gjensidige.com ANNUAL REPORT 2010

Transcription

1 gjensidige.com ANNUAL REPORT 2010

2 EVENTS 2010 THIS IS GJENSIDIGE January March April May June October December The year began with a cold winter, which affected the insurance results for the first quarter. Gjensidige established its own customer ombudsman. Gjensidige entered into an agreement concerning the acquisition of Nykredit Forsikring in Denmark. The general meeting decided to convert Gjensidige into a public limited company. A dividend of NOK 1.65 billion was adopted for the 2009 financial year. For the first time since it started up in 2007, Gjensidige Bank reported a profit before tax in the first quarter of The conversion of Gjensidige into a public limited company was carried out at the end of June. It was decided that Gjensidige s head office would be moved to a new building on Schweigaardsgate in the centre of Oslo. The new building shall be ready in the fourth quarter of The Norwegian Automobile Association (NAF) announced a break with Gjensidige after nearly 40 years of cooperation. Gjensidige applied for listing on Oslo Børs (the Oslo Stock Exchange). Gjensidige was listed on Oslo Børs on 10 December. In connection with the listing, the Gjensidige Foundation sold nearly 40 per cent of its shares. FINANCIAL CALENDAR April General meeting 12 May Q1-result Silent period starting 14 April 11 August Q2-result Silent period starting 14 July 10 November Q3-result Silent period starting 13 October

3 gjensidige annual report this is gjensidige 2 An historic year 4 Values and vision 6 The markets 8 Preserving security 10 Financial key figures 11 Non-financial key figures 12 Goals and strategy operations 15 Operations 16 General insurance Private 18 General insurance Commercial 20 General insurance Nordic 22 General insurance Baltic 24 Pension and savings 26 Online retail banking 28 Health care services 30 Asset management 32 Additional information perspective perspective this is gjensidige 35 Employees 38 Gjensidige and the society 41 The Gjensidige foundation governance 43 Management and control 45 Solvency II 46 The Gjensidige share 48 Corporate governance 54 Group Management 56 Supervisory board, Control committee and Nomination committee 57 Glossary results 59 Report of the Board of Directors 78 Consolidated accounts 148 Parent company accounts 195 Declaration of the Board and CEO 196 Auditor s report 198 Statement by the control Committee 199 Statement by the supervisory Board

4 2 gjensidige annual report 2010 An historic year In June 2010, Gjensidige was converted from a mutual company to a public limited company. The subsequent stock exchange listing on 10 December marked the beginning of an exciting new epoch in our nearly 200-year-old company history. At the beginning of 2011, Gjensidige has emerged as a modern, stockexchange-listed general insurance group with a leading position in Norway and a number four position in the Nordic countries. During the last decade, Gjensidige was transformed from a group of co-operating mutual companies and mutual fire insurers into a modern general insurance group. Substantial value has been created and manifested under way, and starting in 2007, an ambitious dividend policy has helped ensure that substantial amounts of the value added have been paid as dividends to our owners. The profit for 2010 provides the basis for still another substantial dividend to our owners. Despite a cold winter at the beginning of the year with major claims payments after frost damage, the insurance profit for the year as a whole was adequate. The result for our banking operations ended up as a profit for the first time since starting up in 2007, and the pension and savings operations are on track to achieve their target of a profit before tax starting in In addition, the financial market has contributed to a good profit in our investment operations. General insurance operations are and will continue to be the core of Gjensidige. In order to support the Norwegian general insurance operations, banking, health and pension and savings products are also offered in the Norwegian market. These are relation-building products that help improve customer loyalty. Starting in 2006, the operations were expanded to also include general insurance in Denmark, Sweden and the Baltic States. These foreign investments shall mainly contribute to the Norwegian general insurance operations through economies of scale. The acquisition of Nykredit Forsikring in Denmark in the spring of 2010 was a significant expansion of our Nordic operations and has turned Gjensidige into a major player in Denmark with a market share of around six per cent. This acquisition also signifies a breakthrough for our Nordic and Baltic strategy. About 25 per cent of the general insurance revenues now come from foreign operations.

5 gjensidige annual report Gjensidige has met new needs and requirements from the society and customers with pro-active measures. Through focused customer orientation, the Group has adapted the distribution to altered customer behaviour. The Group currently has a unique strength in Norway. We can only ensure satisfied customers in the future as well through continued simplification and improvement. This makes great demands on continued innovation with regard to places where we may meet the customers. This is where our continuing efforts to promote customer orientation and our efforts to create the right Gjensidige experience are important. A dizzying technological development is going on all around us. A few years ago, who could have foreseen the exciting opportunities that are offered through new mobile platforms for interaction between us and our customers? E-readers such as Ipad and its competitors are sold in substantial quantities in Norway as well. This is an example of how rapidly and intensively our customers adapt to new trends and change their customer behaviour. Gjensidige s employees are distinguished by a high level of expertise, the ability to implement changes and a stamina that earns them much respect. There is every reason to thank the individual employee for the efforts that have been made and that have created the overall profit for In connection with the stock exchange listing, nearly fifty per cent of the employees in Norway, Sweden and Denmark became shareholders in the company. This testifies to their loyalty and their great faith in the Company. Efforts to further develop the skills of managers and employees have been and continue to be an important and necessary measure that will not become any less important in the coming years. Competent employees are extremely important in order to ensure satisfied customers, regardless of the situation or event that brings them in contact with employees in the Group. Therefore, we have intensified our efforts to provide further internal education and training and established the Gjensidige Academy. The Academy has overall responsibility for both management and employee development. After train ing and an examination, 460 of the Group s salespersons and advisers were approved or authorised in various roles. Gjensidige shall arrange matters as favourably as possible, but regardless of his/her position and role, the individual employee must take independent responsibility for developing his/her own knowledge and improving the skills that are required. After the successful stock exchange listing in December 2010, Gjensidige faces the future with about 50,000 new shareholders behind them. For Gjensidige, this is a new interest group whose expectations and demands will further hone our skills. The biggest owner is the Gjensidige Foundation, which in addition to exercising active ownership in the Group, will also pass on dividends from Gjensidige to our Norwegian general insurance customers. This is a unique model, which together with the Foundation s charitable activities will help attract considerable attention to the Watchman in the Norwegian market. The Group has ambitious return and profitability requirements, which will require a focused further development and further modernisation of the whole Gjensidige Group. We must have standardised processes and comprehensive solutions that apply across national boundaries and in all of our business areas. The Group must emerge as one Gjensidige both in Norway and abroad. Gjensidige has targeted a clear objective of achieving a combined ratio between 90 and 93 starting in This objective requires a continued strong awareness associated with developing cost-effective solutions in all of our business areas. In order to achieve the profitability targets that we have set ourselves, we must also be able to correctly price the risks that we assume through our insurance activities. This calls for a further development of our systems for risk assessment and pricing. The Group s new status as a listed company does not signify any change in the long-term goals of being a profitable, leading, customer-oriented general insurance company in the Nordic market. Gjensidige will be an active participant in the ongoing structural changes that will occur in the Nordic general insurance market in the coming years. One necessary condition for participating actively is access to necessary capital. The stock-exchange listing has given the Group a security that can be used in acquisitions or in other ways of financing profitable growth. perspective this is gjensidige

6 4 gjensidige annual report 2010 values and vision Gjensidige is a sound Norwegian financial group and one of the leading players in general insurance in the Nordic countries. Gjensidige offers general insurance products in Norway, Sweden, Denmark and the three Baltic States. In addition, it offers banking for private persons, pensions and savings products and health care services in Norway. operations Vision The operations are divided into seven business areas. These are described on pages 20-43: general insurance private Norway general insurance Commercial Norway general insurance Nordic general insurance Baltics pension and savings online retail banking Health care services General insurance is the Group s core business. Gjensidige is one of Norway s best-known brands. Both the company logo and the Watchman have a high recognition factor. The roots of the general insurance operations can be traced back to the 1820s, while the Watchman has been the trademark for insurance business for more than 75 years and 2008 saw the launch of the Watchman logo in the other countries where Gjensidige offers insurance products. The Group s health care service has been branded Hjelp24. We shall know the customer best and care the most! GJENSIDIGE FORSIKRING ASA Gjensidige Bank ASA Gjensidige Pensjonsforsikring AS Gjensidige Investeringsrådgivning ASA Gjensidige Forsikring ASA Tennant Försäkringsaktiebolag AB Gjensidige Forsikring ASA AS Gjensidige Baltic Hjelp24 AS Norway Norway Norway Danish branch Sweden Swedish branch Latvia Norway Gjensidige Bank Boligkreditt AS Gjensidiges Arbejdsskadeforsikring A/S * Nykredit Forsikring A/S * Tennant Forsikring NUF Lithuanian branch Estonian branch Norway Denmark Denmark Norway Lithuania Estonia Banking Pension and savings General insurance and white label Health The figure shows principal operational subsidiaries and branches in Gjensidige * Gjensidiges Arbejdsskadeforsikring A/S and Nykredit Forsikring A/S are owned by Gjensidige Forsikring ASA, but run by the Danish branch Owned through holding company Branch Subsidiary

7 gjensidige annual report The Gjensidige Experience Gjensidige is one of the strongest brands in Norway in any business sector. Gjensidige shall develop this brand strength further as the brand becomes a more significant Nordic and Baltic player. Through its brand building, Gjensidige shall develop a clear, business-oriented brand position in the Baltic States, Sweden and Denmark as well as in Norway. Gjensidige has wanted to optimise the connection between the Company s business development and its brand management. The core of this work has been combining the Company s strategic choices and customer orientation with the brand building of the Company. The development of the Gjensidige Experience is a key factor in these efforts. perspective this is gjensidige Gjensidige has established a common framework for the Group s customer orientation the Gjensidige Experience, with the four organisational principles: We keep our promises We always provide quality We make the complicated simple We ensure that the customer is satisfied These four principles shall provide clear guidelines for the organisation and act as guiding principles for Gjensidige s customer-oriented value added and development. The Gjensidige Experience shall characterise our encounter with the customer. It shall distinguish us from our competitors and ensure that Gjensidige will be one of the most customer-oriented companies in the market in any business sector.

8 6 gjensidige annual report 2010 Markets The Scandinavian general insurance markets are consolidated markets. This is particularly true for Norway and Sweden, where the three largest players account for 70.7 and 63.7 per cent of the market respectively, but also for Denmark, where the three largest players account for 53.3 per cent of the market. The Scandinavian insurance markets are distinguished by cost-efficient and disciplined players that focus on profitability. However, this has not prevented new players from entering the field in recent years both established financial groups with a more extensive new range of products and foreign insurance companies, as well as a few minor niche players. This has resulted in a market with strong competition among the providers. In the Baltics, the biggest players are foreign financial groups. Only one of the five biggest companies is locally owned. The distribution model deviates somewhat from the Scandinavian one, through more extensive use of agents, and this is illustrated by the substantially higher cost ratio with which the Baltic players operate. Market share Norway, total Market share Denmark Other 19.0% Other 30.7 % Tryg 20.8 % Gjensidige 27.9% Sparebank1 10.3% Topdanmark 18.6 % Tryg 17.1% Gjensidige 5.8 % Alm. Brand 10.1 % If 25.7% Codan 13.9 % Based on premium portfolio 2010 Based on gross premiums written 2010 Market share Norway, private Market share Sweden Other 21,1% Other 19.3% Länsförsäkringar 28,8% Gjensidige 27,2% Gjensidige 1.3% Sparebank1 12.5% Tryg 16,8% If 24.2% Folksam 15.2% Trygg-Hansa 16.0% If 18,9% Based on premium portfolio 2010 Based on earned premiums 2010 Market share Norway, commercial Market share Baltic sources: 1 Finance Norway, general insurance statistics, Q Sparebank1 Skadeforsikring og Sparebank1 Livsforsikirng presented together. 2 The Danish Insurance Association, general insurance statistics 4th quarter 2009, Nykredit Forsikring included 3 The Swedish Insurance Federation, general insurance statistics, 4th quarter Insurance Supervisory Authorities of Latvia, Lithuania, Estomia; Estonia Statistics; Gjensidige Baltic reports, Swedbank Varakirdiustus interim report 4th quarter 2010; with manual corrections. Other 18,6% Sparebank1 5,2% Tryg 17,0% Gjensidige 29,8% If 29,4% Based on premium portfolio 2010 Codan 20.8% If 15.0% BTA 14.6% Gjensidige 6.9% Other 29,2% Ergo 13.5% Based on gross premiums written 2010

9 gjensidige annual report perspective this is gjensidige NORWAY SWEDEN ESTONIA LATVIA Financial offices Local offices Fire mutuals Nordic Baltics DENMARK LITHUANIA

10 8 gjensidige annual report 2010 Preserving security The roots of today s Gjensidige Group can be traced back to the inner parts of Eastern Norway in the years around 1820, when Lands Private Brandassuranceforening was founded as the first mutual fire insurer. By 1920, the number of mutual fire insurers had increased to 260. The Group s life insurance business can be traced back to the establishment of Christiania Almindelige Gjensidige Forsørgelsesanstalt in The Group has been preserving security for about 190 years 1922 The Company was estab lished with the name of Samtrygd as a joint rein surance company for the mutual fire insurers in Norway Samtrygd merged with Norsk Bilfor sikring Gjensidige (NBG) and became the biggest car insurance company in the Norwegian market. Later that same year, collaboration was entered into with Gjensidige Liv under the Gjensidige brand and the Watchman logo. The companies were placed under joint management in Gjensidige had evolved into a financial group with a full range of general and life insurance, pension and other financial services as well as online Internet banking services The Watchman was put to use as the logo of Gjensidige Liv together with the slogan Time passes; Gjensidige endures The Company offered insurance directly to the market. At the same time, the insurance cover and range of products were expanded. The new products were also sold through the mutual fire insurers and gave them the possibility of covering the entire need for insurance in their local markets The acquisition of Forenede Forsikring resulted in a significant expansion of the Company s business.

11 gjensidige annual report Sixteen regional mutual fire insurers merged with Gjensidige Forsikring, transforming Gjensidige from a mutual federation of Gjensidige companies into an integrated mutual group. Later that same year, Gjensidige, Gjensidige Liv and Sparebanken nor merged and combined their business operations to form the financial group Gjensidige nor The Group acquired Falck and became active in the Norwegian health service market Gjensidige nor asa merged with DnB Holding asa and established DnB nor asa. A strategic cooperative agreement was established between the new group and Gjensidige The online Internet bank, Gjensidige Bank, was established. 25 per cent of the equity in Gjensidige Forsikring BA was re-classified to equity certificate capital, and transferred to the Gjensidige Foundation 2006 The Group started new operations in pensions and savings Gjensidige Bank ac quired Citibank s Norwegian business in consumer financing. perspective this is gjensidige 2002 Gjensidige nor was divided into two cooperating groups, the general insurance group, Gjensidige nor Forsikring and the stockexchange-listed banking and life insurance company, Gjensidige nor asa The cooperative agree ment between Gjensidige and DnB nor was terminated. Gjensidige expanded its geographical area to include Denmark, Sweden and the Baltic States Gjensidige Forsikring BA was converted into a public limited company (asa). At the same time, the Gjensidige Foundation was converted into a financial foundation and became the owner of all of the shares in the Group. Gjensidige Forsikring asa was listed on the stock exchange in december. The Gjensidige Foundation sold nearly 40 per cent of its shares..

12 10 gjensidige annual report 2010 combined ratio development Equity and solvency MArgin capital Return on equity 100 % Combined ratio Loss ratio NOK million 20,000 15,000 Equity 25 % , Cost ratio 5, Solvency margin capital Combined ratio, net of reinsurance = Loss ratio, net of reinsurance + Cost ratio, net of reinsurance Solvency margin capital = Net subordinated capital including share of security provisions (based on the company accounts for Gjensidige Forsikring ASA) Return on equity = Profit before tax expense / average equity for the period. Financial key figures Restated profit and loss Earned premiums, general insurance NOK million 17, , , , ,188.6 Other operating income NOK million 1, , Net income from investments NOK million 2, ,788.0 (258.7) 2, ,689.6 Claims incurred, general insurance NOK million (13,456.6) (12,071.0) (11,983.8) (11,696.5) (10,031.2) Other claims incurred, losses etc. NOK million (743.0) (390.3) (393.3) (90.7) (4.1) Operating expenses, general insurance NOK million (2,810.4) (2,771.5) (2,638.3) (2,598.9) (2,487.1) Other operating expenses NOK million (1,274.9) (1,059.2) (890.1) (741.1) (445.3) Tax expense NOK million (303.6) (861.8) (55.0) (541.3) (138.7) Profit for the year NOK million 2, , , ,091.9 Underwriting result, general insurance 1 NOK million Run-off results, general insurance 2 NOK million (18.0) Combined ratio, net of reinsurance 3 Per cent 95.3% 94.8% 94.4% 96.3% 94.9% Loss ratio, net of reinsurance 4 Per cent 78.9% 77.1% 77.4% 78.8% 76.1% Cost ratio, net of reinsurance 5 Per cent 16.5% 17.7% 17.0% 17.5% 18.9% Restated Balance sheet Investment portfolio 6 NOK million 52, , , , ,966.0 Provisions for unearned premiums, gross NOK million 9, , , , ,737.9 Claims provisions, gross NOK million 28, , , , ,556.7 Equity NOK million 23, , , , ,017.3 Total equity and liabilities NOK million 84, , , , ,112.7 Solvency margin capital 7 NOK million 15, , , , ,760.3 Solvency margin 8 Per cent Capital adequacy ratio 9 Per cent Restated return Return on financial assets (roi) 10 Per cent (0.6) Return on equity (roe) 11 Per cent

13 gjensidige annual report NuMBer of employees per country NuMBer of employees by business area Sweden 151 Denmark 486 Baltics 451 Pension and savings 49 Health care services 607 Online retail banking 132 Norway General insurance 3,129 The Group had a total of 3,917 employees at the end of 2010 Non-financial key figures Health, safety and environment Sickness absence, Gjensidige Forsikring Per cent Injuries, Gjensidige Forsikring Number Turnover of employees, Gjensidige Forsikring Per cent employees Group, as a whole Persons 3,917 3,780 3,640 3,460 2,033 Average age, Gjensidige Forsikring Year Average amount spent on skills development per employee NOK 10,420 10,000 5,400 9,300 10,000 Participation in a training programme Days 6,200 3,231 4,756 2,485 2,500 perspective this is gjensidige Definitions: 1. Underwriting-result, general insurance = earned premiums, net of reinsurance - claims incurred etc operating expenses 2. Run-off result, general insurance = change in estimates from earlier periods 3. Combined ratio, net of reinsurance = claims ratio, net of reinsurance + cost ratio, net of reinsurance 4. Loss ratio, net of reinsurance = claims incurred etc. / earned premium, net of reinsurance 5. Cost ratio, net of reinsurance = operating expenses / earned premium, net of reinsurance 6. Investment portfolio = includes all investment funds in the Group, except Pension and savings and Online retail banking 7. Solvency margin capital = net subordinated capital including share of security provisions (based on the company accounts for Gjensidige Forsikring ASA in accordance with NGAAP) 8. Solvency margin is calculated at company level according to regulations from the Financial Supervisory Authority of Norway. 9. Capital adequacy ratio = net subordinated capital / risk-weighted calculation basis (based on the consolidated accounts in accordance with NGAAP). 10. Return on financial assets = net financial income as a percentage of the average financial assets including property (excluding Pensions and savings and Online retail banking) 11. Return on equity = profit before tax / average equity for the period

14 12 gjensidige annual report 2010 TArgets and strategy Gjensidige s overarching goal is to be a leading, profitable, customer-oriented general insurance company in the Nordic market. General insurance operations are the Group s core operations. Gjensidige is currently a full-fledged provider of products in general insurance and insurances of the person to Norwegian private and com mercial customers. Other target areas a broad range of products in Norway and general insurance in the Nordic countries and the Baltics should primarily support the core business operations by offering relation-building products and services and economies of scale, respectively. Gjensidige s sound brand forms a good basis for the sale of new products and services to the Group s roughly one million customers in Norway. Combined with a further development and expansion of the loyalty programmes in the general market and aimed at the organisation market, this will contribute to more satisfied customers and reduced customer churn. The Group s own data shows that customers who enter into a customer programme in the private and agricultural market have an average customer relationship with Gjensidige that lasts a little over 12 years, whereas the other customers last a little over 5 years on the average. The Group s focus on the relation-building support areas of banking, pension and savings, and health services shall strengthen the Group s competi tiveness and help develop Gjensidige as a customer-centric player. The Group s substantial customer base represents a unique opportunity to succeed with profitable growth through the cross sale of new services to insurance customers. A diversified product portfolio will allow Gjensidige to capitalise to a greater extent on the value of its existing customer base and distribution platform. Through growth in general insurance in the Nordic countries and the Baltics, the Group shall achieve economies of scale in the form of synergies that contribute to long-term value creation, increased competitiveness through the addition of new customers and greater risk diversification through a larger and more diversified portfolio. The cost synergies are especially achieved in the areas of reinsurance, development and management of insurance products, common guidelines for underwriting, more efficient capital allocation and common ICT solutions. In addition to organic growth, Gjensidige will also attempt to grow in the coming years through the acquisition of other businesses that support the Group s growth strategy within its range of products and services and its geographical area, provided that the transactions support the Group s long-term return on equity requirements of 15 per cent before tax. Gjensidige is and shall be an attractive workplace that attracts, challenges and develops motivated and competent employees and managers. This will be achieved through a strong concentration on management and employee development, the development of good, fair reward models and a systematic effort to further develop the skills in the organisation. General insurance = Core business Healthcare services Online retail banking Pension and savings General insurance Support products Geographical expansion - scale Norway Nordic Baltic

15 gjensidige annual report TArgets AreA goals comments Group Return on equity before tax > 15 per cent Return on equity in 2010 of 14.4 per cent Rating Dividend Maintain single A-rating from Standard & Poor s per cent of the profit for the year after taxfor the Group A-rating confirmed by Standard & Poor s in August 2010 The Board of Directors recommends that NOK 2,350.0 million be paid in dividends for 2010, corresponding to 80 per cent of the profit for the year, after tax, for the Group perspective this is gjensidige GENERAL INSURANCE Combined ratio < 97 per cent per cent Combined ratio of 95.3 per cent in 2010 Adjusted goal effective starting in 2011 Claims incurred Reduction of NOK 400 to 500 million (inflation adjusted) as of 2011 Reduction from 2007-level Delivered Operating expences Reduction of NOK 300 to 400 million (inflation adjusted) as of 2011 Reduction from 2007-level Delivered pension And SAvings Profitability Goal of achieving break-even during 2011 Assets under management Annual doubling An important criterion for achieving the goal is further growth in assets under management Goal for the period Increased by per cent in 2010 online retail BAnking Profitability Goal of achieving break-even during 2010 Delivered Core capital adequacy > 12 per cent At year-end 2010, the core capital adequacy was 16.1 per cent HEALTH CARE SERVICES EBITA-margin 6-8 per cent EBITA-margin of 5.0 per cent in 2010

16 operations

17 gjensidige annual report operations The operations in Gjensidige are divided into seven business areas: general insurance Private, Commercial, Nordic and Baltic, Pension and savings, Online retail banking and Health care services. In addition to the seven business areas, the asset management function manages the Group s investment portfolio. Online retail banking 4.2% Pension and savings 1.8% Baltic 2.5% INCOME PER SEGMENT 1 Health care services 2.9% perspective operations Nordic 20.9% Private 44.2% Commercial 23.6% 1 The distribution is based on earned premiums, net of reinsurance, excluding other income and elimination GENERAL insurance norway general insurance is Gjensidige s core business a complete supplier of general insurance products to private customers in Norway and a full range of products in general insurance and insurances of the person to Norwegian business and commerce 859,500 private and agricultural customers 91,000 commercial customers The support AreAS the support areas have been established in order to support our core business in Norway pension and savings: A broad range of pension, investment and savings products is offered for both the private and commercial markets in Norway online retail banking: Through Internet banking, banking products are offered to the private and agricultural markets in Norway Health care services: Under the brand name Hjelp24, various health services are offered to private customers, companies and to the public sector in Norway Geographical expansion expansion of the general insurance operations into Denmark, Sweden and the three Baltic States established position through seven acquisitions in the period the private and commercial market in Sweden and Denmark insurance to municipalities and municipal operations in Norway, Sweden and Denmark general insurance in all three of the Baltic States Asset MAnagement the asset management function manages the Group s investment portfolio within constraints set by the Board of Directors the portfolio consists of investments in a number of asset classes, including bonds and money market instruments, property and shares assets under management of nok 52,347.0 million at year-end 2010

18 16 gjensidige annual report 2010 general insurance private norway A solid brand and high customer satisfaction are the key to Gjensidige s leading position in private insurance in Norway. Continuous improvement and measures to increase the customer value ensure a strong customer orientation in all points of contact with the customers, resulting in increased customer satisfaction. OPERATions The business area Private Norway offers a broad range of insurance products and services: accident and health (disability and accident insurances, sickness and treatment insurances, child insurances) property (home-owner s and holiday home insurance, household contents insurance) 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) other insurances (travel insurance, pet insurance, etc.) Gjensidige also offers banking, savings and investment products to its private customers and is enjoying good customer growth in these product areas. Solid brand position Gjensidige is positively distinguished from other companies by having the highest percentage among both its own customers and in the market in general, who think the Company fits the descriptions reliable and has satisfied and loyal customers (source: Competitor and Brand Survey Synovate). For a player in a trust-based business sector, this is a very attractive position in which to be. Leading market position Gjensidige is the biggest player in the private market, with a market share of 27.2 per cent in 2010, a slight reduction from 27.5 per cent in At the product level, Gjensidige is the market leader in both car and home-owner s insurance. In the agricultural segment, Gjensidige has a market share of fully 71.3 per cent. Customer programme contributes to loyalty At year-end 2010, Gjensidige had 859,500 private and agricultural customers. About 316,000 of these customers were included in the customer programme Gjensidige Fordel, where the customers earn a number of benefits in addition to a customer discount based on their overall relationship with Gjensidige. About 303,000 of the customers are included in various customer programmes that Gjensidige has with key partners such as the Norwegian Farmers Union, the Norwegian Farmers and Smallholders Union, the Norwegian Fishermen s Union, the Confederation of Vocational Unions (YS), the Norwegian Society of Engineers and Technologists (nito) and Tekna. Gjensidige s loyalty programme and organisation customers often have a long-term relationship to the Company. The average lengths of the customer relationships in these two categories are 11 and 16 years respectively, compared with an average of five years for other customer relationships. In 2010, Gjensidige renewed the agreements with the Norwegian Farmers Union, YS, nito and Tekna. The results are long-term agreements that provide a good basis for a further improved position in the organisational market in the coming years. Breadth in customer purchases Surveys show that customers who have purchased more than one product from Gjensidige are more satisfied than customers who only have one. It is a top priority objective for the Company to increase the percentage of customers who bundle their insurance, banking and pension products with Gjensidige. Best when it counts During 2010, the business area Private Norway handled nearly 322,000 claims settlements. Our goal is to be the company that takes best care of its customers, and this includes after a loss has occurred. Distribution channels Gjensidige has a multi-channel strategy where products and services are distributed by phone, Internetbased solutions and our local offices. The customer gets uniform service regardless of the channel. Insurance and financial offices Gjensidige currently has in excess of 50 insurance offices distributed throughout the country. The insurance offices are responsible for functions where local knowledge, a one-on-one relationship and personal contact are appropriate. All of the insurance offices offer the full range of products from the Group, but with different degrees of local specialist expertise. In 21 places where the customer base is sufficient, financial offices have been established with specialist expertise in the whole range of services. Key figures NOK million Gross premiums written 8, , , ,910.6 Earned premiums, net of reinsurance 8, , , ,729.8 Claims incurred, etc. (6,296.7) (6,007.4) (5,795.6) (5,757.2) Operating expenses (1,194.5) (1,296.3) (1,340.8) (1,376.3) Underwriting result Loss ratio, net of reinsurance % 76.5% 73.3% 74.5% Cost ratio, net of reinsurance % 16.5% 16.9% 17.8% Combined ratio, net of reinsurance % 93.0% 90.2% 92.3% Definitions: 1. underwriting result = earned premiums, net of reinsurance - claims incurred, etc. - operating expenses 2. loss ratio, net of reinsurance = claims incurred etc./earned premiums, net of reinsurance 3. Cost ratio, net of reinsurance = operating expenses/earned premiums, net of reinsurance 4. Combined ratio, net of reinsurance = loss ratio, net of reinsurance + cost ratio, net of reinsurance

19 gjensidige annual report ProduCt groups, private NorWAy Other 8.7% MArket shares, private NorWAy % 35 customer satisfaction, private NorWAy % 75 Agriculture 11.3% Motor 42.6% Accident and health 16.6% Property 20.8% Gjensidige if Tryg Sparebank Loyalty programmes Organisation market No agreement Total Based on gross premiums written 2010 Total non-marine insurance excluding insurances of the person. Source: Customer satisfaction survey, self-initiated custumer analysis, conducted by Norsk Kundebarometer/BI. Gjensidige cooperates with 19 mutual fire insurers throughout the country, which function in the same way as the insurance offices of Gjensidige Forsikring. Sales centre Gjensidige has established a specialised outward sales channel that employs technology for high activity and efficiency. The channel is working with potentially new and existing customers and helps create further growth in Gjensidige. Customer centre Gjensidige s customer centre is an independent sales and relationship channel that provides service and sells insurance and financial products to private customers by telephone and over the Internet. The three customer centres are also open in the evening and receive about 1.2 million incoming telephone calls annually. Gjensidige.no The Financial Portal, gjensidige.no, is becoming a more and more important channel for Gjensidige s contact with private customers. The number of selfservice customers has undergone a steady growth in 2010, and more and more customers complete their purchases and service over the Internet. Agents and car dealers As a supplement to Gjensidige s own channels, products are distributed through agents, including banks, a large number of car dealers, estate agencies and other agencies. CUSTOMer orientation in focus In 2010, Gjensidige initiated a number of measures to ensure a further customer orientation and efficient operation of the business. All employees and managers attend Gjensidige s Customer and Brand School, and there is a strong focus on customer orientation. Regular evaluation of customer satisfaction is conducted at all levels and forms a good basis for adjustments in measures. The new home insurance rate that was introduced in 2010 ensures an even more correct pricing of the risk associated with the customer s home The processes for claims handling are continiously improved in order to give the customers both rapid and more correct claims settlements. RESULTS Earned premiums, net of reinsurance came to nok 8,279.4 million in 2010, an increase of 5.4 per cent from the previous year. The trend in earned premiums in 2010 reflects the effect of implemented premium increases. New premium rates for the motor vehicle and home-owner products, introduced in the autumn of 2009 and the summer of 2010 respectively, ensure a more correct pricing of risk. Claims incurred, net of reinsurance came to nok 6,296.7 million in 2010, compared with nok 6,007.4 million in The loss ratio came to 76.1 in 2010, compared with 76.5 the previous year. Claims incurred for 2010 were affected by the frost at the beginning of the year, whereas claims incurred for 2009 were affected by a substantial bolstering of the actuarial reserves for the child insurance product. Large losses* came to nok million in 2010, compared with nok 42.7 million in the previous year. Claims incurred for 2010 were positively affected by run-off gains**, as opposed to a run-off loss in the previous year, primarily as a result of the effect of strengthening the actuarial reserves for the child insurance product in The cost ratio came to 14.4 for 2010, a reduction of 2.1 percentage points relative to the previous year. Nominally, the expenses were reduced by nok million in 2010 relative to The reduction came as a result of the efficiency improvement efforts. The combined ratio for 2010 was 90.5 per cent, compared with 93.0 in The underwriting result came to nok million in 2010, compared with nok million in the previous year. OBJecTives and STraTEGies The business area shall support the Group s CR objective of starting in 2011: the operations shall be made more efficient, and both claims incurred and operating expenses shall be further reduced. The leading position in the Norwegian private market shall be maintained: Continued growth in the premium level. Further improvement of the distribution. Continuation of the effort to increase private customers involvement in the Company. Gjensidige shall be the leading company when it comes to customer orientation: differentiation through extreme customer orientation the quality of service shall be increased at all points of contact with the customer the products shall be further simplified and improved in order to improve the customer orientation. OUTlooK The Norwegian general insurance market has traditionally been distinguished by strong brands and four well-positioned players. Adequate profitability over a number of years has allowed new competitors to enter the market. Small niche companies have gradually increased their market shares, partly through aggressive pricing. The banks have also entered the market and offer competition with favourable product bundle pricing and their frequent contact with customers. With a leading brand, strong efforts to improve customer orientation and a full range of products offered, Gjensidige is well positioned to meet this competition. * losses exceeding nok ten million ** rub-off gain/loss = actuarial gains and losses from earlier periods perspective operations

20 18 gjensidige annual report 2010 general insurance CoMMercial NorWAy In 2010, Gjensidige has consolidated its position as the biggest player in the commercial market, with a market share of 29,8 per cent at year-end The Company s solutions in insurance, pensions and health care provide security for life, health and business assets. OPERATions Gjensidige offers Norwegian business and commerce a broad range of insurance solutions for: accident and death (occupational injury insurance mandated by law, insurance in the event of other illnesses and accidents on the job and during leisure time, group life, treatment guarantee and travel insurance) Motor (company car, lorry, bus, heavy equipment) property (including assets and operating losses) liability (public liability, property damage liability, product liability and recall, directors and officers liability, crime insurance, legal expenses) Marine/cargo (coastal and fishing boat, building risk, aquaculture, insurance of goods under transport) In addition, Gjensidige can offer its commercial customers comprehensive solutions that also meet the commercial customers needs for pension and savings products as well as selected health care services through Hjelp24. At year-end 2010, 85 per cent of the group s pension customers were also general insurance customers. Distribution About 2,700 of the commercial customers are served indirectly through insurance brokers. The remaining customers were served by the Group s direct distribution system, fire mutuals, agencies and marine insurance associations. Corporate customers/brokers (kkm) KKM is a national relationship channel with brokers and Norway s largest enterprises. KKM has a high level of marketing and professional expertise with a strong focus on risk assessment and risk management. The service and servicing concept is based on relations with customers and brokers, a high level of professional expertise and often solutions that are specially adapted to meet the customers needs. Specialised customer centres A business centre is an efficient sales and customer centre that ensures high accessibility and uniform service of small and medium-sized corporate customers. The channel offers many standardised products and prices and serves the customer by phone and Internet. Insurance offices Medium-sized and large corporate customers are served through Gjensidige s insurance offices, which are staffed with specialists in commercial insurance. Internet Gjensidige offers sector-adapted advice and sales of bundled products on open websites. In addition, the Næringsnett and Pensjonsnett websites give the customer access to updated information about his/her customer relationship and the possibility of reporting changes or preferences for offers on new products. Agencies, mutual fire insurers and marine insurance associations Fire mutuals ensures distribution in areas where Gjensidige does not have its own offices. Cooperating Marine insurance associations distributes vessel insurance to Norwegian fishing- and coastal vessels. The agencies supplies our own distribution in growth areas, and only distribute for Gjensidige and do so under a common brand. Market leader Gjensidige is the market leader in the commercial segment, and at year-end 2010 it had a market share in the commercial segment of 29.8 per cent. This is somewhat lower (0.8 percentage points) than at year-end The total market in the commercial segment decreased during The declining market is a result of considerable price competition between the major established players and many new minor players. In this situation, Gjensidige has a responsibility as the market leader and will continue to consistently focus on profitability. At year-end 2010, Gjensidige had about 90,000 commercial customers. Each company had an average of about 2.4 insurance products. Key figures NOK million Gross premiums written 4, , , ,464.7 Earned premiums, net of reinsurance 4, , , ,072.7 Claims incurred etc. (3,602.6) (3,819.0) (4,219.7) (4,331.4) Operating expenses (570.0) (613.3) (630.4) (647.7) Underwriting result Loss ratio, net of reinurance % 80.6% 85.9% 85.4% Cost ratio, net of reinurance % 12.9% 12.8% 12.8% Combined ratio, net of reinurance % 93.6% 98.8% 98.2% Definitions: 1 underwriting result = earned premiums, net of reinsurance - claims incured etc. - operating expenses 2 loss ratio, net of reinurance = claims incurred / earned premiums, net of reinsurance 3 Cost ratio, net of reinurance = operating expenses / earned premiums, net of reinsurance 4 Combined ratio, net of reinurance = loss ratio, net of reinsurance + cost ratio, net of reinsurance