Recognition for corporate social responsibility in Lithuania Our corporate social responsibility project ‘Find time for conversation’ won two top awards in the Baltic Communication Awards. Flood protection from Gjensidige Prior to the expected spring flood, we deployed flood damage equipment in advance for the first time in a number of locations at risk in Norway.
* Dividend reinvested ** Non-weighted average in local currency for Tryg, Topdanmark, Sampo and Alm.Brand * Dividend reinvested ** Non-weighted average in local currency for Tryg, Topdanmark, Sampo and Alm.Brand.
Clarification of our corporate social responsibility Sustainability and corporate social responsibility have been important to our business right back to when the first Gjensidige companies were founded more than 200 years ago. The UN Global Compact Principles, which we have endorsed, form the basis for our current sustainability work. Sustainability is a precondition for long-term value creation and is integral to our strategy. The Board has highlighted four UN Sustainable Development Goals that we shall particularly endeavour to support: Good health; Decent work and economic growth; Sustainable cities and communities; and Climate action. In 2018, we launched a process to identify concrete measures and goals that will further refine our sustainability work. As a leading insurance company, we will endeavour to reduce carbon intensity by means of loss prevention work and more environmentally friendly claims settlement processes. You can read more about this on page 22–49 of this annual report.
In the short term however, our priority is to get the most out of our existing business. Good profitability is a vital condition for ensuring we have the momentum and determination we need to set the agenda, and to be an active driver of development. Our point of departure is very strong. We have particularly satisfied customers and high customer loyalty, in Norway especially, where we have the strongest reputation in the financial sector and one of the strongest regardless of sector. We have the broadest and most refined insurance expertise, and our employees are more engaged than the average for our sector in the Nordic countries.
Three key strategic priorities have been and remain the basis for our business. We aim to deliver the best digital customer experiences in the Nordic countries and the Baltic states, we will make use of data, technology and knowledge in increasingly sophisticated ways, and we will actively work on management and employee development.
The competitive situation We face competition from traditional general insurance companies and bancassurance companies. We have seen a few attempts in recent years to establish non-traditional business models. The number of such initiatives is expected to increase going forward. New regulation and technology may usher in new business models that may challenge existing models.
48.0% Motor 31.7% Building 6.1% Accident and health 11.2% Liability 3.1% Other
Source: Baltics Insurance Supervisory Authorities of Latvia and Lithuania, Estonia Statistics, competitor reports, and manual corrections. Based on gross written premiums for 3rd quarter 2018.
Customers Dialogue with our customers is an important means of reaching our ambition to become the most customer- oriented general insur ance company in the Nordic countries. We communicate with our customers through • Relevant products/services • Digital solutions • Loss prevention • Efficient claims settlements
Overriding management Gjensidige will help to ensure that we, our partners and customers work to reach the environmental and climate goals of the Paris Agreement. The expected increase in the scope of natural disasters as a result of environmental and climate change affects our activities, such as the development of products, financial planning, pricing, rebuilding and loss prevention measures. Environmental and climate change affects risk assessments and the pricing of insurance. For example, we continuously assess the effects of extreme weather and changes in risk exposure, based on experience, expert assessments and prognoses.
New measures • Further develop our digital solutions pursuant to diversity and universal design requirements.
Good business governance We are concerned with good risk management because it is essential to an insurance company. It affects everything from product pricing assessment to capital needs. We have established an internal control system that facilitates compliance with laws and regulations. We have a particular focus on data protection compliance (GDPR), corruption and money laundering, and our Code of Conduct.
Our business shall be characterised by propriety and reliability, with effective risk management and good internal control, which also improves products, services and processes. In addition to complying with external and internal rules, decisions and actions shall also be in line with Gjensidige’s values and Code of Conduct, in a manner that creates and preserves value for customers, owners, employees and society at large.
All procurements shall be as environmentally effective as possible, meaning that they shall seek to achieve maximum value creation and minimum environmental harm. Suppliers are, to the extent possible, encouraged to make environmentally friendly choices. This applies to all the countries we operate in.
• Our agricultural advisers have conducted more than 11,000 risk checks since 2015. As a result, we are now seeing a record low number of fires in farm buildings.
Road safety Young drivers are especially at risk of being involved in accidents. Gjensidige therefore has several measures targeting this group. In Norway, we give an insurance discount to young people who have practised driving with an accompanying driver for a sufficient number of kilometres. When they reach the age of 23, customers who have driven claim-free for the past year or longer will receive a sum of money as a reward. The longer the claim-free period, the bigger the reward. We collaborate with the Norwegian Council for Road Safety (Trygg Trafikk) on awareness -raising campaigns in upper secondary schools several places in Norway. #ErDuSikker? is a traffic safety competition for upper secondary schools.
Certified Eco-Lighthouse In order to ensure that we impact the environment as little as possible, all our 11 Norwegian offices that have more than 30 employees are certified Eco-Lighthouses. Eco-Lighthouse is a national environmental certification scheme run by the Eco-Lighthouse Foundation. The foundation was established by key organisations in the private and public sector.
10. Businesses should work against corruption in all its forms, including extortion and bribery.
ESG is a part of all credit analyses that form the basis for investments in corporate bonds, and in the ongoing dialogue with companies and the dialogue prior to share issues.
5.7 Digital transformation What we do The continuous improvement of processes is vital to being customer-oriented and ensuring cost efficiency. Digitalisation offers many sustainable solutions that benefit our customers and society at large. The use of artificial intelligence is also considered to be one of our priority emerging risks, where we see both opportunities and threats.
In Denmark, Gjensidige supports the Christmas Seal Homes foundation (Julemærkehjemmene), which helps children who are victims of bullying or isolation.
In Lithuania, we cooperate with the aid organisation Food Bank, which distributes food to the poor. Gjensidige provides free insurance, supports activities and encourages employees to take part in the distribution of food packages. In 2018, we funded food packages for 13,400 people, instead of giving our business associates Christmas presents. We are a member of the ‘For a Safe Lithuania’ campaign, the purpose of which is to give children from underprivileged families an increased sense of security and self-esteem. In Latvia, we are doing a tour of the biggest schools, teaching children about safety in the home. We sponsor and help to organise the Fire Safety Conference, which targets business and industry. In Estonia as well, we cooperate with the Food Bank on the distribution of food to the poor.
Our Code of Conduct describes our values and underlines that all our activities must stand up to public scrutiny. Together with other documents, the Code of Conduct describes what is acceptable conduct and requires all employees to behave in a respectful, considerate and generally polite manner in relation to colleagues, competitors, customers and others.
Managers, proportion men/women 3 Per cent 63/37 63/37 64/36 63/37 59/41
Prior to the meeting, the shareholders have ample opportunity to contact the Company to clarify matters or to get help to raise items at the General Meeting.
If the chair of the board has been directly or indir ectly involved in a matter, another board member has chaired the meeting instead. If a board member is disqualified on grounds of partiality, he/she cannot be involved in consideration of the matter in question, and must leave the board room and is excluded from involvement in the matter.
The work on internal control is based on the COSO principles, which comprise three lines of defence. They are the management’s own control measures (first line), the Compliance function’s and Risk Management function’s control measures (second line) and the Internal Audit (third line). Gjensidige is first and foremost an insurance group. The independent actuary function is therefore an important and necessary part of the Board’s work, and for assessing the actuarial liabilities.
The Board has issued a separate report on corporate social responsibility, see page 22–49. Consideration for society at large is an integral part of Gjensidige’s strategy and a precondition for long-term value creation.
Combined ratio 85.0 per cent (90.7 per cent excluding run-off gains beyond expected level)
3. Our goal is for 80 per cent of all claims in our Norwegian business to be reported digitally, and for 64 per cent of all claim reports to be processed automatically in 2022. In 2018, 80 per cent of claim reports concerning travel were registered digitally and 22 per cent were processed automatically. Many customers were notified that their claim has been processed within two seconds of submitting the claims report. This is possible thanks to standardised, digital claims forms and algorithms that are built into our core system.
Dynamic organisational development Restructuring was carried out towards the end of 2018, where the most significant change was that the responsibility for claims processing was transferred to the respective divisions Private, Commercial, Denmark and Sweden. The purpose of this was to give the divisions overall responsibility for their customers, in order to further strengthen customer satisfaction and competitiveness. The development of interdisciplinary competence is important for keeping up with developments that address changes in technology and customer behaviour, and new measures will be considered in 2019.
In the commercial segment, we have a number of organisational and chain agreements with industry associations and individual companies. New agreements were established and existing agreements renewed in 2018.
Capital and balance sheet optimisation Gjensidige works continuously on balance sheet and capital optimisation in order to ensure attainment of the Group’s financial targets as well as an efficient capital structure and sufficient financial flexibility.
The Pension segment contributed record profits in 2018, driven by higher income through growth in customer portfolios and positive non-recurring effects. The Retail Bank’s profit performance deteriorated as a result of higher operating and non-recurring expenses, write-downs and losses in addition to a reduction in income.
General Insurance Private The underwriting result was NOK 1,934.8 million (2,200.0). A more adverse frequency claims situation, particularly driven by extreme weather conditions in Norway, and an increase in large losses were partly offset by an increase in run-off gains. The combined ratio was 77.9 (74.2).
Nafstad has had several leading positions in Equinor Norsk Hydro, Saga Petroleum and the Ministry of Petroleum and Energy. She holds directorships-/ chairman positions in a number of Boards of Statoil’s international companies.
Operating expenses amounted to NOK 872.3 million (840.1), corresponding to a cost ratio of 11.5 (11.5).
General Insurance Sweden The underwriting result increased to NOK 78.2 million (minus 91.6). The improvement was primarily driven by a more favourable underlying frequency claims situation and higher run-off gains. The combined ratio was 95.0 (105.3).
Operating expenses amounted to NOK 334.4 million (345.9). Currency effects increased operating expenses by NOK 10.0 million. The underlying improvement was mainly due to restructuring and cost saving initiatives. The cost ratio improved to 31.0 per cent (32.2).
Operating expenses were NOK 488.4 million (412.5). The increase was driven by costs related to sale of the bank to Nordea, termination of the distribution agreement with Gjensidige’s Private division and business growth. Expenses, adjusted for non- recurring items were NOK 459.5 million (412.5). The increase is mainly due to business growth.
1 The geographical distribution is related to issuers and does not reflect actual currency exposure
Operational risk Operational risk is defined as a potential incident or event that may arise during operations and that may have financial consequence and/or negative consequences for reputation. Operational risk can be due to human error, weaknesses in systems, faults in processes or external events. In order to reduce the risk, emphasis has been placed on well-defined and clear lines of reporting and division of responsibility in the organisation of the business. Set procedures have been established for conducting risk assessments, and the Board evaluates the status annually as part of the Company’s internal control system.
Strategic risk Strategic risk is related to decisions and strategic choices as well as the implementation of critical measures. Gjensidige’s strategy is monitored continuously in relation to changes in performance, developments in the market and competition, and changes in framework conditions. Factors that have been identified as critical to the Company’s goal attainment are monitored particularly closely. To ensure that Gjensidige is ahead of developments, strategic risk is managed through continuous monitoring of competitors and the market, follow-up of profitability, and through product development and planning processes.
Employees, corporate social responsibility and the environment The Board has prepared a separate report on corporate social responsibility in line with Oslo Børs’ recommendation on page 22-49. The report also covers employee and environmental considerations.
Results from investments in associates and joint ventures 5 291.8 255.8
Provision for liabilities Subordinated debt 13, 18 1,498.0 1,947.3 Premium reserve in life insurance 6,336.2 5,784.9 Provision for unearned premiums, gross, in general insurance 16 10,051.1 9,961.4 Claims provision, gross 16 29,355.8 31,322.7 Other technical provisions 353.2 339.6 Pension liabilities 10 562.4 578.3 Other provisions 19 319.3 328.6
Gjensidige Bank implemented IFRS 9 at 1 January 2018, and there were two implementation effects. The new impairment requirements increased the bank’s provision for expected credit losses with NOK
Gjensidige implemented amendments to IFRS 2 at 1 January 2018, and there was one implementation effect. The tax liability as at 31
Basis of measurement The consolidated financial statements have been prepared based on the historical cost principle with the following exceptions
As a result of Gjensidige Forsikring entering into an agreement with
Each component of owner-occupied property, plant and equipment are depreciated using the straight-line method over estimated useful life. Land, leisure houses and cottages are not depreciated.
Deductible grants to defined contribution plans are recognised as employee expenses in the income statement when accrued.
96 | Gjensidige annual report 2018 3. Risk and capital management
An underwriting policy approved by the Board gives guidelines for fundamental principles and responsibilities in product and tariff development, risk selection and determination of the terms and pricing of individual risks. The Board has further approved policy for technical provisions, which gives the overall principles for the provisions. Gjensidige’s internal model is used to determine longterm profitability targets for each line of business.
Gjensidige Pensjonsforsikring AS offers several disability pension products and for this reason disability risk is a material risk. In addition, longevity risk is a substantial risk because of the portfolio of paid up policies. In Solvency II context the risk exposure looks
The tables below show allocation of the fixed-income portfolio per sector and per rating category at year-end in 2018 and 2017.
In addition, there is a requirement for an annual review and reporting of operational risk. “Risk and compliance coordinators” are appointed within each division and operating subsidiary in order to assist managers with operational risk management.
The target zone for the solvency margin is between 135 per cent and 200 per cent, provided that the sale of the bank is carried out as planned. The solvency margin levels are expected to be at the upper end of the range to support a Standard & Poor's A rating or equivalent, to stabilize regular dividends over time, to ensure financial flexibility for smaller acquisitions and organic growth not financed through retained earnings, as well as providing a buffer against regulatory uncertainties
108 | Gjensidige annual report 2018 together with dividends must not exceed justifiable payment of dividend based on a company’s financial strength and operations.
The Private segment offers a wide range of general insurance products and services in the Norwegian private market, both in property and accident and health and leisure.
The Group’s operations in Denmark offers general insurance products to private, commercial and municipal markets, including insurances related to motor, property, accident and health, liability, agriculture and leisure.
Description of the segments income and expenses Segment income is defined as earned premiums for general insurance and earned premiums and management income etc. for
ADB Gjensidige No need for impairment No need for impairment No need for impairment No need for impairment
Gjensidige Forsikring ASA is the Group's parent company. As at 31 December 2018 the following companies are regarded related parties. See note 5 in Gjensidige Forsikring ASA for specification of subsidiaries and joint ventures.
Weighted average share price of shares released during the period 147.91 133.53
Total positive impact on equity from IFRS 9 at transition amounts to NOK 10.4 million after tax.
Total reinsurers' share of insurance-related liabilities in general insurance, gross 513.2 739.5
Cash and cash equivalents at the end of the year ¹ 1,656.4 1,625.0
The amendments to IFRS 4 permit entities that predominantly undertake insurance activities the option to defer the effective date of IFRS 9 until 1 January 2021. The effect of such a deferral is that the entities concerned may continue to report under the existing standard, IAS 39 Financial Instruments.
Total auditor's fee (incl. VAT) 3.4 3.3 1 Other expenses include cost reductions for Gjensidige Forsikring ASA regarding duties performed for subsidiaries and cost allocations to claims and finance.
Fair value Financial assets and liabilities measured at fair value are carried at the amount each asset/liability can be settled to in an orderly transaction between market participants at the measurements date at the prevailing market conditions.