Our customers were more satisfied with us in 2017 than ever before, and we maintained high market shares. Profitability remained very good.
Universum Awards 2017: Gjensidige was proclaimed the most attractive employer in the Norwegian insurance industry.
Image recognition in claims Gjensidige launched a photo recognition tool that uses artificial intelligence to assess claims based on submission of images via our claims reporting app.
Partner agreement with the Norwegian Society for Sea Rescue We signed a partner agreement with the Norwegian Society for Sea Rescue, who shares our commitment to protect lives, health and assets. 120,000 members will receive discounts on boat insurance, as well as other benefits.
About the reporting Gjensidige publishes a web-based annual report on www.gjensidige.no/ reporting. The annual report 2017 will not be printed.
Christmas gift to SOS We donated NOK 500,000 as a Christmas gift to SOS Children's Villages.
Key figures 2 Letter from the CEO 6 Operations in brief 8 Asset management 16 Additional information 18 Investor information 20 Corporate social responsibility 22 Corporate governance 40 The Board’s report 54 Financial statements and notes 79
Gjensidige recorded a profit after tax of NOK 4.5 billion in 2017, corresponding to a return on equity of 21.3 per cent. For the general insurance operation the premium growth was 4.3 per cent and the combined ratio was 85.4 per cent. The earnings per share was NOK 9.05 and the Board has proposed a dividend of NOK 7.10 per share.
Earned premiums, general insurance NOK million 23,398.3 22,441.9 21,272.0 20,386.8 18,736.9
Net income from investments NOK million 2,029.0 2,196.1 1,473.3 2,475.6 2,538.1
Other claims incurred, losses etc. NOK million (2,311.6) (1,963.7) (1,927.8) (1,892.4) (1,435.7)
Profit for the year NOK million 4,519.3 4,665.9 3,784.7 4,189.6 3,670.6
Regular dividend per share (Based on profit for the year) NOK 7.10 6.80 6.40 5.90 6.80
Special dividend per share (Based on distribution of excess capital) NOK 6.00 10.00
Sickness absence (Self-certified and doctor-certified), Gjensidige Forsikring % 3.9 3.9 4.1 4.7 5.1
Number of employees in the Group Persons 3,834 4,005 3,908 3,525 3,377
Participation in a training programme Days 6,960 7,487 5,524 7,400 8,900
Gjensidige delivered sound results also in 2017, with a total profit of NOK 4.5 billion. Profitability in Norway was still very good and, outside Norway, it developed in a positive direction according to plan.
Work on strengthening our position outside Norway continues unabated. Sweden, Denmark and the Baltics will be reported as separate segments from 2018.
Our banking and pension businesses have now been in operation for more than ten years and they are both strong, ambitious players in the Norwegian market. Combined, they contributed a total of NOK 716 million to Gjensidige’s profit for 2017.
Cooperation with our biggest owner, the Gjensidige Foundation, has also been good in the past year. In 2017, our general insurance customers in Norway received customer dividend from the Gjensidige Foundation in the amount of NOK 2.1 billion. The customer dividend is a unique advantage for our customers.
We have had to live with a continued low interest rate level in 2017. The low level is expected to continue in 2018. A low interest rate level means less financial income and increases the need for a strong insurance result. This underlines the importance of good profitability in our core business through cost efficiency, good risk selection and tariff setting.
This does not mean that we will give less priority to what has been our most important social responsibility throughout most of our history, namely to prevent loss and accidents in the areas where we do business.
We must recognise that we are increasingly perceived as an international company with international responsibility. This will make new demands of us, both as regards activities and transparency towards the market.
You can read more about our corporate social responsibility on page 22-39 of this annual report.
Changed framework conditions create new opportunities One of Gjensidige’s most important competitive advantages is our ability to change. We have extensive experience of adapting to our customers’ needs, and will continue to do so as the framework conditions change.
The future will be characterised by an ageing population and increased digitalisation, which will necessitate new solutions, business models and initiatives.
Our investments in the accident and health market will continue at a pace that is adapted to market developments. This is an area where we expect growth in the Nordic countries for a long time to come, driven by demographic developments.
We aim to deliver the best digital customer experiences. We want to be relevant to people’s everyday lives and businesses’ day-to-day operations. Our job is to ensure that our customers are well prepared if something should happen. And we will help them when a loss or accident occurs. We shall still know the customer best – and care the most.
Gjensidige is a Nordic general insurance group listed on Oslo Børs, with its head office in Oslo. We safeguard life, health and assets in Norway, Denmark, Sweden, Lithuania, Latvia and Estonia. In Norway, we also offer pension schemes and banking and savings solutions for private customers.
Strategy A strong focus on customers is at the core of Gjensidige’s strategy. Backed by a down-to-earth business culture and analytically-driven core operations, this will give Gjensidige a competitive advantage.
Three strategic areas are in focus: digital customer experiences, business intelligence and analytics, and dynamic organisational capabilities.
Our strategic ambitions cannot be realised without motivated, committed managers and employees who have the right expertise and attitudes. A higher pace of change – not least as regards technology and customer behaviour – means that a transition is needed from traditional training-based competence-raising measures to a dynamic learning culture driven by individual managers and employees. Competence shall increasingly be shared through data-driven work processes and cooperation-based solutions. A stronger overall understanding shall be created through internal rotation of managers and staff.
with regards to the partial internal model. See note 23 for further description. **** Combined ratio target on an undiscounted basis, assuming ~4 pp run-off gains next 3-5 years and normalised large losses impact. Beyond the next 3-5 years, the target is 90-93 given 0 pp run-off.
The distribution is based on earned premiums /income, excluding corporate center and other income including eliminations.
Rating Maintain A rating from S&P A rating confirmed in August 2017
Operations in brief 2017 Customer orientation was the top priority in the Private segment in 2017. Work on further digitalising the customer processes to be able to meet customer expectations was in focus. We allowed car claims to be reported using a mobile application instead of the traditional claims report form on paper. The app can use image recognition to appraise the damage immediately, with the help of artificial intelligence. Continuous work on the tariffs, and improved customer and risk selection, contributed to growth, good profitability and increased quality in the customer portfolio.
Outlook Continuous work is carried out in the Private segment on measures aimed at customer retention and increased quality in all customer processes. Improved availability, simplification of products and processes and more digitalisation are prioritised in order to support the Group’s financial targets and improve customer orientation.
Commercial The Commercial segment offers a wide range of general insurance products to the commercial, agricultural and municipal markets in Norway. Sales primarily take place through dedicated distribution channels, and only 20 per cent of the premium volume is brokered business. Gjensidige is market leader in general insurance for the commercial and agricultural markets.
Operations in brief 2017 Sales activities and retaining good customers were the top priorities in the Commercial segment in 2017. Models based on analytics have been further developed to ensure continued high customer satisfaction and efficient distribution. New products and digital solutions adapted to changed customer needs were also launched. Strategic staff planning throughout the year helped to ensure good operational efficiency in the segment. There is a strong focus on competence building to ensure relevance and competitiveness in a professionalised procurement market.
The Norwegian macro economy has stabilised and the market for commercial insurance is somewhat improving. The market is characterised by strong competition and continued price pressure, especially for group pension schemes.
As from 2018, the Nordic segment will be split into a Danish and a Swedish business area. Both areas will give priority to increased profitability, cost efficiency, integration of acquired businesses, organisational and culture development and investments in customer-oriented digital solutions. The design and implementation of measures will be adapted to each area’s distinctive characteristics.
Combined ratio 97.1 % 95.8 % 90.3 % Source: The Danish Insurance Association, based on gross premiums earned 2016
Source: Insurance Sweden, based on earned premiums as at 3rd quarter 2017 30.5 % Länsförsäkringar 14.7 % Trygg-Hansa 9.5 % Alm Brand
The Nordic segment includes the Group’s operations in the Danish and Swedish private, commercial and municipal markets. Gjensidige has its own distribution channels in these markets as well as distribution through a number of partners and brokers. In
Source: Baltics Insurance Supervisory Authorities of Latvia and Lithuania, Estonia Statistics, competitor reports, and manual corrections. Based on gross written premiums for 3rd quarter 2017.
Operations in brief 2017 Operations in the Baltics were dominated by rationalisation of processes in 2017. Lithuania, Estonia and parts of Latvia are now operating on the same IT core system. Initiatives relating to product development, tariff programmes, distribution, customer relationship management (CRM) and claims settlement continue according to plan after the acquisition of PZU Lietuva late in 2015.
Competition is intense and the pressure on prices considerable, but new and more sophisticated tariffs are expected to contribute to better portfolio quality and profitability. The distribution will be moved towards an increasing share of direct distribution through phone and web sales. The business is expected to be profitable from full-year 2018.
Pension Gjensidige Pensjonsforsikring (GPF) shall contribute to the sale of a wide range of products to general insurance customers in Norway, and it offers pension products mainly to the Norwegian commercial market. The products are distributed directly by Gjensidige and via selected partners. Gjensidige is the fourth biggest provider in the market for private collective defined contribution pensions with individual investment options.
Operations in brief 2017 Sales to affinity group customers in the general insurance business, the sale of car insurance and savings products were given high priority in 2017. Growth in lending was high, and loans to the Group’s general insurance customers accounted for 75 per cent of the bank’s lending volume at year-end.
The fulfilment of this purpose will continuously be assessed against the capital required for the bank. The bank will continue to offer a wide range of financial services at attractive terms, through customer-friendly digital solutions, Gjensidige’s branch offices and cooperating car dealers, and shall contribute to the Group’s growth and profitability.
The banking market in Norway is characterised by considerable competition and an increasing number of competitors. Gjensidige Bank will continue to offer competitive terms in segments that are strategically important to the Group.
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 with a duraction and currency that matches the duration and currency of the technical provisions.
At year-end 2017, the total investment portfolio amounted to NOK 54.9 billion. The financial result amounted to NOK 2.0 billion, corresponding to a return on financial assets of 3.7 per cent.
Financial result from the investment portfolio 3.7 3.9 2.6 2,002.6 2,155.1 1,492.4
Earned premiums Private NOK million 8,516.5 8,291.3 8,152.3 Commercial NOK million 7,300.5 7,257.4 7,076.8 Nordic NOK million 6,563.5 5,917.8 5,233.3 Baltics NOK million 1,074.7 1,036.3 642.0 Corporate Centre/reinsurance NOK million (56.9) (60.9) 167.7 Total NOK million 23,398.3 22,441.9 21,272.0 Loss ratio 13
Pension Assets under management pension, at the end of the period NOK million 28,699.0 23,237.3 20,033.0 of which the group policy portfolio NOK million 6,018.4 5,409.6 4,877.5
Shared customers’ share of gross lending 25 % 75.0 76.2 77.0
Each quarter, we meet with analysts and investors to discuss results and business operations. A member of Gjensidige’s Investor Relations team usually attends these meetings, possibly together with the CEO and/or the CFO or another relevant executive from the Company.
For the 2017 financial year, the Board has proposed that a dividend of NOK 7.10 per share be distributed based on the profit for the year. This corresponds to 79 per cent of the profit after tax.
Customer dividend The Gjensidige Foundation is the largest shareholder in Gjensidige, with a holding of 62.2 per cent. The Foundation passes on share dividend relating to the profit for the year from Gjensidige to Gjensidige’s general insurance customers in Norway in the form of customer dividend. Share dividends relating to the distribution of excess capital are retained and managed by the Gjensidige Foundation.
The Gjensidige share yielded a total return of 19 per cent in 2017. At year-end, Gjensidige was the seventh biggest company listed on Oslo Børs, with a market value of NOK 77 billion. The profit per share was NOK 9.05 in 2017, and the Board has proposed a dividend of NOK 7.10 per share.
Ownership At year-end 2017, Gjensidige had approximately 33,000 shareholders. The 20 biggest owners represented a total of 85.1 per cent of the shares in the Company.
General Meeting The next ordinary General Meeting will be held at Gjensidige’s offices in Schweigaards gate 21, Oslo, on 5 April 2018 at 17:00 CET.
Per cent 2 Deutsche Bank 3.9 3 Caisse de Depot et Placement du Quebec 3.7 5 Danske Bank 2.7 6 BlackRock Inc 2.1 7 State Street Corporation 0.8 8 The Vanguard Group, Inc 0.8 9 DNB ASA 0.8 10 Storebrand Group 0.6 11 Safe Investment Company 0.5 14 Thornburg Investment Mgt 0.5 15 JPMorgan Chase & Co 0.4 16 Northern Trust Corporation 0.4 18 Fidelity Worldwide Investment (FIL) 0.3 19 Legal & General Group 0.3 20 Societe Generale 0.3 1 The list of shareholders is based on an analysis of the register of shareholders in the Norwegian Central Securities Depository (VPS) as at 31 December 2016, carried out by Orient Capital Ltd. The analysis maps the owners behind the nominee accounts. There is no guarantee that the list is correct.
The assessments made in 2017 were mostly the same as in 2016. The topic ‘Labour rights’ was removed from the table, as we do not see any material risk relating to this topic at the overall level of our operational activities. Instead, labour rights are covered as part of ‘Socially responsible capital management’.
The result of the analysis can be compiled in a table, where topics of great significance to both stakeholders and Gjensidige are placed in the top right-hand corner. Topics that are less important to Gjensidige and the stakeholders are placed in the bottom left-hand corner.
Si gn ifi ca nc e to st ak eh ol de rs
Gjensidige’s corporate social responsibility policy is based on our role as one of the biggest insurance companies in the Nordic region with significant engagement in investment activities with a global focus.
Gjensidige’s employees must comply with laws and regulations in the societies in which we do business, and act in accordance with ethical standards. Ethics and compliance with laws and regulations are key aspects of the internal training of our staff.
We shall seek to engage in dialogue with all interest groups affected by our activities. We shall ensure as little negative impact on the environment and climate as possible.
The Board and the management have adopted policies, guidelines and instructions that detail and specify the framework our employees must adhere to in different situations. Documents that are particularly relevant to the exercise of our corporate social responsibility are listed in a table on page 39.
Several other chapters in this annual report are relevant to understanding how Gjensidige exercises its corporate social responsibility. The most important are: • Corporate governance. Page 40 • Note 3, Risk and capital management. Page 94 • Note 8, Salaries and remuneration. Page 116 • Note 22, Share-based payment. Page 141
Socially responsible capital management Gjensidige’s asset management shall be based on the ten UN Global Compact principles: 1. Businesses should support and respect the protection of internationally proclaimed human rights 2. Businesses should make sure that they are not complicit in human rights abuses 3. Businesses should uphold the freedom of association and the effective recognition of the right to collective bargaining 4. Businesses should uphold the elimination of all forms of forced and compulsory labour 5. Businesses should uphold the effective abolition of child labour 6. Businesses should uphold the elimination of discrimination in respect of employment and occupation 7. Businesses should support a precautionary approach to environmental challenges 8. Businesses should undertake initiatives to promote greater environmental responsibility 9. Businesses should encourage the development and diffusion of environmentally friendly technologies 10.Businesses should work against corruption in all its forms, including extortion and bribery
In addition, asset management shall comply with international conventions on inhumane weapons.
The guidelines apply to investments in equities, fixedincome instruments, hedge funds and property.
The Group’s Chief Investment Officer is responsible for ensuring compliance with the policy and guidelines. We have hired the recognised consultancy firm Global Ethical Standard (GES) to carry out an ethical screening of companies. GES’s analyses form the basis for our assessment of whether to exclude companies from our investment universe.
One member of the capital management team is responsible for reviewing and compiling all information from the external consultants. This employee draws up a recommendation to the Chief Investment Officer and the Chief Risk Officer, who reach a final decision on whether to exclude the company in question.
Companies that commit serious or systematic violations of our ethical guidelines and fail to take satisfactory steps to correct their conduct shall be placed on the list of excluded companies.
If excluded companies nonetheless appear in externally managed funds, we will ask the manager 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 criteria will not be given new investment mandates. Gjensidige’s Chief Investment Officer decides in each case whether the violation is severe enough for existing investments to be terminated.
In 2017, we contacted 9 external managers about 25 companies that were on our list of excluded companies. At the end of the year, we were still in dialogue with the managers about these companies.
Our real estate investments are made through the property company Oslo Areal, a company that engages in property development in the Oslo area and invests in environmentally friendly buildings near public transport hubs. The company uses the BREEAM NOR environmental classification system for new buildings and complete restorations.
The price customers pay for their insurance is normally strongly affected by the financial risk the customer represents. This risk is affected by the customer’s choice of house, car and behaviour, among other things. We reward a number of security measures by giving a discount on the insurance premium. Measures that contribute to reducing the risk for both us and customers include burglar alarms, inspections of electrical systems in buildings, the installation of equipment that reduces the risk of water damage in buildings, and tracking systems for cars.
Road safety Young drivers are especially at risk of being involved in car accidents. Gjensidige therefore has several measures targeting this group.
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 claim-free period, the bigger the reward.
We collaborate with the Norwegian Council for Road Safety (Trygg Trafikk) on awareness-raising campaigns in upper secondary schools several places in Norway. In 2017, we contributed to the «ErDuSikker» campaign, which raises road safety awareness through a competition in which pupils solve various assignments. Examples of assignments are exercises that highlight dangerous behaviour in traffic, for example sending text messages while driving. The contributions are submitted via social media. More than 8,000 pupils from 38 schools all over the country submitted contributions in 2017.
We collaborate with other insurance companies on road safety through the industry organisation Finance Norway.
We use our sponsorships to create activities for children and young people, so that we help to recruit new athletes and promote a healthier lifestyle.
For the last few years, we have organised two projects called Minihåndballjentene and Minihåndballgutta that have been very popular. The projects target children between the ages of 9 and 12, and it entails that a number of boys and girls are selected as mascots for the national handball teams. The national team members mentor their mascots throughout the year, and attend practice sessions with the mascot’s teams. It is highly motivating for both the children and their parents, who often do voluntary work for the team, to meet top players this way. The age group was chosen because figures from the Handball Association show that many children drop out of the sport when they reach their early teens. The projects are considered an important contribution to the Handball Association seeing a 5-per cent rise in recruitment from 2016 to 2017.
Employees Competence development Business-driven development of employees, managers and the organisation is one of Gjensidige’s focus areas. We believe that employees thrive when
they can use their abilities, develop and be part of a group. The Group has adopted a People Strategy that prioritises competence-raising measures, because the right expertise will be critical to Gjensidige’s chances of succeeding going forward.
Measures: 1. A main survey that is presented to the Board, the senior group management and all middle managers in autumn 2. A follow-up survey to see whether the measures implemented are effective 3. Special measures for entities that deviate significantly from the goal of employee engagement and job satisfaction.
Measures to recruit and retain critical expertise: 1. We have gathered employees with expertise in employer branding, recruitment and onboarding on the same team. This will create synergies going forward at all stages of the process, from attracting the right expertise to retaining it.
5. Every year, we organise the Gjensidige Day at Gjensidige’s head office, which offers a varied programme for students. In 2017, 60 students
5. E-learning plays an increasingly important role in the school’s programmes. It is mainly used for training in insurance subjects, systems, ethics and procedures. In 2017, staff have completed and passed 7,927 e-learning courses. A total of 701 different competence tests were held.
Cooperation with employee representatives The cooperation between the Company’s management and the employees’ trade unions is systematic and good, and it is based on a well-established struc - ture with regular meetings of various committees. Rules have been adopted for what processes and decisions employee representatives shall be involved in. Employee representatives are paid by the Company.
In 2017, 86 per cent of the Company’s employees in Norway were covered by collective agreements. In Denmark, 80 per cent of our employees were covered by collective agreements, and in Sweden 100 per cent.
Diversity, equality and anti-discrimination measures Gjensidige’s overriding goal is that all employees in the Group shall have equal opportunities for personal and professional development. We have zero tolerance for discrimination on grounds of • gender • age • disability • ethnic origin • sexual orientation • religion
4. We are working on a new diversity policy that will address age, background, mobility impairments and other factors.
Gender distribution in executive positions Gjensidige wishes to increase the proportion of women in executive positions, and this is well known among managers at all levels. It is also an express wish to increase diversity in general, in terms of employees’ age, qualifications, background and gender. This is followed up with managers: Measures implemented in 2017: 1. Focus on follow-up of and scorecards for senior managers 2. Systematic reporting of the staff composition, including gender balance, in the follow-up of senior managers 3. Reporting procedures for employees who experience discrimination 4. Gjensidige has an equality and discrimination committee that convenes as necessary. The committee comprises staff from the HR department and employee representatives. It is the Group’s HSE manager who decides when to convene the committee. The committee had one meeting in 2016 and one in 2017. The topic was equal pay for women and men. No wage disparities on the basis of gender were identified in Gjensidige.
Parents are allowed to stay home from work when their children are ill, as long as this is necessary and reasonable.
We take steps to ensure that employees can work from home, out of consideration for their family or for other reasons.
The HR Department is responsible for strategic staff planning, including mapping of critical roles and expertise in the Company. The plan ensures that there are successors to all critical positions in the Company, and that we always cultivate talents who can take over key positions.
We work systematically on talent recruitment and have developed an employer branding strategy to this end. We make targeted efforts to raise Gjensidige’s profile as an employer through digital channels.
Our health-promoting measures include (this varies from office to office): • Arrangements to facilitate cycling to work in the form of bicycle parking and changing rooms • Gym rooms • Competitions that motivate employees for moderate physical activity on a daily basis • Short exercise breaks during working hours • Company sports club that organises a range of activities
The HSE work is monitored through audits and followed up internally by employees with special responsibility for HSE. All incidents that can represent a risk must be reported in the Company’s nonconformity system.
Measures to ensure a satisfactory HSE situation: 1. Internal HSE audits are carried out to ensure compliance with statutory requirements and internal guidelines. In 2017, as the year before,
2. Working environment issues are integrated in the annual employee satisfaction survey that is conducted among all employees to identify matters that require special attention.
3. All managers review the survey with their staff in cooperation with the HR department. Each department defines an action plan that is followed up by the respective managers.
Customer satisfaction and product quality It is Gjensidige’s goal to be the most customer- oriented company in the Nordic insurance industry. Customer orientation permeates our behaviour, priorities and communication at all levels of the organisation.
The possibility of efficient but thorough complaints handling is part of delivering high-quality claims settlements. Gjensidige has established a complaints system whereby customer complaints can be considered at three levels. The first level is the case officer. If the case officer does not reverse the decision, the customer can complain to the second level – the customer ombudsman – which is 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.
Of the cases reported to the Financial Services Complaints Board, the Board found in favour of the customer in whole or in part in 15 per cent of the cases, compared with 21 per cent in 2016. A high percentage would indicate that the threshold for succeeding with a complaint internally in Gjensidige was high.
Personal data shall only be used and stored for as long as this is necessary, and they shall be deleted immediately when they are no longer needed, unless special exemptions are authorised by law.
The data protection officers have an independent role and are in contact with the Norwegian
In 2017, we started an extensive process to ensure that we meet the requirements set out in the new personal data legislation that enters into force in spring 2018.
Notification of matters warranting criticism Gjensidige shall have a low threshold for reporting unpleasant matters. Employees who wish to raise such matters can contact their manager, the HR Department, their HSE manager, an employee representative or the safety delegate.
Notifications addressed to the internal mailbox are dealt with by the Company’s HR department
based on clear procedures. Relevant matters are reported to the Group’s risk committee and the Board of Directors.
Ethical and customer-friendly business operations Gjensidige shall have a corporate culture where each individual employee exercises good judgement and is able to handle difficult situations that may arise. Our value creation shall take place in accordance with our ethical guidelines. They are set out in a number of policy documents that are adopted by the Board and managed by the EVP of Group Staff and General Services.
Gjensidige’s internal regulations state that the Company has zero tolerance for corruption and anything resembling corruption. The regulations consist of instructions and a group policy adopted by the Board. The group policies for corporate social responsibility, the group policy on the code of conduct, the group policy on specific ethical guidelines relating to hospitality activities and guidelines on welfare measures, seminars and gifts are also relevant in this context.
Our anti-corruption programme consists of three main elements: 1. Preventive activities 2. Control and detection 3. Follow-up and sanctions
Control and detection include audits, compliance, notification/whistleblowing, reporting and internal investigation.
Follow-up and sanctions take place in accordance with policies and instructions, and are decided by HR and, ultimately, the CEO.
It is not permitted to accept gifts worth more than NOK 500. Regardless of the gift’s value, it must not be accepted if it means that the employee’s partiality or independence can be placed in doubt.
All gifts and hospitality activities must be registered in the Company’s gift and hospitality register.
All managers are responsible for establishing procedures and processes in their area of responsibility in order to prevent and uncover irregularities and fraudulent acts, including corruption. Our Internal Investigation Unit is tasked with uncovering corruption, and it is responsible for investigating concrete cases where improper conduct is suspected. The unit shall also contribute to establishing and developing procedures and processes that can prevent and uncover such matters.
All new employees in the Group participate in an introductory course at which ethics and corruption are on the agenda.
Gjensidige does not make donations to politicians, political parties or organisations with a mainly political agenda.
Investigation of suspicion of unethical conduct The Internal Investigation Unit considered 48 cases in 2017 concerning suspicion of malpractices or irregularities. Four of these cases gave grounds for especially thorough investigations, but none of them concluded that corruption had taken place.
In cases where there is a sufficiently strong suspicion of money laundering or financing of terrorism, Gjensidige will report the matter as a suspicious transaction to the Norwegian National Authority for Investigation and Prosecution of Economic and Environmental Crime (Økokrim).
The work to combat money laundering is prioritised at corporate management level. Instructions relating to money laundering have been adopted by the Board, and a risk assessment focusing on money laundering is presented to the senior group management once a year. The importance of combating money laundering is clearly communicated at all levels.
Most purchasing agreements are the result of competitive tendering carried out in accordance with adopted guidelines. All our suppliers must sign a self-declaration on corporate social responsibility. By signing this declaration, they undertake to: • Conduct their business in a way that does not violate internationally recognised principles and guidelines relating to human and labour rights
• Ensure that manufacturers and sub-suppliers of goods and/or services to Gjensidige do not violate internationally recognised principles and guidelines relating to human and labour rights
The environment and climate Gjensidige’s activities do not pollute the natural environment to any material extent. Our CSR policy states that the we shall have as little negative impact on the environment and climate as possible.
handling and reduction of materials consumption, waste, energy consumption and transport.
At our Copenhagen office, systems and procedures for handling and sorting waste are approved by the City of Copenhagen’s environmental authorities.
The Group’s energy consumption in 2017 was 12,773 MWh. Most of our energy consumption is related to lighting, heating and computers. The energy carriers are electricity, which in Norway is almost exclusively based on hydropower; district heating, which is largely based on waste incineration; and fuel oil.
We help our employees to be environmentally friendly, both in the performance of their duties, as employees in general and in their spare time, among other things through information published on our intranet site.
Gjensidige did not cause illegal emissions or receive fines or other sanctions relating to the environment in 2017.
In 2017, the proportion increased from 65 to 70 per cent.
Every year, Gjensidige conducts an emerging risk analysis in order to identify risk relating to phenomena and trends that may represent new risk or changed risk. Such trends can represent both threats against our business and opportunities to create new business. The analysis is intended to describe risks that can be significant, but that cannot be quantified by means of experience-based methods. The purpose of this exercise is not to calculate an exact value for different outcomes, but rather to establish a basis for further discussion, analysis and decisions.
Block chain: This technology is best known for digital currencies, but it enables completely new ways of handling transactions and keeping an overview of rights. It is important for us to keep up to date on this technology and to be prepared to start using it if it becomes expedient.
Synthetic biology: Technology for growing cells and tissue in laboratories and tailoring them to specific purposes opens up new possibilities in the prevention and treatment of diseases and injuries. This may affect mortality, life expectancy and treatment needs, and could significantly impact the financial aspects of life and health insurance.
In Oslo, Gjensidige cooperates with the Church City Mission on creating a better and safer environment in the city centre, where the Company’s head office is located. On Gjensidige’s part, this cooperation involves a financial contribution to the Church City Mission and participation by our employees. In 2017, employees from several offices all over the country contributed to the Church City Mission’s knitting campaign, which is organised before Christmas every year to get people involved and raise money for a Christmas celebration for disadvantaged people.
In all the three Baltic countries, we are conducting ‘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 loss prevention and to prevent accidents, fires and burglaries.
In Latvia, we are doing a tour of the biggest schools, teaching children about safety in the home. We sponsor and help to organise the Fire Safety Conference, which targets business and industry.
Corruption • Group policy for handling irregularities and malpractices, including corruption • Instructions for handling irregularities and malpractices, including corruption
Employees, proportion men/women *** Per cent 52/48 53/ 47 52/ 48 50/ 50
Managers, proportion men/women *** Per cent 63/37 64/ 36 63/ 37 59/ 41
4. The main elements in the systems for internal control and risk management are described in section 10 of the statement, see section 10a below. The systems for internal control and risk management relating to the financial reporting process are described separately in section 10b.
5. The Company’s Articles of Association do not contain provisions that, in whole or in part, expand on or deviate from the provisions of Chapter 5 of the Public Limited Liability Companies Act.
The Board’s statement on corporate governance in Gjensidige Forsikring ASA is available at www.gjensidige.no.
Core values and social responsibility Gjensidige’s core values and social mission lie in its core business operations – to safeguard life, health and assets through relieving customers of financial risk and providing active, helpful assistance when there is a risk of loss or when a claim has arisen.
Gjensidige has signed the UN Global Compact and we are committed to promoting the ten Global Compact principles for sustainable development. This is particularly important in relation to our asset management, where ethical screening is used to ensure that we do not invest in companies that are in breach of our ethical standards.
Through our operations, we have acquired extensive expertise in loss prevention. This know-how shall as far as possible be used for the benefit of society as a whole. Traffic and fires are especially important areas in which the Company’s expertise in loss prevention can help to save lives and assets. Other important areas are awareness-raising campaigns aimed at combating fraud and other crime, and efforts to promote physical and mental health in the population. The Company’s efforts in the area of corporate social responsibility will be concentrated on loss prevention in the broadest sense.
The Company’s financial investments shall comply with generally accepted guidelines for socially responsible investments (SRI). Gjensidige’s guidelines for SRI cover human rights, labour rights, the environment, corruption and weapons production. Companies that fail to meet the requirements set out in the guidelines will be excluded from Gjensidige’s investment universe.
Vision and goals Gjensidige’s vision is to know the customer best and care the most. Its mission is to safeguard life, health and assets, which has been the Company’s value basis for two hundred years.
Gjensidige’s position shall be further strengthened through the development of Gjensidige as a pan-Nordic general insurance player that also takes its share of the growing accident and health insurance market. Acquisitions shall complement organic growth and contribute to the Company delivering on its strategic goals, and the following group targets after 2–3 years: • a return on equity of more than 15 per cent • a combined ratio in the range of 90–93
Customers’ needs and behaviour are changing faster than ever. It is therefore paramount to reduce the time it takes to develop and launch new customer-oriented services.
a transition is needed from traditional training- based competence-raising measures to a dynamic learning culture driven by individual managers and employees. Competence shall increasingly be shared through data-driven work processes and cooperation-based solutions. A stronger overall understanding shall be created through internal rotation of managers and staff.
Gjensidige Bank and Gjensidige Pensjonsforsikring play an important strategic role in relation to Gjensidige’s position in the Norwegian market. Exclusive customer solutions and concepts will continue to be important in both the private and commercial markets.
As part of our strategic work, we constantly challenge our strategic platform. The main conclusion is that it remains firm, also after the changes we see in the market, including further development of Gjensidige’s partner strategy using new technologies.
Gjensidige shall have a capitalisation that is adapted to the Group’s strategic targets and risk appetite at all times. The Group shall maintain its financial flexibility and at the same time exercise a stringent capital discipline that supports the return on equity target.
Adopted dividend for 2016 A dividend of NOK 3.4 billion was adopted and disbursed in April 2017 for the 2016 financial year. That corresponds to NOK 6.80 per share.
Authorisations granted to the Board Gjensidige’s annual general meeting granted the following authorisations to the Board in 2017: – Authorisation to purchase Gjensidige shares in the market with a total nominal value of up to NOK 50,000,000, corresponding to 25,000,000 shares with a nominal value of NOK 2. The authorisation is valid until the next annual general meeting, but no longer than until 30 June 2018, and the shares can, among other things, be used as consideration shares in connection with the acquisition of businesses or for subsequent sale and deletion The authorisation can also be used to fulfil the Group’s obligations under the share savings programme and incentive schemes for employees. The Board is free to acquire and sell shares in the manner that the Board finds expedient, such, however, that general principles concerning equal treatment of shareholders are adhered to. The minimum and maximum amounts that can be paid per share are NOK 20 and NOK 225, respectively. In 2017, the authorisation was used to purchase shares in connection with the share savings programme for employees and incentive schemes for executive personnel. The authorisation was considered as a separate item at the Company’s annual general meeting.
– Authorisation of the Board to decide the distribution of dividend on the basis of the Company’s annual accounts for 2016. The authorisation is valid until the next annual general meeting, but no longer than until 30 June 2018. The authorisation is in accordance with the Company’s adopted capital strategy and dividend policy. It gives the Company flexibility and means that the Company can
When the Board proposes new authorisations to the general meeting, they shall, in the same way as the existing authorisations, be considered as separate items at the Company’s annual general meeting, be limited to defined purposes and be valid until the next annual general meeting.
Deviations from the Code of Practice: The authorisation of the Board to carry out share capital increases and to purchase own shares is not entirely limited to defined purposes. Steps were not taken to ensure that the general meeting could vote on each individual purpose the authorisations were intended to cover. This was done in order to ensure the flexibility the authorisations was meant to represent.
Each share carries one vote at the general meeting, unless otherwise stipulated by law or other official decision.
Deviations from the Code of Practice: None 5. Freely negotiable shares Pursuant to the Articles of Association, the shares in the Company are freely negotiable. Gjensidige is a Norwegian financial institution. Norwegian framework legislation contains general licensing provisions that apply to all Norwegian financial institutions in connection with large acquisitions of shares (ten per cent or more).
The general meeting is conducted in accordance with the Code of Practice: – The Articles of Association stipulate that three weeks’ notice shall be given. The notice of the meeting and case documents are made available on the Company’s website: Shareholders may nonetheless demand that the case documents be sent to them free of charge. The minutes will be published at as soon as they are available.
– If necessary, and if the nature of the matter so requires, the whole Board and the whole Nomination Committee will be present at the meeting.
– Shareholders may attend by proxy. The notice of the meeting will contain more detailed information about the procedure for attendance by proxy, including an authorisation form. In addition, a person will be appointed who can vote by proxy on behalf of shareholders.
be present at the general meeting. It has so far not been necessary for all the above parties to be present, but this may change depending on the circumstances relating to the matters to be considered. In accordance with the Articles of Association, the Chair of the Board, the Chair of the Nomination Committee, the Company’s auditor and the CEO will be present to answer any questions.
As of 31 December 2017, the Nomination Committee consisted of the following members: – Einar Enger (Chair) – Marianne Ødegaard Ribe – John Ove Ottestad – Torun Bakken Skjervø – Joakim Gjersøe
The Nomination Committee shall contribute to the election of competent and engaged officers with a focus on value creation. The objective is that, together, the elected officers shall be capable of challenging and inspiring the management in the Company’s business areas.
Deviations from the Code of Practice: None 8. The Board, composition and independence Composition of the Board The Board of Gjensidige shall consist of ten members, three of whom are elected by the employees. The shareholder-elected board members are elected for two years at a time. Board members elected by and from among the employees are also elected for two years at time, but such that at least one member is up for election every year.
The Chair of the Board is elected for one year at a time by the general meeting.
The Board’s independence No member of the Company’s management is a member of the Board. All shareholder-elected board members are independent of executive personnel. Board members Eivind Elnan, Per-Arne Bjørge and Hilde Nafstad were elected on the proposal of the Company’s biggest owner, the Gjensidige Foundation. All board members are independent of important business associates.
The Board holds regular physical board meetings and holds nine fixed meetings every year. Additional meetings may be held depending on the matters at hand and the situation. They can be held by phone or electronically using the Company’s board portal. In 2017, a total of 11 board meetings were held, of which one was an extraordinary board meeting and one was held via the board portal. One of the ordinary meetings was an annual strategy meeting. The Board also held a study session to obtain external input on the Board’s strategy revision.
The committee shall state an opinion on the election of the auditor and the auditor’s fee. The committee held seven meetings in 2017.
The Risk Committee The Risk Committee is a preparatory and advisory select committee. Among other things, the Risk Committee shall prepare the Board’s consideration of matters relating to the group companies’ overall risk, and regularly assess whether the Group’s management and control systems are adapted to the appetite for risk and scope of the business. The committee also reviews the Company’s risk limits and investment strategy and limits. It also prepares the Board’s consideration of ORSA and ICAAP, and of whether the risk management system ensures that the internal model reflects at all times the Group’s risk profile in an appropriate manner.
As of 31 December 2017, the Risk Committee consisted of the following members: – Inge K Hansen (Chair) – Per Arne Bjørge – John Giverholt – Lotte Kronholm Sjøberg
The committee is an advisory body to the Board. It held one meeting in 2017.
As of 31 December 2017, the Remuneration Committee consisted of the following members: – Inge K Hansen – Eivind Elnan – Gunnar Mjåtvedt
The Board’s impartiality The Group’s rules of procedure for the Board regulate matters concerning board members’ impartiality. A board member is disqualified from participating in considering or deciding matters that are of such great importance to the board member or his/her related parties that he or she must be deemed to have a direct or indirect
personal or financial interest in the matter. The same applies to the CEO. Board members are also disqualified when other special circumstances are present that could undermine trust in their motives for participating in deciding a matter.
In 2017, the Chair of the Board recused himself in connection with the consideration of one matter following an impartiality assessment.
Deviations from the Code of Practice: None 10 Risk management and internal control a) General The Board focuses on risk management and internal control, which are an integral part of the Board’s systematic work. The Board has adopted a group policy for rik management and internal control. Among other things, the document describes the main principles for risk management and internal control, in addition to describing the division of responsibility. The document is available at
The main purpose of risk management and internal control is to provide reasonable assurance of goal attainment based on the following methods: • Targeted, efficient operations.
• The Board shall ensure that such processes are satisfactorily established, implemented and followed up, among other things by considering reports prepared by the Risk Management and Compliance functions that are submitted to the Board by the CEO and the internal audit function, which reports directly to the Board.
The Actuary function is an independent control function that is responsible for actuarial matters. The control tasks that have been assigned to the Actuary function follow from Section 28 of the Financial Undertakings Act concerning the implementation of the Solvency II Directive.
The internal audit function is an independent, objective confirmatory and advisory function that shall contribute to the organisation achieving its goals. Group Audit is the Company’s third-line defence. It is tasked with carrying out an independent risk assessment that covers all the Group’s operations. Group Audit’s primary responsibility is to monitor and check the Group’s processes for risk management, internal control and corporate governance. The head of the internal audit function is appointed and dismissed by the Board and submits reports on the Group’s risk management and internal control to the Board and the CEO at least once a year.
b) Financial reporting and financial management Among other things, the CFO is responsible for asset management, risk and capital management, the Actuary function, the planning process and financial performance. Among other things, the Executive Vice President of Group Staff and General Services is responsible for financial reporting and follow-up of the results of and limits on investment activities. This organisation is intended to ensure independence between the leading premise setter for profit performance and those who report the results.
Requirements and principles for outsourced functions or activities are specified in the ‘Group Policy on Outsourcing’, which has been approved by the Board. The policy ensures compliance with the requirements of the outsourcing provisions in Norwegian law and the Solvency II regulations.
All functions and activities that are not defined as core functions and activities may be outsourced provided that Gjensidige retains full responsibility for the discharging of the entity’s obligations.
• Intragroup outsourcing shall always be in line with relevant market prices and conditions; in other words, the same conditions shall apply as for outsourcing to an external party. Particular care should be taken when considering intragroup outsourcing, so that potential conflicts of interest are identified and mitigated.
In connection with the outsourcing of important work processes, such as payroll and ICT services, the Group obtains statements in accordance with ISA3402 in order to assess the contracting party’s internal control. The purpose of this is to ensure that the contracting party has satisfactory internal control. Gjensidige’s own security department also performs independent security checks of the contracting party in relation to ICT systems, including access control and the protection of sensitive data.
As a rule, board members or companies with which they are associated shall not take on specific assignments for the Company in addition to their office as a board member. If such assignments nonetheless arise, the whole Board shall be informed about this. No such assignments were carried out in 2017, and no fees have therefore been paid to board members over and above the remuneration they receive as members of the Board.
Deviations from the Code of Practice: None 12. Remuneration of executive personnel The Group has established a remuneration system that applies to all employees. The system is intended to ensure that Gjensidige attracts and retains employees who perform, develop, learn and share. The remuneration shall be competitive, but the Group shall not be a wage leader. Employees are expected to take an overall view of the pay and benefits offered by the Group. The Group’s remuneration systems shall be open and performance-based, so that they, as far as possible, are perceived as being fair and predictable. The remuneration that is paid shall correspond to the agreed performance.
Guidelines for remuneration and career development shall be linked to achievement of the Group’s strategic and financial goals and core values, and both quantitative and qualitative targets shall be taken into consideration. The measurement criteria shall promote the desired corporate culture and long-term value creation, and, as far as possible, take actual capital costs into account. The remuneration system shall contribute to promoting and providing incentives for good risk management, prevent excessive risk-taking and contribute to avoiding conflicts of interest. A fixed basic salary shall be the main element of the overall remuneration, which also consists of variable pay, pension and insurance schemes, and payments in kind. Variable pay shall be used to reward achievements that exceed expectations, where both results and behaviour in the form of compliance with core values, brand and management principles will be assessed.
Variable pay shall be performance-based without being a risk driver, and it shall reflect the results and contributions of both the Company, the division, the department and the individual employee. Other compensation elements offered shall be perceived as attractive by both new and current employees.
The Board’s guidelines for stipulating the remuneration of the Senior Group Management and executive personnel meet the regulatory requirements.
The remuneration of the CEO is decided by the Board on the basis of an overall assessment that takes into account Gjensidige’s remuneration system and the market salary for corresponding positions. The fixed salary is assessed and stipulated annually based on wage growth in society in general and in the financial industry in particular. Variable remuneration (bonus) is decided by the Board on the basis of agreed goals and deliveries. It can amount to up to 50 per cent of the fixed salary including holiday pay. Variable remuneration is earned annually and is based on an overall assessment of financial and non-financial performance over the past two years. Half of the variable remuneration is in the form of a promise of shares in Gjensidige Forsikring ASA, one third of which are allocated in each of the following three years. Restricted variable remuneration that has not yet been disbursed may be reduced if subsequent results and developments indicate that it was based on incorrect assumptions.
Remuneration of the senior group management is stipulated by the CEO within limits discussed with the Remuneration Committee and on the basis of guidelines issued by the Board. Correspondingly, the Group’s guidelines are used as the basis for other executive personnel and employees who can materially influence risk.
The guidelines are submitted to the general meeting as a separate item in accordance with the Public Limited Liability Companies Act Section 6-16 a. The general meeting’s decision on the guidelines in the statement on the remuneration of executive personnel is advisory in relation to the Board, except the part of the document that concerns share-based remuneration, which is binding. As a result, the general meeting holds an advisory vote on the Board’s statement on the stipulation of pay and other remuneration and the Board’s guidelines for the stipulation of pay for executive personnel, as well as a binding vote on the new guidelines for the allocation of shares, subscription rights etc. that the Board proposes pursuant to the Public Limited Liability Companies Act Section 6-16 a (1) no 3.
Deviations from the Code of Practice: None 14. Corporate takeovers The Company has one big owner, the Gjensidige Foundation. The Foundation has laid down in its statutes that its ownership interest shall amount to at least 60 per cent of the shares issued in Gjensidige.
The guidelines are in compliance with the Norwegian Code of Practice for Corporate Governance. The Board will obtain independent valuations and draft a recommendation on whether or not the shareholders should accept the bid.
Company’s shareholders are treated equally and kept up-to-date about relevant matters relating to the bid. The shareholders must be informed as soon as possible to give them time to consider the bid. Endeavours will otherwise be made to avoid undue disruption of other activities during a takeover process.
The Board shall not attempt to prevent bids being made, and, as a rule, it shall seek to facilitate the implementation of bids that may be in the interests of the shareholders. The Board shall not take such actions as described in the Securities Trading Act Section 6-17 without first obtaining instructions from the general meeting. The Company shall not use authorisations to issue shares to prevent a bid.
In order to look after the shareholders’ interests, the Board shall consider whether to initiate processes that trigger competing bids in a way that safeguards the shareholders’ interests.
As a rule, the Company shall engage the services of an independent legal adviser and an independent financial adviser in its work of assessing a submitted or notified serious bid. These advisers cannot represent the Company’s shareholders in connection with the transaction. Grounds shall be stated for the experts’ valuation.
The external auditor normally carries out an interim audit every autumn in addition to auditing the annual accounts. The interim audit focuses on the Company’s internal control in relation to the presentation of the accounts. The accounting department and executive personnel have regular contact with the auditor throughout the year.
A policy and guidelines have been adopted for relations with the elected auditor. At least every five years, several accounting companies will normally be invited to tender for the contract for the statutory auditing.
The underwriting result was NOK 3.4 billion, corresponding to a combined ratio of 85.4. The result was on a par with the result in 2016, adjusted for non-recurring effects. Earned premiums increased by 4.3 per cent to NOK 23.4 billion. Claims expenses increased by 5.7 per cent. Expenses resulting from large losses were lower than expected in a typical year. Run-off gains were as expected. The result is affected by good customer and risk selection and sensible risk pricing.
Our ambition is to create the best customer experience in our industry, and we call this the Gjensidige Experience. One of the most important ways of achieving this goal is through training and competence-raising for our employees. The development of digital services and use of data and insight to ensure that we are relevant to our customers’ everyday lives are also becoming more and more important.
The Gjensidige Insurance Group achieved a solid result in 2017 as well. Customer satisfaction increased to a record level, and competitiveness remained good.
plicity. Our customers can buy insurance, seek advice and report claims on the internet when it suits them. At the same time, continuous efforts are being made to rationalise internal work processes so that we can continue to improve our service to customers in a seamless way across different channels.
Gjensidige had a market share of 23.9 per cent in the private market at the end of the third quarter 2017. The market share in the commercial market was 28.4 per cent.
In the Baltic general insurance market, Gjensidige had a market share of 9.8 per cent at the end of third quarter. (Sources: Insurance Supervisory Commission of the Republic of Lithuania; Latvian Insurers Association; Statistics Estonia, Gjensidige, all third quarter 2017.)
Distribution Norway Gjensidige has approximately 760,000 customers in the Private segment and around 150,000 in the Commercial segment in Norway.
Gjensidige’s commercial customers in Norway are primarily served through dedicated sales channels (around 80 per cent of the premium volume). The other customers are mostly served indirectly through insurance brokers.
The sales centres and customer service centres are responsible for external sales and for serving
The customer portal gjensidige.no plays an increasingly important role in relations with our customers. In the portal, private and commercial customers can see an overview of their insurance policies. They can manage their customer relationship themselves, for example by reporting a claim or keeping track of case processing on the internet. A considerable proportion of sales to private customers in Norway is now initiated at gjensidige.no. Almost 60 per cent of customers use the internet at one or several points in the purchasing process, and more than 60 per cent of all frequency claims are reported online.
Nordic Gjensidige distributes general insurance products in Denmark through its own sales network and in cooperation with the Nykredit group. In addition, private insurance products are sold through a number of partners, especially travel agents, car dealers and estate agents. Otherwise, the private market is served directly via underwriters, telephony and the internet.
Baltics The most important distribution channels in the Baltic states are direct sales via offices or by phone, and sales through insurance agents and brokers. Sales via the internet are increasing, but still make up a small proportion of overall sales. Gjensidige aims to continue to develop cost-efficient, multi-channel distribution models also in the Baltic market, with the emphasis on web-based solutions and telephony.
Gjensidige Pensjonsforsikring cooperates closely with Gjensidige Forsikring on the distribution of pension and accident and health insurance agreements to Norwegian companies and private individuals. Gjensidige Pensjonsforsikring is the only player in the market that offers funds exclusively managed externally, and it has highly efficient solutions for membership administration and information about pension rights.
Technology and development Technological development and digitalisation continue with undiminished intensity. Gjensidige is always looking for new opportunities to improve its customer service and rationalise its operations.
Among other things, Bjørge has previously been a bank director with Kreditkassen (Nordea) and worked as an auditor. He has a bachelor in economics and is a qualified auditor.
Striking a balance between continuity and modernisation will continue to be important. New technology is providing more and more opportunities to collect and utilise market and customer data and better assess risk. Gjensidige is investing in technology and expertise on a continuous basis in order to generate and utilise relevant insight.
We have merged our development and technology capacity and expertise to form a single effective group entity called Technology and Development. This entity shall be a driving force for the realisation of projects in Gjensidige’s strategic focus areas and shall ensure increased use of best practice across the Group.
One important task is to develop and improve digital user interfaces and services for our customers.
The work on automating internal processes continued unabated in 2017, at the same time as we developed more customer-oriented solutions based on new technology. We have identified between 250 and 300 processes that can be digitalised and/or automated. Roughly 20 per cent of this potential was realised in the course of 2017.
Developments in the Nordic and Baltic segments according to plan Operations in the Nordic region (excl. Norway) saw a considerable growth in volume in 2017 as a result of the acquisition of Mølholm Forsikring in Denmark and Vardia in Sweden. Our Baltic business had its first full year of operation following the integration of business acquired late in 2015. The premium volume from operations outside Norway accounted for 32.6 per cent of the total general insurance premium volume in 2017.
Gjensidige has a scalable business model in the Nordic countries. This means that we can attract the best qualified candidates in the market, and it enables us to invest in state-of-the-art technology. Combined with our experience data, based on a long history and big customer databases, this leads to sophisticated analytical insight and competitiveness that can be utilised across segments and geographical borders.
Goal attainment – financial and operational targets In connection with the annual update of the Group’s capital management policy, the Board adopted new solvency margin targets (previous targets in brackets): - The standard formula: 120–150 per cent (115–140) - Partial internal model: 125–175 per cent (120–175)
The cost ratio is expected to be around 15 per cent. Continuous efforts are being made to reduce the underlying cost base in order to create room for investments in new technology, the brand and relevant expertise, and thereby ensure good competitiveness going forward.
The best digital customer experience in general insurance Gjensidige is developing digital service solutions in step with changes in customer preferences and to make operations more and more efficient.
In 2017, a lot of attention has been devoted to simplifying and digitalising processes for claims handling and the purchase of insurance. The results of this work has been encouraging.
Dividend Nominal high and stable. Payout ratio >70 per cent Payout ratio 79 per cent*
Cost ratio ~15 per cent 15.3 per cent * Dividends based on profit for the year.
The purchase process for accident and health insurance policies that require a health declaration was massively improved when we launched a simplified digital health declaration with automated assessment. The solution means that many customers will have their insurance applications processed in a matter of seconds, while they used to have to wait for several weeks.
In autumn 2017, we launched a simple ‘chat-bot’ that can help customers with frequently asked questions about claims. The solution will be further developed to be able to handle a broader range of questions from customers.
In 2017, we established joint infrastructure for analytical CRM also outside Norway. This will enable increased cross sales, better customer communication and greater accuracy in external sales activities. CRM is an area with a considerable potential, also in the time ahead.
Dynamic organisational development Technological possibilities, customer behaviour and other framework conditions are changing at an increasing pace. This will make increasing demands of management, expertise, dynamic organisational development and corporate culture. Increased technological understanding and mobility in the organisation are preconditions for our capacity for change and development.
In addition to being a member of the board of Gjensidige Foundation, he is Chair of the board of Scuti AS, Industrivegen 10 Verdal AS, Braxi AS and Ax Innovasjon AS. He is also a member of the board of Securo AS.
An important prerequisite for succeeding in the time ahead will be to continue to develop our corporate culture. We therefore focus on team-based work across functional boundaries, and on removing organisational obstacles. The goal is to continue developing an organisation characterised by efficient cooperation and the sharing of knowledge across organisational entities.
Strategic staffing planning is an important foundation for competence and organisational development. The right expertise in the right place at the right time is important. We must be capable of attracting, retaining and developing our employees, and this is something we focus strongly on. A strengthening of insurance, analytical and digital skills throughout the organisation will be emphasised in the follow-up of managers going forward. Measures in this context will include activities through the Gjensidige Customer and Brand School, planned secondments and job rotation. A gradual shift will have to be made from in-house learning programmes to innovative platforms that enable managers and employees to learn to develop themselves.
Satisfied, loyal customers Gjensidige’s recognition in the Norwegian market is stable and high, and most customers consider Gjensidige when they are buying insurance. According to Ipsos’s annual surveys, we have the best reputation of the biggest companies in the Norwegian financial sector. In 2017, we were awarded the Ipsos Reputation Prize, for a consistently high and growing reputation in Norway. In Denmark, determined efforts are being made to increase familiarity with Gjensidige. Unaided familiarity in the Danish market was 15 per cent on average in 2017.
The customer satisfaction rate showed positive development and increased from 77.4 in 2016 to a record-strong 77.9 in 2017. Satisfaction is highest among customers who have reported a claim or been in dialogue with Gjensidige for other reasons.
The proportion of Gjensidige Pensjonsforsikring’s customers who also have general insurance policies in Gjensidige Forsikring is approximately 70 per cent.
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. At year-end 2017, 90 per cent of customers were aware of the customer dividend model and more than 70 per cent stated that the model contributed to their wanting to continue as customers. Awareness of the customer dividend system among potential customers was around 60 per cent.
In the Commercial segment, we have a number of organisational and chain agreements with industry associations and individual companies. New agreements were established and existing agreements renewed in 2017.
We also entered into a partnership agreement with the retail group Dansk Supermarked in 2017. So far, we have launched an electronics insurance policy for households (‘Husets elektronikkforsikring’), which covers most electric and electronic appliances people have in their homes. The insurance is sold through the chains Bilka and Føtex and online at wupti.dk. More types of concept insurance policies are being developed that will be distributed via Dansk Supermarked’s stores and web portals.
Growth through acquisitions Gjensidige has clear ambitions for growth in the Nordic region and the Baltics. Since 2005, Gjensidige has acquired a considerable number of small and medium-sized companies and/ or portfolios in these markets. The acquisition of complementary companies and portfolios enables us to utilise best practice across the Group based on a scalable business model.
In April 2017, a dividend of NOK 3.4 billion was distributed based on the profit for 2016, in line with a dividend policy that aims for a high and stable nominal dividend.
An attractive share The Gjensidige share yielded a total return for shareholders of 19 per cent in 2017, corresponding to the return on Oslo Børs in the same period. During the period since the Company was listed on the stock exchange in December 2010, the Gjensidige share has yielded a total return of 346 per cent. The average daily trading volume on Oslo Børs was around 416,000 shares in 2017, and the share is one of the 25 most liquid shares listed there. In addition, a substantial number of shares are traded in other marketplaces. Gjensidige pursues a shareholder-friendly capital and dividend policy, and the Gjensidige share is and should be a dividend-paying share.
Although the regulations have entered into force, there is still some uncertainty about how the calculation of capital requirements and qualifying funds will take place under the new rules. For Gjensidige, the biggest remaining uncertainty factors are whether provisions for the guarantee scheme will be included in qualifying funds, and uncertainties relating to tax. The Financial Supervisory Authority takes the view that the guarantee provision shall be treated as a liability. In Gjensidige’s opinion, special Norwegian provisions that are actually an equity element should be treated as solvency capital. Gjensidige will continue to make endeavours to ensure that the regulations are in line with this view.
A proposal was submitted in 2015 to change the tax deduction right with effect from 1 January 2016. The proposal meant that the deduction right would be limited to provisions calculated in accordance with the Solvency II regulations. In its original form, the proposal could have had significant negative tax consequences for Gjensidige, both upon its introduction and in the future. The introduction was postponed as a result of consultation submissions received. The Ministry of Finance will carry out a more thorough assessment of the various factors that were pointed out during the consultation. The national budget for 2018 signalled that new rules will soon be distributed for consultation, but it is still unclear whether and, if so, how the new deduction rules will be changed.
General Insurance Private 2,200.0 2,196.7 General Insurance Commercial 1,634.8 1,631.3 General Insurance Nordic 192.4 247.3 General Insurance Baltics (7.2) (99.5) Corporate Centre/costs related to owner (272.4) (10.6) Corporate Centre/reinsurance 1 (337.5) (230.6) Underwriting result general insurance 2 3,410.1 3,734.6
Pension 103.7 114.8 Retail Bank 612.3 439.1 Financial result from the investment portfolio 3 2,002.6 2,155.1 Amortisation and impairment losses of excess value – intangible assets (261.3) (254.2) Other items (38.3) (49.5) Profit/(loss) for the period before tax expense 5,829.1 6,139.9
Gisele Marchand (1958) has been a member of the Board of Gjensidige since 2010. She is CEO of the law firm Haavind AS, a board member and chair of the audit committee of Norgesgruppen AS and Selvaag Bolig ASA, and a board member of Eiendomsspar AS, Victoria Eiendom AS, Scatec Solar ASA and Boligbygg Oslo KF. She has previous experience from several Boards, e.g. Norske Skog ASA and Oslo Børs AS.
With the exception of claims provisions relating to the Danish workers’ compensation portfolio and accident and health claims in Swedish third-party liability motor insurance, Gjensidige’s claims provisions are recognised at nominal value (not discounted). In preparation for expected changes in IFRS and the introduction of Solvency II, Gjensidige has, with effect from the second quarter 2010, calculated but not recognised the effect on the combined ratio of discounting the claims provisions. For 2017, the combined ratio on a discounted basis would have been 84.8, compared with 82.4 based on the recognised nominal amount.
Expenses for research and development have not been charged to income in Gjensidige’s consolidated accounts in 2017 or 2016. Nor have such expenses been capitalised during these two financial years. The parent company has continued its collaboration with the Norwegian Computing Centre and SFI (Statistics for Innovation), which are carrying out projects relating to risk assessment and data analysis.
Off-balance sheet commitments and derivatives As part of the Group’s investment activities, an agreement has been entered into for the investment of up to NOK 1,392.5 million (1,174.3) in loan funds with secured loans and various private equity and property fund investments, in addition to the amounts recognised in the balance sheet.
tional activities mainly consists of payments in the form of premiums and net payments on/disbursements of loans from the banking operations and from the sale of investment assets, plus payments in the form of claims settlement costs, purchases of reinsurance, administration expenses and tax.
The net cash flow from operational activities was NOK 1,718.1 million (2,512.8) in 2017. There is a large positive cash flow from the insurance operations. The difference between the operating profit and the cash flow from operational activities is due to the nature of the business, whereby investments in financial assets are part of operations. The change in the cash flow in 2017 can largely be explained by higher investments in securities because of a lower dividend in 2017 than in 2016.
The net cash flow from financing activities mainly consists of payments made/received in connection with external debt financing and the payment of dividend to shareholders. The net cash flow from financing activities was negative in the amount of NOK 397.5 million (3,224.5) in 2017. The change is largely due to the distribution of a lower dividend in 2017.
General Insurance Private The underwriting result was NOK 2,200.0 million (2,196.7). The positive effect from higher run-off gains was offset by a higher underlying loss ratio. The combined ratio was 74.2 (73.5).
NOK 154.3 million. Adjusted for this and for one large leisure contract that was not renewed from 1 January 2017, premium growth was a satisfactory 3.1 per cent. Premiums for property and accident and health insurance increased, while leisure insurance premiums decreased. Adjusted for the one contract mentioned above, leisure insurance showed growth in premiums. Motor premiums were stable.
Operating expenses amounted to NOK 1,090.3 million (1,063,8) and the cost ratio was 12.8 (12.8).
General Insurance Commercial The underwriting result was NOK 1,634.8 million (1,631.3). The lower level of large losses was offset by a less favourable underlying frequency claims development. The combined ratio was 77.6 (77.5).
Hilde Merete Nafstad (1963) has been a member of the Board of Gjensidige since 2017. She is Vice President Finance and Control in Statoil, and is a Master of General Business from BI (siviløkonom). She is a deputy member of the general assembly of Gjensidige Foundation.
Large losses 1 195.2 448.6 Run-off gains/(losses) 2 452.9 486.5 1 Large losses = loss events in excess of NOK 10.0 million. Claims incurred in excess of NOK 30.0 million per event are charged to the Corporate Centre.
General Insurance Nordic The underwriting result was NOK 192.4 million (247.3). The reduction in the underwriting result was driven by higher large losses and a run-off loss in Sweden. This was partly offset by an increase in the underwriting result in Denmark, mainly due to lower large losses and higher run-off gains. The combined ratio was 97.1 (95.8). The combined ratio in Denmark was 94.1 (94.7), while the combined ratio in Sweden was 105.3 (99.9).
Earned premiums increased to NOK 6,563.5 million (5,917.8). Currency effects increased earned premiums by NOK 9.8 million. The Mondux transfer reduced earned premiums by NOK 105.4 million, and the Mølholm acquisition contributed NOK 345.4 million. The premiums in the Danish portfolio accounted for around 74 per cent of total premiums in the segment. In Denmark, growth was slightly negative, driven by a decline in commercial insurance lines that was partly offset by growth in private insurance lines. The underlying premium development in the Swedish portfolio was positive, driven by both private and commercial insurance lines.
Amortisation and impairment losses of excess value – intangible assets (224.2) (216.8) Large losses 1 128.3 161.6 Run-off gains/(losses) 2 93.2 150.7 1 Large losses = loss event in excess of NOK 10.0 million. Claims incurred in excess of NOK 30.0 million per event are charged to the Corporate Centre.
Claims incurred amounted to NOK 736.0 million (748.4). The underlying difference was NOK 4.5 million higher when adjusted for currency effects. The reported loss ratio was 68.5 (72.2), mainly due to an improved underlying frequency claims development. Continued improvements in tariffs and the claims handling process are expected to further improve profitability going forward.
Operating expenses amounted to NOK 345.9 million (387.4). The underlying difference was NOK 2.3 million higher when adjusted for currency effects. The cost ratio improved to 32.2 percent (37.4), mainly due to restructuring and cost-saving initiatives.
Among other things, Kronholm Sjøberg has previously held position as a consultant in the change and ownership-departement in Nykredit Forsikring. Among other things, she has studied at Copenhagen Business School and has a Master’s Degree in mediation and conflict resolution from Faculty of Law, Copenhagen University.
Kronholm Sjøberg is up for election to the Board in 2019.
From 1 January 2018, the Nordic segment will be reported as two segments, Denmark and Sweden, respectively.
Net financial income, including returns on both the group policy portfolio and the corporate portfolio, increased to NOK 29.7 million (26.4) due to reclassifications of income the preceding year following clarifications from the Norwegian FSA. Apart from this, net financial income decreased in 2017 due to reduced interest income related to the company portfolio after the issuing of a subordinated loan (Tier 2) of NOK 300 million in June the year before, in addition to a generally reduced yield on the group portfolio. The company’s share of the profit related to the paid-up policy portfolio was allocated in its entirety as a longevity provision.
Assets under management increased by NOK 5,461.7 million. At the end of the year, pension assets under management amounted to NOK 28,699.0 million (23,237.3) including the group policy portfolio of NOK 6,018.4 million (5,409.6).
Recognised return on the paid-up policy portfolio 3 3.75 % 4.08 % Value-adjusted return on the paid-up policy portfolio 4 4.47 % 4.87 % 1 Run-off gains/(losses) = changes in estimates from previous years 2 Operating margin = net operating income/(net insurance revenue + management income etc.) 3 Recognised return on the paid-up policy portfolio = realised return on the portfolio 4 Value-adjusted return on the paid-up policy portfolio = total return on the portfolio
Retail Bank The profit before tax expense increased to NOK 612.3 million (439.1). The improvement was the result of higher income driven by portfolio growth and increased margins as well as lower write-downs and losses. The result includes a non-recurring gain of NOK 116.6 million from the sale of an impaired unsecured lending portfolio during November 2017. The contribution from the merged savings and investment operations was NOK 11.2 million (10.1).
Net interest income amounted to NOK 992.3 million (797.3). The improvement was driven by business growth and increased margins.
Total write-downs and losses amounted to NOK 10.3 million (69.5). The sale of the impaired unsecured lending portfolio resulted in a gain of NOK 116.6 million, of which NOK 107.7 was related to write-downs. Adjusted for the portfolio sales in 2017 and 2016, total write-downs and losses were NOK 118.0 million (82.1), primarily related to the unsecured lending portfolio. This was the result of portfolio growth and changes in credit policy. Write-downs and losses were 0.02 per cent (0.18) of average gross lending. Normalised for the portfolio sale, the ratio was 0.27 per cent (0.21). The weighted average loan-to-value ratio1 was estimated to be 60.6 per cent (61.7) for the mortgage portfolio.
Gross lending increased by 11.7 per cent and amounted to NOK 46,056.1 million (41,249.5) at the end of the year. Deposits increased by 11.7 per cent, reaching NOK 23,765.7 million (21,270.4). The deposits-to-loans ratio was 51.6 per cent (51.6).
On 20 April 2017, the Pillar 2 requirement for Gjensidige Bank ASA was set at 1.5 per cent by the Norwegian Financial Supervisory Authority. The core equity Tier 1 capital for the bank had to be increased to 13.0 per cent with effect from 30 June 2017. As a result, the bank increased its equity through a private placement of NOK 195.0 million with the parent company, and it issued a perpetual 1 The estimate is based on the exposure at the reporting date and the property valuation at the time the loan was approved, including any higher priority pledge(s).
1 Net interest margin = net interest income/average total assets 2 Write-downs and losses = write-downs and losses/average gross lending 3 Cost/income ratio = operating expenses/total income
Tier 1 capital instrument with a total nominal value of NOK 70.0 million in the second quarter. As of 31 December, the requirement for core equity Tier 1 capital was 13.5 per cent.
After the annual evaluation process, Standard and Poor’s kept the rating unchanged for Gjensidige Bank ASA and its subsidiary Gjensidige Bank Boligkreditt AS at a long-term and short-term counterparty credit rating of A/A-1, outlook ‘stable’. The covered bonds portfolio issued by Gjensidige Bank Boligkreditt kept its long-term rating of AAA and the outlook remained ‘stable’
Match portfolio The match portfolio amounted to NOK 35.6 billion (35.1). The portfolio yielded a return of 2.8 per cent (3.5), excluding changes in the value of the bonds recognised at amortised cost.
The geographical distribution1 of the match portfolio is shown in the chart on page 72.
Free portfolio The free portfolio amounted to NOK 19.3 billion (18.9) at the end of the period. The return was 5.3 per cent (4.6) for the full-year.
Fixed-income instruments The fixed-income instruments in the free portfolio amounted to NOK 9.2 billion (10.1), of which money market investments, including cash, accounted for NOK 4.1 billion (4.3). The rest of the portfolio was invested in international bonds (investment grade, high yield and convertible bonds). The total fixed-income portfolio yielded a return of 2.8 per cent (5.2). It was positively affected by good returns on convertible bonds, high yield bonds and investment grade bonds, and a moderate return on money market investments and cash.
Financial result from the invesment portfolio 3.7 3.9 2,002.6 2,155.1 54,860.2 53,957.7
2 The item includes investment grade, emerging market and current bonds. Investment grade and emerging market bonds are investments in internationally diversified funds that are externally managed.
The Board stipulates annual limits for the Group’s reinsurance programme. The limits are defined based on the need to protect equity against large loss events or other significant negative developments. Reinsurance is also used to safeguard the underwriting result and provide protection against the frequency of medium-sized and large losses. The reinsurance programme is described in more detail in Note 3 to the consolidated annual accounts.
The technical provisions are intended to cover claims that have incurred and been reported to the Company (RBNS), and claims that have incurred but not yet been reported (IBNR). There will always be a risk that these provisions will be insufficient. Gjensidige therefore makes continuous efforts to further develop methods and models based on new experience and knowledge. External actuaries are sometimes used to perform independent calculations of the best estimate for technical provisions.
Ethical issues are discussed at training courses for new employees and they are also discussed regularly by management groups and at departmental staff meetings. This is intended to reduce the risk of breaches of procedures and guidelines, while also contributing to a good working environment. Employees have also signed a personal data discipline statement relating to the use of the Group’s information and IT systems.
Risk management is described in more detail in Note 3 to the consolidated annual accounts.
In the insurance market, Gjensidige faces challenges from both traditional Norwegian financial players and new companies. Increased digitalisation and new business models entail new challenges. Emphasis is therefore placed on Gjensidige’s ability
More and more is expected of our staff and managers in terms of expertise. There is a risk that inadequate or insufficiently adapted expertise will reduce our chances of realising commercial and strategic ambitions. There is also competition to attract and retain capable employees. Targeted efforts are therefore being made to ensure that we have the right expertise at all levels of the organisation, including through systematic staffing and succession planning and arrangements that ensure good internal mobility among employees.
Employees, corporate social responsibility and the environment Gjensidige has endorsed the UN Global Compact principles and follows Oslo Børs’s guidance on the reporting of corporate social responsibility. Our work on corporate social responsibility is described in a separate statement on pages 22–39 of the annual report. The Board of Gjensidige has adopted guidelines for how the Company shall exercise social responsibility. The guidelines and the group policy for socially responsible investments are available at www.gjensidige.no/group.
3. Over the next 3-5 years, average annual run-off gains are expected to be around NOK 1,000 million, moving the expected reported combined ratio to the lower end of the 86-89 corridor (undiscounted).
4. Regulatory uncertainty relating to Solvency II is unchanged. All else being equal, this supports the already strong capital position.
Over time, dividend pay-outs will reflect Gjensidige’s policy not to build unnecessary excess capital.
In order to support the three strategic priorities and ensure strong competiveness in future, efficiency measures are being taken to create room for increased investments, primarily in the fields of technology, competence development and brand strength.
Competition is still strong in the Norwegian general insurance market. Gjensidige has managed to capitalise on its position as market leader in Norway, and its competitiveness remains good. It has strengthened its leading position relative to its main competitors in parallel with delivering good profitability and high customer satisfaction. The growth rate is expected to remain subdued in the short to medium term, although an uptick in inflation and growth will lead to increased insurance premiums. Continued efforts to maintain and further strengthen Gjensidige’s position in the Norwegian market will be prioritised, with particular focus on ensuring cost-efficiency and improving digital customer experiences. At the same time, new, profitable opportunities for growth will be considered in the Nordic region and the Baltic states in order to ensure good utilisation of a scalable business model and best practice. Strong emphasis will also be placed on further developing cooperation with partners and distributors.
Geopolitical uncertainty, low interest rates and financial challenges in several key economies, as well as in the Nordic countries, reflect an uncertain economic situation and remain a source of uncertainty. Gjensidige has a robust investment strategy, although returns are affected by challenging market conditions. The Group is financially sound and has a high proportion of its business in the Norwegian general insurance market. The macroeconomic outlook in the Nordic region and the outlook for Gjensidige’s operations are still regarded as good.
There are still some outstanding uncertainties relating to changes to the regulatory framework conditions for the financial sector in Norway and internationally. Gjensidige has submitted an application to use its own partial internal model (PIM) under the Solvency II Regulation. After the balance sheet date, Gjensidige received feedback from the FSA with regards to this. See note 23 for further description. Endeavours will continue to be made to win acceptance for inclusion of the guarantee provision as solvency capital.
Allocation of the profit before other income and expenses The Group’s profit for the year after tax expense amounted to NOK 4,519.3 million. The Board has adopted a dividend policy that forms the basis for the dividend proposal submitted to the general meeting. The Board proposes a dividend of NOK 3.55 billion for the 2017 financial year. This corresponds to NOK 7.10 per share, or 78.6 per cent of the Group’s profit after tax.
The Board wishes to thank each individual employee for their contribution to Gjensidige’s good results in 2017.
Declaration from the Board and the CEO ...................185 Auditor’s report .........................................................186
Interest expenses etc. and write-downs and losses from banking operations (649.8) (680.1)
Share of other comprehensive income from associates and joint ventures (0.7) 0.3
Tax on items that are not reclassified to profit or loss 9 85.7 39.7
Total items that are not reclassified subsequently to profit or loss (257.7) (118.7)
Total items that may be reclassified subsequently to profit or loss 489.1 (337.1)
Total comprehensive income attributable to: Owners of the company 4,754.4 4,214.6
Oslo, 15 February 2018 – The Board of Gjensidige Forsikring ASA
Goodwill 11 3,557.4 3,140.2 Other intangible assets 11 1,472.2 1,360.5 Deferred tax assets 9 11.3 19.1 Investments in associates and joint ventures 5 1,859.4 1,601.6 Interest-bearing receivables from joint venture 5, 13 1,620.1 1,420.2 Owner-occupied property, plant and equipment 12 290.1 321.9 Pension assets 10 206.0 488.7
Financial assets Financial derivatives 13 674.0 1,335.4 Shares and similar interests 13, 14 7,328.3 6,892.1 Bonds and other securities with fixed income 13 30,734.2 30,385.8 Bonds held to maturity 13 1,136.0 1,625.9 Loans and receivables 13, 15 67,010.1 60,030.6 Assets in life insurance with investment options 13 22,565.5 17,780.0 Reinsurance deposits 0.3 Reinsurers' share of insurance-related liabilities in general insurance, gross 16 827.4 706.8 Receivables related to direct operations and reinsurance 5,840.8 5,621.5 Other receivables 15 1,064.5 945.9 Prepaid expenses and earned, not received income 15 189.9 91.3 Cash and cash equivalents 2,685.2 2,158.7
Provision for liabilities Subordinated debt 13, 18 1,947.3 1,946.8 Premium reserve in life insurance 5,784.9 4,127.0 Provision for unearned premiums, gross, in general insurance 16 9,961.4 9,527.9 Claims provision, gross 16 31,322.7 32,447.5 Other technical provisions 339.6 297.3 Pension liabilities 10 578.3 511.8 Other provisions 19 328.6 342.1
Tax on items that are not reclassified to profit or loss 39.7 39.7
Tax on items that may be reclassified to profit or loss 66.6 0.1 66.7
Tax on items that are not reclassified to profit or loss 85.7 85.7
Tax on items that may be reclassified to profit or loss (88.2) (88.2)
Total components of other comprehensive income 0.3 488.4 (256.6) (0.7) 231.3
Equity as at 31.12.2017 attributable to the owners of the company
Net receipts/payments from sale/acquisition of subsidiaries, associates and joint ventures (502.6) (92.2)
Net receipts/payments on sale/acquisition of owner-occupied property, plant and equipment and intangible assets (328.1) (110.7)
Effect of exchange rate changes on cash and cash equivalents 40.5 (33.1)
Norway. The company’s head office is located at Schweigaardsgate 21, Oslo, Norway. The consolidated financial statements of the
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 2017, Norwegian disclosure requirements as set out in the Accounting Act as at 31 December 2017 and additional disclosure requirements in accordance with the
Gjensidige are mentioned below. Gjensidige does not plan early implementation of these standards.
IFRS 2 has been amended regarding the classification and measurement of share-based payment transactions with a net settlement feature for withholding tax obligations. If the entity is obliged to withhold an amount for an employee’s tax obligation associated with a share-based payment, and transfer that amount in cash to the tax authority on the employee’s behalf, then the entity shall account for that obligation as an equity-settled share-based payment transaction. The amendments are effective from 1 January 2018. The tax obligation in Gjensidige’s remuneration scheme will be reclassified from liability to equity as at 1 January 2018. From this date the tax obligation will be accounted for as an equity-settled share-based payment transaction instead of a cash-settled sharebased payment transaction. Our preliminary assessment is that the amendment is not expected to have a significant effect on
According to prevailing rules, impairment for credit losses shall only be recognised when objective evidence of impairment losses exists.
During 2017, Gjensidige Bank has worked extensively to put together an internal model to comply with the new IFRS 9 guideline.
The new impairment requirements are expected to increase the bank’s provisioning for expected credit losses with NOK 13.8 million or 7.7 per cent. Total provisioning for credit losses amounted to
Capital Adequacy ratios will take into consideration the amortisation schedule proposed by the Norwegian regulations (transition rule).
The impact on the Common Equity Tier 1 capital ratio, before the transition rules, was assessed as immaterial at 0.044 per cent. Year 1 impact in the Common Equity Tier 1 capital ratio after transition rules was estimated at 0.002 per cent.
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 2021. The effect of such a deferral is that the entities concerned may continue to report under the existing standard, IAS 39 Financial Instruments. In addition, the insurance sector of a financial conglomerate is allowed to defer the application of IFRS 9 until 1 January 2021, where all of the following conditions are met: • no financial instruments are transferred between the insurance sector and any other sector of the financial conglomerate other than financial instruments that are measured at fair value with changes in fair value recognised through the profit of loss account by both sectors involved in such transfers; • the financial conglomerate states in the consolidated financial statements which insurance entities in the group are applying IAS 39; • disclosures requested by IFRS 7 are provided separately for the insurance sector applying IAS 39 and for the rest of the group applying IFRS 9.
IFRS 16 requires all contracts that qualify under its definition as a lease to be reported on a lessee’s balance sheet as right of use assets and lease liabilities. Earlier classification of leases as either operating leases or finance leases are removed. Short-term leases
IFRS 16 is effective 1 January 2019. The standard is expected to have an effect on Gjensidige’s financial statements, significantly increasing Gjensidige’s recognised assets and liabilities and potentially affecting the presentation and timing of recognition of charges in the income statement.
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 nonmonetary 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.
The operating segments are determined based on Gjensidige’s internal organisational management structure and the internal financial reporting structure to the chief operating decision maker. In
Gjensidige reports on six operating segments, which are independently managed by managers responsible for the respective segments depending on the products and services offered, distribution and settlement channels, brands and customer profiles. Identification of the segments is based on the existence of segment managers who report directly to the Senior Group
Gjensidige Forsikring controls an investee when it is exposed, or has the rights, to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee. The subsidiaries are included in the consolidated financial statements from the date that control commences until the date that control ceases. If the Group has the majority of voting rights in an entity, the entity is presumably a subsidiary of the
The purchase price allocation of the business combination changes if there is new information about the fair value applicable per date for acquisition of control. The allocation can be changed up to 12 months after the acquisition date (if the purchase price allocation that was completed at the acquisition date was preliminary). Noncontrolling interests are calculated on the non-controlling interests of identifiable assets and liabilities or at fair value.
Earned premiums from general insurance Insurance premiums are recognised over the term of the policy.
Financial expenses consist of interest expenses on loans that are not part of the banking operations, realised losses related to
88 | Gjensidige annual report 2017 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 are recognised in profit or loss using the effective interest method.
The estimated useful lives for the current and comparative periods are as follows, with technical installations having the highest depreciation rate
Depreciation method, expected useful life and residual values are reassessed annually. An impairment loss is recognised if the carrying amount of an asset is less than the recoverable amount.
Operational lease contracts Leases, where the most of the risk and return associated with ownership of the asset are not transferred, are classified as operating leases. Lease payments are classified as operating expenses and are recognised on a straight-line basis over the contract period.
Development expenditures (both internally and externally generated) is capitalized only if the development expenditure can be measured reliably, the product or process is technically and commercially feasible, future economic benefits are probable, and
The amortisation period and amortisation method are reassessed annually. An impairment loss is recognised if the carrying amount of an asset is less than the recoverable amount.
• significant reduction in earnings in relation to historical or expected future earnings
Provisions for life insurance Technical provisions regarding life insurance in Gjensidige
The category investments held to maturity comprises the class bonds held to maturity.
The category financial liabilities at amortised cost comprises the classes subordinated debt, deposits from and liabilities to customers, interest-bearing liabilities, other liabilities, liabilities related to direct insurance and accrued expenses and deferred income. Interest-bearing liabilities consist mainly of issued certificates and bonds, and buy-back of own issued bonds.
Other items classified as equity Natural perils capital and guarantee scheme provision are accounted for as equity because the funds belong to the group. As a consequence they do not meet the requirement for liability in IAS
Loans, receivables and investments held to maturity For financial assets that are not measured at fair value, an assessment of whether there is objective evidence that there has been a reduction in the value of a financial asset or group of assets is made on each reporting date. Objective evidence might be information about credit report alerts, defaults, issuer or borrower suffering significant financial difficulties, bankruptcy or observable data indicating that there is a measurable reduction in future cash flows from a group of financial assets, even though the reduction cannot yet be linked to an individual asset.
An assessment is first made to whether objective evidence of impairment of financial assets that are individually significant exists.
Provisions are recognised when Gjensidige has a legal or constructive obligation as a result of a past event, it is probable that this will entail the payment or transfer of other assets to settle the
The share-based payment arrangements is measured at fair value at the time of allocation. Fair value is accrued over the period during which employees acquire the right to receive the shares. Sharebased 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 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.
The provider of intra-group services, that are not considered core activities, will as a main rule, allocate its incurred net costs (all costs included) based on a Cost Contribution Arrangement as described in OECD Guidelines chapter 8 and on the basis of paragraph 13-1 in the Norwegian Tax Act.
Goodwill Goodwill is tested for impairment annually or more often if there are indications that the amounts may be subject to impairment. The testing for impairment entails determining recoverable amount for the cash-generating unit. Normally recoverable amount will be determined by means of discounted cash flows based on business plans. The business plans are based on prior experience and the expected market development. See note 11.
Individual write-downs are assessed before the write-down on groups is determined. If there is objective evidence that a financial asset is impaired, a write-down is made for the estimated loss.
For certain lines within accident and health insurances, it may take ten to 15 years before all the claims that occurred in a calendar year are reported to the company. In addition, there will be many instances where information reported in a claim is inadequate to calculate a correct provision. This may be due to ambiguity concerning the causal relationship and uncertainty about the injured party’s future work capacity etc. Many personal injury claims are tried in the court system, and over time the level of compensation for such claims has increased. This will also be of consequence to claims that occurred in prior years and have not yet been settled.
94 | Gjensidige annual report 2017 3. Risk and capital management
Gjensidige Bank ASA. Financial risk is also a material risk for the group.
In this note, the risk management system will be described first.
Group, excluding Gjensidige Bank ASA. Finally, the capital requirement for these risks and the capital management will be described.
The primary responsibility for risk management and internal control is held by every employee and leader in the group. This is the first line of defence. There are established procedures and guidelines that must be followed, and risk management and internal control is therefore performed as a part of all employee’s daily work. Control functions in line management are incorporated into the overall internal control system. Such functions include risk and compliance coordinators, group security, data privacy officer, anti-money laundry officer and quality functions reviewing distribution and claims handling.
The CEO has an overall responsibility for the risk management of the group. The Group’s capital management committee has an advisory role with regard to the assessment and proposal of changes in use of capital. The Group’s Risk Control Committee has an advisory role to the CEO with respect to overall Group Risk situation, and other risk management and internal control matters.
Gjensidige Forsikring ASA has established strategies, policies and more detailed guidelines, routines and authorisation rules for main
Gjensidige annual report 2017 | 95 risk areas. Group policies are subject to approval by the Board of each company within the Gjensidige Forsikring Group based on local legislation.
In order to describe general insurance risk the most important components are elaborated below, and these are reserve risk, premium risk and lapse risk.
Reserve risk is the risk that the current claims provisions are not sufficient to cover the development of already incurred claims and related expenses. Reserve risk reflects the emergence of uncertainty related to: • Actual claims' size (for reported, but not yet settled claims, i.e. RBNS) being higher than expected,
• Claims incurred but not yet reported (IBNR) being greater than expected, and
Estimation uncertainty is an inherent character of the claim provisions. Several factors contribute to this uncertainty and include claim frequency and claim severity. An increase in the frequency of claims can be due to seasonal effects and more sustainable effects.
Norway Workers’ Compensation covers both accident and diseases, while in Denmark diseases are covered by a governmental body. The compensation in Norway is exclusively in the form of lump sums, while in Denmark the compensation consists of both lump sums and annuity payments. Annuity payments are calculated on the basis of assumptions about mortality, interest rate and retirement age. For bodily injuries the severity of claims is also influenced by court awards, which tend to increase the compensation more than the general inflation. This is also a significant factor, due to the long period typically required to settle these cases.
At the end of the accident year 12,418.5 12,384.4 11,856.9 13,843.0 14,695.5 12,814.0 14,468.1 14,294.9 12,138.9 13,196.7 13,667.3 - Ten years later 11,762.3
Premium risk originates from the following factors: • Uncertainty in premium rates
Lapse risk is defined as the risk of a change in value caused by deviations from the actual rate of policy lapses from their expected rates, i.e. an increase in the level of customers leaving the company. Gjensidige considers lapse risk to be limited for non-life and health insurance business, as the main effect of higher lapse rates will be a reduction in future profit.
Table 2a – Gross premiums written per line of business, Gjensidige Insurance Group
An underwriting policy approved by the Board gives guidelines for fundamental principles and responsibilities in product and tariff development, risk selection and determination of the terms and pricing of individual risks. The Analytics, Product and Price division of Gjensidige Forsikring ASA has overall responsibility for the management of the underwriting policy for the entire Group.
Gjensidige’s internal model is used to determine long-term profitability targets for each line of business.
The Group CEO delegate authority to the respective executive vice presidents of the Analysis, Product and Price, Private, Commercial,
Actuary departments hold regular meetings together with the business areas to capture changes in the development of reported claims. This includes communication in respect of the
In addition more specific requirements on managing insurance risk are given in underlying guidelines and instructions.
Mortality risk is the risk that actual mortality rates are higher than expected. It is defined as a permanent increase in mortality rates for all ages. Higher mortality rates will result in higher claim payments to the surviving spouse or children. Mortality risk in Gjensidige
Pensjonsforsikring AS is low as there is a limited amount of policies covering mortality risk. In addition mortality rates are low, so an increase in these will have a limited impact. This means that it is not the risk of increased mortality that is dominant for Gjensidige
Longevity risk is the risk that actual mortality rates are lower than expected. Lower mortality will result in a higher total of pension payments for guaranteed products. The company cannot charge additional premium for contractual periods previously entered into.
Pensjonsforsikring AS has been increasing reserves in order to satisfy the mortality tariff “K2013”. Per 01.01.2018 the reserves must be further increased by NOK 17.65 million.
100 | Gjensidige annual report 2017 the contract boundary is longer. For some products, the company cannot increase the administration fee if the expenses increase
For information on managing life insurance risk, see description under managing insurance risk under general insurance.
Financial risk is the risk of experiencing losses due to changes in macroeconomic conditions and/or changes in financial asset values and liabilities. Gjensidige is exposed to these types of risk through the Group’s investment activities. The risk is managed at the aggregate level and handled through the guidelines for asset management and investment strategies, which have been drawn up for Gjensidige Forsikring ASA and its subsidiaries. The primary purpose of the investments is to support the insurance business by securing the value of insurance liabilities against fluctuations in market variables. Funds beyond this will be invested to help achieve the Group's overall profitability goals, with a controlled downside risk.
Risk exposure Within market risk the largest risks are spread risk and equity risk for Gjensidige Insurance 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 Insurance Group. Consequently, equity risk is greatest for Gjensidige Forsikring ASA. The investments in property through Oslo Areal AS contribute to property risk. There is also some currency risk, while the interest rate risk and concentration risk contributes only marginally to the total risk exposure.
The tables below show allocation of the fixed-income portfolio per sector and per rating category at year-end in 2017 and 2016.
Table 8 – Allocation of the fixed-income portfolio per rating category
Issuers without a rating from an official rating company are mainly investments in the Norwegian fixed-income portfolio,
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.
There are also investments in several private equity funds as well as fund of funds, focusing on the Nordic region.
After the majority of the remaining investment in Sparebank 1 SR-
Gjensidige Forsikring ASA. Gjensidige Forsikring ASA has a 50 per cent share in Oslo Areal AS, which is fully consolidated in the solvency calculations. The Group owns most of its properties through Oslo Areal AS, although a small part of the portfolio is invested in property funds outside Norway.
Figure 5a shows the expected pay-out pattern for the premium and claims provisions for the general insurance operation as at year-end 2017 and 2016, respectively. Approximately one third of the provisions are expected to be paid out within one year.
As mentioned the match portfolio is intended to correspond to the
Table 9 – Maturity profile (numbers of years) fixed-income portfolio NOK millions 2017 2016
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. Generally, foreign exchange risk in the investment portfolio is hedged close to 100 per cent, within a permitted limit of
+/- ten per cent per currency, except for smaller mandates with active currency management.
The Board yearly approves the investment strategy with limits for the various types of risk and asset allocation. A dynamic risk management model is established, which provides the necessary framework for rapid adaptation of risk to changes in market conditions and/or weak development for financial income.
The investment strategy defines several risk limits in order to have a diversified investment portfolio. The limits have been set to interest rate risk, asset and liability management risk (ALM-risk), credit spread risk, foreign exchange risk and asset allocation in the investment portfolio. There is also a limit for risk-adjusted capital for the investment portfolio. These limits are reported monthly and monitored frequently.
Gjensidige Forsikring ASA uses financial derivatives to hedge foreign currency risk arising from investments in securities, and the ownership of foreign branches with other functional currency.
• Interest rate: It is assumed that the yield curve taken as a whole changes with one percentage point
The Board sets the overall limit for the bank's credit risk appetite through its Credit Strategy and Policy and the Credit Risk Appetite
In relation to car finance, the bank also has a commercial lending offering in an exceptional basis to support the growth of the standard loans and leasing offered within the car finance business and to create awareness in the market of the banks products. This includes products like dealer floor finance, fleet finance to key players in the car dealer market and loans and leasing to a few corporates related to car business. Lending in the commercial segment are usually secured exposures and in addition the bank may require guarantees prior to approving the exposure.
NOK millions Gross lending Guarantees Total off balance commitments Individual writedowns Other exposures Maximum credit exposure
Gross lendings in default for more than 90 days amounted to NOK
254.4 million by the end of the year, compared to NOK 399.5 million in 2016. The total written-down balance on loans in 2017 amounted to NOK 180.3 million compared with NOK 387.6 million in 2016.
Market risk is the risk of losses associated with movements in market prices, which, in this context relate to positions and activities in the interest-, currency-, credit and stock markets.
MY. The bank’s limit for cumulative exposure to interest rate risk is 1,500 MY. Interest rate risk under three months is measured and reported, but the exposure is not included in the interest risk limits.
When the limit is fully utilised, the loss for the bank given a one percentage point change in the yield curve will be NOK 15 million.
The bank manages this risk by using derivatives. The bank changes from currencies into NOK with an approved counterparty on both principal and interest through "cross currency rate swaps". In practice this means that a combination of a bond in currency and cross-currency rate swap rate swap, the bond is converted from currency into a bond in NOK based on NIBOR. Under IFRS the changes in the fair value of the derivative related to changes in cross currency basis swaps are recognised as value change in financial instruments.
Bank ASA does not have market risk under Pillar 1 because the bank does not have a trading portfolio.
The largest loan is about NOK 308.0 million. The exposure related to the ten largest loans (limit) is about NOK 1,058,5 million. The bank's liquidity reserves are mainly placed in securities issued by the Norwegian government and Norwegian covered bonds (OMF).
Departmental managers in the various operational areas are responsible for identifying, limiting and managing the operational risks within their respective areas. Operational risks are identified and communicated via the bank's internal procedures which are tested regularly. Responsibility for follow-up of internal control rests with the Internal Control Manager.
The bank’s management regularly reviews its internal controls. The bank has a complex IT infrastructure that must function at all times.
It therefore has a particular focus on risks related to ICT/security.
Liquidity risk is the risk of the bank not being able to meet its debt obligations when due and/or not being able to finance growth of its assets without incurring a substantial increase in costs.
The bank shall have a liquidity reserve (buffer) in short-term deposits, liquid securities and/or committed credit facilities that, in an acute liquidity freeze in the market, allow sufficient time to implement the necessary measures.
As of 31 December 2017 the liquidity reserve was NOK 6,081.0 million, divided between NOK 430.1 million in bank deposits and
Loans to and claims on customers 440.9 848.6 3,556.0 16,481.4 36,723.5 323.1 58,373.5
Liabilities opened for the issue of securities 2.3 56.3 1,356.9 18,741.2 4,333.2 24,489.9
Certificates, bonds and other interest-bearing securities 103.3 6.8 710.0 2,440.5 405.8 3,666.5
The most important tool for managing strategic risk in Gjensidige is a robust Group strategy process and a dynamic performance management process.
The main governing documents for managing strategic risk are: • Group strategy
Capital management Gjensidige shall have a capitalisation that is adapted to the Group's strategic targets and risk appetite at all times. The Group shall maintain its financial flexibility and at the same time exercise a stringent capital discipline that supports the return on equity target. Any future excess capital will be distributed to the shareholders over time.
The current regulatory requirement for the Group is based on the standard formula specified by the Solvency II regulation. Gjensidige aims for a partial internal model for calculating the regulatory requirement. Application for an approval is sent to the Norwegian financial supervisory authorities. After the balance sheet date,
• Internal risk-based requirement based on the internal model, as defined by Gjensidige: 169 per cent.
• Rating requirement: A-rating from Standard and Poor’s: 106 per cent
ASA is NOK 11.2 billion. Eligible capital is NOK 18.9 billion. This gives a solvency margin of 169 per cent.
Forsikring Group, figures for the bank are included where it is relevant.
Capital Requirement (MCR) for solo companies and minimum consolidated group Solvency Capital Requirement for insurance groups. If the capital falls below this level, the company or group will be prohibited to continue the business any further. Minimum consolidated group SCR applies for the insurance group excluding the bank.
Total eligible own funds to meet the MCR/minimum consolidated group SCR
Table 17 – Eligible capital to cover the Solvency Capital Requirement
• Technical provisions are valued differently (see below for more details)
• Different valuation of deferred tax as a result of the differences above
According to Solvency II principles, technical provisions are derived as the sum of a best estimate and a risk margin. For non-life and health insurance the best estimate of technical provisions consist of the premium provisions and the claims provisions. The tables below show the technical provisions for Gjensidige Forsikring ASA and for the Gjensidige Forsikring Group according to accounting principles and Solvency II principles.
Claims provisions for non-life and health insurance are discounted in Solvency II, while the claims provisions (except claims provisions for workers’ compensation product in Denmark and motor vehicle liability insurance in Sweden) are undiscounted in the accounting figures. All other assumptions for Solvency II purposes are identical with the accounting assumptions.
Technical provisions for life insurance are based on a market value approach according to Solvency II principles, where future cashflows are discounted using the Solvency II interest rate curve. This is different from accounting principles where the guaranteed interest rate is used. Also, the main difference between accounting and
A risk margin is added to the technical provisions according to
Solvency II regulations. Gjensidige has mainly tier 1 capital, which is considered to be capital of best quality. Of the total amount of tier 1 capital, NOK 1,031 million comes from the restricted tier 1 category. This is the market value of bonds issued by Gjensidige
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 comprises of bonds issued by Gjensidige Forsikring ASA
Gjensidige Bank ASA (nominal amount of NOK 450 million). The market value of these bonds is NOK 1,960 million per 31.12.2017.
Table 20 – Eligible own funds to meet Minimum Capital Requirement, split by tiers
Total eligible basic own funds to meet MCR/minimum consolidated group SCR
Counterparty default risk and operational risk also contribute to the capital requirement. A diversification benefit is accounted for as all risks will not occur at the same time. The capital requirement is also adjusted for future tax benefit which would occur if a loss equal to the solvency capital requirement should occur. This tax benefit can only be accounted for if it is reasonable that the company is able to continue with its business after such a loss.
The Minimum Capital Requirement shall be between 25 per cent and 45 per cent of the SCR. The minimum capital requirement for
Gjensidige Forsikring ASA is NOK 4,702.1 million, which constitute 42 per cent of the SCR.
Gjensidige Forsikring ASA and subsidiaries are given in the table below.
The rating requirement results in the lowest excess capital at group level. Gjensidige’s target financial strength rating is ‘A’ (single A)
Calculation of technical provisions according to Solvency II principles was suggested in a letter from the FSA in June 2014. In August 2015 the Ministry of Justice cancelled a hearing regarding tax based on technical provisions calculated according to Solvency II principles, and the issue was postponed. The Norwegian government budget for 2018 suggests that new rules will be sent to hearing soon, but it is still unclear if and possibly how the new deduction rules will be changed. According to Gjensidige’s assessment, transition to Solvency II principles should not involve significant changes in the tax position and Gjensidige expects that the final regulations will reflect this.
There is uncertainty associated with the risk-reducing effect of deferred tax which is taken into account in the calculation of the capital requirement. This is a tax benefit that will occur if Gjensidige would receive an economic loss equal to the capital requirement. Such an effect can only be taken into account if it is likely that a continued operation of the company is possible and that there is a future profit that will make it possible to exploit this benefit. An international work is ongoing which may result in more
110 | Gjensidige annual report 2017 specific criteria for calculating the risk-reducing effect of deferred tax. This can lead to changes in the capital requirement.
Stress test The stress test for the Gjensidige Forsikring Group is defined in the
Capital Management policy approved by the Board. The main objective of the stress test is to demonstrate the adequacy of capital as a result of extreme but plausible events. The stress test is performed by summing up probable losses from the various areas of the business. Stress parameters for investments are chosen in order to reflect a loss probability of 1 in 200 on a quarterly basis.
The outcome of the stress test at year-end 2017 and 2016 is presented below.
Insurance risk (life and non-life) Expected loss CR > 100 (705.0)
• Interest rate risk is calculated on a 50 bps increase in the interest rates. It includes effect on both assets and liabilities
• Insurance risk: For non-life and health insurance business the expected loss is determined as the expected loss given that the combined ratio is above one hundred (calculated by the internal model). For life insurance business the stress is determined as the loss for death, longevity and disability insurance with probability of 1 in 200 on a quarterly basis (calculated by the standard formula).
Group’s internal reporting. The Group CEO holds regular meetings with its reporting managers for the different segments, concerning performance management, which focuses on future measures to ensure performance and deliveries.
The Private segment offers a wide range of general insurance products and services in the Norwegian private market, including insurances related to motor, property, accident and health and leisure.
The Commercial segment offers a wide range of general insurance products to the commercial, agriculture and municipality markets in
Norway, including insurances related to motor, property, accident, health, agriculture and marine/cargo.
The Nordic segment includes the Group’s operations in the Danish and Swedish private, commercial and municipal markets, including insurances related to motor, property, accident and health, liability, agriculture and leisure.
Description of the segments income and expenses Segment income is defined as earned premiums for general insurance, earned premiums and management income etc. for
The segment result is defined as the underwriting result for general insurance, and the profit before tax expense for Pension and Retail
from 1 January 2017. The new name of the former Pension and
Private Commercial Nordic Baltics Pension Retail Bank Eliminations etc. 1 Total
112 | Gjensidige annual report 2017 5. Shares in associates and joint ventures
Part of the agreement is that Gjensidige, through a price-adjustment mechanism, was exposed to the property market development with an amount corresponding to half of the proceeds during the period until 31 December 2016. Gjensidige therefore had a higher property-exposure in that period than the 50 per cent holding in
Oslo Areal has entered into contractual commitments to invest about NOK 490.0 million (30.0) in existing and new properties. The commitment falls due during the period until 31 December 2018.
114 | Gjensidige annual report 2017 6. Net income from investments
Net income from subsidiaries, associated companies and joint ventures 50.9 94.2
Net gains/(losses) from sale of subsidiaries, associated companies and joint ventures 255.8 184.1
Net gains/(losses) from changes in exchange rates on loans and receivables 40.0 (21.6)
Total net income and gains/(losses) from financial liabilities at amortised cost (41.9) (37.9)
Interest income from financial assets not recognised at fair value through profit or loss 738.8 886.8
Pension cost - defined benefit plan (note 10 incl. social security cost) 58.4 (419.5)
Total auditor's fee (incl. VAT) 6.7 7.6 1 Other expenses include cost reductions for Gjensidige Forsikring ASA in connection with duties performed for subsidiaries and cost allocations to claims and finance.
The average number of employees in the Group was 3,850 (4,029).
Guidelines for remuneration and career development shall be linked to achievement of the Group’s strategic and financial goals and core values, and both quantitative and qualitative targets shall be taken into consideration. The measurement criteria shall promote the desired corporate culture and long-term value creation, and, as far as possible, take actual capital costs into account. The remuneration system shall contribute to promoting and providing incentives for good risk management, prevent excessive risk-taking and contribute to avoiding conflicts of interest. A fixed basic salary shall be the main element of the overall remuneration, which also consists of variable remuneration, pension, insurance and payments in kind. Variable remuneration shall be used to reward performances which exceeds expectations, where both results and behaviour in form of compliance with the core values, brand and management principles are to be assessed.
The CEO’s salary and other benefits are stipulated by the Board on the basis of an overall assessment that takes into account
The fixed salary is assessed and stipulated annually on the basis of the wage growth in society in general and in the financial industry in particular. Variable remuneration (bonus) is decided by the Board on the basis of agreed goals and deliveries. It can amount to up to 50 per cent of the fixed salary including holiday pay. Variable remuneration is earned annually and is based on an overall assessment of financial and non-financial performance over the last two years. Variable remunaration is not included in the pension basis. The assessment takes into account the enterprise’s overall performance targets for return on equity adjusted for extraordinary dividends and transactions and combined ratio, as well as developments in customer satisfaction. In addition, it emphasizes the CEO’s personal contribution to the Group’s development and results, compliance with the Group’s vision, values, ethical guidelines and management principles.
The CEO does not receive performance-based benefits over and above the above-mentioned bonus, but may receive payments in kind such as a company car and the coverage of costs for electronic communication. Payments in kind shall be related to the
On retirement at the age of 60, a corresponding agreed reduction applies from 100 per cent upon retirement to 70 per cent upon reaching the age of 67. From the age of 67, the pension is calculated on the basis of the Company’s ordinary entitlement earning period of 30 years and is 70 per cent of the fixed salary with a full earning period. Company car arrangements and other benefits are retained until the age of 67.
Remuneration of executive personnel and employees who can materially influence the Group’s risk
Gjensidige annual report 2017 | 117 extraordinary dividends and transactions and combined ratio, as well as developments in customer satisfaction. In addition, it evaluates the target achievement of the business unit in question, as well as personal contribution relating to compliance with the
The retirement age for members of the senior group management is 62. The basis for the pension rights earned in the period between 62-67 years is based on the period the individual has been a member of the senior group management. One member has a retirement age of 70, in accordance with the national labour legislation. Of the current members of the senior group management, five are members of the closed Norwegian definedbenefit pension scheme. Given the full earnings period, they are entitled to a pension of 70 per cent of final salary at the full vesting period of 30 years. Three members are part of the Company’s defined-contribution pension scheme. The Company continues a previously agreed individual pension agreement for one member of the senior group management.
There are no early retirement schemes for executives who relinquish their position in Gjensidige Forsikring ASA in Norway beyond the one mentioned above. In accordance with practice in
Pension benefits and payments in kind follow the Group’s general arrangement.
Binding guidelines for shares, subscription rights etc. for the upcoming financial year
Share savings programme The Board has decided to continue the Group’s share savings programme for employees in 2018. The CEO and executive personnel are entitled to take part in the programme on a par with other Gjensidige employees. Under the current programme, employees can save through deductions from their salary for the purchase of shares in Gjensidige Forsikring ASA for up to NOK 75,000 per year. Purchases take place quarterly following publication of the results. A discount of 20 per cent of the purchase price is offered, limited upwards to NOK 1,500 in 2016 and NOK 3,000 from 2017. For those who keep the shares and are still employed in the Group, one bonus share is awarded for every four share they have owned for more than two years.
Catharina Hellerud, Executive Vice President 2,985.5 376.5 163.8 440.4 378.7 3,115 3,726 6,338 17,650 3
Jørgen Inge Ringdal, Executive Vice President 2,582.6 339.3 196.4 722.5 380.3 2,399 3,864 5,948 19,811 2
Hege Yli Melhus Ask, Executive Vice President (1.1.16-30.9.16) 9 2,668.1 247.7 160.6 470.9 260.6 1,039 3,221 3,375 11,204 3
Catharina Hellerud, Executive Vice President 2,910.2 360.6 165.0 486.7 404.2 2,835 4,387 6,949 15,055 3
Cecilie Ditlev-Simonsen, Executive Vice President (1.1.16-11.11.16) 1 1,874.7 20.0 146.4 423.2 0.0 2,295 3,358 5,341 0 3
Kaare Østgaard, Executive Vice President 2,732.3 304.9 171.3 763.6 324.7 2,432 3,866 6,127 11,103 3
Jostein Amdal, Executive Vice President (1.10.16-31.12.16) 1 781.1 104.4 40.8 97.5 117.2 32 38 283 13,193
Krister Georg Aanesen, Executive Vice President (1.10.16-31.12.16) 1, 10 662.3 90.5 37.7 57.5 80.7 25 0 197 854
The control committee and supervisory board are liquidated as of 1 January 2016.
The consequences of the tax relief decision have been incorporated into the tax expense and tax liabilities from the fourth quarter 2010.
The tax relief decision involves greater complexity and discretionary assessments, which entails a greater degree of uncertainty with respect to the tax expense and tax liabilities until all the effects have ultimately been evaluated by the tax authorities.
Tax Office for Large Enterprises in connection with the calculation of a tax gain as a result of the conversion of Gjensidige Forsikring
Natural perils capital Natural perils capital is considered to be a permanent difference for tax purposes and no deferred tax is calculated.
Occupational Pensions. The Company’s pension plans meet the requirements of the Act.
Gjensidige Forsikring’s branches and some of its subsidiaries have a defined contribution pension plan corresponding to the plan in
NOK 480 million was recognised in the pension expense and the pension liability was reduced correspondingly.
The reason for the low wage growth is that the pension plan is closed to new members and that the average age of employee members is 56.1 years.
122 | Gjensidige annual report 2017 the actuarial calculation of the pension liability in the balance sheet is based on.
Gjensidige manages employees’ wage growth based on collective agreements and individual agreements. Salary levels can increase strongly from one year to the next.
One of the proposed amendments is to make pension assets in the pension fund subject to a funding requirement in line with Solvency
Private collective pension (AFP) As a member of Finance Norway, Gjensidige has a collective (AFP)
pension agreement for its employees. AFP is a defined benefit scheme funded jointly by many employers. The administrator of the
Gjensidige annual report 2017 | 123 pension plan has not presented calculations that allocate the pension assets or liabilities in the plans to the individual member enterprises. Gjensidige therefore recognises the plan as a defined contribution plan.
Gjensidige’s share of total annual pay will not be acceptable since such a key is too simple and will not adequately reflect the financial liabilities.
Removed CPI indexing of current pensions 14.2 14.2 (449.3) (33.3) (482.6)
Net defined benefit obligation/(benefit asset) (205.5) 577.8 372.3 (488.3) 511.5 23.2
Removed CPI indexing of current pensions 14.2 14.2 (449.3) (33.4) (482.7)
Remeasurement of the net defined benefit liability/asset recognised in other comprehensive income
Gjensidige annual report 2017 | 125 11. Goodwill and intangible assets
As at 31 December 2016, including uncompleted projects 3,391.7 1,208.1 1,407.3 777.4 6,784.5
Impairment testing goodwill The carrying amount of goodwill in the Group as at 31 December 2017 is NOK 3.557,4 million.
Each of the units above is the smallest identifiable group of assets that generates cash inflows and are considered as separate cashgenerating units. The annual assessment of impairment losses was carried out in the third quarter of 2017. 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.
The discount rate is before tax, and is composed of a risk-free interest rate, a risk premium and a market beta. The risk-free rate is equivalent to a ten-year interest rate on government bonds in the respective countries where the subsidiaries and branches operate in and in addition a risk premium is added. The risk premium varies so that the discount rate is 7,5 per cent for all companies. This corresponds to the discount rate of the group and is the same as used in 2016. The group’s discount rate represents the group’s assumption of risk, and is the same independent of country.
128 | Gjensidige annual report 2017 13. Financial assets and liabilities
Financial derivatives at fair value through profit or loss 674.0 674.0 1,335.4 1,335.4
Financial derivatives at fair value through profit or loss 584.9 584.9 1,191.8 1,191.8
Financial derivatives at fair value through profit or loss 674.0 674.0
Financial derivatives at fair value through profit or loss 584.9 584.9
Financial derivatives at fair value through profit or loss 1,335.4 1,335.4
Bonds and other fixed income securities classified as loans and receivables 20,529.0 1.5 20,530.5
Financial derivatives at fair value through profit or loss 1,191.8 1,191.8
Bonds and other fixed income securities Change in value 10% 90.4
Sensitivity of financial assets valued based on non-observable market data (level 3) 2016
Bonds and other fixed income securities Change in value 10% 133.4
Fair value hedging Gjensidige utilizes fair value hedge to manage its currency risk in fixed agreements of acquisition of the operations. In 2017 this has been used regarding the acquisition of Mølholm Forsikring. Hedging is performed to prevent from valuation variations of a future settlement due to changes in the currency rate. Currency futures designed as hedging instruments are measured at fair value and changes in fair value are recognised continuously in profit or loss together with the change in fair value of the fixed agreement. The change in fair value of the fixed agreement is recognised in goodwill when the acquired operation is accounted for.
Net gain/loss recognised in profit or loss 0.7 14. Shares and similar interests
Total shares and similar interests owned by other group companies 774.6
Total shares and similar interests owned by the Gjensidige Forsikring Group 7,328.3
Group. Primarily this is loans with floating rate to customers in the private segment.
Of other loans NOK 63.1 million (80.3) are loans given to agricultural customers. Included in other loans are also NOK 40.0 million (40.0) in loans given with regard to sale of subsidiaries.
The loans for consumer goods are loans without a collateral requirement offered to private customers. The loans for auto financing are loans secured by motor vehicles, primarily cars. All loans are mainly given with floating rate.
Claims incurred, but not reported 15,468.8 (0.1) 15,468.7 14,847.2 (5.9) 14,841.4
Claims paid, prior year claims (7,210.9) 234.3 (6,976.5) (6,289.8) 417.8 (5,872.0)
Arising from current year claims 19,764.1 (624.6) 19,139.5 18,311.9 (477.3) 17,834.6
Arising from prior year claims (run-off) (1,164.8) 134.6 (1,030.3) (1,033.2) 9.8 (1,023.4)
Claims incurred, but not reported 17,185.8 (1.1) 17,184.7 15,468.8 (0.1) 15,468.7
The reason why the claims provisions for annuities are discounted is due to very long cash flows and substantial future interest income. The claims for occupational injuries in Denmark are paid either as annuities or as lump-sum indemnities (which are calculated mainly as discounted annuities). Therefore, it is most expedient to regard the whole portfolio as annuities. For Swedish
Over the next 3-5 years, average annual run-off gains are expected to be around NOK 1,000 million, moving the expected reported combined ratio to the lower end of the 86-89 corridor
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.
Gjensidige's share-based payment arrangements. Of these 191,277 (169,093) 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 33,199 (38,728) shares have been allocated to executive personnel within the share-based remuneration scheme and 36,132 (37,737) bonus shares have been allocated to employees in the share savings programme. Own shares are reduced by 5,745 (reduced by 41,358) through the year.
Gjensidige Bank ASA and Gjensidige Forsikring ASA, classified as equity. In connection with the issuance in 2016, NOK 3.2 million was recognised as a deduction in equity.
NOK 0.00 (4.00) based on excess 1 Proposed dividend for 2017 is not recognised at the reporting date, and it does not have any tax consequences.
Interest rate NIBOR 3M + 1.55% NIBOR 3M + 1.65% NIBOR 3M + 2.55% NIBOR 3M + 2.90% NIBOR 3M + 1.50%
Interest rate NIBOR 3M + 3.15% NIBOR 3M + 3.40% NIBOR 3M + 3.60% NIBOR 3M + 3.20 %
Deposits from and liabilities to customers without maturity date, bank 17,365.0 16,614.7
Fire Mutuals and Gjensidige Pensjonskasse 2 111.0 25.4 111.0 44.3 2 Gjensidige Forsikring ASA is a sponsor of Gjensidige Pensjonskasse and has contributed with funds equivalent to NOK 111.0 million.
Bank deposits Fire Mutuals Gjensidige Bank ASA 45.7 12.7 3 The companies merged in 2017.
The timing of the outflow of capital is dependent on when the funds are making capital calls from their investors. Average remaining operating time for the funds, based on fair value, is slightly less than four years (four) and slightly less than five years (six) in average including option for of extension.
According to the agreement with Gjensidige Pensjonskasse the return, if not sufficient to cover the pension plans guaranteed interest rate, should be covered from the premium fund or through contribution from Gjensidige Forsikring.
The fair value at grant date is based on the market price. The discount is recognised as payroll expenses at the time of allocation.
Weighted average exercise price will always be 0, since the scheme comprises shares and not options.
Income from investments in subsidiaries, associates and joint ventures 83.9 113.3
Impairment losses of investments in subsidiaries, associates and joint ventures (49.4) (94.2)
Tax on items that may be reclassified to profit or loss 9 (88.2) 66.6
Tax on items that are not reclassified to profit or loss 39.8 39.8
Tax on items that may be reclassified to profit or loss 66.6 66.6
Tax on items that are not reclassified to profit or loss 84.8 84.8
Cash and cash equivalents at the end of the year ¹ 1,625.0 1,143.0
Statement of compliance The financial statements have been prepared in accordance with the Norwegian Accounting Act and Norwegian Financial Reporting
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 2017. 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 2: Classification and measurement of share-based payment transactions (2016)
IFRS 2 has been amended regarding the classification and measurement of share-based payment transactions with a net settlement feature for withholding tax obligations. If the entity is obliged to withhold an amount for an employee’s tax obligation associated with a share-based payment, and transfer that amount in cash to the tax authority on the employee’s behalf, then
Basis of measurement The financial statements have been prepared based on the historical cost principle with the following exceptions
• financial instruments at fair value through profit or loss are measured at fair value
The financial statements are presented in NOK. The mother company and the different branches have respectively Norwegian,
In case of loss of control, significant influence or joint control, accumulated exchange rate differences that are recognised in other comprehensive income related to investments attributable to controlling interests, are recognised in the income statement.
Private and General insurance Norway, which are independently managed by managers responsible for the respective segments depending on the products and services offered, distribution and settlement channels, brands and customer profiles. Identification of the segments is based on the existence of segment managers who report directly to the Senior Group Management/CEO and who are responsible for the performance of the segment under their charge.
Premiums Insurance premiums are recognised over the term of the policy.
Gross premiums earned are calculated on the basis of the amounts
Claims incurred Claims incurred consist of gross paid claims, in addition to a change in gross provision for claims. Similarly, this also applies for the reinsurers’ share of the claims costs, which reduce the corresponding gross claims costs. Direct and indirect claims processing costs are included in claims incurred. The claims incurred contain run-off gains/losses on previous years’ claims
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 are recognised in profit or loss using the effective interest method.
Other intangible assets Other intangible assets which consist of customer relationships, trademarks, internally developed software and other intangible assets that are acquired separately or as a group are recognised at historical cost less accumulated amortisation and accumulated impairment losses. New intangible assets are capitalized only if future economic benefits associated with the asset are probable and the cost of the asset can be measured reliably.
Reinsurers’ share of provision for unearned premiums, gross and reinsurers’ share of claims provision, gross are included in reinsurers’ share of insurance-related liabilities in general
­insurance, gross. The reinsurers’ share is less expected losses on claims based on objective evidence of impairment losses.
Subsequent to initial recognition the instruments are measured as described below.
At fair value through profit or loss Financial assets and liabilities are classified at fair value through profit or loss if they are held for trading or are designated as such upon initial recognition. All financial assets and liabilities can be designated at fair value through profit or loss if
152 | Gjensidige annual report 2017 fair value of the fixed agreement is recognised in the cost price of the share when the acquired operation is accounted for.
Financial liabilities classified as equity Gjensidige has perpetual tier 1 capital accounted for as equity. The instruments are perpetual, but the principal can be repaid on specific dates, for the first time five years after it was issued. The agreed terms meet the requirements in the EU’s CRR/Solvency II
Provisions are recognised when Gjensidige has a legal or constructive obligation as a result of a past event, it is probable that this will entail the payment or transfer of other assets to settle the obligation, and a reliable estimate can be made of the amount of the obligation.
Deviations between estimated pension liability and estimated value of pension assets in the previous financial year and actuarial pension liability and fair value of pension assets at the beginning of the year are recognised in other comprehensive income. These will never be reclassified through profit or loss.
The preparation of the financial statements under IFRS and the application of the adopted accounting policies require that management make assessments, prepare estimates and apply assumptions that affect the carrying amounts of assets and liabilities, income and expenses. The estimates and the associated assumptions are based on experience and other factors that are assessed as being justifiable based on the underlying conditions.
Actual figures may deviate from these estimates. The estimates and associated prerequisites are reviewed regularly. Changes in accounting estimates are recognised in the period the estimates are revised if the change only affects this period, or both in the period the estimates change and in future periods if the changes affect both the existing and future periods.
Loans and receivables For financial assets that are not measured at fair value, it is assessed whether there is objective evidence that there has been a reduction in the value of a financial asset or a group of financial assets on each reporting date. See note 15.
The risk linked to provisions for lines related to insurances of the person is thus affected by external conditions. To reduce this risk, the company calculates its claims liability based on various methods and follows up that the registered provisions linked to ongoing claims cases are updated at all times based on the current calculation rules. See note 3 (in the consolidated group accounts)
Gjensidige annual report 2017 | 155 4. Premiums and claims etc. in general insurance
Provision for unearned premiums, gross 132.0 376.8 226.2 1,201.7 2,085.2 38.7 3,169.1 234.2 446.0 549.0 310.2
156 | Gjensidige annual report 2017 5. Shares in subsidiaries and joint ventures
Gjensidige Bank Holding AS (liquidated 2017) Oslo, Norway 100% 2,131.4 2,152.7
² Gjensidige Investeringsrådgivning AS was merged with Gjensidige Bank ASA during 2017.
Areal. The investment is recognised at cost of NOK 1.1 billion at year end. Gjensidige Forsikring has granted a loan to Oslo Areal amounting to NOK 1.6 billion at year end. The loan is interestbearing.
Net income from investments in subsidiaries, associated companies and joint ventures 83.8 110.4
Impairment investments in subsidiaries, associated companies and joint ventures (49.4) (94.2)
Total net income and gains/(losses) from investments in subsidiaries, associated companies and joint ventures 34.5 19.1
Total net income and gains/(losses) from financial assets at fair value through profit or loss, designated 1,214.6 1,121.7
Total net income and gains/(losses) from loans and receivables 706.0 714.5
Interest income and expenses from financial assets and liabilities not recognised at fair value through profit or loss
Interest expenses from financial assets not recognised at fair value through profit or loss (37.0) (34.3)
Net interest from bank deposits and subordinated loan classified as other income and other expenses (22.5) (21.7)
Pension cost - defined contribution plan (note 10 incl. social security cost) 198.6 188.5
Pension cost - defined benefit plan (note 10 incl. social security cost) 52.5 (419.5)
The average number of employees in the Group was 2,899 (2,948).
The Board’s statement on the stipulation of pay and other remuneration Gjensidige’s remuneration policy
The Board has established a remuneration committee consisting of three members; the Chairman of the Board and two board members.
• Acting as adviser to the CEO in connection with the annual assessment of the remuneration of the senior group management
CEO, in accordance with limits discussed with the remuneration committee and on the basis of guidelines issued by the Board.
The fixed salary is assessed and stipulated annually on the basis of wage growth in society in general and in the financial industry in particular. Variable remuneration (bonus) to executive personnel is earned annually, and is based on an overall assessment of financial and non-financial performance over the two last years. The assessment takes into account a combination of the enterprise’s overall performance targets for return on equity adjusted for
Gjensidige annual report 2017 | 161 extraordinary dividends and transactions and combined ratio, as well as developments in customer satisfaction. In addition, it evaluates the target achievement of the business unit in question, as well as personal contribution relating to compliance with the
None of the executive personnel with supervisory tasks currently has variable bonus schemes, but they get to participate in the collective bonus scheme in the same manner as other employees.
Of the variable remuneration earned in 2017 by the CEO and other employees covered by the Regulations relating to remuneration in financial institutions, 50 per cent of the gross earned variable remuneration will be given in the form of a promise of shares in
Kim Rud-Petersen, Executive Vice President 3,045.6 316.3 290.1 639.8 294.6 2,578 3,496 5,953 11,438
Jostein Amdal, Executive Vice President 2,828.8 384.5 161.7 456.4 386.6 835 148 970 13,906
1 The stated remuneration applies to the period the individual in question has held the position/office. 2 Age 62, 100 per cent salary reducing gradually to 70 per cent at age 67 according to time of earning, then Gjensidige Forsikring's ordinary pension terms will take effect. 3 Age 62, 70 per cent salary until age 67 according to time of earning, then Gjensidige Forsikring's ordinary pension terms wil l take effect. 4 For staff representatives only remuneration for the current position is stated. 5 Everyone in the senior group management except for one has pension plans, benefit or contribution based. 6 Including bonus shares in the share saving's programme for employees. See note 22 for terms and further description of the scheme. 7 Remuneration includes participation as Chairman in the Audit Committee honoured with NOK 144.5 thousand for 2016. 8 Remuneration includes participation in the Audit Committee honoured with NOK 96.0 thousand for 2016. 9 Hege Yli Melhus Ask has been on leave from 1 Octorber to 31 December. Her remuneration is presented for the whole year. 10 Constituted Executive Vice President for Hege Yli Melhus Ask from 1 October to 31 December.
Change in deferred tax recognised in profit or loss 299.2 8.5
Net deferred tax liabilities/(deferred tax assets) as at 31 December 1,122.5 905.4
Gjensidige in relation to the above-mentioned figures, which will then not materialize. The appeal is still being processed by the Tax
Natural perils capital and Guarantee scheme provision According to the Norwegian Financial Reporting Regulations for
Insurance Companies § 3-4 there are not made any provision for deferred tax on Natural perils capital and Guarantee scheme provision.
With effect from and including 2016, Gjensidige changed its contribution rates and cut-off point as an adaptation to the new Act relating to Company Pension Schemes. The new rates are seven per cent of earnings between 0 and 7.1 times the National
The pension assets’ exposure to interest rate risk is deemed to be moderate because the market value-weighted duration is approximately 2.5 years. The portfolio value will fall by approximately 2.5 per cent in the event of a parallel shift in the yield curve of plus one percentage point.
The pension liability will increase by 12,1 per cent in the event of a parallel shift in the whole yield curve (fall in interest) of minus one percentage point. The value will fall by 9.7 per cent in the event of an interest rate increase of one percentage point.
“investment grade”. Over five per cent of the pension fund’s interest rate investments have a weaker rating than BBB. Unrated bonds amount to 37 per cent. If the credit risk on a global basis were to increase by a factor corresponding to the factor used in stress tests for pension funds (equal to a deterioration in relation to the 99.5 percentile), this would lead to a fall of approximately ten per cent in the bond portfolio. This corresponds to an average widening of spreads of 2.1 per cent.
Based on the same stress tests as for the pension assets, the liabilities would decrease by approximately 11.7 per cent based on a widening of spreads of 0.9 per cent.
II. The level of the pension assets is entering a period of political risk.
pension agreement for its employees. AFP is a defined benefit scheme funded jointly by many employers. The administrator of the pension plan has not presented calculations that allocate the pension assets or liabilities in the plans to the individual member enterprises. Gjensidige therefore recognises the plan as a defined contribution plan.
If the administrator of the AFP plan presents such allocation figures, this could result in the plan being recognised as a defined benefit plan. It is difficult, however, to arrive at an allocation key that is acceptable to Gjensidige. An allocation key based on the
Present value of the defined benefit obligation 2,149.1 552.2 2,701.3 1,940.1 493.2 2,433.2
Removed CPI indexing of current pensions 14.2 14.2 (445.8) (31.0) (476.8)
Expected contribution to the defined benefit plan for the next year 1 Future salary increases represent our expected average future salary increase for the industry. Since Gjensidige has a closed plan, average future salary increase for our population is 1.5 per cent (1.5). See explanation under Actuarial assumptions.
Impairment testing goodwill The carrying amount of goodwill in the company as at 31 December 2017 is NOK 1.843,4 million.
Each of the units above is the smallest identifiable group of assets that generates cash inflows and considered as separate cashgenerating units. The annual assessment of impairment losses was carried out in the third quarter of 2017. There has also been carried out indication assessments during other quarters in order to assess whether there is new evidence that calls for a new impairment assessment.
Board. The growth in this 5 year period is higher than the long term growth expectancy. In the period after 2021 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 2026. Gjensidige normally has a ten-year horizon on its models, as the acquired companies are in a growth phase and a shorter period will give a less correct view of expected cash flows.
The long term growth rate beyond the board approved plan, is no higher than the long term growth in the market for the respective cash generating units.
The growth rate is determined to 2.5 per cent in Scandinavia and the same that was used in 2016.
Gouda portfolio No need for impairment No need for impairment No need for impairment No need for impairment
Gjensidige Forsikring, white label No need for impairment No need for impairment No need for impairment No need for impairment
Gjensidige annual report 2017 | 171 12. Owner-occupied property, plant and equipment
Useful life (years) 10-50 3-10 1 Plant and equipment consist mainly of machinery, vehicles, fixtures and furniture.
The following financial assets/liabilities are classified as level two in the valuation hierarchy: • Currency derivatives, equity options and forward rate agreements, in which fair value is derived from the value of underlying instruments. These derivatives are valued using common valuation techniques for derivatives (option pricing models etc.).
• Real estate funds. The real estate funds are valued based on reported NAV values as reported by the fund administrators.
Because of late reporting from the funds, the NAV values from the previous quarterly reporting are used in estimating fair value.
Financial derivatives at fair value through profit or loss 549.2 549.2 1,207.8 1,207.8
Bonds and other fixed income securities classified as loans and receivables 15 16,496.6 17,708.7 15,895.8 17,160.4
Receivables related to direct operations and reinsurance 5,467.3 5,467.3 5,323.0 5,323.0
Prepaid expenses and earned, not received income 36.5 36.5 4.2 4.2
Financial derivatives at fair value through profit or loss 568.6 568.6 1,173.1 1,173.1
Financial derivatives at fair value through profit or loss 549.2 549.2
Financial derivatives at fair value through profit or loss 1,207.8 1,207.8
Financial derivatives at fair value through profit or loss 1,173.1 1,173.1
Bonds and other fixed income securities Decrease in value 10% 49.3
176 | Gjensidige annual report 2017 14. Shares and similar interests
Incentive Active Value Fund Cl. A EUR Unrestricted Hedge fund 116.6
Forsikring has not issued guarantees for which provisions have been made.
Claims reported and claims handling costs 15,593.1 (512.2) 15,080.9 17,038.3 (356.1) 16,682.2
Claims paid, prior year claims (6,953.1) 0.2 (6,952.9) (5,941.3) 92.1 (5,849.2)
Claims incurred, but not reported 16,902.2 0.0 16,902.2 15,209.4 0.0 15,209.4
At the end of the year the number of own shares was 21.073
The provision for guarantee scheme is restricted capital and shall provide security to the insured for the right fulfilment of claims covered by the agreement even after the agreement is terminated in Norway.
The shareholder list is based on the VPS shareholder registry as of 31 December 2017. A shareholder list showing the owners behind nominee accounts can be found on page 21.
Provision as at 31 December 107.6 186.4 1 In 2017 NOK 46.3 million is allocated to restructuring provision, due to a decision of changes in processes in Norway and Sweden. The processes have been communicated to all entities affected by the changes.
Gjensigestiftelsen holds 62.24 per cent of the shares in Gjensidige Forsikring ASA Oslo, Norway
The table below shows a summary of contributions/dividends from/to related parties as well as other gains and losses.
As part of its ongoing financial management, Gjensidige has undertaken to invest up to NOK 614.4 million (1,146.1) in loan funds containing senior secured debt and various private equity and real estate investments, over and above amounts recognised in the balance sheet.
The timing of the outflow of capital is dependent on when the funds are making capital calls from their investors. Average remaining operating time for the funds, based on fair value, is slightly less than four years (four) and slightly less than fem years (six) in average including option for extension.
Gjensidige has established a share savings programme for employees of the Group with the exception of employees of
Fair value of the bonus shares allocated through the share savings program is calculated on the basis of the share price at grant date, taking into account the likelihood of the employee still being employed after two years and that he/she has not sold his/her shares during the same two-year period. The amount is recognised during the vesting period which is two years.
Expected dividend (NOK per share) 1 6.57 6.67 6.57 6.67 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 70 per cent 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.
Weighted average exercise price will always be 0, since the scheme comprises bonus shares and not options.
Fair value of shares granted that are to be settled in cash 154.90 137.00 2 The fair value is calculated based on the market value of the share at the time of allocation.
Norway (FSA) for a Partial Internal Model (PIM) under the Solvency
Partial Internal Model, the regulatory Solvency II ratio is estimated to be 145-155 per cent.
Today, the Board and the CEO have considered and approved the Board’s Report and the Annual Accounts for Gjensidige Forsikring ASA, the Group and the parent company, for the calendar year 2017 and as per 31 December 2017.
The consolidated accounts have been prepared in accordance with the EU-approved International Financial Reporting Standards (IFRS) and interpretations, together with the additional disclosure requirements that derive from the accounting regulation non-life insurance undertakings pursuant to the Norwegian Accounting Act and that shall be adopted as per 31 December 2017. The annual accounts for the parent company were submitted in accordance with the Accounting Act and the Regulations concerning accounting regulation for non-life insurance undertakings as per 31 December 2017. The Board’s Report for the Group and the parent company, including The Boards statement on corporate governance and corporate social responsibility, is in accordance with the requirements of the Accounting Act and Norwegian Accounting Standard no. 16 as per 31 December 2017.
To the best of our knowledge: • the annual accounts for 2017 for the Group and the parent company have been prepared in accordance with current accounting standards • the information in the accounts gives a true and fair view of the Group’s and the parent company’s assets, liabilities and financial position and results as a whole as per 31 December 2017
• The Board’s Report for the Group and the parent company gives a true and fair summary of: - the development, results and position of the Group and the parent company - the most important risk and uncertainty factors that the Group and parent company are currently facing
Inge K. Hansen Lotte K. Sjøberg Eivind Elnan Chairman Board member Board member