It all started with a sense of community. If there was a fire on the neighbouring farm, it could be rebuilt with the help of what people had paid to the mutual fire insurance – jointly.
For more than 200 years, Gjensidige has played an important role in the development of society as we know it today. Gjensidige has not only survived but become a leading company in our part of the world. The key to this development has been its capacity for change; the capacity to change the business in step with new external requirements, and the capacity to influence societal developments.
Preconditions for being able to deliver this are a strong brand, the right technology and an organisation characterised by good leadership, capabilities and culture. Sustainability and corporate social responsibility must be integrated into the Company’s operations and are a foundation for our entire business. The board believes that the sustainability efforts are important to the Company’s value creation.
The result achieved in 2019 is our best result ever. There are several reasons for the strong improvement from 2018.
I am pleased with the profitability measures we have implemented, and the effect we have achieved. We have succeeded in carrying out repricing without material losses of volume. The quality of the portfolio has also improved, because churn was lowest in the customer groups with good profitability.
For more than 200 years, Gjensidige has sought to create a sense of security for our customers by safeguarding life, health and assets. That’s our mission. We have continuously implemented damage prevention measures, and provided help when the damage was done. Our experience and expertise shall benefit society at large. Gjensidige shall maintain a stronger focus on sustainability and thereby help to implement the Paris Agreement and the UN Sustainable Development Goals.
Dividends Nominal high and stable and payout ratio >80 % over time 1 Defined as an alternative performance measure (APM). APMs are described at www.gjensidige.no/reporting in a document named APMs Gjensidige Forsikring Group Q4 2019. 2 Assuming annual run-off gains ~NOK 1 billion through 2022. Corresponds to 9093 per cent given zero run-off gains post 2022. 3 Corresponds to >16 per cent given zero run-off gains post 2022 4 Excluding run-off
Global megatrends towards 2030 Global megatrends relating to demographics, health, digitalisation, urbanisation and climate and environmental change give rise to opportunities and threats for the insurance industry, that we need to understand.
 Digital user habits have spillover effects across industries, giving rise to expectations of good, personal digital services – also in insurance.
Improvement agenda We will continuously develop and rationalise our core processes based on our customers’ needs, behaviour and expectations, and make investments to ensure future flexibility and agility. Investing in a modern, flexible technology platform and next generation tariffs and analytical CRM are crucial focus areas. The investments on the improvement agenda will make heavy demands on the Group’s ability to follow through, especially at the start of the strategy period. Combined with good cost discipline, however, this will gradually allow the Group to free up resources for new and other development ambitions towards the end of the strategy period.
The capitalisation of the Group will be based on a solvency margin target of 150–200 per cent for the Partial Internal Model (PIM). This applies to both the regulatory approved model (legal perspective) and the calibrated model (own partial internal model). The solvency margin level should support an ‘A’ rating from Standard & Poor’s, stable regular dividends over time, financial flexibility for smaller acquisitions and organic growth not financed through retained earnings, as well as providing a buffer for regulatory changes.
Human capital and structural capital – people and the system Our employees’ expertise, combined with data and technology, is used to develop products and services, give customers advice and help them when they need us. We develop systems and processes to be able to model and assess risk and to provide more relevant and efficient customer service.
In Denmark, Gjensidige distributes general insurance products through its own sales network and in cooperation with the Nykredit group. In addition, private insurance products are sold through a number of partners, especially travel agents, car dealers and estate agents. A considerable share of sales in the Danish commercial market take place in collaboration with brokers. The market for small and medium-sized customers and agricultural customers is served via the phone and through dedicated underwriters. Distribution in the municipal market takes place either directly or through brokers.
In Sweden, general insurance products for private customers are largely distributed through our own sales system, but also digitally through aggregators and insurance mediators such as partners. In the commercial market, distribution mainly takes place through insurance brokers and partners, but the proportion of direct sales is also increasing.
Gjensidige shall work on damage-preventing measures that strengthen individual and institutional capacity on climate change mitigation and early warning, and strengthen their knowledge of and raise awareness about the climate.
Natural disaster claims With the help of weather data, we send text messages to customers who are likely to be affected by bad weather. The messages are based on official weather data and our customer data, so that we avoid distributing false alarms. Every year, we receive feedback from grateful customers who have had time to secure their assets thanks to these messages. We have contributed to increased flood preparedness by deploying pumping equipment in areas prone to flooding before the spring thaw. The intention is to reduce the risk of major losses, and to provide the quickest possible help to as many customers as possible affected by the flood.
The general insurance market in the Nordic countries is mature. The Baltic general insurance market is slightly less mature, with a potential for strong growth as the standard of living improves. The high level of prosperity in the Nordic region means that people have substantial assets to insure. For private customers, the biggest products are home insurance and motor insurance. Travel, leisure boats and valuables also represent a significant volume of insurance.
• Our asset management is based on the 10 UN Global Compact principles, which promote human rights, labour standards, the environment and anti-corruption work. This is enshrined in Gjensidige’s SRI policy (policy for socially responsible investments) and its appendices, which are available at gjensidige.no.
The work carried is proportionate to the share of our investments that largely entail following up external fund managers, bond investments in the match portfolio and real estate investments in Oslo Areal.
Per Arne Bjørge Board member Per Arne Bjørge (1950) has been a member of Gjensidige’s Board of Directors since 2011. He holds a bachelor’s degree in Economics and Business Administration and the exam for state authorised public accountants.
Vibeke Krag is independent of key employees, main business partners and the major shareholder.
Ethical and customer-friendly business operations Gjensidige shall have a corporate culture where each individual employee exercises good judgement. Our value creation shall take place in accordance with our Code of Conduct, which is described in a number of policy documents that are adopted by the Board.
1. Statement on corporate governance This statement is based on the principle of ‘comply or explain’. There are no major deviations. However, in line with the requirements of the Code of Practice, we nonetheless include a statement on each point in accordance with the Code of Practice of 17 October 2018. Minor deviations are noted and explained.
It is considered expedient for the Board to be authorised by the General Meeting to make decisions concerning the distribution of dividends throughout the year if there are financial grounds for doing so. Such decisions must be formally based on the approved accounts for 2019, and will, if relevant, come in addition to the dividend adopted by the General Meeting. Such authorisation must be decided by the General Meeting, and it will apply until the next annual general meeting, no longer, however, than until 30 June the following year.
Furthermore, the Board believes it is expedient for the Board to be given limited authority to increase the share capital through subscription for new shares. Such authorisation must be decided by the General Meeting and will apply until 30 June the following year. Reference is made to the items to be considered by the General Meeting for more information and for the conditions that are set.
The first line of defence consists of each individual employee and manager, who are responsible for risk assessment, risk management and risk reduction measures in their day-to-day work, in addition to maintaining internal control.
The overriding objective of Gjensidige’s management of operational risk is to ensure that the Group’s risk level is within the adopted risk appetite adopted by the board as well as ensuring that operational incidents are acted upon to improve governance of the business. Gjensidige has low tolerance for operational risk.
Climate-related financial disclosures (TCFD) Gjensidige will help to ensure that we, our partners and customers work to reach the environmental and climate goals of the Paris Agreement. Gjensidige considers climate change to represent a major challenge for society as a whole and has set clear goals in its sustainability strategy for how the Company shall contribute to a reduction in greenhouse gas emissions, both directly and indirectly, through damage prevention, claims settlement processes, socially responsible investments and own emissions. As an insurance company, risk relating to weather and climate-related events is a natural part of the risk we cover for our customers. In a broader, more long-term perspective, climate risk also has the potential to affect insurance risk, financial risk, operational risk and business and strategic risk.
• Opportunity: ‘The right risk pricing and terms and conditions of subscription can increase Gjensidige’s business volume and earnings. With the use of data and expertise, Gjensidige can prevent losses.’
The following assumptions were used in the calculation of average material consumption and waste produced by fire and water damage frequency claims: Fire damage: Replacing floors and walls Cleaning and painting surfaces Electronics Waste, corresponding new materials Energy consumed Kilometres driven, repairs
We can look back on a year in which we achieved many things that will benefit our customers, owners, employees and the environment, of which damagepreventing measures were one of the most important. Gjensidige has helped to prevent losses and accidents for more than 200 years, and we will give even higher priority to this work in line with the sustainability goals.
In Denmark, there were 2,689 pieces about Gjensidige, of which 1,009 included damage prevention topics or social responsibility topics. The comparable figure in 2018 was 576.
1 Given CR within the stipulated range, which reflects a normal claims year
The vast majority of procurements are made locally. This means that, as far as possible, our partners/suppliers are available in the area where a need has arisen or a loss occurred. No suppliers have been excluded due to screening, but all of them receive feedback on areas of improvements based on scores in the ESG status-reporting.
Air travel is the Company’s other main source of CO2e, which contributed 1,915 tonnes of CO2e in 2019.
• More dialogue with and increased influence over external fund managers concerning ESG.
Physical risks associated with Gjensidige’s investments mainly concern properties in Oslo Areal. More specifically 18 properties, all in a central location in Oslo and Stavanger, which make up a considerable proportion of the investment portfolio. Although the properties are concentrated in the same geographical area, the physical risk is deemed to be low. The property investments are considered to be equipped to withstand transition risk, as a result of strict energy requirements and other regulations. The remaining part of the investment portfolio is deemed to be well diversified and does not entail any concentrated risk over and above systematic risk.
Important events in 2019 Completed the sale of Gjensidige Bank and established cooperation with Nordea In 2018, Gjensidige Forsikring entered into an agreement on selling Gjensidige Bank to Nordea. The sale was carried out in the first quarter 2019 and resulted in proceeds of approximately NOK 5.6 billion. At the same time, the parties entered into mutual cooperation on the distribution of banking and insurance services in Norway aimed at private customers. The partnership has got off to a good start, driven by partners with strong brands and compatible business cultures. Both parties’ presence in important customer processes will be strengthened with a relevant, diverse and attractive product portfolio. Both Gjensidige and Nordea have high digital ambitions, and are working to offer customers seamless, integrated digital solutions. Towards the end of the year, the partnership was also expanded to include the commercial segment, where there is great potential, especially for SME customers.
Claims incurred amounted to NOK 5,682.6 million (5,720.7). The loss ratio improved to 64.0 (65.3), primarily driven by a 3.7 percentage point improvement in the underlying frequency loss ratio. A positive effect from lower large losses was more than offset by lower run-off gains. Both the motor and property insurance lines showed improved profitability, reflecting the difference in weather conditions. The profitability of the motor insurance line also reflected significant pricing measures and adjustments to terms and conditions in response to claims inflation. The negative 12-month rolling underlying profitability trend for motor, excluding the extraordinary weather effects in the previous year, reached a turning point during the first quarter 2019 and continued to improve to a satisfactory level in subsequent quarters.
Earned premiums increased to NOK 8,164.1 million (7,603.3), reflecting pricing measures and solid renewals. All the main product lines recorded higher premiums. The overall portfolio quality is solid, reflecting good risk selection and risk pricing.
Earned premiums amounted to NOK 1,126.9 million (1,078.8). Measured in local currency, earned premiums rose by 1.8 per cent, reflecting sales growth in the accident, health and motor insurance lines. This was offset by somewhat lower prices as a result of fierce competition, particularly in motor insurance.
Gjensidige Pensjonsforsikring is well under way with the preparations for the scheme. Its introduction creates new opportunities and the Company will make active efforts to establish a position in the new market.
IFRS 17 Insurance Contracts Gjensidige has started work on implementing the new accounting standard IFRS 17 Insurance Contracts, which is expected to enter into force on 1 January 2022. The standard will affect the Group’s accounts by introducing material changes to the measurement and presentation of income and expenses. For further information, see Note 1 on accounting principles.
Comprehensive income attributable to: Owners of the company continuing operations 6,418.0 3,358.8 Owners of the company discontinued operations 37.6 335.0 Non-controlling interests 0.1 (1.2) Total 6,455.7 3,692.6
Effect of exchange rate changes on cash and cash equivalents (6.1) (7.9) Net cash flow (420.4) 154.6
Operational activities are primary activities within each of the Group’s business areas. Investment activities include the purchase and sale of assets that are not considered cash equivalents, and which are not included in the Group’s primary activities. Financing activities include raising and repaying loans, as well as collecting and servicing equity.
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 measured at amortised cost are recognised in profit or loss using the effective interest method.
The category at fair value through profit or loss comprise the classes shares and similar interests and bonds and other fixed income assets.
• Group security is responsible for establishing, implementing, operating, monitoring, reviewing, maintaining and improving the information security management system.
Gjensidige Forsikring Group injury, where it takes long time to settle claims. A large part of the reserve risk is related to lines of business such as “Workers' compensation insurance”, “Motor vehicle liability insurance” and “Income protection insurance”. For premium risk, the risk exposure is mainly related to “Motor insurance” and “Fire and other damage to property insurance”.
Pensjonsforsikring was finished with long-life reserve so that the reserves are now on a par with the mortality tariff.
For both the Gjensidige Forsikring Group and Gjensidige Forsikring ASA the equity exposures are mainly investments in Norwegian equity funds and internationally diversified funds, with the majority focusing on developed markets. There are also investments in several private equity funds as well as fund of funds, focusing on the Nordic region.
Managing financial risk Management of financial risk is described in chapter “Good management and control – we are serious about our responsibility” and subchapter “Risk – the core of the business”.
Technical provisions for life insurance are based on a market value approach according to Solvency II principles, where future cash-flows are discounted using the Solvency II interest rate curve. This is different from accounting principles where the guaranteed interest rate is used. Also, the main difference between accounting and Solvency II principles, for index- and unit-linked insurance, is the inclusion of future profits in Solvency II.
A risk margin is added to the technical provisions according to Solvency II principles. The risk margin is calculated as the cost of holding the capital needed to cover the solvency capital requirement through the entire run-off, if all business was terminated.
Tier 1 17,671.3 14,792.5 17,382.6 18,232.4 Of this; Restricted tier 1 capital 1,026.0 1,010.0 1,026.0 1,010.0
Tier 2 999.4 980.1 838.3 819.4 Total eligible basic own funds to meet MCR/minimum consolidated group SCR
Gjensidige Forsikring Group than this, then it has to be approved in advance by the Financial Supervisory Authority (FSA).
The outcome of the stress test at year-end 2019 and 2018 is presented below.
• Capital, Gjensidige Bank: Capital deficit to fulfil regulatory requirement for Gjensidige Bank given that the crisis scenario presented in the ICAAP occurs
General Insurance Denmark 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.
Sigurd Austin, Executive Vice President 3,115.8 401.0 186.6 665.0 400.2 2,929 3,209 6,051 14,124 3
External and internal assistance used in relation with implementation or substantial upgrade of software, including adjustment of standard systems, are capitalized as intangible assets. Amortisation is included in the accounting line Expenses.
Need for impairment app. NOK 58 million No need for impairment Need for impairment app. NOK 729 million Nykredit portfolio No need for impairment No need for impairment No need for impairment No need for impairment Mølholm portfolio No need for impairment No need for impairment No need for impairment No need for impairment Gjensidige Forsikring, Swedish branch No need for impairment No need for impairment No need for impairment No need for impairment ADB Gjensidige No need for impairment No need for impairment No need for impairment No need for impairment
Gjensidige Forsikring Group 13. Financial assets and liabilities Fair value Financial assets and liabilities measured at fair value are carried at the amount each asset/liability can be settled to in an orderly transaction between market participants at the measurements date at the prevailing market conditions.
Cash flow from financing activities Payment of dividend (3,549.9) (3,549.9) Net receipts/payments on subordinated debt incl. interest (34.2) (29.8) Net receipts/payments on loans between Group companies 1.0 Payments regarding intra-group equity transactions (208.1) (119.2) Payments regarding intra-group equity transactions, subsidiary held for sale (95.0) Net receipts/payments on sale/acquisition of own shares (9.2) (11.0) Repayment of lease liabilities (146.0) Payment of interest related to lease liabilities (30.4) Tier 1 interest payments (50.9) (46.6) Net cash flow from financing activities (4,028.6) (3,850.5)
The effect of this will vary with the size and interest rate of the tax debt. In Gjensidige, fund bonds are classified as debt for tax purposes, and the tax expense was reduced by NOK 12,8 million in 2019 compared with the previous principle.
IFRS 17 Insurance Contracts (2017) IFRS 17 Insurance Contracts, published on May 18, 2017 with effect from 1 January 2021. IFRS 17 establishes the principles for the recognition, measurement, presentation and disclosure of insurance contracts and supersedes IFRS 4 Insurance contracts. The new standard applies to insurance contracts issued, to all reinsurance contracts and to investment contracts with discretionary participating features provided the entity also issues insurance contracts. The standard defines the level of aggregation to be used for measuring the insurance contract liabilities and the related profitability. IFRS 17 requires identifying portfolios of insurance contracts, which comprise contracts that are subject to similar risks and are managed together. Each portfolio of insurance contracts issued shall be divided into three groups: • contracts that are onerous at initial recognition; • contracts that at initial recognition have no significant possibility of becoming onerous subsequently; • and the remaining contracts in the portfolio.
For branches with other functional currencies, balance sheet items are translated at the exchange rate at the balance sheet date, including excess values on acquisition, and profit and loss accounts at an annual average rate. Exchange rate differences are recognised in other comprehensive income.
• owner-occupied property 10-50 years • plant and equipment 3-10 years • right-of-use property 2-10 years • right-of-use plant and equipment 1-3 years
Of which sales expenses Employee benefit expenses 1,071.9 996.8 Commission 497.0 529.6 Other sales expenses 747.1 624.5 Total sales expenses 2,315.9 2,150.9
The Board has decided to continue the Group’s share savings programme for employees in 2020. The CEO and executive personnel are entitled to take part in the programme on a par with other Gjensidige employees. Under the current programme, employees can save through deductions from their salary for the purchase of shares in Gjensidige Forsikring ASA for up to NOK 90,000 per year. Purchases take place quarterly following publication of the results. A discount of 20 per cent of the purchase price is offered, limited upwards to NOK 3,000. For those who keep the shares and are still employed in the Group, one bonus share is awarded for every four share they have owned for more than two years.
Change in deferred tax recognised in other comprenehsive income Pensions (29.1) (12.3) Exchange differences (0.3) (0.8)
Goodwill Gjensidige Forsikring, Danish branch 1,493.3 1,508.1 Nykredit portfolio 892.2 Mølholm portfolio 227.3 Gouda portfolio 87.0 87.6 Gjensidige Forsikring, Swedish branch 121.7 122.2 Gjensidige Forsikring, white label 128.7 128.7 Total 2,950.1 1,846.6
Cost As at 1 January 2018 27.0 451.8 478.8 Additions 1.5 21.0 22.5 Disposals (15.6) (15.6) Exchange differences (0.7) (0.7) As at 31 December 2018 28.5 456.6 485.1 Uncompleted projects 45.4 45.4 As at 31 December 2018, including uncompleted projects 28.5 502.1 530.5
Additions through merger 55.6 55.6 Claims paid, prior year claims (5,550.8) 104.7 (5,446.1) (7,358.6) 331.4 (7,027.1)
Guarantee scheme Norwegian companies and companies from the EEA area with a branch in Norway are members of the Guarantee Scheme for non-life insurance. The purpose of the guarantee scheme is to prevent or reduce losses for individuals and small and mediumsized businesses if their insurance companies are unable to meet their obligations. The provision for guarantee scheme is restricted capital and shall contribute to securing claims arising from an agreement on direct non-life insurance, to the insured and injured third party.
Guarantees and committed capital Committed capital, not paid 590.5 568.7 Credit facility Oslo Areal 1,598.6 1,486.9
• The financial statements of the group, which comprise the statement of financial position as at 31 December 2019, the income statement, statement of comprehensive income, statement of changes in equity and statement of cash flows for the year then ended, and notes to the financial statements, including a summary of significant accounting policies.
Opinion on Registration and Documentation Based on our audit of the financial statements as described above, and control procedures we have considered necessary in accordance with the International Standard on Assurance Engagements (!SAE) 3000, Assurance Engagements Other than Audits or Reviews of Historical Financial Information, it is our opinion that management has fulfilled its duty to produce a proper and clearly set out registration and documentation of the Company's accounting information in accordance with the law and bookkeeping standards and practices generally accepted in Norway.
Gjensidige’s business model Insurance segments 102-3 NRS 16 2-4 Location of headquarters Oslo, Norway 102-4 NRS 16 2-4 Location of operations Note 5 Gjensidige Forsikring ASA