specification of other financially related income and expenses not recognised in net income from investments Commission arising from the investment of assets on behalf of individuals 31.3 22.4 1 Net other financial income/(costs) include financial income and expenses not attributable to individual classes of financial assets or liabilities, and financial administration costs.
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 above ten years (eight) and twelve
results Gjensidige Annual Report 2011 transactions With related parties income statement The table below shows transactions with related parties recognised in the income statement.
noK million income expense income expense gross premiums written Gjensidiges Arbejdsskadeforsikring A/S 14.3 13.1 Gjensidige Baltic 8.2 8.4 Gjensidige Pensjonsforsikring AS (owned by Gjensidige Pensjon og Sparing Holding AS) 0.1 0.2 Nykredit Forsikring A/S 808.3 782.2 Tennant Försäkringsaktiebolag AB (merged with Gjensidige Forsikring ASA, effective 1.1.2011) 8.3 gross paid claims Gjensidige Baltic 8.2 Nykredit Forsikring A/S 606.4 374.5 change in gross provision for claims Gjensdige Baltic 10.1 Nykredit Forsikring A/S 62.8 294.6 Tennant Forsikring NUF (merged with Gjensidige Forsikring ASA, effective 1.1.2011) 1.6 commissions Gjensidige Bank ASA (owned by Gjensidige Bank Holding AS) 0.9 administration expenses Gjensidige Bank ASA (owned by Gjensidige Bank Holding AS) 27.6 21.7 Gjensidige Investeringsrådgivning ASA (owned by Gjensidige Pensjon og Sparing Holding AS) 7.5 8.3 Gjensidige Pensjon og Sparing Holding AS 10.0 10.6 Gjensidige Pensjonsforsikring AS (owned by Gjensidige Pensjon og Sparing Holding AS) 35.1 39.5 Glitne Invest AS 0.5 0.1 Hjelp24 AS (formerly owned by Glitne Invest AS, sold during 2011) 5.2 4.8 Nykredit Forsikring A/S 109.4 107.5 Oslo Areal AS 0.2 0.2 4.2 Tennant Assuranse AS 21.4 Tennant Forsikring NUF (merged with Gjensidige Forsikring ASA, effective 1.1.2011) 5.0 Tennant Holding AB 8.3 6.1 interest expenses Fair Forsikring A/S (liquidated during 2011) 9.0 17.7 Tennant Holding AB 14.9 21 – RElATED PARTY TRANSACTIONS (CONT.)
purchase and sale oF assets Gjensidige Forsikring owns all of the shares of Tennant Holding AB, a company domiciled in Sweden. As at 17 March 2011 it was agreed that Gjensidige Forsikring was to acquire all of the shares of Tennant Försäkringsaktiebolag, an insurance company also domiciled in Sweden, from Tennant Holding AB. The remuneration is set to fair value and amounts to NOK 470.0 million. The remuneration was interest-bearing until settlement before year-end. The Norwegian Financial Supervisory Authority of Norway has approved the transactions. 14 October Tennant Försäkringsaktiebolag was merged into Gjensidige Forsikring ASA. The merger was conducted as a mother-daughter merger and is therefore accounted for as group continuity. In the Group accounts all consequenses of the merger are eliminated. There have not been significant transactions with related parties other than ordinary current agreements conducted at arm’s length and the transaction/ merger mentioned above.
results 127 Gjensidige Annual Report 2011 21 – RElATED PARTY TRANSACTIONS (CONT.)
noK million Received given Received given group contributions Gjensidige Bank ASA (owned by Gjensidige Bank Holding AS) 74.1 Gjensidige Pensjonsforsikring AS (owned by Gjensidige Pensjon og Sparing Holding AS) 111.5 26.8 Gjensidige Investeringsrådgivning ASA (owned by Gjensidige Pensjon og Sparing Holding AS) 14.6 Gjensidige Fondene AS (owned by Gjensidige Pensjon og Sparing Holding AS) 0.4 Glitne Invest AS 36.2 22.3 Oslo Areal AS 273.4 101.1 Strandtorget Eiendom AS 37.0 Tennant Assuranse AS 6.0 Tennant Försäkringsaktiebolag AB 1.0 dividends Gjensidige Baltic 22.9 21.1 Gjensidiges Arbejdsskadeforsikring A/S 104.9 Gjensidige Norge AS 6.0 Nykredit Forsikring A/S 55.5 Storebrand 120.4 SpareBank1 SR-Bank 57.0 36.2 Tennant Holding AB 27.3 total group contributions and dividends 672.7 149.0 292.7 41.4 liquidation losses Fair Forsikring A/S (227.8)
The table below shows a summary of receivables/liabilities from/to subsidiaries, associates and related parties.
noK million Receivables liabilities Receivables liabilities intercompany non-interest bearing debts and receivables within the group Fair Forsikring A/S including subsidiaries 3.5 Gjensidige Arbejdsskadeforsikring A/S 1.0 13.0 Gjensidige Bank ASA (owned by Gjensidige Bank Holding AS) 2.5 0.8 Gjensidige Fondene AS (owned by Gjensidige Pensjon og Sparing Holding AS) 0.1 Gjensidige Pensjon og Sparing Holding AS 0.6 1.2 Gjensidige Pensjonsforsikring AS (owned by Gjensidige Pensjon og Sparing Holding AS) 107.3 22.8 Gjensidige Investeringsrådgivning ASA (owned by Gjensidige Pensjon og Sparing Holding AS) 0.7 14.8 Gjensidigestiftelsen 0.4 34.4 Glitne Invest AS 36.2 22.2 Hjelp24 AS (formerly owned by Glitne Invest AS, sold during 2011) 1.4 Nykredit Forsikring A/S 63.4 19.3 26.2 Oslo Areal AS 273.3 80.0 Tennant Holding AB 11.2 Tennant Försäkringsaktiebolag AB (merged with Gjensidige Forsikring ASA, effective 1.1.2011) 13.0 Tennant Assuranse AS (owned by Glitne Invest AS) 2.8 Tennant Assurance AB (owned by Tennant Försäkringsaktiebolag AB) 6.0 Tennant Forsikring NUF (merged with Gjensidige Forsikring ASA, effective 1.1.2011) 1.4 Samtrygd Eigedom AS 1.7 1.7 total intercompany non-interest bearing debts and receivables group 380.6 134.6 190.7 57.0 claims provision within the group Gjensidige Baltic 10.1 total claims provision within the group 10.1 total intercompany balances within the group 380.6 144.7 190.7 57.0 co-operating companies 1 and other related parties
Equity 23,228.6 23,137.8 Administration provision 1 1,114.1 Security provision (2,445.9) (2,398.2)
Tax effects 842.5 821.4 equity ngaaP 19,350.4 20,325.0 Hybrid capital in associates, proportion 432.8 426.3 Effect of guarantee scheme provision and Natural perils fund 1 (3,040.4) (4,307.0)
Deferred tax assets (7.4) (199.4) Other intangible assets (1,201.7) (1,349.5) Investment properties, unrealised gains, proportion (158.4) (268.1) Reinsurance provision, minimum requirement (4.5) (6.4)
Index bonds in associates, proportion 8.3 Subordinated loans in associates, proportion 1,502.1 1,670.7 45 % of investment properties, unrealised gains, proportion 71.3 120.7 additional capital 1,573.3 1,799.7
Net primary capital 14,461.0 13,731.2 Proportion of security provision 1,100.6 1,079.3 Proportion of Natural perils fund (up to 25 % of the Natural perils fund is included) 615.7 660.7 solvency margin capital 16,177.3 15,471.1 Solvency margin minimum requirement 6,084.4 6,097.6 in excess of requirement 10,092.9 9,373.5
Solvency margin capital in per cent of requirement 265.9 % 253.7 %
Clearstream Banking S.A. Nominee 5,480,737 1.10 % Goldman Sachs & Co - Equity Nominee 4,249,635 0.85 % Skagen Kon-Tiki 4,051,238 0.81 %
Skagen Global Ii 2,831,800 0.57 % Citigroup Global Markets Inc Nominee 2,800,730 0.56 % State Street Bank And Trust Co Nominee 2,661,644 0.53 %
State Street Bank And Trust Co. Nominee 1,964,661 0.39 % Bnym As Emea Asia 25 Omnibus Nominee 1,636,307 0.33 % Invesco Perp European Eq Fund 1,426,653 0.29 % Klp Aksje Norge Indeks Vpf 1,282,884 0.26 % number of shares 20 largest shareholders 406,540,357 81.31 %
equitY-settled share saVinGs proGramme For emploYees In 2011, the Board of Directors of Gjensidige Forsikring ASA decided to introduce a share savings programme for employees of the Group with the exception of employees of Gjensidige Baltic. All employees of the Group were given an opportunity to buy shares for up to NOK 75,000. In 2012, the scheme will be turned into a share savings programme, whereby all permanent employees of the Group will be given an opportunity to save an annual amount of up to NOK 75,000. Saving will take the form of fixed deductions from salary that will be converted into shares four times a year. The employees will be offered a discount of 20 per cent, limited upwards to NOK 1,500 kroner per year, which corresponds to the maximum tax-exempt discount. Employees will receive one bonus share for every four shares they have owned for more than two years, provided that they are still employed by the Company.
Permanent employees as of 13 December 2010 were entitled to buy shares. No requirements were applied as regards percentage of a full-time position, whether the employees had been at work, absent because of illness, on leave of absence etc. The offer was also made to employees who were recipients of work clarification benefit. There were no other conditions relating to the offer to buy shares.
Weighted average share price (NOK) 64.13 N/A Expected turnover 10 % N/A Expected sale 5 % N/A The options effective life (years) 2 N/A Expected dividend (NOK per share) 4.63 N/A
Allocated return on investments transferred from the non-technical accounts 720.6 759.7 general insurance claims Gross paid claims 4 (12,536.4) (11,188.0) Paid claims, reinsurers' share 483.3 246.3 Change in gross provision for claims 4 (1,232.6) (1,877.7) Change in provision for claims, reinsurers' share 535.6 201.1 total claims incurred, net of reinsurance (12,750.1) (12,618.3)
Received commissions for ceded reinsurance and profit share 6.2 8.2 total insurance-related operating expenses (2,640.9) (2,498.3)
Gjensidige Annual Report 2011 results nOk million notes 1.1.-31.12.2011 1.1.-31.12.2010 net income from investments Income from investments in subsidiaries and associates 444.9 292.7 Impairment losses investments in subsidiaries and associates (152.3) Interest income and dividend etc. from financial assets 1,300.3 1,339.2 Net operating income from property 64.7 67.5 Changes in fair value on investments (88.0) 362.7 Realised gain and loss on investments 245.5 421.5 Administration expenses related to investments, including interest expenses (126.3) (169.1) total net income from investments 19 1,841.1 2,162.2
Allocated return on investments transferred to the technical account (720.6) (759.7)
134 results stateMent OF FinanCial pOsitiOn gjensiDige FOrsikring asa nOk million notes 31.12.2011 restated 1 assets Goodwill 1,162.0 1,035.6 Other intangible assets 689.1 659.1 total intangible assets 5 1,851.1 1,694.7 investments buildings and other real estate Investment properties 8 896.6 1,102.5 Owner-occupied property 7 94.5 112.0 subsidiaries and associates Shares in subsidiaries 6 10,374.4 14,471.5 Shares in associates 6 3,436.7 3,435.2 Financial assets measured at amortised cost Bonds held to maturity 9 10,807.0 13,600.6 Loans 9, 10 7,451.8 4,168.4 Financial assets measured at fair value Shares and similar interests 9, 12 3,466.2 3,912.2 Bonds and other fixed-income securities 9 13,292.2 8,463.7 Financial derivatives 9 115.7 434.5 Reinsurance deposits 406.0 344.6 total investments 50,341.2 50,045.1 reinsurers' share of insurance-related liabilities in general insurance, gross Reinsurers' share of provision for unearned premiums, gross 13 13.1 22.2
Reinsurers' share of claims provision, gross 13 960.4 412.8 total reinsurers' share of gross insurance-related liabilities in general insurance, gross 973.5 435.0 receivables Receivables related to direct operations 9 3,467.6 3,336.3 Receivables related to reinsurance 9 164.4 43.5 Receivables within the group 21 380.6 190.7 Other receivables 10 137.5 123.8 total receivables 4,150.1 3,694.4
Other assets Plant and equipment 7 229.6 289.8 Cash and cash equivalents 9, 11, 25 1,453.7 775.5 Deferred tax assets 16 75.6 18.4 total other assets 1,758.9 1,083.7 prepaid expenses and earned, not received income Other prepaid expenses and earned, not received income 47.1 11.5 total prepaid expenses and earned, not received income 47.1 11.5 tOtal assets 59,121.8 56,964.4
136 results stateMent OF Changes in eQUity gjensiDige FOrsikring asa nOk million share capital Own shares premium reserve
Components of other comprehensive income Exchange differences 4.5 4.5 Actuarial gains and losses on pension (122.9) (122.9) Tax on other comprehensive income 34.6 34.6 total components of other comprehensive income 4.5 (122.9) 34.6 (83.8)
Components of other comprehensive income Exchange differences 0.1 0.3 0.4 Actuarial gains and losses on pension (337.1) (337.1) Tax on other comprehensive income 93.6 93.6 total components of other comprehensive income 0.1 (336.8) 93.6 (243.1)
Accrued dividend (2,274.6) (2,274.6) Equity-settled share-based payment transactions 0.9 0.9 Effect of merger (2.8) 4.2 1.4
Cash flow from operating activities Premiums paid, net of reinsurance 16,795.6 15,825.4 Claims paid, net of reinsurance (11,909.0) (11,333.7) Net payment of loans to customers 41.8 54.7 Net receipts/payments from financial assets (1,065.8) 2,765.8 Net receipts/payments from properties 310.2 105.7 Operating expenses paid, including commissions (2,563.3) (2,655.4) Taxes paid (296.9) (716.9) Net other receipts/payments 19.7 158.5 net cash flow from operating activities 1,332.2 4,204.1
Cash flow from financing activities Payment of dividend (2,349.9) (1,677.6) Net receipts/payments on other short-term liabilities 0.8 Payments regarding intra-group equity transactions 311.4 (587.7) net cash flow from financing activities (2,037.7) (2,265.3)
Effect of currency exchange rate changes on cash and cash equivalents 0.4 6.6 net cash flow for the period 678.1 (368.4)
Cash and cash equivalents at the start of the period 775.5 1,143.9 Cash and cash equivalents at the end of the period 1,453.7 775.5 net movements in cash and cash equivalents 678.1 (368.4)
REPORTING ENTITY Gjensidige Forsikring ASA is a publicly listed company domiciled in Norway. The company’s head office is located at Drammensveien 288, Oslo, Norway. The activities of the company consist of general insurance. The company does business in Norway, Sweden and Denmark.
BASIS OF PREPARATION STATEmENT OF cOmPlIANcE The financial statements have been prepared in accordance with the Norwegian Accounting Act and Norwegian Financial Reporting Regulations for Insurance Companies (FOR 1998-12-16 nr 1241). The Norwegian Financial Reporting Regulations for Insurance Companies is to a great extent based on IFRSs endorsed by EU, and interpretations.
In accordance with guidelines given by the Financial Supervisory Authority of Norway, the transition to new regulations is considered a change in accounting policies and the date of transition is 1 January 2011. The effect of the change in accounting policies as at 1 January 2010 is recognised directly in equity. Current corresponding figures 2010 are equally revised.
Standards that can influence accounting principles • Amendments to IAS 12 Income Taxes, which enter into force on 1 January 2012, but have not yet been approved by the EU, will not have any significant effect.
• IFRS 9 Financial Instruments, issued in November 2009 and October 2010, is expected to enter into force on 1 January 2015. This is the first phase of the International Accounting Standards Board’s (IASB) three-phase project aimed at replacing IAS 39. It concerns the classification and measurement of financial assets and liabilities. Financial assets will be classified either at fair value or at amortised cost, depending on how they are managed and on what contractual cash flow characteristics they have. Phases two and three concern impairment losses and hedge accounting, respectively. The standard is still being prepared and is not yet completed. Our preliminary assessment is that the standard can result in the reclassification of financial instruments in the financial statements.
Standards that will affect disclosure requirements • Several amendments have been made to IFRS 7 Disclosure – Financial Instruments with different commencement dates, and to IFRS 12 Disclosure of Interests in Other Entities, which enters into force on 1 January 2013, but which it is uncertain when the EU will approve. All these will entail additional disclosure requirements for us.
FuNcTIONAl ANd PRESENTATION cuRRENcY The financial statements are presented in NOK. Gjensidige Forsikring has three functional currencies: Norwegian, Swedish and Danish kroner. All financial information is presented in NOK, unless otherwise stated.
SuBSIdIARIES ANd ASSOcIATEd cOmPANIES Subsidiaries and associated companies are recognised using the cost method.
cASh FlOW STATEmENT Cash flows from operating activities are presented according to the direct method, which gives information about material classes and payments.
NET INcOmE FROm INVESTmENTS Financial income consist of interest income on financial investments, dividend received, realised gains related to financial assets, change in fair value of financial assets at fair value through profit or loss, and gains on financial derivatives. Interest income is recognised in profit or loss using the effective interest method.
Exchange differences arising on retranslations are recognised in profit or loss.
FOREIGN BRANch Foreign branches that have other functional currencies are translated to NOK by translating the income statement at average exchange rates for the period of activity, and by translating the balance sheet at exchange rates at the reporting date. Exchange differences are recognised as a separate component of equity. On disposal of the foreign operation, the cumulative amount of the exchange difference recognised in other comprehensive income relating to that foreign branch is recognised in profit of loss, when the gain or loss on disposal is recognised.
TANGIBlE ASSETS OWNER-OccuPIEd PROPERTY, PlANT ANd EquIPmENT recognition and measurement Items of owner-occupied property, plant and equipment are measured at cost less accumulated depreciation and accumulated impairment losses. Cost includes expenditures that are directly attributable to the acquisition of the item. In cases where equipment or significant items have different useful lives, they are accounted for as separate components.
subsequent costs Subsequent costs are recognised in the asset’s carrying amount when it is probable that the future economic benefits associated with the asset will flow to the Group, and the cost of the asset can be measured reliably. If the subsequent cost is a replacement cost for part of an item of owneroccupied property, plant and equipment, the cost is capitalized and the carrying amount of what has been replaced is derecognised. Repairs and maintenances are recognised in profit or loss in the period in which they are incurred.
INTANGIBlE ASSETS GOOdWIll Goodwill acquired in acquisition of portfolios represents cost price of the acquisition in excess of the company’s share of the net fair value of identifiable assets, liabilities and contingent liabilities in the acquired portfolio at the time of acquisition. Goodwill is recognised initially at cost and subsequently measured at cost less accumulated impairment losses.
ImPAIRmENT OF NON-FINANcIAl ASSETS Indicators of impairment of the carrying amount of tangible and intangible assets are assessed at each reporting date. If such indicators exist, then recoverable amount of an assets or a cash generating unit is estimated. Indicators that are assessed as significant by the Group and might trigger testing for an impairment loss are as follows • significant reduction in earnings in relation to historical or expected future earnings • significant changes in the Group’s use of assets or overall strategy for the business • significant negative trends for the industry or economy • other external and internal indicators
TEchNIcAl PROVISIONS PROVISION FOR uNEARNEd PREmIumS, GROSS The provision for unearned premiums, gross reflects the accrual of premiums written. The provision corresponds to the unearned portions of the premiums written. No deduction is made for any expenses before the premiums written are accrued.
REINSuRERS’ ShARE OF INSuRANcE-RElATEd lIABIlITIES IN GENERAl INSuRANcE, GROSS Reinsurers’ share of insurance-related liabilities in general insurance, gross is classified as an asset in the balance sheet. Reinsurers’ share of provision for unearned premiums, gross and reinsurers’ share of claims provision, gross are included in reinsurers’ share of insurance-related liabilities in general insurance, gross. The reinsurers’ share is less expected losses on claims based on objective evidence of impairment losses.
Financial assets are derecognised when the contractual rights to cash flows from the financial asset expire, or when the Group transfers the financial asset in a transaction where all or practically all the risk and rewards related to ownership of the assets are transferred.
142 results are fixed or determinable. Loans and receivables are measured at amortised cost using the effective interest method, less any impairment losses.
FINANcIAl dERIVATIVES Financial derivatives are used in the management of exposure to equities, bonds and foreign exchange in order to achieve the desired level of risk and return. The instruments are used both for trading purposes and for hedging of other balance sheet items. Any trading of financial derivatives is subject to strict limitations.
dEFINITION OF FAIR VAluE Financial assets and liabilities measured at fair value are carried at the amount each asset/liability can be settled to in a transaction carried out at arm’s length distance.
Quoted prices in active markets are considered the best estimate of an asset/liability’s fair value. When quoted prices in active markets are not available, the fair value of financial assets/ liabilities is preferably estimated on the basis of valuation techniques based on observable market data. When neither quoted prices in active markets nor observable market data is available, the fair value of financial assets/liabilities is estimated based on valuation techniques which are based on non-observable market data.
AVAIlABlE FOR SAlE For financial assets available for sale, an assessment to whether the assets are impaired is carried out quarterly.
Impairment losses recognised in profit or loss are not reversed through profit or loss, but in other comprehensive income.
RESTRucTuRING Provision for restructuring are recognised when the company has approved a detailed and formal restructuring plan which has commenced or has been announced. Provisions are not made for future expenses attributed to the operations.
ShARE-BASEd PAYmENT The fair value of share-based payment arrangements allocated to employees is at the time of allocation recognised as personnel costs, with a corresponding increase in equity. Share-based payment arrangements which are recovered immediately are recognised as expenses at the time of allocation. Vesting conditions are taken into account by adjusting the number of equity instruments included in the measurement of the transaction amount so that, ultimately, the amount recognised shall be based on the number of equity instruments that eventually vest. Non-vesting conditions are reflected in the measurement of fair value, and no adjustment of the amount recognised as expenses is done upon failing to meet such conditions.
Share-based payment transactions in which the company receives goods or services as payment for the company’s own equity instruments is recognised as share-based payment transactions with settlement in equity, regardless of how the company has acquired the equity instruments. Share-based payment arrangements settled by one of the shareholders in the ultimate mother company is also recognised as a share-based payment transaction with settlement in equity.
dEFERREd TAX Deferred tax is determined based on differences between the carrying amount and the amounts used for taxation purposes, of assets and liabilities at the reporting date. Deferred tax liabilities are generally recognised for all taxable temporary differences. Deferred tax assets are generally recognised for all deductible temporary differences to the extent that it is probable that they can be offset by future taxable income. If deferred tax arises in connection with the initial recognition of a liability or asset acquired in a transaction that is not a business combination, and it does not affect the financial or taxable profit or loss at the time of the transaction, then it will not be recognised.
TRANSAcTIONS WITh AFFIlIATEd cOmPANIES The Fire Mutuals operates as agents on behalf of Gjensidige Forsikring. For these services commission is paid. For handling the cooperation and to reinsure the Fire Mutuals’ fire insurance Gjensidige receives cost refunds. Due to the fire policy reinsurance plan, Gjensidige Forsikring also manages assets on behalf of the Fire Mutuals. The Fire Mutuals are credited interest for these assets.
PREmIum RESERVE Premium reserve consists of paid in capital and can be used to cover losses.
OThER PAId IN EquITY Other paid in equity consists of wage costs that are recognised in profit and loss as a result of the share purchase program for employees.
AcTuARIAl GAINS/lOSSES PENSION Actuarial gains/losses pension consists of gains/losses occurring by changing the actuarial assumptions used when calculating pension liability.
OThER EARNEd EquITY Other earned equity consists of this year’s and previous year’s retained earnings that are not disposed to other purposes and includes provisions for compulsory restricted funds (Natural perils fund, guarantee scheme).
NATuRAl PERIlS FuNd Operating profit/loss from the compulsory natural perils insurance shall be adjusted against a Natural perils fund. The provision can only be used for claims related to natural perils. Natural peril is defined as claim in direct relation to natural hazard, such as landslide, storm, flood, storm surge, earthquake or eruption.
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.
INSuRANcE-RElATEd lIABIlITIES Use of estimates in calculation of insurance-related liabilities is primary applicable for claims provisions.
For long-tail lines, the risk is linked to the fact that the ultimate claim costs must be estimated based on experience and empirical data. 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. The risk linked to provisions for lines related to insurances of the person is thus affected by external conditions. To reduce this risk, the company calculates its claims liability based on various methods and follows up that the registered provisions linked to ongoing claims cases are updated at all times based on the current calculation rules. See note 3 and 13.
PENSION The present value of pension liabilities is calculated on the basis of actuarial and financial assumptions. Any change in the assumptions affects the estimated liability. Change in the discount rate is the assumption most significant to the value of the pension liability. The discount rate and other assumptions are normally reviewed once a year when the actuarial calculations are performed unless there have been significant changes during the year. See note 14.
technical provisions Provision for unearned premiums, gross 1,118.7 2,137.3 879.8 1,257.5 90.5 254.4 206.8 80.0 3,887.7 Claims provision, gross 1,206.6 5,431.0 4,731.5 699.5 74.4 2,325.2 132.7 23.3 9,193.2 Gross loss liability 1,079.9 3,518.8 3,065.5 453.2 72.3 1,740.3 131.8 22.4 6,565.4
Security provision 1,218.7 FSAN 1 minimum requirement 1,218.7 1 The Financial Supervisory Authority of Norway.
prOvisiOn FOr UnearneD preMiUMs ClaiMs prOvisiOn nOk million gross net of reinsurance gross net of reinsurance pool arrangements Norwegian Natural perils fund 106.7 106.7 336.9 300.4 Norwegian Occupational Injury Insurers' Bureau 43.2 43.2 Norwegian Motor Insurers' Bureau 32.9 32.9 Norwegian Pharmapool 4.0 4.0 total pool arrangements 106.7 106.7 417.0 380.5 4 – preMiUMs anD ClaiMs etC. in general insUranCe
Underwriting result gross claims incurred technical provisions Provision for unearned premiums, gross 16.9 16.9 106.7 6,497.8
as at 31 December 2011 1,262.0 426.5 61.6 419.1 53.0 2,222.2 Uncompleted projects 92.9 92.9 as at 31 December 2011, including uncompleted projects 1,262.0 426.5 61.6 511.9 53.0 2,315.1 amortisation and impairment losses As at 1 January 2011 (35.6) (7.4) (219.8) (889.1) (1,151.9)
Amortisation recognised during the period (37.2) (8.4) (105.8) (6.1) (157.5) Disposals 96.7 881.3 978.0 Exchange differences 0.1 0.1 0.3 as at 31 December 2011 (100.0) (101.8) (19.1) (229.0) (13.9) (463.9)
As at 1 January 2011 1,035.6 306.8 44.4 262.6 45.3 1,694.7 as at 31 December 2011 1,162.0 324.7 42.4 282.9 39.1 1,851.1
ImPAIRmENT TESTING OF GOOdWIll The carrying amount of goodwill in the company as at 31 December 2011 is NOK 1,162.0 million. Of this NOK 163.5 million is related to Gjensidige Forsikring ASA, Swedish branch’s acquisition of the insurance portfolio from the subsidiary Tennant Försäkringsaktiebolag AB at 1 October 2009 and NOK 869.8 million relates to Gjensidige Forsikring ASA, Danish branch’s acquisition of insurance portfolio from Fair Forsikring A/S and KommuneForsikring A/S 1 January 2010 and from Nykredit Forsikring A/S from 1 October 2010. NOK 128.7 million is connected to the merger between Gjensidige Forsikring ASA and Tennant Försäkringsaktiebolag, which merged from 1 January 2011. The branches are independent cash-generating units.
BudGETS/PROGNOSES ANd ThE PERIOd FOR WhIch ThE cASh FlOWS ARE PROjEcTEd The projection of cash flows is based on budgets for the next four years reviewed by the management and approved by the Board of Directors. In the period after 2015 an annual growth of three per cent has been projected in until 2020. The terminal value is calculated in 2020. The growth in is grounded in the fact that the companies are small and with a solid parent company, which gives them good chances of increasing market shares. The cash flows are estimated to a normal level before a terminal value is calculated. Gjensidige normally has a ten-year horizon on its models, as the company is in a growth phase and a shorter period will not give a correct view of expected cash flows.
ThE mANAGEmENT’S mEThOd As far as possible, the management has sought to document the assumptions upon which the models are based through external information. External information is first and foremost used in the assessment of discount rate and exchange rates. When it comes to future cash flows, the management has also considered the degree of historical achievement of budgets. If expected budgeted results are not achieved, the management has conducted a deviation analysis. These deviation analyses are reviewed by the Boards of Directors of the respective subsidiaries, as well as by the management in Gjensidige Forsikring.
Long-term expected inflation 2-3 % total nominal growth expectation 4-6 %
dIScOuNT RATE The discount rate is before tax, and is composed of a risk-free interest rate, a risk premium and a market beta. The risk-free rate is equivalent to a ten year interest rate on government bonds in the respective countries the branches operate in. In addition a risk premium of 5.5 percentage points has been added for Denmark and Sweden.
SENSITIVITY ANAlYSIS kEY ASSumPTIONS The excess values associated with the acquisition are based on different key assumptions. If these assumptions change significantly from what they are expected to be in the impairment models, a need for impairment may arise. See table.
Gjensidige Baltic No need for impairment sensitivity table Discount rate increases by 1 %
No need for impairment No need for impairment Need for impairment, app. NOK 120 million
In Gjensidige Forsikring ASA investments in subsidiaries are accounted for at cost. Exchange differences can thus cause changes in value that causes impairment at company level. The table below shows the effect on the company’s financial statements.
Fair Forsikring A/S (liquidated in 2011) Copenhagen 100 % 2,668.7 2,668.7 Gjensidige Bank Holding AS Oslo 100 % 1,590.4 1,491.7 1,590.4 1,491.7 Gjensidige Norge AS Oslo 100 % 195.7 1.1 195.7 1.1 Gjensidige Pensjon og Sparing Holding AS Oslo 100 % 842.4 842.4 761.8 761.8 Glitne Invest AS Oslo 100 % 340.1 340.1 340.1 340.1 Oslo Areal AS Oslo 100 % 4,938.1 4,938.1 4,938.1 4,938.1 Gjensidige Baltic Riga 100 % 351.5 347.8 351.5 347.8 Samtrygd Eigedom AS Førde 100 % 6.9 6.9 6.9 6.9 Strandtorget Drift AS Oslo 100 % 0.4 0.4 0.4 0.4 Strandtorget Eiendom AS Oslo 100 % 0.2 0.2 0.1 0.1 Tennant Holding AB Stockholm 100 % 103.9 10.2 568.3 474.6 Gjensidiges Arbejdsskadeforsikring A/S Copenhagen 100 % 770.2 770.2 770.2 770.2 Nykredit Forsikring A/S Copenhagen 100 % 1,625.1 1,625.1 2,669.6 2,669.6 total subsidiaries 10,765.0 10,374.4 14,862.1 14,471.5 assOCiates nOk million registered office interest held
Storebrand ASA Oslo 24.3 % 4,604.4 2,567.4 4,604.4 2,567.4 SpareBank 1 SR-Bank Stavanger 10.3 % 866.4 866.4 866.4 866.4 Bilskadeinstituttet AS Oslo 29.5 % 0.4 0.4 0.4 0.4 Vervet AS including subordinated loan 1 Tromsø 25 % 32.3 2.5 30.8 1.0 total shares in associates 5,503.5 3,436.7 5,502.0 3,435.2 1 Subordinated loan of NOK 24.0 million is included in cost.
For the whole company 2010 Fair Forsikring A/S (group) 2,457.6 2,456.1 1.4 296.1 129.4 N/A Gjensidige Bank Holding (group) 15,789.6 1,314.9 14,474.6 335.7 24.6 N/A Gjensidige Norge AS 1.2 1.1 0.1 N/A Gjensidige Pensjon og Sparing Holding (group) 7,257.2 462.6 6,794.6 335.8 (20.1) N/A Glitne Invest (group) 647.3 417.1 230.2 544.7 31.6 N/A Oslo Areal AS 5,420.4 4,823.7 596.6 107.0 N/A Gjensidige Baltic 717.5 313.1 404.4 459.3 43.9 N/A Samtrygd Eigedom AS 6.4 6.4 0.1 0.3 N/A Strandtorget Drift AS 1.8 0.5 1.2 N/A Strandtorget Eiendom AS 0.1 0.1 N/A Tennant Holding AB (group) 727.0 344.7 382.3 453.0 41.9 N/A Gjensidiges Arbejdsskadeforsikring A/S 4,221.5 512.0 3,709.5 360.2 54.1 N/A Nykredit Forsikring A/S 2,461.8 1,443.9 1,018.0 116.2 537.9 N/A total subsidiaries 39,709.2 12,096.3 27,612.9 2,901.1 950.6 2 Operating income. For companies where financial income is operating income, financial income is included. For other companies financial income is not included.
For the whole company 2010 Storebrand ASA 390,414.0 18,417.0 371,997.0 48,241.0 1,480.0 4,777.9 SpareBank 1 SR-Bank 134,778.0 9,402.0 125,376.0 3,414.0 1,317.0 1,180.6 Bilskadeinstituttet AS 5.3 4.8 0.5 1.6 0.2 N/A Vervet AS 109.2 13.1 96.1 0.5 (0.4) N/A total associates 525,306.5 27,836.9 497,469.6 51,657.1 2,796.8
Gjensidige also owns bonds issued by SpareBank1 SR-Bank. The carrying amount of these bonds is NOK 343.7 million.
Depreciation method Straight-line Straight-line Useful life (years) 10-50 3-5 1 Plant and equipment consist mainly of machinery, vehicles, fixtures and furniture. 2 In 2010, an impairment loss of NOK 2.2 million on an owner-occupied property was recognised. The new value of the property was determined by using the Group’s internal valuation model, cf.
Carrying amount of land and owner-occupied property 94.5 112.0 excess value beyond carrying amount 11.9 10.9
Gjensidige Annual Report 2011 results 8 – investMent prOperties nOk million 2011 2010 statement of financial position As at 1 January 1,102.5 1,163.5 Additions from subsequent expenditure 4.0 82.6 Disposals (266.9) (128.1) Net gains/(losses) from fair value adjustments 57.0 (15.5)
The table below shows how the sensitivity of the yield and the market rent affects the value of the property portfolio, as it stands as at 31 December 2011.
Yield is determined based on a normal required rate of return adjusted for the location of the property,type, technical standard and the contracts. The normal required rate of return is determined from the required rate of return that can be derived from transactions in the market, and expectations of interest level and risk adjustment. The market rent is determined from existing contracts on the property and comparable properties, observations from contractual negotiations, requests for offers and information from realtors and Eiendomsverdi’s database.
154 results nOk million notes Carrying amount as at 31.12.2011 Fair value as at 31.12.2011 Carrying amount as at 31.12.2010 Fair value as at 31.12.2010
Financial assets Financial derivatives Financial derivatives at fair value through profit or loss 104.8 104.8 434.5 434.5 Financial derivatives subject to hedge accounting 10.9 10.9
Financial assets held to maturity Bonds held to maturity 10,807.0 11,139.5 13,600.6 14,022.5
Loans and receivables Bonds and other fixed income securities classified as loans and receivables 10 7,227.8 7,117.3 3,903.8 3,926.0
Receivables related to direct operations and reinsurance 3,632.0 3,632.0 3,379.8 3,379.8
Prepaid expenses and earned, not received income 10 47.1 47.1 11.5 11.5
Liabilities related to direct insurance and reinsurance 436.6 436.6 310.2 310.2 Accrued expenses and deferred income 15 178.5 178.5 130.6 130.6 Liabilities to subsidiaries and associates 21 134.6 134.6 57.0 57.0 gain/(loss) not recognised in profit or loss 222.0 444.2 9 – FinanCial assets anD liabilities
quOTEd PRIcES IN AcTIVE mARkETS Quoted prices in active markets are considered the best estimate of an asset/liability’s fair value. A financial asset/liability is considered valued based on quoted prices in active markets if fair value is estimated based on easily and regularly available prices and these prices represent actual and regularly occurring transaction transactions at arm’s length distance. Financial assets/ liabilities valued based on quoted prices in active markets are classified as level one in the valuation hierarchy.
Financial liabilities Financial derivatives Financial derivatives at fair value through profit or loss 67.9 67.9 9 – FinanCial assets anD liabilities (COnt.)
The following financial assets are classified as level three in the valuation hierarchy • Unlisted private equity-investments. The private equity investments that are not organized as funds are valued using cash flow analysis, price multiples and recent market transactions. The private equity investments that are organized as funds are valued based on NAV values (Net Asset
SENSITIVITY FINANcIAl ASSETS lEVEl ThREE The sensitivity analysis for financial assets valued based on non-observable market data show the gain/loss of realistic and plausible market scenarios. A decrease in value of ten per cent is considered a realistic and plausible market scenario for both shares and similar interests and for bonds and other fixed income securities that are included in level three in the valuation hierarchy.
transfers into/out of level 3 as at amount of net unrealised gains recognised in profit or loss that are attributable to instruments held as at 31.12.2010
Bonds and other fixed income securities 8.5 (2.2) 0.2 6.5 (2.2)
Bonds and other fixed income securities Decrease in value 10 % 0.6 total 192.1 9 – FinanCial assets anD liabilities (COnt.)
sensitivity FinanCial assets valUeD baseD On nOn-Observable Market Data (level 3) 2011 sensitivity FinanCial assets valUeD baseD On nOn-Observable Market Data (level 3) 2010
The hedging efficiency is measured per hedging object. The hedging instruments are rolled over continously so that the principal value is approximately similar to that of the hedged object.
The effect of the hedge accounting is a gain on the hedging instruments of NOK 1.8 million, which is reclassified from net income from investments to exchange differences on the net investment.
158 results 10 – lOans anD reCeivables lOans nOk million 2011 2010
Mortgage loans 1.9 2.4 Bonds classified as loans and receivables 7,227.8 3,903.8 Other loans 243.5 299.0 Impairment to fair value (16.3) (31.2) Subordinated loans 0.8 0.6 Provision for impairment losses (5.9) (6.2)
Intercompany SOS International 24.6 24.8 Other receivables 51.5 78.3 total other receivables 137.5 123.8
The recognition of impairment losses is done on each loan individually on the basis of objective evidence. Impairment assessments are not done on groups of loans.
Other loans are primarily interest-free loans to agricultural customers. The loans are in their entirety intended for installment of fire detection systems with these customers. There is no mortgage attached to the loans, and the terms varies from three years to over 20 years. Gjensidige Forsikring has not offered this type of loan to its customers since 2008. The default rate is 1.69 per cent at year end, compared to 1.5 per cent in 2010. Discounting has been conducted in order to take into account the fact that the loans are non-interest-bearing. The discount rate used is 4.66 per cent.
Weighted average rate for interest earned on cash and bank deposits is approximately 2.4 per cent (3.1).
Norvestor IV LP 17.7 Nordic PEP 1 IS (Altor fund III) 12.3 % 15.1 Teknoinvest VIII KS (inkl. Teknoinv. VIII (GP) KS) 13.9 % 13.1 Convexa Capital VIII AS - klasse B 11.1 Verdane Capital V B KS 10.6 Teknoinvest VIII B DIS 15.7 % 9.9 Verdane Capital VII KS 9.4 Fjord Invest AS 8.9 Northzone VI L.P. 8.1 Viking Venture II B IS 16.9 % 6.1 Kapnord Fond AS 5.5 Axcel IV 5.1 Viking Venture AS 4.4 Helgeland Invest 4.0 Tun Media (Landbrukets Medieselskap AS) 3.7 Convexa Capital IV 3.2 BTV Investeringsfond AS 3.0 Norchip AS 2.5 Rogaland Kunnskapsinvest 2.5 Convexa Capital IV 2.4 Norinnova 2.1 Energy Ventures IV LP 1.8 Berger Eiendom 1.7 Midvest I A 1.6 Såkorninvest Sør 1.5 Energy Ventures IS 17.5 % 1.4 Norinnova Invest AS 1.3 HitecVision VI LP 1.1 Midvest II A 1.0 Teknoinvest VIII C IS 26.8 % 1.0 Other private equity investments 5.5 total private equity investments 1,272.7 hedgefunds Winton Futures Fund- Lead Series 191.4 The Winton Evolution Fund 113.6 Sector EuroPower Fund Class A EUR 78.4 Winton Evolution fund, Class H- Euro 67.6 Sector Speculare IV Fund Class A USD 19.8 Sector Maritime Investment Class A 15.5 Sector Speculare II Fund Class A USD 13.4 HORIZON TACTICAL TRAD USD-B 10.1 Sector Maritime Investment Class A1 7.2 Sector Exspec Fund Class A USD 3.9 Sector Consolidare Fund USD 2.4 Sector Spesit I Fund Class A USD 1.9 total hedgefunds 525.2 real estate funds CEREP II 73.2 CEREP III 89.6 CEREP 15.6 La Salle 43.2 total real estate funds 221.6
Combination funds FORTIS L FUND-BD CONV WRLD-I 674.7 total combination funds 674.7 nOk million interest held beyond 10 % 31.12.2011 12 – shares anD siMilar interests (COnt.)
Other investments total other investments 111.0 shares and similar interests owned by other branches Aksjer og andeler eid av Gjensidige Forsikring ASA, Danish branch 2.1 total shares and similar interests owned by other branches 2.1 tOtal shares anD siMilar interests OWneD by gjensiDige FOrsikring asa 3,466.2 short-term insurance contracts, gross Provision for unearned premiums, gross 6,497.8 6,406.7
Claims incurred, but not reported 13,376.3 11,803.0 total claims provision, gross 25,481.1 24,057.5
Other insurance-related provisions 2,527.5 2,480.4 total insurance-related liabilities, gross 34,506.4 32,944.6 short-term insurance contracts, reinsurers' share Reinsurers' share of provision for unearned premiums, gross 13.1 22.2
Claims incurred, but not reported 13,233.0 11,776.3 total claims provision, net of reinsurance 24,520.7 23,644.7
Claims and claims handling costs Claims reported and claims handling costs 12,254.5 (386.1) 11,868.3 9,981.3 (146.3) 9,835.0
Acquisitions through business combinations and merger 197.4 (10.7) 186.7 2,042.7 (0.4) 2,042.3 Claims paid, prior year claims (6,355.7) 272.2 (6,083.5) (5,590.2) 135.9 (5,454.3)
increase in liabilities Arising from current year claims 13,882.8 (1,046.0) 12,836.8 13,231.9 (365.0) 12,866.9 - of this paid (6,035.3) 245.7 (5,789.7) (5,533.2) (5,533.2) Arising from prior year claims (run-off) (260.1) (9.8) (270.0) (230.9) 1.5 (229.3)
2010 is restated according to new accounting regulations and in accordance with restated financial statement.
Amount recognised as expense for the defined contribution plan is NOK 85.0 million (62.4). Amount recognised in 2011 includes premium to Fellesordningen for LO/NHO.
dEFINEd BENEFIT PlAN The retirement pension together with contributions from the National Insurance and taken into consideration paid-up policies, constitutes about 70 per cent of salary at retirement age, provided a completed contribution time of 30 years. The retirement age is 67 years, while as for the underwriters a retirement age of 65 years applies.
Difference between estimated pension liability and estimated value of plan assets as at last financial year and estimated pension liability and fair value of plan assets as at the beginning of this year is recognised in other comprehensive income.
sensitivity +1 % discount rate rate +1 % salary adjustment adjustment
historical information Present value of the defined benefit obligation 2,883.7 2,626.4 2,528.4 2,894.7 2,553.1
The fair value of the plan assets 2,075.9 2,040.8 1,953.3 1,754.2 1,568.5 Deficit in the plan 807.8 585.6 575.2 1,140.5 984.6 cONTRAcTuAl PENSION (AFP) The liability to pay own risk according to the former arrangement is accounted for as a business specific defined benefit plan. Own risk are still to be paid until the pension liability is fulfilled for the company’s own early retirees choosing the former AFP plan. Pension liability for former employees that have chosen to retire before 1 January 2011 is fulfilled as originally planned until everybody has reached 67 years. Hence there will not be a settlement for this group of employees.
AFP is a defined benefit pension plan and should intentionally be accounted for as a pension liability in the balance sheet. There is, however, not sufficient information to recognise a liability in the financial statements for 2010 and the arrangement is therefore recognised as a defined contribution plan.
166 results 15 – prOvisiOns anD Other liabilities nOk million 2011 2010
Other provisions 27.4 7.6 total other provisions for liabilities 97.4 62.3
Provision as at 1 January 54.7 64.4 New provisions 50.0 25.0 Provisions used during the year (34.7) (34.7) provision as at 31 December 70.0 54.7 1 In 2011 it has been decided to make a new provision of NOK 40.0 million in association with the restructurering and new distribution strategy for the Private marked. It has also been decided to make an new provision of NOK 10.0 million in association with the ongoing effeciency improvement measure of Commercial function started in 2010. These processes have been communicated to all business areas involved. During 2011 there have been used NOK 34.7 million of the provisions for 2010.
Deductible temporary differences Loans and receivables (80.6) (82.2) Plant, equipment and intangible assets (129.4) Provisions for liabilities (97.4) (62.3) Pension liabilities (933.4) (662.3) total deductible temporary differences (1,111.4) (936.2)
TAX EXPENSE In connection with the conversion of Gjensidige Forsikring BA to a public limited company the Ministry of Finance has consented to an exemption from capital gains taxation on the transfer of business to the newly formed public limited company under certain conditions. The consequences of the 16 – taX (COnt.)
Change in deferred tax Deferred tax liabilities as at 1 January (16.4) Change in accounting principles 13.9 Deferred tax liabilities as at 1 January restated (18.4) (2.5) Merged company 13.2 Change in deferred tax recognised in profit or loss 22.0 14.1
tax recognised in other comprehensive income Deferred tax on pensions 94.4 34.6 Deferred tax on hedge accounting (2.0) Tax payable on hedge accounting 1.3 total tax recognised in other comprehensive income 93.6 34.6 tax on items recognised directly in equity Tax payable on dividend costs 13.2 total tax on items recognised directly in equity 13.2 tax relief decision have been incorporated into the tax expense and tax liabilities from the fourth quarter of 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.
Depreciation and value adjustments (note 5 and 7), excl. depreciation properties 232.0 215.6 Employee benefit expenses 1,572.5 1,310.3 Fee for customer representatives 3.8 6.3 Software costs 316.7 301.2 Auditor’s fee (incl. VAT) 6.7 9.0 Consultants’ and lawyers’ fees 101.3 67.2
Commodity costs and other expenses 11.1 32.6 total other expenses 11.1 32.6
The remuneration committee shall prepare matters for consideration by the Board of Directors. It is primarily responsible for • Drafting proposals for and following up compliance with the Group’s guidelines and framework for remuneration • Annually considering and proposing the remuneration of the CEO • Annually considering and drafting proposals for the CEO’s scorecard • Acting as adviser to the CEO in connection with the annual assessment of the remuneration of the senior group management • Considering the management’s proposed ‘Statement on the stipulation of pay and other remuneration for executive personnel’ cf. the Public Limited Liability Companies Act section 6-16a
GuIdElINES FOR ThE uPcOmING FINANcIAl YEAR REmuNERATION OF ThE cEO The CEO’s salary and other benefits are stipulated by the Board of Directors on the basis of an overall assessment that takes into account Gjensidige’s remuneration scheme and market salary for corresponding positions.
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 pay (bonus) is decided by the Board of Directors 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 pay is not included in the pension basis. The assessment takes into account the enterprise’s overall performance targets for return on equity and combined ratio, and an evaluation of the CEO’s personal contribution to the Group’s development and results, compliance with the Group’s vision, values, ethical guidelines, management principles and customer satisfaction.
Variable remuneration relating to Gjensidige’s performance is decided on the basis of the past two years’ performance. Half of the variable remuneration is paid 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. 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 CEO’s function in the Group, and otherwise be in line with market practice.
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 pay (bonus) can be paid to executive personnel on the basis of concrete performance measurements in defined target areas and a discretionary assessment stipulated in scorecards and derived from the Group’s strategies and goals. The assessment takes into account a combination of the enterprise’s overall performance targets for return on equity and combined ratio, the business unit in question and an evaluation of the person in question’s personal contribution, including an overall assessment relating to compliance with the Group’s vision, values, ethical guidelines, management principles and customer satisfaction. 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.
The retirement age for members of the senior group management is 62. Of the current members of the senior group management, five are members of the closed
Calculated value of total benefits other than cash rights earned in the fin. year according to defined benefit pension plan 8 sharebased
loans, advance payments, guarantees, outstanding amount interest rate 6 applicable conditions and installment plan number of options assigned/
Bjørn Asp, Executive Vise President 2,085.2 438.3 203.2 504.4 2.6 5,913.9 3.82-3.89 % 20.07.33 38 3,918 3
Members of the senior group management have a period of notice of six months. There is no severance pay arrangement for executive personnel who leave their position in Gjensidige.
BINdING GuIdElINES FOR ShARES, SuBScRIPTION RIGhTS ETc. FOR ThE uPcOmING FINANcIAl YEAR Of the variable pay earned in 2012 by the CEO and other employees covered by the Regulations relating to remuneration in financial institutions, 50 per cent of the gross earned variable pay will be given in the form of a promise of shares in Gjensidige Forsikring ASA. One third of the shares will be allocated in each of the following three years.
Gunnhild H. Andersen, staff representative 7 200.0 14.9 695 Kjetil Kristensen, staff representative 7 195.0 18.0 466 Gunnar Mjåtvedt, staff representative 7 238.0 18.0 1,509 Tor Øwre (1.1.11-31.5.11) 100.0 Per Arne Bjørge (1.6.11-31.12.11) 110.0 1.5 10,271 the board of Directors, deputies 5
Tor Magne Lønnum, Deputy CEO 2,913.7 1,397.0 218.1 663.9 4,213 3
Gunnhild H. Andersen, staff representative 235.0 605 Kjetil Kristensen, staff representative 235.0 406 Gunnar Mjåtvedt, staff representative 280.0 799 Marianne Bø Engebretsen (1.1.10-28.6.10) 1, 11, staff representative the board of Directors, deputies 6
Per Gunnar Skorge (24.3.10-31.12.10) 1 3.0 staff representative Marianne Brinch van Meenen (28.6.10-31.12.10) 1, 10, staff representative 505 Ingvild Sollie Andersen (1.1.10-28.6.10) 1, staff representative 11.0 Knut Bertil Øygard (1.1.10-28.6.10) 1, staff representative 13.0
Derivatives Net interest income/(expenses) from derivatives (10.8) 1.2 Unrealised gain/(loss) from derivatives (307.9) 185.9 Realised gain/(loss) from derivatives 406.8 21.0 total net income from derivatives 88.2 208.1 total net income and gains/(losses) from financial assets at fair value through profit or loss, designated 526.0 1,214.7
Specifications interest income and expenses from financial assets and liabilities not recognised at fair value through profit or loss Interest income from financial assets not recognised at fair value through profit or loss 972.0 931.0 Interest expense from financial assets not recognised at fair value through profit or loss (40.1)
1 Net other financial income/(costs) include financial income and expenses not attributable to individual classes of financial assets or liabilities, and financial administration costs.
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 above ten (eight) years and twelve (ten) years in average including option of extention.
Gjensidige Forsikring was until 1 January 2012 responsible externally for any insurance claim arising from the co-operating Fire Mutuals’ operations.
Gjensidige Forsikring ASA is the Group‘s parent company. As at 31 December 2011 the following companies are regarded related parties.
nOk million income expense income expense gross premiums written Gjensidiges Arbejdsskadeforsikring A/S 14.3 13.1 Gjensidige Baltic 8.2 8.4 Gjensidige Pensjonsforsikring AS (owned by Gjensidige Pensjon og Sparing Holding AS) 0.1 0.2 Nykredit Forsikring A/S 808.3 782.2 Tennant Försäkringsaktiebolag AB (merged with Gjensidige Forsikring ASA, effective 1.1.2011) 8.3 gross paid claims Gjensidige Baltic 8.2 Nykredit Forsikring A/S 606.4 374.5
Change in gross provision for claims Gjensdige Baltic 10.1 Nykredit Forsikring A/S 62.8 294.6 Tennant Forsikring NUF (merged with Gjensidige Forsikring ASA, effective 1.1.2011) 1.6
Commissions Gjensidige Bank ASA (owned by Gjensidige Bank Holding AS) 0.9 administration expenses Gjensidige Bank ASA (owned by Gjensidige Bank Holding AS) 27.6 21.7 Gjensidige Investeringsrådgivning ASA (owned by Gjensidige Pensjon og Sparing Holding AS) 7.5 8.3 Gjensidige Pensjon og Sparing Holding AS 10.0 10.6 Gjensidige Pensjonsforsikring AS (owned by Gjensidige Pensjon og Sparing Holding AS) 35.1 39.5 Glitne Invest AS 0.5 0.1 Hjelp24 AS (formerly owned by Glitne Invest AS, sold during 2011) 5.2 4.8 Nykredit Forsikring A/S 109.4 107.5 Oslo Areal AS 0.2 0.2 4.2 Tennant Assuranse AS 21.4 Tennant Forsikring NUF (merged with Gjensidige Forsikring ASA, effective 1.1.2011) 5.0 Tennant Holding AB 8.3 6.1 interest expenses Fair Forsikring A/S (liquidated during 2011) 9.0 17.7 Tennant Holding AB 14.9 21 – relateD party transaCtiOns (COnt.)
Gjensidige Annual Report 2011 results 21 – relateD party transaCtiOns (COnt.)
Gjensidige Forsikring was until 1 January 2012 responsible externally for any insurance claim arising from the cooperating mutual fire insurers’ fire insurance business, see note 20.
nOk million received given received given group contributions Gjensidige Bank ASA (owned by Gjensidige Bank Holding AS) 74.1 Gjensidige Pensjonsforsikring AS (owned by Gjensidige Pensjon og Sparing Holding AS) 111.5 26.8 Gjensidige Investeringsrådgivning ASA (owned by Gjensidige Pensjon og Sparing Holding AS) 14.6 Gjensidige Fondene AS (owned by Gjensidige Pensjon og Sparing Holding AS) 0.4 Glitne Invest AS 36.2 22.3 Oslo Areal AS 273.4 101.1 Strandtorget Eiendom AS 37.0 Tennant Assuranse AS 6.0 Tennant Försäkringsaktiebolag AB 1.0
nOk million receivables liabilities receivables liabilities intercompany non-interest bearing debts and receivables within the group Fair Forsikring A/S including subsidiaries 3.5 Gjensidige Arbejdsskadeforsikring A/S 1.0 13.0 Gjensidige Bank ASA (owned by Gjensidige Bank Holding AS) 2.5 0.8 Gjensidige Fondene AS (owned by Gjensidige Pensjon og Sparing Holding AS) 0.1 Gjensidige Pensjon og Sparing Holding AS 0.6 1.2 Gjensidige Pensjonsforsikring AS (owned by Gjensidige Pensjon og Sparing Holding AS) 107.3 22.8 Gjensidige Investeringsrådgivning ASA (owned by Gjensidige Pensjon og Sparing Holding AS) 0.7 14.8 Gjensidigestiftelsen 0.4 34.4 Glitne Invest AS 36.2 22.2 Hjelp24 AS (formerly owned by Glitne Invest AS, sold during 2011) 1.4 Nykredit Forsikring A/S 63.4 19.3 26.2 Oslo Areal AS 273.3 80.0 Tennant Holding AB 11.2 Tennant Försäkringsaktiebolag AB (merged with Gjensidige Forsikring ASA, effective 1.1.2011) 13.0 Tennant Assuranse AS (owned by Glitne Invest AS) 2.8 Tennant Assurance AB (owned by Tennant Försäkringsaktiebolag AB) 6.0 Tennant Forsikring NUF (merged with Gjensidige Forsikring ASA, effective 1.1.2011) 1.4 Samtrygd Eigedom AS 1.7 1.7 total intercompany non-interest bearing debts and receivables group 380.6 134.6 190.7 57.0
Deferred tax assets (75.6) (26.4) Other intangible assets (689.1) (659.1) Investment properties, unrealised gains, proportion (158.4) (209.3) Reinsurance provision, minimum requirement (4.5) (6.4)
Assets with 0 % risk weight 3,513.2 3,391.0 Assets with 10 % risk weight 1,287.2 292.6 Assets with 20 % risk weight 20,597.7 18,267.7 Assets with 35 % risk weight 0.5 1.3 Assets with 50 % risk weight 1,070.6 1,524.4 Assets with 100 % risk weight 30,492.1 31,213.2 Assets with 150 % risk weight 118.3 126.7
Assets with 0 % risk weight 0.0 0.0 Assets with 10 % risk weight 128.7 29.3 Assets with 20 % risk weight 4,119.5 3,653.5 Assets with 35 % risk weight 0.2 0.4 Assets with 50 % risk weight 535.3 762.2 Assets with 100 % risk weight 30,492.1 31,213.2 Assets with 150 % risk weight 177.5 190.0 total risk weighted assets 35,453.3 35,848.7
On 23 January 2012, a binding agreement was entered into for the sale of one shopping centre in the property portfolio in the amount corresponding 22 – events aFter the balanCe sheet Date to their carrying amount. The transaction is expected to be completed with accounting effect in the first quarter 2012.
Proportion of security provision 1,100.6 1,105.6 Proportion of Natural perils fund (up to 25 % of the Natural perils fund is included) 615.7 653.9 solvency margin capital 15,179.3 15,712.1
Solvency margin minimum requirement 2,836.3 2,700.0 in excess of requirement 12,343.0 13,012.2 Solvency margin capital in per cent of requirement 535.2 % 581.9 % 1 1 The figures for 2010 have been restated due to reclassification of the administration provision.
180 results 27 – share-baseD payMent dEScRIPTION OF ThE ShARE-BASEd PAYmENT ARRANGEmENTS As at 31 December 2011, Gjensidige has the following share-based payment arrangements: EquITY-SETTlEd ShARE-BASEd PAYmENT With effect from 2011, Gjensidige established equity-settled share-based payment for executive personnel.
EquITY-SETTlEd ShARE SAVINGS PROGRAmmE FOR EmPlOYEES In 2011, the Board of Directors of Gjensidige Forsikring ASA decided to introduce a share savings programme for employees of the Group with the exception of employees of Gjensidige Baltic. All employees of the Group were given an opportunity to buy shares for up to NOK 75,000. In 2012, the scheme will be turned into a share savings programme, whereby all permanent employees of the Group will be given an opportunity to save an annual amount of up to NOK 75,000. Saving will take the form of fixed deductions from salary that will be converted into shares four times a year. The employees will be offered a discount of 20 per cent, limited upwards to NOK 1,500 kroner per year, which corresponds to the maximum tax-exempt discount. Employees will receive one bonus share for every four shares they have owned for more than two years, provided that they are still employed by the Company.
As at 31 December 2010, the participants had invested NOK 44.8 million in the share purchase scheme.
FAIR VAluE mEASuREmENT The fair value of the bonus shares allocated through the share savings programme 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 following assumptions were used in the calculation of fair value at the time of allocation nOk million 2011 2010
Stock saving programme for employees in 2011 17 0.9 Stock purchase offering for employees allocated in 2010 17 6.7
Weighted average exercise prices of bonus shares in 2011 number of bonus shares
Today, the Board of Directors and the CEO have considered and approved the Report of the Board of Directors and the Annual Accounts for Gjensidige Forsikring ASA, the Group and the parent company, for the calendar year 2011 and as per 31 December 2011.
PHOTOS: Yvonne Holth Cover photos, The Board of Directors, Helge Leiro Baastad,
June – July Large number of claims in Eastern Norway following the major flood in June. Copenhagen experienced extensive damage following the torrential downpour in July.