was characterised by an unusual number of damages resulting from weather and climate. Our customer satisfaction rose to a new record level.
Sustainable products Ethical labelling of funds, an online doctor and the innovative BikeFinder solution to reduce the number of bike thefts are examples of our sustain a bility initiatives in 2018.
Sale of Gjensidige Bank We agreed to sell Gjensidige Bank to Nordea, and entered into an agreement on mutual distribution of banking and insurance products, which will enhance the range of services we offer our customers.
‘Plogging’ to tackle litter Plogging is a new activity that involves picking up litter while you jog. Gjensidige was one of the organisers of a new plogging run at Oslo Marathon.
General Meeting 28 March Ex dividend date 29 March Q1-result 25 April Q2-result 12 July Q3-result 23 October
Christmas donation to Save the Children The year’s Christmas donation went to Save the Children, following a vote among our employees in Norway, Sweden and Denmark.
Collaboration with YS and Tekna We renewed our partnership agreements with the trade unions Tekna and YS. Through these agreements, the members of these unions can take out insurance on favourable terms from Gjensidige.
Green watchman In connection with our Capital Markets Day, we launched a green version of our watchman logo, as a symbol of our focus on sustainability.
Key figures 2 Letter from the CEO 6 Business in brief 8 Asset management 18 Investor information 20 Sustainability 22 Corporate governance 50 The Board´s report 56 Financial statements and notes 81
Gjensidige recorded a profit after tax of NOK 3.7 billion in 2018, corresponding to a return on equity of 17.3 per cent. For the general insurance operation the premium growth was 2.8 per cent and the combined ratio was 85.0 per cent. The earnings per share was NOK 7.44 and the Board has proposed a dividend of NOK 7.10 per share.
Underwriting result general insurance* NOK bn * Defined as alternative performance measure (APM). APMs are described on www.gjensidige.no/reporting in document named APMs Gjensidige Forsikring Group 2018
Dec 2018Dec 2017Dec 2016Dec 2015Dec 2014Dec 2013Dec 2012Dec 2011Dec 2010 7.10...
Net income from investments NOK million 830.2 2,002.2 2,152.6 1,488.2 2,447.9
Operating expenses, general insurance NOK million (3,655.9) (3,586.5) (3,191.4) (3,217.6) (3,054.0)
Profit/(loss) from continuing operations NOK million 3,381.6 4,060.2 4,340.5 3,561.6 4,007.5
Profit/(loss) from continuing and discontinued operations NOK million 3,716.4 4,519.3 4,665.9 3,784.7 4,189.6
Regular dividend per share (Based on profit for the year) NOK 7.10 7.10 6.80 6.40 5.90
Special dividend per share (Based on distribution of excess capital) NOK 6.00
Number of employees in the Group Persons 3,893 3,834 4,005 3,908 3,525
Average amount spent on skills development per employee NOK 11,100 10,300 15,000 17,500 17,500
Key figures 2,122 Norway 718 Denmark 289 Sweden 764 Baltics 3,660 General insurance 171 Bank 62 Pension
After several years of record-breaking results, we must conclude that 2018 was a year marked by an abnormally high number of weather-related claims. The total profit amounted nonetheless to a healthy NOK 3.7 billion. The poorer profit performance was in part due to circumstances beyond our control, including a harsh winter, an unusually dry summer and several flood events. Fluctuations like this are part and parcel of the general insurance business. However, we cannot ascribe the weaker result in 2018 to weather conditions alone. Profitability was also challenged by changes in the market. We have conducted a thorough analysis of the reasons for this development and we have identified targeted measures to get us back on a winning track.
Attractive customer dividend Cooperation with our biggest owner, the Gjensidige Foundation, was also good in 2018. The Foundation distributes its ordinary share dividend in full to
Norwegian general insurance customers, who received dividend totalling NOK 2.2 billion in 2018. Since the Company was listed in 2010, our customers have received NOK 15 billion in dividend. We are the only insurance company in Norway to pay a customer dividend. A number of savings banks have started paying a customer dividend in recent years, based on the model we use, and we regard this as confirmation that this arrangement is successful and attractive.
Best today, best in the future The general insurance business model has remained surprisingly stable for centuries. We are now experiencing leaps and bounds in technology, regulatory changes and changed customer behaviour, which indicate that the business model may undergo material changes over the next ten to twenty years. Those who have not heard about disruption – new business models that completely undermine traditional methods – must have been in hibernation. In other sectors, we have seen large, established companies being swept away in a short space of time, because they were unable to adapt to the new competitive situation. We are determined to retain a leading role in the changes taking place now, and those we see taking form. We have established an internal think tank to work on developing new business models that can address threats and opportunities. We will not hesitate to ‘disrupt’ our own business models when this is expedient.
The sale of Gjensidige Bank will free up capital in the first quarter of 2019. We will take the time we need to investigate possible acquisition or merger options before any excess capital goes back to our owners.
Best today, best tomorrow Our most important priority in the short term is to improve the profitability of our existing activities. Sound profitability is a precondition for having the resources required to test, learn and develop, which, in turn, are necessary for maintaining competitiveness in the long term.
We will clarify financial accountability in the business segments, introduce a new IT core system and infrastructure and improve our price models. We are in the process of developing a new core system, and will implement it first in Denmark and Sweden, and then Norway. A new joint group core system will provide better opportunities for the business segments to share best practice, and develop new products and price models more quickly.
Capital discipline will continue to be given high priority, and our capital strategy will support our attractive dividend policy and contribute to ensuring high and stable nominal dividends on a regular basis. We will continue to have a rational and disciplined approach to possibilities for mergers and acquisitions. We will free up capital in 2019 through the sale of Gjensidige Bank. We will spend the year exploring the structural opportunities available before, if applicable, returning excess capital to the owners.
Gjensidige’s position shall be further strengthened through the development of Gjensidige as a pan-Nordic general insurance player that is also taking its share of the growing accident and health insurance market. By complementing organic growth and contributing to the Group delivering on its strategic goals, acquisitions shall increase the value of the Group and its long-term dividend capacity.
Insightful analysis New technology and new customer behaviour, not least with respect to sharing data, creates increasingly better opportunities for ‘knowing the customer best’. We have a large customer base, and enjoy the trust of our customers. We will maintain this trust by collecting, processing and using data in a secure and structured manner, which enables us to develop increasingly relevant and user-friendly solutions for customers. By predicting customers’ needs more accurately, we can provide better advice in both staffed and self-service solutions. We will also develop pricing and tariff models based on data, technology and insight in order to ensure optimal risk selection and risk pricing at all times.
Strategy towards 2030 In the long term, we believe that access to real-time data generated by developing and participating in ecosystems is more important than all other relevant trends. We believe that this will become increasingly important in all our product areas, while the pace and focus will vary from area to area.
2 Assuming sale of Gjensidige Bank 3 Corresponds to >16 per cent given zero run-off gains post 2022 4 Excluding run-off
Underwriting result from operations outside Norway NOK 750 m 4 (in 2022)
Dividend Nominal high and stable. Payout ratio >80 prosent over time 2
Key figures Private 16.7 % Accident and health 1.4 % Natural peril
Gjensidige is market leader in general insurance for the commercial and agricultural markets. Most of the customer portfolio consists of small and medium-sized enterprises and agricultural customers.
Key figures Commercial 20.7% Motor 36.1% Building 22.3% Accident and health 5.7% Liability 4.9% Marine/cargo 2.7% Natural peril 7.7% Other 28.7% Gjensidige 25.4% If 14.1% Tryg 4.4% SpareBank1 27.4% Other
Outlook In recent years, Gjensidige has consolidated its position as market leader in commercial and agricultural insurance, and is in a good position for the future.
Work on improved risk pricing and analytical processes as tools for strengthening customer activities is given particular focus in the Commercial segment. Continuous initiatives to deliver the best customer experience in combination with analytics and operational efficiency will help to ensure forward-looking and customer-oriented operations.
The Commercial segment expects the development in premiums to be positive throughout 2019 thanks to the current positive trend in the Norwegian economy. Previous and new price initiatives are also expected to contribute to growth in premiums and improved profitability. The work on adapting the products’ terms and conditions will also continue.
Outlook The Danish general insurance market is relatively consolidated, and marked by both strong competition and high price pressure. To generate further profitability, Gjensidige will prioritise increasing sales efficiency and customer loyalty, improving pricing models and further developing the partnership structure of the Danish part of the business. We will work on further rationalising costs through digitalisation and automation. Simplifying the business model, the organisation, products and processes are important means of achieving efficient operations. The implementation of the new IT core system, which will start in 2019, will make an important contribution to this work.
Source: The Danish Insurance Association, based on gross premiums as at 3rd quarter 2017 7.6% Gjensidige 17.8% Tryg 16.6% Topdanmark 10.5% Codan 9.5% Alm Brand
Source: Insurance Sweden, based on earned premiums as at 3rd quarter 2018 2.1% Gjensidige 30.3% Länsförsäkringar 18.4% If 16.0% Folksam 14.5% Trygg Hansa
The Sweden segment includes the Group’s operations in the Swedish private, commercial and municipal markets. Gjensidige has its own distribution channels in these markets as well as distribution through a number of partners and brokers. We are the seventh biggest general insurance company in Sweden, by market share.
The Baltic part of the business improved its profitability in 2018 through significant rationalisation measures and optimisation of tariffs and sales processes. There has been significant progress with respect to digitalisation, strengthening direct sales channels, analytical CRM, risk-based pricing and optimisation of claims processing.
59.4% Motor 14.8% Building 17.1% Accident and health 3.4% Liability 0.8% Marine 4.6% Annet 8.3% Gjensidige 25.3% PZU 20.4% Vienna 12.2% If 13.4% Ergo
Gjensidige’s Baltic segment offers general insurance products to the private and commercial markets in Lithuania, Latvia and Estonia. A large proportion of products are distributed through external channels such as insurance agents and brokers, but we also distribute products through our own channels. Gjensidige is the fifth biggest player in the Baltics, where strong growth is expected in the immature insurance market as the living standard improves.
Source: Finance Norway, 3rd quarter 2018. Based on insurance obligations * With individual investment options
Growth in car financing, improvements in consumer financing and sales of a wide range of products to members of the bank’s partner organisations were high priorities in 2018. Competitive prices, good digital solutions and efficient customer service resulted in strong lending growth during the year.
The purpose of the investment portfolio is primarily to cover the actuarial liabilities and to achieve the Group target return on equity. At the end of 2018, the portfolio totalled NOK 52.8 billion.
The investment portfolio consists of two parts: a match portfolio and a free portfolio. The match portfolio is intended to correspond to the Group’s technical provisions. It is invested in fixed-income instruments with a duration and currency that matches the duration and currency of the technical provisions.
At year-end 2018, the total investment portfolio amounted to NOK 52.8 billion. The financial result amounted to NOK 0.8 billion, corresponding to a return on financial assets of 1.5 per cent.
Investor information Gjensidige shall have an open dialogue with all stakeholders, and it follows the Oslo Børs Code of Practice for IR. Established guidelines for investor relations are available at www.gjensidige.no/ir.
Customer dividend is allocated to customers based on how much they paid in insurance premiums during the financial year in question. It is then distributed to customers who are still customers at the
The Gjensidige share yielded a total return of minus 8 per cent in 2019. At year-end, Gjensidige was the ninth biggest company listed on Oslo Børs, with a market value of NOK 68 billion. The profit per share was NOK 7.44 in 2018, and the Board has proposed a dividend of NOK 7.10 per share.
Distribution of shares excluding shares owned by the Gjensidige Foundation 24 % North-America 25 % Europe excl. UK and Norway time of Gjensidige’s general meeting, which adopts the customer dividend. Customer dividend paid in 2018, based on the profit for 2017, accounted for 14 per cent of premiums paid in 2017.
The Foundation manages ownership of Gjensidige on behalf of Gjensidige’s general insurance customers in Norway. It has an ownership policy that focuses on high value creation over time, and expects a competitive dividend.
For more detailed information about the governing bodies and/or the General Meeting, see page 50-55 and/or www.gjensidige.no/ir.
Per cent 3 Caisse de Depot et Placement du Quebec 3.68 4 Deutsche Bank 3.50 5 BlackRock Inc 1.98 6 Danske Bank 1.87 7 DNB ASA 1.16 8 The Vanguard Group, Inc 0.98 10 Svenska Handelsbanken Group 0.92 11 State Street Corporation 0.85 12 Storebrand Investments 0.68 13 Government of China 0.53 14 KLP Kapitalforvaltning 0.47 15 Beutel Goodman & Co 0.31 16 Northern Trust Corporation 0.29 18 Legal & General Group 0.25 19 Scotia Bank 0.25 20 Equinor ASA 0.25 1 The list of shareholders is based on an analysis of the register of shareholders in the Norwegian Central Securities Depository (VPS) as at 31 December 2018, carried out by Orient Capital Ltd. The analysis maps the owners behind the nominee accounts. There is no guarantee that the list is correct.
Over the course of its 200-year history, Gjensidige has sought to create a sense of security for our customers by safeguarding life, health and assets. We have implemented loss prevention measures, and provided help when the damage was done. Our experience and expertise shall benefit society at large.
A description of how we work on our obligations under the UN Global Compact follows below. Our work is also in accordance with the UNEP Principles for Sustainable Insurance. We describe our focus areas, goals, measures, the measures’ effect and our ambitions for new measures. The report complies with the recommendations in Finance Norway’s ‘Roadmap for green competitiveness in the financial sector,’ which describes how the financial sector can contribute to making Norway a low-emissions society.
Chapter 2 on page 23 describes the risk and materiality assessment, and Chapter 5 on page 28 sets out the grounds for our focus areas and the status of measures. The focus areas fall under three overriding categories: climate and the environment, social factors and business governance.
Climate change and environmental challenges are a high priority, and Gjensidige has set ambitious and clear goals for our contribution to reducing greenhouse gas emissions (carbon intensity), both directly and indirectly through loss prevention, our claims settlements and our own emissions.
Social factors: All aspects of our activities shall be based on respect for human rights and employees’ right to meaningful work under safe conditions. We will further develop an organisation in which diversity characterises our activities and generates new ideas and perspectives in the work on a more sustainable society.
Good business governance is decisive for the Board and the management. Corporate governance is described in a separate chapter in the annual report on page 50–55. Socially responsible investments (SRI), data protection (GDPR), corruption and money laundering, and our Code of Conduct are particularly relevant to sustainability. Certain policies adopted by the Board are available at gjensidige.no. Other policies relevant to our sustainability work are set out in Chapter 5.7 on page 42.
Sustainability Gjensidige’s ambitions, measures and goals are de scrib ed in more detail in Chapter 5 on page 28 of this report, where we also describe which of the UN Sustainable Development Goals our measures contribute to.
2. Gjensidige’s work on sustainability Sustainability and insurance go hand in hand. Gjensidige has been creating value for society for more than 200 years by engaging in the lives of people and enterprises before and after claims arise. Based on our long experience, we have gathered knowledge about what causes losses, and how they can be avoided.
Sustainability is about striking a balance between what is good for the climate and environment, social factors and the economy. We use this definition actively in our work on integrating sustainability throughout the organisation. Our internal processes shall maintain a high ethical standard.
We must apply new thinking, and involve customers, employees and suppliers in the further development of our sustainable solutions. We are already well under way, and this will be a feature of our work going forward.
Customer satisfaction Satisfied customers and good risk assessments are decisive for value creation in the short and long term. Satisfaction with the Company and our individual advisers is measured on a continuous basis, and improvement measures are initiated based on feedback from the customers.
(KTI) was 78.1 at group level, which is an increase of 0.2 from 2017,and the best result we have ever achieved.
Stakeholder analysis By stakeholder is meant those who influence the Company or who are influenced by the Company. In line with the recommendation made by Oslo Børs on the reporting of corporate social responsibility, a thorough stakeholder analysis was conducted in 2016. It is updated every year. Investors/owners, customers, employees, suppliers and society at large are our most important stakeholders. We engage in dialogue with our stakeholders as necessary. We have illustrated the arenas for and topics of our dialogue with different stakeholders in the figure on next page.
Definition Development that meets the needs of the present without compromising the ability of future generations to meet their own needs.
• digital transformation • socially responsible investments • good risk management • own climate footprint • engaged employees • a safer society
The results of the risk and materiality assessment have been compiled in a table, where topics of great significance to both stakeholders and Gjensidige are placed in the top right-hand corner. Topics that are less important to Gjensidige and the stakeholders are placed in the bottom left-hand corner.
Employees Engaged and motivated employees are important to our profitability, and we have different forums that give us an insight into ideas and concerns • Labour rights • Competence development • HSE • Protection of privacy • Diversity • Employee surveys
Society at large Insurance is an important social benefit and significant factor in safeguarding life, health and assets. We safeguard the interests of society through: • Loss prevention • Environmental and climate measures • Socially responsible capital management • Protection of privacy • Anti-corruption and money laundering • Sponsorship and donations
3. Gjensidige’s sustainability risk management process Insurance is a collective financial arrangement where- by those with insurance receive help when a loss arises. Sustainable solutions are a precondition for longterm value creation and a cornerstone of Gjensidige’s strategy, and it shall permeate everything we do. Good risk management is the core of our business.
The policy makes requirements of the risk management system, which is intended to ensure that the Group's risk profile is within the limits adopted by the Board at all times. Risk is categorised as: • Business and strategic risk • Insurance risk • Financial risk • Operational risk and compliance risk
Risk description Emerging risks: The risk picture is complex and constantly changing. Emerging risk is potential new or changed risks that generally develop over time, often as a result of changes in climate, the political situation or technology. Since 2009, Gjensidige has had a separate emerging risk process. Its main objective is to identify and monitor these types of potential emerging risks and the possible consequences for the Company, so that the necessary measures and adjustments can be implemented at an early stage. The assessment of emerging risks is based on internal assessment and on various external sources. The emerging risks given priority in Gjensidige in 2018 were: • Extreme weather and climate change • Artificial intelligence • Nanotechnology • Synthetic biology
Extreme weather and climate change have been included in Gjensidige’s emerging risk report since 2009. Wind and flooding are considered the biggest risks for Gjensidige. Gjensidige’s internal model is used to assess its potential exposure to these types of events, and to other natural and weather events.
Artificial intelligence (AI) is computer systems that are capable of solving problems by learning from their own experience. The use of AI presents opportunities for rationalising processes and changing interaction with customers.
Climate-related threats, opportunities and risk The climate and environment are affected by the customer’s choice of house, car and behaviour, among other things. Gjensidige rewards a number of security measures by giving a discount on the insurance premium. Measures that contribute to reducing the risk for both us and customers include warnings of weather events, burglar alarms, inspections of electrical systems in buildings, the installation of equipment that reduces the risk of water damage in buildings, and tracking systems for cars.
• In cooperation with Finance Norway, share insurance claims data relating to weather events, so that a joint Norwegian database can be estab lished to help municipalities plan developments and regulations.
Physical measures to handle physical climate risk • Gjensidige already notifies customers if bad weather is forecast that entails a risk to life, health and assets.
• Implement loss-reducing measures such as deployment of flood protection equipment in the event of a risk of flooding.
Other measures to handle risk • By means of a Risk Management concept, we will establish an index that shows how our customer portfolio is developing with respect to risk level.
• We shall acquire more knowledge of the climate and environmental consequences, to ensure that our customer dialogue creates confidence in the market and that we are perceived as the most sustainable insurance company.
Objectives and methods On our Capital Market Day, we communicated our ambition to reduce our own and claims-related carbon intensity, relative to earned premiums, year by year1. We will work on finalising the method for achieving break-even and establish a reliable means of measuring and reporting status in 2019.
Gjensidige’s activities shall promote four UN Sustainable Development Goals in particular, which are the SDGs that concern Good health; Decent work and economic growth; Sustainable cities and communities; and Climate action.
3 Good health; targets: 3.6 and 3.8 Gjensidige shall help to halve the number of deaths and injuries caused by road traffic accidents.
11 Sustainable cities and communities; targets: 11.5, 11a, and 11b Gjensidige shall by 2030 significantly reduce the number of deaths and the number of people affected by disasters, including water-related disasters, and help to reduce the direct economic losses relative to global gross domestic product that follow from such disasters. Gjensidige shall support positive economic, social and environmental links between urban, periurban and rural areas by strengthening national and regional development planning. Gjensidige shall also support adaptation to climate change, resilience to disasters, and develop and implement holistic and comprehensive disaster risk management at all levels.
1 Given a Combined Ratio within the stipulated range, which reflects normal claims years.
5. The focus areas for Gjensidige’s sustainability work We have set goals for our sustainability work, and initiate measures in all of the areas we believe are significant for reaching the goal. The following areas are designated as important to Gjensidige’s work on the environment and climate, social factors and business governance, based on the materiality analysis.
Loss-reducing measures Loss-reducing measures have always been a key element of our corporate social responsibility. Providing guidance to customers is the mainstay of our customer dialogue, and we will help customers to reduce their risk of loss.
By providing advice to our customers and society at large, we shall help to increase their knowledge of sustainability. • Requirements made of customers in the private and commercial markets to be entitled to discounts.
What we have achieved: • Our loss prevention work is showing good effect in agriculture.
Experience’ to enable our customer advisers to give good, sustainable advice.
What we have achieved: • Part of the environmental certification scheme run by the Eco-Lighthouse Foundation.
New measures • Reduce the strain on employees and the load on the environment by reducing travel, and further facilitate new communication channels to reduce travel needs.
All investments shall, as far as practically possible, be screened for breaches of our SRI policy, which is based on the UN Global Compact principles and the Inhumane Weapons Convention. All breaches must be followed up.
All external fund managers must recognise the importance of the UN SDGs, and have a strategy for how they as fund managers can work to achieve one or more of these goals.
What we have achieved: • More dialogue with external fund managers on ESG.
Engaged employees We wish to develop an organisation in which diversity characterises our activities and generates new ideas and perspectives in the work on a more sustainable society. We want our employees to be engaged and motivated, and we encourage them to give feedback on what works well and what areas could be improved in our annual employee satisfaction survey.
5,982 course days in 2018. • 75 per cent job satisfaction (95 per cent response rate), higher than the average for the industry in the Nordic countries.
• Ranked by SheIndex. Third best of 25 listed companies on Oslo Børs.
By the end of 2025, we shall have made it possible for customers to make sustainable choices within the established product areas, motor vehicles, property, leisure, and accident and health.
What we have achieved: • We have a broad range of products that directly and indirectly have a climate/ environmental profile included in the terms.
New measures • Develop more green products. • Enable the customer to make sustainable choices, based on better information about terms and consequences.
Ninetyfive per cent of our customers shall be ‘paperless’ by 2025.
• Further develop our digital advisory services to ensure efficient customer service.
A safer society – social commitment For many years, Gjensidige has collaborated with various non-profit organisations and sports associations to contribute to a safer society.
What we have achieved: • Helped ensure that disadvantaged people in all the countries in which we operate have received assistance, meals, Christmas presents etc.
• Established a collaboration with the Church City Mission, including an initiative to provide work experience for refugees.
• Further develop sponsorship agreements with sports associations to give disadvantaged children and young people the opportunity to take part in activities.
What we have achieved: • The Financial Services Complaints Board received 297 complaints from Gjensidige customers in the first nine months of 2018, and in 18 per cent of the cases, it found in favour of the customers.
There is a greater focus on the circular economy in our claims settlement. This applies to both buildings and motor vehicles. Reuse must never be at the expense of quality and safety, and we make stringent environmental and quality requirements in relation to the choice of materials. This is because quality is sustainable.
Companies that provide services in connection with claims payments for damaged buildings in Norway must be certified in Startbank. Startbank is a register of suppliers that is used by purchasers in the fields of building, construction, public administration, insurance and real estate. This ensures that qualified suppliers are law-abiding and that competition takes place on equal terms.
Environmentally friendly building and household contents insurance When a loss is reported, we make sure that our customers feel safe and well-informed about the choices we recommend. Gjensidige also has extensive networks of local assessors in every country, who help to assess the scope of damage. In the work on repairing the damage or replacing the loss, materials are chosen based on social factors, the environment and financial durability. Local assessors, as well as using photos and robot assessment, also mean there is less need to travel, both for customers and assessors.
In Sweden, we cooperate with Godsinlösen (GIAB). GIAB works on the circular economy, by collecting damaged items from insurance companies and repairing them, thus contributing to reuse. This enables us to contribute to increasing durability and saving the environment.
Environmentally friendly motor insurance Repairing damage to and covering losses for cars and other vehicles represent a large percentage of Gjensidige’s claims costs. This is an area in which we can influence and achieve sustainable solutions. The circular economy in the form of more repairs and the reuse of car parts is a topic in every country we operate in. Gjensidige is participating in a pilot project under the auspices of Finance Norway Insurance services and Norske Biloppsamleres Forening to test the availability of used parts and prices. The purpose of the pilot is to: • reduce the number of vehicles that are written off by lowering the costs of repairs by utilising used parts
• contribute to increased employment in garages • reduce the costs of spare parts by using used parts rather than new parts where expedient (Norway has Europe’s most expensive parts and the lowest reuse percentage of used parts)
The practice of using used parts is more common in Sweden where the conditions are different; people have a different relationship to cars (cheaper to buy), a better distribution network and all cars that are scrapped go to disassembly companies. Our supplier agreements stipulate that the garages must always endeavour to repair or find used parts before they order new parts. The calculation system CABAS is used to manage this process in Sweden. We have also reduced the use of loss assessment in Sweden, which helps to reduce transport costs.
Effect of our efforts • Car parts are reused in 5 per cent of motor insurance claims in Norway, Sweden and Denmark.
• We have conducted safety audits of 5 suppliers. • In 2018, we calculated claims expenses relating to climate-related losses (storms, flooding, unusually strong wind and unusually high precipitation) to total NOK 210.5 million.
• Rebuild private homes in a green manner following a claim, exceeding the minimum requirements.
5.2 Loss-reducing measures for our customers and society What we do Natural disaster claims With the help of weather data, we send text messages to customers who are likely to be affected by bad weather. The messages are based on official weather data and our customer data, so that we avoid distributing false alarms. Every year, we receive feedback from grateful customers who have had time to secure their assets thanks to these messages.
Gjensidige helps to improve road safety in Estonia by running an annual campaign to increase pedestrians ’ use of reflective devices, and in 2018, Gjensidige distributed 20,000 reflective vests in Latvia and Lithuania to increase pedestrians’ visibility in traffic.
awareness day – on 1 December 2018. The goal of the campaign is to raise awareness about how important an early warning is in the event of fire. An important message is that people should change the batteries in their smoke detectors on a set date every year. Gjensidige makes essential contributions to the campaign by planning, making and funding information videos and other material, and through marketing, funding of batteries and participating in stands and home visits.
Gjensidige conducts risk checks of 3,500 agricultural customers every year, to identify faults etc. that may cause fires. Checking electrical systems using a heat-seeking camera is an important part of the risk check. Our experience shows that 7 of 10 fires are related to faults in electrical systems.
• We have never registered so few fires among our agricultural customers. • More than 6,500 pupils from 27 schools all over the country submitted contributions to the #ErDuSikker campaign in 2018.
5.3 Our own climate footprint What we do • Eco-Lighthouse • Company cars • Travel
The offices that are certified Eco-Lighthouses use an environmental management system for the handling and reduction of materials consumption, waste, energy consumption and transport. An annual environmental report is prepared for all these offices that documents the status of implemented
environmental measures and action plans for the coming year. Among other things, the report covers waste handling, energy consumption, procurements, paper consumption, transport and climate accounts. The offices must be recertified every three years. It is an extensive process that is carried out by an environmental team at the office in question in cooperation with an external adviser certified by the Eco-Lighthouse Foundation. In 2017, our offices Trondheim and Tønsberg were recertified.
As a knowledge-based company, our direct emissions are largely related to the running of offices and to travel and transport.
The environmental measures focus on energy efficiency, reduced travel through increased use of video conferences, and responsible waste management with extensive separation at source.
5.4 Socially responsible investments What we do Gjensidige has endorsed the UN Global Compact. This is the framework that guides the assessments we make in relation to socially responsible investments and corporate social responsibility in the investment area. Gjensidige supports the Carbon Disclosure Projects’ (CDP) work as an Investor Signatory in its endeavours to improve companies’ reporting of their effect on the climate and the strategy they employ to reduce CO2.
Gjensidige’s asset management is based on the 10 UN Global Compact principles: 1. Businesses should support and respect the protection of internationally proclaimed human rights.
Our guidelines concern investments in shares, interest instruments, hedge funds and property; both direct investments and through external fund managers. In addition, asset management shall comply with international conventions on inhumane weapons.
One member of the capital management team is responsible for reviewing and compiling all information from the external consultants and other external sources in connection with preparation of Gjensidige’s exclusion list. This employee draws up a recommendation to the Chief Investment Officer (CIO) and the Chief Risk Officer (CRO), who together make a final decision on whether to exclude companies or take them off the exclusion list. Companies that commit serious or systematic violations of Gjensidige’s ethical guidelines and fail to take satisfactory steps to correct their conduct shall be placed on the list of excluded companies.
The work on socially responsible investments is summed up by the table below. The work carried out is in proportion to the percentage of our investments which largely entail following up external fund managers, bond investments in the match portfolio and real estate investments in Oslo Areal: Direct investments External fund managers
Uses the BREEAM NOR environmental classification system for new buildings and complete restorations.
Work has been conducted throughout the year to include an ESG assessment in all internal credit analyses. The focus of this work has been on identifying ESG elements that influence our assessment of the credit risk. Governance is considered to be particularly important across companies.
Our real estate investments are made through the property company Oslo Areal, a company that engages in property development in the Oslo area and invests in environmentally friendly buildings near public transport hubs. The company uses the BREEAM NOR environmental classification system for new buildings and complete restorations. In 2018, the Company sold two properties without environmental certification and purchased two buildings in an environmental location beside a public transport hub, one of which is a new building certified pursuant to BREEAM NOR in the design and planning phase. The two new properties both have green roofs, and one of the buildings has a solar energy system. The Company was also awarded its first BREEAM-In-Use certification for Sørkedalsveien 6 in Oslo in 2018.
Diversity The right competence in the right place at the right time is vital to maintaining competitiveness. It is important to Gjensidige to facilitate diversity. We look at alternative work methods that include diversity, and that also make it possible to work even more efficiently across the organisation. Our experience is that such work methods are perceived as enriching and generate new approaches and solutions to different problems.
Gender equality Gjensidige has had a strong focus on gender balance and increasing the percentage of women in senior positions. There is zero tolerance for all forms of discrimination. Requirements relating to greater diversity are included in the senior management’s Performance Agreements, and in the basis for the assessment of bonus. Diversity is followed up in the biannual People Review, which covers all members of the senior management.
We have established a collaboration with Seema in 2018, which aims to increase the focus on and understanding of the importance of diversity and diversity management as a sustainable competitive advantage.
ILO and cooperation with employee representatives All of our employees have full freedom of association. Collective bargaining takes place in accordance with the agreements with the different trade unions. Gjensidige recognizes the main ILO conventions, and supports the International Labour Organization’s promotion of decent work based on social justice and internationally recognised labour rights.
The cooperation between the Company’s management and the employees’ trade unions is systematic and good, and it is based on a well-established structure with regular meetings of various committees. Rules have been adopted for what processes and decisions employee representatives shall be involved in. Employee representatives are paid by the Company. Under Norwegian law, employees of the Group are entitled to be represented on the Company’s governing bodies. Employee representatives are elected by and from among the employees.
IW enterprise Gjensidige shall be an inclusive workplace for all employees. We are an Inclusive Workplace (IW) enterprise and cooperate with the Norwegian Labour and Welfare Administration (NAV) on job training for people who, for various reasons, have been unemployed. NAV pays subsidies for employees who suffer from chronic illnesses but who still manage to work.
Definition of diversity Diversity is defined as differences in employees’: • gender • age • competence • functional ability • ethnic origin • sexual orientation • religion
The HSE work is monitored through audits and followed up internally by employees with special responsibility for HSE. All incidents that can represent a risk must be reported in the Company’s nonconformity system. In 2018, as the year before, three such audits were carried out in Norway, two in Denmark, and one in Sweden.
Employees who work in sales and customer advice take part in an extensive course programme leading up to an exam that tests their professional knowhow, ethics and the customer dialogue. Advisers targeting the private market are certified in accordance with a national industry scheme for the sale of general insurance.
All new Gjensidige employees take part in an introduction day where the CEO and other key personnel talk about the Company’s strategy, competence- building, culture, brand, ethics and more practical information.
We have also established an internal mentoring programme, as a supplement to the personal growth and development of individual employees and managers. The programme will help us to retain critical expertise, promote Gjensidige’s culture and contribute to internal career development across divisions and business areas.
We also run a management programme at the senior executive level in cooperation with the Norwegian School of Economics (NHH), the Administrative Research Unit AFF and HEC Paris.
A followup survey is conducted in addition to the main survey, if necessary, to see whether measures are effective. Special measures are implemented for entities that deviate significantly from the goal of employee engagement and job satisfaction. Work engagement is included in the followup of managers and the Performance Agreement for the senior group management.
HR reports An HR report is prepared every quarter, showing the status of HR trends in gender balance, developments in wage disparities between women and men, the status of measures after the employee survey, turnover, sickness absence, the proportion of consultants and temporary staff. Work is now underway to ensure that measures are implemented to follow up competence goals.
People review The Performance Agreement, which makes up part of the bonus evaluation, also measures senior managers ’ management and strategic staff planning prowess.
• Equileap has ranked Gjensidige the best company in Norway in terms of gender balance, and 19th in the top 200 companies worldwide – up from number 40 in 2017.
• In 2018, 100 per cent of our employees took a course on the GDPR.
• Universum ranked Gjensidige Norway's most attractive employer in the insurance industry in 2018.
• The Gjensidige Customer and Brand School had 5,982 course days in 2018 (6,960 course days in 2017).
• E-learning plays an increasingly important role in the school’s programmes In 2018, 11,805 e-learning courses were completed and passed, compared to 7,927 i 2017.
New measures • Integrate diversity management based on experience from the collaboration with Seema on diversity and diversity management, and assess the need to initiate measures to reduce covert discrimination.
5.6 Sustainable products What we do Active loss prevention and the provision of advice gives customers the incentive to prevent and limit losses. This is because it is more environmentally friendly to prevent and upgrade than to rebuild. Safety measures are rewarded by discounts being given when insurance is taken out.
Property Sustainable measures after claims events: • Demolition and removal: Waste that after a claims event is harmful to the environment must be destroyed in an environmentally sound manner at Gjensidige’s expense.
• Public orders/technical regulations: After a claims event, we cover the upgrade to the applicable technical regulations (less energy consumption, less risk of loss).
• Incentives in coverage that include faulty workmanship encourages the use of local, skilled and taxable labour. It also counteracts unnecessary repairs and social dumping.
• We cover alterations/facilitation for wheelchair users following accidents as standard in our home, cabin and household contents policies.
• Under this agreement, young people receive a payout when they turn 23 if they have not incurred driving claims.
Liability insurance Customers are given incentives to secure their assets by preventing and limiting losses. We actively follow up sectors that file many liability claims, in order to reduce the number of claims in future. We require that they implement various safety measures before they can take out insurance, to encourage them to operate in a responsible manner. New products include: • Gjensidige’s environmental insurance covers more than ordinary liability insurance. It covers expenses in connection with preventing and limiting losses, and environmental compensation pursuant to the Nature Diversity Act, which is intended to safeguard nature, landscapes and biological diversity.
Travel insurance We have developed digital services with an online shop, online claims forms and digital proof of insurance. Ensuring customers’ safety when they are travelling is important, and we offer advice on travel and illness in the Gjensidige app. We take advantage of reuse and repairs where expedient in settlement processes. • Online doctor: Customers can have a video consultation with a doctor by means of an app on their mobile phone. This solution saves customers time and transport expenses.
Gjensidige has an efficient digital claims settlement process, which has a high rate of customer satisfaction. Gjensidige offers a range of digital services and digitalisation activities, including the following: Research collaboration: In order to ensure that our products and customer service maintain a high international level at all times, we collaborate with research institutions on innovation. In the period from 2015 to 2022, we are participating in a research collaboration with, among others, the University of Oslo, the University of Bergen and the Norwegian Computing Centre on several projects that we expect to give us new insight into topics relating to the processing of large data volumes (big data). Examples include risk pricing, forecast and trend analyses and insurance fraud.
Paperless customers: We work continuously to increase the proportion of ‘paperless’ customers, meaning customers who choose to receive information from us through digital channels instead of on paper. With the exception of information that is required by law to be distributed on paper, paperless customers receive all documentation and other information by email, text messages or by logging into our web portal. Digital customer communication improves the customer experience and helps to reduce costs and paper consumption.
Effect of our efforts • Gjensidige came out top as the most digital insurance company in the year’s Digital Leaders study. The consultancy company BearingPoint assessed the digital maturity of 78 Norwegian companies.
New measures • Further develop our digital advisory services to ensure efficient customer services and that our customers receive information about sustainable solutions.
• Gjensidige’s goal is for 80 per cent of all claims to be reported via digital channels by 2022. Another goal is for 80 per cent of the claims to be processed automatically.
The Gjensidige Foundation aims to contribute to a safer society and is particularly concerned with preventive measures and activities for children and young people throughout Norway.
We use our sponsorships to create activities for children and young people, so that we help to recruit new athletes and promote a healthier lifestyle. For the last few years, we have organised two projects called ‘Minihåndballjentene’ and ‘Minihåndballgutta’ that have been very popular. The projects target children between the ages of 9 and 12, and entail that a number of boys and girls are selected as mascots for the national handball teams. The national team members mentor their mascots throughout the year, and attend practice sessions with the mascot’s teams. It is highly motivating for the children, and their parents, who often do voluntary work for the team, to meet top players this way. The age group was chosen because figures from the Handball Association show that many children drop out of the sport when they reach their early teens. The projects are considered an important contribution to the Handball Association seeing a rise in recruitment.
Effect of our efforts • Instead of giving employees a Christmas present, we made a NOK 250,000 donation to Save the Children. The Company’s employees decided which cause would receive the donation through a vote.
• We gave NOK 100,000 to the Red Cross in connection with their ‘Christmas relay race’ in 2018.
• The Christmas Seal Homes foundation (Julemærke-hjemmene) helps around 750 children every year who are victims of bullying or isolation.
• Gjensidige helps to finance the public welfare system by paying direct and indirect taxes and pay to employees. Tax payable amounted to
NOK 1,282 million for the Group in 2018. A large amount in value added tax comes in addition. Pay and employee benefits amounted to NOK 2,982 million.
New measures • Extend collaboration with voluntary/non-profit organisations to also include work experience, help to achieve a warmer society, and engage our employees in different activities involving children and young people.
5.9 Good business governance What we do • Emerging risks and risk management (see
Chapter 3 on page 25) • Data protection (GDPR) • Insurance Distribution Directive (IDD) • Customer complaints • Anti-corruption • Money laundering and financing of terrorism • Notification channel
Data protection (GDPR) Gjensidige processes personal data in accordance with the laws and regulations that regulate our collection, storage and use of such data. A group policy and instructions provide detailed requirements for the processing of personal data. Gjensidige’s employees are bound by a statutory duty of secrecy about all matters relating to our customers. Data protection training is mandatory for all employees and is also a part of the introductory programme for new employees. Access to personal customer data shall only be granted to employees who need it in the course of their work. The Company shall not obtain other personal data than what it needs to serve the individual customer.
The respective EVPs have overriding responsibility for the processing of personal data and internal control relating thereto. Other managers are responsible for ensuring that employees who have access to personal data have the competence and other qualifications required to be able to comply with the regulations and protect the customer’s personal data.
Risk assessments relating to breaches of data protection regulations are carried out, as part of the Company’s ordinary risk assessment process, to safeguard information security, among other things. A more detailed risk assessment (Data Privacy Impact Assessment – DPIA) is carried out if changes are made that are likely to affect security.
Our internal regulations include a prohibition against role conflicts that can prevent impartial conduct in relation to customers, suppliers, shareholders or other business connections.
Complaints handling Gjensidige has established a complaints system whereby customer complaints can be considered at three levels. 1. The customer’s case officer. 2. The customer ombudsman (the Company’s internal complaints board). The customer ombudsman service is staffed by highly experienced claims settlement personnel, who can take a fresh look at the case without being influenced by the original case officer’s personal assessment.
We have established notification channels in all countries we operate in, apart from Sweden where the legislation is different and notification must take place through a manager. In Norway, whistleblowing is facilitated through two electronic mailboxes: • An internal mailbox for reporting ethics-related matters • An external mailbox for reporting irregularities and malpractices
Notifications addressed to the internal mailbox are dealt with by the Company’s HR department based on clear procedures. Relevant matters are reported to the Group’s risk committee and the Board.
Anti-corruption For Gjensidige, the risk of corruption will largely be related to the Company’s sale of insurance and investment advice to the private and public sector, entering into agreements and the procurement of goods and services. Our definition of corruption follows the definition used in Norwegian law: abusing one’s position to obtain an advantage for the company, oneself or others. The work on combating corruption requires clearly defined rules and active enforcement of the rules.
Our employees are not allowed to offer or receive bribes or facilitation payments. The same applies to gifts that can be regarded as improper. The rules apply to managers and employees at all levels of the Company, also in countries where Norwegian law does not apply. Special rules have been stipulated for employees with responsibility for relations with customers and suppliers.
Control and detection include audits, compliance, notification/whistleblowing, reporting and internal investigation. Follow-up and sanctions take place in accordance with policies and instructions, and are decided by HR and, ultimately, the CEO.
All managers are responsible for establishing procedures and processes in their area of responsi bility in order to prevent and uncover irregularities and fraudulent acts, including corruption. The Internal Investigation Unit is tasked with uncovering corruption, and it is responsible for investigating concrete cases where improper conduct is suspected. The unit shall also contribute to establishing and developing procedures and processes that can prevent and uncover such matters.
All new employees in the Group participate in an introductory course at which ethics and corruption are on the agenda. Gjensidige does not make donations to politicians, political parties or organisations with a mainly political agenda.
Protection of privacy • Group policy for the processing of personal data • Instructions for the processing of personal data • Instructions for employees’ processing of personal data
Complaints handling • Guidelines for the companies’ and customer ombudsman’s complaints handling
Ethics • Code of Conduct • Ethical Rules for Gjensidige • Specification of ethical rules • Policy on prohibited restriction of competition
• Of the cases reported to the Financial Services Complaints Board, the Board found in favour of the customer in whole or in part in 18 per cent of the cases in 2018, compared to 15 per cent in 2017. A high percentage would indicate that the threshold for succeeding with a complaint internally in Gjensidige is high.
• We don‘t have comparable statistics regarding Sweden and Denmark, both because of diverging statistical routines and low market shares. We regard the level of complaints as acceptable, but continually strive to reduce the number.
New measures • Gjensidige will join the Global Reporting Initiative or other reporting initiatives (2-5 years). • Integrate TFCD (Task Force on Climaterelated
Paperless customers Per cent Per cent 73 70 65 60 57
Paris 2015 UN Global Compact NORSIF UN Principles for Sustainable Insurance
The Board is concerned with openness and honesty, and equal treatment of shareholders. The Company’s business shall be based on sustainable strategies and decisions. Our information principles are set out on our website. We are predictable and transparent.
2. The business The Articles of Association describe the object of the business and set clear limits for its content. Gjensidige is a financial group, and is subject to the restrictions and rules set out in the Financial Institutions Act. Within this framework, Gjensidige primarily operates as a general insurance group in the Nordic countries and the Baltic states. In Norway, the Group is also engaged in banking and life and pension insurance. In 2019, Gjensidige will no longer have investments in banking operations, but banking will continue to be integrated in its business through a strategic collaboration with Nordea.
Long term objectives, strategies and the risk profile are also evaluated once a year in connection with the work on strategy in June, or as necessary in connection with major events or structural changes.
It can be expedient for the Board to be authorised by the General Meeting to make decisions concerning the distribution of dividends throughout the year if there are financial grounds for doing so. Such decisions must be formally based on the approved accounts for 2018, and will, if relevant, come in addition to the dividend adopted by the Annual General Meeting. Such authorisation must be decided by the General Meeting. It will apply until the next Annual General Meeting, but no longer than until 30 June the following year.
The Board also believes that it is expedient for the Board to be authorised to raise subordinated loans and other external financing, and to trade in the bonds issued at all times under the Company’s subordinated bond issues. Such authorisation must be decided by the General Meeting and will apply until the next Annual General Meeting, but no longer than until 30 June the following year.
Finally, the Board also believes that it is expedient for it to be given limited authority to increase the share capital through subscription for new shares. Such authorisation must be decided by the General Meeting and will apply until 30 June the following year.
This also applies if the Board utilises the authorisations it has been granted.
The Board’s transactions in own shares must always comply with the arm’s length principle and be on ordinary market terms.
undertakings, partly because of official suitability requirements and partly because of the requirements of the Board's combined expertise, i.e. to ensure a functioning board with broad expertise.
For Gjensidige, where one shareholder owns more than 60% of the shares, it is not the formal election itself at the General Meeting that represents a challenge, but the preparations for the election. The Board has noted that elections require an extensive process. All shareholders can submit proposals for candidates, and the Nomination Committee contacts the biggest shareholders in writing. All submitted views are taken into account. The Board considers this work to be very important to the Company’s business, position and further development.
7. Nomination Committee The Company has a Nomination Committee, as provided for in the Articles of Association, comprising four to six members, subject to the decision of the General Meeting. The General Meeting elects the chair and members, and stipulates the committee´s remuneration.
Board. The Board's Audit Committee has a right to state its opinion in that connection.
No executive personnel or representatives of business associates are members of the Board.
The Nomination Committee encourages board members to own shares in the Company.
In accordance with the law, the Board has established three board committees comprising board members – the Remuneration Committee, the Audit Committee and the Risk Committee. The committees ’ mandates are based on a group perspective. The board committees do not have decision-making power. Their purpose is to make preparations for board meetings. In the Board's experience, the introduction of board committees has improved its work, and has led to deeper and stronger involvement in the business’s challenges and initiatives.
The Board has adopted rules of procedure for its work, and works on the basis of an annual plan. There is a good, open atmosphere on the Board. The board members have effective access to material relevant to their board work through Admincontrol.
The Board carries out an annual self-evaluation, with or without external help. The Nomination Committee has access to the evaluation. It also holds discussions with the Board and the Company's management on their work and the expertise needed to meet the challenges that are expected to arise in the longer term.
10. Risk management and internal control The Board complies with NUES’s recommendations in its work on risk management and internal control. The Company’s most important risk areas and the internal control system are continuously reviewed.
The accounting department has established processes for good internal control, and focuses on having the right expertise and sufficient resources to prepare the accounts and other statutory reporting in accordance with the applicable laws and regulations.
The reporting of deviations and other established systematic reporting give the Board insight into the processes and status.
12. Remuneration of executive personnel The Board has adopted guidelines for a remuneration scheme that applies to executive personnel. It is presented to the General Meeting each year, together with a report on any deviations that have taken place since the previous General Meeting. The statement is available in the case documents at www.gjensidige.no and also in Note 8.
14. Takeovers Guidelines have been adopted for how the Board shall respond to any takeover bids. The guidelines are in accordance with the Code of Practice.
15. The external auditor The external auditor submits his/her plan for the performance of the audit each year. The plan is initially discussed by the Board’s Audit Committee, and is also seen in conjunction with other internal control and risk management plans. The plan is considered at a board meeting with the external auditor in attendance.
The Gjensidige Insurance Group delivered a good underwriting result in 2018. The return on financial assets was affected by challenging financial markets. The profit after tax expense was NOK 3.7 billion, corresponding to NOK 7.44 per share.
The underwriting result was NOK 3.6 billion, corresponding to a combined ratio of 85.0. This was a slight improvement on the previous year. However, adjusted for high run-off gains, the underwriting result in 2018 was weaker than in 2017. Earned premiums increased by 2.8 per cent to NOK 24.1 billion.
General insurance operations outside Norway showed a considerable improvement, as a result of better underlying frequency claims development and lower operating expenses combined with higher run-off gains.
The Board proposes that the Company pay a dividend of NOK 3.55 billion for the 2018 financial year. That corresponds to NOK 7.10 per share and entails a distribution percentage of 95.5 per cent. Compared with the previous financial year, the proposal corresponds to an unchanged nominal dividend. Gjensidige’s goal is to distribute high and stable nominal dividends to shareholders, and a dividend ratio over time of at least 70 per cent of the profit after tax expense over time . After the sale of Gjensidige Bank, the targeted dividend ratio will increase to 80 per cent of the profit after tax expense over time. When determining the size of the dividend, consideration will be given to expected future capital needs. Over time, Gjensidige will also distribute excess capital.
The Gjensidige Foundation’s share of the dividend amounts to NOK 2.2 billion. Pursuant to the Foundation’s statutes, the regular dividend will be passed on to Gjensidige’s general insurance customers in Norway. The customer dividend is adopted by the Foundation’s general meeting in May.
Gjensidige is the market leader in general insurance in Norway, and one of the biggest insurance companies in the Nordic region and the Baltic states. These markets represent our defined market area for further growth.
Gjensidige’s business model is based on an integrated value chain that includes the development and pro duction of financial services and products, a high degree of direct distribution, service and customer dialogue, and efficient claims settlements. Digitalisation and an analytical approach mark activities throughout the value chain. Distribution in cooperation with our partners is an important part of the business model, especially in Denmark and Sweden.
Customer orientation Gjensidige is working systematically to become the most customer-oriented company in the Nordic general insurance field. Our vision is to ‘know the customer best and care the most’. Customer satisfaction is measured systematically, both at group level and down to the individual employee level, and improvement measures are implemented continuously. Customer satisfaction was record-high in 2018. This is the result of systematic work over a long period.
Our ambition is to create the best customer ex perience in our industry, and we call this the Gjensidige Experience. One of the most important ways of achieving this goal is through training and competence-raising for our employees.
Work continued unabated on developing and improving such solutions in 2018. We are continuously developing new self-service solutions for PCs, mobile phones and tablets. Our customers can buy insurance, seek advice and report claims on the internet when it suits them.
In 2018, we carried out a number of measures to make it easier and more attractive to report and check the status of claims online. In Norway, 63 per cent of frequency claims were reported through Gjensidige’s app or website in 2018. Digital claim reports leads to quicker case processing and payment, and experience shows that this is very important to customer satisfaction.
In addition to offering traditional insurance products, Gjensidige has developed several value-adding services for the Norwegian private market, including services relating to property, motor and health insurance. The purpose is to contribute to brand preference and loyalty.
Gjensidige had a market share of 24.2 per cent in the private market at the end of the third quarter 2018. The market share in the commercial market was 28.7 per cent.
The market share in Denmark was 7.6 per cent in the third quarter 2017, including Mølholm. The figure is based on the most recent statistics from the Danish Insurance Association and our own calculations. In Sweden, the market share was 2.1 per cent in the third quarter 2018, according to Insurance Sweden.
Distribution Norway Gjensidige has approximately 775,000 customers in the Private segment and around 150,000 in the Commercial segment in Norway.
The sales centres and customer service centres are responsible for external sales and for serving customers who contact us to buy or change insurance policies or to seek advice over the phone. We have 32 local branch offices that offer advisory services in the fields of insurance and banking. The offices can refer customers to other departments if the queries concern pensions and saving. In summer 2018, a decision was made to reduce the number of offices to 24 during 2019, due to the increasing number of sales made over the phone and online, and as part of the ongoing work on cost-efficiency.
Denmark Gjensidige distributes general insurance products in Denmark through its own sales network and in cooperation with the Nykredit Group, which is Denmark’s biggest mortgage lender. In addition, private insurance products are sold through a number of partners, especially travel agents, car dealers and estate agents. Otherwise, the private market is served directly via telephony and the internet. The use of underwriters was discontinued in 2018.
A considerable share of sales in the Danish commercial market take place in collaboration with brokers. The market for small and medium-sized customers and agricultural customers is served via the phone and through dedicated underwriters.
Per Arne Bjørge (1950) has been a member of the Board of Gjensidige since 2011. He is Chair of the Board and general manager of PAB Consulting AS. Bjørge is Chair of the board of Borgund Invest AS, Havskjer AS and Havskaar AS. He is a board member of the Gjensidige Foundation and of 3D Perception AS and of Tafjord Kraft AS.
Eivind Elnan (1974) has been a member of the Board of Gjensidige since 2017. He has during the past ten years founded and built up two technology companies, Securo AS/Scuti AS and Hypoxic Technologies AS, both of which focus on fire protection solutions. He is now general manager of Hypoxic Technologies AS, which in 2017 became part of the German group Wagner Group GmbH. He has a master’s degree (sivilingeniør) in Industrial Economics and Technology Management from the Norwegian University of Science and Technology (NTNU). Elnan has been a board member of the Gjensidige Foundation since 2016, and was previously a deputy member of the board. Elnan has previous work experience from Securo AS, Innherred Vekst AS and Accenture and other firms.
Sweden In Sweden, general insurance products are largely distributed to private customers directly by phone and via the internet, but also through insurance mediators such as partners and agents. Distribution is based on thorough segmentation. In the commercial market, distribution mainly takes place through insurance brokers and partners, but the proportion of direct sales is also increasing. We focus our activities on small and medium-sized enterprises in selected sectors.
Since 2007, Gjensidige’s customers in Norway have had access to banking services through Gjensidige Bank. In summer 2018, Gjensidige entered into an agreement on the sale of Gjensidige Bank to Nordea. The parties agreed, at the same time, to enter into mutual cooperation on the distribution of banking and insurance services in Norway. Gjensidige expects that this cooperation will give customers an even better range of financial services, and that it will foster strong customer loyalty and be a means of recruiting new customers.
The use of smart phones means that customers increasingly expect to be able to do things themselves, through user-friendly apps or web portals. Customers doing things themselves opens up new possibilities for creating customised solutions of high relevance and value to customers. We see a growing trend in various market surveys that both private and commercial customers prefer self-service solutions.
Good utilisation of data is contingent on technological solutions and expertise being in place to collect, store and structure data in a safe and useful manner.
Customers’ use of our digital sales, service and claims solutions has increased significantly throughout 2018, and is expected to continue. This means that our staffed channels can spend more time on providing value-adding advisory services.
In 2018, we have also started introducing more automation in our tariff setting, to enable us to update prices more quickly than before. This is vital to be able to quickly adapt prices to changes in competitive conditions and claims inflation. For example, we changed the tariffs for motor insurance in the Norwegian private market twice in 2018, processes which previously could take as long as 12 months.
In 2018, we started testing in connection with the introduction of a new core system. It will be implemented in Denmark in 2019, thereafter in Sweden, and in Norway at a later date. The new core system will provide brand new opportunities for using best practice throughout the Group. We will be able to develop products and tariffs more quickly than before, and have better options for establishing ecosystems of products and services in cooperation with other parties. The new core system will help to increase cost-efficiency and secure our competitiveness also in the longer term.
The increase in claims incurred was addressed by significant price adjustments both for property and motor insurance, to ensure satisfactory profitability going forward. It takes 12 to 24 months in general insurance to see the full effect of price measures in the accounts.
Despite considerable price increases during 2018, Gjensidige strengthened its leading position in the Norwegian general insurance market. Its market share increased slightly during the year, and, in the third quarter, it was at its highest level in more than six years.
The development in its market shares and customer satisfaction reflect the Group's continued strong competitiveness.
we will continue to work with measures to increase cost efficiency and adjustment of prices to further enhance profitability.
Goal attainment and updated financial and operational targets The tables to the right show the goal attainment for financial and operational targets that apply to the period 2014 to 2018.
The ambitious operational targets launched in 2014 were met, with the exception of the percentage of digital customers. There was considerable progress however with respect to the percentage of digital customers during the period.
New financial and updated targets In autumn 2018, the Board adopted updated financial targets that apply to each year from 2019 up to and including 2022. Operational targets were also adopted that we aim to reach during 2022. They were described in more detail in connection with the Capital Markets Day in November 2018.
Most customer-oriented – and sustainable Our ambition of being the most customer-oriented general insurance company in the Nordic region and the Baltic states forms the basis for all our priorities. And we shall achieve this through cost-efficient operations based on digitalisation, analytical insight and relevant expertise. Sustainable decisions and solutions are a basic precondition for long-term value creation.
Nominal high and stable >70 per cent 1 Combined ratio target on an undiscounted basis, assuming ~NOK 1bn annual run-off gains through 2022.
Customer retention > 90 per cent, Norway 91 per cent > 85 per cent, outside of Norway 79 per cent
Sales effectiveness + 10 per cent, Group + 1 per cent
1 Assuming annual run-off gains ~NOK 1 billion through 2022 Corresponds to 90-93 per cent given zero run-off gains post 2022 2 Assuming sale of Gjensidige Bank 3 Corresponds to >16 per cent given zero run-off gains post 2022 4 Excluding run-off
For more than 200 years, Gjensidige has exercised social responsibility by safeguarding people’s lives, health and assets, and we have engaged in loss prevention activities for just as long. In 2018, we announced our goal to reduce both our own and our customers’ carbon intensity, and we launched the green watchman. Read more about this and other sustainability goals in our Sustainability report on page 22-49.
Three operational strategic focus areas Gjensidige has defined three strategic focus areas in order to achieve its financial and operational targets: digital customer experiences, analytics-driven operations and dynamic organisational development. See page 8-10 and 78-79 for a more detailed description of Gjensidige’s strategy. A selection of measures and initiatives that have been implemented in 2018 relating to these focus areas is presented in the following.
The best digital customer experience in general insurance Gjensidige shall be the most customer-oriented general insurance company in the Nordic region and the Baltic states. In order to keep this promise, we must offer good, digital services. Customers increasingly prefer to use self-service solutions in digital channels, and technology increasingly facilitates more automated processes.
We have four priority ambitions for customer orientation towards 2022: 1. We shall maintain customer satisfaction at a very high level, with a customer satisfaction index (CSI) of above 78 for the Group.
2. We shall maintain very high customer loyalty in Norway, and increase loyalty outside Norway. Our goals for customer retention in Norway and outside Norway are 90 and 85 per cent respectively.
We expect digitalisation, automation and artificial intelligence to form the basis for more user-friendly solutions in the time ahead. They enable us and our customers to save time, and our advisers to spend more time on providing value-adding advisory services to customers.
As well as generating rationalisation gains, experience shows that digital solutions also help increase customer satisfaction. This is because we can serve customers more quickly and smoothly, and fewer errors arise.
We have made efforts to strengthen and improve our analysis activities in all these areas in recent years. New tools, such as artificial intelligence and machine learning, are important aspects in this work. Four areas have highest priority going forward: 1. We are introducing more and more automation and standardisation in pricing, so that we can update tariffs more quickly than before. Processes that previously took months can now be completed in the course of a few days. While all tariffs
John Giverholt (1952) has been a member of the Board of Gjensidige since 2016. He was formerly Managing Director of Ferd AS. He was previously CFO of the same company, Executive Vice President at DNB and Deputy Finance Director at Norsk Hydro.
Giverholt holds a Bachelor’s degree in business economics from the University of Manchester and the exam for stateauthorised auditors from the Norwegian School of Economics (NHH).
were processed manually until very recently, we had, at the end of 2018, started implementing automated processing for 18 per cent of our data-driven tariffs. All data-driven tariffs will be automated by 2022.
2. We shall strengthen sales efficiency by analysing data in real time. This improves our opportunity to provide relevant and value-adding advisory services to our customers in all channels, both self-service and staffed channels. When customers receive more targeted advice and information about products, it saves time for them and our customer advisers. It also increases the likelihood of the customer buying a product that meets their need. We will also increase sales efficiency by optimising our channel mix by using internal distribution channels and optimal use of our channels.
4. We shall reduce claims incurred by NOK 500 million by 2022 through better control of repair methods and selection of suppliers, and reducing fraud, as well as cutting costs through increased automation. One example of this is cosmetic damage to cars, which can be processed more quickly and cheaply using what is known as ‘smart repair’.
It is important to Gjensidige to further develop its corporate culture. The whole organisation was involved in the work on the new core values in 2018: ‘Create a sense of security, apply new thinking, go for it’. The core values were launched in September, and are now in the process of being implemented in our development and evaluation activities.
A senior management programme was initiated in 2018 to help secure a joint understanding of the challenges and opportunities in the Group.
Strategic staffing planning is an important foundation for competence and organisational development. A strengthening of insurance, analytical and digital skills throughout the organisation will be emphasised in the follow-up of managers going forward. Measures in this context will include activities through the Gjensidige Customer and Brand School, planned secondments and job rotation.
The customer satisfaction rate again showed positive development and increased from 77.9 in 2017 to a record-strong 78.1 in 2018. Satisfaction is highest among customers who have reported a claim or been in dialogue with Gjensidige for other reasons.
Customer satisfaction is high in Gjensidige Norway, which confirms high satisfaction with our services. Around 70 per cent of our private customers are members of an organisation or loyalty programme, and these customers are characterised by even higher loyalty than average. Our most loyal insurance customers are those who have the most products.
In Denmark, determined efforts are being made to increase familiarity with Gjensidige. Unaided familiarity in the Danish market was 15 per cent on average in 2018.
Unique customer dividend model in Norway The arrangement whereby our customers receive customer dividend from Gjensidige’s biggest owner, the Gjensidige Foundation, is unique. Every year since the Company was listed on the stock exchange, Gjensidige has paid customer dividend to its Norwegian general insurance customers based on how much they pay in insurance premiums. During this period, customers have received an annual amount corresponding to 11-16 per cent of their premium. We measure customers’ awareness of the customer dividend on an ongoing basis. At year-end 2018, 92 per cent of customers were aware of the customer dividend model and more than 75 per cent stated that the model contributed to their wanting to continue as customers. Awareness of the customer dividend system among potential customers was 64 per cent.
Good cooperation with partners Gjensidige has many years’ experience of partnership agreements, and, at the turn of the year, our partner organisations had a total of 1.7 million members. Our partnership agreements are structured so that the customer relationship is owned by and the customer dialogue takes place directly with Gjensidige.
In 2018, we renewed the agreements in Norway with the trade unions YS and Tekna, which we have cooperated with for many years, while NITO, which we have also cooperated with for many years, decided not to renew its agreement.
In April 2018, a dividend of NOK 3.55 billion was distributed based on the profit for 2017, in line with a dividend policy that aims for a high and stable nominal dividend.
At year-end 2018, the remaining capacity to issue Tier 1 loans amounted to NOK 1.4–1.9 billion. It is not Gjensidige’s ambition to fully utilise this capacity, but it will consider the possibilities for issuing further loans contingent on satisfactory market terms. The capacity to issue Tier 2 loans was fully utilised. In addition, other balance sheet and capital optimisation measures will be continuously assessed.
Return on the Gjensidige share The Gjensidige share yielded a negative total return for shareholders of 8 per cent in 2018. Oslo Børs recorded a negative total return of 2 per cent during the same period. Since the Company was listed on the stock exchange in December 2010, the Gjensidige share has yielded a total return of 310 per cent. The average daily trading volume on Oslo Børs was around 573,000 shares in 2018, and the share is one of the 25 most liquid shares listed there. In addition, a substantial number of shares are traded in other marketplaces. Gjensidige pursues a shareholder- friendly capital and dividend policy, and the Gjensidige share is and should be a dividend- paying share.
Gjensidige, provides a good picture of the Company’s risk situation and capital needs, and will continue to be used for internal control purposes. The Board has been involved in an extensive process to ensure the model is understood, and has discussed its results and methods in a number of contexts.
Tax Tax deductions for technical provisions in general insurance companies will be limited with effect from 2018 to provisions for probable future expenses linked to insurance liabilities. Tax deductions will thus no longer be made for provisions for natural disaster capital and the guarantee scheme for general insurance (Norway). A transitional arrangement is in place whereby provisions for natural disaster capital and the guarantee scheme for general insurance, as of 1 January 2018, can, for tax purposes, be placed in a separate account that will only be taxable if the general insurance business is wound-up. Provision is not made for deferred tax on natural disaster capital or for the guarantee scheme for general insurance (Norway) pursuant to IAS 12 Income Taxes.
The tax value of the technical provisions in Gjensidige Forsikring was significantly reduced in 2018, largely because the previous security provision is no longer included. A transitional arrangement nonetheless enables the firm to divide the revenue recognition, for tax purposes, of this reduction on a straight-line basis over ten years, starting in 2018. The amount in question is NOK 4,667 million.
She is a Board Member of Nykredit A/S, Nykredit Realkredit A/S, Eniig Energi A/S, Eniig Energi Naturgas A/S, Unified Credit and Competition Council. In addition she is a Member of the Nomination Committee for the University of Copenhagen.
Krag has a Master of Law from University of Copenhagen and has a Board Leadership Masterclass from Copenhagen Business School.
Data protection EU’s new General Data Protection Regulation (GDPR) entered into force in 2018. Gjensidige took this opportunity to overhaul its systems and procedures for collecting, storing, processing and erasing data covered by the regulation. This was a major project that not only ensured compliance with the regulation, but also led to many operational improvements.
Statement concerning the annual accounts Gjensidige reports consolidated financial information pursuant to International Financial Reporting Standards (IFRS).
The preparation of the accounts and application of the chosen accounting principles involve using assessments and estimates, and necessitate the application of assumptions that affect the carrying amount of assets and liabilities, income and expenses. The estimates and the pertaining assumptions are based on experience and other factors. The
Profit/loss The Group recorded a profit before tax expense of NOK 4,265.0 million (5,216.8). The result does not include the profit from Gjensidige Bank. The profit from general insurance operations, measured by the underwriting result, was NOK 3,605.8 million (3,410.1), corresponding to a combined ratio of 85.0 (85.4). The profit was positively affected by high run-off gains of NOK 2.4 billion. Adjusted for this, the underwriting result was NOK 1,248,9 million (2,379,8), corresponding to a combined ratio of 94.8 (89.8).
The tax expense amounted to NOK 883.5 million (1,156.6), corresponding to an effective tax rate of 20.7 per cent (22.2). The effective tax rate was affected by realised and unrealised gains from equity investments in the EEA and a reduction in deferred tax on the guarantee scheme of around NOK 200 million.
The underwriting result was positively affected by solid growth in premiums of 2.8 per cent, and earned premiums increased to NOK 24.1 billion (23.4). The result reflects the extraordinary weather conditions in Norway, with a long, harsh winter followed by an unusually warm, dry summer, and storms and heavy rain during the third quarter. Weather-related developments in frequency claims for motor, building and agricultural insurance in the first three quarters of the year, taking average historical levels into
General Insurance Private 1,934.8 2,200.0 General Insurance Commercial 1,548.2 1,634.8 General Insurance Denmark 434.5 284.0 General Insurance Sweden 78.2 (91.6) General Insurance Baltics 68.5 (7.2) Corporate Centre/costs related to owner (379.1) (272.4) Corporate Centre/reinsurance 1 (79.3) (337.5) Underwriting result general insurance 4 3,605.8 3,410.1
Financial result from the investment portfolio 4 820.9 2,002.6 Amortisation and impairment losses of excess value – intangible assets (264.6) (261.3) Other items (63.8) (38.3) Profit/(loss) for the period before tax expense 4,265.0 5,216.8
2 Large losses = loss events in excess of NOK 10.0 million. Expected large losses for the quarter were NOK 318.0 million. 3 Run-off gains/(losses) = changes in estimates from earlier periods. Provisions are based on best estimates, and the expected run-off result over time is zero. 4 Defined as alternative performance measure (APM). APMs are described on www.gjensidige.no/reporting in document named
An in-depth analysis performed by Gjensidige’s actuaries in the fourth quarter concluded that there was a surplus in the claims provisions relating to accident and health claims for occupational injuries and motor claims in Norway, primarily from the period 2008 to 2014. This comes in addition to the previously calculated surplus provision, the remaining part of which amounts to NOK 4 billion, and which is scheduled to be distributed in the amount of around NOK 1 billion per year from 2019. The surplus of NOK 1,080 million was released in full in the fourth quarter, which contributed to the high level of run-off gains for the year 2018.
Cash flow Gjensidige is primarily an insurance company in which investments are part of the operational cash flow and therefore largely affected by strategic decisions. The Company’s ability to self-finance investments is good. The net cash flow from operational activities mainly consists of payments in the form of premiums, net payments made/received in connection with deposits and loans from the banking operations and from the sale of investment assets, plus payments in the form of claims settlement costs, purchases of reinsurance, administration expenses and tax.
The net cash flow from investment activities mainly consists of payments made/received in connection with the acquisition of subsidiaries and associated companies, owner-occupied property, plant and equipment, plus dividend from associated companies and joint ventures. The net cash flow from investment activities in 2018 was minus NOK 438.3 million (minus 834.6). The acquisition of Mølholm Forsikring in 2017 meant investments were higher than in 2018, when no similar purchases were made.
The net cash flow from financing activities mainly consists of payments made/received in connection with external debt financing and the payment of dividend to shareholders. The net cash flow from financing activities in 2018 was NOK 2,492.5 million (minus 397.5). The change is largely due to higher loans from financial institutions in the banking operations.
Earned premiums increased to NOK 8,762.5 million (8,516.5). All main product lines recorded higher premiums compared with the same period the previous year, driven by price increases. Gjensidige’s competitive position remained strong despite continued fierce competition.
Hilde Merete Nafstad (1963) has been a member of the Board of Gjensidige since 2017.
Amortisation and impairment losses of excess value – intangible assets (17.5) (22.2)
Run-off gains/(losses) 2 787.2 473.2 1 Large losses = loss events in excess of NOK 10.0 million. Claims incurred in excess of NOK 30.0 million per event are charged to the Corporate Centre.
Operating expenses amounted to NOK 1,106.9 million (1,090.3), which translates into a cost ratio of 12.6 (12.8).
Earned premiums increased to NOK 7,603.3 million (7,300.5) mainly due to new business initiatives and solid renewals throughout the year for most product lines, especially motor, property and liability insurance. Ongoing pricing initiatives contributed to premium growth. Price increases and adjustments of terms and conditions will continue.
Motor and property were significantly impacted by the severe winter conditions. Property was further affected by damages resulting from heavy rainfall and storms during the third quarter.
Anne Marie Nyhammer (1964) has been a member of Gjensidige’s Board as an employee representative since 2016. She is technical man a ger in Gjensidige, and employee representative.
Nyhammer has previously been employed in DnB and in Norsk Hydro/Leirvik Sveis.
Motor insurance was negatively impacted by underlying claims inflation. Pricing measures were stepped up from the first quarter and will continue going forward, with the aim of closing the gap to the expected underlying claims inflation. It takes 12-24 months to see the full effect of price increases in the results. Motor profitability is still expected to reach a turning point during the first half of 2019.
Run-off gains/(losses) 2 1,268.4 452.9 1 Large losses = loss events in excess of NOK 10.0 million. Claims incurred in excess of NOK 30.0 million per event are charged to the Corporate Centre.
General Insurance Denmark The underwriting result was NOK 434.5 million (284.0). The increase in the underwriting result was mainly driven by higher run-off gains, lower large losses and a somewhat improved underlying frequency claims situation. The combined ratio was 91.1 (94.1).
Earned premiums 4,904.6 4,827.4 Claims incurred etc. (3,766.2) (3,863.0) Operating expenses (704.0) (680.3) Underwriting result3 434.5 284.0
Run-off gains/(losses) 2 171.0 98.9 1 Large losses = loss events in excess of NOK 10.0 million. Claims incurred in excess of NOK 30.0 million per event are charged to the Corporate Centre.
1 Large losses = loss events in excess of NOK 10.0 million. Claims incurred in excess of NOK 30.0 million per event are charged to the Corporate Centre.
both the private and commercial portfolio as a result of improved pricing and risk selection. Negotiations with partners and quality improvements are expected to contribute to continued improved profitability going forward.
General Insurance Baltics The underwriting result increased to NOK 68.5 million (minus 7.2), primarily driven by a significant improvement in the frequency claims situation and a favourable cost development. Initiatives to improve profitability were successfully executed during 2018. The combined ratio was 93.7 (100.7).
Claims incurred amounted to NOK 675.9 million (736.0). Currency effects increased claims incurred by NOK 21.3 million. The loss ratio was 62.7 (68.5). The significant improvement was primarily the result of improved tariffs, portfolio restructuring and efficient claims handling processes.
Terje Seljeseth (1960) has been a member of the Board of Gjensidige since 2018. He is working with analytics at the Tinius Foundation, and has previously been Executive Vice President in Schibsted for Product & Technology and for Classified Media. He has also been Managing Director in FINN.no, and has held various positions in Aftenposten AS and Telenor Media AS.
Seljeseth is an ADB Candidate / IT from the Computer Science School in Oslo and has Mathematics/ Informatics from UIO.
Pension Increased operating revenues continued to contribute to significant growth in earnings. The profit before tax expense was NOK 166.6 million (103.7) which is the best yearly result ever for the pension business.
During the fourth quarter the provisioning for longevity relating to the paid-up policy portfolio was completed.
Among other things, Kronholm Sjøberg has previously held position as a consultant in the change and ownership-departement in Nykredit Forsikring. She has studied at Copenhagen Business School and has a Master’s Degree in mediation and conflict resolution from Faculty of Law, Copenhagen University.
Administration fees increased to NOK 144.4 million (134.6) driven by a growing customer portfolio. Insurance income was NOK 72.6 million (36.3). The main reasons for the improved income was a strengthening of IBNR reserves the same quarter in 2017 and risk result relating to the paid-up policies, previously used for provisioning for longevity 2018. Management income increased to NOK 150.5 million (130.4) as a result of growth in assets under management.
Operating expenses increased to NOK 241.0 million (227.3), driven by increased distribution costs due to higher business volume.
The recognised return on the paid-up policy portfolio was 5.61 per cent (3.75). The improvement was related to non-recurring effects due to the changed classification of unrealised gains relating to property investments. The average annual interest guarantee was 3.3 per cent.
Assets under management have increased by NOK 1,989.2 million since year end 2017, but they decreased by NOK 1,023.3 billion during the fourth quarter as a result of market turmoil. Total pension assets under management amounted to NOK 30,688.2 million (28,699.0) including the group policy portfolio of NOK 6,586.4 million (6,018.4).
Net interest income amounted to NOK 1,021.3 million (992.3). The improvement was driven by lending growth, partly offset by lower lending margins.
The net interest margin1 was 1.89 per cent (2.03). The decrease was driven by the change in the portfolio composition and an increase in financing costs.
The new IFRS rules have been implemented and the previous year’s financials are therefore not directly comparable. The transition from IAS 39 to IFRS 9 rules led to an increase of NOK 13.9 million in the losses and provisioning balance at the beginning of the year. The impact was charged directly to equity, after adjusting for the impact of tax.
The weighted average loan-to-value ratio2 for the mortgage portfolio was estimated to be 60.9 per cent (60.6).
Gross lending increased by 12.0 per cent and amounted to NOK 51,582.5 million (46,056.1) at the end of 2018. Deposits decreased by 2.7 per cent, reaching NOK 23,123.0 million (23,765.7). The deposits-to-loans ratio was 44.8 per cent (51.6).
As result of the Share Purchase Agreement between Gjensidige Forsikring ASA and Nordea, S&P Global Ratings placed its 'A' long-term and 'A-1' shortterm issuer credit ratings for Gjensidige Bank ASA and its subsidiary Gjensidige Bank Boligkreditt AS, on Credit Watch with positive implications. The change took place on 4 July.
Interest income and related income 1,744.6 1,631.7 Interest expenses and related expenses (723.3) (639.4) Net interest income 1,021.3 992.3 Net commission income and other income (15.7) 42.9 Total income 1,005.6 1,035.2 Operating expenses (488.4) (412.5) Write-downs and losses (70.0) (10.3) Profit/(loss) before tax expense 447.3 612.3 1 Defined as alternative performance measure (APM). APMs are described on www.gjensidige.no/reporting in document named APMs Gjensidige Bank 2018 1) The net interest margin is calculated as net interest income as a percentage of average total assets, annualised.
2) The loan-to-value ratio estimate is calculated on the basis of the exposure on the reporting date and the property valuation, including any higher priority pledge(s), at the time the loan was approved and taking into account any corrections done manually thereafter to reflect accurate valuation.
Geographic distribution match portfolio at the end of 2018 48.0% Norway 6.4% Sweden 25.4% Denmark 6.8% USA 5.1% UK 2.2% Baltics 6.1% Other
Counterparty risk �xed income instruments at the end of 2018 Per cent
Net income from investments 830.2 2,002.2 1 The item includes discounting effects of the insurance liabilities in Denmark and Sweden, and a mismatch between interest rate adjustments on the liability side in Denmark and the corresponding interest rate hedge. Investments include mortgage, sovereign and corporate bonds, investment grade bond funds and loan funds containing secured debt.
Management of financial assets and properties The Group’s investment portfolio includes all investment funds in the Group, except for investment funds in the Pension and Retail Bank segments. The investment portfolio is split into two parts: a match portfolio and a free portfolio. The match portfolio is intended to correspond to the Group’s technical provisions. It is invested in fixed-income instruments with a duration and currency that match the duration and currency of the technical provisions. The free portfolio consists of various assets. The allocation of assets in this portfolio must be seen in conjunction with the Group’s capitalisation and risk capacity, as well as the Group’s risk appetite at all times. Results from the use of derivatives for tactical and risk management purposes are assigned to the respective asset classes. Currency risk in the investment portfolio is generally hedged close to 100 per cent, within a permitted range of +/- 10 per cent per currency.
Unrealised excess value amounted to NOK 0.8 billion (1.2) at the end of the period. The reinvestment rate for new investments in the portfolio of bonds held at amortised cost was approximately 3.3 per cent on average for the year, and the running yield was 3.8 per cent at the end of the period.
The average duration of the match portfolio was 3.3 years. The average term to maturity for the corresponding insurance liabilities was 3.8 years. The distribution of counterparty risk and credit rating is shown in the charts on page 74. Securities without an official credit rating amounted to NOK 9.0 billion (10.7). Of these securities, 6.1 per cent (6.5) were issued by Norwegian savings banks, while the remainder were mostly issued by Norwegian power producers and distributors, property companies, industry and municipalities. Bonds with a coupon linked to the development of the Norwegian consumer price index accounted for 6.4 per cent (8.5) of the match portfolio.
At the end of the period, the average duration in the portfolio was approximately 3.1 years. The distribution of counterparty risk and credit rating is shown in the tables on page 74. Securities without an official credit rating amounted to NOK 1.3 billion (2.3). Of these securities, 6.0 per cent (15.2) were issued by Norwegian savings banks, while the remainder were mostly issued by industry and municipalities.
The geographical distribution1 of the fixed-income instruments in the free portfolio is shown in the chart above.
Property portfolio At the end of the period, the exposure to commercial real estate in the portfolio was NOK 4.6 billion (3.5).
The property portfolio yielded a return of 7.0 per cent (9.7).
Risk Risk is defined as the possibility of a potential event affecting the Group’s goal attainment. In order to understand and manage risk, an assessment is therefore carried out of both the probability of the potential event occurring and its consequences should it occur. Through the Group’s risk management and internal control framework, a common library structure has been established that systematically identifies, assesses, communicates and manages risk throughout the Group. The risk assessment process is coordinated with the Group’s planning and strategy processes.
Risk management is based on specified goals and strategies and the limits on risk exposure stipulated by the Board. Further description of risk management can be found in Note 3 to the annual accounts.
The technical provisions are intended to cover claims that have been incurred and reported to the Company (RBNS), and claims that have been incurred but not yet been reported (IBNR). There will always be a risk that these provisions will be insufficient. Gjensidige therefore makes continuous efforts to further develop methods and models based on new experience and knowledge. External actuaries are sometimes used to perform independent calculations of the best estimate for technical provisions.
Financial risk Financial risk concerns exposure relating to financial investments in the insurance operations. The counter entry in the balance sheet consists of actuarial liabilities, other liabilities and equity. The investments mainly consist of fixed-income investments, property and equity investments. The value of the investments can be affected by changes in macroeconomic factors.
The Board has assessed the risk of losses on loans, guarantee liabilities and other receivables, and necessary provisions have been made in the accounts.
The Gjensidige Customer and Brand School is responsible for competence-raising and management development in Gjensidige. The school offers training for sales personnel, claims handlers and managers based on the Group’s strategic focus and development areas. New employer branding measures have been implemented and recruitment processes have been further developed and made more targeted.
Corporate governance The Board has prepared a separate report on corporate governance in line with NUES’ recommendation on page 50-55.
Model (both the regulatory approved model and the model with internal calibration) between 135 and 200 per cent • The solvency margin should remain in the upper half of the range in order to support an ‘A’ rating, stable regular dividends over time, financial flexibility for smaller acquisitions and organic growth not financed through retained earnings, as well as providing a buffer for regulatory changes.
Gjensidige’s ambition is to become the most customer-oriented general insurance company in the Nordic and Baltic region. The Group’s priority is to retain its strong and unique position in Norway and to continue improving profitability outside. Furthermore, the Group will focus on ensuring con tinued capital discipline, including delivering attractive returns to shareholders. The key operational strategic priorities to reach these ambitions are to deliver the best digital customer experiences, focus on business intelligence and advanced analytics and to develop dynamic organisational capabilities.
Organic growth is expected to be in line with nominal GDP growth in Gjensidige’s market areas in the Nordic countries and the Baltic states over time. In addition, profitable growth will be achieved by pursuing a disciplined acquisition strategy, as has been done successfully in the past. Strong emphasis will also be placed on further developing cooperation with partners and distributors. The sale of Gjensidige Bank to Nordea is expected to be closed during the first quarter 2019. The mutual distribution of insurance and financing products will commence shortly after, with the parties exploring opportunities in both the private and commercial segments.
Competition is still strong in the Norwegian general insurance market. Gjensidige has managed to capitalise on its position as market leader in Norway, and competitiveness remains good. Continued efforts to maintain and further strengthen Gjensidige’s position in the Norwegian market will be prioritised.
In particular, Gjensidige will continue with efforts to improve profitability for the motor insurance line in Norway. Profitability for this insurance line is still expected to reach a turning point during the first half of 2019.
Gjensidige has a robust investment strategy, although returns are affected by challenging market conditions. There are still some outstanding uncertainties relating to changes to the regulatory framework conditions for the financial sector in Norway and internationally.
Allocation of the profit before other income and expenses The Group’s profit for the year after tax expense for continued and discontinued operations amounted to NOK 3,716.4 million. The Board has adopted a dividend policy that forms the basis for the dividend proposal submitted to the general meeting. The Board proposes a dividend of NOK 3.55 billion for the 2018 financial year. This corresponds to NOK 7.10 per share, or 95.5 per cent of the Group’s profit after tax. The proposed dividend is contingent on the approval of the Financial Supervisory Authority because it amounts to more than 100 per cent of the profit for Gjensidige Forsikring ASA in 2018.
The Board has decided to pay employees of Gjensidige Forsikring ASA a collective bonus corresponding to NOK 16.000, including holiday pay, per full-time employee. The bonus is based on the underwriting result, market development, customer satisfaction and organisation, engagement, expertise and presence. The Board can apply a discretionary assessment in relation to the criteria, and assess the year’s results and to what extent they support the dividend policy.
The Board wishes to thank each individual employee for their contribution to Gjensidige’s results in 2018.
Gisele Marchand Per Arne Bjørge Eivind Elnan John Giverholt Vibeke Krag Chair
Gunnar Mjåtvedt Hilde Merete Nafstad Anne Marie Nyhammer Terje Seljeseth Lotte Kronholm Sjøberg
Consolidated income statement ................................ 82 Consolidated statement of comprehensive income ..... 83 Consolidated statement of financial position .............. 84 Consolidated statement of changes in equity ............. 85 Consolidated statement of cash flows ........................ 86
Amortisation and impairment losses of excess value - intangible assets (264.6) (261.3)
Profit/(loss) attributable to: Owners of the company continuing operations 3,382.7 4,064.0
Earnings per share from continuing and discontinued operations, NOK (basic and diluted) 24 7.44 9.05
Earnings per share from continuing operations, NOK (basic and diluted) 24 6.77 8.13
Other comprehensive income that will not be reclassified subsequently to profit or loss
Share of other comprehensive income of associates and joint ventures 0.0 (0.7)
Total other comprehensive income that will not be reclassified subsequently to profit or loss (38.1) (255.9)
Other comprehensive income that will be reclassified subsequently to profit or loss
Tax on other comprehensive income that will be reclassified subsequently to profit or loss 9 (0.7) (88.2)
Total other comprehensive income that will be reclassified subsequently to profit or loss 14.2 489.1
Total comprehensive income attributable to: Owners of the company continuing operations 3,358.8 4,297.2
Hilde Merete Nafstad Anne Marie Nyhammer Terje Seljeseth Lotte Kronholm Sjøberg Helge Leiro Baastad CEO
Goodwill 11 3,577.0 3,557.4 Other intangible assets 11 1,288.1 1,472.2 Deferred tax assets 9 13.1 11.3 Investments in associates and joint ventures 5 2,959.7 1,859.4 Interest-bearing receivables from joint venture 5, 13 2,513.1 1,620.1 Owner-occupied property, plant and equipment 12 251.9 290.1 Pension assets 10 156.6 206.0
Financial assets Financial derivatives 13 577.9 674.0 Shares and similar interests 13, 14 5,134.9 7,328.3 Bonds and other securities with fixed income 13 26,374.8 30,734.2 Bonds held to maturity 13 391.5 1,136.0 Loans and receivables 13, 15 20,477.9 67,010.1 Assets in life insurance with investment options 13 23,909.5 22,565.5 Reinsurers' share of insurance-related liabilities in general insurance, gross 16 926.9 827.4 Receivables related to direct operations and reinsurance 6,784.7 5,840.8 Other receivables 15 1,081.7 1,064.5 Prepaid expenses and earned, not received income 15 81.7 189.9 Cash and cash equivalents 2,363.3 2,685.2
Equity Share capital 999.9 1,000.0 Share premium 1,430.0 1,430.0 Natural perils capital 2,491.1 2,333.4 Guarantee scheme provision 653.9 638.3 Perpetual Tier 1 capital Gjensidige Bank (held for sale) 444.8 Other equity 17,824.9 18,283.4 Total equity attributable to owners of the company 23,844.7 23,685.1 Non-controlling interests 0.5 18.0 Total equity 17 23,845.2 23,703.1
Financial liabilities Financial derivatives 13 869.9 584.9 Deposits from and liabilities to customers 13, 19 23,765.7 Interest-bearing liabilities 13, 19 23,083.4 Other liabilities 13, 19 2,838.4 1,265.2 Current tax 9 638.8 1,131.5 Deferred tax liabilities 9 1,093.0 1,076.8 Liabilities related to direct insurance and reinsurance 13 1,174.5 1,132.8 Liabilities in life insurance with investment options 13 23,909.5 22,565.5 Accrued expenses and deferred income 13, 19 403.3 500.8
Adjustment on initial application of IFRS 9 in the bank (10.4) (10.4)
Total transactions with owners of the company (0.0) 7.9 28.4 (3,568.6) (3,532.3)
Net receipts/payments on sale/acquisition of owner-occupied property, plant and equipment and intangible assets (403.6) (328.1)
Net receipts/payments on sale/acquisition of customer portfolios - intangible assets (3.9)
Effect of exchange rate changes on cash and cash equivalents (7.9) 40.5
Cash and cash equivalents at the end of the year 2,839.9 2,685.2
Statement of compliance The consolidated financial statements have been prepared in accordance with IFRSs endorsed by EU, and interpretations that should be adopted as of 31 December 2018, Norwegian disclosure requirements as set out in the Accounting Act as at 31 December 2018 and additional disclosure requirements in accordance with the
New standards adopted IFRS 15 Recognition of revenue for customers (2014)
13.8 million. The negative net implementation effect of NOK 10.4 million (after tax) were recognised in the opening balance. See note 25 about discontinued operations and the financial statement of
Amendments to IFRS 2: Classifications and measurement of share-based payment transactions
December 2017 amounting to NOK 8.5 million was reclassified from liability to equity as at 1 January 2018.
See also the section below about delayed implementation. The standard introduces new requirements for the classification and measurement of financial assets, including a new expected loss model for the recognition of impairment losses, and changed requirements for hedge accounting.
The amendments to IFRS 4 permit entities that predominantly undertake insurance activities the option to defer the effective date of IFRS 9 until 1 January 2021. The effect of such a deferral is that the entities concerned may continue to report under the existing standard, IAS 39 Financial Instruments. In addition, the insurance sector of a financial conglomerate is allowed to defer the application of IFRS 9 until 1 January 2021, where all of the following conditions are met: • no financial instruments are transferred between the insurance sector and any other sector of the financial conglomerate other than financial instruments that are
88 | Gjensidige annual report 2018 measured at fair value with changes in fair value recognised through the profit of loss account by both sectors involved in such transfers; • the financial conglomerate states in the consolidated financial statements which insurance entities in the group are applying IAS 39; • disclosures requested by IFRS 7 are provided separately for the insurance sector applying IAS 39 and for the rest of the group applying IFRS 9.
Gjensidige is a financial conglomerate that mainly has business within insurance, and has therefore decided to make use of this exception.
Amendments to IAS 12: Changes in classification of tax on equity items that are classified as liability for tax purposes
Functional currency is determined for each company in Gjensidige, based on the currency within the primary economic environment where each company operates. Transactions in the company’s accounts are measured in the subsidiary’s functional currency.
The consolidated financial statements are presented in NOK. The mother company and the different branches have respectively
Management/CEO and who are responsible for the performance of the segment under their charge.
Associates are entities in which Gjensidige has a significant, but not a controlling or joint control, influence over the financial and operational management. Normally this will apply when Gjensidige has between 20 and 50 per cent of the voting power of another entity.
The Group's share of earnings from investments in associates and joint ventures is presented on a separate line in the income statement. Changes in other income and expenses in these investments are included in other income and expenses.
Transactions eliminated on consolidation Intra-group balances and transactions, and unrealised income and expenses arising from intra-group transactions, are eliminated in the consolidated financial statements. Unrealised gains arising from transactions with equity accounted companies are eliminated against the investment to the extent of Gjensidige’s interest.
Unrealised losses are eliminated in the same way, but only to the extent that there is no evidence of impairment.
Cash flows from operating activities are presented according to the direct method, which gives information about material classes and payments.
Goodwill Goodwill acquired in a business combination represents cost price of the acquisition in excess of Gjensidige’s share of the net fair value of identifiable assets, liabilities and contingent liabilities in the acquired entity at the time of acquisition. Goodwill is recognised initially at cost and subsequently measured at cost less accumulated impairment losses.
Amortisation Intangible assets, other than goodwill is amortised on a straight-line basis over the estimated useful life, from the date that they are available for use. The estimated useful lives for the current and comparative periods are as follows
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 Gjensidige and might trigger testing for an impairment loss are as follows
Impairment losses are recognised in profit or loss if the carrying amount of an asset or cash-generating unit exceeds its estimated recoverable amount. Impairment losses recognised in respect of cash-generating units are allocated first to the carrying amount of goodwill and then proportionally to the carrying amount of each asset in the cash-generating unit. Previously recognised impairment losses are for assets except for goodwill, reversed if the prerequisites for impairment losses are no longer present.
Claims provision, gross The claims provision comprises provisions for anticipated future claims payments in respect of claims incurred, but not fully settled at the reporting date. These include both claims that have been reported (RBNS – reported but not settled) and those that have not yet been reported (IBNR – incurred but not reported). The provisions related to reported claims are assessed individually by the Claims Department, while the IBNR provisions are calculated based on empirical data for the time it takes from a loss or claim occurring (date of loss) until it is reported (date reported). Based on experience and the development of the portfolio, a statistical model is prepared to calculate the scope of post-reported claims. The appropriateness of the model is measured by calculating the deviation between earlier post-reported claims and post-reported claims estimated by the model.
Claims provisions are not normally discounted. For contracts with annuity payments over a long horizon, discounting is performed.
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.
The category financial derivatives comprise the classes financial derivatives at fair value through profit or loss and financial derivatives used as hedge accounting.
The share-based payment arrangements is measured at fair value at the time of allocation. Fair value is accrued over the period during which employees acquire the right to receive the shares. Sharebased payment arrangements which are recovered immediately are recognised as expenses at the time of allocation. Vesting conditions are taken into account by adjusting the number of equity instruments included in the measurement of the transaction amount so that, ultimately, the amount recognised shall be based on the number of equity instruments that eventually vest. Non-vesting conditions and possible market conditions are reflected in the measurement of fair value, and no adjustment of the amount charged as expenses is done upon failing to meet such conditions.
tax liability and transfer this amount in cash to the tax authorities on behalf of the employee. Employers' social security costs are calculated based on the fair value of the shares on each balance sheet date. The amount is recognised in the income statement over the expected vesting period and accrued according to IAS 37.
The management must be committed to a plan to sell the asset, which is expected to qualify for recognition as a completed sale within one year from the date of classification.
Pensjonsforsikring AS. Financial risk is also a material risk for the group.
On 2 July Gjensidige agreed to sell Gjensidige Bank AS to Nordea, and since the third quarter the bank has been reported as discontinued operations.
Then the different risks and management of these risks will be described. Finally, the capital requirement for these risks and the capital management will be described. Note that we distinguish between the terms Gjensidige Insurance Group and Gjensidige
The primary responsibility for risk management and internal control is held by every employee and leader in the group. This is the first line of defence. There are established procedures and guidelines that must be followed, and risk management and internal control is therefore performed as a part of all employees’ daily work. Control functions in line management are incorporated into the overall internal control system. Such functions include risk and compliance coordinators, group security, data privacy officer, anti-money laundry officer and quality functions reviewing distribution and claims handling.
The CEO has an overall responsibility for the risk management of the group. The Group’s capital management committee has an advisory role regarding the assessment and proposal of changes in use of capital. The Group’s Risk Control Committee has an advisory role to the CEO with respect to overall Group Risk situation, and other risk management and internal control matters.
• The compliance function shall identify, assess, advice, monitor and report on risk related to compliance with external and internal regulations. The compliance function is headed by the Chief Compliance Officer (CCO)
• The actuarial function is responsible for coordinating the calculation and control of the technical provisions. The responsibility is centralised in the Group’s Actuary department, which is headed by the Chief Actuary. Even though the actuarial function is organised in the Group’s Actuary department, its responsibilities are limited to controlling activities, and has no responsibility for developing claim provision models and regular claim provision calculations. This ensures independence of the actuarial function.
The Board has the overall responsibility for ensuring that the level of risk-taking in the Group is satisfactory relative to the Group’s financial strength and willingness to take risks. The board has adopted a risk appetite statement that covers the most important types of risks. This entails ensuring that necessary governing documents and procedures are in place. Laws and regulation are to be followed. The work with the risk management and internal control is to be appropriately organised, documented and reported.
In order to describe general insurance risk, the most important components are elaborated below, and these are reserve risk, premium risk and lapse risk.
Reserve risk is the risk that the current claims provisions are not sufficient to cover the development of already incurred claims and related expenses. Reserve risk reflects the emergence of uncertainty related to: • Actual claim size (for reported, but not yet settled claims, i.e. RBNS) being higher than expected,
• Methods where “Chain ladder” and “Expected loss ratio” methods are used in combination. One advantage of the use of these methods is that more weight can be given to experience data when the run-off development of the actual claim year has become more stable.
The estimation of IBNR is generally subject to a greater degree of uncertainty than the estimation of the cost of settling claims already notified (RBNS), where information about the claim is available.
There may be cases where certain claims may not be apparent to the insured until many years after the event that gave rise to the claims.
Norway Workers’ Compensation covers both accident and diseases, while in Denmark diseases are covered by a governmental body. The compensation in Norway is exclusively in the form of lump sums, while in Denmark the compensation consists of both lump sums and annuity payments. Annuity payments are calculated on the basis of assumptions about mortality, interest rate and retirement age. For bodily injuries, the severity of claims is also influenced by court awards, which tend to increase the compensation more than the general inflation. This is also a significant factor, due to the long period typically required to settle these cases.
At the end of the accident year 13,004.2 12,569.8 14,785.3 15,981.0 13,479.3 15,379.0 14,952.6 12,836.3 13,893.0 14,918.1 16,719.5 - Ten years later 12,142.0
At the end of the accident year 12,390.1 11,860.2 13,836.8 14,692.3 12,804.0 14,460.0 14,282.2 12,129.5 13,190.6 14,260.2 16,238.6 - Ten years later 11,535.3
The purpose is to diversify the types of insurance risks, and within each of these categories achieve a sufficiently large population of risks to reduce the fluctuation in the expected outcome. There are detailed guidelines that ensure that the risks underwritten are within
A retention limit specifies the maximum loss that the Gjensidige is willing to take and gives guidance on reinsurance Gjensidige purchases. The maximum retention limit is specified in the Capital management policy and is approved by the Board. Gjensidige’s internal model is used to determine the reinsurance strategy.
The Gjensidige Forsikring Group has a centralised actuarial function, where the Chief Actuary in Gjensidige Forsikring ASA has the overall responsibility for the Group’s insurance technical provisions. Having the actuarial function as a common second line of defense for the Group ensures that all parts of the organisation use the same principles and models for the calculation of technical provisions.
Insurance risk is mitigated through several arrangements, like for instance reinsurance and hedging of inflation.
Group, approved by the Board, was NOK 480 million in 2018, increased from NOK 470 million in 2017. As a general rule,
Gjensidige’s capitalisation. As a general requirement, all reinsurers need to be rated ‘A-’or better by Standard & Poor’s (or the equivalent from other rating agencies) when entering into a contract with Gjensidige.
The Gjensidige Insurance Group is exposed to life insurance risk through products sold in Gjensidige Pensjonsforsikring AS.
Pensjonsforsikring AS is low as there is a limited amount of policies covering mortality risk. In addition, mortality rates are low, so an increase in these will have a limited impact. This means that it is not the risk of increased mortality that is dominant for Gjensidige
Gjensidige Pensjonsforsikring AS is especially exposed to longevity risk in the paid-up policies, where Gjensidige Pensjonsforsikring AS
Disability risk is the risk that actual disability is higher than expected and/or the recovery is lower than expected. Higher disability rates, but also lower recovery rates will increase the claim payments. Both individual and collective disability products expose Gjensidige
However, if a large number of customers choose to leave the company, the effect on the capital position would be limited.
(e.g. guaranteed paid-up policies). For other products, the company can increase the administration fee for the future and thereby reduce the losses.
Life insurance consists of policies in the Norwegian market. The portfolio derives mainly from employees of small and medium-sized commercial customers in the whole country, and the risk concentration is considered limited.
The investment portfolio for general insurance is split into two parts: a match portfolio and a free portfolio. The match portfolio is intended to correspond to the Group’s technical provisions in order to reduce interest rate risk, currency risk and to some extent inflation risk. It is invested in fixed-income instruments with a duration matched to the duration of the technical provisions. The free portfolio consists of various assets. The allocation of assets in this portfolio must be seen in relation to the Group’s capitalisation and risk capacity, as well as the Group’s risk appetite at all times.
Investment portfolio total 1 The item includes the market value of the interest rate hedge in Denmark. Investments include mortgage, sovereign and corporate bonds, investment grade bond funds and loan funds containing secured debt. 2 The item includes investment grade and current bonds. Investment grade bonds are investments in internationally diversified funds that are externally managed. 3 Investments in internationally diversified funds that are externally managed. 4 The item mainly includes investments in internationally diversified funds that are externally managed. In addition, there is negative derivative exposure of NOK 598.5 million. 5 In addition, there is a total return swap with Gjensidige Pensjonskasse reducing the property exposure by NOK 150.0 million. 6 The item includes currency hedging related to Gjensidige Sverige and Gjensidige Denmark, lending, paid-in capital in Gjensidige Pensjonskasse and hedge funds.
Spread risk is the risk related to the values of assets, liabilities and financial instruments due to changes in the level or volatility of credit spreads over the risk-free interest rate term structure. It is the fixedincome portfolio that is exposed to spread risk.
Issuers without a rating from an official rating company are mainly investments in the Norwegian fixed-income portfolio.
Oslo area, but it also contains property in other major cities in
Interest rate risk is the risk related to the value of assets, liabilities and financial instruments due to changes in the term structure of interest rates or interest rate volatility. For both the Gjensidige
Figure 5a shows the expected pay-out pattern for the premium and claims provisions for the general insurance operation as at year-end 2018 and 2017, respectively. Approximately one third of the provisions are expected to be paid out within one year.
Gjensidige Insurance Group’s technical provisions in order to reduce interest rate risk. There is also some interest rate risk in the free portfolio.
Pensjonsforsikring AS is a reduction of interest rate levels. This risk arises in the portfolio of paid-up policies which guarantees an annual investment return. A decrease in the interest rate level increases the risk of not achieving the guaranteed investment return. However, the sensitivity to interest rate in Gjensidige
Foreign exchange risk is the risk related to the value of assets, liabilities and financial instruments due to changes in currency exchange rates.
Counterparty default risk reflects possible losses due to unexpected default of the counterparties and debtors of Gjensidige Insurance
Credit policy. The guidelines define a number of industry sectors together with allocation limits to each sector in order to ensure diversification in the total portfolio. The current allocation of fixedincome securities meets the guidelines requirement.
Geographical concentrations of fixed-income securities in the match portfolios of the Gjensidige Insurance Group and Gjensidige
Forsikring ASA are mainly proportional to the amount of technical provisions in the various countries, in which business is conducted.
Gjensidige Forsikring ASA has a liquidity policy regarding assets, and limits have been set for the necessary access to liquid funds.
use several risk mitigation techniques. The match portfolio is intended to correspond to the Group’s technical provisions in order to reduce interest rate risk, currency risk and to some extent inflation risk. It is invested in fixed-income instruments with a duration matched to the duration of the technical provisions.
Currency forwards and currency swaps are the primary instruments used for hedging currency risk. In addition, the Gjensidige
Equity exposure is hedged to a certain extent by the use of put options and futures.
Master agreements, which set out standard terms that apply to all the transactions entered between parts. The Master Agreement allows parties to calculate their financial exposure under OTC
An independent Compliance function has been established to help the Group to avoid official sanctions, financial losses or a loss of reputation as a result of failure to comply with laws, regulations and standards. The Compliance function identifies, assesses, advises on, monitors and reports on the Group’s risk of non-compliance with laws, regulations and internal guidelines. An incidents database has been created in order to close, handle and, not least, learn from undesirable incidents.
Strategic risks in the business are covered in the own risk and solvency assessment (ORSA).
Any future excess capital will be distributed to the shareholders over time.
3.55 billion. The sale of Gjensidige bank has not yet been completed, and the bank is therefore included in the calculations above. The solvency margin without the bank would have been 245 per cent for the approved partial internal model.
principles and accounting principles are: • Intangibles are valued to zero under Solvency II
• Held-to-maturity-bonds are valued to market value under Solvency II, while amortized cost is used for accounting purposes
Eligible capital to meet the Solvency Capital Requirement is the difference between assets and liabilities.
Gjensidige Forsikring Group the tier 1 capital also includes tier 1 capital from the bank sector. Restricted tier 1 capital for the bank sector is NOK 445 million (nominal amount NOK 445 million) and consists of bonds issued by Gjensidige Bank ASA.
Gjensidige Forsikring ASA consists of natural perils capital and subordinated liabilities. Natural perils capital can only be used to cover claims related to natural perils, but can in an insolvent situation also be used to cover other liabilities. The subordinated liabilities comprise of bonds issued by Gjensidige Forsikring ASA
Gjensidige Bank ASA (nominal amount of NOK 550 million). The market value of these bonds is NOK 2.027 million per 31.12.2018.
The minimum consolidated group SCR is the sum of the minimum capital requirement of the judicial entities belonging to the group. The minimum consolidated capital requirement for Gjensidige Forsikring Group is NOK 4.900,5 million, which constitute 52 per cent of the SCR.
Solvency II. Gjensidige is of the opinion that the high level of domestic deposits which are actually equity elements should be treated as eligible solvency capital. The company will continue to pursue a regulatory framework in line with this. Until a final clarification is reached, the guarantee scheme provision is treated as a liability under Solvency II. A hearing from the FSA, dated 31.
Gjensidige. The EU does not want to change the modelling of interest rate risk at the time being, and the requirements for calculations and documentation of risk-reducing effect of deferred taxes in the capital requirement will not have a capital effect with
Tax effects are accounted for as a deferred tax asset would arise after a large financial loss.
The outcome of the stress test at year-end 2018 and 2017 is presented below.
Insurance risk (life and non-life) Expected loss CR > 100 (559.0)
• Credit spread risk: 0 per cent loss on government bonds and municipality bonds, 0,4 per cent loss on Danish mortgage bonds and covered bonds, 1,9 per cent loss on loan funds containing secured debt and 3,07 per cent loss on other bonds
Gjensidige Bank was discontinued from the third quarter 2018 and is no longer a separate segment in Gjensidige Group. The segment information reported does therefore not include amounts for
Norway, including insurances related to motor, property, accident, health, coastal and marine/transport.
Gjensidige Pensjonsforsikring shall contribute to sales of a wide range of products to general insurance customers in Norway by offering pension and savings products, mainly to the Norwegian commercial market. The pension products include defined contribution pensions and related risk for disability and death, private pension savings and individual disability pensions.
Change in the segments Due to the merger of Gjensidige Bank ASA (GB) and Gjensidige
Investeringsrådgivning AS (GIR) in 2017, the evaluation of GIR has been moved from Gjensidige Pensjon og Sparing Holding AS to GB
110 | Gjensidige annual report 2018 5. Investments in associates and joint ventures
Malling & Co Eiendomsfond IS ¹ Oslo, Norway 35.1 % 792.3 908.5
¹ In addition, the Investment option portfolio in Gjensidige Pensjonsforsikring AS holds a 27.8 % share in the fund.
Net gains/(losses) from sale of subsidiaries, associated companies and joint ventures 291.8 255.8
Total net income and gains/(losses) from investments in subsidiaries, associated companies and joint ventures 291.8 255.8
Total net income and gains/(losses) from bonds held to maturity 27.0 81.3
Total net income and gains/(losses) from loans and receivables 705.4 713.2
Total net income and gains/(losses) from financial liabilities at amortised cost (43.0) (41.9)
Total interest income from financial assets not recognised at fair value through profit or loss 733.9 745.6
The average number of employees in the Group was 3,633 (3,850).
The remuneration committee shall prepare matters for consideration by the Board. It is primarily responsible for: • The Board’s annual statement of Gjensidige’s remuneration policy
• The Board’s treatment of completed HR processes, including talent and successor development and strategic manpower management
The overall remuneration is decided on the basis of the need to offer competitive terms in the various business areas. It shall contribute to attracting and retaining executive personnel with the
The fixed salary is assessed and stipulated annually on the basis of wage growth in society in general and in the financial industry in particular. Variable remuneration (bonus) to executive personnel is earned annually, and is based on an overall assessment of financial and non-financial performance over the two last years. The assessment takes into account a combination of the enterprise’s overall performance targets for return on equity adjusted for extraordinary dividends and transactions and combined ratio, as well as developments in customer satisfaction. In addition, it evaluates the target achievement of the business unit in question, as well as personal contribution relating to compliance with the
The Board has decided to continue the Group’s share savings programme for employees in 2019. The CEO and executive personnel are entitled to take part in the programme on a par with other Gjensidige employees. Under the current programme, employees can save through deductions from their salary for the purchase of shares in Gjensidige Forsikring ASA for up to NOK
Hege Yli Melhus Ask, Executive Vice President (1.1.18-31.8.18) 1, 9 1,869.8 18.5 110.7 406.1 4.9 1,205 1,567 2,842 3
Lotte Kronholm Sjøberg, staff representative 4, 8 346.0 5.1 752 1 The stated remuneration applies to the period the individual in question has held the position/office. 2 Age 62, 100 per cent salary reducing gradually to 70 per cent at age 67 according to time of earning, then Gjensidige Forsikring's ordinary pension terms will take effect. 3 Age 62, 70 per cent salary until age 67 according to time of earning, then Gjensidige Forsikring's ordinary pension terms will take effect. 4 For staff representatives only remuneration for the current position is stated. 5 Everyone in the senior group management has pension plans, benefit or contribution based. 6 Including bonus shares in the share saving's programme for employees. See note 22 for terms and further description of the scheme. 7 Remuneration includes remuneration as Chairman in the Audit Committee honoured with NOK 155 thousand for 2018. 8 Remuneration includes remuneration in other committees. 9 Hege Yli Melhus Ask's remuneration is presented until her resignation 31 August 2018. 10 Kim Rud-Petersen resigned from his position 31 August 2018. End-pay is agreed to amount to NOK 9,129 thousand. 11 Borrower in Gjensidige Bank ASA with NOK 2,516.7 thousand outstanding. Applicable terms are 2.19% interest for housing credit and 2.55% for top-up loan. Maturity date for top-up loan is 20.9.2030. 12 Borrower in Gjensidige Bank ASA with NOK 3,105.2 thousand outstanding. Applicable terms are 2.19% interest and loan maturity as at 28.11.2023.
Valuation allowance and reversal of loss carried forward in subsidiaries (1.6) (10.1)
Change in deferred tax recognised in profit or loss continuing operations 35.1 248.0
Change in deferred tax recognised in other comprehensive income and directly in the balance sheet
The tax-deductible insurance provisions in Gjensidige Forsikring are significantly reduced in 2018, mainly because the former Security provision has been excluded. A transitional rule allows the company to distribute the taxable income arising from this evenly over the next 10 years, starting 2018. The amount to be distributed is NOK
The discount rate is based on a yield curve stipulated on the basis of the covered bond yield. The discount rate is based on observed interest approximately ten years ahead. The market’s long-term view of the interest rate level is estimated on the basis of the required real interest rate, inflation and future credit risk. An interpolation has been made in the period between the observed interest and long-term market expectations. A discount curve has thus been calculated for each year in which pensions will be disbursed.
If wage growth is one percentage point higher, it will lead to a 3.9 per cent increase in the liability. If wage growth is one percentage point lower, it will lead to a 3.1 per cent decrease in the liability. If G
is one percentage point higher it will lead to a 1.5 per cent decrease in the liability.
If the level of the pension assets falls below a lower limit, Gjensidige will have to pay extra pension contributions to bring them up to the lower limit. On certain conditions, Gjensidige will also be repaid pension assets.
Net defined benefit obligation/(benefit asset) (156.6) 562.4 405.8 (205.5) 577.8 372.3
122 | Gjensidige annual report 2018 11. Goodwill and intangible assets
The group has not acquired any portfolio or company in 2018. In 2017, the Danish company Mølholm Forsikring A/S was acquired.
Impairment testing goodwill The carrying amount of goodwill in the Group as at 31 December 2018 is NOK 3,577.0 million.
Each of the units above is the smallest identifiable group of assets that generates cash inflows and are considered as separate cashgenerating units. The annual assessment of impairment losses was carried out in the third quarter of 2018. An indication assessment was also carried out in the other quarters in order to assess whether new circumstances calls for new impairment testing of goodwill.
The projection of cash flows is based on budget and forecast for the next five years reviewed by the management and approved by the
Directors of the respective subsidiaries, as well as the management in Gjensidige Forsikring.
The growth rate is determined to 2.5 per cent in Scandinavia and 3.0 per cent in Baltics. This is the same growth as in 2017.
The excess values related to the acquisitions are based on different key assumptions. If these assumptions change significantly from expected 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% next 3 years All circumstances occur simultaneously
Gjensidige Forsikring, Danish branch No need for impairment No need for impairment No need for impairment Need for impairment app. NOK 588 million
Nykredit Forsikring 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 Need for impairment app. NOK 256 million
Gouda porfolio No need for impairment No need for impairment No need for impairment No need for impairment
124 | Gjensidige annual report 2018 12. Owner-occupied property, plant and equipment
As at 31 December 2018, including uncompleted projects 32.2 565.2 597.5
Gjensidige annual report 2018 | 125 13. Financial assets and liabilities
Hedging was performed to prevent from valuation variations of a future settlement due to changes in the currency rate. Currency futures designed as hedging instruments were measured at fair value and changes in fair value were recognised continuously in profit or loss, together with the change in fair value of the fixed agreement. The change in fair value of the fixed agreement was recognised in goodwill when the acquired operation was accounted for.
Financial derivatives at fair value through profit or loss 577.9 577.9 674.0 674.0
Shares and similar interests in life insurance with investment options 20,627.2 20,627.2 20,034.3 20,034.3
Bonds and other fixed income securities classified as loans and receivables 15 20,303.7 21,176.9 21,032.6 22,475.7
Receivables related to direct operations and reinsurance 6,784.7 6,784.7 5,840.8 5,840.8
Prepaid expenses and earned, not received income 15 81.7 81.7 189.9 189.9
Financial derivatives at fair value through profit or loss 869.9 869.9 584.9 584.9
Bonds and other fixed income securities classified as loans and receivables 21,173.0 3.8 21,176.9
Shares and similar interests in life insurance with investment options 20,021.1 13.2 20,034.3
Gjensidige annual report 2018 | 129 14. Shares and similar interests
Danske Invest Norske Aksjer Institusjon I 981 582 020 Equity fund 306.7
Total funds 4,823.6 1 Norwegian Private Equity funds organised as internal partnerships doesn't have organisation number.
Total shares and similar interests owned by Gjensidige Forsikring ASA 5,061.4
Of other loans NOK 49.0 million (63.1) are loans given to agricultural customers. Included in other loans are also NOK 82.4 million (40.0) in loans given with regard to sale of subsidiaries.
The loans in 2017 for consumer goods are loans without a collateral requirement offered to private customers. The loans in 2017 for auto financing are loans secured by motor vehicles, primarily cars.
A considerable number of receivables in relation with asset management is short-term receivables regarding financial investments.
Gjensidige annual report 2018 | 131 16. Insurance-related liabilities and reinsurers' share
Arising from current year claims 21,301.5 (302.5) 20,999.0 19,764.1 (624.6) 19,139.5
Arising from prior year claims (run-off) (2,338.9) (18.0) (2,356.9) (1,164.8) 134.6 (1,030.3)
Claims incurred, but not reported 15,520.4 (163.8) 15,356.6 17,185.8 (1.1) 17,184.7
The shareholder list is based on the VPS shareholder registry as of 31 December 2018. A shareholder list showing the owners behind nominee accounts can be found on page 21.
Deposits from and liabilities to customers without maturity date, bank 17,365.0
Deposits from and liabilities to customers with maturity date, bank 6,400.6
Motor insurance tax to Norwegian Motor Insurers’ Bureau (TFF) 1,612.6 0.0
¹ Gjensidige Forsikring ASA is a sponsor of Gjensidige Pensjonskasse and has contributed with funds equivalent to NOK 111.0 million.
Description of the share-based payment arrangements As at 31 December 2018, Gjensidige has the following share-based payment arrangements: Share-based remuneration for executive personnel with settlement in equity and cash (remuneration scheme)
Gjensidige has established equity-settled share-based payment for the group management and more explicitly defined executive personnel.
Gjensidige Baltic. All employees are given an opportunity to save an annual amount of up to NOK 75,000. Saving take the form of fixed deductions from salary that is used to buy shares four times a year. The employees are offered a discount in the form of a contribution of 20 per cent, limited upwards to NOK 3,000 kroner per year, which corresponds to the maximum tax-exempt discount.
Weighted average share price of bonus shares released during the period 130.55 139.26
Earnings per share from continuing and discontinued operations (NOK), basis 7.44 9.05
Earnings per share from continuing operations (NOK), diluted 6.76 8.13 1 Holdings of own shares are not included in the calculations of the number of shares.
Reconciliation of financial position balances from IAS 39 to IFRS 9
Reconciliation of provision for losses at transition from IAS 39 to IFRS 9
The total negative impact on equity from IFRS 9 at transition amounts to NOK 10.4 million after tax.
Changes in estimates related to defined benefit plans 10 (49.4) (339.3)
Tax on other comprehensive income that are not reclassified to profit or loss 9 12.3 84.8
Total other comprehensive income that are not reclassified to profit or loss (37.0) (254.5)
Other comprehensive income that may be reclassified to profit or loss
Total other comprehensive income that may be reclassified to profit or loss 2.5 271.7
Net receipts/payments from sale/acquisition of subsidiaries, associates and joint ventures (28.4) (516.7)
Net receipts/payments on sale/acquisition of owner-occupied property, plant and equipment and intangible assets
Net receipt/payments from sale/acquisition of customer portfolios - intangible assets (3.9)
Norway. Gjensidige’s head office is located at Schweigaardsgate 21, Oslo, Norway. The activities of Gjensidige consist of general insurance. Gjensidige does business in Norway, Sweden and
The accounting policies applied in the financial statements are described below. The policies are used consistently throughout
Gjensidige with the exception of one difference that is permitted in accordance with IFRS 4 about insurance contracts. See description under the section Claims provision, gross.
39. The impairment rules in IFRS 9 will be applicable to all financial assets measured at amortised cost and interest rate instruments at fair value through other comprehensive income. In addition, loan commitments, financial guarantee contracts and lease receivables are within the scope of the standard. The measurement of the provision for expected credit losses on financial assets depends on whether the credit risk has increased significantly since initial recognition. At initial recognition and if the credit risk has not increased significantly, the provision shall equal 12-month expected credit losses. If the credit risk has increased significantly, the provision shall equal lifetime expected credit losses. This dual approach replaces today’s collective impairment model.
agreements are not considered to fall under IFRS 16 since these are based on the purchase of capacity that is not physically separated and thus not identifiable. The rental period will be calculated based on the duration of the agreement plus any option periods if these with reasonable certainty will be exercised. Joint expenses etc. will not be recognised in the lease liability for the rental contracts. The discount rate for the rental contracts will be determined by looking at observable borrowing rates in the bond market for each of the countries in which Gjensidige operates. The interest rates will be adapted to the actual lease contracts duration etc. The discount rate for the leasing cars will be determined based on an assessment of which loan interest Gjensidige would achieve for financing cars from a financing company.
Goodwill arising on the acquisition of a foreign portfolio and fair value adjustments of the carrying amount of assets and liabilities arising on the acquisition of the foreign branch are treated as assets and liabilities in the functional currency of the foreign branch.
Investment activities include the purchase and sale of assets that are not considered cash equivalents and which are not included in
Claims incurred Claims incurred consist of gross paid claims less reinsurers’ share, in addition to a change in gross provision for claims, gross, also less reinsurers’ share. Direct and indirect claims processing costs are included in claims incurred. The claims incurred contain run-off gains/losses on previous years’ claims -provisions.
Gjensidige for conducting its business. If the properties are used both for Gjensidige’s own use and as investment properties, classification of the properties is based on the actual use of the properties.
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.
The category loans and receivables comprises the classes loans, receivables related to direct operations and reinsurance, other receivables, prepaid expenses and earned, not received income, cash and cash equivalents, bonds and other fixed income securities classified as loans and receivables and receivables within
Hedge accounting Gjensidige utilises fair value hedging on currency risk in fixed agreements of acquisition of operations. Changes in the fair value of the hedging instrument are recognised in profit or loss, together with the change in fair value of the fixed agreement. The change in fair value of the fixed agreement is recognised in the cost price of the share when the acquired operation is accounted for.
Other items classified as equity Natural perils capital and guarantee scheme provision are accounted for as equity because the funds belong to the group. As a consequence, they do not meet the requirement for liability in IAS
prices are used, while for financial instruments not traded in an active market, fair value is determined using appropriate valuation methods.
150 | Gjensidige annual report 2018 discounted at the original effective interest rate. The loss is recognised in profit or loss.
Standards (FOR 2008-01-21 no. 57). This implies that dividend reduces equity in the fiscal year the dividend provision relates to.
Gjensidige has a share saving program for employees and a sharebased remuneration scheme for senior executives. The share savings program is an arrangement with settlement in shares, while the remuneration scheme is an arrangement with settlement in both shares and cash.
The share-based payment arrangement is measured at fair value at the time of allocation. Fair value is accrued over the period during which employees acquire the right to receive the shares. Sharebased payment arrangements which are recovered immediately are recognised as expenses at the time of allocation. Vesting conditions are taken into account by adjusting the number of equity instruments included in the measurement of the transaction amount so that, ultimately, the amount recognised shall be based on the number of equity instruments that eventually vest. Non-vesting conditions and possible market 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.
See note 22 for a further description of Gjensidige’s share-based payment arrangements.
Forsikring. For these services commission is paid. The Fire Mutuals are also independent insurance companies with fire and natural damage on their own account. Gjensidige provides various services to support this insurance business. For these services and to reinsure the Fire Mutuals’ fire insurance, Gjensidige receives payment based on arm’s length distance.
A discontinued operation is a part of Gjensidige that either has been disposed of or is classified as held for sale and: • represents a separate major line of business or geographical area of operations,
Non-current assets are classified as held for sale if their carrying amount will be recovered principally through a sale transaction rather than through continuing use. For this to be the case, the asset must be available for immediate sale in its present condition.
For segment information according to IFRS 8 please refer to note 4 in the consolidated financial statements. The information below is worked out based on the requirements in the Norwegian Financial Reporting Regulations for Non-Life Insurance Companies.
154 | Gjensidige annual report 2018 5. Shares in subsidiaries and joint ventures
Shares in subsidiaries, held for sale (see note 25 in Gjensidige Forsikring Group's financial statement)
Areal. The investment is recognised at cost of NOK 1.1 billion at year end. Gjensidige Forsikring has granted a loan to Oslo Areal amounting to NOK 2.5 billion at year end. The loan is interestbearing and total loan limit is NOK 4.0 billion.
Oslo Areal has entered into contractual commitments to invest about NOK 99.0 million (490.0) in existing and new properties. The commitment falls due during the period until 31 December 2019.
Impairment investments in subsidiaries, associated companies and joint ventures (76.0) (49.4)
Net realised gains/(losses) from bonds and other fixed-income securities 85.5 52.1
Total net income and gains/(losses) from bonds and other fixed-income securities 300.1 361.2
Net gains/(losses) from changes in exchange rates on bonds held to maturity 16.5
Total interest income from financial assets not recognised at fair value through profit or loss 724.0 724.6
Total interest expenses from financial assets not recognised at fair value through profit or loss (31.0) (37.0)
Net interest from bank deposits and subordinated loan classified as other income and other expenses (25.8) (24.0)
1 Net other financial income/(expenses) include financial income and expenses not attributable to individual classes of financial assets or liabilities, and financial administration costs.
Guidelines for remuneration and career development shall be linked to achievement of the Group’s strategic and financial goals and core values, and both quantitative and qualitative targets shall be taken into consideration. The measurement criteria shall promote the desired corporate culture and long-term value creation, and, as far as possible, take actual capital costs into account. The remuneration system shall contribute to promoting and providing incentives for good risk management, prevent excessive risk-taking and contribute to avoiding conflicts of interest. A fixed basic salary shall be the main element of the overall remuneration, which also consists of variable remuneration, pension, insurance and payments in kind. Variable remuneration shall be used to reward performances that is agreed through target cards or that exceeds expectations, where both results and behaviour in form of compliance with the core values, brand and management principles are to be assessed.
The senior group management is defined as senior executives and they are responsible for activities that may be critical to the company's risk exposure. The level of remuneration will take into account both qualitative criteria for their role and quantitative criteria, as well as an individual assessment of their impact on the company's risk.
• The annual evaluation of and matters concerning salary and remuneration to the company’s internal auditor
Gjensidige annual report 2018 | 159 desired expertise and experience who promote the Group’s core values and development.
Given the full earnings period, they are entitled to a pension of 70 per cent of final salary at the full vesting period of 30 years at age 67. Four members are part of the Company’s defined-contribution pension scheme. The Company continues a previously agreed individual pension agreement for one member of the senior group management.
Kim Rud-Petersen, Executive Vice President (1.1.18-31.8.18) 1, 10 1,919.8 273.8 189.9 675.9 253.1 2,079 3,147 4,885
Mats C. Gottschalk, Executive Vice President 3,069.7 451.5 160.8 470.6 450.7 3,255 3,515 6,526 15,772 3
Aysegul Cin, Executive Vice President (1.9.18-31.12.18) 1 780.4 30.0 116.2 60.8 30.0 1,489
Lotte Kronholm Sjøberg, staff representative 4, 8 346.0 5.1 752 1 The stated remuneration applies to the period the individual in question has held the position/office. 2 Age 62, 100 per cent salary reducing gradually to 70 per cent at age 67 according to time of earning, then Gjensidige Forsikring's ordinary pension terms will take effect. 3 Age 62, 70 per cent salary until age 67 according to time of earning, then Gjensidige Forsikring's ordinary pension terms wil l take effect. 4 For staff representatives only remuneration for the current position is stated. 5 Everyone in the senior group management has pension plans, benefit or contribution based. 6 Including bonus shares in the share saving's programme for employees. See note 22 for terms and further description of the scheme. 7 Remuneration includes remuneration as Chairman in the Audit Committee honoured with NOK 155 thousand for 2018. 8 Remuneration includes remuneration in other committees. 9 Hege Yli Melhus Ask's remuneration is presented until her resignation 31 August 2018. 10 Kim Rud-Petersen resigned from his position 31 August 2018. End-pay is agreed to amount to NOK 9,129 thousand. 11 Borrower in Gjensidige Bank ASA with NOK 2,516.7 thousand outstanding. Applicable terms are 2.19% interest for housing credit and 2.55% for top-up loan. Maturity date for top-up loan is 20.9.2030. 12 Borrower in Gjensidige Bank ASA with NOK 3,105.2 thousand outstanding. Applicable terms are 2.19% interest and loan maturity as at 28.11.2023.
Jørgen Inge Ringdal, Executive Vice President 2,649.4 356.3 195.7 632.1 358.4 2,913 3,222 5,639 22,143 2
Kim Rud-Petersen, Executive Vice President 3,045.6 391.1 290.1 639.8 369.4 2,578 3,496 5,953 11,438
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.
Gjensidigestiftelsen received a similar decision, and we have been informed that they have appealed the decision on the grounds that there is no basis for the change and that the tax office has based its decision on an incorrect valuation. Gjensidige agrees with
As from 2018 tax deductible insurance provisions are limited to provisions for probable future costs related to insurance liabilities.
As a transitional mean the amount allocated to the Natural perils capital and the Guarantee scheme provision as at 1.1.2018, for tax purposes may be set aside in a separate account which will only be taxable at the time of winding-up the insurance business. According to the Norwegian Financial Reporting Regulations for Insurance
The ordinary retirement pension is a funded plan where the employer contributes by paying into the pension assets. Pension over and above the ordinary group pension agreement is an unfunded plan that is paid for through operations.
The pension assets are higher than the calculated pension liabilities. However, the use of pension assets to pay future premiums is limited, and part of the overfunding is expected to be used to increase pension payments. An increase in the liabilities
The pension liability will increase by 11.9 per cent in the event of a parallel shift in the whole yield curve (fall in interest) of minus one percentage point. The value will fall by 9.8 per cent in the event of an interest rate increase of one percentage point.
The pension assets’ exposure to credit risk is deemed to be moderate. Most of the pension fund’s fixed-income investments shall be within “investment grade”. If the credit risk on a global basis were to increase by a factor corresponding to the factor used in stress tests for pension funds (equal to a deterioration in relation to
As at 31 December 2018, including uncompleted projects 1,946.6 753.2 1,496.4 350.3 4,546.5
The company has not acquired any portfolio or company in 2018. In 2017, the Danish company Mølholm Forsikring A/S was acquired.
Impairment testing goodwill The carrying amount of goodwill in the company as at 31 December 2018 is NOK 1.846,6 million.
The projection of cash flows is based on budget and forecast for the next four years reviewed by the management and approved by the
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 Board of the respective subsidiaries, as well as the management in
The growth rate is determined to 2.5 per cent in Scandinavia and the same that was used in 2017.
Gjensidige Forsikring, Danish branch No need for impairment No need for impairment No need for impairment Need for impairment app. NOK 481 million
Gjensidige annual report 2018 | 169 13. Financial assets and liabilities
A financial asset/liability is considered valued based on nonobservable market data if fair value is estimated without being based on quoted prices in active markets or observable market data. Financial assets/liabilities valued based on non-observable market data are classified as level three in the valuation hierarchy.
Capital Valuation. Because of late reporting from the funds, the NAV from the previous quarterly reporting is used in estimating fair value. The NAV is then assessed for discretionary adjustments based on objective events since the last reporting date. Objective events may be the development in underlying values of listed companies since the last reporting, changes in regulations or substantial market movements.
Measurement department, the Chief Investment Officer decides which valuation models will be used when valuing financial assets classified as level three in the valuation hierarchy. The models are evaluated as required. The fair value and results of the investments and compliance with the stipulated limits are reported weekly to the
Receivables related to direct operations and reinsurance 6,399.0 6,399.0 5,467.3 5,467.3
Prepaid expenses and earned, not received income 46.2 46.2 36.5 36.5
Liabilities related to direct insurance and reinsurance 422.4 425.5 779.4 779.4
Bonds and other fixed income securities 904.3 60.7 (187.6) 1.3 778.7
Bonds and other fixed income securities Decrease in value 10% 77.9
Sensitivity of financial assets valued based on non-observable market data (level 3) 2017
Arising from prior year claims (run-off) (2,295.3) (11.0) (2,306.3) (1,159.1) 140.0 (1,019.1)
Claims reported and claims handling costs 13,593.0 (473.6) 13,119.4 13,774.4 (698.0) 13,076.4
Exchange differences Exchange differences consist of exchange differences that occur when converting foreign branches, and when converting liabilities that hedge the company’s net investment in foreign branches.
Total gains and losses in connection with sale, liquidation and impairment losses 76.0 49.4
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 or have become retired. No other vesting conditions exists in this arrangement.
Fair value of shares granted that are to be settled in cash 135.20 154.90 2 The fair value is calculated based on the market value of the share at the time of allocation.
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 2018. 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 2018. 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 2018.
To the best of our knowledge: • the annual accounts for 2018 for the Group and the parent company have been prepared in accordance with current accounting standards • the information in the accounts gives a true and fair view of the Group’s and the parent company’s assets, liabilities and financial position and results as a whole as per 31 December 2018