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 where the subsidiaries and branches operate in and in addition a risk premium is added. The risk premium is increased somewhat from 2015 due to the decline in interest rate on government bonds. The discount rate that has been used is 7.5 per cent. This corresponds to the discount rate of the group.
Sensitivity analysis to key assumptions The excess values related to the acquisitions 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.
Growth reduces by 2% compared to expected next 3 years CR increases by 2%
Gouda portfolio No need for impairment No need for impairment No need for impairment No need for impairment Gjensidige Forsikring, Swedish branch 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 Investeringsrådgivning AS ³ Oslo, Norway 100% 25.0 47.3 Total subsidiaries 6,202.2 5,741.7 5,785.0 5,421.2
Vervet AS including subordinated loan ² (sold in 2016) Tromsø, Norway 25% 35.3 11.5
Joint ventures Oslo Areal AS Oslo, Norge 50% 1,086.9 1,086.9 1,086.9 1,086.9
Total associates and joint ventures 1,086.9 1,086.9 1,122.2 1,098.4 1 Gjensidige Baltic AAS and PZU Lietuva SA were merged into ADB Gjensidige in 2016. 2 Subordinated loan of NOK 24.0 million is included in cost. ³ Gjensidige Investeringsrådgivning AS was distributed as dividend from Gjensidige Pensjon og Sparing Holding AS to Gjensidige Forsikring ASA during 2016.
NOK millions Assets Equity Liabilities Revenues 6 Profit/(loss) Share of stock value
There are some restrictions on Gjensidige Forsikring ASA’s ability to access or use the Group’s assets, as well as settling its obligations. Group contributions added together with dividends must not exceed justifiable payment of dividend based on a company’s financial strength and operations. Distributions from life insurance companies must be within profit for the year. If it is desired to distribute more than this, then it has to be approved in advance by the Financial Supervisory Authority. The regulatory framework for capital and solvency margin must be complied, as well as asset management regulations that set requirements which must be met in order to cover the technical provisions. In addition, Gjensidige shall fulfil the capital requirements for an A rating, which ties additional capital.
Gjensidige annual report 2016 | 167 8. Financial assets and liabilities Fair value Financial assets and liabilities measured at fair value are carried at the amount each asset/liability can be settled to in an orderly transaction between market participants at the measurements date at the prevailing market conditions.
Different valuation techniques and methods are used to estimate fair value depending on the type of financial instruments and to which extent they are traded in active markets. Instruments are classified in their entirety in one of three valuation levels in a hierarchy on the basis of the lowest level input that is significant to the fair value measurement in its entirety.
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 transactions at arm’s length principle. Financial assets/liabilities valued based on quoted prices in active markets are classified as level one in the valuation hierarchy.
Loans and receivables Bonds and other fixed income securities classified as loans and receivables 9 15,895.8 17,160.4 16,173.2 17,439.1 Loans 9 123.1 123.1 165.1 165.1 Receivables related to direct operations and reinsurance 5,323.0 5,323.0 4,696.7 4,696.7 Receivables from Group companies 22 89.5 89.5 61.0 61.0 Other receivables 9 833.5 833.5 367.2 367.2 Prepaid expenses and earned, not received income 4.2 4.2 25.7 25.7 Cash and cash equivalents 10, 11 1,143.0 1,143.0 1,704.5 1,704.5
Financial assets at fair value through profit or loss, initial recognition Shares and similar interests 807.6 3,764.6 1,562.2 6,134.4 Bonds and other fixed income securities 6,711.7 15,063.0 1,333.5 23,108.2
Financial assets at amortised cost Bonds held to maturity 1,286.3 1,286.3 Bonds and other fixed income securities classified as loans and receivables 17,158.9 1.5 17,160.4 Loans 123.1 123.1
Financial liabilities Financial derivatives Financial derivatives at fair value through profit or loss 1,173.1 1,173.1
Financial assets at fair value through profit or loss, initial recognition Shares and similar interests 1,092.2 4,110.6 1,927.9 7,130.7 Bonds and other fixed income securities 7,462.6 14,568.6 2,174.5 24,205.7
Financial liabilities Financial derivatives Financial derivatives at fair value through profit or loss 366.3 366.3
unrealised gains recognised in profit or loss Purchases Sales Settle- ments
Shares and similar interests 1,927.9 (350.7) 171.8 (186.8) 1,562.2 (303.9) Bonds and other fixed income securities 2,174.5 (114.3) 324.2 (119.2) (832.9) (98.7) 1,333.5 24.0 Total 4,102.4 (465.0) 496.0 (306.0) (832.9) (98.7) 2,895.7 (279.9)
Vervet AS was sold in 2016. Interest accrues only on Midvest I og Midvest II.
Other receivables Receivables in relation with asset management 700.0 272.0 Receivables SOS International 19.4 21.3 Receivables regarding to real estate 54.5 16.2 Other receivables 59.5 57.7 Total other receivables 833.5 367.2
172 | Gjensidige annual report 2016 12. Shares and similar interests
Other foreign shares Deutsche Wohnen AG 11.3 Vonovia SE 10.3 LEG Immobilien AG 9.5 Novo Nordisk A/S 8.7 Grand City Properties SA 8.4 Telefonaktiebolaget LM Ericsson 3.0 Total other foreign shares 51.2
Other investments Gjensidige Pensjonskasse 94.7 % 111.0 Total other investments 111.0
Acquisitions through business combinations 348.3 (247.7) 100.6 50.5 50.5 Claims paid, prior year claims (5,941.3) 92.1 (5,849.2) (6,592.7) 199.8 (6,392.9)
Over the next 3-5 years, average annual run-off gains are expected to be around NOK 900 million, moving the expected reported combined ratio to the lower end of the 86-89 corridor (undiscounted).
Defined contribution plan Defined contribution pension is a private pension plan that supplements the National Insurance scheme. Benefits from the pension plan come in addition to retirement pension from the National Insurance scheme. The retirement age is 70.
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 Insurance basic amount (G) and 20 per cent of earnings between 7.1 and 12 G.
Defined benefit plan Description of the plan Together with benefits from the National Insurance scheme and any paid-up policies from former employment relationships, the retirement pension amounts to approximately 70 per cent of the final salary, given a full earning period of 30 years. The retirement age is 70, but it is 65 for underwriters.
With effect from 2016, Gjensidige removed the clause concerning CPI indexing of current pensions. This was recognised as a plan change in the accounts. Income in the amount of approximately NOK 480 million was recognised in the pension expense and the pension liability was reduced correspondingly.
The difference between the estimated pension liability and the estimated value of pension assets as of the previous financial year and the actuarial pension liability and the fair value of the pension assets as of the beginning of the year is recognised under Other comprehensive income. In 2016, this had a negative effect on equity of approximately NOK 26 million. In addition, non-available excess funding of approximately NOK 133 million was recognised, so that the sum of the negative effect on equity was approximately NOK 159 million. In 2015, this had a positive effect on equity of approximately NOK 70 million, which was primarily due to a increased discount rate.
The discount rate is the assumption that has the greatest impact on the value of the pension liability. Wage growth, pension increases and the adjustment of the National Insurance basic amount are based on historical observations and expected future inflation. Wage growth is set at 3.1 per cent, like the year before, and is adjusted for age based on a decreasing trend. The year-on-year nominal wage growth 2016/17 is calculated to be 1.5 per cent, which is a decrease from last year’s 1.6. 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 56.6 years.
Gjensidige’s pension assets are managed by Gjensidige Pensjonskasse as an investment choice portfolio. This means that Gjensidige decides itself how the pension assets are invested within a set of limits that are approved by the board of the pension fund. Gjensidige has a separate investment committee that decides how the pension assets are allocated. The investment choice portfolio entails a financial risk for Gjensidige Forsikring.
The financial risk is related to investments in equities, interestbearing securities and property. Most of the investments are in securities funds and bonds. The financial risk comprises stock market, interest rate, credit, currency and liquidity risk.
Financial risk in pension assets is estimated using defined stress parameters for each asset class and assumptions about how the development of the different asset classes will co-vary.
Interest rate risk The pension assets’ exposure to interest rate risk is deemed to be moderate because the market value-weighted duration is approximately three years. The portfolio value will fall by
The pension liabilities are only exposed to Norwegian kroner (NOK). Liquidity risk The liquidity risk in the pension assets is deemed to be low, since there are short-term investments at all times that exceed short-term liabilities. The investments are deemed to be sufficiently liquid. Life expectancy and disability The life expectancy assumptions are based on the table GAP07 developed by Gabler AS, a firm of actuarial consultants. This table has been used since 31 December 2007. The assumptions on which the table is based are systematically followed up every year. The table is unbiased and dynamic, so that life expectancy is improved every year. No information has become available in 2016 to indicate that GAP07 should be changed. A thorough review of GAP07 is scheduled to take place in 2017, however, and life expectancy assumptions for the population and in the banking and insurance sector will be reassessed. There is uncertainty about how life expectancy will develop, especially for men. The Financial Supervisory Authority of Norway has adopted separate minimum requirements for life expectancy prices (K2013) for pension plans. These requirements concern the minimum price a life insurance company or pension fund shall charge to insure benefits. These minimum prices thereby affect the size of the contributions that must be made towards the annual earnings and for the minimum requirement for pension assets. GAP07 has a shorter life expectancy than K2013. Everything else being equal, this will mean that payment of the minimum requirement for pension assets will be based on a higher life expectancy than the corresponding measurement of the liability. This means that a future increase in pensions will be included in the liability as a result of the payment being based on a longer life expectancy. The disability frequency is based on table IR73. It measures disability in the long term. The prevalence of disability is low compared with many other employers. In 2016, the realised value of disability events was lower than expected (gain). Deaths led to a higher realised value than expected (loss). Realised life expectancy was somewhat lower than expected (gain). Overall, a small gain has been recognised for this type of risk. Gjensidige’s employees could be involved in big disaster-like events such as plane crashes, bus crashes, as spectators at sporting events or through incidents in the workplace. If such an event occurs, the pension liability could significantly increase. Gjensidige has invested in disaster insurance that means that it will receive compensation if such an event occurs. Wage growth Future pension benefits depend on future wage growth and the development of the National Insurance basic amount (G). If wage growth in the Company is lower than the increase in G, the benefits will be reduced. The Group assumes that wage growth is agedependent. A younger employee can expect higher annual wage growth than an older employee. Wage growth is based on expectations of growth in real wages in Norway and inflation in Norway. Inflation is also part of the interest rate. An increase in inflation will thus influence both wage growth and the increase in the interest rate. Normally, this could reduce the pension liability somewhat. Real wage growth is estimated for Norway and is largely based on macroeconomic projections. The prevailing consensus in macroeconomic circles is that it should be in the range of 1.5 to 2 per cent. The average for the last 20 years has been 1.9 per cent. Real wage growth is corrected for the age effect, so that the real wage growth for younger employees is stronger than for older employees. A pension plan rarely has the same age composition as the economy as a whole. This is particularly the case for Gjensidige’s pension plan, which is closed to new entrants.
Interest cost 62.0 12.9 74.9 56.8 12.3 69.1 Actuarial gains and losses 7.0 6.1 13.2 (63.6) (11.1) (74.7) Benefits paid (91.5) (38.0) (129.4) (89.5) (40.2) (129.7) Employers' national insurance contributions of benefits paid (16.5) (5.1) (21.6) (5.7) (5.7)
Amount recognised in the balance sheet Present value of the defined benefit obligation 1,940.1 493.2 2,433.2 2,258.8 528.7 2,787.6 Fair value of plan assets (2,426.3) (2,426.3) (2,352.0) (2,352.0) Net defined benefit obligation/(benefit asset) (486.2) 493.2 7.0 (93.1) 528.7 435.6
Expense recognised in profit or loss Current service cost 32.3 10.1 42.4 34.9 10.7 45.7 Interest cost 62.0 12.9 74.9 56.8 12.3 69.1 Interest income (66.0) (66.0) (59.9) (59.9) Removed CPI indexing of current pensions (445.8) (476.8) Employers' national insurance contributions 4.6 1.4 6.0 4.9 1.5 6.4 Total defined benefit pension cost (412.9) (6.5) (419.5) 36.8 24.5 61.4
Actuarial assumptions Discount rate 2.77% 2.80% Future salary increases 1 3.10% 3.10% Change in social security base amount 3.10% 3.10% Future pension increases 0.00% 1.90%
Other specifications Amount recognised as expense for the defined contribution plan 188.5 142.1
Expected contribution to the defined benefit plan for the next year 0.0 0.0 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 2.0 per cent (2.6). See explanation under Actuarial assumptions.
Sensitivity 10% increased mortality (3.6%) (4.3%) 10% decreased mortality 2.7% 3.3% + 1% point discount rate (9.2%) (11.0%) - 1% point discount rate 11.0% 14.7% + 1% point salary adjustment 3.9% 4.3% - 1% point salary adjustment (3.0%) (3.3%) + 1% point social security base amount (1.5%) (1.6%) - 1% point social security base amount 1.7% 1.8% + 1% point future pension increase 9.0% 11.9% - 1% point future pension increase 0.0% (9.4%)
Shares and similar interests 58.2 58.2 Bonds 1,785.7 509.5 2,295.3 Bank 9.7 9.7 Derivatives 63.1 63.1 Total 1,785.7 640.5 2,426.3
Shares and similar interests 88.0 88.0 Bonds 960.1 1,162.3 2,122.4 Bank 54.6 54.6 Derivatives 87.0 87.0 Total 960.1 1,391.9 2,352.0 15. Provisions and other liabilities
Other provisions and liabilities Restructuring costs 1 186.4 85.8 Other provisions 140.8 250.1 Total other provisions and liabilities 327.2 335.8
Other liabilities Outstanding accounts Fire Mutuals 30.4 40.0 Accounts payable 236.6 182.5 Liabilities in relation with properties 3.5 1.2 Liabilities in relation with asset management 5.1 Liabilities to public authorities 499.8 340.7 Other liabilities 477.5 406.0 Total other liabilities 1,252.9 970.4
Other accrued expenses and deferred income Liabilities to public authorities 21.6 21.3 Accrued personnel costs 270.1 258.4 Other accrued expenses and deferred income 9.7 17.4 Total other accrued expenses and deferred income 301.4 297.2
Restructuring costs 1 Provision as at 1 January 85.8 7.1 New provisions 145.4 84.9 Provisions used during the year (44.0) (7.1) Exchange rate difference (0.8) 0.9 Provision as at 31 December 186.4 85.8 1 In 2016 NOK 145.4 million is allocated to restructuring provision, due to a decision of changes in processes in Norway, Denmark and Sweden. The processes have been communicated to all entities affected by the changes.
Specification of tax expense Tax payable (1,309.6) (895.4) Correction previous years (4.0) (14.5) Change in deferred tax (8.5) (188.7) Total tax expense (1,322.0) (1,098.5)
Deferred tax liabilities and deferred tax assets Deferred tax liabilities and deferred tax assets are offset when there is a legally enforceable right to offset those assets/liabilities and when deferred tax liabilities/deferred tax assets relate to the same fiscal authority. The amounts offset are as follows: Taxable temporary differences Property, plant and equipment and intangible assets 846.1 1,214.1 Shares, bonds and other securities 133.8 227.6 Profit and loss account 210.8 229.5 Pension assets 45.8 Security provision 2,823.4 2,823.4 Total taxable temporary differences 4,059.9 4,494.5
Change in deferred tax Deferred tax liabilities as at 1 January 934.9 (31.1) Change in Norwegian Financial Reporting Regulation for Insurance Companies 760.9 Change in deferred tax recognised in profit or loss 8.5 188.7
Tax recognised in other comprehensive income Deferred tax pensions 39.8 (18.4) Change in tax rate on pensions from 27% to 25% 1.4 Tax payable on hedge accounting (16.9) Tax payable on exchange rate differences 66.6 (79.8) Total tax on items in other comprehensive income 106.4 (113.8)
Insurance-related administration expenses incl. commissions for received reinsurance and sales expenses Depreciation and value adjustments (note 5 and note 7), excl. depreciation properties 332.3 292.2 Employee benefit expenses (note 18) 2,001.7 2,238.6 Fee for customer representatives 3.3 4.8 Software costs 398.2 350.2 Auditor’s fee (incl. VAT) 3.2 3.9 Consultants’ and lawyers’ fees 66.8 93.5 Commissions 483.5 626.9 Other expenses 1 (315.5) (492.5) Total insurance-related operating expenses incl. commissions for received reinsurance and sales expenses 2,973.4 3,117.5
Of which sales expenses Employee benefit expenses 662.7 679.3 Commission 323.4 315.4 Other sales expenses 432.5 446.7 Total sales expenses 1,418.5 1,441.4
Employee benefit expenses Wages and salaries 1,844.1 1,662.3 Social security cost 378.2 339.6 Pension cost - defined contribution plan (note 14 incl. social security cost) 188.5 165.4 Pension cost - defined benefit plan (note 14 incl. social security cost) (419.5) 61.4 Share-based payment (note 25) 10.5 10.0 Total employee benefit expenses 2,001.7 2,238.6
Variable remuneration shall be performance-based without being a risk driver, and shall reflect the results and contributions on company, division, department and individual level. Other elements of compensation offered should be considered attractive from both new and current employees.
Guidelines for the upcoming financial year Remuneration of the CEO The CEO’s salary and other benefits are stipulated by the Board on the basis of an overall assessment that takes into account
Remuneration of personnel with supervisory tasks The remuneration of personnel with supervisory tasks shall be independent of the performance of the business area they are in charge of.
Binding guidelines for shares, subscription rights etc. for the upcoming financial year Of the variable pay earned in 2016 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 released in each of the following three years.
Report on executive remuneration in the preceding financial year In accordance with the guidelines, one employee in the finance department has been offered up to 50 per cent variable remuneration. The Board confirms that the guidelines on the remuneration of executive personnel for 2016 set out in last year’s statement have been complied with.
The Board Inge K. Hansen, Chairman 544.8 7.3 12,253 Trond V. Andersen (1.1.16-6.4.16) 1 139.8 7.9 Hans-Erik Andersson (1.1.16-6.4.16) 1, 7 180.0 4.5 Gisele Marchand 8 412.5 1.5 1,481 Knud Peder Daugaard (7.4.16-31.12.16) 1, 8 John Giverholt (7.4.16-31.12.16) 1 Anne Marie Nyhammer, staff representative (1.9.16-31.12.16) 1 Kjetil Kristensen, staff representative (1.1.16-31.8.16) 1, 4, 8 317.2 Gunnar Mjåtvedt, staff representative 4, 8 364.0 1,975 Per Arne Bjørge 8 364.0 2.9 10,542 Mette Rostad 268.0 2.1 1,550 Tine Wollebekk 1, 8 299.6 1.5 Lotte Kronholm Sjøberg, staff representative 4 268.0 429
The Board Inge K. Hansen, Chairman 538.5 4.8 12,253 Trond V. Andersen 282.5 9.3 1,805 Hans-Erik Andersson 8 416.5 1.5 1,778 Gisele Marchand 9 369.5 1.5 1,481 Gunnhild H. Andersen, staff representative (1.1.15-28.5.15) 1, 5 230.8 Kjetil Kristensen, staff representative 5, 9 369.5 578 Gunnar Mjåtvedt, staff representative 5, 9 369.5 1,907 Per Arne Bjørge 9 369.5 3.1 10,542 Mette Rostad 275.5 6.8 1,550 Tine Wollebekk 268.5 1.5 Lotte Kronholm Sjøberg, staff representative (28.5.15-31.12.15) 1, 5 88.3 283
Net income and gains/(losses) from buildings and other real estate Investment properties Rental income from investment properties, excl. unrealised gains/(losses) 12.0 Net revaluation investment properties 38.4 16.2 Net gains/(losses) from sale of investment properties 15.2 Administration expenses related to investment properties (1.4) Total net income and gains/(losses) from investment properties 38.4 41.9
Net income and gains/(losses) from financial assets at fair value through profit or loss, designated Shares and similar interests Dividend income 46.8 72.1 Unrealised gains/(losses) from shares and similar interests (369.8) (488.7) Realised gains/(losses) from shares and similar interests 556.8 578.1 Total net income and gains/(losses) from shares and similar interests 233.8 161.5
Net income and gains/(losses) from bonds held to maturity Net interest income from bonds held to maturity 119.7 128.2 Unrealised gains/(losses) from bonds held to maturity 0.3 Net gains/(losses) from changes in exchange rates on bonds held to maturity 181.2 376.7 Total net income and gains/(losses) from bonds held to maturity 300.9 505.2
Net income and gains/(losses) from financial liabilities at amortised cost Net interest income/(expenses) from subordinated debt (31.6) (34.6) Total net income and gains/(losses) from financial liabilities at amortised cost (31.6) (34.6)
Net other financial income/(expenses) 1 (21.1) (327.1) Discounting of claims provision classified as interest expense (44.9) (57.1) Change in discount rate claims provision (194.5) 57.6
General terms Regulatory regulation Solvency II Solvency II Regulatory call Yes No
Overview Gjensidige Forsikring ASA is the Group's parent company. As at 31 December 2016 the following companies are regarded related parties.
Gross premiums written ADB Gjensidige 32.4 18.8 Gjensidige Pensjonsforsikring AS (owned by Gjensidige Pensjon og Sparing Holding AS) 5.5 4.0 Nykredit Forsikring A/S 1,041.8 1,037.2
Gross paid claims ADB Gjensidige 0.3 3.9 Gjensidige Pensjonsforsikring AS (owned by Gjensidige Pensjon og Sparing Holding AS) 12.6 45.3 Nykredit Forsikring A/S 812.4 760.3
Change in gross provision for claims ADB Gjensidige 8.7 2.7 Gjensidige Pensjonsforsikring AS (owned by Gjensidige Pensjon og Sparing Holding AS) 10.8 5.9 Nykredit Forsikring A/S 40.1 44.8
Dividends Gjensidige Pensjon og Sparing Holding AS 32.0 Gjensidige Pensjonskasse 9.5 9.5 Gjensidigestiftelsen 3,858.9 1,836.1 Nykredit Forsikring A/S 58.2 Oslo Areal AS 110.0
In addition, the shares in Gjensidige Investeringsrådgiving AS (GIR) were distributed as dividend from Gjensidige Pensjon og Sparing Holding AS to Gjensidige Forsikring ASA. This was done according to accounting continuity and booked as a share split of Gjensidige Pensjon og Sparing Holding AS.
Impairment losses Gjensidige Baltic AAS (merged into ADB Gjensidige in 2016) 13.5 Nykredit Forsikring A/S 94.2
The shareholder list is based on the VPS shareholder registry as of 31 December 2016. A shareholder list showing the owners behind nominee accounts can be found on page XX.
Weighted average share price (NOK) 143.60 131.40 141.86 128.91 Expected turnover N/A N/A 10% 10% Expected sale N/A N/A 5% 5% Lock-in period (years) 3 3 2 2 Expected dividend (NOK per share) 1 6.67 5.41 6.67 5.41 1 The expected return is based on the Group's actual profit/loss after tax expense as of the third quarter, grossed up to a full year, plus the maximum distribution of dividend corresponding to 80 per cent 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.
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 2016 and as per 31 December 2016.
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 2016. 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 2016. 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 2016.
Inge K. Hansen Lotte K. Sjøberg Knud Peder Daugaard Chairman Board member Board member
Gunnar Mjåtvedt Anne Marie Nyhammer Mette Rostad Board member Board member Board member
Auditor's report KPMG AS Sørkedalsveien 6 Postboks 7000 Majorstuen 0306 Oslo
We have audited the financial statements of Gjensidige Forsikring ASA. The financial statements comprise: • The financial statements of the parent company, which comprise the balance sheet as at 31 December 2016, and income statement, statement of comprehensive income, statement of changes in equity, cash flow for the year then ended, and notes to the financial statements, including a summary of significant accounting policies, and
• The accompanying financial statements give a true and fair view of the financial position of the group as at 31 December 2016, and its financial performance and its cash flows for the year then ended in accordance with International Financial Reporting Standards as adopted by the EU.
Although historical performance often is a good basis for estimating the claims provision, changes in economic trends, legislation and court decisions for personal injury claims may affect this assumption. When such development changes are identified, models are adjusted. This is a manual process and requires judgmental assessments by specialists.
• analyzed historical run-off and combined ratio to evaluate the prediction ability of the model.
• re-performed management's calculations on selected industries and compared the outcome against management's estimates and investigated any differences.
Description of the matter Our audit approach There is uncertainty about the carrying value of goodwill. The risk related to valuation of goodwill is caused by inherent uncertainty of future cash flows. Management use significant judgment in determining the underlying assumptions of the model for assessing impairment, including combined ratio, growth rates and discount rates.
• considered whether methods applied at the impairment testing are consistent over time.
• considered whether the sensitivity analysis, which is included in note 5, appropriately describes the group's exposure to further impairments if discount rates, growth rates and combined ratio would differ from management's projections.
The Board of Directors and the Managing Director (management) are responsible for the preparation of the financial statements in accordance with the law and regulations. This includes giving a true and fair presentation in accordance with the Norwegian Accounting Act and accounting standards and practices generally accepted in Norway for the parent company, and in accordance with International Financial Reporting Standards as adopted by the EU for the group. Management is also responsible for such internal control as management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the financial statements, management is responsible for assessing the Company’s and the Group’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Company or the Group or to cease operations, or has no realistic alternative but to do so.
As part of an audit in accordance with laws, regulations, and auditing standards and practices generally accepted in Norway, including ISAs, we exercise professional judgment and maintain professional scepticism throughout the audit. We also: • identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error. We design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.
• obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s or the Group's internal control.
• conclude on the appropriateness of management’s use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Company’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Company to cease to continue as a going concern.
We communicate with the Board of Directors regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.
Based on our audit of the financial statements as described above, it is our opinion that the information presented in the Board of Directors’ report and statements on Corporate Governance and Corporate Social Responsibility concerning the financial statements, the going concern assumption, and the proposal for the allocation of the profit is consistent with the financial statements and complies with the law and regulations.