January The year began with a cold winter, which affected the insurance results for the first quarter. Gjensidige established its own customer ombudsman.
April The general meeting decided to convert Gjensidige into a public limited company.
A dividend of NOK 1.65 billion was adopted for the 2009 financial year.
June The conversion of Gjensidige into a public limited company was carried out at the end of June.
October It was decided that Gjensidige’s head office would be moved to a new building on Schweigaardsgate in the centre of Oslo. The new building shall be ready in the fourth quarter of 2013.
The Norwegian Automobile Association (NAF) announced a break with Gjensidige after nearly 40 years of cooperation.
December Gjensidige was listed on Oslo Børs on 10 December. In connection with the listing, the Gjensidige Foundation sold nearly 40 per cent of its shares.
gjensidige annual report 2010 1 perspective th is is gjen sidige this is gjensidige 2 An historic year 4 values and vision 6 the markets 8 preserving security 10 Financial key figures 11 non-financial key figures 12 goals and strategy operAtions 15 operations 16 general insurance private 18 general insurance commercial 20 general insurance nordic 22 general insurance Baltic 24 pension and savings 26 online retail banking 28 health care services 30 Asset management 32 Additional information perspective 35 employees 38 gjensidige and the society 41 the gjensidige foundation governAnce 43 Management and control 45 solvency ii 46 the gjensidige share 48 corporate governance 54 group Management 56 supervisory board, control committee and nomination committee 57 glossary results 59 report of the Board of directors 78 consolidated accounts 148 parent company accounts 195 declaration of the Board and ceo 196 Auditor’s report 198 statement by the control committee 199 statement by the supervisory Board
An historic yeAr in june 2010, gjensidige was converted from a mutual company to a public limited company. the subsequent stock exchange listing on 10 december marked the beginning of an exciting new epoch in our nearly 200-year-old company history.
at the beginning of 2011, gjensidige has emerged as a modern, stockexchange -listed general insurance group with a leading position in norway and a number four position in the nordic countries.
substantial value has been created and manifested under way, and starting in 2007, an ambitious dividend policy has helped ensure that substantial amounts of the value added have been paid as dividends to our owners. the profit for 2010 provides the basis for still another substantial dividend to our owners.
despite a cold winter at the beginning of the year with major claims payments after frost damage, the insurance profit for the year as a whole was adequate. the result for our banking operations ended up as a profit for the first time since starting up in 2007, and the pension and savings operations are on track to achieve their target of a profit before tax starting in 2011. in addition, the financial market has contributed to a good profit in our investment operations.
efforts to further develop the skills of managers and employees have been and continue to be an important and necessary measure that will not become any less important in the coming years. Competent employees are extremely important in order to ensure satisfied customers, regardless of the situation or event that brings them in contact with employees in the group. therefore, we have intensified our efforts to provide further internal education and training and established the gjensidige academy.
after the successful stock exchange listing in december 2010, gjensidige faces the future with about 50,000 new shareholders behind them. For gjensidige, this is a new interest group whose expectations and demands will further hone our skills. the biggest owner is the gjensidige Foundation, which in addition to exercising active ownership in the group, will also pass on dividends from gjensidige to our norwegian general insurance customers. this is a unique model, which together with the Foundation’s charitable activities will help attract considerable attention to the Watchman in the norwegian market.
in order to achieve the profitability targets that we have set ourselves, we must also be able to correctly price the risks that we assume through our insurance activities. this calls for a further development of our systems for risk assessment and pricing.
vAlues And vision the operations are divided into seven business areas. these are described on pages 20-43: • general insurance private norway • general insurance Commercial norway • general insurance nordic • general insurance Baltics • pension and savings • online retail banking • Health care services general insurance is the group’s core business.
The figure shows principal operational subsidiaries and branches in Gjensidige Owned through holding company Branch Subsidiary
MArkets the scandinavian insurance markets are distinguished by cost-efficient and disciplined players that focus on profitability. However, this has not prevented new players from entering the field in recent years – both established financial groups with a more extensive new range of products and foreign insurance companies, as well as a few minor niche players. this has resulted in a market with strong competition among the providers.
sources: 1 Finance norway, general insurance statistics, Q4 2010. sparebank1 skadeforsikring og sparebank1 livsforsikirng presented together. 2 the danish insurance association, general insurance statistics 4th quarter 2009, nykredit Forsikring included 3 the swedish insurance Federation, general insurance statistics, 4th quarter 2010 4 insurance supervisory authorities of latvia, lithuania, estomia; estonia statistics; gjensidige Baltic reports, swedbank Varakirdiustus interim report 4th quarter 2010; with manual corrections.
Based on premium portfolio 2010 Based on gross premiums written 2010
gjensidige annual report 2010 7 perspective th is is gjen sidige
The Group has been preservinG securiTy for abouT 190 years the Company was estab lished with the name of samtrygd as a joint rein surance company for the mutual fire insurers in norway.
the Watchman was put to use as the logo of gjensidige liv together with the slogan “time passes; gjensidige endures.”
samtrygd merged with norsk Bilfor sikring gjensidige (nBg) and became the biggest car insurance company in the norwegian market. later that same year, collaboration was entered into with gjensidige liv under the gjensidige brand and the Watchman logo. the companies were placed under joint management in 1985.
the acquisition of Forenede Forsikring resulted in a significant expansion of the Company’s business.
sixteen regional mutual fire insurers merged with gjensidige Forsikring, transforming gjensidige from a mutual federation of gjensidige companies into an integrated mutual group. later that same year, gjensidige, gjensidige liv and sparebanken nor merged and combined their business operations to form the financial group gjensidige nor.
gjensidige nor asa merged with dnB Holding asa and established dnB nor asa. a strategic cooperative agreement was established between the new group and gjensidige.
the online internet bank, gjensidige Bank, was established. 25 per cent of the equity in gjensidige Forsikring Ba was re-classified to equity certificate capital, and transferred to the gjensidige Foundation 2009 gjensidige Bank ac quired Citibank’s norwegian business in consumer financing.
Claims incurred, general insurance noK million (13,456.6) (12,071.0) (11,983.8) (11,696.5) (10,031.2)
profit for the year noK million 2,950.4 2,304.8 252.3 2,470.5 4,091.9 underwriting result, general insurance 1 noK million 796.3 817.9 859.8 552.6 670.2 run-off results, general insurance 2 noK million 301.1 310.2 417.3 49.5 (18.0)
loss ratio, net of reinsurance 4 per cent 78.9% 77.1% 77.4% 78.8% 76.1%
Cost ratio, net of reinsurance 5 per cent 16.5% 17.7% 17.0% 17.5% 18.9%
Capital adequacy ratio 9 per cent 16.1 18.9 20.7 26.1 41.6 restated return on financial assets (roi) 10 per cent 5.2 5.5 (0.6) 6.3 9.2 return on equity (roe) 11 per cent 14.4 15.2 1.5 15.4 24.2
Norway 2.829 nuMBer oF eMployees per country the group had a total of 3,917 employees at the end of 2010 nuMBer oF eMployees By Business AreA
AreA goAls coMMents group return on equity before tax > 15 per cent return on equity in 2010 of 14.4 per cent rating Maintain single a-rating from standard & poor’s a-rating confirmed by standard & poor’s in august 2010 dividend 50-80 per cent of the profit for the year after taxfor the group the Board of directors recommends that noK 2,350.0 million be paid in dividends for 2010, corresponding to 80 per cent of the profit for the year, after tax, for the group generAl insurAnce
Core capital adequacy > 12 per cent at year-end 2010, the core capital adequacy was 16.1 per cent heAlth cAre services eBita-margin 6-8 per cent eBita-margin of 5.0 per cent in 2010 tArgets
Asset MAnAgeMent • the asset management function manages the group’s investment portfolio within constraints set by the Board of directors • the portfolio consists of investments in a number of asset classes, including bonds and money market instruments, property and shares • assets under management of noK 52,347.0 million at year-end 2010 the support AreAs • the support areas have been established in order to support our core business in norway • pension and savings: a broad range of pension, investment and savings products is offered for both the private and commercial markets in norway • online retail banking: through internet banking, banking products are offered to the private and agricultural markets in norway • Health care services: under the brand name Hjelp24, various health services are offered to private customers, companies and to the public sector in norway
leading market position gjensidige is the biggest player in the private market, with a market share of 27.2 per cent in 2010, a slight reduction from 27.5 per cent in 2009. at the product level, gjensidige is the market leader in both car and home-owner’s insurance. in the agricultural segment, gjensidige has a market share of fully 71.3 per cent.
about 303,000 of the customers are included in various customer programmes that gjensidige has with key partners such as the norwegian Farmers union, the norwegian Farmers’ and smallholders’ union, the norwegian Fishermen’s union, the Confederation of Vocational unions (Ys), the norwegian society of engineers and technologists (nito) and tekna.
gjensidige’s loyalty programme and organisation customers often have a long-term relationship to the Company. the average lengths of the customer relationships in these two categories are 11 and 16 years respectively, compared with an average of five years for other customer relationships.
Breadth in customer purchases surveys show that customers who have purchased more than one product from gjensidige are more satisfied than customers who only have one. it is a top priority objective for the Company to increase the percentage of customers who bundle their insurance, banking and pension products with gjensidige.
gjensidige annual report 2010 17 perspective o perAtio n s gjensidige cooperates with 19 mutual fire insurers throughout the country, which function in the same way as the insurance offices of gjensidige Forsikring.
sales centre gjensidige has established a specialised outward sales channel that employs technology for high activity and efficiency. the channel is working with potentially new and existing customers and helps create further growth in gjensidige.
customer centre gjensidige’s customer centre is an independent sales and relationship channel that provides service and sells insurance and financial products to private customers by telephone and over the internet. the three customer centres are also open in the evening and receive about 1.2 million incoming telephone calls annually.
cusToMer orienTaTion in focus in 2010, gjensidige initiated a number of measures to ensure a further customer orientation and efficient operation of the business. all employees and managers attend gjensidige’s Customer and Brand school, and there is a strong focus on customer orientation. regular evaluation of customer satisfaction is conducted at all levels and forms a good basis for adjustments in measures.
resulTs earned premiums, net of reinsurance came to noK 8,279.4 million in 2010, an increase of 5.4 per cent from the previous year. the trend in earned premiums in 2010 reflects the effect of implemented premium increases. new premium rates for the motor vehicle and home-owner products, introduced in the autumn of 2009 and the summer of 2010 respectively, ensure a more correct pricing of risk.
the combined ratio for 2010 was 90.5 per cent, compared with 93.0 in 2009. the underwriting result came to noK 788.2 million in 2010, compared with noK 552.4 million in the previous year.
the leading position in the norwegian private market shall be maintained: • Continued growth in the premium level. • Further improvement of the distribution. • Continuation of the effort to increase private customers’ involvement in the Company.
ouTlooK the norwegian general insurance market has traditionally been distinguished by strong brands and four well-positioned players. adequate profitability over a number of years has allowed new competitors to enter the market. small niche companies have gradually increased their market shares, partly through aggressive pricing. the banks have also entered the market and offer competition with favourable product bundle pricing and their frequent contact with customers. With a leading brand, strong efforts to improve customer orientation and a full range of products offered, gjensidige is well positioned to meet this competition.
in addition, gjensidige can offer its commercial customers comprehensive solutions that also meet the commercial customers’ needs for pension and savings products as well as selected health care services through Hjelp24. at year-end 2010, 85 per cent of the group’s pension customers were also general insurance customers.
DisTribuTion about 2,700 of the commercial customers are served indirectly through insurance brokers. the remaining customers were served by the group’s direct distribution system, fire mutuals, agencies and marine insurance associations.
specialised customer centres a business centre is an efficient sales and customer centre that ensures high accessibility and uniform service of small and medium-sized corporate customers. the channel offers many standardised products and prices and serves the customer by phone and internet.
Agencies, mutual fire insurers and marine insurance associations Fire mutuals ensures distribution in areas where gjensidige does not have its own offices. Cooperating Marine insurance associations distributes vessel insurance to norwegian fishing- and coastal vessels.
loss ratio, net of reinurance 2 81.5% 80.6% 85.9% 85.4% Cost ratio, net of reinurance 3 12.9% 12.9% 12.8% 12.8% Combined ratio, net of reinurance 4 94.4% 93.6% 98.8% 98.2%
gjensidige’s customer and Brand school through a number of meetings at the gjensidige school in 2010, all employees and managers in the commercial segment have been given renewed training in customer service that is strongly based on gjensidige’s brand and culture.
resulTs earned premiums, net of reinsurance came to noK 4,418.5 million in 2010, a decrease of 6.7 per cent from the previous year. the reduction in premium volume was mainly attributed to a clear prioritisation of profitability over volume, e.g. by discontinuing specific segments in the marine portfolio and giving less priority to the insurances of the person portfolio.
Claims incurred, net of reinsurance came to noK 3,602.6 in 2010, compared with noK 3,819.0 million in 2009. For 2010, the loss ratio was 81.5, a worsening from 80.6 in 2009. Claims incurred was affected by the frost in the first quarter of 2010.
ouTlooK new competitors are still gaining a foothold in the commercial market. these competitors are mainly concentrating on distribution through insurance brokers and through industry-wide agreements, and they are giving rise to greater competition in all segments. gjensidige’s sound financial situation, long-term perspective and focus on customer orien tation are expected to be important competitive advantages in the coming years.
it is expected that the market for defined-contribution pensions and health-related services will increase in the coming years.
product groups, coMMerciAl norWAy MArket shAres, coMMerciAl norWAy custoMer sAtisFAction coMMerciAl norWAy
private and commercial customers gjensidige currently offers nearly a full range of products to the segment’s private and commercial customers in sweden and denmark. in the private market, this includes motor vehicle, home, changeof -ownership and accident insurance, among others. in the commercial market, a full range of products is offered with the exception of insurance in the marine segment and guarantee insurance.
Most of the insurance products are sold under gjensidige’s name and brand. the exception is insurance that is sold to private customers of the nykredit group in denmark, where nykredit Forsikring’s name and brand are used, and whitelabel products distributed by tennant.
the municipal segment gjensidige is a complete supplier of general insurance products to scandinavian municipalities and municipal operations. this also includes workers’ compensation insurance and the organisation of schemes for own insurers.
the white label market in the Company’s white label business, the target group consists mainly of products for the private market in norway. in addition to standardised products for the private market, the portfolio also consists of some niche products. Based on the customer composition in the the white label portfolio, the business is transferred to private norway from january 1th 2011.
various distribution models Denmark the private market in denmark is served via the call centres in Copenhagen and Viby as well as via the internet. in addition, private products are sold through partners, including Kia Motors, the danish Consumers Co-operative society (FdB), the danish association of Managers and executives and edC, denmark’s largest estate agency chain.
in the danish commercial market, the sales are conducted in cooperation with brokers along with own insurers in the case of small and mediumsized corporate customers and agriculture.
The municipal market the distribution in the municipal market is conducted either directly or by brokers. the market is primarily based on competitive tenders.
The white label efforts the distribution is mainly through agents and business partners, such as shops, car dealers and banks that want to expand their range of products to include insurance products under their own brand.
3. Cost ratio, net of reinsurance = operating expenses/earned premiums, net of reinsurance 4. Combined ratio, net of reinsurance = loss ratio, net of reinsurance + cost ratio, net of reinsurance gjensidige’s nordic business offers customised solutions to its private and commercial customers in sweden and denmark. this business also includes the group’s competence centre for insurance to municipalities and municipal operations, where gjensidige has a leading position in the scandinavian market.
the strategic cooperation with the nykredit group on distribution represents a considerable potential for gjensidige in the danish market.
in 2010, a distribution agreement was also entered into with denmark’s largest estate agency chain, edC, which has more than 240 estate agencies and about a 20 per cent market share in the danish real estate market. this agreement includes the distribution of insurance products under gjensidige’s brand and will particularly strengthen gjensidige’s position in the private market.
resulTs earned premiums, net of reinsurance came to noK 3,906.1 million in 2010, an increase of 62.5 per cent over the previous year. this increase came primarily as a result of the acquisition of nykredit Forsikring, which is included in the data starting on 1 May 2010, in addition to growth in the danish and swedish commercial business.
Claims incurred, net of reinsurance, came to noK 3,252.0 million in 2010, compared with noK 1,833.0 million in 2009. an increased business volume also gives increased claims incurred. Furthermore, the claims incurred in 2010 were affected by a harsh winter in sweden and denmark during the first quarter.
in august 2010, a judgment was handed down by the danish supreme Court on calculating indemnity for part-time employees, and this judgment will result in a higher indemnity for many claims, including the re-opening of previously closed claims. gjensidige’s assessment is that the effect of the judgment is covered by the existing actuarial provisions. therefore, the judgment has had no accounting effect for gjensidige.
the loss ratio came to 83.3 in 2010 compared with 76.3 in the previous year. the level of large losses* was substantially higher in 2010 than in 2009, which had a negative effect on the underwriting profit. among other things, the level of major losses in 2010 was affected by a large fire in sweden and by heavy rains in denmark in august. total large losses came to noK 205.9 million in 2010 compared with noK 77.4 million the previous year. the run-off gain** was lower in 2010 than in 2009.
development of the position in the danish market: • Further growth will primarily occur through acquisitions that support the group’s Cr and roe targets of 90-93 and 15 per cent respectively.
• the distribution agreements with the nykredit group and edC are expected to contribute to organic growth that exceeds the market growth.
Further development of distribution: • Further development of new distribution models through own distribution and partnership agreements ouTlooK through the acquisition of nykredit Forsikring, gjensidige has established a sound platform for the danish business and is now the fifth largest player in the danish market.
Based on gross premiums written 2010 source: Forsikring & pension 4th quarter 2009
Motor vehicle insurance constitutes by far the largest proportion of the portfolio, though the percentage of building and personal insurances have increased in recent years.
there are a number of major foreign players in the Baltic markets. of the eight largest insurance companies, only one of them is locally owned. in the Baltics as a whole, gjensidige is the sixth largest player with an 6.9 per cent market share at year-end 2010. gjensidige has its strongest market position in latvia, with a market share of 11.1 per cent. in lithuania, gjensidige is the sixth largest player, with a market share of 6.5 per cent. gjensidige is smallest in estonia, with a market share of 3.3 per cent.
Gross premiums written 395.2 592.2 657.7 432.6 earned premiums, net of reinsurance 459.3 663.4 592.4 360.2 Claims incurred, net of reinsurance (305.3) (411.5) (371.3) (231.0)
amortisation – other intangible assets (8.6) (100.2) (9.3) (17.6) loss ratio, net of reinsurance 2 66.5% 62.0% 62.7% 64.2% Cost ratio, net of reinsurance 3 29.8% 31.9% 31.0% 31.6% Combined ratio, net of reinsurance 4 96.2% 93.9% 93.7% 95.8%
gjensidige continued to develop its core insurance products in the Baltic markets in 2010. in addition, the products have been adapted to a market with lower purchasing power.
resulTs earned premiums, net of reinsurance came to noK 459.3 million in 2010, an increase over noK 663.4 million the previous year. earned premiums in 2010 were mainly affected by a rapid decline in the premium volume in the insurance markets in the Baltics.
Claims incurred, net of reinsurance came to noK 305.3 million in 2010, compared with noK 411.5 million in 2009. the loss ratio came to 66.5 in 2010 compared with 62.0 in the previous year. there were no large claims* in the Baltic business in 2010 or 2009. the relatively higher loss ratio in 2010 was mainly attributed to the abnormally snowy winter in the first quarter and in december. in general, the effects of the financial crisis resulted in less activity, a reduced number of claims and a drop in the price of repair costs, which has also resulted in run-off gains** in both 2010 and 2009. the run-off gain in 2010 is somewhat higher than the run-off gain in 2009.
the cost ratio was 29.8 for 2010, a reduction of 2.1 percentage points compared with the previous year. nominal expenses decreased by noK 74.8 million in 2010 relative to 2009, equivalent to 35.4 per cent. during 2009 and 2010, a number of cost-cutting measures were implemented, and this, together with the lower volume of business, has helped reduce operating expenses. gjensidige Baltics has one of the best cost ratios in the Baltic market.
the combined ratio for 2010 was 96.2 per cent, compared with 93.9 in 2009. the loss and cost ratios were still among the best in the industry in the Baltics. the underwriting result came to noK 17.4 million in 2010 compared with noK 40.5 million the previous year.
• Focus in particular on further developing the scope of local offices and further developing internet sales as a distribution channel ouTlooK the Baltic markets are still in an early development phase, and given the significant share of both the private and commercial markets that are still uninsured, solid growth is expected when the general economic situation has improved again.
business gjensidige’s operations in the pension and savings business are organised with gjensidige pensjon og sparing Holding as serving as the holding company for gjensidige pensjonsforsikring as and gjensidige investeringsrådgivning asa.
this business area provides services in the following main categories: pensions • group occupational pensions: defined-contribution schemes with associated risk coverage • Management of paid-up policies and pension capital certificates • individual pensions: individual pension schemes
• a number of funds from reputable managers (unit trusts, bond funds, fixed income funds and alternative investments)
gjensidiges’s policy states that all products shall be as transparent and understandable as possible. this is also in harmony with the new MiFid regulations that have been implemented in the whole organisation. in addition, the Company has attached importance to making the advisors’ remuneration system neutral with regard to the products
Across-the-board sales to the group’s insurance customers pension and savings products are distributed through the distribution channels to the business areas private norway and Commercial norway, where the investment and pension advisers respectively are working systematically on acrossthe -board sales to existing customers. in addition, the products are sold through partners, e.g. Handelsbanken.
pensions and savings gained 12,622 new customers in 2010 and had a total of 71,947 customers at year-end. a large percentage of these customers, 85 per cent, were also insurance customers.
strong market position in 2010, gjensidige further enhanced its position as the decidedly largest player in the transfer market for private pension schemes. gjensidige’s market share for transferred funds, fund pensions and annuities amounted to 50 per cent at year-end 2010. Measured relative to premiums in force, gjensidige has increased its market share from five per cent at year-end 2009 to 7 per cent as per the fourth quarter. the Company is also among the leading players in the new subscription of group definedcontribution pensions. gjensidige was the second largest player in this market at the end of 2010 with a market share of 27.5 per cent. (source: Fno)
Gross premiums written 2,296.7 2,077.3 1,562.6 496.4 earned premiums, net of reinsurance 335.8 116.3 58.1 27.9 Claims incurred, etc. (258.1) (121.5) (39.0) (19.3)
throughout 2010, gjensidige has had healthy growth within the service active Management. the target group is institutional customers who want customised solutions and who are covered by special statutory management and reporting requirements. in 2010, there has been a focus on developing good, efficient reporting systems, and priority will be given to further development in 2011.
resulTs gross premiums written amounted to 2,296.7 noK million in 2010. noK 980.3 of this amount were premiums written and noK 1,316.4 million were transferred funds. throughout all of 2010, gjensidige has enjoyed good growth in its customer portfolio, especially for group definedcontribution pensions. in 2009, gross premiums written amounted to noK 2,077.3 million. earned premiums, net of reinsurance, totalled noK 335.5 million in 2010, compared with noK 116.3 million in 2009.
noK 4.2 million was allocated to additional provisions for the paid-up policy portfolio in 2010, equivalent to 15.0 per cent of the realised return in addition to guaranteed interest (3.5 per cent on the average). noK 13.2 million was allocated to additional provisions in 2009, equivalent to 50 per cent of the realised return in addition to guaranteed interest (3.7 per cent on the average). the additional provision totalled noK 29.5 million at year-end, whereas the securities adjustment reserve amounted to noK 7.4 million.
the profit/loss before tax was a loss of noK 27.9 million in 2010, compared with a loss before tax of noK 107.8 million in 2009. as operations are still in a development phase, these results were as expected. it is expected that the business area will achieve a profit before tax in 2011.
the group’s general insurance customer base of just under one million customers represents a unique opportunity to succeed with profitable growth through the cross-sale of products in pensions and savings.
• the concentration on pensions is especially intended for the commercial customers.
pensions and savings shall exploit the opportunities in an emerging market: • in the commercial market, the focus is especially on the market for conversion from defined-benefit schemes to defined-contribution schemes and the transfer market for group defined-contribution schemes.
• efforts will also be made to increase the volume in the institutional savings market.
Asset AllocAtion portFolio, group policy total assets under management at the end of the period.
business gjensidige Bank is an internet bank aimed at the private market in norway, which was launched in 2007. the bank has offices in Førde and in oslo, norway. gjensidige Bank asa is a wholly-owned subsidiary of gjensidige Bank Holding as, which in turn is a wholly-owned subsidiary of gjensidige Forsikring asa. gjensidige Bank Boligkreditt as is a wholly owned subsidiary of gjensidige Bank asa.
satisfied customers the banking services provided have been wellreceived in the market, and internal measurements of customer satisfaction show that customers are satisfied with gjensidige Bank. the bank aims to realise the groups’s vision: “We shall know the customer best and care the most”, and it makes continuous, systematic efforts to live up to this vision.
distribution distribution is via the portal www.gjensidige.no and gjensidige’s 22 financial offices with central locations throughout the country. in addition, the bank’s products are offered through its own customer centre.
gross lending, addition in the period 2,543.9 4,864.2 3,330.0 3,381.4 deposits, addition in the period 2,569.6 419.1 4,430.3 1,701.1 gross lending at the end of the period 14,119.5 11,575.6 6,711.4 3,381.4 deposits at the end of the period 9,120.0 6,550.4 6,131.4 1,701.1 deposit-to-loan ratio in the period 1 101.0 8.6 133.0 50.3 deposit-to-loan ratio at the end of the period 1 64.6 56.6 91.4 50.3 net interest income in per cent 2 2.88 0.63 0.74 0.71 Capital adequacy 3 16.1 17.8 18.7 20.8 definitions 1 deposit-to-loan ratio= deposits as a percentage of gross lending 2 net interest in percent, annualised = net interest and credit commission income and/or average assets under management 3. Capital adequacy = equity and subordinated loan capital / risk weigted capital gjensidige Bank is a nationwide internet bank aimed at the norwegian private and agricultural markets. the bank offers traditional banking products adapted to electronic distribution and is one of the biggest players in consumer finance in norway.
in addition, Bankid was established. among other things, this improves the customer experience and makes the dialogue with customers simpler, while supporting the bank’s ambitions for customer satisfaction.
operating expenses amounted to noK 302.1 million in 2010, compared with noK 147.3 million in 2009. the cost increase is mainly attributed to a higher cost base as a result of the consumer loan business that was acquired in december 2009.
deposits And lending quArterly developMent in the nuMBer oF oF custoMers net interest incoMe
operaTions our operations cover the whole treatment chain – from prevention and risk assessment to rehabilitation and vocational reintegration, and they are organised in four service areas: corporate health services Hjelp24 HMs is norway’s largest consulting organisation in the fields of corporate health services and Hse (health, safety and environment) with 330 consultants. the operations are nationwide and have a market share of about 20 per cent. Hjelp24 HMs has about 4,600 corporate customers with a total of about 230,000 employees.
private hospital and specialist services Hjelp24 niMi is a private hospital, specialist centre and fitness and rehabilitation centre. Hjelp24 niMi is a leader in health services, lifestyle changes and the treatment of patients with injuries and disorders of the musculoskeletal system. the business also offers a unique programme for persons suffering from morbid obesity.
diversified customer portfolio the health services are provided to private customers, businesses and the public sector. the portfolio consists of a number of the most respect ed companies in norway, which gives gjensidige a unique position. over 90 per cent of Hjelp24’s total services are provided to the corporate market, including public enterprises. the other 10 per cent of the turnover is from private customers, primarily in the oslo area, in the fields of fitness, lifestyle and treatment through Hjelp24 niMi’s centres at ullevål stadium and at ekeberg.
distribution Hjelp24 is norway’s largest and only nationwide provider of Hse and corporate health services (CHs) with about 40 offices. as a nationwide chain, Hjelp24 has a special opportunity to serve large, nationwide customers.
acQuisiTion resulTs in GroWTh in 2010, Hjelp24 HMs was certified as an authorised corporate health service under the new certification scheme from the norwegian labour inspection authority. Business enterprises that are required to have corporate health services may only be provided with these services from a certified institution. the demand in the market for corporate health services grew rapidly in 2010 as a result of the enhanced trade regulations for corporate health services, and contracts were signed with almost 400 new corporate customers in 2010.
in 2010, the market for private health services was affected by tough price competition related to public procurement. this has resulted in lower prices and margins on renegotiated contracts, but also the loss of individual contracts, where the price reduction was so great that it was not feasible to provide services under the new terms. However, Hjelp24 was able to renew some of its most important contracts. For instance, Hjelp24 respons renewed a contract for personal security alarms and related services with the City of oslo. in addition, Hjelp24 niMi won the tender for rehabilitation of seriously owerweigted persons, among other things, from the south-eastern norway regional Health authority, which means that the programme at niMi ringerike is assured of heAlth cAre services under the brand name Hjelp24, gjensidige is the largest and leading player in private health services in norway. our healthcare personnel are available to the customers round-the-clock every day of the year.
key figures amortisation – other intangible assets eBita-margin in per cent 2 5.0% 6.4% 8.1% 7.9%
definitions: 1 eBita = earnings before interest, taxes and amortisation 2 eBita-margin in per cent = eBita/operating income
several minor acquisitions were completed in 2010. Hjelp24 improved its expertise and scope in analysis and management training through the acquisition of scandinavian leadership as. in 2010, Hjelp24 also carried out its first acquisition outside of norway when the swedish company pandora Management aB was acquired in May. among other things, pandora operates corporate health services for about half of the employees in the City of stockholm through its subsidiary st. erikshälsan. the acquisitions have ensured growth in turnover in a year where the organic growth has trended slightly negative.
Hjelp24 was reported to the police for violation of professional secrecy and illegal handling of patient information in connection with a complaint in a competitive tender held during the autumn of 2009. the police investigation is on-going. the company is cooperating with the police in the case and has made all information available.
operating expenses amounted to noK 517.3million in 2010, compared with noK 476.5 million in 2009. part of this increase is attributed to acquired companies. Cost measures were implemented in 2010 as a result of the loss of individual government contracts. these cost measures will first take full effect starting in the first quarter of 2011.
eBita for 2010 came to noK 27.3 million, compared with noK 32.7 million in 2009. this gave an eBita margin for 2010 of 5.0 per cent, compared with 6.4 per cent in 2009. the decline in the margin was mainly attributed to the loss of government contracts where it takes some time to adjust the costs to a new income level.
obJecTives anD sTraTeGies a financial target has been specified for the business area of an annual eBita margin of between six and eight per cent: • the business area has yielded profits since start-up. • Further measures focused on income and expenses shall help yield a profit within the targeted eBita margin.
• Health care services are especially aimed at the commercial customers where there is a cross-sales potential.
the current leading position in the private health market shall be maintained: • the market leader position shall be utilised in a growing market. • the product portfolio shall be adapted to the customers’ demand for health care services.
Based on operating income 2010 eBita-margin is the earnings before interest, taxes and amortisation divided by operating income eBitA-MArgin 600NOK million
the implementation is based on extensive use of external managers as well as some internal management for nordic equities and tactical allocation. real estate investment in norway is made through the whollyowned property management company, oslo areal.
the fixed-income portfolio the fixed-income portfolio amounted to noK 37,611.4 million at year-end 2010, compared with noK 37,859.0 million at year-end 2009. the fixedincome portfolio consists of four sub-portfolios: money market instruments (15.8 per cent), current bonds (22.0 per cent), bonds held to maturity (26.6 per cent) and loans and receivables (7.5 per cent). in the current bond portfolio, convertible bonds amount to noK 523.3 million and danish mortgage bonds amount to noK 6,607.7 million.
the counterparty risk in the fixed-income portfolio breaks down into 20.1 per cent central government and other public sector, 62.1 per cent banks and financial institutions and 17.8 per cent industrial concerns.
an overview of the ten largest issuers as per 31 december 2010 and 31 december 2009 is included in note 3, tables 20a and 20b.
an overview of the breakdown of the fixed-income portfolio by rating category is presented in note 3, tables 19a and 19b.
Bonds held to maturity 776.6 801.7 516.6 loans and receivables 149.3 14.8 property 359.2 5.8 350.3 Hedge funds and other financial investments 98.5 83.6 (85.8) other financial items 1 (116.0) (100.9) (207.3) Management costs (55.8) (70.8) (43.5) Financial results for the investment portfolio 2,704.6 2,723.2 (277.9)
Asset MAnAgeMent the objective of the investment portfolio is primarily to cover the actuarial provisions. the portfolio consists of investments in a number of asset classes, including bonds and money market instruments, property and shares. at year-end 2010, the portfolio amounted to noK 52,347.0 million.
private equity fund investments were recognised at the best estimate of fair value. the basis for valuation is the european Venture Capital association’s (eVCa) Valuation principles. to compensate for late reporting, corrections are made for known events such as payments and disbursements, known changes in value such as the observed stock market price, and any other known events. at year-end 2010, the investments in private equity amounted to noK 1,134.9 million compared with noK 817.7 million at year-end 2009. this increase in exposure to private equity is attributed to the increase in value and new investments.
an overview of the ten largest exposures to equity as per 31 december 2010 and 31 december 2009 is included in note 3, tables 10a and 10b. an overview of the five biggest private equity investments is included in note 3, table 12a and 12b. the real estate portfolio real estate investments amounted to noK 6.445,1 million at year-end 2010, compared with noK 6,030.5 million at year-end 2009. this increase is attributed to a net purchase during 2010. the investments are concentrated in office properties
return by asset classes 2010 gjensidige’s investment portfolio split in the various asset classes at the end of 2010 development in asset allocation at the end of the period. For 2008-2010, shares are split into shares and shares in associated companies. For 2006-2007, all shares are reported together
hedge funds the exposure to hedge funds amounted to noK 756.6 million as per 31 december 2010 compared with noK 532.5 million the previous year. the hedge funds are used as aggressive management styles in interest rates, shares, raw materials and allocation.
the fixed-income portfolio has not been subject to losses resulting from bankruptcies of our debtors in 2010.
equity and investments in associated companies all in all, the investments in equity and associated companies yielded a profit of noK 703.4 million in 2010 compared with a profit of noK 308.6 million in 2009.
the private equity portfolio yielded a result of 210.4 million in 2010, compared with a loss of noK 26.5 million in 2009.
the real estate portfolio the real estate portfolio yielded a profit of noK 359.2 million in 2010 compared with noK 5.8 million in 2009. the current income in the real estate portfolio amounted to noK 422.7 million in 2010. the average required rate of return in the valuation of the real estate portfolio was reduced during the year, from 6.75 per cent to 6.6 per cent as per 31 december 2010.
in addition, a negative value adjustment of 36.1 million was made for the international real estate funds in 2010.
AdditionAl inForMAtion gjensidige insurAnce group equity (restated for 2009) noK million 23,137.8 21,968.2 19,585.9 20,302.5 return on equity - annualised 2 (restated for 2009) % 14.4 15.2 1.5 15.4
Capital adequacy ratio 3 (restated for 2009) % 16.1 18.9 20.7 26.1 solvency margin gjensidige Forsikring 4 (restated for 2009) % 581.2 713.8 642.2 561.3 shAre cApitAl number of outstanding shares at the end of the period number 500,000,000 500,000,000 the period’s earning per share (restated for 2009) noK 5.90 4.61 generAl insurAnce
Customers (pension) with insur. agreem. at the end of the per. number 56,498 43,907 28,617 13,126
Customers (savings) with insur. agreem. at the end of the per. number 4,493 6,282 6,028 5,080 online retAil BAnking gross lending, addition in the period noK million 2,543.9 4,864.2 3,330.0 3,381.4 deposits, addition in the period noK million 2,569.6 419.1 4,430.3 1,701.1 gross lending, at the end of the period noK million 14,119.5 11,575.6 6,711.4 3,381.4 deposits, at the end of the period noK million 9,120.0 6,550.4 6,131.4 1,701.1 deposit-to-loan ratio in the period 12 % 101.0 8.6 133.0 50.3 deposit-to-loan ratio at the end of the period 12 % 64.6 56.6 91.4 50.3 net interest income in per cent 13 % 2.88 0.63 0.74 0.71
Customers, addition in the period 14 number 13,649 31,532 22,169 22,244
Customers, at the end of the period 14 number 89,594 75,945 44,413 22,244
13 net interest income in per cent = net interest income and credit commission income / average assets under management 14 registered customers include customers who have signed up to be customers during the last three months (started the “become a customer” process) and customers that actively use the bank. the method of measurement was changed from 1 january 2009. prior to this, customer records older than six months were extracted 15 Capital adequacy = primary capital / calculation basis for credit risk, market risk and operational risk 16 eBita = earnings before interest, taxes and amortisation 17 eBita margin in per cent = eBita / operating income
• the social interaction among the employees is also good, with a score of 77. this too is well above the average in the reference group.
• the employees in gjensidige experience more demanding job requirements than the reference group at the same time as fatigue on the job is a little lower than the average. that indicates that the job requirements do not have a detrimental effect on people’s health.
the individual manager presents the pss results for his/her employees. the employees then work on this according to a pre-determined process and shall end up with: • an area that already functions well and certain measures that ought to be taken in order to maintain this.
• an area where there is room for improvement and certain measures that ought to be taken in order to achieve this improvement.
a schedule shall be drawn up for these measures. if they are not continuous, they shall be completed by 1 april 2011.
only certified advisers all insurance advisers and their managers shall take theoretical and practical tests in accordance with Finance norway’s (Fno’s) certification scheme. in order to be certified, they have to take a theoretical and a practical test, which documents sufficient knowledge about: • the Company’s products • safety regulations and prevention of loss • causes of damage and claims settlement • ethics, communication and customer orientation
in gjensidige, the requirements were set somewhat higher than in the Fno’s standard scheme. 496 advisers passed the examination and were certified in 2010. thus, with the exception of employees who were absent due to leave or illness, all of the advisers were certified by year-end.
Holding examinations and the necessary education and training has made great demands on both the organisation and the individual employee. naturally many of them were nervous before taking the exam. the certification scheme serves as a quality assurance that will benefit both the customers and the certified advisers.
decrease in absence due to illness in 2010, absence due to illness amounted to 5.2 per cent in the norwegian insurance business. the corresponding figure for the entire group was 4.4 per cent. systematic efforts have been made to re duce the absence due to illness to the targeted level, which is 4 per cent for the group. the Company’s aim is to make the workplace health-promoting.
the block method entails that groups of applicants are called in simultaneously and participate in interviews, group discussions and case work. those who are hired go right into gjensidige’s Customer and Brand school so that they are given education and training right from the start.
With this acquisition, gjensidige gains a market share in denmark of almost six per cent, which gjensidige is a customer-oriented company. Customer orientation requires skilled, motivated employees, who have what it takes to go all out for the customer. therefore, gjensidige is going in for skills development and improvements in the working environment. gjensidige shall be a health-promoting workplace where employees can develop professionally.
the number of employees has also increased substantially. gjensidige now has 486 employees in denmark. Most of them work at gjensidige’s danish head office in Copenhagen, but there is also a department in Århus.
the jury explained the award as follows: “the Competence award for 2010 is awarded to gjensidige Forsikring on the basis of the Company’s comprehensive and systematic efforts to develop skills over a period of time. skills development in gjensidige Forsikring is closely related to the Company ’s overall strategy. the group management is strongly committed to these programmes for all levels of the organisation. the opportunities for skills development are highly valued among current employees and serve as a competitive advantage during recruitment.”
in gjensidige, newly hired salespersons and advisers go directly into a training programme. For most of these persons, the training will lead to an examination as part of the general insurance companies’ certification scheme for salespersons and advisers. subsequently, ongoing skills development is offered in the form of courses and e-learning. For those who have management responsibility, there are separate training programmes that emphasise management skills.
the focus on skills development is a key part of gjensidige’s brand building. the customers shall feel that the Company offers better counselling and service than our competitors. this cannot be achieved without employees who have sufficient expertise and motivation. the awarding of the Competence award for 2010 is regarded as a recognition of efforts that have been underway for many years and that are still developing.
The GJensiDiGe acaDeMy in the spring of 2009, gjensidige established its own school - the Customer and Brand school - which was delegated responsibility for internal skills development, especially in sales and settlement. the school enabled skills development to become more structured and focused than previously, and it quickly became very popular. Feedback unanimously showed that the school’s courses yielded good results in the form of better performance. some employees with long service have been sceptical about “wasting” time on schooling. Without exception, this kind of scepticism has been shown to be groundless.
Hr norway’s award for competence enterprise of the year. in the autumn of 2010, a decision was made to further increase the funding of skills development by establishing the gjensidige academy.
the academy has its own administration, which reports to a Board of directors consisting of members of gjensidige’s group management. the ties to the group management reflect the key role that the academy plays in gjensidige’s strategy. the Company shall differentiate itself from its competitors by having competent employees who can and will give the customers a better experience than they expect.
the objectives of the gjensidige academy are to: • Help give gjensidige a competitive advantage by establishing the best funding of skills development in the industry and enhancing gjensidige’s standing as an attractive employer
• through competent, motivated managers and employees, we want to improve gjensidige’s ability to develop and adapt in order to ensure results-driven operations in all units.
• arouse motivation for professional development, a good working environment and a common learning arena in the group.
• Help employees and managers quickly attain a proper level of competence.
senior policy, aGe liMiT anD courT case gjensidige has an active senior policy that aims to get as many employees as possible to work until they turn 67. an important measure for seniors has been the opportunity to work in a 90 per cent
gjensidige annual report 2010 37 perspective position with full salary or in an 80 per cent position with 90% salary.
the scheme is under evaluation. among other things, it is being assessed in light of the pension reform.
since 1972, gjensidige has had an upper age limit of 67 for its employees. in the autumn of 2009, the Company was sued by an employee who wanted to remain in her position after turning 67.
the question of an age limit is an important matter of principle for gjensidige and for much of the rest of the norwegian labour market. the norwegian employers’ association for the Financial sector (Fa) has declared third-party intervention in support of gjensidige and has helped the Company with legal assistance during the hearing. in addition, the norwegian Confederation of trade unions (lo) and the Confederation of norwegian enterprise (nHo) have gotten involved and inquired jointly with the Ministry of labour for a clarification with regard to company-determined age limits.
if the age limit of 67 should be waived, the statutory age limit will be 70. together with the opportunity to retire with a pension at age 62, this kind of age limit will make the need for recruitment less predictable. it might also require amendments in measures for seniors and/or the pension scheme. the age limit of 67 must be consistently enforced in order to be legal, so it has not been relevant to make exceptions for those who have insisted on continuing in their positions.
our business is a social responsibility in itself, and it is a natural social responsibility to ensure that the whole society can benefit from our expertise in loss prevention. in this context, the media play an important role. in 2010, gjensidige contributed to almost 500 newspaper articles and items on tV and radio about the prevention of loss.
one of the most important measures to induce young people to become safer drivers is training in the company of an adult. this kind of training develops experience under controlled conditions and increases awareness and understanding. therefore, gjensidige gives better premiums to young drivers who participate in volume training programmes.
gjensidige annual report 2010 39 perspective where a fire inspection is conducted, information about fire is furnished to the residents and smoke detector batteries are handed out. in 2010, about 40,000 homes were visited in connection with this campaign. a “fire calendar” was also handed out, in which the norwegian Women’s Handball team demonstrates fire prevention in the home.
our commitment to fire prevention among elderly persons who still live at home was continued in 2010. this is a group of people who are especially vulnerable to fire. a joint project with the City of oslo and the oslo Fire and rescue department in which domestic help undertakes an annual fire inspection has had good results.
in cooperation with dsB and the norwegian Fire protection association, we helped develop and market educational materials on fire prevention for the norwegian school system.
gjensidige is represented on a number of councils, committees and boards and contributes regularly to the improvement of the regulations.
ski helMets are now used by almost all children under age 14, and their use is also rapidly increasing among adolescents and adults. through the cooperation that gjensidige has established with the norwegian ski area association, we supply many alpine facilities with helmets, which are lent free of charge to children and youth. over a period of 15 years, gjensidige has furnished nearly 20,000 helmets. according to the norwegian ski area association, the use of helmets has increased by 60 per cent in recent decades.
physicAl exercise is important for both mental and physical health. gjensidige is the main sponsor of the norwegian Women’s Handball team. in cooperation with the norwegian Handball association, we arrange handball schools for children and young people. in 2010, these handball schools attracted about 4,000 participants during the winter school holiday and just as many during the autumn school holiday. We furnish athletic clubs in handball, football and nordic skiing with uniforms.
gloBAl cliMAte change will affect our business through more frequent damage caused by extreme weather. For many years, gjensidige has helped acquire new information about the impacts of climate change. in 2010, we cooperated with the norwegian Computing Centre and the london school of economics on a project that aims to describe local effects of global warming.
gjensidige has endorsed the national climate change campaign, Klimaløftet (the Climate pledge), which is an action programme under the direction of the norwegian Ministry of the environment. among other things, it entails that we commit ourselves to conduct a greenhouse gas audit, draft action plans and compensate fully or partially for our own emissions by purchasing carbon offsets. in 2010, gjensidige’s operations resulted in emissions of 3,028 tonnes of Co2, which is roughly equivalent to our emissions in 2009.
each year, we try to reduce our consumption of energy and other resources. in 2010, our energy consumption was 14.1 million kWh, which amounted to a reduction of 3 per cent from 2009. the reason why the reduction was not larger was mainly attributed to the cold winter at the beginning of 2010 and another cold period in november and december.
Video conferences are an effective way to reduce emissions related to travel. in 2010, 11,334 hours of video conferences were held, which was an increase of 35 per cent from the previous year. We used 248 tonnes of paper, which was 27 per cent less than in 2009.
405,700 customers have elected to receive documents electronically instead of on paper. this amounts to a doubling since 2009.
the custoMers are our reason for existing. in 2010, we improved our score in the norwegian Customer Barometer survey, which measures our customers’ satisfaction. Both in the private and corporate markets, customer satisfaction came close to the ambitious goals we had set.
in keeping with requirements from the industry, those who serve the customers shall either be certified financial advisers or have passed an examination from the financial sector’s certification scheme. at year-end 2010, all of gjensidige’s salespersons and advisers were certified or approved, with the exception of employees who were absent due to illness or on leave.
tArget group suBject stAtus 2009 stAtus 2010 tArget2010 tArget2011 vAlue creAtion And resource use owners return on equity before tax 15.2% 14.4% >15% >15%
Customers Customer satisfaction (Kti) retail 72 72 74 74 environment energy consumption in MWh 14.4 14.1 13.0 12.7
Female managers 36% 35% increase increase average amount spent on training (noK) 10,000 10,420 11.300 10.420 average retirement age 62.3 år 62.9 år ethics employees policies, measures regarding impartiality, bribery and ethics
Control Continued personal statement regarding environment and social responsibility for suppliers
Human rights asset management the group’s own financial investments follow international rules for “socially responsible investments (sri)”
For the 2009 financial year, gjensidige Forsikring paid out a total of about noK 1.2 billion in dividends to its customers. starting in the 2010 financial year, the customers’ dividend from gjensidige Forsikring will be distributed by the gjensidige Foundation.
From its establishment in october 2007 up to year-end 2010, the gjensidige Foundation has awarded a total of noK 533 million to 2,324 projects to promote security and health. examples of national projects that have received considerable support are the ’learning to swim’ campaign in cooperation with the norwegian swimming Federation, the project “en helt vanlig jul” (a typical Christmas) with the Church City Mission, active against Cancer, uniCeF’s “You can be the one” project, Young enterprise and Mot.
the gjensidige Foundation’s representatives from the owner committees in each region recommend relevant local applications for support. the Board of directors makes the final decision as to which projects will be approved.
gjensidige annual report 2010 43 perspective go vern An ce risk management and risk factors are described more thoroughly in the directors’ report and in note 3.
Centralised risk management functions independent of business operations have been established in the form of Compliance and risk and capital management. the internal audit function provides a further independent level of control and reports directly to the Board of directors. these functions are organised according to the principle of three lines of defence.
MAnAgeMent And control risk management is an integral part of gjensidige’s day-to-day operations. strong, comprehensive risk management is an important strategic tool for increasing value creation, and it enables the group to handle uncertainty, threats and negative outcomes and to utilise the group’s risk capacity in an optimal manner.
the group Ceo holds regular performance review meetings with the managers who report to him, where the focus is on measures to ensure earnings and performance. a comprehensive overview of the risk and capital situation for the group will be prepared quarterly with an assessment of the need for measures that will be reviewed by both the Board of directors and the management.
coMpliance gjensidige shall comply with all laws and rules that apply to the business (compliance). the Board of directors has established a group policy for compliance that describes the main principles of responsibility for compliance and the organisation of the compliance function. the compliance function is an independent function that identifies, assesses, gives advice on, monitors and reports the group’s compliance risk. assessment of the compliance risk is included in the group’s annual processes for risk assessment. a compliance officer has been appointed in all business and support areas and in the subsidiaries.
the group Compliance officer is responsible for the group’s overarching control and reporting of compliance risk and any violations of regulations to which the group is subject. the compliance function shall help ensure: • that the management and employees have or are furnished with sufficient insight into or understanding of the compliance risk • that laws, rules and standards are complied with and that the management shall be informed without prompting about all relevant factors that have or can have a significant effect on the relevant area of operations
• that compliance shall be ensured, for example, by examining compliance with external and internal sets of rules.
the manager of the function reports to the group Ceo and to the Board of directors. the compliance function is also responsible for the group’s warning routine for possible fraudulent acts and irregularities and for the prevention and examination of such.
The risK ManaGeMenT funcTion the department for risk and Capital Management is headed by the Chief risk officer (Cro) and is responsible for monitoring the total risk situation and the framework for risk management, including internal control and the measurement and aggregation of risk.
For more information about risk and capital management, cf. note 3.
inTernal auDiTinG the group has its own internal auditing function that covers all of the group’s companies. group auditing is an independent, objective supervisory function. on behalf of the Board of directors and senior management, it reviews and assesses whether adequate, effective and appropriate management and controls have been established and implemented in the group.
the function was set up and functions in accordance with international standards and the requirements laid down in the regulations concerning risk Management and internal Control. the group auditing Manager reports and submits reports to the Board of directors on risk management and internal controls. the audit reports are also presented to the control committee and the external auditor.
the Board of directors approves group auditing’s resources and annual plans. the group auditing Manager is hired and dismissed by the Board of directors.
• ensuring an efficient processing of data for the internal model, reporting and risk management.
Many of the requirements for efficient group-wide risk management that are specified in the solvency ii regulations have already been met at gjensidige. Functions and governing documents are in place and efforts are being made to get as many common systems and routines as possible in the individual companies in the group. the overriding principle that is followed is to ensure that risk and business management are as closely integrated as possible. this gives quicker identification of risks compared with not achieving goals and initiating corrective measures.
solvency ii under the direction of the eu, the solvency ii regulations were established, and these regulations will result in a new standard for the calculation of capital requirements, requirements for risk management and the reporting of the risk and capital situation in european insurance companies.
the gjensidige shAre gjensidige Forsikring asa was listed on oslo Børs (the oslo stock exchange) on 10 december 2010. at year-end 2010, the Company had nearly 50,000 shareholders. the gjensidige Foundation is the largest shareholder with a stake of just over 60 per cent.
shareholDer anD ir policy gjensidige shall maintain an open dialogue with all interested parties. shareholders, potential investors and other players in the financial market shall have access to relevant and supplementary information regarding group strategies and financial targets, economic development and financial standing.
all financial and other investor information will be disclosed simultaneously in norwegian and english. information on the group’s website, www.gjensidige. com, is also available in norwegian and english.
in determining the size of the annual dividend, consideration shall be given to the group’s capital requirements, including capital adequacy requirements, together with the group’s objectives and strategic plans. unless the capital requirements suggest otherwise, the Board of directors’ goal is that between 50 and 80 per cent of the profit for the year after tax will be distributed as dividends.
the dividend for the 2010 financial year will be approved by the general meeting on 27 april 2011 and paid based on shareholdings on the date of the general meeting. the dividend is expected to be paid about eight business days after the date of the general meeting.
oWnership in june 2010, gjensidige Forsikring was converted from a mutually owned company to a public limited company (asa). at the time of conversion, the gjensidige Foundation owned all of the shares of gjensidige Forsikring and conducted a sell-down in connection with the listing of the shares of gjensidige Forsikring on oslo Børs in december.
the gjensidige Foundation has an ownership policy that focuses on high value creation over a period of time. the gjensidige Foundation expects an annual dividend that is competitive relative to equivalent businesses, and it wants to have a leading ownership and help ensure stable ownership and predictability. the Foundation can accept a reduced ownership ratio in the event of acquisitions or capital expansions that are in harmony with gjensidige’s overall strategy. in addition, the Foundation expects the Company to be managed in accordance with recognised principles for good corporate governance.
the gjensidige Foundation administers ownership on behalf of the norwegian general insurance customers, which entails, for example, that the dividend from gjensidige Forsikring is redistributed through the gjensidige Foundation to the norwegian general insurance customers.
gjensidige annual report 2010 47 perspective go vern An ce reGisTrar gjensidige’s registrar is dnB nor Bank asa, Verdipapir.ervice, 0021 oslo, norway. tel.: +47 22 48 35 90, fax: +47 22 48 11 71.
share capiTal the share capital in the Company is noK 1,000,000,000 divided among 500,000,000 shares with a nominal value of noK 2 per share.
the Board of directors will propose that the authorisations be extended in the same scope, for the same purpose and on the same terms.
the next ordinary general meeting will be held at Felix Conference Centre, Bryggetorget 3, oslo, norway on 27 april 2011, at 15:00, Cet.
the agenda and appendices will be made available on the Company’s website. shareholders may have the documents for the general meeting mailed to them free-of-charge if they so request. these documents may be ordered from www.gjensidige.com financial calenDar 27 april general Meeting 12 May Q1 results 2011 11 august Q2 results 2011 10 november Q3 results 2011 1 december Capital Market day analysTs a number of brokerages initiated coverage of gjensidige Forsikring in connection with the stock exchange introduction in december 2010. a list of the brokerages that cover gjensidige may be found at www.gjensidige.com.
core values anD social responsibiliTy gjensidige’s core values lie in its core business operations - give the customers security by safeguarding life, health and assets by relieving the customers of risk. one of the premises for our operations is that they are based on ethics and social responsibility.
especially important areas are traffic and fire, where the Company’s expertise in loss prevention can help save lives and assets. other important areas are awareness campaigns that counteract fraud and other crimes and efforts that promote physical and mental health in the population. therefore, the socially responsible extra efforts shall be concentrated on loss prevention in the broadest sense.
a separate information bulletin with routines for how whistle blowing is to be practiced has been established and is included as a part of the ethical guidelines. a separate ethical suggestions box has been established, where relevant matters can be reported.
objectives and main strategies at least once a year, the Board of directors considers the Company’s strategy and determines it with relevant short and long term aims. Current objectives and main strategies are described in greater detail in the annual report on pages 12-13 purpose the Company’s purpose is established in the articles of association, which are available in their entirety on the group’s web site, www.gjensidige.com. the purpose is to meet the customers’ needs for security by offering competitive insurance products and other services that are naturally associated with those products.
gjensidige shall have a competitive dividend policy relative to comparable investments. in determining the size of the annual dividend, consideration shall be given to the group’s capital requirements, including capital adequacy requirements, together with the group’s objectives and strategic plans.
the Board of directors’ recommendation for the distribution of dividends for the 2010 financial year is explained in greater detail in the report of the Board of directors.
Authority granted to the Board of directors gjensidige’s annual general meeting has given the Board of directors the following authorisations: - authorisation to buy back up to 0.030 per cent of the issued shares for implementation of the employee share ownership programme. this authorisation is valid up to the next ordinary general meeting, but no later than 30 june 2011. the objective of this kind of measure will be to improve a good business culture and employee loyalty by making the employees partial owners of the Company. the authorisation was employed in connection with an equity offering to the Company’s employees in denmark and sweden.
- authorisation to buy back up to five per cent of the issued shares for subsequent deletion. the authorisation is valid up to the next ordinary general meeting, but no later than 30 june 2011. the grounds for this authorisation are to give the Board of directors the opportunity to utilise the mechanisms that the public limited Companies act allows for the distribution of capital to the Company’s shareholders. the buyback of the Company’s own shares will also be an important measure for achieving a continuous adjustment to an appropriate capital structure. the authorisation has not been utilised.
every Board member and member of the management shall immediately notify the Board in writing if he or she directly or indirectly has an interest in a transaction or agreement that has been entered into or is being considered to be entered into by the Company. this applies even if the Board member is deemed to be disqualified to consider the matter because of conflict of interest. these provisions are laid down in the rules of procedure.
Th e no m in at io n co m m itt ee
Co nt ro l co m m itt ee e GENERAL MEETING
- shareholders wishing to attend the general meeting must notify the Company in writing no later than five days prior to the meeting. the deadline for registration is based on practical considerations for the arrangement of the general meeting.
- in connection with the general meeting’s election, arrangements will be made so that candidates can be voted for one at a time.
- pursuant to the articles of association, the general meeting shall be chaired by the chair of the supervisory board, or alternatively by the deputy chair, and in the absence of both by the Chairman of the Board or another person designated by the Board of directors.
noMinaTion coMMiTTee gjensidige has stipulated in the articles of association that the Company shall have a nomination committee consisting of four to six members elected by the general meeting. the chair of the supervisory board is a permanent member if he or she has not already been elected by the general meeting. the chair and members of the nomination committee are elected by the general meeting once a year.
recommendations with grounds and relevant personal information are enclosed with the notice of the election meeting in which the nomination is being made.
rules of procedure have been drawn up for the nomination committee’s work, and these have been approved by the general meeting. the rules of procedure are available at www.gjensidige.com.
the supervisory board’s independence the supervisory board has a diversified composition, and the majority of its members are independent of any special interests (direct, indirect or through employment) in the Company. two of the shareholder-elected representatives are independent of the gjensidige Foundation.
pursuant to section 2d-3, paragraph four of the Financial institutions act, no more than one third of the members of the supervisory board or the Board of directors of gjensidige may be elected representatives of the gjensidige Foundation. the Ministry of Finance has granted dispensation from this provision so that more than one third of the members of the board may be elected representatives of the foundation until the next ordinary general meeting, i.e. the ordinary general meeting in the spring of 2011. after that, the gjensidige Foundation will be represented by up to one third of the members of the supervisory board.
the composition of the Board of directors the Board of directors of gjensidige shall be composed of ten members, three of whom are to be elected by the employees. in financial institutions, the law requires that the Board of directors be elected by the supervisory board. the shareholder-elected Board members are to be elected for one-year terms. the Chairman of the Board will be directly elected by the supervisory board. the employee-elected Board members are to be elected for two-year terms, but in such a way that at least one member is up for election each year.
- the members of the Board of directors should be independent of the Company’s day-to-day management.
the Board of directors’ independence no one employed in the day-to-day management is a member of the Board of directors. all of the shareholder-elected Board members are independent of the executive management. three of the shareholder-elected Board members represent the gjensidige Foundation. the remaining Board members are independent of the principle shareholder. all of the Board members are independent of important business associates.
Board members’ shareholdings 9 of the Board’s members own shares in the Company; cf. the list on page 137 of the annual report. the Board members comply with the general rules for primary insiders, but have voluntarily accepted and informed their closely related parties that trading in gjensidige’s shares or derivative instruments will only be conducted within a reasonable time frame after the quarterly report has been submitted so that trading can be conducted with equal information about the Company and the Company’s financial position.
the Board of directors holds physical meetings regularly and holds nine regular meetings each year. additional meetings may be held depending of the matters to be considered and the situation. these meetings may be held as telephone meetings. in 2010, a total of 11 Board meetings were held prior to the conversion to a public limited company and 8 afterward. one of the meetings was a two-day strategy meeting.
in connection with the demutualisation and conversion of the Company, the Ministry of Finance has set a licence condition that Board members who are affiliated with the gjensidige Foundation (three members at present) may not be members of the audit committee. in cooperation with the authorities, a transitional arrangement has been established that will last up to 30 june 2011 at the latest.
Centralised risk management functions have been established that are independent of the business operations: Compliance and risk and Capital Management.
- group auditing is an independent, objective supervisory function. on behalf of the Board of directors and senior management, it reviews and assesses whether adequate, effective and appropriate management and controls have been established and implemented in the group.
the group’s risk management functions are organised according to the principle of three lines of defence and are described in greater detail in a separate chapter of the annual report concerning management and control on pages 43-45 and in note 3 of the annual accounts.
Financial institutions are required to have their own elected control committee. the control committee is independent of the Board of directors and administration and meets regularly. it ensures that the Company will comply with the current laws, regulations and other rules laid down by the authorities, the +Company’s articles of association and resolutions by decision-making bodies. the committee has full supervision of the operations and is composed of three members. a list of the control committee’s members and the control committee’s rules of procedure is available at www.gjensidige.com.
reMuneraTion of The boarD of DirecTors the nomination committee recommends the remuneration to the Board of directors, which is determined by the supervisory board. this remuneration is not performancerelated, and none of the Board members have share options issued by the Company.
reMuneraTion of The eXecuTive ManaGeMenT the group has established a remuneration scheme that applies to all employees. remuneration shall be competitive, but not the highest salaries in the industry. it is expected that our employees view what the group offers in terms of remuneration and benefits as a total package.
gjensidige annual report 2010 53 perspective go vern An ce est. a regular basic salary shall be the main element of the total remuneration, which also consists of a bonus, a pension and benefits in kind.
the committee shall prepare items of business for the Board of directors and have the main responsibility for: − drafting proposals for and monitoring compliance with the group’s guidelines and limits for remuneration − annually assessing and proposing the group Ceo’s remuneration − annually drawing up a proposal for the group Ceo’s personal scorecard − being an advisor to the group Ceo concerning the annual assessment of the remuneration to the rest of the executive management − drafting proposals for principles and a statement on determining pay and other remuneration to executive management, employees and elected representatives with job tasks of crucial importance to the enterprise’s risk exposure as well as other employees and elected representatives with supervisory tasks
the Board’s guidelines for determination of the remuneration of the executive management are presented in note [19] in the annual report. these guidelines are submitted to the annual general meeting as a separate item of business.
inforMaTion anD coMMunicaTion gjensidige shall maintain an open dialogue with all interested parties. shareholders, potential investors and other players in the financial market shall have access to relevant and supplementary information regarding group strategies and financial targets, economic growth and financial standing. the Board of directors has approved guidelines for reporting financial and other information. the guidelines are available at www.gjensidige.com.
guidelines have been specified for contact with owners outside of the general meeting. the guidelines are available at www.gjensidige.com.
corporaTe TaKeovers guidelines have been approved for corporate takeovers. these guidelines ensure that all of the shareholders’ interests are safeguarded and help promote equal treatment of the shareholders.
auDiTor an external auditor is elected by the supervisory board in accordance with a recommendation from the Company’s nomination committee.
a number of regular meetings between the external auditor and company bodies are held during the year - the auditor annually presents the main features of the audit plan to the audit committee. in addition, the auditor’s assessment of the internal control related to financial reporting is considered by the audit committee.
the Board of directors has specified policy and guidelines for the relationship to the elected auditor. at least once every five years, tenders will normally be solicited from several accounting firms to perform the statutory auditing of the Company.
the Company’s guidelines set constraints on the purchase of supplementary services from the elected auditor. Furthermore, the audit committee shall monitor the auditor’s independence, including the services other than auditing that are provided by the auditor. the breakdown between auditor’s fees and consulting fees for 2010 is presented in note 18 in the annual report. the supervisory board approves the auditor’s remuneration. in the meeting, information is provided about the breakdown of the auditor’s remuneration into auditing and other services.
2 Tor M. lønnuM Deputy ceo and Group cfo lønnum was appointed deputy Ceo and group Chief Financial officer (“CFo”) in 2004. Mr. lønnum joined gjensidige in 1999 and has held various executive positions within the group, including director of strategy and group development. Mr. lønnum has been a member of the group management since 2001. Before joining gjensidige, he held various executive positions, including CFo of skipper electronics as from 1991 to 1993, and he was a manager at KpMg from 1996 to 1999. He is member of the Board of directors of sparebank 1 sr-Bank and has previously been a member of the Board of lindorff Holding aB. Mr. lønnum is a state authorised public accountant from the norwegian school of economics and Business administration (nHH), and holds a degree in accounting from the norwegian school of Management (Bi) as well as an executive MBa from the university of Bristol and École nationale des ponts et Chaussées.
3 heGe yli Melhus executive vice president, private Melhus was appointed executive Vice president private in january 2011. she joined gjensidige from her position as Ceo of agito nordic as. Melhus has previously served as group executive Vice president Markets (electricity, private and Corporate) in Hafslund asa. Her work experience also includes the position as associate in Kistefos Venture Capital as and research associate at insead, France. Melhus is a Board member of skagerak Venture Capital and has previously been a member of the Board of representatives of nordea Bank norge asa. she holds a Maîtrise des sciences de gestion (eq. Ma in Business economics) from université paris iX dauphine, France.
4 bJørn asp executive vice president, pension and savings asp was appointed executive Vice president for pension and savings in 2005. Mr. asp joined gjensidige in 1982 and has held various executive positions within the group. He has been a member of the group management since 2001. Mr. asp was previously a member of the Board of directors of Viking Venture, steinkjer næringsselskap and Marin Vekst. He holds a degree in economics from Handelsakademiet.
6 lise WesTly executive vice president, health care services Westly was appointed executive Vice president, Health Care services in 2010. she joined gjensidige in 2010 from her previous position as Ceo of Capio/Volvat Medical Center. Before joining gjensidige, Ms. Westly held various executive positions, including managing director of Capio norge Holding as and Volvat Medisinske senter as, as well as Chair of the Board of Mensendieck Klin. Fysioterapi as, Capio anoreksi senter Fredrikstad as and Klinikk Bunæs as. she is a trained pharmacist and also has an MBa from Henley Business school, university of reading.
9 JørGen rinGDal executive vice president, Group staff ringdal was appointed executive Vice president of group staff in 2006. He joined gjensidige in 1996 and has been a member of the group management since then. He has held various executive positions within the group, including Corporate president of economics/Finance. Before joining gjensidige, Mr. ringdal held various executive positions, including assistant Chief auditor, at norges Bank (the norwegian central bank) from 1989 to 1992, and was a manager at KpMg from 1992 to 1996. He is Chairman of the Board of gjensidige Bank Boligkreditt as and gjensidige pensjonskasse and member of the Board of gjensidige Bank Holding as. He is a state authorised public accountant and holds an MBa from the norwegian school of economics and Business administration (nHH).
gjensidige annual report 2010 57 perspective go vern An ce glossAry coMbineD raTio Combined ratio (Cr ) is a key figure in the insurance sector and shows the ratio of costs (both claims incurred and operating expenses) to earned premiums in the general insurance operations. the combined ratio is equal to the sum of the loss ratio and the cost ratio.
ebiTa stands for earnings before interest, taxes and amortisation. the eBita margin is eBita as a percentage of the operating income. in gjensidige, eBita is employed as a key figure in the health segment.
reTurn on eQuiTy before TaX earnings before tax as a percentage of average equity during the period.
solvency MarGin capiTal the capital that can be counted, pursuant to the regulations, as coverage of the solvency margin requirement is called solvency margin capital.
unDerWriTinG underwriting is the risk and price assessment that is made when drawing up an insurance contract. the underwriting profit is the earnings of the insurance operations and does not include the earnings from financial investments.
the following explanations are not meant to be technical definitions, but to give a general and fundamental understanding of some of the key concepts that are used in the annual report.
perspektiv 59gjensidige annual report 2010 resu lts report of the Board of directors the gjensidige group achieved a profit before tax of noK 3,254.0 million in 2010. the Board of directors recommends that noK 2,350.0 million be paid in dividends, corresponding to 80 per cent of the group’s profit for the year after tax.
the group’s general insurance operations achieved satisfactory profitability in 2010 even though the results were affected by a harsh winter in the first and part of the fourth quarter. Measures initiated in order to reduce expenses have yielded the intended results, and the cost ratio improved considerably in 2010. the underlying loss ratio also trended positive throughout the year.
the business areas pension and savings and online retail banking enjoyed a positive trend in 2010, and the banking operations reported their first year with a profit before tax. the health care operations reported a slight increase in operating income from 2009 to 2010, primarily as a result of some minor acquisitions. the business area reported a profit and an adequate eBita margin for 2010.
the general insurance operations include products in both general insurance and insurances of the person. the norwegian general insurance operations also include life insurance, which is a pure risk insurance of at most one-year’s duration. group life insurance is the largest product here. now that the greater part of the danish and swedish operations are organised through branches of the norwegian parent company, these products will also be introduced in denmark and sweden under the norwegian licence.
objectives and strategies gjensidige’s overall objective is to be a leading, profitable, customer-oriented nordic general insurance company. the general insurance operations are the group’s core operations. the group’s other target areas shall mainly support the core operations by offering a broad range of relation-building products and services, such as banking and pensions and savings to the norwegian general insurance customers, while achieving economies of scale by investing in general insurance operations in the nordic countries and the Baltic.
an important part of the strategy for the core business operations is to maintain a disciplined approach to the insurance risks that are written. in this way, the group’s long experience and large amounts of data constitute a significant competitive advantage. For gjensidige, profitability in the insurance operations is given priority over increased market shares. one consequence of this is that in recent years gjensidige has given less priority, for example, to personal risk products and withdrawn from the markets for supply ships, offshore installations and foreign fishing vessels as a result of low product profitability.
Customer services in norway are organised in two divisions, private and Commercial. Variation and breadth in the distribution system are important in order
the group’s focus on the more relationship-building product and service areas of banking, pensions and savings, and health services shall strengthen the group’s competitiveness and help develop gjensidige as a customer-centric player. the group’s substantial customer base represents a unique opportunity to succeed with profitable growth through the cross sale of new services to insurance customers. a diversified product portfolio will allow gjensidige to capitalise to a greater extent on the value of its existing customer base and distribution platform. at year-end 2010, 84.8 per cent of the pensions and savings customers and 48.8 per cent of the banking customers were also general insurance customers in gjensidige.
gjensidige’s health services company, Hjelp24, has grown considerably since its start-up in 2001, and it is currently the largest and leading player in the private health services sector in norway. the business area currently functions as a support area for the norwegian general insurance operations, and the services are especially intended for the norwegian commercial customers. the Board of directors has asked management to assess whether Hjelp24 should remain a wholly-owned part of the group’s broad-based activities in norway. the nordic market for private health services is characterised by substantial growth and development. the management will assess whether Hjelp24 can be given better conditions for taking part in this development through other structural solutions. it is expected that a conclusion will be drawn during the second half of 2011.
through growth in general insurance in the nordic countries and the Baltic, the group shall achieve economies of scale in the form of synergies that contribute to long-term value creation, increased competitive strength through the addition of new customers and greater risk diversification through a larger and more diversified portfolio. the cost synergies are especially achieved in the areas of reinsurance, development and management of insurance products, common guidelines for underwriting, more efficient capital allocation, and common support and iCt solutions. there is also a potential for synergies on the income side. the group’s danish operations have leading expertise in insurance solutions for the municipal sector, for example, which is a valuable platform for the group’s development of corresponding offers in the other nordic countries. Furthermore, gjensidige’s expertise in multi-distribution channels in norway amounts to a significant competitive advantage that should also be utilised in the other markets.
in addition to organic growth, gjensidige will also seek to achieve growth in the future through the acquisition of businesses that support the group’s growth strategy within its broad range of products and geographical area, provided that the transactions support the group’s long-term return on equity requirements within three years. the insurance operations that are acquired must also deliver results that lie within the group’s combined ratio target within two to three years after acquisition. the group’s financial targets are discussed in greater detail below.
the group’s capital management is based on gjensidige’s internal risk-based capital model and should ensure that the capital cost is taken into consideration when making decisions on the allocation of capital. this allows the management to assess the relationship between risk in the investment and the insurance operations while ensuring that the pricing of the insurance products reflects the capital cost and the long-term profitability requirements.
gjensidige is, and shall be an attractive workplace that attracts, challenges and develops motivated and competent employees and managers. this will be achieved through a strong focus on management and employee development, the development of good reward models and a systematic effort to further develop the skills in the organisation. training to develop the group’s managers, sales and skills is offered at the gjensidige academy, where the resources are concentrated.
perspektiv 61gjensidige annual report 2010 resu lts fiNaNcial targets gjensidige’s primary financial target is a return on equity of 15 per cent before tax. the group’s return on equity before tax came to 14.4 per cent in 2010, which was slightly below the targeted level. as mentioned in the introduction, the profit for 2010 was affected by the harsh winter in the first and part of the fourth quarter, which had a negative impact on the return on equity.
up to 2008, the group had a target of an average combined ratio of 97 per cent for the norwegian general insurance operations. in connection with the Board of directors’ evaluation of the group’s strategy and financial targets in 2008, the target was reduced to a combined ratio of between 90 and 93 for the total general insurance operations effective starting in 2011.
one important consequence of the revised profit target is that the group gives priority to insurance profitability and a balanced portfolio over increased market shares. in order to obtain satisfactory profitability there is in recent years carried out a substantial premium increase and new rate models have been introduced in combination with the introduction of a basic premium of noK 180 per policyholder starting in the second half of 2010. Furthermore, in 2008 an efficiency improvement programme was launched in order to reduce the claims incurred by noK 400 to 500 million and the operating expenses by noK 300 to 400 million. Both of the programmes were completed at year-end 2010, with cost reductions within the targeted levels. the combined ratio for the general insurance operations came to 95.3 per cent in 2010. When the implemented measures take full effect, it is expected that the combined ratio will lie within the targeted level starting in 2011.
as part of the strategic update, the Board of directors has set a goal that the general insurance operations should achieve a cost ratio target of 15 by 2015. Various measures shall be implemented in order to achieve this target, the most important of which are related to the automation and reinforcement of self-service solutions, the relocation of functions and the simplification of the product structure.
Both the pensions and savings operations and gjensidige Bank are still in a startup phase. the bank achieved a profit in 2010, whereas the equivalent target for pensions and savings is a profit in 2011. Within three years, both operations shall yield a return in accordance with the group’s long-term target for return on equity.
the market shares in denmark and sweden were respectively 5.8 per cent (based on the last available statistics from danish insurance association (F&p) per december 2010) and 1.3 per cent (source: the swedish insurance Federation, statistics per fourth quarter 2010).
custoMer orieNtatioN gjensidige has chosen customer orientation as a strategic direction for the group. this is deeply rooted in the group’s vision of “knowing the customer best and caring the most”. in a highly competitive market, customer satisfaction will be increasingly important in order to stand out from the competitors, iNge k. haNseN chairman of the board
Hansen was appointed chairman of gjensidige’s Board of directors in 2008. Mr. Hansen acts as an adviser. He has previously held various executive positions, such as group director and CFo of statoil, Ceo of aker Kværner and adviser to aker asa. He is the chairman of the Board of directors of siriusungen as, norsun as, Bertel o. steen, Hotell- og restauranthuset Continental as, leonhard nilsen og sønner as and a member of the Board of directors of norWind as, Hydro asa, jiffy international as, sissener as and Master Marine as. Mr. Hansen is a graduate of the norwegian school of economics and Business administration (nHH). Hansen has been present at 18 board meetings.
in order to get an assessment of gjensidige in comparison with other companies, gjensidige has chosen to take part in the sector-independent norwegian Customer Barometer survey. the aim is for gjensidige to establish itself over a period of time as one of the ten companies with the highest customer satisfaction in norway.
in recent years, the customer satisfaction score has been one of the best among banking and insurance companies. the aim is to further improve this performance so that satisfied customers become gjensidige’s strongest characteristic and most important competitive advantage.
gjensidige has established a common framework for the group’s customer orientation - the gjensidigeexperience - with the following four organisational principles: • We keep our promises • We always provide quality • We make the complicated simple • We ensure that the customer is satisfied these principles shall give the organisation a clear direction and act as guiding principles for gjensidige’s customer-oriented value creation and development.
With the gjensidigeexperience as a basis, systematic efforts are being made to improve customer satisfaction. a comprehensive group programme has been initiated to identify and improve the perceived value of being a customer of gjensidige. under this programme, nearly 80 improvement measures were initiated in 2010. in order to support the improvement efforts, gjensidige is conducting its own measurements of the ways in which the customers perceive the service that is provided. the service satisfaction is measured and monitored continuously all the way down to the employee level.
distriButioN gjensidige has a little less than a million insurance customers in norway, about 860,000 private customers and 90.000 commercial customers. the private customers are served through a variety of distribution channels, such as local offices, customer and sales centres, and the internet, whereas the commercial customers are served by telephone and by business centres and through local representatives. the 500 biggest commercial customers are served by a separate organisational unit together with customers through the system of brokers.
the distribution of roles among the various channels has been modified and clarified in recent years. among other things, this entailed a reduction in the number of local offices from 141 at year-end 2005 to 50 at year-end 2010. at the same time, sales centres (outgoing call centres) were established to improve the efficiency of new sales. at year-end 2010, a total of 21 of the 50 local offices had been upgraded to financial offices, which are offices offering the full range of products so that they can attend to all of the customers’ needs in insurance, banking, pensions and savings. the customers are now offered products and services through one point of contact, which greatly improves the possibility of increased sales of a broader range of products.
gjensidige has good, effective solutions for sales over the internet. gjensidige. no is a complete financial portal for insurance, banking, pensions and savings. gjensidige has launched a new shopping basket where the customer can buy insurance products online, and it has established new login pages for private and corporate customers. Here the customers get a complete overview of own products and services, and they can manage their customer relations with gjensidige, e.g. report a claim or change a fund. there were 7.8 million visits to gjensidige.no in 2010, an increase of 40 per cent from 2009. sales over the internet increased by almost 15 per cent from 2009 to 2010. Continued rapid growth is expected in this distribution channel.
in connection with the acquisition of nykredit Forsikring, a long-term distribution agreement with the nykredit group was also signed. nykredit is one of denmark’s largest financial groups, with an extensive distribution network with 70 branch offices and two estate agency chains with 310 offices in addition to a telephone-based customer centre. nykredit distributes general insurance on behalf of gjensidige to both the private and commercial markets.
in the swedish private market, the distribution is conducted both directly by phone and internet and through insurance mediators (partners and agents). in the commercial market, the distribution is mainly through insurance brokers and partners.
guNNhild h. aNderseN Board member andersen (employee representative) was appointed to gjensidige’s Board of directors as an employee representative in 2008. she is a customer advisor in gjensidige with more than 20 years experience in the insurance sector. Ms. andersen is a member of the board of finance sector union’s geographic division Østfold. andersen has been present at 19 board meetings.
perspektiv 63gjensidige annual report 2010 resu lts gjensidige has also positioned itself for the delivery of products adapted to a variety of distribution channels (white label) both in norway and in the rest of the nordic region. the distribution is mainly through agents and business partners, such as shops, car dealers and banks that want to expand their range of products to include insurance products under their own brand.
Year 2010 important events 2010 was an eventful year for gjensidige. through the acquisition of nykredit Forsikring, the group established a sound platform in the danish market. after the acquisition, the operations outside norway amount to about one fourth of the group’s general insurance operations. the conversion of the parent company, gjensidige Forsikring, from a mutual company to a public limited company has ensured gjensidige a long-term source of financing and improved the group’s strategic flexibility.
starting on 1 january 2010, the danish insurance operations were organised as a branch of the norwegian parent company. the exception is danish work injury insurance, which is organised in the group’s danish company for work injury insurance, and the private portfolio in nykredit Forsikring. the swedish operations were organised into branches in the autumn of 2009. the establishment of branches improves the premises for working internationally at the same time as a simplified decision-making structure contributes to more efficient operations.the organisation into branches has a positive effect on the objective of reducing expenses.
in order to reduce the level of claims incurred by between noK 400 and 500 million (from the 2007 level, adjusted for inflation) by 2011, a number of projects were initiated – a total of about 350 different measures that can be broken down into three main categories: • Measures to reduce the claims processing time, which, among other things, will give lower compensation for loss of income, taxes and interest.
• Measures to reduce the claims processing expenses through increased efficiency in the settlement organisation. introduction of new technology and new service solutions shall support our efficiency improvement aims.
Considerable efforts have already been made to reduce claims incurred, and at year-end 2010 the project was completed according to plan.
troNd vegard aNderseN Board member andersen was elected member of gjensidige’s Board of directors in 2009 after being a member of the owners committee for east norway since 2005. Mr. andersen is the managing director of Fredrikstad energi as and has previously held the position senior manager of pricewaterhouseCoopers., He is also chairman or member of the Board of directors of all Fredrikstad energi’s subsidiaries, and board member of Værste as. He is a Certified public accountant and holds a Master of science in Business and economics from the norwegian school of Business economics and administration (nHH). andersen has been present at 19 board meetings.
during 2010, the norwegian automobile association (naF) decided to terminate its long-term collaboration with gjensidige. the organisation has decided that it wants to assume a new role as a distributor of insurance in the coming years. Both parties do not want the customers to suffer as a result of this and are cooperating to ensure that they are safeguarded well. gjensidige has initiated a number of activities to keep these customers, and the customers will receive several good offers and services in 2011. roadside assistance services that were previously provided by naF will be provided by Falck in the coming years.
changes in the regulatory framework throughout all of 2010, gjensidige has continued to work on preparations for the solvency ii regulations, which will entail a new standard for calculating capital requirements, requirements for risk management and reporting of the risk and capital situation in european insurance companies. the solvency ii regulations are still under development and are expected to come into effect at the beginning of 2013.
the group has made an assessment of the preparations that ought to be made in order to meet the new requirements in solvency ii. gjensidige is well-positioned to meet the new requirements, but there are areas where we can make further improvements between now and the time when the regulations enter into force. the Board of directors is regularly informed about relevant topics pertaining to solvency ii. processes and functions in the group are reviewed and assessed with regard to new and existing requirements, and changes are implemented in order to ensure a uniform risk management that is well-integrated with other management processes.
coMMeNts oN the aNNual accouNts gjensidige reports consolidated financial information in accordance with the international Financial reporting standards (iFrs).
in accordance with the requirements in the norwegian accounting legislation, the Board of directors confirms that the prerequisites have been met for preparation of the accounts under the assumption that the Company will continue as a going concern and that the annual accounts have been prepared under this assumption. gjensidige Forsikring Ba was converted into a public limited company (asa) on 28 june 2010.
With the exception of actuarial provisions related to the danish workers’ compensation portfolio, gjensidige’s actuarial provisions are recognised at nominal values (not discounted). starting in the second quarter of 2010, in preparation for expected changes in iFrs and new solvency regulations (introduction of solvency ii in 2013), gjensidige has calculated, but not recognised, the effect on the combined ratio of discounting the compensation provisions. For 2010 as a whole, the combined ratio on a discounted basis would have been 90.4, a reduction of 5.0 percentage points relative to the recognised nominal amount.
perspektiv 65gjensidige annual report 2010 resu lts in the calculation, a swap rate is used for the norwegian and swedish provisions, and an interest rate determined by the danish Financial supervisory authority is used for the danish provisions. a euro swap curve has been used for the Baltic provisions.
operating income earned premiums, net of reinsurance from the general insurance operations amounted to noK 17,063.3 million in 2010, compared with noK 15,660.4 million in 2009, equivalent to an increase of 9.0 per cent. all in all, the general insurance operations outside norway contributed noK 4,365.4 million in earned premiums in 2010, compared with noK 3,066.9 million in 2009.
in the norwegian private segment, earned premiums, net of reinsurance increased by 5.4 per cent in 2010. there is tough competition in the norwegian private market, but implemented measures in premiums, sales and distribution have given gjensidige increased market power in the private market. in the norwegian commercial segment, gjensidige has given priority to profitability over growth, which has resulted in a greater loss of business and a reduction in earned premiums.
Much of the growth in premiums in 2010 was attributed to the acquisition of nykredit Forsikring, which was consolidated as per 1 May 2010, in addition to organic growth in the danish and swedish business and especially in the commercial segment.
in the Baltic, the total market shrank by 12 per cent in 2010, while gjensidige had a reduction in earned premiums, net of reinsurance of 30.8 per cent. Corrected for exchange rate fluctuations, the reduction in local currency amounted to 24 per cent. gjensidige’s shrinking Baltic market share was reduced from 9.2 per cent in 2009 to around 7 per cent in 2010. this was attributed to the decline in the market in latvia, which is the market in which gjensidige has the greatest share of its Baltic operations, and which has been greater than the decline in the other Baltic markets. in addition, the Baltic market has been affected by reduced insurance premiums to a level that gjensidige has chosen not to follow because it yields such a low profitability.
all in all, the investments in equity and associated companies yielded a profit of noK 703.4 million in 2010, compared with a profit of noK 308.6 million in 2009. the exposure to equities at year-end 2010 consisted mainly of the items in storebrand and sparebank1 sr-Bank along with the group’s private equity portfolio and short-term investments. of the profit for 2010, the profit from associated companies amounted to noK 488.7 million, noK 342.2 million of which came from the investment in storebrand and noK 142.1 million from the investment in sparebank1 sr-Bank. in 2009, the investments in associated companies contributed a profit of noK 263.3 million.
Kristensen was appointed to the Board of directors of gjensidige as an employee representative in 2008. He is a senior customer advisor in gjensidige. Mr. Kristensen is also the senior employee representative for the private division and is member of the executive committee of the financial sector union of norway. Mr. Kristensen studied iCt and economics at the university College of Finnmark. Kristensen has been present at 18 board meetings.
claims incurred, interest expenses, losses, etc. Claims incurred, net of reinsurance from the general insurance operations amounted to noK 13,456.6 million compared with noK 12,071.0 million in 2009. the loss ratio increased by 1.8 percentage points relative to 2009 and ended up at 78.9. the harsh winter in 2010 affected the claims incurred for 2010. the loss ratio was also affected by the higher level of major claims in 2010 than in 2009. Major claims amounted to noK 502.9 million in 2010, compared with noK 313.2 million the previous year. the nordic segment in particular was affected by major claims in 2010, with a number of large fires.
the run-off gain for previous claim years was somewhat lower in 2010 than in 2009. in 2010, the net run-off gain was noK 301.1 million, 1.8 per cent of earned premiums, net of reinsurance. the corresponding figures in 2009 were noK 310.2 million (gain) and 2.0 per cent respectively. the run-off gain in 2010 was primarily related to a positive trend in insurances of the person in both the norwegian and danish operations. the run-off gain in 2009 was negatively affected by a bolstering of the actuarial reserves related to the child insurance product.
operating expenses the cost ratio for general insurance (the operating expenses from general insurance relative to the earned premiums, net of reinsurance) was 16.5 per cent in 2010, compared with 17.7 per cent for the previous year. the nominal operating expenses from general insurance amounted to noK 2,810.4 million, compared with noK 2,771.5 million in 2009, an increase of 1.4 per cent. the nominal increase in operating expenses from general insurance was mainly attributed to the acquisition of nykredit Forsikring, which was consolidated in the figures effective 1 May 2010.
Conversion from a mutual form of ownership to a public limited company initially triggers taxation as a result of the sale of the transferred assets when they are transferred to the newly founded limited company. the Ministry of Finance has consented to an exemption for gjensidige Forsikring from capital gains taxation on the transfer of business to the newly formed public limited company under certain conditions, given that gjensidigestiftelsen is being taxed by sale of shares in gjensidige Forsikring asa. the consequences of the tax relief decision have been incorporated into the tax expense and tax liabilities. the tax relief decision involves greater complexity and discretionary assessments, until all of the effects have ultimately been evaluated by the tax authorities.
the group’s capital adequacy was 16.1 per cent at year-end 2010, compared with 18.9 per cent at year-end 2009. the statutory requirement is eight per cent.
in addition to testing the capital with regard to legal requirements, a calculation of the capital requirements for the group’s operations is made on a quarterly basis. this calculation is done in the group’s internal risk models, which are based on a financial valuation of assets and liabilities. the principles are consistent with those expected to apply after the introduction of the solvency ii regime. Capital in excess of this amount constitutes the group’s excess capital. in order to determine the final excess capital, a deduction is made for estimated requirements for additional capital needed to maintain the group’s a rating from standard & poor’s, which was most recently confirmed in august 2010. at year-end 2010, the excess capital was calculated to be noK 6.4 billion, taking into consideration the proposed dividend of noK 2,350.0 million.
the Board considers the group’s capital situation and financial strength to be good.
off-balance sheet obligations and derivatives as part of the group’s investment operations, an agreement has been entered into relating to the investment of a maximum of noK 705.8 million in various private equity investments and real estate funds in excess of the amounts recorded on the balance sheet. gjensidige is liable externally for any insurance claim arising in the cooperating mutual fire insurers’ fire insurance operations.
net cash flow from operational activities was positive at noK 4,253.3 million in 2010, compared with a negative cash flow of noK 3,914.5 million in 2009.
net cash flow from investment activities consists mainly of payments and disbursements in connection with the acquisition of subsidiaries, owner-occupied property and plant and equipment. net cash flow from investment activities was negative at noK 2,916.6 million in 2010, compared with a negative cash flow of noK 174.7 million in 2009.
the segMeNts private Norway the private area offers general insurance related to motor vehicles, property, insurances of the person and agriculture in the norwegian private and agricultural markets.
rates for the motor vehicle and home-owner products, introduced in the autumn of 2009 and the summer of 2010 respectively, ensure a more correct pricing of risk.
Claims incurred, net of reinsurance came to noK 6,296.7 million in 2010, compared with noK 6,007.4 million in 2009. the loss ratio came to 76.1 in 2010, compared with 76.5 in the previous year. Claims incurred for 2010 were affected by the frost at the beginning of the year, whereas claims incurred for 2009 were affected by a substantial bolstering of the actuarial reserves for the child insurance product.
large losses came to noK 107.5 million in 2010, compared with noK 42.7 million the previous year. Claims incurred for 2010 were positively affected by the run-off gains, as opposed to a run-off loss in the previous year, primarily as a result of the effect of bolstering the actuarial reserves for the child insurance product in 2009.
the combined ratio for 2010 was 90.5 per cent, compared with 93.0 in 2009. the underwriting profit amounted to noK 788.2 million in 2010, compared with noK 552.4 million the previous year.
earned premiums came to noK 4,418.5 million in 2010, a decrease of 6.7 per cent from the previous year. the reduction in premium volume was mainly attributed to a clear prioritisation of profitability over volume, e.g. by discontinuing specific segments in the marine portfolio in 2009 and giving less priority to the insurances of the person portfolio.
the development in recent years with a high number of frequency claims makes it necessary with continuing price increases on certain products, but to a lesser extent than already carried out.
Claims incurred, net of reinsurance came to noK 3,252.0 million in 2010, compared with noK 1,833.0 million in 2009. an increased business volume also gives increased claims incurred. Furthermore, the claims incurred in 2010 were affected by a harsh winter in sweden and denmark during the first quarter. in august 2010, a judgment was handed down by the danish supreme Court on calculating indemnity for part-time employees, and this judgment will result in a higher indemnity for many claims, including the re-opening of previously closed claims. gjensidige’s assessment is that the effect of the judgment is covered by the existing actuarial provisions. therefore, the judgment has had no accounting effect for gjensidige. the loss ratio came to 83.3 in 2010, compared with 76.3 in the previous year. the level of large losses was substantially higher in 2010 than in 2009, which had a negative effect on the underwriting profit. among other things, the level of large losses in 2010 was affected by a large fire in sweden and by heavy rains in denmark in august. total large losses came to noK 205.9 million in 2010, compared with noK 77.4 million the previous year. the run-off gain was lower in 2010 than in 2009.
Baltic gjensidige’s Baltic operations sell general insurance products to the private and commercial markets in latvia, lithuania and estonia.
earned premiums, net of reinsurance came to noK 459.3 million in 2010, a decrease from noK 663.4 million the previous year. earned premiums in 2010 were mainly affected by a rapid decline in the premium volume in the insurance markets in the Baltic.
Claims incurred, net of reinsurance came to noK 305.3 million in 2010, compared with noK 411.5 million in 2009. the loss ratio came to 66.5 in 2010, compared with 62.0 in the previous year. there were no large losses in the Baltic operations in 2010 or 2009. so far, the effects of the financial crisis resulted in a reduced number of claims and a drop in the price of repair costs, which has resulted in run-off gains in both 2010 and 2009. the run-off gain in 2010 was somewhat higher than the run-off gain in 2009.
pension and savings gjensidige offers a broad range of pension, investment and savings products to the private and commercial markets. the pension products include occupational pension insurance, individual pension savings, disability pensions and the management of paid-up policies. the Vekter Funds make up the core of the savings products.
gross premiums written amounted to noK 2,296.7 million in 2010. noK 980.3 million of this amount were premiums written and noK 1,316.4 million were transferred funds. gjensidige has experienced good growth in the customer portfolio during all of 2010, especially for group defined-contribution pensions, which will contribute to continued growth in premium volumes in the future. in 2009, gross premiums written amounted to noK 2,077.3 million. earned premiums, net of reinsurance, totalled noK 335.8 million in 2010, compared with noK 116.3 million in 2009.
noK 11.0 million was allocated to additional provisions for the paid-up policy portfolio in 2010, equivalent to 15.0 per cent of the realised return in addition to guaranteed interest (3.6 per cent on the average). noK 13.2 million was allocated to additional provisions in 2009, equivalent to 50 per cent of the realised return in addition to guaranteed interest (3.7 per cent on the average). the additional provision totalled noK 29.5 million at year-end, whereas the securities adjustment reserve amounted to noK 7.4 million.
the profit/(loss) before tax expense was a loss of noK 27.9 million in 2010, compared with a loss before tax of noK 107.8 million in 2009. as operations are still in a development phase, these results were as expected. it is expected that the business area will achieve a profit before tax in 2011.
total assets total assets increased by noK 1,767.3 million during 2010 and amounted to noK 12,371.3 million at year-end. assets under management in the savings operations amounted to noK 5,697.2 million. assets under management in the pension operations amounted to noK 6,674.1 million, of which the collective portfolio amounted to noK 2,146.0 million.
losses on loans/guarantees amounted to noK 109.4 million in 2010, compared with noK 3.0 million in 2009. total impairment losses on loans in 2010 amounts to noK 117.1 million compared to noK 15.3 million in 2009. impairment losses on loans have increased due to the acquisition of the consumer loan portfolio. the loss situation is in accordance with the expectations and is normal for the consumer loan portfolio.
capital adequacy the capital adequacy was 16.1 per cent at year-end 2010, compared with 17.8 per cent at the end of the previous year. the bank’s objective is to have a capital adequacy of at least 12 per cent.
health-related services under the brand Hjelp24, gjensidige is a leading player in private health services in norway. it offers corporate health services, personal security alarm services, private hospital and specialist services and working environment surveys. the services are provided to private customers, businesses and the public sector.
operating expenses amounted to noK 517.3 million in 2010, compared with noK 476.5 million in 2009. part of this increase is attributed to acquired companies. Cost measures have been implemented in 2010 as a result of the loss of some government contracts. the cost measures will first take full effect starting in the first quarter of 2011.
Øwre was elected member of gjensidige’s Board of directors in 2003. Mr. has extensive experience in management, sales, systems development and programming, including serving as senior manager at iBM. He was a board member of polarporten as from 2005 to 2007. Mr. Øwre holds a degree in Business economy from the norwegian school of Management (Bi) and the north norwegian Management Foundation. Øwre has been present at 18 board meetings.
gjensidige is facing challenges in the insurance market from both traditional norwegian financial institutions, which are concentrating to a greater extent on the sale of general insurance, and from new market players. loss of business combined with diminished profitability in insurance will impact negatively on the Company’s return on equity and other key figures. therefore, it is considered important that gjensidige be able to rapidly adapt to the consumers’ desires for service in new channels and efficiently employ modern technology and support systems. the group is continuously seeking to develop new, customer-adapted products and service solutions, while reviewing and standardising organisation, processes and value chains in order to reduce costs and increase efficiency.
the Board of directors establishes annual limits for the group’s reinsurance programme. these limits are based on the need to protect equity against claims that exceed a justifiable amount and the need to reduce fluctuations in earnings. insurance risk is deemed to be moderate with the reinsurance cover the group has in place. the reinsurance programme is described in greater detail in note 3 of the consolidated annual accounts.
the group’s actuarial function makes calculations and assessments of the actuarial provisions, including the development and maintenance of adequate models and methods of estimating losses that have occurred, but not yet been reported to the group. there is a significant inherent risk that the provisions are not sufficient, but the group is working continuously to improve the actuarial methods and employs external actuaries at times for independent reviews of the provisions.
limits have been determined for the necessary access to liquid funds. these limits are taken into account when determining the strategic allocation of assets. the liquidity risk is regarded as very low. the group is exposed to credit risk through investments in the bond and money markets and through its lending activities. the Board of directors has set limits for credit activities. Credit losses have been immaterial to date. outstanding claims against the group’s reinsurers may also represent a substantial credit risk. Counterparty risk in the
reinsurance market is subject to continuous assessment. all reinsurers for the group must have at least a standard & poor’s a- rating or its equivalent from one of the other reputable rating companies.
operational risk operational risk is the risk of loss due to weaknesses or errors in processes and systems, errors committed by employees, or external events. to reduce this risk, the group focuses on organising its operations with clear, well-defined lines of reporting and responsibility. Fixed procedures have been established for the execution of risk assessment, and the Board of directors considers the annual status in the established internal control system. an independent compliance function was established that should help ensure that the group does not incur government sanctions, financial losses or damage to its reputation as a result of non-compliance with laws, rules and standards. the compliance function identifies, assesses, gives advice on, monitors and reports the group’s compliance risk.
ethical issues are discussed in management groups and in employee meetings. this should reduce the risk of breaches of procedures and guidelines while helping to create a good working environment. employees have also signed a separate computer acceptable use policy related to the use of the group’s information and it systems.
on behalf of the Board of directors, gjensidige’s internal auditing function monitors and assesses the extent to which risk management and internal controls meet expectations.
selected quantitative goals have been set for socially responsible operations with regard to customers, suppliers, employees and the environment.
Cooperation with the employees and the Finance sector union of norway has been good. the Cooperation and Working environment Committee has convened regularly. the Board of directors considers the in-house working environment to be good.
employee satisfaction gjensidige conducts an employee satisfaction survey (ess) annually. this survey gives good indications of the factors that are essential to the working environment and well-being and also provides a good basis for all employees to get involved in the processes related to those factors.
the gjensidige academy and skills development the gjensidige academy was established in 2010. all of gjensidige’s efforts in management and employee development are concentrated in the academy. the academy’s tasks are closely related to the group’s strategy, and measures that are established shall support the group’s capability of rapid restructuring and development.
For many years, e-learning has been an important learning channel for gjensidige, and there was a substantial development in this area in 2010. several compulsory courses have been developed relating to ethics, money laundering and procedures and rules related to stock-exchange listing. in addition, e-learning is employed as a basis for much of the vocational and product training at gjensidige’s Customer and Brand school and for the training of salespersons in connection with marketing campaigns.
undergone an increase in use. it is required that all of the employees should have gone through this training before the marketing activities commence.
on the whole for all types of e-learning, there were about 16,900 passed courses in the parent company in 2010, compared with 8,510 courses passed in 2009. in addition, courses have been provided to the subsidiaries, which had more than 700 passed courses in 2010.
in 2011, further efforts will be made in the development of the gjensidige academy, including new management and employee programmes that will include the whole group.
as with previous years, 2010 has been distinguished by a rapid pace of work, restructuring and reorganisation, and Hr/Hse have been well-integrated into these processes.
internal Hse audits were conducted in the autumn of 2010 in the centres. after this audit, the conclusion was that quality-assured and systematic Hse efforts were being conducted at all levels. Working environment and Hse committees have held regular meetings.
senior policy gjensidige has an active senior policy that aims to get as many employees as possible to work until they turn 67. an important measure for seniors has been the opportunity to work in a 90 per cent position with full salary or in an 80 per cent position with 90 per cent salary. this scheme is under evaluation, among other things in light of the pension reform.
gjensidige awarded hr Norway’s competence award in 2010, gjensidige Forsikring was awarded the Competence award for that year from Hr norway on the strength of the Company’s long-term comprehensive and systematic efforts at skills development. this is an award that is given out annually to a firm, organisation or individual that has achieved particularly good results in the area of personal and organisational development in the past year.
in the grounds for giving the award to gjensidige, it is specified that the efforts at skills development in gjensidige Forsikring are distinguished by systematic procedures and continuity. different efforts are considered in context and help support each other. the result is a good comprehensive package that ensures that the employees will develop their skills in step with the market’s requirements and the Company’s needs.
the established pension, savings and banking operations have developed in keeping with our expectations, and they will strengthen the group’s position and foundation for growth in norway in the long run. gjensidige Bank has achieved a volume that should make it possible to operate profitably in the coming years. a further objective is that the pensions and savings operations shall achieve break-even in 2011.
a change in the regulatory framework in general may affect gjensidige’s operations. no new regulatory framework has been passed in 2010 that will have a major impact on the operations, but there are a number of initiatives that will have an impact over a period of time. this is especially true of the eu’s solvency project for insurance companies, solvency ii. the solvency ii project is in progress under the direction of the eu, and this project will result in a completely new standard for capital adequacy and the regulation of european insurance companies. solvency ii will help improve the quantification of risk and capital requirements for insurance companies, and it will strengthen risk management in general. the new regulations, which are expected to enter into force at the beginning of 2013, will give companies a greater incentive to survey and manage all risks in a consistent manner. gjensidige is actively following these developments, and they have participated, for example, in the quantitative impact studies. the conclusion from the preliminary study is that gjensidige is well positioned to meet the new requirements. solvency ii will also entail new requirements for the way in which risk management in the business is organised and performed as well as new reporting requirements. in connection with updating the group’s strategy, the Board of directors has requested that the management assess whether the health-related services
segment should remain a wholly-owned part of the group’s broad-based activities in norway. a conclusion is expected in the second half of May 2011.
as part of the strategic update, the Board of directors has also defined a goal that the general insurance operations shall achieve a cost ratio of 15 by 2015. Various measures shall be implemented to achieve this target, the most important of which are related to automation and the improvement of self-service solutions, the relocation of functions and the simplification of the product structure.
normally there is a great deal of uncertainty regarding forward-looking matters, but in the Board’s opinion the group is well-equipped to meet the competition in the years to come.
it is recommended that the parent company’s profit before other components of comprehensive income of noK 2,590.2 million be allocated as follows: dividends 2,350.0 transferred to restricted funds 249.3 transfer from other unrestricted reserves (9.1) allocated 2,590.2 other components of comprehensive income that are presented in the income statement are not included in the allocation of profit. after the allocation of profit before other components of comprehensive income, the parent company’s unrestricted reserves amount to noK 13,302.5 million.
Notes 2 use of estimates ...........................................................................91 3 Management of insurance and financial risk ...............................92 6 shares in associates.................................................................... 117 7 owner-occupied property, plant and equipment ...................... 118 9 Financial asset and liabilities ...................................................... 120 10 Financial derivatives and hedge fund ........................................ 123 11 loans and receivables ................................................................ 125 12 Cash and cash equivalents ......................................................... 126 13 shares and similar interests........................................................ 126 14 insurance-related liabilities and reinsurers’ share ..................... 128 16 provisions and other liabilities .................................................... 133 19 salaries and remuneration .......................................................... 136 20 net income from investments ................................................... 140 22 related party transactions ......................................................... 141 23 events after the balance sheet date ......................................... 144 28 share-based payment ................................................................ 146 29 earnings per share ...................................................................... 146 30 acquisition of nykredit .............................................................. 147 gjeNsidige forsikriNg asa page income statement.................................................................................148 Balance sheet ........................................................................................150 statement of changes in equity ...........................................................152 statement of cash flows ......................................................................153 accounting policies ...............................................................................154
Notes 2 use of estimates ........................................................................ 161 3 Management of insurance and financial risk ............................ 161 4 premiums and claims etc. in general insurance ......................... 162 6 shares in subsidiaries and associates ........................................ 166 7 owner-occupied property, plant and equipment ...................... 168 9 Financial asset and liabilities ...................................................... 170 11 loans and receivables ................................................................ 174 12 Cash and cash equivalents ......................................................... 174 13 shares and similar interests........................................................ 175 14 insurance-related liabilities and reinsurers’ share ..................... 177 16 provisions and other liabilities .................................................... 181 19 salaries and remuneration .......................................................... 184 20 net income from investments ................................................... 188 22 related party transactions ......................................................... 189 23 events after the balance sheet date ......................................... 192 28 share-based payment ................................................................ 194 declaration from the Board of directors and the Ceo ....................... 195 auditor’s report .................................................................................... 196 statement by the Control committee .................................................. 198 statement by the supervisory board ................................................... 199
Claims incurred etc. from general insurance (13,456.6) (12,071.0) Claims incurred etc. from pension (258.1) (121.5) interest expenses etc. and loss on loans/quarantees from banking operations (484.9) (268.8) total claims, interest expenses, loss etc. (14,199.6) (12,461.4)
Nok million Notes 31.12.2010 31.12.2009 assets other intangible assets 5 1,349.5 847.1 deferred tax assets 17 199.4 investments in associates 6 4,275.5 3,783.3 owner-occupied property 7 318.5 282.2 plant and equipment 7 345.1 316.1 investment properties 8 5,900.3 5,509.9 financial assets Financial derivatives 9, 10 536.6 203.2 shares and similar interests 9, 13 4,282.9 7,728.6 Bonds and other securities with fixed income 9 18,389.9 15,562.4 Bonds held to maturity 9 14,497.5 15,816.0 loans and other receivables 9, 11 19,537.8 13,349.5 assets in life insurance with investment options 11 4,503.6 2,823.4 reinsurance deposits 0.6 0.6 reinsurers' share of insurance-related liabilities in general insurance, gross 14 487.0 239.3 receivables related to direct operations and reinsurance 11 3,585.1 3,435.8 other receivables 11 342.2 303.5 prepaid expenses and earned, not received income 11 84.5 56.9 Cash and cash equivalents 12, 26 2,889.9 3,103.5 eQuitY aNd liaBilities equity share capital 1,000.0 1,000.0 premium reserve 1,430.0 1,430.0 other equity 20,707.8 19,538.2 total equity 23,137.8 21,968.2 provision for liabilities provision for unearned premiums, gross 14 9,078.3 7,671.7 Claims provision, gross 14 28,339.3 25,857.2 other insurance-related provisions 14 119.0 69.7 financial liabilities Financial derivatives 9, 10 155.3 93.1 deposits from and liabilities to customers 9, 16 9,120.0 6,550.4 interest-bearing liabilities 9, 16 5,254.9 4,916.1 deferred tax liabilities 17 1,274.6 1,205.6 liabilities related to direct insurance 9, 16 392.5 346.4 accrued dividend 74.8 liabilities in life insurance with investment options 16 4,503.6 2,823.4 accrued expenses and deferred income 9, 16 210.7 206.3 total liabilities 60,969.1 52,900.7 total eQuitY aNd liaBilities 84,106.8 74,868.9 coNsolidated stateMeNt of fiNaNcial positioN
17. mars 2011, styret i gjensidige Forsikring asa inge K. Hansen randi B. sætershagen gunnhild H. andersen trond Vegard andersen Hans-erik F. andersson Kjetil Kristensen Chairman gisele Marchand gunnar Mjåtvedt Mari t. skjærstad tor Øwre Helge leiro Baastad Ceo
equity equali- total total certificate sation other class i class ii total Nok million capital fund equity capital capital equity equity as at 31.12.2008 restated 3,860.0 123.3 913.1 4,896.5 14,689.5 19,585.9 ownership fraction 25 % 75 %
other exchange actuarial other share own premium paid in differ- gains/los. earned total
tax on other comprehensive income (28.5) (28.5) total components of other comprehensive income (19.4) (118.0) (10.9) (148.4)
total comprehensive income for the year (19.4) (118.0) 2,939.5 2,802.0 paid dividend (1,650.0) (1,650.0) equity-settled share-based payment transactions 7.5 7.5 tax on items recognised directly in equity 13.2 13.2
coNsolidated stateMeNt of cash flows Nok million 1.1.-31.12.2010 1.1.-31.12.2009 cash flow from operating activities premiums paid, net of reinsurance 20,023.9 17,565.2 Claims paid, net of reinsurance (12,970.2) (11,061.3)
interest and other financial income 149.4 591.2 net receipts/payments - property activities 40.0 267.9 net receipts/payments - other income 608.9 549.6 payments of tax (1,155.2) (401.4)
Net cash flow for the period (287.5) 199.4 effect of currency fluctuations on cash and cash equivalents 1.7 (110.4)
changes in accounting policies there are no changes in accounting policies in 2010.
the iFrss and interpretations that have been issued up until 17 March 2011, not yet mandatory as at 31 december 2010, i.e. iFrs 9 and iFriC 19, amendments to ias 32, iFriC 14, revised ias 24, as well as improvements to iFrss are assumed, based on assessments made so far, not to have material impact on reported figures.
due to rounding differences, figures and percentages may not add up to the total.
associates associates are entities in which the group has a significant, but not a controlling, influence over the financial and operating policies. normally this will apply when the group has between 20 and 50 per cent of the voting power of another entity. associates are accounted for using the equity method, and are recognised initially at cost. the group’s investment includes goodwill identified on acquisition, net of any accumulated impairment losses. the consolidated financial statements include the group’s share of income, expenses, and movements in equity, after adjustments to align the accounting policies with those of the group, from the date that significant influence commences until the date that the significant influence ceases.
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 the group’s interest. unrealised losses are eliminated in the same way, but only to the extent that there is no evidence of impairment.
cash flow stateMeNt Cash flows from operating activities are presented according to the direct method, which gives information about material classes and payments.
recogNitioN of reveNue aNd eXpeNses operating income and operating expenses consist of income and expenses in relation to the business in the different business areas, see below.
interest income and credit commission income from banking operations interest income and interest expenses are calculated and recognised using the effective interest method. the calculation takes into account arrangement fees and direct marginal transaction costs that form an integral part of the effective interest rate. interest is recognised in profit or loss using the effective interest method both for balance sheet items that are measured at amortised cost and those that are measured at fair value through profit and loss. interest income on impaired loans is calculated as the effective interest on the impaired value.
Commission income from various customer services is recognised depending on the nature of the commission. Charges are recognised as income when the services have been delivered or when a significant proportion have been completed. Charges that are received for services provided are recognised as income in the period in which the service was performed. Commissions received as payment for various services is recognised as income when the service has been performed. Commission expenses are transaction based, and are recognised in the period in which the service was received.
insurance-related operating expenses consist of insurance-related administration expenses including commissions for received reinsurance and sales expenses, less received commissions for ceded reinsurance and profit share.
Financial expenses consist of interest expenses on loans that are not part of the banking operations, realised losses related to financial assets, change in fair value of financial assets at fair value through profit or loss, recognised impairment on financial assets and recognised loss on financial derivatives. all expenses related to loans are recognised in profit or loss using the effective interest method.
transactions in foreign currencies are translated to the respective functional currencies of the respective group entities at exchange rates at the date of the transaction.
exchange gains and losses arising from a monetary item receivable from or payable to a foreign operation, the settlement of which is neither planned nor likely in the foreseeable future, are considered to form a part of the net investment in the foreign operation and are recognised in other comprehensive income.
gjensidige may engage in refurbishment, major upgrades or new property projects. the costs for these are recognised using the same principles as for an acquired asset.
in cases of change of use and reclassification to owner-occupied property, fair value at the date of the reclassification is used as cost for subsequent reporting.
trademarks, internally developed software and other intangible assets that are acquired separately or as a group are recognised at historical cost less accumulated amortisation and accumulated impairment losses. new intangible assets are capitalized only if future economic benefits associated with the asset are probable and the cost of the asset can be measured reliably.
iMpairMeNt of NoN-fiNaNcial assets indicators of impairment of the carrying amount of tangible and intangible assets are assessed at each reporting date. if such indicators exist, then recoverable amount of an assets or a cash generating unit is estimated. indicators that are assessed as significant by the group and might trigger testing for an impairment loss are as follows • significant reduction in earnings in relation to historical or expected future earnings • significant changes in the group’s use of assets or overall strategy for the business • significant negative trends for the industry or economy • other external and internal indicators goodwill is tested for impairment annually. the annual testing of goodwill is performed in the third quarter.
recoverable amount is the greater of the fair value less costs to sell and value in use. in assessing value in use, estimated future cash flows are discounted to present value using a pre-tax discount rate that reflects the time value of money and the risks specific to the asset. For the purpose of impairment testing, assets are grouped together into the smallest group of assets generating cash inflows that are largely independent of cash inflows from other assets or groups of assets (cash-generating unit). goodwill is allocated to the cash-generating unit expecting to benefit from the business combination.
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 reversed if the prerequisites for impairment losses are no longer present. impairment losses will only be reversed if the recoverable amount does not exceed the amount that would have been the carrying amount at the time of the reversal if the impairment loss had not been recognised.
impairment losses recognised for goodwill will not be reversed in a subsequent period. on disposal of a cash generating unit, the goodwill attributable will be included in the determination of the gain or loss on disposal.
claims provision, gross the claims provision comprise 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 to the company (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.
adequacy test a yearly adequacy test is performed to verify that the level of the provisions is sufficient compared to the company’s liabilities. Current estimates for future claims payments for the company’s insurance liabilities at the reporting date, as well as related cash flows, are used to perform the test. this includes both claims incurred before the reporting date (claims provisions) and claims that will occur from the reporting date until the next annual renewal (premium provisions). any negative discrepancy between the original provision and the liability adequacy test will entail provision for insufficient premium level.
the technical provisions related to the unit linked contracts are determined by the market value of the financial assets. the unit linked
perspektiv 87gjensidige annual report 2010 resu lts contracts portfolio is not exposed to investment risk related to the customer assets since the customers are not guaranteed any return. in addition there is a portfolio of annuity contracts which have an average 3.6 per cent annually guaranteed return on assets.
fiNaNcial iNstruMeNts Financial instruments are classified in one of the following categories • at fair value through profit or loss • available for sale • investments held to maturity • loans and receivables • financial derivatives • financial liabilities at amortised cost recognition and derecognition Financial assets and liabilities are recognised when gjensidige becomes a party to the instrument’s contractual terms. initial recognition is at fair value. For instruments that are not derivatives or measured at fair value through profit or loss, transaction expenses that are directly attributable to the acquisition or issuance of the financial asset or the financial liability, are included. normally initial recognition will be equal to the transaction price. subsequent to initial recognition the instruments are measured as described below.
at fair value through profit or loss Financial assets and liabilities are classified at fair value through profit or loss if they are held for trading or are designated as such upon initial recognition. all financial assets and liabilities can be designated at fair value through profit or loss if • the classification reduces a mismatch in measurement or recognition that would have arisen otherwise as a result of different rules for the measurement of assets and liabilities
• the financial assets are included in a portfolio that is measured and evaluated regularly at fair value gjensidige holds an investment portfolio that is designated at fair value at initial recognition, and that is managed and evaluated regularly at fair value. this is according to the Board of directors’ approved risk management and investment strategy, and information based on fair value is provided regularly to the senior group Management and the Board of directors.
transaction expenses are recognised in profit or loss when they incur. Financial assets at fair value through profit or loss are measured at fair value at the reporting date. Changes in fair value are recognised in profit or loss.
the category at fair value through profit or loss comprises the classes shares and similar interests and bonds and other fixed income assets.
investments held to maturity investments held to maturity are non-derivative financial assets with payments that are fixed or which can be determined in addition to a fixed maturity date, in which a business has intentions and ability to hold to maturity with the exception of • those that the business designates as at fair value through profit or loss at initial recognition • those that meet the definition of loans and receivables investments held to maturity are measured at amortised cost using the effective interest method, less any 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 and cash and cash equivalents and obligations classified as loans and receivables.
transaction expenses are recognised in profit or loss when they incur. subsequent to initial recognition financial derivatives are measured at fair value and changes in fair value are recognised in profit or loss.
the category financial derivatives comprises the classes financial derivatives at fair value through profit or loss and financial derivatives used as hedge accounting.
the category financial liabilities at amortised cost comprises the classes deposits from and liabilities to customers, interest-bearing liabilities, other liabilities, liabilities related to direct insurance and accrued expenses and deferred income. interest-bearing liabilities consist mainly of issued certificates and bonds, and buy-back of own issued bonds.
definition of fair value Financial assets and liabilities measured at fair value are carried at the amount each asset/liability can be settled to in a transaction carried out at arm’s length distance.
Quoted prices in active markets are considered the best estimate of an asset/liability’s fair value. When quoted prices in active markets are not available, the fair value of financial assets/ liabilities is preferably estimated on the basis of valuation techniques based on observable market data. When neither quoted prices in active markets nor observable market data is available, the fair value of financial assets/ liabilities is estimated based on valuation techniques which are based on non-observable market data.
iMpairMeNt of fiNaNcial assets loans, receivables and investments held to maturity For financial assets that are not measured at fair value, an assessment of whether there is objective evidence that there has been a reduction in the value of a financial asset or group of assets is made on each reporting date. objective evidence might be information about credit report alerts, defaults, issuer or borrower suffering significant financial difficulties, bankruptcy or observable data indicating that there is a measurable reduction in future cash flows from a group of financial assets, even though the reduction cannot yet be linked to an individual asset.
if there is objective evidence that the asset is impaired, impairment loss are calculated as the difference between the carrying amount of the asset and the present value of estimated future cash flows discounted at the original effective interest rate.
provisioNs provisions are recognised when the group has a legal or constructive obligation as a result of a past event, it is probable that this will entail the payment or transfer of other assets to settle the obligation, and a reliable estimate can be made of the amount of the obligation.
restructuring provision for restructuring are recognised when the group has approved a detailed and formal restructuring plan which has commenced or has been announced. provisions are not made for future expenses attributed to the operations.
peNsioNs gjensidige has both defined contribution and defined benefit plans for its employees. the defined benefit plan has been placed in a separate pension fund and is closed to new employees.
share-Based paYMeNt the fair value of share-based payment arrangements allocated to employees is at the time of allocation recognised as personnel costs, with a corresponding increase in equity. share-based payment arrangements which are recovered immediately are recognised as expenses at the time of allocation. none-recovery 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.
current tax Current tax is tax payable on the taxable profit for the year, based on tax rates enacted or substantively enacted at the reporting date, and any adjustment to tax payable in respect of previous years.
deferred tax liabilities are recognised for temporary differences resulting from investments in subsidiaries and associates, except in cases where the group is able to control the reversal of temporary differences, and it is probable that the temporary difference will not be reversed in foreseeable future. deferred tax assets that arise from deductible temporary differences for such investments are only recognised to the extent that it is probable that there will be sufficient taxable income to utilise the asset from the temporary difference, and they are expected to reverse in the foreseeable future.
related partY traNsactioNs intra-group balances and transactions are eliminated in preparing the consolidated financial statements.
the owners of ordinary shares have dividend and voting rights. there are no rights attached to the holding of own shares.
in thousand equity certificates 2009 outstanding 1 january 77,200 Capital reduction 22,800 Capital reduction 100,000 as at 30 september 2009 the equity certificate capital was reduced to noK 1,000.0 million, divided into 100 million equity certificates with a nominal value of noK 10. the amount being reduced was transferred with equal amounts to premium reserve and equalization fund belonging to class i capital. the change did not change the ownership fraction between class i capital and class ii capital.
preMiuM reserve premium reserve consists of paid in capital and can be used to cover losses.
other paid iN eQuitY other paid in equity consists of wage costs that are recognised in profit and loss as a result of the share purchase program for employees.
eXchaNge differeNces exchange differences consist of exchange differences that occur when converting foreign subsidiaries, and when converting liabilities that hedge the company’s net investment in foreign subsidiaries.
actuarial gaiNs/losses peNsioN actuarial gains/losses pension consists of gains/losses occurring by changing the actuarial assumptions used when calculating pension liability.
iNvestMeNt properties Fair value is based on market prices and generally accepted valuation models where there are no market prices. a key parameter of the valuation is the long-term required rate of return for the individual property. a further description of the real estate price risk and a sensitivity analysis of investment properties are given in note 8.
plaNt aNd eQuipMeNt, owNer-occupied propertY aNd iNtaNgiBle assets plant and equipment, owner-occupied property and intangible assets are assessed annually to ensure that the depreciation method and the depreciation period used are in accordance with useful life. the same applies to residual value. impairment losses will be recognised if impairment exists. an ongoing assessment of these assets is made in the same manner as investment properties.
goodwill is tested for impairment annually or more often if there are indications that the amounts may be subject to impairment. the testing for impairment entails determining recoverable amount for the cashgenerating unit. normally recoverable amount will be determined by means of discounted cash flows based on business plans. the business plans are based on prior experience and the expected market development. see note 5 and 7.
iNsuraNce-related liaBilities use of estimates in calculation of insurance-related liabilities is primary applicable for claims provisions.
For long-tail lines, the risk is linked to the fact that the ultimate claim costs must be estimated based on experience and empirical data. For certain lines within accident and health insurances, it may take ten to 15 years before all the claims that occurred in a calendar year are reported to the company. in addition, there will be many instances where information reported in a claim is inadequate to calculate a correct provision. this may be due to ambiguity concerning the causal relationship and uncertainty about the injured party’s future work capacity etc. Many personal injury claims are tried in the court system, and over time the level of compensation for such claims has increased. this will also be of consequence to claims that occurred in prior years and have not yet been settled. the risk linked to provisions for lines related to insurances of the person is thus affected by external conditions. to reduce this risk, the company calculates its claims liability based on various methods and follows up that the registered provisions linked to ongoing claims cases are updated at all times based on the current calculation rules. see note 3 and 14.
the basis of insurance is transfer of risk, from the insured to the insurer. gjensidige receives insurance premiums from a large number of policy holders and commits to compensate in case a loss occurs. naturally, insurance risk is a major component of risk for the group. insurance premiums are received in advance and set aside in order to cover future claims. the actuarial provisions combined with the Company’s equity are invested, and consequently the group is exposed to market and credit risk as well.
gjensidige offers many different insurance products aimed at private customers, agriculture, business and commerce in norway. in sweden, private and commercial insurance is offered through a swedish branch of gjensidige Forsikring asa. the remaining company in sweden, tennant Försäkringsaktiebolag aB mainly operates the group’s white label business in norway through its own branch structure. the group also provides general insurance through a danish branch of gjensidige Forsikring asa, as well as through the subsidiaries nykredit Forsikring a/s and gjensidiges arbejdsskadeforsikring a/s, and in the Baltic through its subsidiary gjensidige Baltic.
* Gjensidiges Arbejdsskadeforsikring A/S and Nykredit Forsikring A/S is owned by Gjensidige Forsikring ASA, but run by the Danish branch figure 2 – Business structure given the division of the operations into operative and reporting segments, the group has chosen to also divide the information in this note into general insurance, life insurance/savings and banking business areas, with the exception of certain contexts where it has been natural to present these areas as one. For the description of the management of financial risk within the general insurance operations the focus is on the group’s total general insurance operations and separate tables have not been set up for gjensidige Forsikring asa. this reflects the way in which the financial risk is managed.
orgaNisatioN the Board of directors 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. this entails ensuring that necessary policies, routines and reporting are in place to guarantee a satisfactory risk management and compliance with laws and regulations and that the risk management and internal control efforts will be appropriately organized and documented.
the group Ceo is responsible for the overall risk management in the group. the group’s risk management committee, chaired by the group Ceo, has a supervisory role with regard to the group’s total risk situation and an advisory role to the group Ceo with regard to risk management. the responsibility to help prepare for the risk management committee’s work and to facilitate the group’s internal control processes is delegated to the Chief risk officer. likewise, the Head of group Compliance, which reports on professional matters to the group Ceo, is responsible for the group’s process for preventing and detecting compliance risk pursuant to laws and regulations as well as internal policies and instructions. the responsibility for the ongoing risk management is delegated to the responsible line managers in their respective areas. gjensidige has centralized risk control functions, such as risk management, compliance and actuarial functions. Moreover, the group has an independent internal audit function, which monitors risk management and internal control to ensure that they function properly and which reports directly to the Board of directors.
Group risk committee 1st LINE Perform risk management and internal control 2nd LINE Assess, monitor, give advice and recommendations, quality assurance, quantification, aggregation of risk 3rd LINE Audit the framework for risk management and internal control, report to the Board of Directors
Chief Risk Officer figure 3 – the management system is organized with three lines of defence
the responsibility for both the overall risk management in the group and the execution of investments for the insurance operations is vested in the organization of the deputy Ceo, whereas the function for monitoring and reporting financial returns and compliance with constraints in investment management of the insurance business reports in the line to the executive Vice president, group staff/general services in order to ensure an independent follow-up. in addition, the Chief risk officer has an independent line of reporting to the group’s risk management committee.
For the group, the rating requirements are most binding. gjensidige Forsikring’s target financial strength rating is ‘a’ (single a) from standard & poor’s or the equivalent from another rating institution. this target has been achieved by actual rating of ‘a’ (stable) from standard & poor’s (unchanged since 1999, last updated on 23 august 2010). the rating is subject to an annual review. standard & poor’s rating model is used as an approximation of the capital requirements from this perspective, even though a number of other factors also play an important role in determining the group’s rating. Based on data as at 31 december 2010, the excess capital relative to the targeted a rating is estimated at noK 6,388.6 million. the subsidiaries do not have their own interactive rating, although the rating for gjensidige Forsikring is based on the group’s financial position.
the internal capital requirement is set in the group’s capital management policy, which is approved by the Board of directors. it is defined as the capital that is necessary in order to have a probability of 99.97 per cent of not using up all capital measured over one year, including all of the general insurance group’s assets and liabilities and without counting the expected profit performance during the period as available capital. in this context profit/loss and available capital are measured according to economic principles, even if these may deviate from the accounting policies, in keeping with the proposals that have been made for the solvency ii regulations. among other things, this means that actuarial reserves are assessed at the discounted value instead of at recognised (nominal) value. Both method and level of probability are in keeping with what seems to have been established as an industry standard in europe. the internal requirement is measured by means of gjensidige’s internal model as described below.
gjensidige has, over several years, been developing an internal stochastic simulation model for its insurance operations, based on state-of-theart modeling technology. the model is customized to gjensidige’s risk profile and provides fully stochastic simulations of both insurance and investment operations. this model is a key tool for aggregated risk measurement and capital management as it provides an overview of the aggregated risk profile. the main areas of use of the internal model are • overall risk profile and capital need • Capital allocation • Capital consequences of asset allocation • requirements for and optimization of reinsurance using the internal model, with the definition of internal capital as stated above, the internal capital requirement for the insurance group was set at noK 12,200 million at the end of 2010, compared to noK 11,400 million at the end of 2009. the capital requirements have increased as a result of the growth in the balance sheet, the purchase of nykredit
Forsikring a/s and greater investment risk. the most important contributors are the items in storebrand and spareBank1 sr-Bank in addition to the asset allocation with a higher percentage of shares.
iNsuraNce risk the risk under any insurance contract is the probability that the insured event occurs and the uncertainty of the amount of the resulting claim. By the very nature of an insurance contract, this risk is random and must therefore be estimated.
geNeral iNsuraNce frequency and severity of claims the frequency and severity of claims can be affected by several factors. the different factors will depend on the products, or lines of business (loB) considered.
an increase in the frequency of claims can be due to seasonal effects more sustainable effects. during the winter season snow and cold weather will cause an increase in the frequency of claims in Motor insurance. in property insurance cold winter will cause an increase in the frequency of claims due to frozen water pipes and increased use of electrical power and open fire places for heating of the houses. More permanent shift in the level of frequency of claims may occur due to e.g. change of customer behaviour and new types of claims. the effect on the profitability of a permanent change in the level of the frequency of claims will be high. in Motor insurance in norway, for example, an increase of one percentage point in the level of the frequency of claims will increase the loss ratio by four percentage points.
are well diversified in terms of type and amount of risk, industry and location of the risks. underwriting limits are in place to enforce appropriate risk selection criteria and to ensure that accepted risks are within the limits of the reinsurance contracts.
the claims handling procedures also include a clear strategy and routines for purchasing material and services in an optimal manner. the routines are to use purchase agreements to ensure the quality of our benefits to our customers and to reduce the inflation risk.
table 2 – gross premiums written per geographical area 2010 and 2009
table 3a – gross premiums written per line of business for the gjensidige group 2010 and 2009
Nok million gross premiums written per cent of total gross premiums writte per cent of total accident and health - workers' compensation accident and health - others/ default
Nok million gross premiums written per cent of total gross premiums writte per cent of total accident and health - workers' compensation accident and health - others/default
as from 2007 gjensidige Forsikring asa is the main reinsurer for its subsidiaries, and the subsidiaries’ reinsurance exposure is included in the outwards reinsurance programme for the gjensidige group.
sources of uncertainty in the estimation of future claims payments gjensidige is liable for insured events that occurred during the term of the contract, even if the loss is discovered after the end of the contract term, and claims are paid according to the policy conditions valid at the time of occurrence. as a result, claims are settled over a long period of time, and there is an element of the claims provision that relates to incurred but not reported claims (iBnr).
liability insurance contracts are also subject to the emergence of new types of latent claims, but no allowance is included for this at the balance sheet date.
in estimating the liability for the cost of reported claims not yet paid, gjensidige considers any information available from loss adjusters, claims handlers and information about the costs of settling claims with similar characteristics in previous periods. all claims are assessed on a case-by-case basis by a claims handler. Claims with potential for distortive effects of their development are handled separately and projected to their ultimate by an additional provision (e.g. bodily injury claims in Motor insurance). Where possible, gjensidige adopts multiple techniques to estimate the required level of provision. this provides a greater understanding of the trends inherent in the experience being projected. the projections given by the various methodologies also assist in estimating the range of possible outcomes. the most appropriate estimation technique is selected taking into account the characteristics of the business class and the extent of the development of each accident year. the development of the estimate of ultimate claim cost for claims incurred in a given year is presented in tables 6a and b. this gives an indication of the accuracy of gjensidige’s estimation techniques for claims payments.
insurance contracts are often classified as risks that are short-tail and risks that are long-tail. short-tail risk is characterized by that the period between the occurrences, reporting and final settlement of claims is short. long-tail risk is the opposite. the period between the occurrence, reporting and settlement of claims is long. in property and Motor insurance (excluding bodily injury claims) the claims are reported soon after occurrence, while for accident and health insurance the claims may be reported several years after the occurrence and settled several years after they were reported. the provisions for iBnr for short-tail risks are relatively small, for long-tail risks the provisions for iBnr may constitute a substantial part of the total loss provision.
the duration (average time between the occurrences of claims until finally settled) differs significantly between the types of risk considered. long duration will increase the company’s exposure to inflation. in Motor insurance, physical damage, the duration is less than one year, while in Motor bodily injury claims the average duration is almost eight years. in property insurance the average duration is one to two years, in Workers’ Compensation in norway the average duration is six years. in group life insurance the duration differs significantly between death and disability coverage. Workers’ Compensation in denmark has a particularly long duration due to the annuity part. For the other loBs in the subsidiaries the duration is in line with the similar loBs in norway. in the Baltic the duration is significantly shorter due to few bodily injury claims.
the provisions related to reported claims are assessed individually by a claims handler and registered into the claims system. the development of provisions for notified claims is supervised by the claims managers.
in case of adverse development necessary efforts are put in force. iBnr provisions are based on empirical data, where the basis is the time it takes from a loss or injury occurring (date of loss or injury) until it is reported (date reported). Based on experience and the development of the portfolio statistical models are prepared to calculate the scope of post-reported claims. the fit of the model is measured by looking at the deviation between earlier post-reported claims and those estimated by the model.
the actuaries in the gjensidige group working with technical provisions meet regularly as a part of keeping a high professional level, and they all have access to a common actuarial software system for calculating claims provisions.
during the last years gjensidige has had processes where external actuarial firms have calculated best estimates of the technical provisions. this is done to get a second opinion of the level of the provision from independent, recognised actuarial firms. the deviation between the internal and external estimates of the claims provisions is approximately three per cent on a consolidated basis; this is within normal range for calculations of this type.
Commercial norway 656.2 794.6 total gjensidige forsikring asa 1,464.1 1,655.5 change in severity of claims (+10 %) private norway 629.7 600.8
Changes in the composition of the insurance portfolio will also have impact on changes in the frequency and severity of claims. in times when there are changes in the composition of the insurance portfolio, the effect of changes in the frequency and severity of claims will be influenced by the percentage share of the different insurance product types in the total portfolio.
sensitivity analysis – provision risk the estimation of technical provisions for an insurance portfolio represents an approximation of future cash flow for the claims payments, and there will always be an element of uncertainty in such calculations. provision risks relate to this kind of uncertainty. the uncertainty depends on the nature of the risk. risk with a short duration is less exposed to changes that will affect the future payments. Bodily injury claims are on the other hand very sensitive regarding changes in e.g. inflation and court awards. the effect of court awards are taken into account as soon as they are known. in cases when a judgement is not yet final and legally binding, the effect on the loss provision is based on a probability weighted estimate of the possible outcomes.
inflation risk is an underlying risk in most insurance products. the effect will be different, depending on the characteristics of each product and the terms and conditions that apply for the claims settlement. For loBs with nominal long-tailed provisions the effect of a one percentage point increase in inflation will be significant, proportional to the average duration (in number of years).
the sensitivity analysis shows the effect of a change in inflation rate of one percentage point on the claim provision. the calculations do not include the effect of inflation swap.
perspektiv 99gjensidige annual report 2010 resu lts table 6a – analysis of claims development – gjensidige group gross estimated claims cost at the end of the accident year 9,419.4 10,427.7 10,718.0 11,880.5 11,850.1 12,489.2 12,581.2 12,053.4 13,736.8 - seven years later 9,483.2 10,382.0 - eight years later 9,470.1 prior-year claims provision 2,452.4 gjensidige Baltic 189.0 Claims handling expenses 1,257.8 total 28,339.3 gross estimated claims cost at the end of the accident year 8,604.4 9,566.4 9,731.9 10,973.9 10,983.9 11,558.6 11,548.4 11,012.6 12,824.4 - seven years later 8,570.4 9,512.9 - eight years later 8,551.3 prior-year claims provision 1,085.4 Claims handling expenses 1,221.2 total 24,193.0
the table below and on the next page show the figures for gjensidige Forsikring asa.
table 6b – analysis of claims development – gjensidige forsikring asa
Net of reiNsuraNce estimated claims cost at the end of the accident year 8,078.9 9,355.3 9,671.9 10,656.9 10,926.9 11,371.0 11,415.4 10,998.8 12,364.5 - seven years later 8,110.7 9,305.8 - eight years later 8,022.4 prior-year claims provision 1,270.6 Claims handling expenses 1,221.2 total 23,780.2 table 6b – analysis of claims development – gjensidige forsikring asa life iNsuraNce insurance risk the operations in gjensidige pensjonsforsikring as (gpF) is primarily concentrated around defined contribution schemes within the commercial markets segment and the management of premium reserves for paid-up pensions and individual fund pensions; the latter are not paid through premiums. in addition there is a risk coverage related to the company defined contribution schemes as well as a smaller share of plain risk insurances with disability coverage.
of the products that gpF offers, these insurance risks would primarily be disability and death with loss of income for the insured parties or surviving relatives, alternatively living longer leading to the risk that the accumulated pension is not sufficient to meet the pension payments for life.
the challenge for this type of business will be to collect sufficient risk premiums from customers to build up sufficient premium reserves for future liabilities. When a claim occurs, any inadequate premium reserve is not automatically covered by additional insurance premiums from the healthy population.
in addition to the discussed factors regarding the probability of disability, mortality and longevity, the concentration around given occupational groups or a few, but large, risks would have a negative impact on the insurance profit.
parts of gjensidige sverige aB was reorganised as a branch of gjensidige Forsikring asa in the last quarter of 2009. as from 1 january 2010 the insurance operations in denmark, except for gjensidiges arbejdsskadeforsikring, was reorganised as a branch of gjensidige Forsikring asa. as from fourth quarter 2010 the Commercial market insurance portfolio in nykredit Forsikring was transferred to the danish branch. the table is updated, also for previous years, to illustrate the development over time.
Compulsory occupational pensions 59,718 15,562 other defined contribution pensions 35,067 7,054 total 94,785 22,616 other defined contribution pensions 47 % 39 %
table 7b – Number of members and contracts 2009 Number of members Number of contracts
the number of individuals who are exposed to mortality risk and/or longevity risk is very modest compared to disability risk exposure.
the insurance risk as at 31 december 2010 is considered as satisfactory and the uncertainty around cases which have not yet been reported is safeguarded by the claim provisions. in addition the Company has a satisfactory reinsurance arrangement in place with gjensidige Forsikring asa, which protects against large loss fluctuations. gjensidige Forsikring asa has a considerable portfolio within both individual and group personal risk with disability risk, and through close co-operation with the specialist research departments in this company one will discover early changes in the trend of disability development both in society and in the insurance portfolio.
the actual claims paid in 2010 are still of a modest size and amounted to noK 15 million. the iBnr provisions at year end 2010 are noK 124 million, 53 per cent of the total claims provisions. the provision for reported and settled claims is based on the expected cash value of future liabilities and amounts to noK 109 million, 47 per cent of the total claims provisions. the actual pension payments and the corresponding claims provisions are within the expected payment amounts.
Both actual payments and claims provisions have increased during the last years and are expected to increase in volume over the next few years. this is both due to significant growth in the portfolio volume and that the percentage growth in the number of risk years is high during the first few years since the start of the company. the number of retirement pensioners is still expected to be very low with very modest payments. the payments will either come from the savings account for defined contribution schemes or from the transferred premium reserves from other companies for paid-up pensions and individual fund pensions.
the mortality risk coverage applies to members of an occupational pension scheme, and these give a basis for a potential spouse, cohabitant or child pension. the period of risk is limited to the member’s period of service up to the maximum age limit which is 67 years. specific information about the member’s family situation is not obtained at the time of signing for the pension. the premium is therefore calculated using assumptions about mortality, civil status, number of children as well as knowledge about their age and gender. For gjensidige pensjonsforsikring as these calculations are based on the calculation basis - labelled K2005, which the insurance industry in norway has developed jointly with the norwegian Financial services association (Fno).
the issue of longevity, that only affects the Company’s paid-up policy portfolio for future retirement pensioners, has an inverted dependency on the mortality rate in the insurance portfolio compared to the discussed surviving relatives’ coverage. the Company’s risk here is that the retirement pensioners who have pre-agreed lifelong retirement pensions will live longer than assumed in the calculations. also here the mortality rate basis K2005 is used, but is based on survival probabilities and safety margins “the other way”. in addition, the Financial supervisory authority of norway has also stated a need here for additional safety margins. the adequacy of these margins will continually be evaluated through joint mortality analyses in the industry. last years’ analyses shows that the calculation basis on a long term view does not contain the safety margins originally determined, and the industry has therefore initiated a reassessment of the K2005 calculation basis. the Financial supervisory authority of norway (Finanstilsynet) is informed on the development. a potential strengthening of the reserves will be financed through the profit the company has in its portfolio, alternatively through use of equity.
reiNsuraNce gjensidige purchases reinsurance to protect the group’s equity capital and reinsurance is thus a capital management tool. the same models and methodology, as used for evaluation of alternative asset allocations and the internal risk based capital allocation, are also used to analyze and purchase reinsurance.
gjensidige’s reinsurance programme mainly consists of non-proportional reinsurance. the maximum retention level for the group was noK 250 million in 2010 unaltered from 2009. as a general rule gjensidige purchases reinsurance to limit any single claim or event per insurance product to noK 100 million. 2010 provided a market with premium reductions in some segments, and reinsurance protection was purchased with a lower retention, so that the retention level varies from noK 20 to 100 million, depending on line of business. decisions concerning the reinsurance programme are based on analysis of exposure, claims history, model simulations and gjensidige’s capital structure.
gjensidige Forsikring asa provides a corporate function with regard to reinsurance. gjensidige Forsikring is acting as reinsurer for the subsidiaries, and their exposure is included in the outward reinsurance covers for the group. the reinsurance programme for property insurance also includes the cooperating mutual fire insurers. the subsidiaries’ reinsurance programmes generally have a lower retention, due to their smaller size and capitalization than gjensidige Forsikring asa. the difference between the retention levels is held for own account by gjensidige Forsikring asa.
in norway the exposure to natural perils disasters is handled through the compulsory membership in the norwegian natural perils pool. through this arrangement, gjensidige is exposed to the market share of the total claims for the norwegian market as a whole. on behalf of its members the pool has its own reinsurance programme in place, which further reduces the risk exposure. as in 2009, gjensidige participates with ten per cent on the pool’s programme in 2010. this exposure is included in the outward reinsurance programme, resulting in synergy effects, economies of scale and diversification in gjensidige’s reinsurance programme. in the other countries gjensidige is operating, natural perils claims are included in the ordinary property reinsurance covers. an event resulting in claims in several countries where gjensidige has its business will be aggregated into one event in respect of reinsurance.
MaNageMeNt of fiNaNcial risk – geNeral iNsuraNce operatioNs Financial risk is a collective term for various types of risk related to financial assets. the different types of financial risk are described in greater detail below. operational risk is monitored and controlled as well.
equity price risk is defined as a loss in value resulting from a fall in equity prices. this is analogous to real-estate price risk. see amounts below in the stress test and sensitivity analysis. interest-rate risk is defined as the loss in value resulting from a change in interest rates and is viewed both from the asset-only perspective and in relation to the interest-rate sensitivity of the liabilities. the Board of directors set a limit of noK 720 million on the interest-rate risk in the total fixedincome portfolio (excluding bonds held to maturity and the swaps in gjensidiges arbejdsskadeforsikring) for 2010 (given a 100 basis points shift in the yield curve) for the general insurance operations.
Foreign-exchange risk is defined as the loss resulting from a movement in exchange rates. generally, foreign-exchange risk in the investment portfolio is hedged close to 100 per cent, within limits of +/- ten per cent per currency, except for smaller mandates where active currency management is a part.
liquidity risk is defined as the inability to meet payments at due date, or the need to realize investments at a high cost to meet payments. the Board of directors has set minimum limits for the amount of assets to be realized without undue transaction costs within various time frames.
the insurance operations are exposed to these types of risk through the group’s investment activities, and they are managed at the aggregate level and handled through guidelines for capital management and investment strategies that have been drawn up for the gjensidige group and its subsidiaries and through resolutions in the group’s credit committee.
there has not been any material changes in gjensidige in the processes used to manage risks from previous periods. the investment strategy and other risk management policies are approved by the Board of directors in each company, but are closely coordinated with the parent company’s overarching policies. the general rule is that the asset allocation in the subsidiaries in general insurance will only be used to ensure the technical reserves against interest and foreign-exchange risk with excess funds invested in interest-bearing securities with low risk. exposures to market risk are recognised in the balance sheet of gjensidige Forsikring asa. this is done in order to improve the efficiency of the investment management and capitalization in the group.
the table below gives the main overview of the asset allocation for the insurance business at year-end 2010 and 2009. the actual allocation will vary thorough the year and follow movements in the market, tactical allocation and risk situation. in 2010, the allocation to money markets fell and bonds held at amortized cost rose. allocation to equities, real estate and hedge funds increased, and market values of associates increased.
in terms of concentration risk, the main risks for the group are the investments in storebrand and spareBank1 sr-Bank and the exposure to office properties in the oslo area. Concentration risk is further analysed under the various market risk factors.
the large capital surplus was representative for the situation throughout the year, although the precise figures will vary along with changes in asset allocation and year-to-date profit.
Catastrophe noK 135 million (135.0) (135.0) storebrand og spareBank1 sr-Bank 1,3 std.deviation (422.3) (422.3)
result subsidiaries (gps and Bank) 10 % drop in roe (196.5) (281.4) total decrease in value of stress test (3,257.5) (3,300.7) Buffer capital 6,894.1 8,794.6 capital/surplus in stress scenario 3,636.6 5,493.9 1 bp = basis points eQuitY price risk in 2010, gjensidige’s equity portfolio increased from the previous year. the largest exposures are to storebrand, spareBank1 sr-Bank and underlying companies in private equity funds. the concentration risk is shown in the table below. the majority of the geographic exposure is to norwegian shares.
Nok million 31.12.2010 company storebrand asa 3,287.8 sparebank1 sr-Bank 958.9 spring energy norway as 49.9 at group 40.2 renonorden Holding as 35.2 total five largest 4,372.1 total equities 6,775.8 table 10b – largest equity exposures 2009
Nok million 31.12.2009 company storebrand asa 2,903.5 sparebank1 sr-Bank 877.4 orkla 25.3 apply group as (prev. sørco gruppen as) 23.4 elexia nordic aB 22.6 total five largest 3,852.2 total equities 5,608.5 to illustrate the sensitivity of the equity portfolio to a fall in equity prices, the table below shows the effect of a possible scenario. the figures show the effect on equity, but do not take into account taxation effects. Consideration is given to the fact that storebrand and spareBank1 sr-Bank were recognised as an associated company as at 31 december 2010 so that a drop of ten per cent in the share price will not result in an impairment of the value in the balance sheet, and the items are excluded from the sensitivity calculation. as shown in the table, the sensitivity increased significantly since 2009. as previously mentioned, this was attributed to an increase in the shareholdings.
gjensidige Forsikring invests in a number of private equity funds as well as fund-of-funds. the focus has so far been on the nordic region, and gjensidige will seek to assume an active role through a place on the board or advisory committees of the different funds. the portfolio consists of a mixture of venture and buy-out strategies. For investments outside the nordic region, gjensidige will generally seek to invest through fund-of-funds.
Nok million 31.12.2010 fund Fsn Capital ii lp 129.3 HitecVision private equity V lp 106.4 HitecVision private equity iV lp 85.6 altor Fund ii lp 83.2 northzone V Ks 61.5 total five largest 466.1 total private equity 1,134.9 table 12b – largest private equity funds 2009
iNterest-rate risk Within the group’s insurance companies, overall exposure to interest-rate risk will be reduced by matching a portfolio of fixed income instruments to the overall duration and the payout pattern of the insurance liabilities. since the insurance liabilities are generally not discounted in the balance sheet, this implies that from an accounting perspective insurance liabilities will be exposed to changes in inflation (but not directly to interest rates). an economic perspective, however, argues for hedging interest-rate risk, because the present value of the provisions will be exposed to changes in the real interest rate. From an accounting perspective, the risk from choosing this hedging strategy is reduced, because a major part of the bond portfolio
perspektiv 105gjensidige annual report 2010 resu lts is classified as held to maturity or loans and receivables (hereafter only referred to as the amortized cost portfolio). Furthermore from an economic perspective the inflation risk is partly reduced since a part of these bonds carries a coupon linked to the trend in the consumer price index.
in one of the danish operations, gjensidiges arbejdsskadeforsikring, the long-tail Workers’ Compensation line of business is hedged against changes in the real interest rate through swap agreements. the realinterest -rate risk relates to outstanding premium- and claims provisions of approximately noK 3,500 million (discounted value), where a large percentage of the claims are paid out as annuities, the payments of which are linked to a danish variant of the Cpi (yearly increase in danish workers compensation awards - determined by the authorities, a function of the wage developments). the risk to the present value of these annuities is hedged through a series of swap agreements stretching out over 40 years and covering inflation and interest-rate risk separately so that the net real-interest-rate risk is removed. the swap agreements are reset once a year and security is provided for outstanding market value between the parties, which reduces the counterparty risk and results in a limited book value. the fixed-income portfolio in gjensidiges arbejdsskadeforsikring is invested with a low duration.
the table below shows the maturity profile of the group’s fixed-income portfolio. it does not include the above-mentioned swap agreements, which have a limited carrying amount, but instead the actual fixedincome portfolio in gjensidiges arbejdsskadeforsikring.