Simplification and self-service We launched a new customer portal towards the end of the year. Here, customers can purchase and update insurance policies, report claims and find useful information in connection with different life events.
Pension and Savings Return on equity before tax Support the Group target 3.2 per cent
Targets and strategy The Private Norway segment is characterised by a broad focus on customer retention and improved quality in all customer processes. Better access, simplification of products and processes and increased degree of self-service solutions is prioritized to underpin the Group financial targets and become leading on customer orientation.
Source: Baltics Insurance Supervisory Authorities of Latvia and Lithuania, Estonia Statistics, competitor reports, and manual corrections 2012. Based on gross premiums written.
Net interest income in per cent annualised = net interest income/average total assets
29.6% Storebrand Liv 29.5% DnB Liv 15.8% Nordea Liv 8.7% Andre 8.3% Gjensidige 8.1% Sparebank1 Liv
For the financial year 2012 a dividend of NOK 6.85 per share is proposed, corresponding to 80 per cent of the earnings per share. The dividend will be approved by the Annual General Meeting on 25 April 2013 and paid to shareholders registered on the date of the General Meeting. Dividend is to be paid 8 May 2013.
2. The Code of Practice is available at www.nues.no. 3. The Board has provided a statement on the Company’s corporate governance.
At present, the Supervisory Board comprises 21 members. 14 elected by the shareholders and seven elected by the employees. The members of the Supervisory Board are listed at www.gjensidige.no/investor.
Inge K. Hansen 8 12,253 Gunhild H. Andersen 8 785 Trond Vegard Andersen 7 1,778 Hans-Erik F. Andersson 8 1,778 Per Arne Bjørge 8 10,542 Kjetil Kristensen 7 526 Gisele Marchand 8 1,481 Gunnar Mjåtvedt 8 2,486 Mette Rostad 8 2,794 Mari Skjærstad 8 0
The Board’s independence No member of the Company’s general management is a member of the Board. All shareholder-elected board members are independent of the executive management. Three of the shareholder-elected board members represent the Gjensidige Foundation. The other board members are independent of the principal shareholder. All board members are independent of important business associates.
As part of Gjensidige’s governing documents, an overall description has been prepared of the process relating to the closing of the accounts. Reporting instructions have also been prepared, including accounting principles that subsidiaries and branch offices must use in their reporting. The internal control is based on the principle of division of labour and dualism, and it is documented through descriptions of processes and procedures in material areas. Authorisation structures, reconciliation and management reviews have been established.
Gjensidige’s business model is based on an integrated value chain. It includes the production of financial services and products in addition to a high degree of direct distribution and customer dialogue.
Gjensidige’s internal risk-based capital model shall ensure that the allocation of capital takes capital costs into account. This enables the management to assess the relationship between risk in investment and insurance operations, while ensuring that the pricing of the insurance products reflects capital costs and the longterm profitability requirements.
The private market is served via call centres and the internet. Private insurance products are also sold through a number of partners.
The year 2012 Favourable weather situation While the number of natural disaster claims in Norway in 2011 was the highest since 1992, and claims costs related to extreme weather amounted to almost NOK 330 million for Gjensidige, the weather in 2012 was unusually mild and with no large
Appointed to the Board Gjensidige in 2011. Chairman of the Board and general manager of PAB Consulting AS.
Earned premiums amounted to NOK 5,411.4 million (5,411.9). The introduction of multi-channel distribution and new tariffs resulted in increased selling and distribution power in this segment. This contributed to an increase in the number of new customers. There was good growth in premiums in material damage insurance, while the loss of two large accidentand health insurance agreements in April and July, respectively, had a negative effect on the development of earned premiums within accident and health.
Large losses 1 280.9 281.6 Run-off gains/(-losses) 2 62.4 71.2 1 Large losses = loss event in excess of NOK 10.0 million. Claims incurred in excess of NOK 30.0 million per event are charged to the Corporate Centre.
Claims incurred amounted to NOK 292.6 million (270.7), which corresponded to a loss ratio of 67.0 (68.4). Claims incurred were positively affected by a substantial run-off gain, both in 2012 and in the corresponding period in 2011.
Pension and Savings Pension and Savings is a growth area for Gjensidige in Norway. The segment offers various pension and savings products, mainly to the commercial market. The pension products include defined contribution schemes in group occupational pension, individual pension agreements, individual disability pensions and the management of paid-up policies and pension capital certificates. Gjensidige Investeringsrådgivning is an independent fund provider that offers saving and investment solutions to the private and commercial markets.
Geographic distribution match portfolio at the end of 2012 Geographic distribution match portfolio at the end of 2012
Strategic risk 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 followed particularly closely. To ensure that Gjensidige is ahead of developments, strategic risk is managed through continuous monitoring of competitors and the market, and through product development and planning processes.
The customers have greater and greater expectations of our employees’ expertise. There is a risk that inadequate or insufficiently adapted expertise will reduce our chances of realising commercial and strategic ambitions. There is also competition to attract and retain capable employees. Active and targeted work is therefore carried out on competence-raising at all levels of the organisation, and competence requirements have been defined for different roles. The Gjensidige Customer and Brand School provides all competence-raising and management development in Gjensidige. The school offers training of sales personnel, claims handlers and
Member of the Board of Gjensidige since 2010. A partner of the law firm Johnsrud, Sanderud & Skjærstad AS.
The following International Financial Reporting Standards (IFRS) and interpretation statements have been published up until 6 March 2013, without them having entered into force or having been implemented early
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
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.
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, recognized impairment on financial assets and recognized loss on financial derivatives. All expenses related to loans are recognized in profit or loss using the effective interest method.
Provisions Provisions are recognized 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.
Insurance-related liabilities Use of estimates in calculation of insurance-related liabilities is primary applicable for claims provisions.
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).
Gjensidige Insurance Group 88 I Gjensidige Annual Report 2012 Gjensidige Annual Report 2012 I 89 managers. In case of adverse development necessary efforts are put in force.
Table 4 below shows the impact on profit or loss for the year, and thereby on equity at year-end, of changes in Combined Ratio (CR). Tax impact is not included in the calculations. CR is the key measure of profitability in the general insurance business. The calculations show the effect of a change of one per cent in CR for each segment. An increase in CR can be caused by an increase in the loss frequency and/or an increase in the severity. In some LOBs there is a risk that the loss frequency and the severity of claims are correlated so that an increase in the underlying insurance risk may affect both the frequency and severity of claims.
Table 5 – Sensitivity analysis claims provision Change in inflation (+/- 1 %-point) NOK million 2012 2011 Private Norway 340.6 330.7 Commercial Norway 423.5 423.3
Gjensidige Forsikring invests in a number of private equity funds as well as fund-of-funds. The focus is 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 funds.
Installments not due 3,148.6 0.5 <35 days 284.7 96.4 35-90 days 96.5 4.4 > 90 days 96.4 63.6 Total 3,626.2 164.9
Reinsurance is used to manage insurance risk. This does not, however, discharge Gjensidige from any liability as primary insurer. If a reinsurer fails to pay a claim for any reason, Gjensidige remains liable for the payment to the policyholder. The creditworthiness of reinsurers is considered by reviewing their financial strength prior to finalization of any contract. As a general requirement, all reinsurers need to be rated ‘A-‘or better by Standard & Poor’s (or the equivalent from other rating agencies) when entering into the contract with Gjensidige. The figure below shows the breakdown of the purchased reinsurance capacity for 2012 and 2011, i.e. the rating of the reinsurers that would have been drawn in if the losses had occurred.
Unsecured consumer finance lending business is one of the leading products for the bank. This portfolio has higher returns proportionate to the level of risk in the portfolio. The bank uses risk based pricing models driven by credit scores.
With the help of these score models the lending portfolios in the bank are grouped into several risk categories starting from the lowest risk to the highest risk segments based on their probability of default. These risk categorizations are done mainly to assist in various credit decisions. These are then further grouped into three main risk classes: low risk, medium risk and high risk which is used for the bank’s monthly monitoring, reporting and follow-up of the customer base.
Gross lendings in default of 30 days amounted to NOK 350.2 million by the end of the year compared to NOK 325.7 million in 2011. The total balance of write-downs of loans in 2012 was NOK 299.9 million versus NOK 254.0 million in 2011. The increase was attributed primarily to the transition of the unsecured loans portfolio to IFRS accounting rules after it was purchased from Citibank at the end of 2009. Gross lending in default over 30 days was 2.02 per cent of gross lending as of the end of the year compared to 2.17 per cent in 2011.
Subsidiaries/portfolios Oslo Areal 191.3 203.1 Gjensidige Forsikring, Danish branch 960.7 1 018.3 Gjensidige Forsikring, White label 128.7 128.7 Gjensidige Arbejdsskadeforsikring 92.5 98.0 Nykredit Forsikring 721.7 751.5 Gjensidige Baltic 62.6 65.9 Gjensidige Forsikring, Swedish branch 83.8 85.2 Gjensidige Bank 1.5 1.5 Glitne Invest 1 22.5 Lokal Forsikring 1 22.5 Byggeriets Forsikringsservice 2.6 Total 2,267.7 2,374.8 1 Glitne Invest was liquidated in 2012 and Lokal Forsikring was included as subsidiary through liquidation dividend from Glitne Invest.
Need for impairment app. NOK 160 million No need for impairment No need for impairment Need for impairment app. NOK 234 million Gjensidige Arbejdsskadeforsikring
note 8 about investment properties. The valuation was not based on observeable market prices or recent transactions. The carrying amount of the property before the impairment was NOK 198.0 million.
NOK Yield Average market rent Average contractual rent Average value per sqm
Financial assets at fair value through profit or loss, initial recognition Shares and similar interests 12 4,321.2 4,321.2 4,021.7 4,021.7 Bonds and other fixed income securities 19,884.2 19,884.2 19,747.1 19,747.1
Financial assets at fair value through profit or loss, initial recognition Shares and similar interests 712.6 1,356.4 1,952.8 4,021.7 Bonds and other fixed income securities 9,615.3 10,107.9 24.0 19,747.1
Short-term insurance contracts, gross Provision for unearned premiums, gross 10,141.6 9,531.4
Other insurance-related provisions 136.6 126.9 Total insurance-related provisions, net of reinsurance 39,167.1 38,597.1
Inge K. Hansen, Chairman 375.8 1.5 11,982 Randi B. Sætershagen 230.0 1.5 8,982 Trond V. Andersen 221.0 1.5 85.2 6.8 % 20.08.2014 1,630 Hans-Erik Andersson 230.0 1.3 1,630 Mari T. Skjærstad 166.0 1.5 Gisele Marchand 180.0 1.5 1,358 Gunnhild H. Andersen, staff representative 7 200.0 695 Kjetil Kristensen, staff representative 7 195.0 466 Gunnar Mjåtvedt, staff representative 7 238.0 1,509 Tor Øwre (1.1.11-31.05.11) 100.0 Per Arne Bjørge (1.6.11-31.12.11) 110.0 1.5 10,271
Total net income and gains/(losses) from buildings and other real estate 287.5 379.7
Gjensidige Insurance Group 136 I Gjensidige Annual Report 2012 Gjensidige Annual Report 2012 I 137 27. Share-based payment Description of the share-based payment arrangements As at 31 December 2012, Gjensidige has the following share-based payment arrangements: Share-based remuneration for executive personnel with settlement in equity and cash (remuneration scheme)
Shares and similar interests (incl. shares and similar interests measured at cost) 9, 12 4,304.7 3,466.2
Fair value is based on market prices, after consideration of any differences in type, location or condition of the individual property. Where market prices are not available, the properties are individually assessed by discounting the expected future net cash flow by the required rate of return for each investment. The net cash flow takes into account existing rental contracts and expectations of future rental income based on the current market situation. The required rate of return is determined based on the expected future risk-free interest rate and an individually assessed risk premium, dependent on the rental situation and the location and standard of the building. An observation of yields reported from market transactions is also performed. The valuation is carried out both by external and internal expertise having substantial experience in valuing similar types of properties in geographical areas where the Group’s investment properties are located.
Amortisation Intangible assets, other than goodwill is amortised on a straight-line basis over the estimated useful life, from the date that they are available for use. The estimated useful lives for the current and comparative periods are as follows • customer relationships 10 years • trademarks 10 years
In 2012, Gjensidige has changed the method it uses to stipulate the discount rate for pension liabilities. This calculation was previously based on the government bond yield, while a covered bond yield is now used. This change has been implemented because there is now deemed to be a deep market for corporate bonds with a long term to maturity. The consequence of using the covered bond yield as the basis for the calculation of gross pension liabilities is a significant reduction in net pension liabilities. The actuarial gain that reduces the pension liabilities amounts to NOK 623.8 million, most of which is due to the transition to basing the estimate on the covered bond yield.
Amortisation recognized during the period (37.2) (8.4) (105.8) (6.1) (157.5) Disposals 96.7 881.3 978.0 Exchange differences 0.1 0.1 0.3 As at 31 December 2011 (100.0) (101.8) (19.1) (229.0) (13.9) (463.9)
Carrying amount As at 1 January 2011 112.0 289.8 401.8 As at 31 December 2011 94.5 229.6 324.2
Carrying amount As at 1 January 2012 94.5 229.6 324.2 As at 31 December 2012 84.6 158.8 243.3
Amount of net realised/ unrealised gains recognized in profit or loss that are attributable to instruments held as at 31.12.2011
Gjensidige Forsikring ASA Norwegian financial shares DnB ASA 23.6 SpareBank1 Ringerike Hadeland 22.6 DnB OBX 6.6 Indre Sogn Sparebank 0.2 Total Norwegian financial shares 52.9
Hedge funds Sector EuroPower Fund Class A EUR 88.5 Sector Healthcare - A USD 83.2 Winton Futures Fund- Lead Series 14.1 Sector Speculare IV Fund Class A USD 13.6 Sector Maritime Investment Class A 13.6 Sector Maritime Investment Class A1 6.3 Horizon Tactical Trad Usd-B 5.9 Sector Speculare II Fund Class A USD 4.6 Sector Exspec Fund Class A USD 2.0 Sector Consolidare Fund USD 1.3 Sector Spesit I Fund Class A USD 1.1 Other hedgefunds 0.3 Total hedge funds 234.5
Restructuring costs 1 57.2 70.0 Other provisions 1.9 27.4 Total other provisions for liabilities 59.1 97.4
Group’s guidelines and framework for remuneration • Annually considering and proposing the remuneration of the CEO • Annually considering and drafting proposals for the CEO’s scorecard • Acting as adviser to the CEO in connection with the annual assessment of the remuneration of the senior group management • Considering the management’s proposed ‘Statement on the stipulation of pay and other remuneration for executive personnel’ cf. the Public Limited Liability Companies Act section 6-16a
Bonds and other fixed-income securities Net interest income/(expenses) from bonds and other fixed-income-securities 287.3 284.5 Unrealised gains/(losses) from bonds and other fixed-income securities (136.5) 209.3 Net realised gains/(losses) from bonds and other fixed-income securities 290.1 87.7 Total net income and gains/(losses) from bonds and other fixed-income securities 440.9 581.4
45 % of investment properties, unrealised gains, proportion 71.3 Additional capital 71.3
State Street Bank And Trust Co. Nominee 10,490,815 2.10% Clearstream Banking S.A. Nominee 7,578,554 1.52% State Street Bank And Trust Co. Nominee 7,171,114 1.43% Skagen Global 5,212,341 1.04% State Street Bank And Trust Co. Nominee 4,708,492 0.94% Goldman Sachs & Co - Equity Nominee 4,417,501 0.88% State Street Bank & Trust Co. Nominee 2,911,032 0.58% State Street Bank And Trust Co Nominee 2,748,199 0.55% State Street Bank And Trust Co. Nominee 2,548,327 0.51% The Northern Trust Co. Nominee 2,341,554 0.47% The Bank Of New York Mellon Nominee 2,150,112 0.43% Odin Norge 2,008,905 0.40% Skagen Global Ii 1,996,324 0.40% Skandinaviska Enskilda Banken Nominee 1,744,331 0.35% Jpmorgan Chase Bank Nominee 1,725,073 0.35% Klp Aksje Norge Indeks Vpf 1,519,108 0.30% The Bank Of New York Mellon Nominee 1,397,761 0.28% Jpmorgan Chase Bank Nominee 1,316,033 0.26% Number of shares 20 largest shareholders 395,542,056 79.11% Total number of shares 500,000,000 100.00%
The fair value at grant date is based on the market price. The discount is recognized as payroll expenses at the time of allocation. The value of the bonus shares is recognized as payroll expenses over the vesting period, which is two years.
The expected return is based on the Group's actual profit/loss after tax expense as of the third quarter, grossed up to a full year, plus the maximum distribution of dividend corresponding to 80 per cent of the profit after tax expense. This was carried out as a technical calculation because the Company's forecast for the fourth quarter result was not available at the time the calculations were carried out.
186 I Gjensidige annual report 2012 Gjensidige annual report 2012 I 187
187Gjensidige Forsikring Konsern – 4. kvartal og foreløpig 2012 186 I Gjensidige annual report 2012
The Company's external auditor has participated in two of the Control Committee's meetings and informed the committee about the external auditor's work. The external auditor has not submitted any management letters to the Company during the fiscal year.