subsidiaries. The primary purpose of the investments is to support the insurance business by securing the value of insurance liabilities against fluctuations in market variables. Funds beyond this will be invested to help achieve the Group's overall profitability goals, with a controlled downside risk.
Match portfolio Fixed income – short duration 7 4,948.9 8.4% 4,818.7 8.2%
Fixed income – short duration 7 1,493.4 1,325.6 Bank deposits 167.1 142.2 Loan and receivables 5,718.7 5,246.3 Current bonds 84.8 249.9 Equities 3.7 6.3 Properties 1,036.4 958.2 Total 8,504.1 7,928.5 7 The content of these items are identical as the previous items named Money market. The name change is related to the expected entrance of EU regulation 2017/1131 on money market funds into Norwegian law early 2021. The regulation involves a strict definition of money market instruments and, although concerning funds, is expected to restrict what one can label “Money market”.
Gjensidige Forsikring Group property risk. There is also some currency risk, while the interest rate risk and concentration risk have a small contribution to the total risk exposure.
Spread risk Spread risk is the risk related to the values of assets, liabilities and financial instruments due to changes in the level or volatility of credit spreads over the risk-free interest rate term structure. It is the fixed-income portfolio that is exposed to spread risk.
The tables below show allocation of the fixed-income portfolio per sector and per rating category at year-end in 2020 and 2019. Investments in fixed-income funds are not included in the tables.
AAA 33.6% 29.5% 34.6% 29.4% AA 13.9% 13.3% 14.8% 14.2% A 17.6% 20.1% 15.2% 18.2% BBB 12.4% 10.6% 12.1% 10.1% BB B CCC or lower Not rated 22.6% 26.5% 23.4% 28.2% Total 100.0% 100.0% 100.0% 100.0%
The equity portfolio has no significant exposures in single shares. The largest equity exposures are presented in Note 14.
Property risk Property risk is the risk related to the value of assets, liabilities and financial instruments due to changes in the level or volatility of market prices of property.
Property risk is material to the Gjensidige Forsikring Group and Gjensidige Forsikring ASA. Gjensidige Forsikring ASA has a 50 per cent share in Oslo Areal AS, which is fully consolidated in the solvency calculations. The Group owns most of its properties through Oslo Areal AS. In addition, a part of the portfolio is invested in property funds. The real estate portfolio managed by Oslo Areal AS consists of investment properties. The real estate portfolio has its largest concentration in offices in the Oslo area, but it also contains property in other major cities in Norway.
Figure 5a shows the expected pay-out pattern for the premium and claims provisions for the general insurance operation as at year-end 2020 and 2019, respectively.
Following the financial crisis in 2008 efforts have been made to reform the IBOR (Interbank Borrowing Rates) and replace it with alternative reference rates. Changes in reference rates can affect measurement, hedge accounting and note information, primarily for financial instruments as well as discounting of insurance liabilities.
Gjensidige has little outstanding of financial instruments and insurance products that are being priced using LIBOR as reference. In loan portfolios where LIBOR constitute reference rates (applicable to GBP), the loan agreements contain mechanisms securing transition to new reference rates.
Foreign exchange risk Foreign exchange risk is the risk related to the value of assets, liabilities and financial instruments due to changes in currency exchange rates.
Counterparty default risk Counterparty default risk reflects possible losses due to unexpected default of the counterparties and debtors of Gjensidige Forsikring Group.
Managing financial risk Management of financial risk is described in chapter “Creating added value in Gjensidige” and subchapter “Risk strategy and risk management.”
Risk sensitivity Sensitivity analysis is performed at the Gjensidige Group level. The sensitivity analysis shows the effect in the accounts of different predefined scenarios. As the effects are on the values in the accounts, assets measured at amortized cost are disregarded. The unrealized excess value will be affected by changes in the interest rate and/or the credit spread. The following assumptions are made for the different risk drivers: • Equities: It is assumed that the market value of equities decreases with 10 per cent. It includes stress on all equities including hedge funds and private equity.
• Credit spread: It is assumed a 100 bps increase in the credit spreads.
Equity down 10% (458.9) (475.0) Interest rate up 100 bps (409.7) (384.4) Spread level up 100 bps (648.5) (707.5) Properties down 10% (627.3) (593.2)
Strategic risk and business risk Strategic risk is the risk of financial losses or lost opportunities due to the inability to establish and implement business plans and strategies, make decisions, allocate resources or respond to changes.
Climate risk Climate risk is risk related to changes in climate. Management of climate risk and business risk is described in chapter “Creating added value in Gjensidige” and subchapter “Climate-related financial disclosures (TCFD) “.
Requirements for Gjensidige’s capitalisation are specified in a capital management policy approved by the Board. A department under the CFO is responsible for the capital management and must ensure that the requirements in the capital management policy are followed.
In 2018, Gjensidige received an approval by the Financial Supervisory Authorities (FSA) to use a partial internal model to
Gjensidige Forsikring Group calculate the regulatory solvency capital requirement. The approved partial internal model is more conservative than the model Gjensidige applied for. The FSA required the use of the standard formula to calculate storm risk, and the standard formula’s correlation between market and underwriting risk. The FSA’s requirements also include somewhat higher capital requirement for market and underwriting risk compared with Gjensidige’s initial application. Gjensidige ‘s appeal on the Financial Supervisory Authority of Norway’s decision on the calibration of market risk was partly approved in the 3rd quarter of 2020. The impact of the change is a reduction in the total solvency capital requirement by approximately NOK 0.2 billion, based on the solvency capital requirement as at 30 September 2020. Gjensidige believes that the partial internal model, without the imposed conditions from the FSA, provides a better presentation of the risk, and will continue to make efforts to get Gjensidige’s own version of the partial internal model approved.
The solvency II balance Both assets and liabilities are valued at market value in Solvency II, and in some cases, this deviates from accounting principles.
• The guarantee scheme provision is treated as a liability under Solvency II, while it is treated as equity according to accounting principles
Technical provisions for life insurance (best estimate) 42,250.5 40,762.6 (1,487.9) 37,193.6 34,303.6 (2,890.0)
Premium provisions for non-life and health insurance 10,882.0 3,220.2 (7,661.8) 10,080.3 2,537.8 (7,542.5)
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 bodily injuries for motor insurance in Sweden and Baltics) are undiscounted in the accounting figures. The claims provision in Silvency II does not include planned run-off gains, as the accounting claims provisions. All other assumptions for Solvency II purposes are identical with the accounting assumptions.
Own shares (0.0) (0.0) (0.0) (0.0) Proposed dividend (4,900.0) (6,125.0) (4,900.0) (6,125.0) Subordinated liabilities (insurance) 2,525.9 2,533.5 2,224.0 2,229.0
Basic own funds 20,977.9 21,855.1 20,308.6 21,261.9 Total eligible own funds to meet the SCR 20,977.9 21,855.1 20,308.6 21,261.9
Eligible own funds are divided into three capital groups according to Solvency II regulations. Gjensidige has mainly tier 1 capital, which is considered to be capital of best quality. Of the total amount of tier 1 capital, NOK 1,015 million comes from the restricted tier 1 category. This is the market value of bonds issued by Gjensidige Forsikring ASA (nominal amount of NOK 1,000 million).
Tier 2 4,123.8 4,183.8 3,821.9 3,879.3 Of this; Natural perils capital 2,612.9 2,676.3 2,612.9 2,676.3
Tier 1 16,854.1 17,671.3 16,486.6 17,382.6 Of this; Restricted tier 1 capital 1,015.0 1,026.0 1,015.0 1,026.0
Diversification (4,426.0) (4,960.2) (3,199.8) (3,517.9) Basic SCR 12,700.5 12,822.6 11,668.0 11,669.5 Operational risk 934.5 847.5 813.8 741.8 Adjustments (riskreducing effect of deferred tax)
In addition to the Solvency Capital Requirement (SCR), there is a defined minimum level of capital. The latter is called Minimum Capital Requirement (MCR) for solo companies and minimum consolidated group Solvency Capital Requirement for insurance groups. If the capital falls below this level, the company or group will be prohibited to continue the business any further.
Capital in excess The regulatory capital surplus for the Gjensidige Forsikring Group, Gjensidige Forsikring ASA and subsidiaries are given in the table below.
There are some restrictions on Gjensidige Forsikring ASA’s and Gjensidige Pensjonsforsikring’s ability to access or use the Group’s assets, as well as settling its obligations. Group contributions added together with dividends must not exceed justifiable payment of dividend based on a company’s financial strength and operations. 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 (FSA).
Changes in the Solvency II regulation 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 Gjensidige based on Gjensidige’s current balance sheet.
The stress test for 2020 shows a drop in the solvency margin of 25,5 percentage points before and after stress. In comparison, the solvency margin increased with 2 percentage points all other equal in the first quarter 2020. Negative results was counteracted by lower capital requirement as a result of lower market values for the investments and a reduction in investment risk.
Effect on surplus capital Available capital before stress 20,977.9 Capital requirement before stress 10,597.5 Surplus without buffer before stress 10,380.5 Surplus without buffer after stress 7,271.7 Solvency ratio after stress 172.5% Solvency ratio before stress 198.0%
• Insurance risk: For non-life and health insurance business the stress is based on 3 percentage points annual increase in combined ratio. For life insurance business the stress is based on 20 per cent annual increase in disability.
General Insurance Denmark The Danish segment includes the Group’s general insurance operations in the private, commercial and municipal markets in Denmark. The segment handles sales, customers and claims settlements.
General Insurance Baltics The Baltics segment includes the Group’s general insurance operations in Lithuania, Latvia and Estonia, aimed at the private and commercial market.
Segment expenses are defined as claims incurred for general insurance and for Pension, operating expenses for all segments and net income from investments for Pension.
Joint ventures Oslo Areal AS Oslo, Norway 50.0% 1,086.9 2,723.8 1,086.9 2,360.4
¹ In addition, the Investment option portfolio in Gjensidige Pensjonsforsikring AS holds a 38.4 % share in the fund.
Associates - additional information Malling & Co Eiendomsfond IS 3,727.4 3,618.2 109.2 103.5 96.6
Associates - additional information Malling & Co Eiendomsfond IS 3,208.3 3,162.2 46.2 75.9 71.0
Income statement - items Operating income 505.5 491.1 Profit/(loss) after tax expense 96.6 677.7 71.0 618.3
Statement of financial position - items Current assets 0.7 41.6 0.7 30.7 Fixed assets 1,416.6 11,045.3 1,416.6 10,788.1 Receivables from related parties 2,309.9 1,790.7 Cash and cash equivalents 0.2 129.1 0.3 35.3 Other liabilities 15.9 1,037.0 2.2 1,330.4 Liabilities to related parties 93.2 4,731.5 44.0 4,803.0 Equity 3,618.2 5,447.5 3,162.2 4,720.8
Oslo Areal has entered into contractual commitments to invest about NOK 66.5 million (100.0) in existing and new properties. The commitment falls due during the period until 31 December 2021.
Net income and gains/(losses) from investments in subsidiaries, associated companies and joint ventures Net income from subsidiaries, associated companies and joint ventures 338.8 309.2 Net gains/(losses) from sale of subsidiaries, associated companies and joint ventures 1,580.3 Total net income and gains/(losses) from investments in subsidiaries, associated companies and joint ventures 338.8 1,889.5
Net income and gains/(losses) from financial assets at fair value through profit or loss, designated upon initial recognition Shares and similar interests Dividend income 7.8 6.7 Unrealised gains/(losses) from shares and similar interests (202.2) 656.5 Realised gains/(losses) from shares and similar interests 649.5 284.0 Total net income and gains/(losses) from shares and similar interests 455.2 947.2
Derivatives Net interest income/(expenses) from derivatives 27.0 30.6 Unrealised gains/(losses) from derivatives 185.4 506.2 Realised gains/(losses) from derivatives (604.4) (854.1) Total net income and gains/(losses) from derivatives (391.9) (317.2)
Total net income and gains/(losses) from financial assets at fair value through profit or loss, designated upon initial recognition 636.7 1,428.3
Net other financial income/(expenses) 1 (53.7) (29.3) Discounting of claims provision classified as interest expense (11.4) (33.2) Change in discount rate claims provision (161.0) (198.1)
Specifications Interest income and expenses from financial assets and liabilities not recognised at fair value through profit or loss Total interest income from financial assets not recognised at fair value through profit or loss 575.6 851.4 Total interest expenses from financial assets not recognised at fair value through profit or loss (41.5) (52.8)
The fixed salary is assessed and stipulated annually on the basis of the wage growth in society in general and in the financial industry in particular. Variable remuneration (bonus) is decided by the Board on the basis of agreed goals and deliveries. It can amount to up to 50 per cent of the fixed salary including holiday pay. Variable remuneration is earned annually and is based on an overall assessment of financial and nonfinancial performance over the last two years. Variable remuneration is not included in the pension basis. The assessment takes into account the enterprise’s overall performance targets for return on equity adjusted for dividends related to distribution of excess capital and transactions and combined ratio, as well as developments in customer satisfaction. In addition, it emphasizes the CEO’s personal contribution to the Group’s historical and future results and wealth creation, compliance with the Group’s vision, values, ethical guidelines and management principles.
The retirement age of the CEO is 62. It is possible to retire after the age of 60 if the Board or CEO so wishes. The CEO has pension rights pursuant to Gjensidige’s closed defined-benefit pension scheme. Pursuant to the CEO’s employment contract, he is entitled to a pension corresponding to 100 per cent of his annual salary on retirement at the age of 62, which is then reduced in steps to 70 per cent upon reaching the age of 67 at full vesting period.