Pension and savings * Gjensidiges Arbejdsskadeforsikring A/S and Nykredit Forsikring A/S are owned by Gjensidige Forsikring ASA, but run by the Danish branch
other claims incurred, losses etc. noK million (743.0) (390.3) (393.3) (90.7) (4.1)
• Motor (liability and casco insurance for cars, motor cycles, mopeds and motor homes, casco insurance for caravans, boat insurance)
• agricultural insurance (building and home contents insurances, insurance of production animals, insurance of farm machinery)
the agencies supplies our own distribution in growth areas, and only distribute for gjensidige and do so under a common brand.
use of technology to automate internal and external processes provides opportunities for new methods of working.
obJecTives anD sTraTeGies the business area shall support the group’s Cr target of 90-93 starting in 2011: • through the acquisition of nykredit Forsikring, gjensidige has achieved a size in the danish market that provides a basis for increased profitability in the coming years.
gjensidige Bank is a bank for customers in the private and agricultural markets and offers: • traditional banking products such as daily banking services and savings • secured loan products (Home loan and auto loan) • unsecured loan products (Consumer loans, credit card and account overdrafts)
the bank has agreements with tekna, the Confederation of Vocational unions (Ys), the norwegian society of engineers and technologists (nito) and the norwegian Farmers and smallholders union (nBs) and offers beneficial products and services to the organisations’ members. the bank’s products are also included in gjensidige’s benefits programme.
the customer growth was steady in 2010, but a rapid increase was reported in the fourth quarter when the customer growth was higher primarily as a result of Bankid, effective marketing of the products personlån and the high-interest account. at year-end, the bank had 89,594 active customers. 49% of those customers are customers interested in or holding other products and services related to banking and insurance.
Hedge funds and other financial investments 1,119.7 1,244.8 1,243.0 definitions: 1 this item mainly consists of the discounting effects of the insurance liabilities in denmark, mismatches between interest-rate and inflation adjustments on the liability side in denmark versus interest-rate and inflation hedging and currency hedging of gjensidige sweden and gjensidige Baltic. the carrying amount corresponds to the market value of interest-rate and inflation swaps in denmark.
gjensidige has participated in all of the quantitative impact studies that have been performed, most recently in 2010 (called Qis 5). these have primarily focused on the impacts on capital, and as far as gjensidige is concerned, Qis 5 shows that the group will also be very well-capitalised under the new regulations, with an excess capital under the new requirements at least as high as under the current regulations. the greater extent of market-based valuation of assets and liabilities under the new regulations will also entail that the excess capital measured against the capital requirements will fluctuate more from one period to another in the future. since the drivers for the capital requirement are significantly different, that may also result in the group making changes in its adaptation of assets, of product pricing and product composition and of the group’s internal legal structure. there is considerable focus on this in the ongoing work in the group’s solvency ii project.
under solvency ii, the group can apply to use an internal model to calculate the regulatory capital requirement. this entails that the capital requirement reflects, to the greatest extent possible, the group’s own quantitative assessment of the risk and the impact of the risk-reduction measures that are in place, e.g. reinsurance. since 2004, gjensidige has developed a so-called asset liability Management (alM) model that is used in its internal capital management. this model will be further developed in both scope and areas of use, and gjensidige will apply to get it approved as an internal model. in addition to a more correct assessment of the capital requirement, this is thought to give improved risk management by more consistently taking the impacts on risk and capital into consideration in strategic and operational decisions.
in 2010, gjensidige has also begun the work of adapting to new reporting requirements. in solvency ii, there are both new requirements for the information that has to be reported to the market in general (”solvency and Financial Condition report”) and to the supervisory authorities (”reporting to supervisors”). the objective of the enhanced reporting requirements is to give the users of accounting information a better picture of the risk that is inherent in the activities in light of the available capital, which shall help the market exercise discipline over the companies’ risk-taking. the information requirements shall be equivalent within the eu so that it is easier to compare companies from different countries. the challenge for the companies is that the preliminary specifications from the supervisory authorities are very extensive, and there will have to be an evaluation of whether such an extensive amount of information is reasonable in light of the objective of the new regulations.
the general meeting is open and accessible to all shareholders. registration to the general meeting is done electronically at www.gjensidige.com. the deadline for registration is 26 april 2011, at12:00 Cet.
unless the capital requirements suggest otherwise, the Board of directors’ objective, given the current capitalisation of the group, is that between 50 and 80 per cent of the profit for the year after tax will be distributed as dividends. in addition to paying a cash dividend, gjensidige will also evaluate the buyback of shares as a means of increasing the total shareholder return.
the Board of directors is authorised to buy back the Company’s own shares. any buyback of shares must occur in a stock exchange or in some other way at the stock market price, normally after a preliminary notice in the form of a stock exchange notice.
free neGoTiabiliTy the shares in the Company are freely negotiable in accordance with the articles of association. gjensidige is a norwegian financial institution. norwegian framework legislation has general licensing rules that apply to all norwegian financial institutions in the event of large acquisitions of shares (ten per cent or more).
shareholders may be represented by proxy. the notice will include further information about the procedure for being represented by proxy, including the authorisation form. in addition, a person will be appointed who may vote by proxy on behalf of shareholders.
two representatives elected by and from among the employee members of the supervisory board shall take part in the nomination committee’s work on preparations for the election of Chairman of the Board and the chair and deputy chair of the supervisory board.
the remuneration scheme shall help promote and provide incentives for good risk management, counteract excessive risk-taking and avoid conflicts of inter-
the Company has a separate investor relations (ir) function and a comunication department, which have a prominent position in the central management and an objective of ensuring that the information efforts are always in accordance with the best practices.
unDerWriTinG reserves accounting provisions that cover unearned premiums that have fallen due, claims that are expected to be incurred and expected costs related to closure of claims incurred.
gjensidige has a long history in life and pension insurance operations, first directly through gjensidige livsforsikring, which later became gjensidige nor spareforsikring, and indirectly in Vital Forsikring asa through the stake in dnB nor. in 2006, gjensidige restarted a separate pension insurance business in gjensidige pensjon og sparing. that same year, the group purchased its first shareholding in storebrand. gjensidige currently owns 24.33 per cent of the shares in storebrand. the stake is regarded as a long-term strategic investment, and together with gjensidige’s own investment in the pension market it gives the group a substantial exposure in the norwegian and swedish life insurance markets.
the most important distribution channels in the Baltic market are direct sales and sales via insurance agents and brokers. sales over the internet are also becoming more important in the Baltic market.
• Measures to prevent or reduce claims incurred through a greater focus on the detection of fraud and greater utilisation of the possibilities of reducing and recovering benefits.
reduced credit spreads have given a somewhat lower return of 4.5 per cent on the fixed-income portfolio in 2010, compared with 6.6 per cent in 2009. the fixed-income portfolio has not been subject to losses resulting from bankruptcies of our debtors in 2010. the international part of the investment portfolio is almost fully hedged.
tax the group had a tax charge of noK 303.6 million in 2010, compared with a tax charge of noK 861.8 million in 2009. the effective tax rate came to 9.3 (27.2) per cent in 2010. after conversion from a mutual company to a public limited company, gjensidige Forsikring is no longer subject to capital taxation, which has a permanent positive effect on the tax rate. in 2009, the capital taxation amounted to noK 36.0 million of the tax expense.
the low effective tax rate for 2010 is attributed to several non-recurring items, including the tax relief decision, the recognition of differences in estimates related to the calculated tax for 2009 and tax-free dividends. the largest single effect is the results of the tax relief decision, which reduces the tax expenses by noK 333.0 million for 2010. Corrected for this and other non-recurring items, a normalised tax rate for the year as a whole would have been 22.2 per cent.
net cash flow from financing activities consists mainly of payments and disbursements related to external debt financing and from the shareholders. net cash flow from financing activities was negative at noK 1,624.2 million in 2010, compared with a positive cash flow of noK 4,288.6 million in 2009. For 2010, the net cash flow was affected by the payment of dividends of noK 1,677.6 million. in 2009, net cash flow was affected by external borrowing in gjensidige Bank of noK 2.7 billion in connection with the acquisition of Citibank’s norwegian consumer loan portfolio.
the cost ratio was 12.9 for 2010, which was the same as in the previous year. nominally, expenses were reduced by noK 43.3 million in 2010 relative to 2009. as a result of the lower premium volume, cost-cutting measures were implemented in all parts of the business. Further measures are planned, and the management has devoted considerable attention to cost control.
the management income in the savings operations came to noK 22.4 million in 2010, compared with noK 11.2 million in 2009. the increase in revenues is attributed to increased sales and growth in the savings portfolio. the profit margin for savings was 0.61 per cent in 2010, compared with 0.90 per cent in 2009. the reduction is attributed to total assets growing more rapidly than income as a result of increased sales with lower margins to institutional customers.
total operating expenses amounted to noK 156.7 million in 2010, noK 109.6 million of which were insurance-related expenses. the corresponding figures for 2009 were noK 179.0 million and noK 102.7 million respectively. the cost increase in 2010 was mainly attributed to portfolio-related costs within the pension area as a result of increased business volume.
social respoNsiBilitY aNd eXterNal eNviroNMeNt gjensidige’s mission in society is to create value for the society by safeguarding life, health and assets and relieving customers of risk. therefore, gjensidige shall exercise social responsibility in particular by ensuring that the expertise that the group possesses in the prevention of damage shall benefit the whole society. ethical, social and environmental considerations have been integrated into the daily operations and influence relations with the group’s interested parties.
perspektiv 75gjensidige annual report 2010 resu lts 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 his position after turning 67. oslo district Court found in favour of the employee when they heard the case in april 2010, but the Company appealed. in december, the Borgarting Court of appeal handed down a judgment in gjensidige’s favour. the case has been appealed to the supreme Court, and the employee will remain in his position until the judgment is final and conclusive.
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, and it involves the possibility of having a certain amount of predictability in connection with agreements, pension matters and workforce management. 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.
Net income from investments income from investments in associates 6 488.7 263.3 operating income from property 422.8 401.2 interest income and dividend etc. from financial assets 1,385.4 1,385.9 net changes in fair value on investments (incl. property) 262.3 773.3 net realised gain and loss on investments 331.4 120.1 expenses related to investments 18 (142.4) (155.9) total net income from investments 20 2,748.2 2,788.0 total operating income and net income from investments 21,539.0 19,458.7 claims, loss etc.
1 the company is converted from limited liability mutual company (Ba) to public limited company (asa). in that connection the comparable figures under equity are changed. there is no change in total equity. restatement of the comparable figures are presented in consolidated statement of changes in equity.
payment on acquisition of portfolio 42.9 interest payments on borrowings (208.1) (36.7) net payment on long term borrowings 218.6 4,328.9 Net cash flow from financing activities (1,624.2) 4,288.6
Basis of measurement the consolidated financial statements have been prepared based on the historical cost principle with the following exceptions • derivatives are measured at fair value • financial instruments at fair value through profit or loss are measured at fair value • financial assets available for sale are measured at fair value • investment properties are measured at fair value functional and presentation currency the consolidated financial statements are presented in noK, which is gjensidige Forsikring’s functional currency. all financial information is presented in noK, unless otherwise stated.
owner-occupied property is defined as property that is used by gjensidige for conducting its business. if the properties are used both for the company’s own use and as investment properties, classification of the properties is based on the actual use of the properties.
Financial assets are derecognised when the contractual rights to cash flows from the financial asset expire, or when the group transfers the financial asset in a transaction where all or practically all the risk and rewards related to ownership of the assets are transferred.
the banking operation has established a liquidity portfolio which is continuously measured and reported at fair value. the bank has a goal of having low interest rate risk and plans and manages the interest rate risk so that one aggregates fixed-rate positions on both deposits, loans and placements in a model, and then use interest rate swaps to balance out potential remaining risk. interest rate swaps are measured at fair value, and in order to avoid inconsistent measurement, bonds and certificates with fixed interest-rates subject to interest rate hedging are measured at fair value.
an assessment is first made to whether objective evidence of impairment of financial assets that are individually significant exists. Financial assets that are not individually significant or that are assessed individually, but not impaired, are assessed in groups with respect to impairment. assets with similar credit risk characteristics are grouped together.
impairment losses recognised in profit or loss are not reversed through profit or loss, but in other comprehensive income.
owN shares at the end of the year the number of own shares was 26,983 (0).
Nok million 2010 2009 as at 31 december noK 4.70 per ordinary share (2009: noK 3.30) 2,350.0 1,650.0 1 proposed dividend for 2010 is not recognised at the reporting time, and it does not have any tax consequences.
perspektiv 91gjensidige annual report 2010 resu lts 2 – use of estiMates the preparation of the financial statements under iFrs and the application of the adopted accounting policies require that management make assessments, prepare estimates and apply assumptions that affect the carrying amounts of assets and liabilities, income and expenses. the estimates and the associated assumptions are based on experience and other factors that are assessed as being justifiable based on the underlying conditions. actual figures may deviate from these estimates. the estimates and associated prerequisites are reviewed regularly. Changes in accounting estimates are recognised in the period the estimates are revised if the change only affects this period, or both in the period the estimates change and in future periods if the changes affect both the existing and future periods.
the responsibility for all investment management is centralized in the group’s investment department. the responsibility for the reserve setting in the insurance companies is correspondingly centralized in the group’s actuary department. all internal guidelines and requirements for risk taking are based on comprehensive group policies and are subject to approval by the Board of directors in each company where this derives from local legislation. a group-wide credit committee chaired by the deputy Ceo has been established to set credit limits for individual issuers of credit together with general guidelines for counterparty risk.
gjensidige manages these risks mainly through close supervision of the development for each loB, underwriting policy and proactive claims handling. the monthly supervision of the results for each loB contains an overview of both premium and loss development. if there is an adverse development of the profitability, sufficient measures will be put in force. this includes necessary premium increases to ensure that the profitability is within the accepted level. the analysis of the profitability can be tracked further to different groups of customers and segments. the underwriting policy attempts to ensure that the underwritten risks
Fire and other damage to property 5,386.5 33.0 % 4,142.8 31.5 %
perspektiv 101gjensidige annual report 2010 resu lts the table below shows the number of members and contracts divided between compulsory occupational pensions and other defined contribution pensions.
For paid-up pension schemes there is in addition a yearly guaranteed minimum rate of return which on average amounts to 3.6 per cent at the end of 2010 (3.7 per cent in 2009).
this stress test based on figures at year-end is shown below (group figures). the capital buffer here is relative to the capital adequacy requirement for the gjensidige group, which is calculated according to norwegian gaap. For purposes of capital adequacy, gjensidige’s stakes in storebrand and spareBank1 sr-Bank are consolidated so that any decline in the share price of these enterprises will not affect the capital buffer. their results are entered in gjensidige’s accounts using the equity method, and in this way they affect the Company’s and the group’s capital buffer situation. Furthermore, consideration is given to the underlying fluctuation risk for the insurance results only to the extent that a weakening of the combined ratio will bring it over 100
per cent. Finally, the risk in the subsidiaries outside general insurance (gjensidige pension and savings, Hjelp24 and gjensidige Bank) are included by assuming a reduction of ten percentage points in their return on equity and including the losses that this may entail.
the parent company hedges its investments, but not future income, in subsidiaries against foreign-exchange risk. For gjensidige Baltic, the hedging is performed in eur because periodically there is low liquidity in the market for lVl. in order to counteract the risk that then arises, a percentage of gjensidige Baltic’s interest-bearing papers are invested in eur. For tennant Forsäkringsaktiebolag, the hedging is in seK. in both cases, the results of the hedging are recognised in the income statement while the change of value in the hedged object is recognised in other comprehensive income. in the danish subsidiaries, nykredit Forsikring and parts of Fair Forsikring, hedge accounting is employed where only the inefficient part of the hedging is recognised in the income statement. this gives a more consistent accounting of hedging and the hedged object. the hedging is carried out with currency swaps, where the amount is adjusted quarterly.
Based on this kind of scenario, the Board of directors has set a liquidity requirement for 2010 of at least noK 4,000 million in the most liquid funds, defined as deposits in banks, bonds and certificates issued by oeCd countries or guaranteed by these countries and money market instruments with a rating of a or better and with a due date within six months. the current allocation meets these requirements. the table below shows the classification used and the amounts as at 31 december 2010 for gjensidige Forsikring asa.
table 24 – asset allocation gjensidige pensjonsforsikring, excluding the unit-linked portfolio
in order to measure interest rate risk, it is taken into consideration that both asset and liabilities are interest rate sensitive. as at 31 december 2010 there is a negative interest rate exposure in the interval of three months to one year of 313 milli years, whereas net accumulated interest rate exposure over three months is negative with 299 milli years. a limit for maximum loss from a one percentage point parallel shift in the yield curve of noK five million is approved by, and reported monthly to the Board of directors.
in the banking operations, the assets and liabilities have contractual maturities. on the liability side, the customers in general may withdraw their deposits at short notice, resulting in a short time to maturity. the Board of directors has specified liquidity reserve requirements in the form of short-term deposits, liquid securities and/or committed drawing rights that will afford the necessary restructuring time in a period with less access to liquidity, in accordance with guidelines specified by Finanstilsynet (the Financial supervisory authority of norway). Based on these criteria, the liquidity reserve requirement as at 31 december 2010 was noK 1,200.8 million, with an actual reserve of noK 1,816.1 million.
Furthermore, the danish operations are the group’s centre of expertise for insurances to municipalities and other public sector entities in norway, sweden and denmark, under the KommuneForsikring brand. the norwegian branch of the swedish operations handles the group’s white label initiative.
etc. 1 total segment income segment income - group 2 - Claims, interest expenses, loss etc. (6,007.4) (3,819.0) (1,833.0) (411.5) (121.5) (268.8) (12,461.4)
an impairment loss on goodwill is in 2009 and 2010 recognised in two segments; nordic and Baltic. For further information, see note 5.
the annual assessment of impairment losses was carried out in the third quarter of 2010. an indication assessment was also carried out in the fourth quarter in order to assess whether new circumstances calls for new impairment testing of goodwill.
Nok million owner-occupied property plant and equipment 1 total cost as at 1 january 2009 385.1 667.6 1,052.8 additions 1.8 124.7 126.5 disposals (0.9) (5.7) (6.6)
Financial income and expenses from investment properties is shown in note 20.
valuation based on non-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.
Bonds and other fixed income securities seNsitivitY fiNaNcial assets valued Based oN NoN-oBeservaBle Market data (level3) 2010 seNsitivitY fiNaNcial assets valued Based oN NoN-oBservaBle Market data (level 3) 2009 recoNciliatioN fiNaNcial assets valued Based oN NoN-oBservaBle Market data (level 3) 2010 recoNciliatioN fiNaNcial assets valued Based oN NoN-oBservaBle Market data (level 3) 2009
discounting has been conducted in order to take into account the fact that the loans are non-interest-bearing. the discount rate used is 4.66 per cent.
the plan also includes disability pension and spouse and child’s pension subject to specific rules. in addition, gjensidige Forsikring has pension liabilities beyond the ordinary collective plan for some employees. this applies to employees with a lower retirement age, employees with salaries above 12 times the social security base amount and supplementary pensions.
Kirsten indgjerd Værdal, Chairman 119.5 5.4 trond Bakke, deputy Chairman 39.5 0.6 in connection with the resignation for one member of the senior group Management, a severe payment of noK 2.2 million has been paid.
21 – coNtiNgeNt liaBilities Nok million 2010 2009 guarantees and committed capital gross guarantees 0.6 0.6 Committed capital, not paid 705.8 946.0 as part of its ongoing financial management, the Company has undertaken to invest up to noK 705.8 million in various private equity and real estate investments, over and above amounts recognised in the balance sheet. investments in private equity and real estate funds totalled noK 1,303.6 million at the end of the year.
deferred tax assets (199.4) other intangible assets (1,349.5) (847.1) investment properties, unrealised gains, proportion (268.1) (278.1) reinsurance provision, minimum requirement (6.4) (5.6)
Ceded reinsurance premiums (438.7) (368.7) premiums written, net of reinsurance 15,874.5 12,785.1 Change in gross provision for unearned premiums (218.7) (102.5)
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
interest-free loans are issued to finance fire alarm systems within agriculture for loss prevention purposes. These loans are repaid using the discount granted on the main policy when the alarm system is installed.
Cost As at 1 january 2010 152.0 15.8 272.4 881.2 1,321.4 Additions 899.2 335.2 53.4 105.2 54.8 1,447.8 Additions from internal development 29.8 29.8 exchangerate differences (15.6) (8.7) (1.5) (0.7) (1.6) (28.1) as at 31 December 2010 1,035.6 342.4 51.8 406.7 934.4 2,770.9 Uncompleted projects 75.7 75.7 as at 31 December 2010, including uncompleted projects 1,035.6 342.4 51.8 482.4 934.4 2,846.5 amortisation and impairment losses As at 1 january 2010 (1.8) (133.3) (881.3) (1,016.3) Amortisation recognised during the period (34.4) (7.6) (87.1) (8.1) (137.1) exchangerate differences 0.5 0.2 0.5 0.2 1.6 as at 31 December 2010 (35.6) (7.4) (219.8) (889.1) (1,151.9)
6 – shares in subsiDiaries anD assOCiates 2 Operating income. For companies where financial income is operating income, financial income is included. For other companies financial income is not included.
perspeCtive 167gjensidige AnnUAL RePORT 2010 resu lts subsiDiaries - aDDitiOnal inFOrMatiOn nOk million assets equity liabilities revenues 2 profit/(loss)
Quoted prices in active markets Quoted prices in active markets are considered the best estimate of an asset/liability’s fair value. A financial asset/liability is considered valued based on quoted prices in active markets if fair value is estimated based on easily and regularly available prices and these prices represent actual and regularly occurring transaction transactions at arm’s length distance. Financial assets/liabilities valued based on quoted prices in active markets are classified as level one in the valuation hierarchy.
Combination funds FORTis L FUnd-Bd COnV WRLd-i 523.2 total combination funds 523.2
perspeCtive 179gjensidige AnnUAL RePORT 2010 resu lts 15 – pensiOn (COnt.)
gunnhild H. Andersen, employee 235.0 605 Kjetil Kristensen, employee 235.0 406 gunnar Mjåtvedt, employee 280.0 799 the board of Directors, deputies 6 sissel johanne Monsvold 27.8 john Ove Ottestad (1.1.10-28.6.10) 1 13.0
Kirsten indgjerd Værdal, Chairman 119.5 5.4 Trond Bakke, deputy Chairman 39.5 0.6 in connection with the resignation for one member of the senior group Management, a severe payment of nOK 2,2 million has been paid.
24 – Capital ratiO nOk million 2010 2009 equity 20,148.6 19,959.3 effect of adm.prov., guarantee scheme prov. and natural perils fund (4,265.4) (3,966.6)
dnB nOR Bank AsA 2,460,837 0.49 % Barclays Bank PLC 2,400,000 0.48 % Vital Forsikring AsA 1,998,200 0.40 %