The 2020 annual report is an integrated report based on the framework of IIRC – the International Integrated Reporting Council. The report was prepared in accordance with the Global Reporting Initiative’s - GRI’s - core principles and Euronext’s recommendation for sustainability reporting from January 2020. In the report, you can read about how we work to create value in the short and long term for our customers, owners, employees, suppliers and society at large, and how sustainability is integrated in our operations. We have chosen to use the integrated reporting framework because we believe it gives a good presentation of Gjensidige and our value creation. The external auditor has issued an independent assurance report on the integrated report 2020.
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 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
CCoovviidd--1199 Covid-19 affected Gjensidige in many ways throughout the year. We made arrangements to enable employees to work from home, the annual general meeting and dividend decision were postponed, customer behaviour changed, and new services were launched to assist customers, for example an online psychologist. The situation also affected our financial results.
MMiimmiirroo –– DDiiggiittaall eeccoossyysstteemm In line with Gjensidige’s ambition of becoming a damage-preventing problem-solver for its customers, Gjensidige acquired an ownership interest in Mimiro, a company that offers digital services to help farmers optimise production and reduce the risk of damage.
SSttrraaiigghhtt--tthhrroouugghh pprroocceessssiinngg ooff ccllaaiimmss We launched several solutions that will make it easier to buy and use Gjensidige’s insurance policies. We started using a fully automated claims handling process for motor claims reported online, which means that customers’ claims will be settled more quickly and more time will be made available for more complex cases.
SSuussttaaiinnaabbllee ccllaaiimmss sseettttlleemmeennttss We will take steps to enable customers to make sustainable choices. In 2020, we launched an environmental dividend for commercial customers that rebuild damaged buildings in such a way that they obtain the environment certification to become BREEAM NOR certified to a ‘Very Good’ standard or better. The environmental dividend corresponds to five per cent of the amount of the initial compensation.
PPaarrttnneerr ffoorr tthhee ZZeerroo EEmmiissssiioonn CCoonnffeerreennccee Gjensidige was the main partner for the Zero Emission Conference, Norway’s biggest climate conference.
2 Based on approved partial internal model in 2018, 2019 and 2020. Based on standard formula in 2016 and 2017.
Underlying frequency loss ratio1 Per cent 67.4 71.8 75.6 72.0 69.8
Total equity and liabilities NOK Millions 118,312.0 112,405.9 156,762.9 149,072.4 135,926.6
Return on financial assets1 Per cent 2.2 4.1 1.5 3.7 3.9
CO2-emissions, scope 3 travel and transport4, 11 Tonnes CO2e 183 1,915 1,475
CO2-emissions, scope 3 claims processes 4a, 11 Tonnes CO2e 31,689 41,523
Number of employees in the Group Persons 3,676 3,674 3,893 3,834 4,005
Gender distribution men/women in executive positions 6 Share 61/39 62/38 63/37 63/37 64/36
Total number of course-days, all employees Days 7,433 5,255 5,982 6,960 7,487
Turnover of employees, Gjensidige Forsikring Per cent 9.4 11.1 12.4 15.3 9.7
Sickness absence, Gjensidige Forsikring Per cent 3.7 3.9 3.8 3.9 3.9
Carbon footprint real estate portfolio13 Intensity10 7.4 8.5 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. 2 The investment portfolio includes all assets in the Group, except Pension. 3 Scope 1: Direct emissions from company cars. Scope 2: Emissions from energy consumption see the section "Results of our commitment to the climate and environment", see Appendix 6 4 Scope 3: Emissions from travel, waste and transport, see Appendix 6 4a Scope 3: Estimated emissions related to material consumption and waste in claims processes 5 CO2-intensity: CO2-emissions in tonnes from claims handling processes, divided by earned premiums in NOK million from general insurance. 6 Norway, Sweden and Denmark. 7 The private segment. 8 The private and commercial segment 9 Tonnes CO2e per NOK Millions of sales. 10 Kg of CO2e per square metre. 11 See the section "Results of our commitment to the climate and environment" for explanation. 12 Scale from 1-10 with 10 being the best. 13 See the section "Results of our commitment to responsible investments" for explanation.
For more than 200 years, Gjensidige’s social mission has been to create a sense of security.
For Gjensidige, as for the rest of society, 2020 was an unusual year. The coronavirus pandemic affected all our stakeholders – customers, owners, employees, suppliers and society at large – in different ways.
WWee ccrreeaattee aa sseennssee ooff sseeccuurriittyy bbyy uunnddeerrssttaannddiinngg rriisskk The ability to understand risk and to translate this understanding into risk reduction measures is a key factor in being able to create a sense of security. We advise our customers of measures that can prevent losses. We offer businesses sophisticated systems for identifying and managing risks.
Gjensidige’s contribution to society is based on our employees’ engagement. The Board would like to thank all its employees for their great effort during this challenging period.
CChhaalllleennggeess rreellaattiinngg ttoo tthhee ccoorroonnaavviirruuss The pandemic left its mark on Gjensidige in 2020. Over a short period in the spring, we received a huge amount of enquiries from customers who needed help to cancel trips or to return from trips they had already embarked on. Digital claims reporting and straight-through processing solutions, combined with an extraordinary effort by our employees, helped to give many customers a good experience.
The shutdown of society meant that most of our staff worked from home for most of the year. We have technical solutions that support working from home, which meant we were able to maintain satisfactory operations. Our employees have demonstrated a great capacity to adapt to new ways of working, and surveys show that the level of commitment remains very high. I am nonetheless concerned about the social aspects of working from home over a long period, and we will endeavour to find solutions that will ensure a sound balance between working from home and working at the office.
DDiiggiittaalliissaattiioonn aanndd aauuttoommaattiioonn In the long term, the coronavirus pandemic will, undoubtedly, result in an increased need for digital self-service solutions and cost-efficient processes. We are well under way with this work. For several types of claims, the processing is almost fully automated. In 2020, we introduced the possibility of reporting motor claims online, followed by straight-through processing of the claim. Motor claims are relatively complex, and automation of this process is demanding. Almost one-fifth of claims from Norwegian customers were processed fully automatically in 2020.
In 2020, all our employees gained access to new digital tools that enable them to interact regardless of where they work. We started the implementation of a new core system that will enable more efficient core processes and lead to greater flexibility and efficiency.
We also worked on a range of measures to make our operations and claims processes more sustainable. In 2020, Gjensidige partnered the Zero Emission Conference, where we focused on, among other things, increased use of the circular economy in insurance.
We will safeguard our customers’ lives, health and assets in a sustainable manner.
OOuurr mmiissssiioonn –– We secure lives, health and assets in a sustainable manner.
OOuurr ppoossiittiioonn –– We shall be the most customer-oriented general insurance company in the Nordic region and the Baltic states.
AA ssaaffeerr ssoocciieettyy • We shall contribute to a safer society by working on damage prevention activities. • Sustainable products shall reflect the needs of customers and society. We shall be a problem-solver that provides our customers with relevant services.
• We need committed employees to be able to run an efficient business and achieve our goals.
• Insurance is very important to society and therefore subject to strict regulation. Good corporate governance is decisive to achieving our goals.
• We shall utilise the possibilities technology and digitalisation present for both damage prevention and sustainable rebuilding.
RReessppoonnssiibbllee iinnvveessttmmeennttss • We shall contribute to ensuring a smooth transition to a zeroemission society. • Our investments shall be in accordance with the group sustainability policy and Gjensidige’s ethical profile, including by ensuring compliance with the UN Global Compact principles and the UN Principles for Responsible Investment (UN PRI).
Gjensidige’s employees to be among the 25 per cent most engaged within the finance industry.
SSuussttaaiinnaabbiilliittyy:: KKeeyy ffiigguurreess aanndd iinnddiiccaattoorrss ooff ggooaall aattttaaiinnmmeenntt iinn tthhee GGrroouupp
FFiinnaanncciiaall aanndd ooppeerraattiioonnaall ttaarrggeettss uupp ttoo aanndd iinncclluuddiinngg 22002222 The Board of Directors has adopted the financial targets, and the management has adopted operational targets to support them.
Dividends Nominal high and stable and payout ratio >80 % over time 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. 2 Assuming annual run-off gains ~NOK 1 billion through 2022. Corresponds to 9093 per cent given zero run-off gains post 2022. 3 Corresponds to >16 per cent given zero run-off gains post 2022. 4 Excluding run-off.
Customer retention > 90 per cent, Norway > 85 per cent, outside Norway
CCuussttoommeerr rreetteennttiioonn:: contributes to longer customer relationships and efficient distribution. Requires customer orientation, efficient processes and good customer solutions.
AAuuttoommaatteedd ttaarriiffffss:: contribute to quicker updating of tariffs. Require increased analytics capacity, standardisation and automation of pricing processes, and a gradual development of more sophisticated tariff models.
CCllaaiimmss ccoosstt:: requires better control of repair methods and choice of suppliers, reduced fraud and more automated processes.
Chapter 1 – This is us - How Gjensidige contributes to the UN Sustainable D
88 DDeecceenntt WWoorrkk aanndd EEccoonnoommiicc GGrroowwtthh Gjensidige insures enterprises that are vital to establishing workplaces, entrepreneurship, creativity and innovation, and stimulates the establishment of new and growth in existing businesses, including through access to financial services.
Gjensidige shall also contribute through adaptation to climate change and strengthen society’s resilience to and ability to handle disasters.
1122 RReessppoonnssiibbllee CCoonnssuummppttiioonn aanndd PPrroodduuccttiioonn Gjensidige shall contribute to sustainable management and efficient use of natural resources, and contribute to reducing food waste and overconsumption of resources and materials in its insurance operations.
Gjensidige is concerned with greater facilitation of the circular economy, and its goal towards 2030 is to progressively improve global resource efficiency in consumption and production, and endeavour to increase awareness of the need for a circular economy, in accordance with the EU Sustainable Consumption and Production Action Plan.
1133 CClliimmaattee AAccttiioonn Gjensidige shall contribute to strengthening resilience and adaptive capacity to climate-related hazards and natural disasters, including providing insurance claims data to the authorities to ensure better measures are instigated to combat climate change and planning at the national level.
• The growing elderly population challenges the Scandinavian welfare model, but also provides opportunities for new products, services and partnerships.
• Climate and nature-related risk, including adaptations to a more sustainable society, change the insurance risk profile and will create new insurance needs.
• Personal and tailored customer dialogue: Expectations of customized digital services and simple customer journeys. Interaction between distribution channels.
• Increased interest in sustainability (especially environment/climate and health), both in the private and the commercial market.
• Increased climate and nature risk create uncertainty regarding claim costs and income from financial investments. At the same time, new insurance needs arise and the need for damage prevention increases.
• Technology generates large amounts of data. New digital tools create opportunities to analyse and create insights through new combinations of structured and unstructured data.
• Efficient operations are ensured through continuous improvement, rationalisation and automation of our processes.
AA pprroobblleemm--ssoollvveerr ffoorr ccuussttoommeerrss The core of Gjensidige’s more than 200-year long success story is that we have always been there for and played an important role in our customers’ lives. Through a fully integrated value chain and direct contact with customers, Gjensidige has gained strong customer insight that has contributed to efficient sales and high customer loyalty, and the development of a strong brand.
Our overriding goal for the private market is to exceed expectations through customer-oriented development and by refining our role as a damage-preventing problem-solver. Deep insight, stronger value propositions and partnerships are important preconditions for achieving this goal. The commercial market is expected to remain a relationship-based market where expertise is an important competitive factor. Our overriding goal for the Commercial segment in the upcoming strategy period is to maintain our market-leading position while strengthening customer relationships. We will achieve
The Group capitalisation target is a 150–200 per cent solvency margin. This applies to both the regulatory approved model (legal perspective) and the calibrated model (own partial internal model). The capitalisation supports an ‘A’ rating from Standard & Poor’s, stable regular dividends over time, financial flexibility for smaller acquisitions and organic growth not financed through retained earnings, as well as providing a buffer for regulatory changes.
The Group will make use of subordinated loans and other external financing in a responsible and value-optimising manner and within the limits set by authorities and rating agencies.
SSeeggmmeenntt ssttrraatteeggyy –– wwee sseeeekk ttoo uunnddeerrssttaanndd oouurr ccuussttoommeerrss’’ ssiittuuaattiioonn ttoo bbee aabbllee ttoo ssoollvvee tthheeiirr pprroobblleemmss
SSttrruuccttuurraall ggrroowwtthh Gjensidige shall take a proactive and disciplined approach to structural growth opportunities through acquisitions/mergers/strategic alliances that complement its core activities and contribute to its investment capacity.
The Group’s growth matrix remains in place: increased scale in general insurance in the Nordic region and the Baltics, and a broad range of services in the financial sector in Norway. At the same time, we must develop strategic alliances with providers who can give us further insight into security-related needs, changes in customer behaviour and new technological opportunities.
Our mission is to safeguard lives, health and assets in a sustainable manner, and thereby create a sense of security for our customers. We will do this both by compensating financial losses when they arise, and by helping customers to prevent losses from occurring.
The Gjensidige Experience has been established as a framework for Gjensidige’s customer orientation. It is intended to be a guiding principle for the Company’s customer-oriented value creation and development. By means of systematic and continuous improvement of our current practice in accordance with the principles of the Gjensidige Experience, Gjensidige shall steer towards the Company’s vision and deliver the best customer experiences in the industry.
Going forward, we will work on measures to further strengthen customer satisfaction and loyalty and to attract new customers. Userfriendly self-service solutions have become an increasingly important precondition for delivering good customer experiences. Both private and commercial customers increasingly prefer to buy insurance and report claims digitally. The development of market-leading selfservice solutions that are conditional on digitalisation, standardisation and automation have therefore had and will continue to be given very high priority.
Gjensidige is founded on a genuine customer orientation. The Company was established by and for the customers. This is our history and our present and future competitive advantage. Our commitment to the customer has contributed to excellent customer experiences and sound results, and forms the basis for the Company’s long success story. This is a key characteristic of Gjensidige and a distinctive feature of the organisation and the Company’s culture.
DDoo yyoouu hhaavvee aa pprroobblleemm wwee ccaann ssoollvvee?? All points of contact between us and our customers shall be refined so that all enquiries and claims, whether great or small, are dealt with in a simple, problem-free way. Analyses of customer data and alliances with other players will be crucial to be able to develop market-leading customer solutions.
Insurance is an important part of the welfare society, and for a healthy financial system. The insurance industry is therefore subject to stringent regulations and requirements for capital and safeguarding customer needs when losses occur.
Gjensidige creates value by understanding society’s and customers’ need for security and predictability. We provide products and services that are relevant for customers and their needs. An important precondition for this is our ability to understand risk and calculate the correct risk price. Gjensidige’s business model is based on a good understanding of society and what can be insured.
Relational capital – the customer in focus • Good adviser • Relevant products and services • Help when a claim has occurred
Financial capital – secures customers and operations • Equity • Debt
Human and structural capital – employees are our most important resource • Engaged and motivated employees • The right expertise • Good tools
Relational capital – the customer in focus • Customer retention: 90% in Norway, 79% outside of Norway
Financial capital – secures customers and operations • Return on equity: 19.2% • Regular dividend
Human and structural capital – employees are our most important resource • Engagement score: 8.5 • Perceived diversity: 9.1
Relational capital – the customer in focus • Good, long-term relationships with all our stakeholders
Human and structural capital – employees are our most important resource • Relevant expertise for risk pricing, damage prevention and good customer experiences, before and after a claim
We use advanced data analytics in all areas of the insurance business, including product development, pricing and underwriting, marketing and sales and claims processing. We have made efforts to strengthen and improve our analytics in all these areas in recent years. We have started using tools such as artificial intelligence and machine learning.
Risk assessment and correct pricing are a fundamental condition for sustainable insurance operations. With our long history and large customer base, we can use our extensive experience to calculate risk and pricing of risk. Risk assessments are based on large quantities of data, highly competent staff and system values. Special risk factors are assessed separately by a dedicated underwriting team. The risk assessments form the basis for rational use of capital, the design of competitive products and advice that contributes to damage prevention for both our customers and society at large. Gjensidige also uses tools to assess the risks faced by individual customers. This enables us to give customers advice on risk reduction measures and help to prevent losses from occurring. By their nature, losses have a negative impact on the environment, since resources are needed to repair or replace the damage. Gjensidige therefore has a strong focus on damage prevention work and thereby helps to prevent insurance events and reduce the impact on the environment. Read more about overarching risk management in the section ‘Risk strategy and risk management’.
Gjensidige uses an omni-channel distribution model. Customers are served through a combination of telephone, internet and office services. Web-based contact plays an increasingly important role in distribution, but many customers still prefer a combination of webbased contact, telephone contact and physical meetings. We work continuously on developing our distribution solutions to enable us to meet customers the way they prefer. Read more about markets and distribution in the section ‘Our markets’.
Our purchasing policy applies to the whole Group and requires that deliveries from our suppliers and partners are sustainable. All our suppliers must sign a self-declaration on corporate social responsibility. By doing so, they undertake to comply with our requirements relating to the environment, CSR and management and control. We use our purchasing power to exert influence, and engage in continuous dialogue with our suppliers to ensure that they choose sustainable solutions. Read more about our follow-up of suppliers in the section ‘We create value in partnership with our suppliers’.
Customers pay their insurance premiums in advance. We manage this capital to ensure that we have the means, at all times, to meet our obligations when claims arise. The investments shall also help us to achieve our return on equity target.
Gjensidige’s asset management is followed up on the basis of the ten UN Global Compact principles and complies with the UN Principles for Responsible Investment. Active dialogue with fund managers, and exclusions, are means to ensure compliance with the policy for responsible investments. Read more about our work in the section ‘Responsible investments’.
The general insurance market in the Nordic countries is mature. The Baltic general insurance market is somewhat less developed, with a potential for strong growth as the standard of living continues to improve. The pandemic that swept the world in 2020 has affected the economies of the Nordic and Baltic states, and caused considerable uncertainty about the future of businesses and individuals. Although the pandemic has caused severe financial difficulties for many, the financial outlook in our region is generally encouraging and points in the direction of gradual improvement. Thanks to public stimulus packages and a gradual easing of the most stringent infection control measures, the financial recovery through the year has been stronger than projected when Norway implemented the most stringent measures in April and March. Covid-19 has had a massive impact on travel patterns in the Nordic region, and the number of cancelled trips increased considerably throughout the year. This led to higher travel insurance payments for the market participants – primarily in the private market, but also in parts of the commercial market. Stringent infection control measures in Norway and Denmark contributed to reduced activity in these countries, which led to less traffic and thereby fewer claims relating to vehicles in the spring. As the measures were gradually eased, the claims situation in both the private and the commercial market returned to normal. Sweden took a different approach to the pandemic, and the total claims situation was less affected by the measures that were implemented.
Property and motor insurance are the biggest products in the commercial market as well, in addition to occupational injury and employee group life insurance. There is also demand from commercial customers for insurances tailored specifically to their business activities.
Most of the large players are companies with general insurance as their core activity, and they are largely based on integrated value chains. The smaller companies include both banks and life insurance companies, as well as pure general insurance companies.
We have seen a few attempts in recent years to establish new business models. The number of such initiatives is expected to increase going forward. New regulatory guidelines and technology may usher in new business models that have the potential to challenge existing models. Our response has been to maintain and strengthen the close relationship we have with our customers through good customer orientation, at the same time as we test, learn and develop new products, solutions and business models. Efficient operations are a precondition for creating room and flexibility for investments in future competitiveness.
Gjensidige Forsikring ASA is the parent company of the Gjensidige Group, and its head office is in Oslo, Norway. The Company has general insurance operations in Norway, Denmark, Sweden and the Baltic states, in addition to pension operations in Norway.
–The general insurance operations include both property insurance and accident and health insurance. The Norwegian general insurance operations also include life insurance, which is pure risk insurance with a duration of up to one year, largely group life insurance. Operations outside Norway primarily take place through branches.
GGeenneerraall IInnssuurraannccee CCoommmmeerrcciiaall:: MMaarrkkeett lleeaaddeerr iinn tthhee ccoommmmeerrcciiaall mmaarrkkeett The Commercial segment provides a wide range of general insurance products to commercial and agricultural customers, and the public sector in Norway. The segment handles sales, customer service and claims settlement.
GGeenneerraall IInnssuurraannccee DDeennmmaarrkk:: EEssttaabblliisshheedd ppllaayyeerr iinn aann aattttrraaccttiivvee mmaarrkkeett The Denmark segment includes the Group’s general insurance operations in the Danish private, commercial and municipal markets.
The segment handles sales, customer service and claims settlement. Approximately 40 per cent of earned premiums come from the private market, while the remainder comes from the commercial market, Gouda and Mølholm Forsikring.
GGeenneerraall IInnssuurraannccee BBaallttiicc:: EEssttaabblliisshheedd ppaarrttiicciippaanntt iinn ccoonnssoolliiddaatteedd mmaarrkkeett wwiitthh ssttrroonngg ggrroowwtthh ppootteennttiiaall The Baltic segment includes the Group’s general insurance operations in Lithuania, Latvia and Estonia, aimed at the private and commercial 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.
Gjensidige has operations in six different countries, is one of the biggest companies on Oslo Børs and has many different stakeholders. Customers, employees, suppliers, investors/owners and society at large are our most important stakeholders. By stakeholder is meant those who influence or are influenced by the Company.
The things that matter most to our stakeholders are illustrated in the figure ‘Stakeholder analysis’. What matters to our stakeholders matters to Gjensidige, and forms the basis for the risk and materiality assessment.
The results of the risk and materiality assessment are summarised in the five topics of greatest importance to our stakeholders and Gjensidige, described in the table below. The results of our efforts are described in the section ‘Value created in 2020’, including which SDGs we support, the status of measures, and their potential effect.
The right expertise is decisive to be able to achieve the goals we have set.
Increased expectations that the companies we invest in take climate and environmental challenges into account, make contributions to society, and, in particular, take responsibility for giving labour rights and corporate governance high priority.
For more than 200 years, we have created a sense of security for our customers, employees and society at large. Secure stakeholders are the best basis for creating value in the short and long term.
Chapter 2 – Creating added value in Gjensidige - A safer society because we understand risk
Gjensidige creates a sense of security for all its stakeholders by making good risk assessments – and through correct risk pricing. We reduce financial uncertainty and shall be relevant in people’s lives. We monitor new and changed risks resulting from climate and environmental change and new social challenges. We analyse emerging risks to ensure the right data basis and pricing.
Gjensidige plays an important role in raising awareness of the risks faced by our customers and society. The right expertise and knowhow is important to be able to understand risk and advise customers and society on how to avoid or reduce the number of undesirable incidents. The potential consequences of climate and environmental challenges are one of the areas we examine in depth. Another area we need to understand better is the consequences of demographic changes and changed health needs.
Sharing of risk is the basic principle of insurance. When many people are exposed to the same type of risk of financial loss, they can equalise the risk by dividing the losses between them. In modern societies, this takes place through insurance companies that assume the risk and compensate the losses of those affected. Good selection and correct pricing of risk is decisive for insurance companies’ financial strength and profitability.
Different types of risk must be understood and followed up to ensure profitability. Gjensidige has established a risk management system that enables us to monitor the claims situation continuously, and thereby prevent and reduce the risk of losses.
Our risk strategy and risk management are based on four types of risk: strategic and business risk, insurance risk, financial risk and operational risk. Climate and environmental risks are considered to affect all risk types. Read more about climate risk in the section “Climate-related financial disclosures (TCFD)”.
• make decisions • allocate resources or respond to external changes.
Chapter 2 – Creating added value in Gjensidige - Risk strategy and risk management
Gjensidige has a high risk appetite in the core area of general insurance in the Nordic countries and the Baltic states.
The risk appetite should be highest in the areas in which we have high competence and access to relevant data.
Other business areas shall contribute to the Group’s total growth and profitability, but with limited risk appetite.
• Changes in the value of financial assets and liabilities as a result of exposure to interest rates, inflation, exchange rates, credit margins, property prices and share prices.
• Liquidity risk, the inability to make payments when they fall due or the need to realise investments at a high cost or lower value to make payments.
• The investment strategy is adopted by the Board and sets limits for the allocation of investment funds.
• A dynamic risk management model provides the necessary framework for adapting risk in the event of changes in market conditions and/or a weak development in financial income.
• The investment strategy defines several risk limitations, both at the aggregate level and by different types of risks and investments, for the purpose of achieving a diversified investment portfolio.
• The reporting is carried out by a dedicated department in order to ensure independent follow-up.
• Monitoring of risk also takes place through stress tests, where the buffer capital must be sufficient at all times to be able to withstand the risk of a sharp simultaneous fall in the value of all asset classes.
For areas that are assumed to have a significant impact on Gjensidige’ s reputation, operational risk must be reduced as far as practicably possible. For other operational risk, a balanced approach should be used as a basis for efficient and futureoriented operations.
Gjensidige works on damage prevention by informing customers and society of effective measures and by guiding customers into implementing risk reduction measures. We grant a discount when customers implement risk reduction measures. We also contribute to the social debate by drawing attention to relevant topics through press releases, social media and news articles.
We have contributed to increased flood preparedness by deploying pumping equipment in areas prone to flooding before the spring thaw. The intention is to reduce the risk of major losses, and to provide the quickest possible help to as many customers as possible affected by the flood. Going forward, it will be important to continue sharing our insight with the public authorities to reduce the risk of losses locally.
Various fire prevention measures are initiated in the Baltic states, including new customers receiving smoke detectors. In Latvia, Gjensidige is one of the sponsors of a fire safety conference focusing on commercial customers. In all the three Baltic countries, we conduct ‘safe home’ campaigns in cooperation with the media and representatives of the fire service, the police, security companies and electricity companies. The purpose of the campaigns is to raise awareness of damage prevention and to prevent accidents, fires and burglaries.
Reducing the risk of damage is sustainability in practice. Helping to protect lives, health and assets is good for the climate and environment, for those who avoid losses and for the economy. Our social mission as an insurance company is precisely to help to create a sense of security for our stakeholders and avoid losses.
RRiisskk cchheecckkss ffoorr ccoommmmeerrcciiaall aanndd aaggrriiccuullttuurraall ccuussttoommeerrss Gjensidige performs annual risk checks for a large number of commercial customers, including agricultural customers, among other things to check whether maintenance is satisfactory and reduce the risk of fire, water damage, weather events and other environmental damage. Loss reduction measures result in a discount in price.
Thermal imaging is a risk assessment tool that uncovers thousands of faults and defects in electrical installations. Electrical inspections are deemed to be our most important instrument for reducing the number of fires experienced by our customers. Gjensidige has granted considerable funds annually, and has, in cooperation with the Norwegian Farmers’ Union, reimbursed farmers’ expenses for documented improvement work.
SSuussttaaiinnaabbiilliittyy ffuunndd ffoorr aaggrriiccuullttuurree The goal is to contribute to a viable, modern agricultural industry in close cooperation with the Norwegian Farmers’ Union. The funds awarded are intended to help both local communities and individual farmers. Applications are considered annually, and the best proposals receive support from the sustainability fund.
RRooaadd ssaaffeettyy Young drivers are especially at risk of being involved in accidents. Gjensidige therefore has several measures targeting this group. In Norway, we give an insurance discount to young people who have practised driving with an accompanying driver for a sufficient number of kilometres. When they reach the age of 23, customers who have driven claim-free for the past year or longer will receive a sum of money as a reward. The longer the claimfree period, the bigger the reward.
MMiimmiirroo In April 2020, Gjensidige acquired an ownership interest in the technology company Mimiro. Mimiro was established by Tine and Felleskjøpet Agri in 2018, and received the Agricultural Innovation Award in 2019. The company uses data supplied by farmers to develop products and services that will make food production in Norway more efficient and environmentally friendly.
In 2020, Gjensidige also entered into a partnership with the Norwegian School of Economics (NHH) to establish the Digital Innovation for Growth (DIG) centre. Together with a number of partners, we established DIG as a unique arena for discussing sustainable development. This gives us an opportunity to make a difference by contributing to applied research on how to better succeed with innovation and value creation. The term of the partnership is until 2024, with an option to extend until 2028.
Chapter 2 – Creating added value in Gjensidige - Damage prevention – the most sustainable approach
FFooccuuss oonn ddaammaaggee pprreevveennttiioonn iinn tthhee mmeeddiiaa Gjensidige has traditionally contributed to many media reports on damage prevention, with the greatest impact in Norway and Denmark.
Chapter 2 – Creating added value in Gjensidige - Sustainable products and services
LLiiffee aanndd hheeaalltthh iinnssuurraannccee Gjensidige will facilitate and encourage better health to increase the quality of life and prevent illness. Customers can use our services without necessarily having sustained a loss that warrants compensation. The services are available 24/7, and make day-to-day life easier for customers. The work is supported by our cooperation with highly skilled suppliers that offer various services: • NNoo IIssoollaattiioonn: Children who cannot attend school because of illness can borrow the classroom robot AV1. The robot is the child’s eyes and ears in the classroom and enables the child to attend classes from home via a tablet or mobile phone.
• SSOOSS IInntteerrnnaattiioonnaall: Round-the-clock service that customers can phone when their public health centre or doctor’s surgery is closed.
Incentives have been established to encourage the use of local, skilled workers who pay taxes. This is also intended to counteract unnecessary repairs and social dumping.
Gjensidige’s environmental insurance covers more than ordinary liability insurance. It covers expenses in connection with preventing and limiting losses, and environmental compensation pursuant to the Nature Diversity Act. The Act is intended to safeguard nature, landscapes and biological diversity.
Drones can be used more to replace human labour, to enable society to run more efficiently. This also reduces the risk of harm to people in that drones can carry out different types of reconnaissance work, e.g. in connection with fires.
IInnssuurraannccee ooff ffaarrmmeedd aanniimmaallss aanndd ppllaanntt ccuullttuurreess The health of domestic animals and farmed animals in Norway is in a unique position, and the use of antibiotics is lowest in Europe. The World Health Organization (WHO) has highlighted antibiotic resistance as one of the most serious challenges facing the world’s population. Limiting the use of antibiotics is an important health measure, which is supported by the insurance product.
In Lithuania, we have cooperated with the aid organisation Food Bank, which distributes food to the poor, since 2007. Gjensidige provides free insurance, supports activities and encourages employees to take
Chapter 2 – Creating added value in Gjensidige - Our social commitment part in the distribution of food packages. We are a member of the ‘For a Safe Lithuania’ campaign, the purpose of which is to give children from underprivileged families an increased sense of security and selfesteem. In Latvia, we are doing a tour of the biggest schools, teaching children about safety in the home.
CCooooppeerraattiioonn wwiitthh tthhee NNoorrwweeggiiaann CCaanncceerr SSoocciieettyy Our main partnership agreement entails a strategic cooperation with the Norwegian Cancer Society. For Gjensidige, the agreement gives us the possibility to develop unique services together, for example services that help to prevent cancer, or that can ease the situation for those affected and their next of kin. This is important, as cancer is the most widespread disease in Norway. About one in three Norwegians will be diagnosed with cancer before they turn 75.
TThhee GGjjeennssiiddiiggee FFoouunnddaattiioonn Gjensidige’s social commitment in Norway must be seen in conjunction with the Gjensidige Foundation, our biggest owner. The Foundation makes substantial security and health donations that are funded by the return on the capital freed up in connection with Gjensidige Forsikring being listed on the stock exchange in 2010.
Chapter 2 – Creating added value in Gjensidige - Our social commitment
SSccooppee 22:: EEnneerrggyy--eeffffiicciieenntt bbuuiillddiinnggss aarree ddeecciissiivvee iinn tthhee cchhooiiccee ooff pprreemmiisseess We make systematic efforts to reduce our impact on the natural environment by limiting our consumption of energy. All our premises are rented, and energy efficiency measures have been established, including switching to LED lighting, making buliding control systems more efficient, replacing windows, replacing old electric panel heaters etc. Energy efficiency is a focus area when choosing premises for our operations, and our head office at Schweigaardsgate 21 holds a BREEAM-NOR ‘Excellent’ certificate.
SSccooppee 33:: TTrraavveell aanndd wwaassttee We focus on reducing different types of waste, such as paper, office supplies, electrical appliances and household waste. We sort our waste by source in order to contribute to recycling and the circular economy. Digitalisation targets have been set for the customer dialogue in order to reduce the amount of paper used, and PCs that are not used by our employees are sold to contribute to recycling.
Reduced travel through increased use of digital/video conferencing will be vital to reducing carbon emissions from our own operations.
SSuussttaaiinnaabbllee ccllaaiimmss sseettttlleemmeennttss We help our customers to prevent loss. When losses nonetheless occur, Gjensidige contributes by reducing the carbon footprint of claims processes. That requires sustainable terms and conditions for our products and good cooperation with our suppliers.
SSccooppee 33:: EEnnvviirroonnmmeennttaallllyy ffrriieennddllyy bbuuiillddiinngg aanndd hhoouusseehhoolldd ccoonntteennttss iinnssuurraannccee When a loss is reported, we make sure that our customers feel safe and wellinformed about the choices recommended. Gjensidige also has extensive networks of local assessors in every country, who help to assess the scope of damage. In the work on repairing the damage or replacing the loss, materials are chosen based on social factors, the environment and financial durability. Local assessors and the use of video surveys and reports with images
Chapter 2 – Creating added value in Gjensidige - Our climate and environmental commitment and text mean both customers and assessors have less need to travel. Gjensidige cooperates with other contracted suppliers and representatives of industry organisations to find new, sustainable solutions for customers and the environment, including by reducing waste and transport. An example of this is point repair. We cooperate with Miko Trading, Panter Verdisikring AS and GIAB to ensure recycling and promote the circular economy.
In Sweden, we cooperate with Godsinlösen (GIAB), an organisation that promotes the circular economy by collecting damaged items from insurance companies and repairing them, thus contributing to reuse. This enables us to contribute to increasing durability and saving the environment.
The practice of using used parts is more common in Sweden where the conditions are different; people have a different relationship to cars (cheaper to buy), a better distribution network, and all cars that are scrapped go to disassembly companies. Our supplier agreements stipulate that the garages must always endeavour to repair or find used parts before they order new parts. The calculation system CABAS is used to manage this process in Sweden. Gjensidige has reduced the use of own loss assessment in all countries, which helps to reduce transport costs.
• Gjensidige endorsed the TCFD in 2020 to show our support of the work on ensuring that climate-related information becomes more widely accessible in society.
• In the investment portfolio, carbon emissions have been calculated for the property portfolio. We also make preparations to report the carbon intensity of other investment portfolios.
• Gjensidige achieved climate neutrality in its own operations in 2020 by buying carbon offsets. We make continuous efforts to reduce our direct and indirect greenhouse gas emissions.
Climate change affects Gjensidige’s core business through increased physical risks, transition risks and liability risks. Gjensidige will help to ensure that we, our partners and customers work to reach the climate goals of the Paris Agreement and reduce nature-related risk. We will continuously improve our activities and report the status, focusing on the four pillars outlined by the Task Force on Climate-related Financial Disclosures (TCFD).
11.. CCoorrppoorraattee ggoovveerrnnaannccee DDiivviissiioonn ooff rreessppoonnssiibbiilliittyy Climate risk is integrated in Gjensidige’s corporate governance. The risk of weather-related events has always been integrated in pricing models and asset management. Climate risk affects multiple areas, and Gjensidige is directly exposed in both the insurance portfolio and the investment portfolio. The greatest risk in the investment portfolio is deemed to be transition risks. In a broader, more long-term perspective, climate risk also has the potential to affect insurance risk, financial risk, operational risk and business and strategic risk.
A clear division of responsibility has been established between the Board, the CEO and the organisation. A sustainability council has been set up to advise the corporate management team, and to ensure consistent management of climate risk in the Group. The council is chaired by the Head of Sustainability.
The individual core areas are responsible for following up climate and environmental risk as part of their day-to-day operation, and for contributing to the attainment of relevant measures. A quarterly sustainability report based on input from the core areas is prepared for the purpose of monitoring the status of measures. The sustainability council and the corporate management receive a quarterly sustainability report, and the Board is informed of the status. The Head of Sustainability convenes meetings on at least a quarterly basis, or as needed.
• Gjensidige is also monitoring the results of public agencies’ climate change assessments. In the countries where Gjensidige has operations, more precipitation is expected in the form of rain, and rising sea levels in the long term, which will increase the risk of damage.
Climate change will impact the whole value chain and the choice of methods and materials in claims settlements. Several initiatives have been launched that will contribute to more recycling and promote the circular economy.
bb.. CClliimmaattee rriisskk ffoorr GGjjeennssiiddiiggee iinn tthhee sshhoorrtt,, mmeeddiiuumm aanndd lloonngg tteerrmm,, bbaasseedd oonn tthhee pprroodduuccttss aanndd sseerrvviicceess tthhaatt wwiillll bbee mmoosstt aaffffeecctteedd.. Climate change will have different consequences for Gjensidige’s products and investments in the short, medium and long term.
The most important climate risks impacting the insurance portfolio: I1: Property, physical risks: the risk of a higher claims frequency and claims for payment as a result of increased flooding. We have already seen significant consequences in the form of insurance claims relating to weather events. In the long term, this can lead to uninsured property and/or geographical areas.
II22: Property, transition risks: changed risk exposure and insurance needs among our customers. When the weather changes, and legislation, markets and trends change to accommodate the demands of a future zero-emission society, our understanding of risk must be updated and reflected in our products and terms and conditions. Tariffs must be updated continuously. The time horizon depends on the product type and risk assessment.
The most important climate risks impacting the investment portfolio: MM11: Property, physical risks: Investments in property exposed to multiple weather events are expected to incur increased expenses for adaptations to avoid losses, but also to ensure that property is insurable. The degree of exposure in Gjensidige’s properties is currently low, but it will be an important factor in future investments.
OOppeerraattiioonnaall rriisskk Climate risk will affect the Company in many ways, and all core areas, from pricing, product development, customer dialogue to claims settlement, will require new follow-up procedures. Some of the risks that have been assessed are described below: OO11: Gjensidige’s liability risks: lawsuits against Gjensidige and losses incurred by others as a result of the Company’s activities.
cc.. AAsssseessssmmeenntt ooff ccoonnsseeqquueenncceess ooff cclliimmaattee sscceennaarriiooss Gjensidige has chosen to apply the most conservative scenario – RCP 8.5 – in its assessment of climate consequences in the short, medium and long term. Although there is agreement on climate change, great uncertainty is attached to transition risks, especially in the long term.
Increased knowledge will probably enable the population, the business sector and the authorities to make adaptations to both avoid and reduce risk.
Climate and weather-related claims currently make up a limited part of Gjensidige’s total claims incurred. Although certain effects are identified for certain types of claims in the short term, the changes are expected to take place gradually and with the greatest effect from 2050 onwards. Transitional risks are expected to be most
• 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.
• For Norway as a whole, the claims development is expected to be fairly stable up until 2050, before it is expected to increase by 40 per cent towards 2100.
• 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
3. Risk management IIddeennttiiffiiccaattiioonn aanndd aasssseessssmmeenntt ooff cclliimmaattee rriisskk Good risk selection and the right pricing are decisive for financial strength and profitability. The expected increase in the scope of natural disasters as a result of environmental and climate change is addressed in our activities, such as the development of products, financial planning, pricing, rebuilding and damage prevention measures. Environmental and climate change affects risk assessments and the pricing of insurance, and the effects of extreme weather and changes in risk exposure are assessed on a continuous basis, based on experience, expert assessments and future projections.
• We purchase reinsurance for the purpose of distributing risk and as protection against large-scale events. We also team up with our partners to ensure a correct understanding of risk, and for the purpose of reporting.
• The Own Risk and Solvency Assessment (ORSA) considers total risk exposure in relation to the capital situation going forward.
• All decision-making processes include an assessment of sustainability, for example strategic projects or product
development processes. This is described in more detail in section ‘Gjensidige’s business model’.
• Risk reduction measures focusing on surface water issues, notification of customers and cooperation with the authorities to reduce the consequences of more weather-related claims.
• In Norway, many natural disaster claims are compensated through the Norwegian Natural Perils Pool, which is regulated by the Natural Perils Insurance Act. Membership of the Pool is compulsory for all insurance companies that sell property insurance (fire insurance) in Norway. The Pool is an equalisation mechanism whereby claims and costs are distributed between the member companies in proportion to their share of the market. The following natural perils are covered by the Pool: storms, landslides/avalanches, floods, storm surges, earthquakes and volcanic eruptions. In accordance with the pertaining regulations, each natural disaster claim will only be covered up to a certain amount, which limits Gjensidige’s losses relating to such claims. As of 1 January 2020, the insurance companies’ total liability for an individual natural disaster claim is limited upwards to NOK 16 billion. Because Gjensidige will only be charged corresponding to its share of the market and the Company has taken out reinsurance for natural disaster claims, Gjensidige’s losses relating to such claims will be very limited.
• The Commercial segment and investments may be subject to considerable transition risk. EU action plans may give rise to new risks and opportunities for us. The EU has a clear ambition to encourage increased recycling and the circular economy, and to limit the amount of waste. Gjensidige will contribute to achieving the EU goals by reducing its carbon footprint through a greater focus on damage prevention and the choice of materials in claims processes.
GGooaall The Board has adopted an ambition to reduce our own and claims-related carbon intensity relative to earned premiums, year by year.
MMeetthhooddss Gjensidige has been certified as an Eco-Lighthouse since 2008, and works continuously on measures to reduce the environmental and climate-related consequences of its own operations. Most of the carbon footprint for Gjensidige’s own operations comes from energy consumption (Scope 2) and air travel by own employees (Scope 3). The climate accounts for Gjensidige’s own operations are described in section ‘Results of our commitment to the climate and environment’.
Gjensidige has prepared climate accounts for the consumption of materials and energy in claims processes (Scope 3) and to be able to measure carbon intensity. We would like to initially assess different initiatives to promote the circular economy, for example more repairs, reuse, reduced waste and different measures for reducing transport costs and more climate and environmentally friendly reconstruction. The climate accounts for claims processes are described in section ‘Results of our commitment to the climate and environment’.
The assumptions behind this average calculation of material consumption are based on car makes and models with a high market share and frequency claims. The reference claim is estimated in the loss assessment system DBS, which is operated by Bilskadekontoret (‘the car claims office’), part of Finance Norway Insurance Services, and shows the actual use of materials for motor vehicles. A separate assessment of frequency claims has been conducted in Denmark, Sweden and the Baltics.
The following materials are included in the claims climate accounts: • Glass • Steel • Aluminium • Plastic • Batteries • Reuse of car parts based on estimate • The use of new car parts generates an equivalent amount of recyclable waste • Scrapping waste is based on recycling of materials such as glass, aluminium, steel
Vehicle write-offs are settled in cash. To ensure we have the right theoretical basis for calculating Gjensidige’s material consumption, we have assumed, based on the official registration system (TFF), that 22 per cent of scrapped cars are replaced by new cars (28 per cent in 2019).
The following assumptions were used in the calculation of average material consumption and waste generated for fire and water damage frequency claims: Fire damage: • Replacing floors and walls • Cleaning and painting surfaces • Electronics • Waste corresponding to consumption of new materials • Energy consumption • Kilometres driven in connection with repairs
The following materials are included in the claims climate accounts: • Wood • Gypsum • Insulation • Paint • Plastic • Electronics
Chapter 2 – Creating added value in Gjensidige - We create value in partnership with our suppliers
All procurements over a certain size must be quality-assured by the Corporate Procurement department. Most purchasing agreements are the result of competitive tendering carried out in accordance with adopted guidelines. All ICT procurements are carried out by Gjensidige’s wholly owned subsidiary Gjensidige Business Services AB. Other procurements are carried out by the parent company.
All procurements shall be as environmentally effective as possible, meaning that endeavours shall be made to achieve maximum value creation and minimum environmental harm. Suppliers are, to the extent possible, encouraged to make environmentally friendly choices. This applies to all the countries we operate in.
Competitive tender procedures are carried out with the help of digital portals. The use of digital tools ensures that all processes are documented and verifiable, and this prevents irregularities and reduces the consumption of paper.
The suppliers are required to perform a self-evaluation and answer questions about the environment, employment conditions, ethics and requirements of subcontractors. The companies are then given a score and feedback on points for improvement. Gjensidige uses this tool to monitor compliance with supplier requirements.
Chapter 2 – Creating added value in Gjensidige - Engaged employees
We work to ensure that all employees feel a sense of security and the freedom to be who they are, and through this help us to deliver on our core values: create a sense of security, apply new thinking, go for it. We need managers who understand the value of diversity, and who integrate diversity management into their day-to-day work.
Chapter 2 – Creating added value in Gjensidige - Engaged employees are sales, claims settlement and management. It offers courses and programmes that underpin our corporate strategy and requirements for certification of customer advisers. All new Gjensidige employees take part in an introduction day where the CEO and other key personnel talk about the Company’s strategy, competence-building, culture, brand, ethics and more practical information. An increasing proportion of training takes place through the use of digital tools combined with physical meetings. Podcasts and video meetings are among the tools used to effectively reach a wider audience. Active use of e-learning and global learning portals such as Udemy provide targeted competence-raising adapted to the individual department’s need for competence.
TTaalleenntt ddeevveellooppmmeenntt It is important to Gjensidige to attract and retain skilled employees. The People Review enables senior managers to follow up developments in the talent pool for experts and managers. Internal mobility is facilitated for the purpose of broadening the employees’ range of qualifications and specialised knowledge. We have also established an internal mentoring programme as a supplement to the personal growth and development of individual employees and managers. The programme will help to promote Gjensidige’s culture and contribute to internal exchange of experience across divisions and business areas. Customised management development programmes have been developed for groups of managers with different experience backgrounds, from newly appointed managers to the senior group management.
We have recently concluded a management programme at the senior executive level in cooperation with NHH, AFF and HEC Paris.
MMyy VVooiiccee –– mmoonntthhllyy mmeeaassuurreemmeenntt ooff eennggaaggeemmeenntt In autumn 2019, the Group started a more dynamic way of following up employees’ job satisfaction and their experience of the work situation. A monthly survey, called My Voice, replaces the annual employee survey. Monthly surveys will ensure relevant results at all times and give us a better chance of understanding and following up how employees experience their work situation ‘here and now’, and how different events and changes affect their job satisfaction. This makes My Voice an even better operational management tool. The increased survey frequency allows us to use the results reported every month to adjust measures as necessary, ensuring the greatest possible improvement effect.
All of our employees have full freedom of association. Collective wage bargaining takes place in accordance with the agreement with the trade unions. Gjensidige recognises ILO conventions and supports the organisation’s promotion of decent work based on social justice and internationally recognised labour rights.
• Gym rooms • Short exercise breaks during working hours • Company sports club that organises a range of activities
Helge Leiro Baastad (1960) has been CEO of Gjensidige since 2003.
He is a member of the board of Finance Norway and Ungt Entreprenørskap.
Baastad joined Gjensidige in 1998 as manager of the private market, and in 2000, he was appointed Executive Vice President responsible for group marketing and support functions. He has previously held various senior management positions with Jordan AS and Denofa Lilleborg Fabrikker. Baastad holds 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).
Our core values shall help us to develop a culture that enables us to face the future head-on.
René Fløystøl (1981) has been Executive Vice President of the Private division since 1 June 2020.
Flessum holds a degree from BI Norwegian Business School 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).
Hellerud joined Gjensidige in 2007 as Head of IR and served as CFO from 2011 to 2016. She has previously held positions at Oslo Børs and as an accountant with Ernst & Young.
Hellerud holds a degree from BI Norwegian Business School 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 from the Norwegian School of Economics (NHH).
The investment portfolio consists of two parts: a match portfolio and a free portfolio. The match portfolio is intended to correspond to the Group’s technical provisions. It is invested in fixed income instruments whose duration is adapted to match the technical provisions.
The free portfolio consists of various assets classes. The allocation of assets in this portfolio must be seen in connection with the Group’s capitalisation and risk capacity, and the Group’s risk appetite at all times.
HHooww wwee cchhoooossee aanndd ffoollllooww uupp oouurr iinnvveessttmmeennttss We are a signatory to and/or endorses various initiatives to promote responsible investments.
• We are a member of the Norwegian Forum for Responsible and Sustainable Investments (NORSIF), support the work on developing and promoting sustainable investments as a dedicated field in Norway, and share experience and knowledge across the Norwegian financial community.
If excluded companies nonetheless appear in externally managed funds, the manager will be asked to explain the situation. Managers who are unable to provide a satisfactory explanation within a reasonable time or who fail to demonstrate willingness to satisfy Gjensidige’s ethical guidelines will not be given new investment mandates. Gjensidige’s CIO decides in each case whether the violation is severe enough for existing investments to be terminated.
The BREEAM NOR environmental classification system is used for new buildings, complete renovations and partially for buildings in use.
AAccttiivvee oowwnneerrsshhiipp Through Oslo Areal, Gjensidige invests in green buildings and locations, particularly located near public transport hubs.
In accordance with our own internal sustainability goals, and the recommendations of the TCFD and the UN Environmental Programme Financial Initiative (UNEP FI), Gjensidige wishes to measure and report greenhouse gas emissions from the investment portfolio. Measurement and reporting of emissions will give us information about the source of the emissions and where Gjensidige can direct efforts to reduce its climate footprint. In the long term, this can be used to evaluate the effect of Gjensidige’s internal work in the sustainability area. Based on a compilation of reported figures and estimates developed by Trucost, we were able to measure the weighted average carbon intensity of our portfolio of listed shares for 2020, in addition to previously reported emissions from real estate investments. With 2020 as the base year, we also have a benchmark for the future development of the equity portfolio. For details, see the section “Results of our commitment to responsible investments”.
MMaannaaggeemmeenntt ooff cclliieenntt aasssseettss iinn GGjjeennssiiddiiggee PPeennssjjoonnssffoorrssiikkrriinngg ((GGPPFF)) GPF manages assets on behalf of its customers. Its main products are group occupational pensions, which are defined-contribution schemes with pertaining risk coverage, management of pension capital certificates and paid-up policies, individual unit-linked pension and individual disability pension. Total assets under management at 31 December 2020 amounted to NOK 42 billion.
The purpose of the asset management is to achieve a competitive return for the pension profiles included in the unit-linked portfolio, and to meet obligations to customers in the group policy portfolio, while considering GPF’s appetite and capacity for risk.
GPF is an independent asset manager, and the asset allocation in the unit-linked portfolio only uses funds managed by external investment managers. We make all decisions concerning strategy, asset classes, portfolio construction, manager selection and risk management.
GPF follows the Group’s policy for responsible investments and cooperates with the Group’s investment centre.
The selection of investment managers for the customer portfolios is based on a comprehensive selection process carried out by the investment centre on assignment for and in cooperation with GPF. All external investment managers are required to have a clear policy for responsible investment integrated in their processes. All the funds included in the customer portfolios are screened against Gjensidige’s exclusion list on a quarterly basis.
The pension profiles and funds customers can choose are labelled with the Morningstar Sustainability Rating (if applicable). GPF aims to establish regular carbon reporting for its asset management in 2021.
Chapter 2 – Creating added value in Gjensidige - Risk understanding and corporate governance lead to long-term value creation
The Board has adopted the Company’s strategy with sustainability as the foundation for all activities. The Board has also adopted policies to be able to monitor goal attainment and compliance with internal rules and external legislation, and the management reports on the status of this on a quarterly basis.
The established governance structure applies to finances, the environment, social conditions and compliance with laws and regulations. The governance structure is described in more detail in the section on ‘Corporate governance’, in Note 3 to the accounts and in the section ‘Risk strategy and risk management’.
CCoorrppoorraattee ggoovveerrnnaannccee aanndd ccoonnttrrooll ooff ddiiffffeerreenntt ttyyppeess ooff rriisskk Gjensidige adheres to the principle of three lines of defence to ensure good risk management and control.
The Group’s second-line functions are independent of its operational activities and submit their reports directly to the CEO and the Board or the Board committees. The control functions are also responsible for organising and ensuring a comprehensive and ongoing process for risk assessments and follow-up.
Chapter 2 – Creating added value in Gjensidige - Gjensidige’s Board of Directors comprises broad expertise
Marchand was elected Chair of the Board in 2018, and has been a member of Gjensidige’s Board of Directors since 2010. She is Chair of the Remuneration Committee and a member of the Risk Committee.
Elnan has founded and built up several technology companies, including Securo AS and Hypoxic Technologies AS, which in 2017 become part of the German Wagner Group, and where he is now the general manager.
Elnan has previous work experience from Securo AS, Innherred Vekst AS and Accenture and other firms.
GGuunnnnaarr RRoobbeerrtt SSeellllæægg –– BBooaarrdd mmeemmbbeerr Gunnar Robert Sellæg (1973) was elected to the Board for the first time in 2020, and is also a member of the Remuneration Committee.
Sellæg holds an MSc degree (sivilingeniør) with the emphasis on process control from the Department of Chemical Engineering at the Norwegian University of Science and Technology (NTNU) / the Norwegian Institute of Technology (NTH).
Krag has broad management experience, legal expertise and extensive expertise and experience in insurance. She also has considerable experience of board work in a number of companies in the insurance, finance and energy sectors as well as public boards and committees.
EElllleenn KKrriissttiinn EEnnggeerr –– BBooaarrdd mmeemmbbeerr Ellen Kristin Enger (1963) was elected employee representative to Gjensidige’s Board of Directors in 2020.
Nafstad holds an MBA degree (siviløkonom) from BI Norwegian Business School.
Pettersen holds a bachelor’s degree in business and administration from Trondheim Økonomiske Høgskole.
TTeerrjjee SSeelljjeesseetthh –– BBooaarrdd mmeemmbbeerr Terje Seljeseth (1960) has been a member of Gjensidige’s Board of Directors since 2018.
ADB candidate/IT from Oslo Computer College (Datahøgskolen i Oslo) and a degree in mathematics/informatics from the University of Oslo.
Seljeseth works on investments and analytics at Blommenholm Industrier, the biggest owner of Schibsted, with a controlling interest. He is a member of the board of Schibsted’s subsidiary Adevinta, Headhunter.ru in Russia and TX Markets in Switzerland, and Chair of the Board of Videocation.no AS. He held the position of CEO of Schibsted for many years and was responsible for developing Schibsted Classified Media (now Adevinta) and the business area Products and Technology.
Seljeseth is independent of key employees, main business partners and the main shareholder.
He is the union representative for Forsikringsforbundet at Gjensidige Forsikring in Denmark.
Gabe Kristiansen has a financial degree in insurance, pension and secured credit from Niels Brock in Copenhagen, and supplementary education from the Danish Insurance Academy.
Gabe Kristiansen is up for re-election to the Board in 2021.
Read more about Code-of Conduct at www.gjensidige.no and Appendix 2 “Selected governing documents”.
Gjensidige depends on the trust of customers, suppliers, the authorities, shareholders and society at large to be able to run its business. The Company’s Code of Conduct shall ensure that all employees act in a way that maintains trust in the Company. All Gjensidige’s activities must stand up to public scrutiny.
IInnffoorrmmaattiioonn sseeccuurriittyy Information security is about protecting information both electronically and physically. The main focus is to strike a balance between confidentiality, integrity and access to information. Gjensidige’s business operations are largely about processing and managing information, which means that good information security is essential to maintaining our customers’ trust and the Group’s reputation and competitiveness.
EEtthhiiccaall aanndd ccuussttoommeerr--ffrriieennddllyy bbuussiinneessss ooppeerraattiioonnss Gjensidige shall have a corporate culture where each individual employee exercises good judgement. Our value creation shall take place in accordance with our Code of Conduct, which is described in a number of policy documents adopted by the Board.
CCoommppllaaiinnttss hhaannddlliinngg Gjensidige has established a complaints system whereby customer complaints can be considered at three levels.
• Level 1: The customer’s case officer. • Level 2: The customer ombudsman (the Company’s internal complaints board). The customer ombudsman service is staffed by highly experienced claims settlement personnel, who can take a fresh look at the case without being influenced by the original case officer’s personal assessment.
• Level 3: The Norwegian Financial Services Complaints Board (Finansklagenemnda), which is a joint complaints board for the whole insurance industry that comprises representatives of the consumer authorities, the financial industry and independent experts. The composition ensures that the independent representatives decide the outcome of cases in which the consumer authorities and the financial industry disagree.
We have notification channels in all countries we operate in. In Norway, whistleblowing is facilitated through two electronic mailboxes that are also accessible in all our other locations: • An internal mailbox for reporting ethics-related matters • An external notification channel for reporting irregularities and malpractices, corruption, money laundering etc.
Notifications addressed to the internal mailbox are dealt with by the Company’s HR department based on clear procedures.
Chapter 2 – Creating added value in Gjensidige - Ethical operations
Employees who have contact with customers undergo thorough training in money laundering regulations and procedures. This applies in all parts of the Group.
22.. TThhee bbuussiinneessss The Articles of Association describe the object of the business and set clear limits for its content. Gjensidige is a financial services group, and is subject to the restrictions and rules set out in the Financial Undertakings Act. Within this framework, Gjensidige primarily operates as a general insurance group in the Nordic countries and the Baltic states. In Norway, the Group is also engaged in life and pension insurance.
Gjensidige’s goals, strategies and risk appetite are reviewed on an ongoing basis, and at least once a year.
33.. EEqquuiittyy aanndd ddiivviiddeennddss The Board has a clearly communicated solvency and dividend policy adapted to the Company’s objectives, strategy and risk appetite. It is available at www.gjensidige.no. The policy emphasises an annual cash dividend, and that any excess capital will not be retained by the Company, but will be disbursed to the shareholders over time.
Gjensidige’s solvency and capital needs are, in principle, defined by the rules adopted by the authorities. The standard requirements that have been adopted are based on average figures. The Board would like solvency and capital requirements to be defined in relation to Gjensidige’s actual exposure at all times, and it has therefore invested considerable resources in the Group’s own internal model, which provides continuous, qualified information about solvency and capital needs. The model constitutes a good, relevant decision-making basis for the Board in the areas covered by the model, and has been approved by the Financial Supervisory Authority, subject to some additional conditions. The Board has also decided that Gjensidige
Chapter 2 – Creating added value in Gjensidige - Corporate governance shall meet the requirements for an A-rating, which also has implications for its final solvency and capital decisions.
It is considered expedient for the Board to be authorised by the General Meeting to make decisions concerning the distribution of dividends throughout the year if there are financial grounds for doing so. Such decisions must be formally based on the most recently approved annual accounts, and will, if relevant, come in addition to the dividend adopted by the General Meeting. Such authorisation must be decided by the General Meeting, and it will apply until the next annual general meeting, no longer, however, than until 30 June the following year.
The Board believes it is expedient for the Board to be authorised to raise subordinated loans and other external financing, and to trade in the bonds issued at all times under the Company’s subordinated bond issues. Such authorisation must be decided by the General Meeting and will apply until the next annual general meeting, no longer, however, than until 30 June the following year.
Chapter 2 – Creating added value in Gjensidige - Corporate governance 55.. SShhaarreess aanndd nneeggoottiiaabbiilliittyy There are no provisions in the Company’s Articles of Association that limit the right to own, trade or vote for shares in the Company.
66.. GGeenneerraall mmeeeettiinnggss The annual general meeting is an important arena for all shareholders.
The Chair of the Board opens the general meeting in accordance with the Company’s Articles of Association. The General Meeting elects the chair of the meeting.
The Board is aware that the Code of Practice recommends that it should be made possible to vote for individual candidates to the Board and Nomination Committee. Elections are demanding in financial undertakings, partly because of official suitability requirements and partly because of the requirements of the Board’s combined expertise, i.e. to ensure a functioning board with broad expertise. For Gjensidige, where one shareholder owns more than 60 per cent of the shares, it is not the formal election itself at the general meeting that represents a challenge, but the preparations for the election. The Board underlines that elections require an extensive process. All shareholders can submit proposals for candidates, and the Nomination Committee contacts the biggest shareholders in writing. All submitted views are taken into account. The Board considers this work to be very important to the Company’s business, position and further development.
77.. NNoommiinnaattiioonn CCoommmmiitttteeee The Company has a Nomination Committee, as provided for in the Articles of Association, comprising four to six members. The General Meeting elects the chair and members, and stipulates the committee’s remuneration.
The committee members are independent of the shareholder-elected board members and executive personnel.
The Nomination Committee’s duties include proposing candidates for the Board and the Nomination Committee and proposing the remuneration of the members of these bodies, as well as the
99.. TThhee wwoorrkk ooff tthhee BBooaarrdd The Board plans nine pre-arranged board meetings per year, including at least one two-day strategy seminar. Between March and September, the board meetings were held via Teams. Four extraordinary meetings were also held via Teams in 2020. Good and efficient procedures have been established for extraordinary board meetings.
Chapter 2 – Creating added value in Gjensidige - Corporate governance control officer. The others are appointed by the CEO. The functions are described in more detail in Note 3. The Board emphasises that these functions have a close relationship with the Board through board work and reporting, and, in particular, the work in the board committees.
If the Chair of the Board has been directly or indirectly involved in a matter, another board member has chaired the meeting instead. If a board member is disqualified on grounds of partiality, he/she cannot be involved in consideration of the matter in question, and must leave the board room and is excluded from involvement in the matter.
1100.. RRiisskk mmaannaaggeemmeenntt aanndd iinntteerrnnaall ccoonnttrrooll The Board complies with the Code of Practice in its work on risk management and internal control. The Company’s most important risk areas and the internal control system are continuously reviewed.
Control activities and the coordination of the different control environments are adopted annually by and in consultation with the Board. The Board’s Audit Committee is responsible for information, communication and risk monitoring.
1122.. RReemmuunneerraattiioonn ooff eexxeeccuuttiivvee ppeerrssoonnnneell The Board has adopted guidelines for a remuneration scheme that applies to executive personnel. It is presented to the General Meeting each year, together with a report on any deviations that have taken place since the previous annual general meeting. The statement is available in the case documents at www.gjensidige.no and also in Note 8.
The guidelines help to ensure good alignment between shareholder and employee interests. The remuneration scheme is linked to value creation over time, and is based on quantifiable factors that the employee can influence. A ceiling has been set for performancebased remuneration.
Gjensidige shall have an open dialogue with all financial market stakeholders, and follows the Oslo Børs Code of Practice for IR. The IR Policy adopted by the Board is available at www.gjensidige.no/investor. We shall ensure that participants in the financial markets have a sufficient base for valuation of the Group by providing simultaneous access to equal, accurate, clear and relevant information at all times. The information must be consistent and wellbalanced. As a rule, we do not disclose specific guiding for the Group’s future financial performance.
Covid-19 led to changes in our contact with investors in 2020. From and including March, the meetings were largely conducted either by video or telephone. The same applied to conferences and other seminars. A high frequency of meetings was maintained through the year, and the level of service and degree of information remained at a high level despite the lack of physical meetings.
Brokers and investors voted Gjensidige the winner of the Stockman Award in 2020. The Norwegian Society of Financial Analysts gives the Stockman Award to the listed company considered to have performed best in terms of strategic investor communication – as assessed by the market participants. The best strategic investor communication entails disclosing good, relevant information about one’s own business to the financial market, and publishing the best annual and interim reports based on financial analysis principles. Gjensidige scored high on the following criteria: • Equal treatment of market participants • A clear and long-term strategy • Clear financial targets and dividend policy • Annual accounts with notes, and Board of Directors’ report
Gjensidige shall make sure that the financial market participants have a sufficient base for valuation of the Group and engage in dialogue with owners, potential investors, analysts and other market participants. Gjensidige targets high and stable nominal dividends to its shareholders, and have a payout-ratio over time of at least 80 per cent of the profit after tax. Over time, Gjensidige will also pay out excess capital.
DDiivviiddeenndd aanndd ddiivviiddeenndd ppoolliiccyy Gjensidige pursues a shareholder-friendly capital and dividend policy, and the Gjensidige share is and should be a dividend-paying share. Gjensidige targets high and stable nominal dividends to its shareholders, and a pay-out ratio over time of at least 80 per cent of the profit after tax expense. When determining the size of the dividend, the expected future capital needs will be taken into account. Over time, Gjensidige will also pay out excess capital.
FFiinnaanncciiaall ccaalleennddaarr 22002211 24 March 2021 Annual general meeting 22 April 2021 Presentation of first quarter results 14 July 2021 Presentation of second quarter results 20 October 2021 Presentation of third quarter results
WWiiddee ggeeooggrraapphhiiccaall ddiissttrriibbuuttiioonn ooff sshhaarreehhoollddeerrss,, wwiitthh aa ssttrroonngg nnaattiioonnaall bbaassee 11
Gjensidigestiftelsen shall have a leading and long-term ownership in Gjensidige and contribute to ensuring stable and predictable ownership. The foundation’s statutes establish that its ownership interest in Gjensidige shall amount to at least 50.1 per cent. According to the ownership policy, the goal is an ownership fraction that exceeds 60/40 over time. Gjensidigestiftelsen has expressed willingness to consider a reduced ownership fraction in the event of any acquisitions or capital increases that are in accordance with Gjensidige’s overall strategy.
Even though Covid-19 had an impact on Gjensidige on most counts, it has been rewarding to experience how we mobilised in a time of uncertainty. We committed ourselves in the national effort and worked to create a sense of safety. Both for our customers and our employees – who delivered above all expectations from their home offices.
A safer society 126 Results of our commitment to a safer society Climate and the environment 132 Results of our commitment to the climate and environment Engaged employees 140 Results of our commitment to engaged employees Responsible investments 147 Results of our commitment to responsible investments Good management and control 153 Results of our commitment to management and control Financial result 159 Financial result 179 Strategy and outlook 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
• Established scheme whereby customers receive 5 per cent dividend when rebuilding to become BREEAM certified.
• ‘Braive’ self-help psychologist service particularly relevant during the Covid-19 pandemic.
• ‘Back to work’ partnership with Unicare • Increased use of digital consultations with doctors, psychologists and vets.
• Renewed our sponsorship agreement with the Norwegian Handball Association and the top division in women’s football in Denmark, and launched “Drømmelaget” (“The Dream team”).
• Cooperation with the Norwegian Labour and Welfare Administration (NAV) to help people who have dropped out of the labour market.
EEffffeecctt ooff oouurr eeffffoorrttss –– ddaammaaggee pprreevveennttiioonn iimmppoorrttaanntt ttoo ssoocciieettyy In 2020, Gjensidige carried out a considerable number of damage prevention measures for individual customers directly and through information in different channels, such as news media, social media and our own websites. Below is more about some of the measures implemented in 2020: • Collaboration with the Norwegian Computing Centre: We combine our claims data with recognised climate models that give good insight into how increased precipitation may affect the scope of damage in Norway up until 2100. The tool is being further developed to improve the prediction of future events and losses, which will also benefit our customers and society.
• New assessments of the risk of fire in modular buildings are disclosed to “Byggskade” in Denmark. A fire prevention initiative (‘Stop branden’) was launched in 2020 in cooperation with Østifterne and Nykredit and will be maintained for the duration of our partnership.
• Digital advice on damage prevention: Gjensidige’s own website gjensidige.no/godtforberedt has 2.46 million page views that generated 35.670 positive feedbacks from the public regarding the help they received.
• ‘Back to work’ – partnership with Unicare to help companies with follow-up of and adaptations for employees on sick leave. Employees receive offer of mapping and follow-up early on as a prevention measure that aims to prevent disability.
EEffffeecctt ooff oouurr eeffffoorrttss –– ssoocciiaall ccoommmmiittmmeenntt OOuurr iinnvvoollvveemmeenntt iinn ssppoorrtt mmaaddee aann iimmppoorrttaanntt ccoonnttrriibbuuttiioonn ttoo aaccttiivviittiieess aammoonngg cchhiillddrreenn aanndd yyoouunngg ppeeooppllee iinn 22002200.. Read about our activities in the section ‘Our social commitment’.
• We also renewed our agreement with the Norwegian Athletics Association, for which we are the main sponsor, with a duration of four years. To increase our involvement in athletics, Gjensidige entered into an agreement with Karsten Warholm in January 2020.
• Gjensidige has continued to support the Church City Mission’s work through the ‘neighbourhood initiative’, and employees from all over Norway took part in the knitting campaign for a warmer society.
• Established cooperation with NAV in Norway to help people with gaps in their CV to enter the labour market. The number of people employed through the scheme in 2020 was 4.
DDiirreecctt aanndd iinnddiirreecctt ttaaxxeess ppaaiidd • Gjensidige has adopted a new group policy on taxes and will continue to take responsibility and contribute to society by paying indirect and direct taxes. Insurance companies are not required to calculate outgoing VAT, and cannot therefore make deductions for incoming VAT. Incentives have been established in our procurement processes to encourage the use of local craftsmen who pay taxes. This is also intended to counteract unnecessary repairs and social dumping.
NNeeww mmeeaassuurreess 22002211 • Expanded partnership with the Norwegian Computing Centre to include topography and physical risk for the purpose of further developing damage prevention measures for customers and public authorities.
• Further develop risk checks with a view to creating good customer experiences and promoting new damage prevention measures.
• Pilot project with external company in Demark involving the use of geodata to map the risk of water damage in at-risk areas and the possibility of damage prevention measures.
It is important for us to deliver good claims settlements. Digitalisation has made the settlement process far more efficient. With the help of climate accounts for claims processes, we can also choose settlement processes that leave the smallest possible climate footprint.
CCoonnttiinnuuoouuss eeffffoorrttss ttoo aallssoo rreedduuccee tthhee ccaarrbboonn iinntteennssiittyy ooff oouurr ccllaaiimmss pprroocceesssseess:: • Reduction in carbon intensity of claims processes from 1.7 in 2019 to 1.2 in 2020.
• Initiated pilot projects with the aim of increasing reuse of car parts and increase the proportion of repairs.
• A 70 per cent reduction in greenhouse gas emissions relating to market-based energy consumption as a result of certificates of origin for clean energy.
• Installed new energy system to balance out consumption peaks in the head office, in addition to new snow-melting system.
• Waste recycled in accordance with Eco-lighthouse requirements. • A total of 84 per cent of discarded computers reused in cooperation with supplier (80 per cent in 2019). Mobile phones are reused in the organisation as far as possible, and the rest are safety disposed of.
• Gjensidige did not cause illegal emissions or receive fines or other sanctions relating to the environment in 2020.
Applied DEFRA 2020 Greenhouse gas reporting: conversion factors 2020. Department for Business, Energy & Industrial Strategy, and NVE (2020) Electricity disclosure. The Norwegian Directorate of Water Resources and Energy. IEAGHG codes used for electricity consumption outside Norway.
Scope 3 Business travel 51.4 521.2 (90.0) Food waste 0.1 Paper 0.1 Electronics 0.0 Residual waste 0.3 1) Employees measured as full time equivalents (FTE). Further specification in climate account Appendix 6.
• Increased use of materials in claims settlement processes by 623 tonnes compared to 2019. The change is due to an increase in frequency claims property, especially consumption of wood, plastic and paint. This also explains the increase in waste compared to 2019.
• Decrease in total Carbon emissions of 9,834 tonnes compared to 2019.
• In general, the climate footprint of materials – including both manufacturing and transport – surpasses the climate footprint of waste. We keep on evaluating and updating methods for the calculation of the climate footprint, in addition to the footprint in terms of use of resources, to strengthen our contribution to a circular economy.
• The model for calculating product footprints is described in the section ‘Climate-related financial disclosures (TCFD)’.
• Compensated for emissions from the claims processes for household contents insurance for young people: 1,050 tonnes of carbon emissions, by purchasing Gold Standard carbon offsets. See Appendix ‘Climate certificate Gjensidige 2020_Young content and travel’.
• Reuse of car parts has long been a priority and is still of central importance. New projects have been initiated to increase the use of used car parts, reduce the number of scrapped cars (condemnation), increase the use of car window repairs and increase the repair rate in accordance with our sustainable repairs model – ‘Smart Repair’.
• Waste emissions make up a relatively small proportion of the products’ CO2-equivalents, but account for a substantial amount in tonnes. In the countries Gjensidige operates in, arrangements are in place for responsible management and recycling in public waste management schemes.
New measures to reduce suppliers’ need for transport in connection with damage repair, and requirement to switch to electric/hybrid cars
• Sixty-five per cent increase in the number of suppliers subject to special follow-up of sustainability. We use the results to ensure that our suppliers comply with our requirements for responsible business. The suppliers must document that they take steps to improve areas identified for improvement, in relation to both the environment and working conditions. They must also document satisfactory management and control.
• Increase the number of top-rated suppliers based on reported status and measures implemented to ensure sustainable operations.
In our work towards a more sustainable society, we are dependent on motivated, committed employees. We achieve this by cultivating diversity and encouraging regular, concrete feedback on what works well – and what could improve.
Gjensidige’s work in 2020 was strongly affected by Covid-19. Most of our employees spent most of the year working from home. Many experienced periods with an unusually high workload due to customers in great need of assistance. We nonetheless saw employee engagement increasing throughout the year.
Have engaged and motivated employees and achieve top results in the employee satisfaction survey.
OOuurr eemmppllooyyeeeess aanndd mmaannaaggeerrss hhaavvee ccooppeedd wweellll wwiitthh tthhee uunnuussuuaall yyeeaarr tthhaatt wwaass 22002200
• Through the pandemic, we have tested, learnt and changed the way we work and lead and have succeeded in delivering some very good results.
EEffffeecctt ooff oouurr eeffffoorrttss –– eennggaaggeedd eemmppllooyyeeeess Figures presented below apply to Norway, Sweden and Denmark. If the figures also include the Baltics, this is indicated positively.
HHRR wwoorrkk iinn aann uunnuussuuaall yyeeaarr Gjensidige has had three focus areas during the Covid-19 crisis: to take social responsibility and prevent the spread of infection, to create a sense of security for our employees and to maintain growth and profitable operations. With security as an important objective, the HR Department facilitated new forms of management and work from a distance. We have followed the official advice, monitored the infection trend closely and contributed to managing the office occupancy rate (see table). We have had serious outbreaks that have been rapidly contained, and a low rate of infection.
Customer Centre. We see a tendency towards reduced sickness absence and increased engagement after the programme.
• Six health and safety audits carried out: two in Norway, two in Sweden and two in Denmark.
• Sickness absence remained stable throughout the year, with a slight, but positive reduction towards the end of the year.
• Women have higher sickness absence than men in society otherwise.
The following are examples of special measures implemented during the pandemic: • Infection control equipment and home office equipment made available to employees.
MMyy VVooiiccee –– mmoonntthhllyy mmeeaassuurreemmeenntt ooff eennggaaggeemmeenntt The new engagement survey ‘My Voice’ was introduced in November 2019. We have thereby gone from annual measurements to continuous development and learning through monthly engagement surveys. My Voice is an operative management tool, and most of our managers use the tool actively.
• Questions concerning the coronavirus situation have given us insight into employees’ experience of information, security, cooperation and efficiency. For these factors, the score fluctuated between 8.8 and 9.2 from March until the end of the year. These monthly surveys gave us valuable information already a few weeks after the crisis broke out. This enabled the crisis management team and local managers to act quickly and make adjustments.
GGjjeennssiiddiiggee oonnee sstteepp aahheeaadd ooff eexxppeerrttiissee cchhaalllleennggeess Attracting, developing and retaining highly competent employees is important to maintain profitability over time. Strategic partnerships with research and educational institutions are part of this effort.
• A strategic partnership agreement with BI Norwegian Business School will lead to raised awareness of Gjensidige as a potential employer among students. Gjensidige’s employees also contribute with advice for the purpose of further development and design of various study programmes. Gjensidige gains access to research, courses and programmes through BI’s Executive Education
• Competence-raising measures established to close critical skills gap for analysts in six countries. Ten modules and 150 employees.
CChhaapptteerr 33 –– VVaalluuee ccrreeaatteedd iinn 22002200 -- RReessuullttss ooff oouurr ccoommmmiittmmeenntt ttoo eennggaaggeedd eemmppllooyyeeeess
• Successful pilot for new Assessment programme, to professionalise talent and succession development.
A number of other competence-raising measures are also carried out in the organisation, such as participation in external courses, conferences and webinars, and many different activities relating to organised and non-organised training, job shadowing etc. We are making efforts to shift the development and follow-up of employees towards an even more continuous process, where employees themselves have a large say in their own development.
EEffffeecctt ooff mmeeaassuurreess iinn 22002200:: • In the engagement survey ‘My Voice’, employees emphasise the
Company’s development possibilities as a strength. A stable high score (8.2 in November 2020) is among the top five per cent in the Finance category.
• Universum ranked Gjensidige as Norway’s most attractive employer in the insurance industry, and Gjensidige was also named ‘climber of the year’ by working IT professionals, climbing from number 59 to number 34 in just one year.
• The number of internships was reduced to eight new places for the 2020/2021 academic year due to the pandemic, but on the positive side, we received a record number of applications totalling almost 1,000.
• Eighteen managers would like to receive students for internships in the 2021/2022 academic year. The number of departments involved is higher than ever before.
• We have recruited eight students for summer internships in technical positions for summer 2021. This will be the first year we offer this type of summer programme to students.
CChhaapptteerr 33 –– VVaalluuee ccrreeaatteedd iinn 22002200 -- RReessuullttss ooff oouurr ccoommmmiittmmeenntt ttoo eennggaaggeedd eemmppllooyyeeeess podcast about diversity, best practice interviews on Gjensidige TV and intranet.
• Various internal initiatives to avoid unconscious discrimination. For example, job advertisement requirements have been reduced to the minimum, and the words used in advertisements shall be as gender-neutral as possible.
• Equality in My Voice: Throughout 2020, the claim ‘People from all backgrounds are treated fairly at Gjensidige’ has returned a stable high score. The score in November 2020 was 9.1, up from 8.8 in November 2019. We keep a close eye on this score, as we work to ensure that all our employees are treated fairly regardless of their background.
Inclusive Workplace enterprise Several activities have been carried out to support inclusive working life. This is explained in a separate appendix to this annual report.
We make systematic efforts to ensure that the management of our investments contributes to a more sustainable world. The Group’s investment strategy and policy for responsible investments ensure a good, sustainable return on the funds invested. In 2020, Gjensidige signed the six UN PRI principles for responsible investments, which entails a greater obligation to integrate ESG perspectives in all parts of capital management and increasingly contribute to the development of this focus area, internally and externally.
Exclude companies we believe are in breach of international standards through the UN Global Compact and Inhumane Weapons Convention.
• Signed UN PRI. • Certified one building to BREEAM-NOR Excellent standard, and working to achieve BREEAM In-Use certification of a further two.
• Carried out climate risk analyses of the portfolio. • Measured the carbon footprint of the equity and property portfolio.
In 2020, we contacted nine external investment managers about 15 companies in their portfolios that were on the list of excluded companies or companies under observation. Our dialogue with external managers resulted in a decision to sell a management mandate that did not meet our ESG requirements. In addition, one mandate was replaced by another one with satisfactory ESG guidelines.
In 2020, Gjensidige signed UN PRI as an asset owner, and the Group’s policies and instructions were revised to reflect this. The Board approved a group policy that, in addition to exclusions, also introduces a requirement for ESG and climate risk analyses in all investment decisions, and to exercise active ownership in both direct investments and in relation to external investment managers. Our focus going forward will be on developing and incorporating several of the UN PRI recommendations, and thereby also improving the basis for external reporting.
Proportion of properties with environmental certification as proportion of square metres (BREEAM)
FFiinnaanncciiaall ccoonnsseeqquueenncceess ooff cclliimmaattee rriisskk The biggest financial climate risk for Gjensidige’s investment portfolio is assumed to arise in the transition to a low-emission society where climate regulation, more stringent emission requirements, a different cost situation and changes in market preferences can affect the value of investments. Through the year, we have conducted several analyses of the portfolio to better understand the climate risk it represents. Among them is the scenario analysis PACTA from 2° Investing Initiative, the results of which were used in scenario analyses for insurance companies developed by Bank of England (BoE). The purpose of the analysis was to better understand the risk of exposure to sectors and technologies with a negative and positive transition risk, and then to include physical risk at sector level in the BoE analysis. The sector exposure for Gjensidige’s investment portfolio at year-end 2020 is shown in the table on the next page.
CChhaapptteerr 33 –– VVaalluuee ccrreeaatteedd iinn 22002200 -- RReessuullttss ooff oouurr ccoommmmiittmmeenntt ttoo rreessppoonnssiibbllee iinnvveessttmmeennttss it, can be one of the catalysts of such transition risk, and it is therefore monitored closely.
Considerable uncertainty is attached to these assessments, which are purely qualitative. Going forward, the assessment of financial risk will be improved through better greenhouse gas emissions data and scenario analyses. However, we consider the framework for doing this for reporting purposes to still be at the development stage. Work is also being carried out to define quantitative targets for financial risk to support the qualitative assessment. This will make it possible to single out the positive opportunities associated with downside risks and more easily define degrees of risk exposure.
For property investments, Oslo Areal reports greenhouse gas emissions in accordance with the GHG Protocol. The most recently reported emissions show a decrease from 8.5 kg/m2 to 7.4 kg/m2 in 2020 for emissions from Scope 1–3. The reduction of 1.1 kg/m2 is primarily due to a lower level of activity in the buildings due to Covid19, and must be considered temporary. In accordance with our strategy, energy efficiency measures have also been implemented for several properties to contribute to a permanently lower carbon intensity. The property portfolio in Oslo Areal makes up 9 per cent of Gjensidige’s total investment portfolio. Gjensidige makes active efforts to encourage investment managers and companies to improve their reporting of emissions.
• There is a focus on further improvement and analysis of our carbon footprint and development of scenario analyses of climate risk.
• Investments that to an even greater extent aim to resolve the current climate challenges through infrastructure investments in renewable energy are considered on an ongoing basis.
Understanding risk and pricing it correctly is Gjensidige’s core competence, and the Group uses advansed risk models. Climate change can impact our risk exposure and create new risks. Good risk management is essential to delivering value for our stakeholders. Ethical values and attitudes are the fundamental of our culture and business operations.
Our business must be characterised by properness and accountability, with effective risk management and good internal control, which will contribute to improvements in products, services, and processes. Beyond compliance with external regulations and internal rules, decisions and actions must be in line with Gjensidige’s values and Code of Conduct, in such a way that values are preserved for customers, owners, employees and society at large.
• Devised scenario for expected water damage up until 2100, and improved pricing of climate risk in our products.
• No serious incidents in 2020 relating to information security, GDPR, corruption or money laundering.
• The Commercial division saw an increase in complaints of 8 per cent from 2019. As many as 78 per cent of the complaints were considered within two weeks, compared with 61 per cent in 2019.
IInnffoorrmmaattiioonn sseeccuurriittyy mmoorree iimmppoorrttaanntt tthhaann eevveerr • Gjensidige has modern security solutions that support remote work for all employees. The infrastructure only permits employees to log on from units owned by Gjensidige, and all activity on the Group’s infrastructure is monitored by the external and internal security centres.
• All employees have undergone security training through introduction courses, e-learning courses and information through internal collaborative platforms.
• All Gjensidige’s service providers must fulfil requirements document and be satisfactorily compliant to the Group’s security requirements. All documents from suppliers are checked and a more extensive control is also carried out for business-critical service providers.
CChhaapptteerr 33 –– VVaalluuee ccrreeaatteedd iinn 22002200 -- RReessuullttss ooff oouurr ccoommmmiittmmeenntt ttoo mmaannaaggeemmeenntt aanndd ccoonnttrrooll
• The introduction programme for new employees includes the following compulsory e-learning courses • The Gjensidige Experience • Information security • Ethics, please • Data protection • Money laundering • Sustainability
• The introduction day for all new employees includes an ethics course.
• All matters can also be reported to line managers, the chief/local safety delegate, the HR department, Group Compliance, the Internal Investigation Unit or the corporate health service
• If the notification receives no response, employees are encouraged to escalate the matter to the senior group management or the Board.
• Updated risk mapping for all business areas. Quarterly reporting on corruption indicators, including procurements under agreements as a proportion of total procurements.
• Quarterly reporting of irregularities and fraudulent acts has been included in the quarterly reporting to the Board.
AAnnttii--mmoonneeyy llaauunnddeerriinngg • Completed 8,748 fraud checks in 2020, which is 82 more than 2019. Fraud checks are important to uncover possible money laundering.
Proportion of complaints upheld by Financial Services Complaints Board 26% 26%
The Covid-19 pandemic had a positive impact on the Group’s claims, estimated at approximately NOK 296 million, corresponding to 1.1 percentage points on the loss ratio. Claims related to cancellations and home transportation increased significantly and were mainly allocated to the Corporate Centre. The negative effect was offset by less travel activity and less driving. In addition, premium growth in Denmark and the Baltics were subdued related to travel insurance for both segments.
The profit after tax expense from continuing and discontinued operations was NOK 4,953.9 million (6,593.8) and the corresponding earnings per share were NOK 9.91 (13.19).
Earned premiums from general insurance increased by 10.2 per cent to NOK 27,160.5 million (24,650.4) for the year. Measured in local currency, the premiums increased by 7.5 per cent. The underwriting result increased due to higher premiums following solid renewals and effective and differentiated pricing measures, which in addition to more favourable weather conditions for motor in Norway during the first quarter and the Covid-19 impact mentioned above, resulted in a 4.5 percentage point improvement in the underlying frequency loss ratio. This was partly offset by higher large losses, lower run-off gains and higher operating expenses.
Earned premiums in the Private segment increased by 6.3 per cent, which together with a significantly lower underlying frequency loss ratio resulted in a higher underwriting result.
The Danish segment recorded an increase of 9.4 per cent in earned premiums measured in local currency. Underlying growth was 5.3 per cent. The underwriting result improved, driven by a lower underlying frequency loss ratio in combination with the solid premium growth.
The return on financial assets was 2.2 per cent (4.1) or NOK 1,341.7 million (2,306.4). The lower return was mainly due to the Covid-19 pandemic which caused a significant downturn in the financial markets towards the end of the first quarter, resulting in negative returns for most asset classes. Significant intervention by central banks and fiscal policy measures drove the market recovery during the rest of the year, resulting in positive returns for the year as a whole.
Expenses for research and development have not been charged to income in Gjensidige’s consolidated accounts in 2020 or 2019. Nor have such expenses been capitalised during these two financial years.
IImmppoorrttaanntt eevveennttss iinn 22002200 TThhee CCoovviidd--1199 ppaannddeemmiicc Covid-19 affected all the countries Gjensidige operates in for large parts of 2020. Uncertainty about how the pandemic would develop and the authorities’ measures to reduce the spread of the virus in the population have affected decisions and operational processes throughout the year. During this period, our number one priority has been to protect the health and safety of our employees, customers, business partners and other stakeholders. We implemented many measures during the year, including home office for most employees and stringent travel restrictions. We have accelerated our digital transformation to be able to maintain a high level of customer service and keep other important business functions operational.
The Board has proposed a dividend based on the profit for 2020 of NOK 3,700 million, corresponding to NOK 7.40 per share. This corresponds to a pay-out ratio of 75 per cent of the Group’s profit after tax. In addition, the Board has decided to distribute excess capital in the amount of NOK 1,200 million. That corresponds to NOK 2.40 per share. The decision is in line with the authorisation granted to the Board by the General Meeting in 2020. The payment was made on 4 February 2021.
SSttrroonngg rreeppuuttaattiioonn,, hhiigghh ccuussttoommeerr ssaattiissffaaccttiioonn aanndd llooyyaallttyy Gjensidige has a strong reputation and brand in Norway. For the 29th year in a row, Ipsos has conducted a profile survey that maps the population’s attitudes to large Norwegian companies. Once again, Gjensidige had the best reputation in the financial sector, and came sixth place overall. We also had the best reputation in the category ‘corporate social responsibility and ethics’ in the financial sector.
Customer satisfaction surveys show that Gjensidige’s customers continued to be very satisfied throughout 2020. The customer satisfaction rate again showed positive development and increased from 78 in 2019 to 79 in 2020. The rate recorded in the Private segment was the best ever. Satisfaction is highest among customers who have reported a claim or been in dialogue with Gjensidige for other reasons. One explanation for this development is that we have been very accessible and provided good service throughout the year, despite the ongoing pandemic.
Customer satisfaction is high in Gjensidige Norway, which confirms high satisfaction with our services. About 85 per cent of premiums in the Private segment come from private customers who are members of an affinity or loyalty programme. These customers often show even stronger loyalty than the average. Our most loyal insurance customers are those who have the most products.
There is still a potential for developing longer-lasting customer relationships in both the private and commercial markets outside Norway.
NNeeww ccoorree ssyysstteemm Gjensidige is developing a new core system for general insurance. A new joint group core system will provide better opportunities for the business segments to share best practices, to develop new products and price models more quickly, and will make it easier to establish ecosystems of products and services in cooperation with other players. The new core system will also help to increase cost-efficiency and secure our competitiveness also in the longer term. The investment in the new core system is expected to be managed within with the current cost ratio target.
The system was implemented in the Danish segment in 2020 and we expect it to be taken into use in the first quarter 2021.
UUnniiqquuee ccuussttoommeerr ddiivviiddeenndd mmooddeell iinn NNoorrwwaayy The arrangement whereby Gjensidige’s biggest owner, the Gjensidige Foundation, pays dividend to our customers, is unique. Every year since the Company was listed on the stock exchange, Gjensidige has paid customer dividend to its Norwegian general insurance customers based on how much they pay in insurance premiums. During this period, customers have received an annual amount corresponding to 11–16 per cent of their premium. We measure customers’ awareness of the customer dividend on an ongoing basis. In the fourth quarter 2020, 90 per cent of customers were aware of the customer dividend model and 79 per cent stated that the model contributed to their wanting to continue as customers. Awareness of the customer dividend system among potential customers was 60 per cent.
Gjensidige has negotiated a new five-year agreement with 11 of 15 mutual fire insurers. The negotiations went on for most of the year, and a key element was to facilitate an operational model that enables the fire insurers and Gjensidige to effectively meet future challenges and maintain local competitiveness. Gjensidige has established dedicated offices in areas where the agreements were not renewed.
In 2020, Gjensidige acquired an ownership interest in Mimiro, a technology company developing a digital ecosystem for the agricultural industry. The move must be seen in conjunction with our ambition to become a damage-preventing problem-solver for our customers. Through Mimiro, we will be able to offer our agricultural customers digital services that can help them ensure optimal production and prevent damages.
LLaanndd sslliiddee aatt GGjjeerrddrruumm The land slide at Gjerdrum in December 2020 is a national tragedy and the worst slide we have experienced in Norway in decades. Our response to the situation was immediate and swift, with our customers well-being being our first priority. Company representatives from Gjensidige were at the site shortly after the slide to assist our customers, and we made sure to have ample capacity and readiness at our customer centres for those who had been impacted.
The slide is defined as a natural perils event by the Norwegian Natural Perils Pool, which operates as a clearing central allocating claims among the different insurance companies according to their national market shares for fire insurance. The current estimate for total claims through the pool is 900 million kroner. Being a member of the pool, we will cover our share of these claims, corresponding to 24.3 per cent market share last year, net of the fire mutuals’ share of the pool. We will also cover claims from the event which are not part of the pool arrangement. Thanks to our reinsurance programme, our net claims recorded in the fourth quarter amounted to 180.4 million.
The Group has a robust solvency position and Gjensidige believes that the Covid-19 pandemic will not have an impact on the Group’s ability to continue as a going concern.
Amortisation and impairment losses of excess value – intangible assets (182.1) (256.4)
Run-off gains/(losses) 1 1,122.3 1,363.2 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. 2 Large losses in excess of NOK 30.0 million are charged to the Corporate Centre, while claims of less than NOK 30.0 million are charged to the segment in which the large losses occur. As a main rule, the Baltics segment has a retention level of EUR 0.5 million, while the Swedish segment has a retention level of NOK 10 million. Large losses allocated to the Corporate Centre amounted to NOK 431.1 million (163.4). Accounting items related to reinsurance are also included. 3 The profit before tax expense is presented for the continuing operation. 4 Large losses = loss events in excess of NOK 10.0 million. 5 Underlying frequency loss ratio = claims incurred etc. excluding large losses and run-off gains/(losses) divided by earned premiums.
NOK 7.40 per share, 75 % pay-out 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. 2 Assuming annual run-off gains ~NOK 1 billion through 2022. Corresponds to 9093 per cent given zero run-off gains post 2022. 3 Corresponds to >16 per cent given zero run-off gains post 2022. 4 Excluding run-off.
The combined ratio was 81.3 per cent – significantly better than the target range of 86 – 89 per cent, thanks to very strong performance in Norway and Denmark. The Covid-situation contributed positively with 1.1 percentage points on the loss ratio. Large losses came in slightly below the expectation for the year, while run-off gains were broadly in line with the planned releases.
Gjensidige has a solid capital position with a year-end 2020 solvency margin at 198 per cent, adjusted for both the proposed regular and declared special dividends, in total amounting to NOK 4,900 million.
Underwriting results outside Norway, excluding run-off gains, came to 740 million kroner, just below the 2022 target of 750 million. We expect some volatility in results for our Swedish and Baltic businesses, however we still expect to meet our target for the three segments in total in 2022.
Group customer satisfaction score climbed further and above the target set for 2022, with the highest score ever for Private and a continued high level for Commercial. One of the factors driving this is the very high availability and good service provided to customers during the pandemic.
Digital claims reporting climbed to the targeted level of 80 per cent during 2020, due to ongoing efforts to improve both the customer experience with the digital solutions as well as effective measures aimed at increasing customers’ motivation to report claims online. The Covid-19 situation also contributed to the development. The share of claims handled fully automatically increased to 17 per cent in 2020. The development was somewhat negatively impacted by some Corona related claims having been handled manually. Efforts to develop these digital services will continue going forward.
GGeenneerraall IInnssuurraannccee PPrriivvaattee The underwriting result was NOK 2,757.4 million (2,025.1). The increase was driven by higher earned premiums and a significantly lower underlying frequency loss ratio. The combined ratio was 70.8 (77.2).
Claims incurred amounted to NOK 5,450.7 million (5,682.6). The loss ratio improved to 57.8 (64.0), driven by a 7.4 percentage point improvement in the underlying frequency loss ratio. Both the motor and property insurance lines recorded improved profitability due to effective pricing measures. Motor insurance was also positively impacted by more favourable weather conditions in the first quarter.
Earned premiums increased to NOK 8,929.0 million (8,164.1), driven by effective pricing measures, solid renewals and portfolio growth. All the main product lines recorded higher earned premiums. Claims incurred amounted to NOK 5,943.9 million (5,608.6). The loss ratio improved to 66.6 (68.7), mainly driven by a 3.2 percentage point decrease in the underlying frequency loss ratio and a lower level of large losses, partly offset by lower run-off gains. Pricing and reunderwriting measures, particularly for the motor and property insurance lines, were the main drivers of this improvement.
The Covid-19 situation had a positive impact on claims, estimated at approximately NOK 119 million, corresponding to 1.3 percentage points on the loss ratio. This was primarily related to less driving of commercial vehicles and less travel activity.
Operating expenses amounted to NOK 888.4 million (825.7), corresponding to a cost ratio of 9.9 (10.1).
GGeenneerraall IInnssuurraannccee DDeennmmaarrkk The underwriting result was NOK 800.5 million (599.3). The improvement was mainly driven by an increase in earned premiums, and a lower underlying frequency loss ratio. The combined ratio was 86.5 (87.9).
Claims incurred amounted to NOK 4,250.2 million (3,642.0). The loss ratio decreased to 71.9 (73.4), driven by a 3.8 percentage point improvement in the underlying frequency loss ratio, partly offset by lower run-off gains and higher large losses. The Covid-19 situation had a positive impact on claims, estimated at approximately NOK 124 million, corresponding to 2.1 percentage points on the loss ratio. This was primarily related to the motor and travel insurance lines. Effective pricing measures in the commercial lines also contributed to the improvement in the underlying frequency loss ratio.
Operating expenses amounted to NOK 859.5 million (718.8). The cost ratio was 14.5 (14.5). The cost ratio was stable despite lower commissions from the discontinued quota share.
GGeenneerraall IInnssuurraannccee SSwweeddeenn The underwriting result was stable at NOK 76.1 million (75.9). The combined ratio was 95.2 (94.6).
Claims incurred amounted to NOK 1,209.9 million (1,058.6). The loss ratio increased to 76.0 (75.3), mainly driven by a 0.5 percentage point increase in the underlying frequency loss ratio. The Covid-19 situation had a negative impact on claims, estimated at approximately NOK 23 million, corresponding to 1.4 percentage point on the loss ratio. This was primarily related to payment protection insurance, partly offset by a slightly positive impact on motor claims due to less driving.
Operating expenses increased to NOK 306.0 million (271.3). The cost ratio was 19.2 (19.3).
Earned premiums in local currency (SEK) 1 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.
Earned premiums in local currency (EUR) 1 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.
PPeennssiioonn The profit before tax expense was NOK 166.8 million (196.9). The decrease was mainly due to lower insurance income and higher operating expenses. The Covid-19 pandemic had a minor impact on the company’s results for the period, apart from the effects from movements in interest rates and market prices.
Operating expenses increased to NOK 291.1 million (275.6), mainly driven by higher depreciation as a result of a shorter depreciation timeframe for IT-investments. A higher head count in response to the growing business volume also had an impact on operating expenses.
Net financial income, including returns on both the group policy portfolio and the corporate portfolio, amounted to NOK 36.0 million (41.5). The decrease was due to non-recurring gains from divestments last year.
Assets under management increased by NOK 5,026.5 million from year-end 2019. Total pension assets under management amounted to NOK 42,361.7 million (37,335.1) including the group policy portfolio of NOK 7,664.1 million (7,204.2).
MMaannaaggeemmeenntt ooff ffiinnaanncciiaall aasssseettss aanndd pprrooppeerrttiieess The Group’s investment portfolio includes all investment funds in the Group, except for investment funds in the Pension segment. The investment portfolio is split into two parts: a match portfolio and a free portfolio. The match portfolio is intended to correspond to the Group’s technical provisions. It is invested in fixed-income instruments that match the duration and currency of the technical provisions. The free portfolio consists of various assets. The allocation of assets in this portfolio must be seen in conjunction with the Group’s capitalisation and risk capacity, as well as the Group’s risk appetite at all times. Results from the use of derivatives for tactical and risk management purposes are assigned to the respective asset classes. Currency risk in the investment portfolio is generally hedged close to 100 per cent, within a permitted range of +/- 10 per cent per currency.
At the end of the period, the average duration in the portfolio was approximately 4.7 years. The distribution of counterparty risk and credit rating is shown in charts on this page. Securities without an official credit rating amounted to NOK 2.4 billion (3.5). Of these securities, 17.4 per cent (10.1) were issued by Norwegian savings banks, while the remainder were mostly issued by industry and municipalities. The geographical distribution of the fixed-income instruments in the free portfolio is shown in the chart below.
At the end of the period, the exposure to commercial real estate in the portfolio was NOK 5.1 billion (4.8). The property portfolio yielded a return of 7.8 per cent (8.0).
Financial assets and properties Return in per cent Result Carrying amount 31.12 NNOOKK mmiilllliioonnss 22002200 22001199 22002200 22001199 22002200 22001199
FFiinnaanncciiaall rreessuulltt ffrroomm tthhee iinnvveessttmmeenntt ppoorrttffoolliioo 77 22..22 44..11 11,,334411..77 22,,330066..44 5588,,888877..44 5599,,005544..44
NNeett iinnccoommee ffrroomm iinnvveessttmmeennttss 11,,331188..55 33,,886600..33 1 The item includes discounting effects of the insurance liabilities in Denmark and Sweden, and a mismatch between interest rate adjustments on the liability side in Denmark and the corresponding interest rate hedge. Investments include mortgage, sovereign and corporate bonds, investment grade bond funds and loan funds containing secured debt. 2 The item includes investment grade and current bonds. Investment grade and emerging market bonds are investments in internationally diversified funds that are externally managed. 3 Investments in internationally diversified funds that are externally managed. 4 Investments mainly in internationally diversified funds that are externally managed. The equity risk exposure is reduced by NOK 354.6 million due to derivatives. 5 The item includes currency hedging related to Gjensidige Sweden, Denmark and Baltics, lending, paid-in capital in Gjensidige Pensjonskasse, profit/loss effects from a total return swap with Gjensidige Pensjonskasse, hedge funds, commodities and finance-related expenses. 6 Defined as an alternative performance measure (APM). APMs are described at www.gjensidige.no/reporting in a document named APMs Gjensidige Forsikring Group 2020. 7 The content of these items is 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”.
Other comprehensive income and expense as presented in the income statement are not included in the allocation of profit.
The Group’s annual financial and solvency targets through 2022 are as follows: • A combined ratio of between 86 and 89 per cent (undiscounted) • Corresponding to 90 to 93 per cent given zero run-off gains • Average annual run-off gains of approximately NOK 1 billion are still expected through 2022 • A cost ratio <15 per cent • A solvency margin based on the Partial Internal Model (both the regulatory approved model and the model with internal calibration) of between 150 and 200 per cent • To support an ‘A’ rating, stable regular dividends over time, financial flexibility for smaller acquisitions and organic growth not financed through retained earnings, as well as providing a buffer for regulatory changes.
These are financial targets and should not be regarded as guidance for any specific quarter or year. Unexpected circumstances relating to the weather, the proportion of large losses and run-off gains or losses could contribute to a combined ratio that is above or below the annual target range.
Geopolitical uncertainty, low interest rates and financial challenges in several key economies reflect an uncertain economic situation. As for the rest of the world, the pandemic has had a significant impact on the economies in Gjensidige’s markets. However, there has been a strong rebound, particularly in the Nordics, thanks to large stimulus packages and gradual easing of restrictions. Although there is still considerable uncertainty, the forecast for economic activity in Gjensidige’s markets is encouraging. The risk of pressure on insurance volumes in the wake of the pandemic is thus lower than initially expected.
Organic growth is expected to be in line with nominal GDP growth in Gjensidige’s market areas in the Nordic and Baltic countries over time. On a Group level, near term growth is expected to be higher. In addition, profitable growth will be achieved by pursuing a disciplined acquisition strategy, as has been done successfully in the past.
In the next few years it is expected that Gjensidige’s business model and the market participants will broadly stay the same. Gjensidige has different positions and preconditions for further growth and development in the different segments and geographies. Best practices will be implemented across segments and borders where natural and expedient. Profitability will be prioritised over growth.
Continued investments in technology and data are key to reducing costs and achieving enhanced functionality and flexibility. This is necessary to enable more flexible partner integration and product modularity. The launch of next generation tariffs and CRM and investments in a new core system and IT infrastructure are important in order to succeed in becoming an analytics-driven company. This will result in better customer experiences, more efficient operations and create sufficient capacity for innovation. Gjensidige has started the process of developing and configuring its new core IT system. The investment is expected to be handled within the current cost ratio target, and will be made step-by-step, starting with Denmark.
Gjensidige has a robust investment strategy, although returns are affected by challenging market conditions.
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 Chapter 4 – Financial statements and notes Gjensidige Forsikring Group Gjensidige Forsikring ASA
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 report contains financial statements and notes for the Gjensidige Forsikring Group and the parent company Gjensidige Forsikring ASA respectively.
Claims Claims incurred etc. from general insurance (18,133.5) (16,978.6) Claims incurred etc. from pension (674.5) (616.3) Total claims (18,808.0) (17,594.9)
Earnings per share from continuing and discontinued operations, NOK (basic and diluted) 24 9.91 13.19
Other comprehensive income Other comprehensive income that will not be reclassified subsequently to profit or loss Remeasurements of the net defined benefit liability/asset 10 (112.2) (117.1) Share of other comprehensive income of associates and joint ventures (1.4) Tax on other comprehensive income that will not be reclassified subsequently to profit or loss 9 28.0 29.3 Total other comprehensive income that will not be reclassified subsequently to profit or loss (85.5) (87.9)
Goodwill 11 3,773.4 3,554.6 Other intangible assets 11 1,132.4 1,124.8 Investments in associates and joint ventures 5 3,760.2 3,318.6 Owner-occupied and right-of-use property, plant and equipment 12 1,149.6 1,264.9 Pension assets 10 338.5 244.3
Equity as at 31.12.2018 attributable to owners of the company 1,000.0 (0.1) 1,430.0 64.7 1,445.3 616.0 (1,974.6) 21,263.3 23,844.7
Equity-settled share-based payment transactions 4.8 4.6 9.4 Perpetual Tier 1 capital (445.5) (0.6) (446.2) Perpetual Tier 1 capital - interest paid (51.4) (51.4) Total transactions with owners of the company 0.0 4.8 (496.9) 4.4 (3,559.6) (4,047.3)
Comprehensive income Profit/(loss) (the controlling interests' share) 45.8 4,908.0 4,953.8 Total other comprehensive income 0.5 368.6 (84.1) (1.4) 283.5 Comprehensive income 0.5 45.8 368.6 (84.1) 4,906.6 5,237.3
Cash flow from financing activities Payment of dividend (6,124.9) (3,549.9) Net receipts/payments on subordinated debt incl. interest (45.5) (47.5) Net receipts/payments on loans to credit institutions (140.9) Net receipts/payments on other short-term liabilities 52.9 Net receipts/payments on interest on funding activities (61.6) Net receipts/payments on sale/acquisition of own shares (13.0) (9.2) Repayment of lease liabilities (178.9) (161.6) Payment of interest related to lease liabilities (29.9) (32.2) Tier 1 interest payments (46.5) (52.1) Net cash flow from financing activities (6,438.6) (4,002.0)
Cash and cash equivalents at the start of the year 2,419.5 2,839.9 Net cash flow 383.0 (414.2) Effect of exchange rate changes on cash and cash equivalents 58.6 (6.1) Cash and cash equivalents at the end of the year 2,861.1 2,419.5
Basis of preparation Statement of compliance The consolidated financial statements have been prepared in accordance with IFRSs endorsed by EU, and interpretations that should be adopted as of 31 December 2020, Norwegian disclosure requirements as set out in the Accounting Act as at 31 December 2020 and additional disclosure requirements in accordance with the Norwegian Financial Reporting Regulations for Non-Life Insurance Companies (FOR 2015-12-18-1775) pursuant to the Norwegian Accounting Act.
IFRS 17 requires a general measurement model based on the following “building blocks”:
At the end of each subsequent reporting period the carrying amount of a group of insurance contracts is remeasured to be the sum of: • the liability for remaining coverage; which comprices the fulfilment cash flows related to future services and the CSM at that date; • and the liability for incurred claims, which is measured as the fulfilment cash flows related to past services at that date.
Functional and presentation currency Functional currency Functional currency is determined for each company in Gjensidige, based on the currency within the primary economic environment where each company operates. Transactions in the company’s accounts are measured in the subsidiary’s functional currency. Transactions in foreign currency are translated to functional currency based on the day rate at the transaction date. At the end of each reporting period, monetary items in foreign currency are translated at the closing rate, non-monetary items are measured at historical cost translated at the time of the transaction and non-monetary items denominated in foreign currency at fair value are translated at the exchange rates prevailing at the date of calculation of fair value. Exchange rate differences are recognised continuously in the income statement during the accounting period.
• General insurance Private • General insurance Commercial • General insurance Denmark • General insurance Sweden • General insurance Baltics • Pension
The result, as well as each component in other comprehensive income, is attributable to the Group and to non-controlling interests, although this results in deficits of non-controlling interests. If necessary, the accounts of subsidiaries are adjusted to be in line with the Group's accounting policies.
Associates and joint ventures Gjensidige has investments in associates and joint ventures.
Associates and joint ventures are accounted for using the equity method, and initial recognition is at cost. Any goodwill is reduced with impairment losses. The investor’s share of the investee’s profit or loss and amortisation of excess value is recognised in the investor’s profit or loss. Distributions received from an investee reduce the carrying amount of the investment.
Ceded reinsurance premiums reduce gross premiums written and are adjusted for according to the insurance period. Premiums for inward reinsurance are classified as gross premiums written and are earned according to the insurance period.
For these leases, Gjensidige recognises the lease payments as other operating expenses in the statement of profit or loss when they incur.
The right-of-use asset is subsequently measured at cost less accumulated depreciation and impairment losses. Depreciations are according to IAS 16 Property, Plant and Equipment, except that the right-of-use asset is depreciated over the earlier of the lease term and the remaining useful life of the right-of-use asset. IAS 36 Impairment of Assets applies to determine whether the right-of-use asset is impaired and to account for any impairment loss identified.
The right-of-use asset is included in the accounting line Owneroccupied property, plant and equipment.
The interest effect of discounting the lease liability is presented separately from the depreciation charge for the right-of-use asset. The depreciation expense is presented with other depreciations, whereas the interest effect of discounting is presented in the line Expenses related to investments and interest expenses.
Impairment of non-financial assets Indicators of impairment of the carrying amount of tangible and intangible assets are assessed at each reporting date. If such indicators exist, then recoverable amount of an assets or a cash generating unit is estimated. Indicators that are assessed as
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 Chapter 4 – Financial statements and notes Gjensidige Forsikring Group 182 Consolidated income statement 183 Consolidated statement of comprehensive income 184 Consolidated statement of financial position 185 Consolidated statement of changes in equity 186 Consolidated statement of cash flows 187 Note 1 Accounting policies 195 Note 2 Use of estimates 196 Note 3 Risk and capital management
Gjensidige Forsikring Group significant by Gjensidige and might trigger testing for an impairment loss are as follows
The category loans and receivables comprise the classes obligations classified as loans and receivables, loans, receivables related to direct operations and reinsurance, other receivablesand cash and cash equivalents.
Hedge accounting Hedge accounting is applied on the largest branches and subsidiaries. Gains and losses on the hedging instrument relating to the effective portion of the hedge are recognised in other comprehensive income, while any gains or losses relating to the ineffective portion are recognised in profit or loss. If subsidiaries are disposed of, the cumulative value of such gains and losses recognised in other comprehensive income is transferred to profit or loss. Where hedge accounting is not implemented, this implies a divergent treatment of the hedged object and the hedge instrument used. Hedge accounting of surplus capital in the Baltics was implemented in 2020.
An assessment is first made to whether objective evidence of impairment of financial assets that are individually significant exists. Financial assets that are not individually significant or that are assessed individually, but not impaired, are assessed in
The share-based payment arrangements are measured at fair value at the time of allocation and is not changed afterwards. Fair value is accrued over the period during which employees acquire the right to receive the shares. Share-based payment arrangements which are recovered immediately are recognised as expenses at the time of allocation. Vesting conditions are taken into account by adjusting the number of equity instruments included in the measurement of the transaction amount so that, ultimately, the amount recognised shall be based on the number of equity instruments that eventually vest. Non-vesting conditions and possible market conditions are reflected in the measurement of fair value, and no adjustment of the amount charged as expenses is done upon failing to meet such conditions.
See note 22 for a further description of Gjensidige’s share-based payment arrangements and their measurement method.
Deferred tax Deferred tax is determined based on differences between the carrying amount and the amounts used for taxation purposes, of assets and liabilities at the reporting date. Deferred tax liabilities are generally recognised for all taxable temporary differences. Deferred tax assets are generally recognised for all deductible temporary differences to the extent that it is probable that they can be offset by future taxable income. If deferred tax arises in connection with the initial recognition of a liability or asset
Gjensidige Forsikring Group acquired in a transaction that is not a business combination, and it does not affect the financial or taxable profit or loss at the time of the transaction, then it will not be recognised.
Gjensidige Forsikring Group 3. Risk and capital management Introduction Gjensidige’s core business is general insurance, and the risk related to non-life and health insurance risk is therefore a major part of the risk Gjensidige is exposed to. Gjensidige is also exposed to life insurance risk through its operations in Gjensidige Pensjonsforsikring AS. Financial risk is also a material risk for the group.
The insurance business For the insurance business as a whole, Covid-19 has resulted in improved underwriting results. Despite increased claim payments for travel insurance, will lower activity in society generally lead to fewer claims.
Investments Gjensidige was affected by the economic fall in the financial markets in the 1st quarter of 2020, but the rest of year gave positive investment results. Gjensidige is still exposed to negative market movements, but the risk level with the current asset allocation is moderate compared to the adopted limits and capacity. The risk is lower than at the beginning of the year. Risk management is operated as before with dynamic management based on market development and the portfolio's return.
Operational performance The majority of employees have worked at home offices throughout the Covid-19 period. The operation of the Group has been more or less normal throughout the period after the outbreak of Covid-19. At the beginning of the shutdown, there were very many claims related to travel insurance that led to increased treatment time, and there were some less significant technical challenges that arose that were resolved relatively quickly. Now there is more or less normal operation of all operations in the group, and there is reason to believe that the operation will function as normal also going forward, even if the government measures are prolonged. If employees should become infected and ill from Covid-19, crisis plans have been prepared, and the group's crisis management has been in full operation throughout the Covid-19 period.
Operation, development, procurement and follow-up of vendors related to information and communication technology services are carried out in the subsidiary Gjensidige Business Services AB.
Figure 2 – The risk management system is organised with three lines
The Board has the overall responsibility for ensuring that the level is within the approved risk appetite and shall thus supervise and utilize the risk management that takes place in the group. The board adopts an overall risk appetite for the most important risks areas in the Group. As part of this work, it ensures that necessary governing documents and procedures are in place.
The Board has established an audit committee and a risk committee consisting of chosen Board members. The audit committee is tasked with preparing the Board’s monitoring of the financial reporting process, the effectiveness of the systems for internal control and risk management, as well as the Company’s internal audit function. The risk committee is a preparatory committee that is to assess the group companies' ability and desire to take risk, as well as to ensure a clear connection between overall strategy, risk management and capital planning.
The aim of both committees is to strengthen and increase the efficiency of the Board's discussions and contribute to improvements in the future. In addition, a remuneration committee assists the Board in remuneration matters. Gjensidige Forsikring ASA has established strategies, policies and more detailed guidelines, routines and authorisation rules for main risk areas. Group policies are subject to approval by the Board of each company within the Group based on local legislation.
The CEO has an overall responsibility for the ongoing risk management of the group.
Responsibility for the day to day risk management is delegated to the responsible line managers who must ensure that risk management and internal control system is established within their areas of responsibility and that relevant risk management activities are carried out. Furthermore, the individual manager shall ensure that risk owners are designated and that necessary measures are implemented.
• The compliance function function’s main tasks are to help ensure that legal requirements, regulations or governing documents are complied with, that operational risk incidents that also are breaches of compliance are followed up and reported (including to national data auditors where necessary) and that the internal control system operates in accordance with the requirements. The compliance function is headed by the Chief Compliance Officer (CCO). COO has a professional and independent reporting line to the CEO and to the Board.
• Group security is responsible for monitoring, reviewing and improving the information security management system. Group security is headed by the Chief Security Officer (CSO).
The third line is the group’s internal audit function, which monitors the risk management and internal control system in the Group. Group Internal Audit will, through a risk-based approach, provide assurance to the organisation’s board and senior management, on how effectively the organisation assesses and manages its risks, including the way the first and second lines operate. The function’s tasks cover all elements of an organisation’s risk management framework. The audit function reports directly to the Board of Gjensidige Forsikring ASA.
The cost of reported claims not yet paid (RBNS) is estimated by a claims handler for each individual claim and is based on relevant information available from claims reports, loss adjusters, medical certificates and information about the costs of settling claims with similar characteristics in previous periods. The key statistical methods used for calculating claims provisions for claims incurred but not yet reported (IBNR) are: • “Chain ladder” methods, which use historical data to estimate the proportions of the paid and incurred to date of the ultimate claim costs.
• Changes in the mix of insurance contracts • The impact of large losses
Total disbursed 13,326.3 14,744.0 12,120.9 14,076.7 13,847.1 12,212.0 13,368.3 14,117.9 14,881.8 12,888.6 10,102.9 145,686.6 Claims provision 744.1 863.7 900.9 940.0 987.2 1,086.7 1,551.4 1,677.9 2,294.4 3,257.2 7,422.9 21,726.5 Prior-year claims provision and loss adjustment provision 6,807.8 Total 28,534.3
Premium risk Premium risk relates to future exposures, future claims and their related expenses. Exposure arises on unexpired risk from contracts already underwritten (i.e. the “unearned” exposure) and from future underwritten contracts.
Risk exposure Reserve risk and premium risk are both material risks. Lapse risk contributes only marginally to the total risk exposure for both the Gjensidige Forsikring Group and Gjensidige Forsikring ASA. For reserve risk, most of the claims provisions and related risk exposure are related to lines of business exposed to personal injury, where it takes long time to settle claims. A large part of the reserve risk is related to lines of business such as “Workers' compensation insurance”, “Motor vehicle liability insurance” and “Income protection insurance”. For premium risk, the risk exposure is mainly related to “Motor insurance” and “Fire and other damage to property insurance”.
Assistance 1,018.3 3.5% 1,150.9 4.3% Health insurance 1,589.3 5.4% 1,486.9 5.6% Other non-life insurance 1,508.5 5.1% 1,304.9 4.9% Non-proportional non-
Other motor insurance 5,292.8 19.5% 4,855.5 19.7% Marine, aviation and transport insurance 334.4 1.2% 305.7 1.2%
Fire and other damage to property insurance 9,787.5 36.0% 8,766.7 35.5%
Assistance 998.8 3.7% 1,129.9 4.6% Health insurance 1,589.3 5.8% 1,486.9 6.0% Non-proportional non-
Table 3 – Gross premiums written per segment, Gjensidige Forsikring Group
Managing insurance risk Management of insurance risk is described in chapter “Creating added value in Gjensidige” and subchapter “Risk strategy and risk management.”
Reinsurance Gjensidige Forsikring ASA buys reinsurance as a protection against catastrophic events (such as windstorms) and large individual claims. The reinsurance programme is mainly bought to protect the Group’s equity capital. Gjensidige purchases almost exclusively non-proportional reinsurance contracts with sufficiently high retentions for coverage of relatively few, large losses. Subsidiaries are reinsured by Gjensidige Forsikring ASA, and the subsidiaries’ reinsurance exposure is included in the reinsurance programme for the Gjensidige Forsikring ASA. The maximum retention level per loss/event for the Group, approved by the Board, was NOK 500 million in 2020, unchanged from 2019.The reinsurance program for 2020 is placed within this limit, where the general retention per loss/loss occurrence is NOK 100 million. For catastrophe events such as natural perils the retention is NOK 200 million. For some insurance risks Gjensidige purchases reinsurance coverage that will reduce the retention level to under 100 million. Decisions concerning the reinsurance programme are based on an analysis of exposure, claims history, Gjensidige’s internal model simulations and Gjensidige’s capitalization. As a general requirement, all reinsurers need to be rated “A- “or better by Standard & Poor’s (or the equivalent from other rating agencies) when entering into a contract with Gjensidige.
Risk sensitivity Sensitivity tests are performed in order to show how different risks impact the profit or loss for the year, and thereby impact the equity at the year-end, please see table 4. Combined Ratio (CR) is the key measure of profitability for the general insurance business. The calculations show the effect of a change of one per cent in CR, which can be caused by both premium risk and reserve risk. Premium risk related to changes in loss frequency and severity of claims is also shown. Note that tax impact is not included in the calculations. Changes in inflation assumptions will mainly affect the claims provisions (reserve risk) but is counter-acted by inflation swaps.
Gjensidige Pensjonsforsikring AS is especially exposed to longevity risk linked to the paid-up policies, where Gjensidige Pensjonsforsikring AS is liable to pay a defined benefit until death or other agreed time.
Gjensidige Forsikring Group leave the company. Lapse risk is mainly related to unit-linked products and represents an important risk for the company in Solvency II. If a large number of customers choose to leave the company it would lead to a loss of assets under management and expected future profit, but at the same time risk will be reduced.
Risk exposure Gjensidige Pensjonsforsikring AS offers several disability pension products and for this reason disability risk is a material risk. In addition, longevity risk is a substantial risk because of the portfolio of paid-up policies. If risk is measured according to Solvency II principles, then the lapse risk is the dominating risk. This is the case in Solvency II because expected future profit is accounted for.
Risk concentration Life insurance consists of policies in the Norwegian market. The portfolio derives mainly from small and medium-sized commercial customers all over the country and in different industries. Risk concentration is therefore considered to be limited.
Management of insurance risk is described in chapter “Creating added value in Gjensidige” and subchapter “Risk strategy and risk management.”
The investment portfolio for general insurance is split into two parts: a match portfolio and a free portfolio. The match portfolio is intended to correspond to the Group’s technical provisions in order to reduce interest rate risk, currency risk and to some extent inflation risk. It is invested in fixed-income instruments with a duration matched to the duration of the technical provisions. The free portfolio consists of various assets. The allocation of assets in this portfolio must be seen in relation to the Group’s capitalization and risk capacity, as well as the Group’s risk appetite at all times.
Bonds at amortised cost 15,360.2 26.1% 14,916.1 25.3% Current bonds 1 16,071.5 27.3% 14,327.1 24.3% Match portfolio total 36,380.6 61.8% 34,062.0 57.7%
Free portfolio Fixed income – short duration 7 4,987.0 8.5% 6,812.3 11.5%
Other bonds 2 5,187.6 8.8% 4,552.9 7.7% High Yield bonds 3 402.3 0.7% 1,101.8 1.9% Convertible bonds 3 1,680.8 2.9% 1,725.3 2.9% Current equities 4 2,390.3 4.1% 3,047.3 5.2% PE funds 1,206.3 2.0% 1,232.3 2.1% Properties 5 5,128.5 8.7% 4,803.9 8.1% Other 6 1,524.0 2.6% 1,716.8 2.9% Free portfolio total 22,506.8 38.2% 24,992.4 42.3% Investment portfolio total 58,887.4 100.0% 59,054.4 100.0%
1 The item includes the market value of the interest rate hedge in Denmark. Investments include mortgage, sovereign and corporate bonds, investment grade bond funds and loan funds containing secured debt. 2 The item includes investment grade, emerging market debt (EMD) and current bonds. Investment grade bonds and EMD are investments in internationally diversified funds that are externally managed. 3 Investments in internationally diversified funds that are externally managed. 4 Investments mainly in internationally diversified funds that are externally managed. The equity risk exposure is reduced by NOK 354.6 million due to derivatives. 5 In addition, there is a total return swap with Gjensidige Pensjonskasse reducing the property exposure by NOK 290.0 million. 6 The item includes currency hedging related to Gjensidige Sweden, Denmark and Baltic, lending, paid-in capital in Gjensidige Pensjonskasse, hedge funds and commodities. 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”.
Risk exposure Within market risk the largest risks are spread risk and equity risk for Gjensidige Forsikring Group and Gjensidige Forsikring ASA. Holdings in related undertakings are in general treated as equity risk in Gjensidige Forsikring ASA, while the risk is fully consolidated for Gjensidige Forsikring Group. Consequently, equity risk is greatest for Gjensidige Forsikring ASA. The investments in property through Oslo Areal AS contribute to
Issuers without a rating from an official rating company are mainly investments in the Norwegian fixed-income portfolio. These are mainly investments in Norwegian savings banks, municipalities, property companies and Norwegian power producers and distributors.
Equity risk Equity risk is the risk related to the values of assets, liabilities and financial instruments as a result of changes in the level or volatility of market prices of equities.
As mentioned, the match portfolio is intended to correspond to the Gjensidige Forsikring Group’s technical provisions in order to reduce interest rate risk. There is also some interest rate risk in the free portfolio.
Regarding NIBOR, EURIBOR and CIBOR the transition to new reference rates are not as imminent. In all new agreements where either NIBOR, EURIBOR or CIBOR are used as reference rate, mechanisms to secure potential transitions to alternative reference rates are embedded. For the time being there are no plans to terminate NIBOR. However, the control mechanism regarding the banks’ quotation of the NIBOR rate is more formalized. Nor the Euro area, Sweden or Denmark have concluded termination of their respective IBOR rates. Gjensidige is attentive to the development.
The risk exposure related to financial instruments and insurance liabilities as a consequence of the transition is considered to be low. The IBOR reform will not change the risk management strategy.
Gjensidige Forsikring Group underwrites insurance in the Scandinavian and Baltic countries, and thus has insurance liabilities in the corresponding currencies. The foreign exchange risk, at both group and company level, is generally hedged by matching technical provisions with investments in the corresponding currency.
Geographical concentration of fixed-income securities in the free portfolio is monitored by using a look-through approach in respect of the fixed-income funds. Fixed-income funds consist of internationally diversified funds in asset classes like investment grade, high yield and convertible bond funds.
The fixed income – short duration portfolio mainly consists of Norwegian bonds and certificates, thereby ensuring liquid assets are held in the portfolio.
Risk mitigation The Gjensidige Forsikring Group and Gjensidige Forsikring ASA use several risk mitigation techniques. The match portfolio is intended to correspond to the Group’s technical provisions in order to reduce interest rate risk, currency risk and to some extent inflation risk. It is invested in fixed-income instruments with a duration matched to the duration of the technical provisions.
Hedging exchange rate exposure Limits have been defined for managing currency risk. Financial derivatives, primarily forward contracts, are used in the ongoing management to keep the exposure within the defined limits. For investments in foreign subsidiaries and branches, a strategy has been implemented with the purpose of minimizing effects on surplus capital as a consequence of changes in the foreign exchange rates. This is implemented by using internal loans between the parent company and branches and use of forward contracts and/or options.
Hedging equity exposure Equity exposure is hedged to a certain extent by the use of put options and futures.
• Property: It is assumed 10 per cent decrease in the property value.
Operational risk The risk that potential events or circumstances may arise and have a financial consequence and / or loss of reputation. Management of operational risk is described in chapter “Creating added value in Gjensidige” and subchapter “Risk strategy and risk management.”
Management of strategic risk and business risk is described in chapter “Creating added value in Gjensidige” and subchapter “Risk strategy and risk management”.
Capital management Gjensidige shall have a capitalization that is adapted to the Group's strategic targets and risk appetite at all times. The Group shall maintain its financial flexibility and at the same time exercise a stringent capital discipline that supports the return on equity target. Any future excess capital will be distributed to the shareholders over time.
The target zone for the solvency margin is between 150 per cent and 200 per cent. This target applies to both the regulatory approved model (legal perspective) and the model with its own calibration (own partial internal model). Solvency margin levels shall support an A-rating from Standard & Poor's, stabilize regular dividends over time, ensure financial flexibility for smaller acquisitions and organic growth that is not funded through retained earnings, and provide a buffer against regulatory changes.
All subsidiaries will be capitalized in line with the respective regulatory requirements, while capital in excess of the requirements will, as far as possible, be held in the parent company Gjensidige Forsikring ASA. The Group will make use of all forms of Tier 1 and Tier 2 capital, including subordinated debt, in a responsible and value-optimizing manner and in line with the limits set by regulators and rating agencies.
The Group’s solvency margins at the end of 2020 were calculated to be: • 198 per cent based on Gjensidige’s approved partial internal model
• 248 per cent based on Gjensidige’s own partial internal model
According to Solvency II principles, technical provisions are the sum of a best estimate and a risk margin. For non-life insurance and health insurance, the best estimate for technical provisions can be divided into premium provisions and claims provisions. The tables below show the technical provisions for Gjensidige Forsikring ASA and the Gjensidige Forsikring Group in accordance with Solvency II principles and accounting principles.
Claims provisions for non-life and health insurance 28,534.3 26,105.5 (2,428.8) 28,164.8 24,342.4 (3,822.4)
Premium provisions for non-life and health insurance 11,433.6 3,556.1 (7,877.5) 10,601.4 2,857.1 (7,744.3)
Risk margin 2,524.1 2,524.1 2,689.6 2,689.6 Total technical provisions 82,218.5 72,948.4 (9,270.1) 75,959.8 64,192.7 (11,767.1)
Claims provisions for non-life and health insurance 28,097.3 25,669.8 (2,427.5) 27,693.3 23,873.8 (3,819.6)
Risk margin 1,426.6 1,426.6 1,352.0 1,352.0 Total technical provisions 38,979.3 30,316.6 (8,662.7) 37,773.6 27,763.5 (10,010.1)
Premium provisions for non-life and health insurance are calculated as the current value of future cash-flows for unexpired risk for contracts within contract boundaries. Premium provisions according to accounting principles correspond to the unexpired proportion of premiums written for contracts in force at the valuation date, where no deductions are made for any expenses before the written premiums are accrued. The practical consequence of this difference is mainly that future profit for the contracts Gjensidige is liable for are included as eligible capital in the Solvency II balance sheet. As the premium provisions according to Solvency II are discounted this will also result in a difference.
The tier 2 capital for the Gjensidige Forsikring Group and Gjensidige Forsikring ASA consists of natural perils capital and subordinated liabilities. Natural perils capital can only be used to cover claims related to natural perils but can in an insolvent situation also be used to cover other liabilities. The subordinated liabilities comprise of bonds issued by Gjensidige Forsikring ASA (nominal amount of NOK 1,200 million) and Gjensidige Pensjonsforsiking AS (nominal amount of NOK 300 million). The market value of these bonds is NOK 1,511 million per 31.12.2020.
Total eligible own funds to meet SCR 20,977.9 21,855.1 20,308.6 21,261.9
Tier 2 1,031.0 999.4 876.6 838.3 Total eligible basic own funds to meet MCR/minimum consolidated group SCR
Regulatory capital requirement The regulatory requirement is based on the approved partial internal model.
Capital available 20,977.9 21,855.1 20,308.6 21,261.9 Capital charge for nonlife and health uw risk 8,721.9 7,556.4 8,564.9 7,392.2
The minimum consolidated group SCR is the sum of the minimum capital requirement of the judicial entities belonging to the group. The minimum consolidated capital requirement for Gjensidige Forsikring Group is NOK 5,155 million, which constitute 49 per cent of the SCR.
Gjensidige Forsikring Group 10,380.5 11,230.2 Gjensidige Forsikring ASA 10,568.9 11,561.0 ADB Gjensidige 263.2 166.4 Gjensidige Pensjonsforsikring AS 657.1 769.0
The outcome of the stress test at year-end 2020 and 2019 is presented below.
Effect on surplus capital Available capital before stress 21,855.1 Capital requirement before stress 10,624.9 Surplus without buffer before stress 11,230.2 Surplus without buffer after stress 8,116.7 Solvency ratio after stress 180.7% Solvency ratio before stress 205.7%
The following assumptions apply for 2020: • The equity risk stress is 20 per cent. It includes stress on all equities including hedge funds, private equity and commodities.
• Interest rate risk is calculated on a 100 bp change in the interest rates. It includes effect on both assets and liabilities. The interest rate scenario is the strictest of an interest rate increase or decrease.
Description of the segments General Insurance Private The Private segment offers a wide range of general insurance products and services to private customers, and handles sales, customer services and claims settlements.
General Insurance Commercial The Commercial segment offers a wide range of general insurance products for commercial customers, agricultural customers and the public sector. The segment handles sales, customer service and claims settlement.
General Insurance Sweden The Swedish segment includes the Group’s general insurance operations in the private and commercial markets in Sweden. The segment handles sales, customer service and claims settlements.
Pension 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.
Associates Malling & Co Eiendomsfond IS ¹ Oslo, Norway 24.0 % 803.2 1,036.4 792.3 958.2
Total investments in associates and joint ventures 3,727.4 3,618.2 109.2 103.5 96.6 338.8
Total investments in associates and joint ventures 3,208.3 3,162.2 46.2 75.9 71.0 309.2
Gjensidige's share of loan 2,365.6 2,401.4 Total receivables on joint ventures 2,365.6 2,401.4
Gjensidige and AMF Pensionsforsäkring (AMF) owns Oslo Areal AS as a joint venture (50/50), as each party has rights to its share of the net assets of the arrangement. The parties will make joint investments in the Norwegian real estate market through Oslo Areal. The investment is recognised at cost of NOK
211 Note 4 Segment information 212 Note 5 Investments in associates and joint ventures 213 Note 6 Net income from investments 214 Note 7 Expenses 215 Note 8 Salaries and remuneration 218 Note 9 Tax 219 Note 10 Pension 223 Note 11 Goodwill and intangible assets 225 Note 12 Owner-occupied and rightoff -use property, plant and equipment 227 Note 13 Financial assets and liabilities 232 Note 14 Shares and similar interests 233 Note 15 Loans and receivables 234 Note 16 Insurance-related liabilities and reinsurers’ share 235 Note 17 Equity 236 Note 18 Hybrid capital 237 Note 19 Provisions and other liabilities 238 Note 20 Related party transactions 239 Note 21 Contingent liabilities 239 Note 22 Share-based payment 241 Note 23 Events after the balance sheet date 241 Note 24 Earnings per share
Net income and gains/(losses) from buildings and other real estate Owner-occupied properties Net gains/(losses) from sale of owner-occupied properties 0.6 0.1 Impairment owner-occupied properties 0.1 Total net income and gains/(losses) from owner-occupied properties 0.7 0.1
Total net income and gains/(losses) from buildings and other real estate 0.7 0.1
Bonds and other fixed-income securities Net interest income/(expenses) from bonds and other fixed-income-securities 267.8 277.4 Unrealised gains/(losses) from bonds and other fixed-income securities (122.2) 343.8 Realised gains/(losses) from bonds and other fixed-income securities 427.8 177.1 Total net income and gains/(losses) from bonds and other fixed-income securities 573.4 798.3
Net income and gains/(losses) from bonds held to maturity Net interest income from bonds held to maturity 1.0 2.7 Realised gains/(losses) from bonds held to maturity (0.7) (1.1) Total net income and gains/(losses) from bonds held to maturity 0.3 1.6
Net income and gains/(losses) from loans and receivables Net interest income/(expenses) from loans and receivables 578.1 617.5 Net gains/(losses) from loans and receivables 21.9 228.3 Net gains/(losses) from changes in exchange rates on loans and receivables 9.6 5.6 Total net income and gains/(losses) from loans and receivables 609.5 851.4
Net income and gains/(losses) from financial liabilities at amortised cost Net interest income/(expenses) from subordinated debt (41.5) (49.9) Total net income and gains/(losses) from financial liabilities at amortised cost (41.5) (49.9)
Operating expenses Depreciation and value adjustments (note 11 and note 12), excl. depreciation properties 666.5 763.1 Employee benefit expenses (note 8) 3,251.3 2,992.1 ICT costs 695.8 665.2 Consultants’ and lawyers’ fees 87.8 138.2 Commissions 621.7 617.1 Other expenses 1 (894.4) (962.2) Total operating expenses 4,428.7 4,213.6
Auditor's fee (incl. VAT) Statutory audit 5.8 4.8 Other assurance services 0.4 0.1 Other non-assurance services 1.0 0.8 Tax consultant services 0.5 0.6 Total auditor's fee (incl. VAT) 7.7 6.3 1 Other expenses include cost allocations to claims and finance.
Gjensidige Forsikring Group 8. Salaries and remuneration The average number of employees in the Group was 3,634 (3,740).
The senior group management is defined as senior executives and they are responsible for activities that may be critical to the company's risk exposure. The level of remuneration will take into account both qualitative and quantitative criteria for their role, as well as an individual assessment of their impact on the company's risk.
• Statement of determining salary and other remuneration to senior executive, including o Guidelines for determining salary and other remuneration for the upcoming financial year o Guidelines for the Management Salary Policy that hast taken place during the previous financial year, including how the guidelines for the executive salary determination have been implemented o An account of the management salary policy that has taken place during the previous financial year, including how the guidelines for the executive salary determination have been implemented
Jostein Amdal, Executive Vice President 3,700.8 542.5 168.0 848.0 545.5 3,366 2,235 6,311 17,657
Aysegul Cin, Executive Vice President 5 2,990.7 576.2 340.0 188.3 379.1 2,264 235 2,736 1,803
Jostein Amdal, Executive Vice President 3,537.2 557.7 169.7 650.1 566.5 3,182 1,185 5,180 15,935
Lars Gøran Bjerklund, Executive Vice President 2,756.7 435.3 277.7 274.0 421.0 847 847
Deferred tax liabilities and deferred tax assets Deferred tax liabilities and deferred tax assets are offset when there is a legally enforceable right to offset those assets/liabilities and when deferred tax liabilities/deferred tax assets relate to the same fiscal authority. Set off only where deferred tax benefits can be utilized by providing group contributions.
Taxable temporary differences Property, plant and equipment and intangible assets 55.6 Shares, bonds and other securities 834.5 1,198.3 Profit and loss account 207.3 259.1 Account for deferred income tax from technical provisions including security provision 3,266.8 3,780.2 Other taxable temporary differences 220.2 161.6 Total taxable temporary differences 4,584.4 5,399.2
Loss carried forward 2021 2022 2023 2024 2025 Later or no due date 95.2 89.8 Total loss carried forward 95.2 89.8
Change in deferred tax recognised in other comprehensive income and directly in the balance sheet Pensions (28.1) (29.3) Companies sold and purchased 19.3 Exchange rate differences (0.4) (0.4)
Gjensidigestiftelsen has filed a lawsuit to have its decision of the Appeals Board changed. Gjensidige supports Gjensidigestiftelsens's view, but has decided not to take part in the lawsuit. For Gjensidige, this means that the Tax Appeals Board's decision has final effect for 2010. The reduction in tax payable for 2010 has consequently been recognised as income of NOK 42.4 million plus interest in the accounts for 2020. For the following years, the outcome of Gjensidigestiftelsen’s lawsuit may be significant, even if Gjensidige is not a party to the case. The tax office will await the outcome of the legal process before final determination of these years.
10. Pension Gjensidige Forsikring is required to have an occupational pension plan pursuant to the Norwegian Act relating to Mandatory Occupational Pensions. The Company’s pension plans meet the requirements of the Act.
Defined benefit plan Description of the plan Together with benefits from the National Insurance scheme and any paid-up policies from former employment relationships, the
Gjensidige Forsikring Group retirement pension amounts to approximately 70 per cent of the final salary, given a full earning period of 30 years. The retirement age is 70, but it is 65 for underwriters.
In the situation of rising interest rates, overfunding will be affected. A change in interest rate below 0.59 per cent will not result in overfunding. A change in interest rate of one percentage point will result in an overfunding of 2.6 per cent of the liability.
The market value of shares fluctuates sharply. Gjensidige Pensjonskasse continuously measures the equity risk in the pension assets based on the principles in Solvency II. The principles for measuring equity risk are based on the fact that the risk increases when shares rise in value and that the risk declines when shares have fallen in value. As at 31 December 2020, the risk (equal to a deterioration in relation to the 99.5 percentile) is set at 39 per cent. Property risk is set at 25 per cent based on the principles in Solvency II.
Present value of the defined benefit obligation As at 1 January 2,102.7 610.6 2,713.3 2,057.2 562.4 2,619.6 Current service cost 25.6 10.1 35.6 25.1 9.8 34.9 Employers' national insurance contributions of current service cost 4.9 1.9 6.8 4.8 1.9 6.7
The effect of the asset ceiling (73.6) (73.6) (50.9) (50.9) Foreign currency exchange rate changes 2.4 2.4 (0.2) (0.2) As at 31 December 2,211.8 716.8 2,928.7 2,102.7 610.6 2,713.3
Fair value of plan assets As at 1 January 2,347.0 2,347.0 2,213.8 2,213.8 Interest income 52.2 52.2 64.5 64.5 Return beyond interest income 175.8 175.8 41.0 41.0 Contributions by the employer 109.9 6.4 116.2 167.5 6.3 173.9 Benefits paid (117.0) (117.0) (112.9) (112.9) Employers' national insurance contributions of benefits paid (17.6) (6.4) (23.9) (26.9) (6.3) (33.2)
Amount recognised in the balance sheet Present value of the defined benefit obligation 2,211.8 716.8 2,928.7 2,102.7 610.6 2,713.3 Fair value of plan assets (2,550.4) (2,550.4) (2,347.0) (2,347.0) Net defined benefit obligation/(benefit asset) (338.5) 716.8 378.3 (244.2) 610.6 366.3
NOK millions Funded 2020 Unfunded 2020 Total 2020 Funded 2019 Unfunded 2019 Total 2019
Cost As at 1 January 2020 3,816.7 1,465.4 1,253.2 842.7 7,378.0 Additions/change in cost (3.9) 169.1 19.6 184.8 Additions internal
(1,157.2) Exchange differences 230.2 96.9 28.9 59.9 415.8 As at 31 December 2020 4,046.9 1,062.5 806.6 922.2 6,838.2 Uncompleted projects 593.1 593.1 As at 31 December 2020, including uncompleted projects 4,046.9 1,062.5 1,399.6 922.2 7,431.2
The group has not acquired any portfolio or company in 2020. It has been assessed whether goodwill and intangible assets have been negatively affected by Covid-19, without this being the case.
Impairment testing goodwill The carrying amount of goodwill in the Group as at 31 December 2020 is NOK 3,773.4 million.
General Insurance Denmark 2,960.3 2,790.6 General Insurance Sweden 224.2 201.9 General Insurance Private 128.7 128.7 General Insurance Baltics 460.2 433.3 Total 3,773.4 3,554.5
Each of the units above is the smallest identifiable group of assets that generates cash inflows and are considered as separate cash-generating units. Normally, each segment will be considered as a cash-generating unit. Acquired portfolios are integrated into the operations in the various countries and have joint management follow-up and management. The annual assessment of impairment losses was carried out in the third quarter of 2020. An indication assessment was also carried out in the other quarters in order to assess whether new circumstances calls for new impairment testing of goodwill. In the fourth quarter, an updated assessment was made of whether the termination of the agreement with Nykredit will have a significant effect on goodwill related to Gjensidige Forsikring, Danish branch. The updated assessment gives no indication of impairment losses.
Budgets/prognoses and the period for which the cash flows are projected The projection of cash flows is based on budget and forecast for the next five years reviewed by the management and approved by the Board of Directors. The growth in this 5-year period is higher than the long-term growth expectancy. In the period after 2024 a lower annual growth has been used than in the budget period to arrive at a normal level before a terminal value is calculated. The terminal value is calculated in 2029. Gjensidige normally has a ten-year horizon on its models, as the acquired companies are in a growth phase and a shorter period will give a less correct view of expected cash flows. The long-term growth rate beyond the board approved plan, is no higher than the longterm growth in the market for the respective cash generating units.
Discount rate The discount rate is before tax, and is composed of a risk-free interest rate, a risk premium and a market beta. The discount rate used corresponds to the group's required return of 6 per cent, reduced from 6.5 per cent in 2019. The group's required return represents the group's risk appetite, and this is the same regardless of country. Land risk is corrected directly in the cash flow on all units. An assessment has been made of whether a discount rate per. geography would have given a different outcome. As a rate that is specific to the asset is not directly available in the market, a rate with a corresponding deduction is used to estimate the discount rate. To determine the discount rate, we use the capital value model as a starting point. The riskfree interest rate corresponds to a ten-year interest rate on government bonds in the respective countries in which the subsidiaries and branches operate. In order to determine the beta, the starting point is observable values for Nordic non-life insurance companies. Compared with the group's required rate of return, the calculated discount rates are lower and therefore the group's required rate of return is used as the discount rate.
Carrying amount As at 1 January 2020 30.3 1,031.4 192.7 10.5 1,264.9 As at 31 December 2020 29.9 919.1 192.9 7.7 1,149.6
Depreciation method Straight-line Straight-line Straight-line Straight-line Useful life (years) 10-50 2-10 3-10 1-3 1 Plant and equipment consist mainly of machinery, vehicles, fixtures and furniture.
Summary of the lease liability in the financial statements As at 1 January 1,125.1 1,304.5 Change in lease liability (6.8) 33.3 New lease liabilities 53.7 (47.7) Paid installment (Cash flow) (178.9) (161.6) Paid interest (Cash flow) (29.9) (32.2) Accrued interest (Profit and loss) 29.9 32.2 Exchange rate differences (Other comprehensive income) 23.3 (3.5) As at 31 December 1,016.4 1,125.1
The discount rate for the rental contracts is determined by looking at observable borrowing rates in the bond market for each of the countries in which Gjensidige operates. The interest rates are adapted to the actual lease contracts duration and currency. The discount rate for the leasing cars is determined based on an assessment of which loan interest Gjensidige would achieve for financing cars from a financing company.
Sensitivity financial assets level three Shares and similar interests (mainly unlisted private equity investments and loan funds and real estate funds), as well as bonds and other fixed-income securities are included in level three in the valuation hierarchy. General market downturns or a worsening of the outlook can affect expectations of future cash flows or the applied multiples, which in turn will lead to a reduction in the value of shares and similar interests. Bonds and other fixed-income securities primarily have interest rate and credit risk as a result of changes in the yield curve or losses due to unexpected default on Gjensidige’s debtors. However, the sensitivity to change in the yield curve is reduced through hedging using interest rate swaps classified as level 2
Financial assets Financial derivatives Financial derivatives at fair value through profit or loss 1,291.2 1,291.2 934.1 934.1 Financial derivatives subject to hedge accounting 3.2 3.2
Shares and similar interests 14 5,526.1 5,526.1 6,551.6 6,551.6 Bonds and other fixed income securities 30,968.9 30,968.9 30,992.4 30,992.4 Shares and similar interests in life insurance with investment options 29,467.1 29,467.1 25,792.8 25,792.8 Bonds and other fixed income securities in life insurance with investment options 5,119.3 5,119.3 4,196.5 4,196.5
Financial liabilities Financial derivatives Financial derivatives at fair value through profit or loss 767.4 767.4 641.0 641.0
Financial liabilities at fair value through profit or loss, designated upon initial recognition
Financial liabilities at amortised cost Subordinated debt 18 1,498.8 1,510.9 1,498.4 1,505.9 Other financial liabilities 19 2,777.3 2,777.3 2,735.4 2,735.4 Liabilities related to direct insurance and reinsurance 783.4 783.4 709.4 709.4
Financial assets at fair value through profit or loss, designated upon initial recognition Shares and similar interests 146.2 4,101.8 1,278.2 5,526.1 Bonds and other fixed income securities 12,849.4 17,841.5 277.9 30,968.9 Shares and similar interests in life insurance with investment options 29,467.1 29,467.1 Bonds and other fixed income securities in life insurance with investment options 5,119.3 5,119.3 Loans 1.9 1.9
Financial assets at amortised cost Bonds held to maturity 153.0 153.0 Bonds and other fixed income securities classified as loans and receivables 22,300.8 22,300.8 Loans 2,371.5 2,371.5
Financial liabilities Financial derivatives Financial derivatives at fair value through profit or loss 767.4 767.4
Perpetual Tier 1 capital ¹ 1,000.5 1.8 1,002.3 Subordinated debt 1,498.0 0.4 1,498.4
ADB Gjensidige Currency-related contracts - hedging instruments 314.3 3.2 0.0 Hedging object 314.3
Claims paid, prior year claims (7,287.0) (39.2) (7,326.1) (5,371.0) 119.2 (5,251.8)
NOK millions 2020 2019 Discounted claims provision, gross - annuities 6,469.6 5,904.9 Nominal claims provision, gross - annuities 6,561.3 6,203.7
Gjensidige Forsikring Group 17. Equity Share capital At the end of the year the share capital consisted of 500 million ordinary shares with a nominal value of NOK 2, according to the statutes. All issued shares are fully paid in.
A total of 257,046 (238,679) own shares at an average share price of NOK 192.92 (162.16) have been acquired to be used in Gjensidige's share-based payment arrangements. Of these 199,495 (186,524) shares have been sold to employees, at the same price, but with a discount in the form of a contribution, see note 22. In addition, 19,495 (28,343) shares have been allocated to executive personnel within the share-based remuneration scheme and 44,940 (36,654) bonus shares have been allocated to employees in the share savings programme. The number of own shares is reduced by 6,729 (reduced by 12,842) through the year.
Investor Ownership in % Gjensidigestiftelsen 62.24% Folketrygdfondet 4.14% Deutsche Bank 3.58% BlackRock Inc 3.04% Nordea 1.36% State Street Corporation 1.11% Svenska Handelsbanken Group 1.08% The Vanguard Group, Inc 1.00%
General terms Regulatory regulation Solvency II Solvency II Regulatory call Yes Yes Conversion right No No
General terms Regulatory regulation Solvency II Regulatory call Yes Conversion right No
Restructuring costs 1 Provisions as at 1 January 74.4 128.3 New provisions 22.6 13.8 Provisions used during the year (29.2) (67.6) Exchange rate differences 1.1 (0.1) Provision as at 31 December 68.9 74.4 1 In 2020, NOK 22.6 million is allocated to restructuring provision, due to a decision of changes in Denmark, Sweden and Baltic. The processes have been communicated to all entities affected by the changes. 2 Other provisions are various bonus schemes.
Accrued expenses and deferred income Liabilities to public authorities 63.9 38.3 Accrued personnel cost 307.6 319.2 Other accrued expenses and deferred income 60.5 64.4 Total accrued expenses and deferred income 432.0 422.0
Overview Gjensidige Forsikring ASA is the Group's parent company. See note 5 in Gjensidige Forsikring ASA for specification of subsidiaries and joint ventures.
Non-interest-bearing receivables and liabilities 26.1 85.4 7.1 56.7 Interest-bearing receivables and liabilities 2,365.6 2,401.4 Reinsurance deposits, premiums and claims provision 105.8 86.7
The timing of the outflow of capital is dependent on when the funds are making capital calls from their investors. Average remaining operating time for the funds, based on fair value, is slightly less than three years (four) and slightly less than four years (five) in average including option for of extension.
Gjensidige Forsikring is liable externally for any insurance claim arising in the cooperating mutual fire insurers' fire insurance operations.
As described in the Board’s statement on the stipulation of pay and other remuneration in note 8, half of the variable remuneration is paid in the form of shares in Gjensidige Forsikring ASA, one third of which will be available in each of the following three years. The part that is to cover the tax liability is withheld and settled in the form of cash (net settlement) and the remaining is distributed in the form of shares.
The fair value at grant date is based on the market price. The discount is recognised as payroll expenses at the time of allocation with a corresponding increase in other paid-in equity. The value of the bonus shares is recognised as payroll expenses over the vesting period, which is two years, with a corresponding increase in other paid-in equity.
Weighted average share price (NOK) 189.00 143.00 192.65 163.02 Expected turnover N/A N/A 10% 10% Expected sale N/A N/A 5% 5% Lock-in period (years) 3 3 2 2 Expected dividend (NOK per share) 1 6.45 10.92 6.45 10.92 1 The expected return is based on the Group's actual profit/loss after tax expense as of the third quarter, grossed up to a full year, plus the maximum distribution of dividend corresponding to 80 per cent (80) of the profit after tax expense. This was carried out as a technical calculation because the Company's forecast for the fourth quarter result was not available at the time the calculations were carried out.
Share-based remuneration for key personnel 8.3 4.9 Share savings programme for employees 9.3 8.2 Total expenses (note 7) 17.6 13.1
Insurance-related operating expenses Insurance-related administration expenses incl. commissions for received reinsurance and sales expenses 7 (3,748.3) (3,544.5)
Net income from investments Income from investments in subsidiaries, associates and joint ventures 3,093.3 Impairment losses of investments in subsidiaries, associates and joint ventures 5.6 (153.2) Interest income and dividend etc. from financial assets 971.1 1,000.8 Changes in fair value on investments (271.4) 1,451.6 Realised gain and loss on investments 480.6 (312.8) Administration expenses related to investments, including interest expenses (198.9) (201.6) Total net income from investments 6 987.1 4,878.1
Reinsurers' share of insurance-related liabilities in general insurance, gross Reinsurers' share of provision for unearned premiums, gross 16 39.9 42.3 Reinsurers' share of claims provision, gross 16 516.6 554.5 Total reinsurers' share of insurance-related liabilities in general insurance, gross 556.6 596.8
Receivables Receivables related to direct operations 13 7,347.5 6,843.3 Receivables related to reinsurance 13 113.4 23.7 Receivables within the group 20 26.1 7.1 Other receivables 13, 15 253.5 864.4 Total receivables 7,740.6 7,738.4
Prepaid expenses and earned, not received income Other prepaid expenses and earned, not received income 97.2 37.7 Total prepaid expenses and earned, not received income 97.2 37.7
Equity and liabilities Paid in equity Share capital 1,000.0 1,000.0 Own shares (0.0) (0.0) Share premium 1,430.0 1,430.0 Perpetual Tier 1 capital 1,002.2 1,002.3 Other paid-in equity 80.6 67.4 Total paid in equity 3,512.8 3,499.6
Insurance-related liabilities in general insurance, gross Provision for unearned premiums, gross 4, 16 10,792.8 10,003.0 Claims provision, gross 4, 16 28,097.3 27,693.3 Provision for premium discounts and other profit agreements 89.1 77.3 Total insurance-related liabilities in general insurance, gross 38,979.3 37,773.6
Provision for liabilities Pension liabilities 10 712.9 608.1 Current tax 9 1,501.9 984.6 Deferred tax liabilities 9 1,198.9 1,391.4 Other provisions 19 288.9 294.5 Total provision for liabilities 3,702.6 3,278.5
Liabilities Liabilities related to direct insurance 13 428.1 380.9 Liabilities related to reinsurance 13 69.8 46.1 Financial derivatives 13 767.4 641.0 Accrued dividend 4,900.0 6,125.0 Lease liability 12 928.9 1,060.5 Other liabilities 13, 19 2,615.4 2,650.7 Liabilities to subsidiaries and associates 13, 20 85.4 56.7 Total liabilities 9,794.9 10,960.9
Accrued expenses and received, not earned income Other accrued expenses and received, not earned income 19 365.9 354.2 Total accrued expenses and received, not earned income 365.9 354.2
258 Note 7 Expenses 259 Note 8 Salaries and remuneration 262 Note 9 Tax 263 Note 10 Pension 267 Note 11 Goodwill and intangible assets 269 Note 12 Owner-occupied and right-of-use property, plant and equipment 271 Note 13 Financial assets and liabilities 274 Note 14 Shares and similar interests 275 Note 15 Loans and receivables 276 Note 16 Insurance-related liabilities and reinsurers’ share 277 Note 17 Equity 278 Note 18 Hybrid capital 278 Note 19 Provisions and other liabilities 279 Note 20 Related party transactions 280 Note 21 Contingent liabilities 280 Note 22 Share-based payment 281 Note 23 Events after the balance sheet date 282 Declaration from the Board and CEO 283 Auditor’s report 288 Assurance integrated 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
Comprehensive income Profit/(loss) before components of other comprehensive income 51.3 7,409.0 7,460.3 Total other comprehensive income (0.0) (48.0) (87.3) (135.3) Comprehensive income (0.0) 51.3 (48.0) (87.3) 7,409.0 7,325.1
Comprehensive income Profit/(loss) before components of other comprehensive income 45.8 4,443.9 4,489.7 Total other comprehensive income 0.5 269.5 (82.2) 187.8 Comprehensive income 0.5 45.8 269.5 (82.2) 4,443.9 4,677.5
Transactions with the owners of the company Own shares 0.0 (13.1) (13.0) Dividend (4,899.9) (4,899.9) Equity-settled share-based payment transactions 12.7 12.7 Perpetual Tier 1 capital 0.6 (0.6) Perpetual Tier 1 capital - interest paid (46.5) (46.5) Total transactions with the owners of the company 0.0 12.7 (45.8) (4,913.6) (4,946.6)
Dividends from subsidiaries 123.7 Group contributions paid (21.9) Net cash flow from investing activities 149.0 5,280.8
New standards and interpretations not yet adopted A number of new standards, changes to standards and interpretations have been issued for financial years beginning after 1 January 2020. They have not been applied when preparing these financial statements. Those that may be relevant to Gjensidige are mentioned below. Gjensidige does not plan early implementation of these standards.
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.
Presentation currency The financial statements are presented in NOK. The mother company and the different branches have respectively Norwegian, Swedish and Danish kroner as functional currency.
Cash flow statement Cash flows from operating activities are presented according to the direct method, which gives information about material classes and payments.
Recognition of revenue and expenses Premiums Insurance premiums are recognised over the term of the policy. Gross premiums earned are calculated on the basis of the amounts Gjensidige has received or is owed for insurance contracts where the insurance period starts before the end of the period (gross premiums written). At the end of the period provisions are recorded, and premiums written that relate to subsequent periods are adjusted for (change in gross provision for unearned premiums). Earned premiums net of reinsurance are calculated by applying equivalent accrual to premium for ceded reinsurance, which reduces the corresponding gross premiums. Premiums for inward reinsurance are classified as gross premiums written and are earned according to the insurance period.
Claims incurred Claims incurred consist of gross paid claims less reinsurers’ share, in addition to a change in gross provision for claims, gross, also less reinsurers’ share. Direct and indirect claims processing costs are included in claims incurred. The claims incurred contain run-off gains/losses on previous years’ claims provisions.
received reinsurance and sales expenses, less received commissions for ceded reinsurance and profit share.
Financial expenses consist of interest expenses on loans, realised losses related to financial assets, change in fair value of financial assets at fair value through profit or loss, recognised impairment on financial assets and recognised loss on financial derivatives. All expenses related to loans measured at amortised cost are recognised in profit or loss using the effective interest method.
• owner-occupied property 10-50 years • right-of-use property 2-10 years • plant and equipment 3-10 years • right-of-use plant and equipment 1-3 years
The lease liability is subsequently measured by increasing the carrying amount to reflect the interest on the lease liability, reducing the carrying amount to reflect the lease payments made and subsequent measurement of the carrying amount to reflect any reassessment of lease modifications, or to reflect adjustments in lease payments due to an adjustment in an index or rate.
The lease liability is inluded in the accouting line Other liabilities in the statement of financial position.
The right-of-use asset is initially measured at cost, comprising the amount of the initial measurement of the lease liability, plus any down payment.
The right-of-use property is shown in a separate line in the statement of financial position, while right-of-use plant and equipment is included in the line Plant and equipment.