Interim Report 3rd quarter Gjensidige Insurance Group

Transcription

1 Interim Report 3rd quarter 2013 Gjensidige Insurance Group

2 Group highlights Third quarter 2013 In the following, figures in brackets indicate the amount or percentage for the corresponding period the year before. The year to date Group Profit/loss before tax expense: NOK 3,291.0 million ( 4,252.3) Profit per share: NOK 5.07 ( 6.50) General insurance Earned premiums: NOK 13,970.6 million (13,379.1) Underwriting result: NOK 1,643.9 million ( 2,005.1) Combined ratio: 88.2 ( 85.0) Cost ratio: 15.3 ( 15.3) Financial result: NOK 1,603.2 million ( 2,232.0) Third quarter Group Profit/loss before tax expense: NOK 1,673.3 million ( 1,606.9) Profit per share: NOK 2.66 ( 2.50) General insurance Earned premiums: NOK 4,866.9 million (4,571.7) Underwriting result: NOK million ( 780.3) Combined ratio: 82.5 ( 82.9) Cost ratio: 14.8 ( 14.8) Financial result: NOK million ( 828.7) Special factors and events Proposed extraordinary dividend of NOK 3.0 billion, corresponding to NOK 6.00 per share New capital strategy and dividend policy New return on equity target > 15 per cent after tax from and including 2015 Storebrand redefined from strategic to financial investment Result performance group NOK million 3 q q General insurance Private , ,439.1 General insurance Commercial ,012.6 General insurance Nordic General insurance Baltics Corporate Centre/costs related to owner (72.2) (75.3) (224.0) (209.6) (294.3) Corporate Centre/reinsurance (15.8) (55.5) (65.0) (88.5) Underwriting result general insurance , , ,607.8 Pension and Savings Retail Bank Return on financial assets , , ,005.1 Amortisation and impairment losses of excess value intangible assets (66.1) (31.3) (130.0) (95.7) (126.9) Other items (1.5) 0.3 (3.2) Profit/(loss) for the period before tax expense 1, , , , ,633.5 Key figures general insurance Large losses Run-off gains/(losses) Loss ratio % 68.2 % 73.0 % 69.7 % 69.9 % Cost ratio % 14.8 % 15.3 % 15.3 % 15.5 % Combined ratio % 82.9 % 88.2 % 85.0 % 85.3 % 1 Large losses in excess of NOK 30.0 million are charged to the Corporate Centre, while claims of less than NOK 30.0 million are charged to the segment in which the large losses occured. The segment Baltics has a retention level of EUR 0.5 million. Large losses allocated to the Corporate Centre amounted to NOK million (110.6) year to date and NOK 0.0 million (36.0) in the quarter. Moreover, accounting items related to written reinsurance and reinstatement premium are included. 2 Underwriting result general insurance = earned premiums - claims incurred etc. - operating expenses 3 Excluding return on financial assets in Pension and Savings and Retail Bank. 4 Large losses = loss events in excess of NOK 10.0 million. Expected large losses for the quarter was NOK million. 5 Run-off gains/(losses) = changes in estimates from earlier periods. Reserving is based on best estimate, and expected run-off result over time is zero. 6 Loss ratio = claims incurred etc./earned premiums 7 Cost ratio = insurance related operating expenses/earned premiums 8 Combined ratio = loss ratio + cost ratio 2 Gjensidige Insurance Group 3rd quarter 2013

3 Solid growth in premiums and good result Group profit performance Year to date development The Group recorded a profit before tax expense of NOK 3,291.0 million (4,252.3) for the year to date. The profit from general insurance operations measured by the underwriting result was NOK 1,643.9 million (2,005.1). For the investment portfolio, the return on financial assets was 2.8 per cent (4.0), or NOK 1,603.2 million (2,232.0). The tax expense amounted to NOK million (979.2), corresponding to an effective tax rate of 22.9 per cent (23.0). The effective tax rate was significantly affected by the recognition of an impairment loss on the investment in Storebrand in the first quarter. Realised and unrealised gains on equity investments in the EEA also affected the tax rate. The profit after tax expense was NOK 2,536.1 million (3,273.1), corresponding to NOK 5.07 (6.50) per share. Satisfactory underlying profitability in the portfolio contributed to a good underwriting result year to date. The decline in the result from the corresponding period last year is primarily due to a more normal trend in frequency claims. Earned premiums in the Private segment increased by 3.7 per cent from the same period last year, mainly driven by higher premiums. However, higher claims expenses contributed to a slightly weaker underwriting result. Earned premiums in the Commercial segment increased by 2.5 per cent as a result of growth in both the Norwegian and Swedish portfolios. An increase in claims incurred contributed to a decline in the underwriting result compared with the same period last year. Earned premiums developed in a positive direction in the Nordic segment, with premiums growing by 9.7 per cent (7.3 per cent in the local currency), primarily as a result of an increase in the number of new commercial customers. A weaker underwriting result compared with the corresponding period last year was largely due to lower runoff gains. The Baltic segment recorded a positive profit performance as a result of an improvement in the Baltic insurance market. The growth in premiums was 15.7 per cent (13.6 per cent in the local currency). The Retail Bank s profit performance was good in the period, driven by volume growth, lower write-downs and efficient operations. Pension and Savings also recorded a positive profit performance. The investment portfolio s profit performance was weaker than in the same period last year, largely because of the recognition of an impairment loss in Storebrand of NOK million in the first quarter. Development during the quarter The Group recorded a profit before tax expense for the quarter of NOK 1,673.3 million (1,606.9). The profit from general insurance oper ations measured by the underwriting result was NOK million (780.3). For the investment portfolio, the return on financial assets was 1.5 per cent (1.5), or NOK million (828.7). The profit after tax expense was NOK 1,328.2 million (1,232.5), corresponding to NOK 2.66 (2.50) per share. The increase in the underwriting result was largely due to a lower proportion of large losses in relation to the same period last year. Both the Retail Bank and Pension and Savings have improved their profit performance since the same period last year as a result of good volume growth. The financial result was satisfactory in the quarter. Equity and capital adequacy The Group s equity amounted to NOK 25,068.2 million (23,980.2) at the end of the third quarter. The annualised return on equity before tax expense was 17.8 per cent (24.3). The capital adequacy was 15.9 per cent (15.9), and the solvency margin was per cent (525.9). In addition to testing the capital in relation to statutory requirements, a calculation is carried out quarterly of the risk-based economic capital requirement and the requirements for maintaining an A rating from Standard & Poor s. The risk-based calculation of the economic capital requirement is carried out using the Group s internal risk model, which is based on an economic valuation of assets and liabilities. Available capital in excess of this amount constitutes the Group s economic excess capital. In addition, a deduction is made for the higher of the estimated additional capital required to maintain the current rating and the capital required to meet the statutory capital adequacy requirements. It is currently the A rating requirement from Standard & Poor s that is the most binding. At the end of the quarter, capital in excess of the most binding requirement (including the technical buffer of five per cent adopted by the Board) amounted to NOK 4.6 billion. Other matters The Norwegian Data Protection Agency s control report The main conclusions of the Data Protection Agency s preliminary control report concerning the processing of personal data were upheld in the final control report received on 20 September Gjensidige does not agree with the Agency s conclusions, but has nonetheless chosen not to appeal the decision. Measures will be initiated to meet the Agency s requirements by 1 March Gjensidiges Arbejdsskadeforsikring The merger with the wholly owned subsidiary Gjensidiges Arbejdsskadeforsikring A/S was concluded in the quarter. The merger itself will not affect the Gjensidige Group s financial position, but it will facilitate more rational and efficient operations. External review of loss reserves Gjensidige engaged an external actuarial consultancy to update its review of the Group's gross loss reserves as at 30 June The starting basis for the update was a comprehensive actuarial review as at 31 March The conclusion of the update is that the Group's gross loss reserves as at 30 June 2013 fall within a reasonable range. Gjensidige Insurance Group 3rd quarter

4 Product groups Private Earned premiums year to date (same period last year) 10.1% (9.6) 17.2% (17.3) Lorem ipsum dolores 43.0% (43.1) Motor Property Accident and health Other 29.7% (29.9) General Insurance Private Year to date development The underwriting result for the year to date was NOK million (1,100.0). The combined ratio was 84.4 (80.4). The main reason for the decline in the underwriting result was an increase in claims expenses compared with the corresponding period last year. Earned premiums amounted to NOK 5,823.7 million (5,622.2). The number of customers is on a par with the corresponding period last year, and the positive development in earned premiums was due to higher premiums. Claims incurred amounted to NOK 4,142.1 million (3,765.6). The loss ratio was 71.0 (67.0). The property product in particular recorded a higher loss ratio than in the corresponding period last year due to several water damage claims early in the year and some large fires and damage caused by precipitation in the third quarter. Total claims incurred for the year to date were within the bounds of what can normally be expected, while the claims trend for the same period in 2012 was particularly favourable. Development during the quarter The underwriting result for the period was NOK million (426.5). The combined ratio was 80.5 (78.3). Earned premiums amounted to NOK 2,064.5 million (1,969.8). The positive development in earned premiums was due to increased premiums, and earned premiums increased in all product areas. Claims incurred amounted to NOK 1,389.9 million (1,289.3). The loss ratio was 67.3 (65.5). The increase in the loss ratio was primarily due to a more normal claims trend for most products compared with the same period last year. The loss ratio for the property product was negatively affected by some large fires and damage caused by precipitation at the start of the quarter. Operating expenses amounted to NOK million (254.1). The cost ratio was 13.2 (12.9). Operating expenses amounted to NOK million (756.5), and the cost ratio was 13.3 (13.5). General Insurance Private NOK million 3 q q Earned premiums 2, , , , ,498.5 Claims incurred etc. (1,389.9) (1,289.3) (4,142.1) (3,765.6) (5,051.7) Operating expenses (273.0) (254.1) (777.8) (756.5) (1,007.7) Underwriting result , ,439.1 Amortisation and impairment losses of excess value intangible assets (2.4) (2.4) (7.1) (7.1) (9.5) Large losses Run-off gains/(losses) (1.2) Loss ratio % 65.5 % 71.0 % 67.0 % 67.4 % Cost ratio % 12.9 % 13.3 % 13.5 % 13.4 % Combined ratio % 78.3 % 84.4 % 80.4 % 80.8 % 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. 2 Run-off gains/(losses) = changes in estimates from earlier periods 3 Loss ratio = claims incurred etc./earned premiums 4 Cost ratio = operating expenses/earned premiums 5 Combined ratio = loss ratio + cost ratio 4 Gjensidige Insurance Group 3rd quarter 2013

5 Product groups Commercial Earned premiums year to date (same period last year) 2.0% (1.9) 5.4% (5.4) 13.4% (12.5) 3.5% (3.4) 25.2% (29.1) Lorem ipsum dolores 21.7% (20.1) 28.9% (27.5) Motor Property Accident and health Marine/cargo Liability Agriculture Other General Insurance Commercial Year to date development The underwriting result for the period was NOK million (796.1). The combined ratio was 86.7 (84.4). The reduction in the underwriting result is largely due to increased claims incurred. Earned premiums increased to NOK 5,221.8 million (5,095.9). Both the Norwegian and Swedish commercial portfolios showed a positive development compared with the same period last year, mainly as a result of an increase in the number of products per customer. The growth was negatively affected by a decline in the Swedish municipal portfolio, and the loss of two big agreements for accident and health schemes that took effect from and including the second and third quarter last year. Claims incurred amounted to NOK 3,898.8 million ( ), which corresponds to a loss ratio of 74.7 (72.6). The effect of a lower proportion of large losses and a favourable claims trend for property and business interruption insurance was outweighed by a more normal weather-related trend in agriculture. In addition, agriculture has been exposed to more fire damage this year. More natural disaster claims also affected claims incurred negatively compared with the corresponding period last year. Development during the quarter The underwriting result for the quarter was NOK million (NOK million), corresponding to a combined ratio of 80.2 (79.2). Earned premiums increased to NOK 1,779.9 million (1,710.7). The development in earned premiums was particularly positive for the property, business interruption and liability products. Claims incurred amounted to NOK 1,213.2 million ( ), which corresponds to a loss ratio of 68.2 (67.9). The increase was mainly due to an underlying increase in claims compared with last year, especially in agriculture. The negative effect was partly outweighed by fewer large losses and higher run-off gains. Operating expenses amounted to NOK million (192.3). The cost ratio was 12.0 (11.2). The increase was partly related to the work on integrating the Swedish units. Operating expenses amounted to NOK million (602.1). The cost ratio was 12.0 (11.8). The increase was partly related to the work on integrating the Swedish units. General Insurance Commercial NOK million 3 q q Earned premiums 1, , , , ,764.8 Claims incurred etc. (1,213.2) (1,161.8) (3,898.8) (3,697.7) (4,943.1) Operating expenses (214.4) (192.3) (627.8) (602.1) (809.1) Underwriting result ,012.6 Large losses Run-off gains/(losses) Loss ratio % 67.9 % 74.7 % 72.6 % 73.1 % Cost ratio % 11.2 % 12.0 % 11.8 % 12.0 % Combined ratio % 79.2 % 86.7 % 84.4 % 85.0 % 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. 2 Run-off gains/(losses) = changes in estimates from earlier periods 3 Loss ratio = claims incurred etc./earned premiums 4 Cost ratio = operating expenses/earned premiums 5 Combined ratio = loss ratio + cost ratio Gjensidige Insurance Group 3rd quarter

6 Product groups Nordic Earned premiums year to date (same period last year) 3.4% (3.4) 0.5% (0.8) 5.6% (6.5) 21.7% (18.4) Lorem ipsum dolores 31.3% (33.0) Motor Property Accident and health Liability Agriculture 37.5% (38.0) Other General Insurance Nordic Year to date development The underwriting result was NOK million (372.1) for the year to date, corresponding to a combined ratio of 87.7 (83.1). The decline in the result was mainly due to significantly lower run-off gains. Earned premiums increased to NOK 2,411.6 million (2,198.2). Of the increase, NOK 48.8 million was due to changes in the exchange rate. The underlying increase was primarily due to an increase in the number of new commercial customers. The changes to the cooperation agreement with the Nykredit Group entered into force with effect from April, and they are expected to contribute to higher sales and customer satisfaction in the Danish private market in the time ahead. Claims incurred amounted to NOK 1,722.0 million (1,452.8). Of the increase, NOK 32.2 million was due to changes in the exchange rate. The loss ratio was 71.4 (66.1). The higher loss ratio was mainly the result of significantly lower run-off gains. Development during the quarter The underwriting result was NOK million (81.7), corresponding to a combined ratio of 85.1 (88.9). The improvement was mainly due to fewer large losses combined with good underlying growth in premiums. Earned premiums amounted to NOK million (735.7). Of the increase, NOK 55.3 million was due to changes in the exchange rate. The underlying increase was mainly due to an increase in the number of new commercial customers. Claims incurred amounted to NOK million (534.1). Of the increase, NOK 36.4 million was due to changes in the exchange rate. The loss ratio was 70.0 (72.6). The lower loss ratio was due to fewer large losses, which was partly outweighed by lower run-off gains. Operating expenses amounted to NOK million (119.9). Of the increase, NOK 9.5 million was due to changes in the exchange rate. The cost ratio was 15.1 (16.3). Operating expenses amounted to NOK million (373.3). Of the increase, NOK 8.2 million was due to changes in the exchange rate. The cost ratio was 16.3 (17.0). General Insurance Nordic NOK million 3 q q Earned premiums , , ,909.7 Claims incurred etc. (586.8) (534.1) (1,722.0) (1,452.8) (1,883.6) Operating expenses (127.0) (119.9) (393.9) (373.3) (506.1) Underwriting result Amortisation and impairment losses of excess value intangible assets (62.3) (27.8) (119.1) (85.0) (112.8) Large losses Run-off gains/(losses) Loss ratio % 72.6 % 71.4 % 66.1 % 64.7 % Cost ratio % 16.3 % 16.3 % 17.0 % 17.4 % Combined ratio % 88.9 % 87.7 % 83.1 % 82.1 % 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. 2 Run-off gains/(losses) = changes in estimates from earlier periods 3 Loss ratio = claims incurred etc./earned premiums 4 Cost ratio = operating expenses/earned premiums 5 Combined ratio = loss ratio + cost ratio 6 Gjensidige Insurance Group 3rd quarter 2013

7 Product groups Baltics Earned premiums year to date (same period last year) 2.6% (3.3) 4.3% (4.4) 15.3% (14.5) Motor 14.9% (15.6) Lorem ipsum dolores 62.9% (62.1) Property Accident and health Liability Other General Insurance Baltics Year to date development The underwriting result amounted to NOK 19.7 million (11.4). The combined ratio was 94.7 (96.5). The improvement in profit performance was largely due to a positive development in earned premiums. Earned premiums amounted to NOK million (322.3). Of the increase, NOK 6.1 million was due to changes in the exchange rate. Earned premiums in health and motor insurance developed particularly well, primarily as a result of an improvement in the Baltic insurance markets. Claims incurred amounted to NOK million (216.7), corresponding to a loss ratio of 68.3 (67.3). Of the increase, NOK 4.1 million was due to changes in the exchange rate. The run-off gains were lower than in the same period last year. The underlying development was driven by a more normalised claims situation and the improved quality of the portfolio. Development during the quarter The underwriting result amounted to NOK 8.6 million (6.6). The combined ratio was 93.5 (94.1). Earned premiums amounted to NOK million (112.2). Of the increase, NOK 7.5 million was due to changes in the exchange rate. The development in earned premiums was especially positive in motor insurance. Claims incurred amounted to NOK 89.9 million (74.4), corresponding to a loss ratio of 67.9 (66.3). Of the increase, NOK 5.1 million was due to changes in the exchange rate. The loss ratio increased as a result of an increased loss frequency in Latvia, which was partly outweighed by increased run-off gains. The nominal operating expenses amounted to NOK 34.0 million (31.2), corresponding to a cost ratio of 25.7 (27.8). Of the increase, NOK 2.2 million was due to changes in the exchange rate. The nominal operating expenses amounted to NOK 98.5 million (94.1), corresponding to a cost ratio of 26.4 (29.2). Of the increase, NOK 1.8 million was due to changes in the exchange rate. Despite increased activity, implemented cost-cutting measures contributed to keeping the nominal cost level stable. General Insurance Baltics NOK million 3 q q Earned premiums Claims incurred etc. (89.9) (74.4) (254.7) (216.7) (292.6) Operating expenses (34.0) (31.2) (98.5) (94.1) (125.4) Underwriting result Amortisation and impairment losses of excess value intangible assets (1.4) (1.2) (3.8) (3.5) (4.7) Large losses Run-off gains/(losses) (2.7) Loss ratio % 66.3 % 68.3 % 67.3 % 67.0 % Cost ratio % 27.8 % 26.4 % 29.2 % 28.7 % Combined ratio % 94.1 % 94.7 % 96.5 % 95.7 % 1 Large losses = loss event in excess of NOK 10.0 million. Claims incurred in excess of EUR 0.5 million per event are charged to the Corporate Centre. 2 Run-off gains/(losses) = changes in estimates from earlier periods 3 Loss ratio = claims incurred etc./earned premiums 4 Cost ratio = operating expenses/earned premiums 5 Combined ratio = loss ratio + cost ratio Gjensidige Insurance Group 3rd quarter

8 Asset allocation the group policy portfolio At the end of the period (same period last year) 6.8 % (15.1) 6.4 % (3.1) 2.7 % (2.4) Pension and Savings Year to date development The profit before tax expense for the year to date was NOK 36.3 million (20.2). This positive development was due to an increase in revenues as a result of growth in the customer portfolio combined with positive market development. At the turn of the year, Gjensidige Pensjonsforsikring took over two external defined contribution portfolios, which led to an increase in assets under management of just over NOK 800 million. Net insurance revenue in the period increased to NOK 93.0 million (83.9) as a result of higher administration costs related to growth in the portfolio. The management income increased to NOK 59.5 million (47.7) as a result of growth in the customer portfolio for both the pension and savings areas, and positive market development. Operating expenses amounted to NOK million (129.4). The increase in expenses was mainly due to higher distribution costs. Financial income amounted to NOK 18.6 million (18.0). This includes the return on the group policy and corporate portfolio. The Company s share of the financial profit on the paid-up portfolio policy was allocated in its entirety as a provision 1 for higher life expectancy. Despite provisions made in the quarter, the financial income showed a positive development, mainly because of a better return on the corporate portfolio as a result of reinvestments. At the end of the period, the assets under management in the pension operations amounted to NOK 13,259.4 million (9,972.0). The group policy portfolio accounted for NOK 3,459.6 million (2,987.0) of this amount. The reocognized return on the paid-up policy portfolio was 3.43 per cent (3.50) in the period. The average annual interest guarantee was 3.6 per cent % (79.4) Lorem ipsum dolores Assets under management for the savings operations amounted to NOK 11,563.3 million (10,189.1) at the end of the period. The total assets under management increased by NOK 4,343.8 million (2,413.5), amounting to NOK 24,822.7 million (20,161.1) at the end of the period. Development during the quarter The profit before tax expense was NOK 12.9 million (1.4). Net insurance revenue in the period amounted to NOK 30.7 million (14.6). The provisions for claims were strengthened throughout the second half-year last year as a result of changes in the estimates of future claims disbursements, which led to increased claims incurred and reduced insurance revenue. In addition, the income last year was further reduced through a change in the classification of financial profit to the owner on the rest of the group insurance portfolio, which led to a corresponding reduction in financial income. The management income amounted to NOK 21.0 million (16.4) and increased as a result of growth in the portfolio. Operating expenses amounted to NOK 45.3 million (42.6). Financial income amounted to NOK 6.4 million (13.0). Bonds held to maturity Money market Other financial investments Bonds classified as loans and receivables 1 Total provisions made at the end of the third quarter amounted to NOK 77.6 million, and the total provisions required to be made over six years amount to about NOK 250 million. Pension and Savings NOK million 3 q q Earned premiums Claims incurred etc. (162.3) (147.5) (528.6) (389.8) (574.9) Net insurance revenue Management income etc Operating expenses (45.3) (42.6) (134.9) (129.4) (170.4) Net operating income 6.5 (11.6) Net financial income Profit/(loss) before tax expense Run-off gains/(losses) 1 (10.9) (10.9) (15.7) Operating margin % (37.41%) 11.59% 1.67% 0.19% Recognised return on the paid-up policy portfolio % 3.50% 4.76% Value-adjusted return on the paid-up policy portfolio % 3.58% 4.77% 1 Run-off gains/(losses) = changes in estimates from earlier periods 1 Operating margin = net operating income/(net insurance revenue + management income etc.) 2 Recognized return on the paid-up policy portfolio = realised return of the portfolio 3 Value-adjusted return on the paid-up policy portfolio = total return of the portfolio 8 Gjensidige Insurance Group 3rd quarter 2013

9 Retail Bank Year to date development Profit before tax expense was NOK million (75.2). The positive development was mainly a result of increased net interest income, coming from the growth in customer lending. Cost efficiency and lower write-downs also contributed to the result. Deposits and lending At the end of the period (same period last year) NOK million Net interest income was NOK million (318.5), primarily driven by customer assets growth. Net commission income and other income were NOK 39.9 million (32.5). There was an increase in the customer related commission income and the gains from the previously written off portion of the acquired unsecured lending portfolio. This improvement was partially offset by the decrease in income from financial instruments. Annualised net interest income in per cent of average total assets was 2.50 percent (2.46), following the improved financing costs. It has been a significant growth in the secured lending the past 12 months. This alone led to a lower net interest margin. Operating expenses were NOK million (221.4). The increase was driven by volume growth and costs related to the newly launched car financing product. Cost/income ratio was 56.9 per cent (63.1). The decline was driven by the increased income and by expense efficiency. Total write-downs and losses were NOK 48.3 million (54.2), primarily related to the unsecured lending portfolio. Annualised write-downs and losses in per cent of average gross lending were 0.33 per cent (0.47). The decline was a result of lower provisioning levels driven by improved expectation of customer repayments. An increased share of the secured loans in the lending portfolio also contributed to the improvement. The write-down and losses were in line with the expectations. The weighted average loan to value 1 was estimated at 64.0 per cent for the mortgage portfolio. Gross lending increased by 42.2 percent year over year, amounting to NOK 23,196.3 million (16,317.8) at the end of the period. The lending activity saw a considerable boost in the first 9 months of the year and is expected to continue but with at a somewhat lower pace in the last quarter of The bank s deposits increased by 21.3 percent year over year, reaching NOK 12,973.0 million (10,693.4) at the end of the period. Deposits to loans ratio was 55.9 percent (65.5) Lending Lending Deposits Deposits There is good access to external financing. Standard & Poor's upgraded Gjensidige Bank s long term rating in the beginning of July from BBB+ to A-, outlook negative. The development was based on their assessment of the support the bank receives from the parent company. The bank s core capital increased during the second quarter, following the growth of the business and the new regulations related to capital, in place starting July 1st. The increase amounted to NOK million. Development during the quarter Profit before tax expense was NOK 49.8 million (27.5). The net interest income was the main driver for the increased profitability. Net interest income was NOK million (104.4), following the growth in customer assets. Net commission income and other income were NOK 19.4 million (12.3). The increase was driven by customer related income and gains from financial instruments and the previously written off portion of the acquired unsecured lending portfolio. Operating expenses were NOK 92.6 million (74.0). The increase in expenses was primarily driven by the volume growth and costs related to the newly launched car financing product. Cost/income ratio was 58.2 per cent (63.4). Total write-downs and losses were NOK 16.8 million (15.2), primarily related to the unsecured lending portfolio. Loan growth was NOK 2,297.4 million (742.2) during the quarter while the deposits increased with NOK million (296.9) 1 The estimate is calculated based on the exposure at the reporting date and the property valuation at the time the loan was approved, including any higher priority pledge(s) Retail Bank NOK million 3 q q Interest income and related income Interest expenses and related expenses (153.7) (131.6) (418.0) (384.1) (506.7) Net interest income Net commission income and other income Total income Operating expenses (92.6) (74.0) (249.2) (221.4) (306.4) Write-downs and losses (16.8) (15.2) (48.3) (54.5) (68.4) Profit/(loss) before tax expense Net interest margin, annualised % 2.46% 2.52% Write-downs and losses, annualised % 0.47% 0.43% Cost/income ratio % 63.4% 56.9% 63.1% 62.8% Capital adequacy % 13.0% 13.6% 1 Net interest margin, annualised = net interest income/average total assets 2 Write-downs and losses, annualised = write-downs and losses/avarage gross lending 3 Cost/income ratio = operating expenses/total income 4 Capital adequacy = primary capital/basis of calculation for credit risk, market risk and operational risk. The result of the period is not included in the calculation for the quarters, with the exception of fourth quarter. Gjensidige Insurance Group 3rd quarter

10 Portfolio split At the end of the period (same period last year) Geographic distribution match portfolio At the end of the period 1.7 % 5.7 % 33.7% (31.8) Lorem ipsum dolores 57.5% (59.4) Match portfolio Assosiated companies Free portfolio 6.2 % 2.5 % 28.3 % Lorem ipsum dolores 49,0 % Norway Sweden Denmark USA UK Baltics 8.9% (8.8) Others 6.6 % Management of financial assets and properties The Group s investment portfolio includes all investment funds in the Group except for investment funds in the Pension and Savings segment and the Retail Bank segment. The investment portfolio consists of three parts: a match portfolio, a free portfolio and associated companies. The match portfolio is intended to correspond to the Group s actuarial provisions. It is invested in fixed-income instruments whose duration is adapted to the disbursement of the actuarial provisions. The free portfolio consists of various assets. The allocation of assets in this portfolio must be seen in connection with the Group s capitalisation and pertaining risk capacity, as well as the Group s ongoing risk management. Associated companies mainly comprise the holdings in Storebrand and SpareBank 1 SR-Bank. Year to date development At the end of the period, the investment portfolio totalled NOK 57,147.8 million (55,821.1). The financial result was NOK 1,603.2 million (2,232.0), which corresponds to a return on financial assets of 2.8 per cent (4.0). The contribution from current equities was significantly higher than in the same period last year, while the contribution from other bonds was significantly lower as a result of increased rates and credit margins. The return for the period was furthermore affected by the impairment loss recognised on the investment in Storebrand in the first quarter. Match portfolio The match portfolio amounted to NOK 32.8 billion (33.2). The portfolio yielded a return of 2.7 per cent (2.8) excluding changes in the value of the part of the portfolio recognised at amortised cost. Unrealised excess value from bonds valued at amortised cost amounted to NOK million (891.3) at the end of the period. The average duration of the match portfolio was 3.3 years, while the average term to maturity for corresponding insurance debt was 3.7 years. The distribution of counterparty risk and credit rating is shown in the charts on pages 11 and 12. Of the securities without an official credit rating, 20.1 per cent were issued by Norwegian savings banks, while the remainder were mostly issued by Norwegian power producers and distributors, property companies or governmentguaranteed companies. Bonds with a coupon that is adjusted on the basis of the Norwegian consumer price index accounted for 13.3 per cent of the match portfolio. The geographical distribution 1 of the match portfolio is shown in the above chart. At the end of the third quarter, there were no direct bond investments in the PIIGS countries. 1 Geographical distribution relates to issuers and does not reflect the actual currency exposure. Financial assets and properties Result 3 q. Result Carrying amount NOK million Match portfolio Money market , ,487.3 Bonds at amortized cost , ,917.4 Current bonds (35.4) , ,747.2 Match portfolio total , ,151.9 Associated companies (110.3) , ,923.6 Free portfolio Money market , ,506.4 Other bonds , ,309.8 Konvertible bonds , Current equities , ,382.4 PE funds , ,324.9 Property , ,992.2 Other 4 (6.3) 30.9 (33.3) , Free portfolio total , ,745.6 Financial profit/(loss) on the investment portfolio , , , ,821.1 Financial income in Pension and savings and Retail bank Net income from investments , , The item includes the discounting effects of insurance obligations in Denmark and mismatch between interest rate adjustments on the liability side in Denmark, versus the interest rate hedge. 2 The item consist of total investment grade, high yield and current bonds. Investment grade and high yield are investments in internationally diversified funds externally managed. 3 Investments in internationally diversified funds externally managed. 4 The item includes currency hedging of Gjensidige Sverige, Gjensidige Baltic and Gjensidige Danmark, and lendings, paid-in capital in Gjensidige Pensjonskasse and hedge funds. 10 Gjensidige Insurance Group 3rd quarter 2013

11 Geographic distribution fixed income instruments in free portfolio At the end of the period 0.1% 8.0% 15.8% 15.8% Lorem ipsum dolores 56.6% Norway Sweden USA UK Baltic Other Counterparty risk fixed income instruments At the end of the period Per cent Industry Banks/ financial institutions Government/ public sector 3.7% 0 Match portfolio Free portfolio Free portfolio The free portfolio amounted to NOK 19.2 billion (17.7) at the end of the period. The return was 4.5 per cent (5.1). Fixed-income instruments The fixed-income instruments in the free portfolio amounted to NOK 9.4 billion (9.5) and yielded a return of 2.7 per cent (5.1). Other bonds yielded a significantly lower return compared with the corresponding period last year. The main reason for this was a weaker return on high-yield and investment grade bonds as a result of higher interest rates, especially in the second quarter, and international credit margins. The average duration in the portfolio was approximately 1.2 years at the end of the period. The distribution of counterparty risk and credit rating is shown in the charts on this and the next page. Of the securities without an official rating, 11.5 per cent were issued by Norwegian savings banks, while the remainder were mostly issued by Norwegian power producers and distributors, property companies or government-guaranteed companies. The geographical distribution 1 of the fixed-income instruments in the free portfolio is shown in the chart above. Bond investments in the PIIGS countries through funds amounted to NOK million at the end of the period. Equity portfolio The total equity exposure at the end of the period (including private equity, but excluding associated companies) was NOK 3.8 billion (2.7). The return on current equities was 12.9 per cent (4.3). This includes the profit from derivatives used for hedging purposes. The return on private equity was 10.3 per cent (10.3). Property portfolio At the end of the period, the property portfolio amounted to NOK 5.0 billion (5.0). The property portfolio yielded a return of 4.1 per cent (3.7). The return on directly owned properties was good, while the return on property funds was negative. Real estate funds amounted to NOK 0.2 billion at the end of the period. The general required rate of return in connection with the valuation of the properties was 6.5 per cent (6.6). The individual valuations resulted in a net increase in value in the year to date of NOK 62.2 million. No external valuations of properties were carried out in the period. The portfolio is concentrated in office properties in Oslo, but it also includes office properties in other Norwegian cities and one office building in Copenhagen. 1 Geographical distribution relates to issuers and does not reflect the actual currency exposure. Return per asset class Per cent 3 q q Match portfolio Money market Bonds at amortized cost Current bonds (0.5) Match portfolio total Associated companies (2.3) Free portfolio Money market Other bonds Konvertible bonds Current equities PE funds Property Other 4 (0.8) 3.8 (3.7) Free portfolio total Financial profit/(loss) on the investment portfolio The item includes the discounting effects of insurance obligations in Denmark and mismatch between interest rate adjustments on the liability side in Denmark, versus the interest rate hedge. 2 The item consist of total investment grade, high yield and current bonds. Investment grade and high yield are investments in internationally diversified funds externally managed. 3 Investments in internationally diversified funds externally managed. 4 The item includes currency hedging of Gjensidige Sverige, Gjensidige Baltic and Gjensidige Danmark, and lendings, paid-in capital in Gjensidige Pensjonskasse and hedge funds. Gjensidige Insurance Group 3rd quarter

12 Credit rating fixed income instruments At the end of the period Per cent No official rating High yield Investment grade Match portfolio Free portfolio Associated companies Associated companies amounted to NOK 5.1 billion (4.9) at the end of the period. The shareholding in Storebrand was recognised in the amount of NOK 3,671.9 million. The corresponding figure for the investment in SpareBank 1 SR-Bank was NOK 1,370.6 million. The return on associated companies was minus 2.3 per cent (plus 7.7), corresponding to minus NOK million (plus 362.0). An impairment loss on the investment in Storebrand was recognised in the amount of NOK million in the first quarter. Gjensidige s estimated share of Storebrand s profit for the year to date amounted to NOK million, including the amortisation of excess value. Gjensidige s estimated share of Spare-Bank 1 SR-Bank s profit for the year to date amounted to NOK million, including the amortisation of excess value. Development during the quarter The financial result for the total investment portfolio was NOK million (828.7) in the quarter, This resulted in a return on financial assets of 1.5 per cent (1.5). The return on the match portfolio was 0.9 per cent (0.8), excluding changes in the value of the portfolio valued at amortised cost. The return on the free portfolio was 1.9 per cent (2.4). The return on associated companies was 3.5 per cent (3.1). Organisation The Group had a total of 3,232 employees at the end of the period, compared with 3,218 at the end of the second quarter. The number of employees broke down as follows: 1,979 (1,983) in general insurance operations in Norway, 132 (136) in Gjensidige Bank, 58 (50) in Gjensidige Pensjon og Sparing, 548 (543) in Denmark, 103 (102) in Sweden and 412 (404) in the Baltics (exclud ing agents). (The figures in brackets refer to the number of em ployees at the end of the previous quarter.) The increase in Gjensidige Pensjon og Sparing relates to a transfer of the distribution of private pension and savings products from Gjensidige Forsikring ASA. Events after the balance sheet date On 18 October 2013 Gjensidige sold 4.22 per cent of the shares in Storebrand at NOK per share. Accounting gain from the transaction is expected to be around NOK 40 million. The Board has found that a strategic rationale to increase the ownership in Storebrand is not present, and the investment is redefined from a strategic to a financial investment. New capital strategy and updated financial targets On 21 October 2013, the Board of Gjensidige Forsikring ASA adopted a new capital strategy and updated financial targets. Proposal extraordinary dividend The Board proposes to distribute excess capital of NOK 3.0 billion, corresponding to NOK 6.00 per share, in extraordinary dividend in May The Gjensidige Foundation, which is Gjensidige s largest owner, has endorsed the proposal and at the same time communicated that extraordinary dividends from Gjensidige will be managed to, among other things, support the customer dividend model and contribute to increased stability in future customer dividends. New capital strategy Any future excess capital over and above the targeted capitalisation will be distributed over time in the form of extraordinary dividends. By targeted capitalisation is meant capitalisation that is adapted to Gjensidige s strategic targets and risk appetite for at all times. The Group shall maintain its financial flexibility and at the same time have a stringent capital discipline. The target capitalisation will be based on the most binding capital requirement plus a technical buffer and a buffer to ensure financial flexibility related to: changed framework conditions organic growth and minor acquisitions that are not financed by retained earnings stabilisation of ordinary dividend over time At the moment, the most binding capital requirement is the A rating requirement from Standard & Poor s. The Board has approved a technical buffer in excess of this requirement of five per cent. New dividend policy At the same time, the Board adopted a new dividend policy that shall apply from and including the 2014 financial year, which states: Gjensidige targets high and stable ordinary dividend pay-outs to its shareholders. The Board targets a pay-out ratio for ordinary dividends over time of at least 70 per cent of profit after tax. When determining the size of the ordinary dividend, the expected future capital need will be taken into account. Over time, Gjensidige will also pay out excess capital above the targeted capitalisation as extraordinary dividends. 12 Gjensidige Insurance Group 3rd quarter 2013

13 The proposed dividend for the 2013 financial year will be based on the excisting dividend policy and can be expected to be in the range of per cent of the profit after tax expense. The basis for the calculation will however be adjusted for the negative effect of the impairment loss on Storebrand in the first quarter. New return on equity target The Board also decided to change the return on equity target from minimum 15 per cent pre tax to minimum 15 per cent after tax from and including Outlook Gjensidige s profitability targets for its general insurance operations remain unchanged. Over time, the annual combined ratio shall be within the corridor The Group s competitiveness is regarded as good, and a great deal of attention is devoted to the work of implementing measures and investments that will put the company in a position to meet customers future needs and service requirements. Profitability is prioritised over growth. In order to underpin Gjensidige s long-term profitability targets, group programmes for optimal tariff-setting, simplification, automation and self-service solutions are carried on. Together with last year s relaunching of Gjensidige s visual profile and online customer portals, these initiatives will strengthen our platform for future growth and help to position Gjensidige as the most customeroriented general insurance company in the Nordic region. High priority is also given to optimal utilisation of partnerships and continuous assessment of new opportunities for growth. Uncertainty about the international economic situation and financial challenges in several key economies create uncertainty for Gjensidige as well. Gjensidige has a robust investment strategy, however, while the Group is financially strong and has a high proportion of its business in the Norwegian general insurance market. The macroeconomic situation with regard to the Norwegian general insurance operations is still regarded as good, and there are further signs of improvement in the Danish property market. The Baltic economies continue to show positive development. There is still uncertainty relating to changed framework conditions for the financial sector in Norway and internationally. The Solvency II Regulations are not expected to be implemented in Norway until 2016 at the earliest. New Norwegian pension legislation is expected to enter into force in The Group has substantial capital buffers in relation to internal risk models, statutory capital adequacy requirements and the target rating. The Board considers the Group s capital situation and financial strength to be good. Sollerud, 21 October 2013 The Board of Gjensidige Forsikring ASA Inge K. Hansen Gunnhild H. Andersen Trond Vegard Andersen Hans-Erik F. Andersson Per Arne Bjørge Chairman Kjetil Kristensen Gisele Marchand Gunnar Mjåtvedt Mari T. Skjærstad Mette Rostad Helge Leiro Baastad CEO Gjensidige Insurance Group 3rd quarter

14 Consolidated income statement NOK million Notes 3 q q Operating income Earned premiums from general insurance 4 4, , , , ,797.3 Earned premiums from pension Interest income etc. from banking operations Other income including eliminations Total operating income 3 5, , , , ,517.7 Net income from investments Results from investments in associates (110.3) Operating income from property Interest income and dividend etc. from financial assets , , ,610.1 Net changes in fair value on investments (incl. property) (228.4) (337.6) (301.2) Net realised gain and loss on investments (129.3) ,150.0 Expenses related to investments (41.5) (46.4) (110.0) (128.1) (179.5) Total net income from investments , , ,055.8 Total operating income and net income from investments 6, , , , ,573.5 Claims, loss etc. Claims incurred etc. from general insurance 5,6 (3,293.7) (3,116.6) (10,195.4) (9,329.3) (12,437.7) Claims incurred etc. from pension (162.3) (147.5) (528.6) (389.8) (574.9) Interest expenses etc. and write-downs and losses from banking operations (170.4) (146.8) (466.3) (438.6) (575.1) Total claims, interest expenses, loss etc. (3,626.5) (3,410.9) (11,190.3) (10,157.7) (13,587.7) Operating expenses Operating expenses from general insurance (720.6) (674.7) (2,131.3) (2,044.8) (2,751.8) Operating expenses from pension (45.3) (42.6) (134.9) (129.4) (170.4) Operating expenses from banking operations (92.6) (74.0) (249.2) (221.4) (306.4) Other operating expenses (2.1) (2.2) (7.1) Amortisation and impairment losses of excess value - intangible assets (66.1) (31.3) (130.0) (95.7) (126.9) Total operating expenses (926.7) (824.8) (2,652.6) (2,485.4) (3,352.3) Total expenses (4,553.3) (4,235.7) (13,842.8) (12,643.0) (16,940.0) Profit/(loss) for the period before tax expense 3 1, , , , ,633.5 Tax expense (345.2) (374.4) (754.9) (979.2) (1,353.5) Profit/(loss) for the period 1, , , , ,280.1 Earnings per share, NOK (basic and diluted) Gjensidige Insurance Group 3rd quarter 2013