ANNUAL REPORT 2007 1 Million Customers 3,460 Employees 100 Offices 35% NOK 2.5 Bill

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ANNUAL REPORT 2007 1 million customers 3,460 employees 100 offices 35% NOK 2.5 bill. in profit of consumers think of Gjensidige first when they are asked to name an insurance company. Now a stock exchange listing is planned for Gjensidige – Norway’s largest and most customer-oriented general insurance company.

events in 2007 • Gjensidige Bank started up in January, with a full launch from June. • Gjensidige was awarded the Agricultural Co-operatives’ equal opportunity award for their efforts to increase the share of women on boards and committees. • Equity certificates were approved as an equity instrument, and the General Meeting approved the stock exchange listing of the group. • The Gjensidige Fund and the Gjensidige Foundation were established. • Hjelp24 Glitne acquired Norsk Idrettsmedisinsk Institutt (NIMI). • Gjensidige purchased the Swedish general insurance company Tennant Insurance Group AB, which has business operations in both Sweden and Norway. • The watchman, which is the company’s trademark, together with the slogan “Time passes, Gjensidige endures” has been used for 75 years. The watchman is one of Norway’s strongest brand symbols. • The management structure of the group was changed. Regional representation and regional boards were discontinued. Regional owner committees will safeguard the interests of the customers going forward. Gjensidige annual report 2007 | 1 t his is This is Gjensidige A growing financial group ...... 2

key figures ...... 4 oper at ions g jensidi e future growth and development ...... 6 History of gjensidige ...... 8 Gjensidige financial portal ...... 9

Operations general insurance – private ...... 12 general insurance – commercial ...... 16 general insurance – other nordic ...... 20 general insurance – baltics ...... 22 pension and savings ...... 24 gjensidige bank ...... 26 hjelp24 health services ...... 28 asset management ...... 30 gjensidige’s people ...... 32 corporate social responsibility ...... 34 m a n ag emen t Management risk and capital management ...... 40 CORPORATE GOVERNANCE ...... 42 gjensidige’S BOARD OF DIRECTORS ...... 46 gjensidige’S GROUP MANAGEMENT ...... 48 Supervisory board, control commitee and nomination committee . 50 Gjensidige’S equity certificates ...... 52 resul Results Report of the board of directors ...... 56 consolidated accounts ...... 70 t s parent company accounts ...... 142 2 | Gjensidige annual report 2007

A growing financial Group Gjensidige is a solid, Norwegian-based financial group . The Group is the market leader for general insurance and insurances of the person in Norway with a market share of 31 0. per cent in 2007 (source: Norwegian Financial Services Association) . Gross premiums written in 2007 totalled NOK 15,726 5. million .

In addition to the insurance operations in Norway, Gjensidige offers health Competitive advantages services, pension and savings products and Internet banking to private Gjensidige excels in particular in five areas. individuals. Outside Norway Gjensidige offers general insurance and insurances of the person in Denmark, Sweden and the Baltic States. 1 Leading company for general insurance and insurances of the person in Norway The roots of the general insurance operations can be traced back to the Gjensidige is the market leader for private, agricultural and group life insur- 1820s, while the watchman has been the company’s trademark for 75 ance, and the second largest company within the commercial insurance years. Gjensidige is one of the most well-known brands in Norway, and the segment, with over 1 million customers at the end of 2007. company’s logo and the watchman have a high level of recognition. 2 Strong brand The planed listing of Gjensidige’s equity certificates on Oslo Børs will The Gjensidige brand and logo with the watchman is well-known, highly provide increased flexibility with regard to financing further growth. respected and evokes strong loyalty in the Norwegian insurance market.

Vision 3 Complete business model Gjensidige attaches importance to maintaining and developing a complete We shall know the customer business model to ensure the necessary degree of closeness to the customers. This is a prerequisite for ongoing customer-orientation and best and care the most! increasing the efficiency of the entire company.

Strategy 4 Management that focuses on value creation Gjensidige’s commercial goal is to be a leading and profitable insurance Gjensidige’s senior management has around 15 years of experience in the company in Norway. Profitable growth shall be generated in other busi- industry, and nine of 13 senior managers have been with the company ness areas to achieve an attractive return for the owners. since 2001. During this period the company has increasingly attached importance to value creation while preserving the traditional, owner- To achieve this the Group shall: controlled structure at the same time. The company’s equity has increased • strengthen the value and profitability of the insurance operations in more than four-fold since 2001. Norway. • grow in the general insurance area in the Nordic region and Baltic 5 Solid finances States. The Group’s financial strength is a solid platform for further growth in • seek profitable growth through offering the customers more products strategically important market segments. Standard & Poor’s, an independ- in the finance and insurance area. ent and recognised international credit rating agency, has given Gjensidige • ensure continued discipline with regard to cost control and efficient a credit rating of “A”. asset management. Gjensidige annual report 2007 | 3 t his is oper at ions g jensidi e

The OPERATIONS ARE DIVIDED INTO SIX BUSINESS AREAS: p12 General insurance Norway This represents the Group’s core business. The operations cover both the private market, including the agricultural market, and the commercial market. p20 General insurance other Nordic The Group’s insurance operations in Denmark operate under the Fair Forsikring trade name in the private market and KommuneForsikring in the municipal and commercial markets. KommuneForsikring is a leading supplier of insurance products in the municipal market in Denmark. In Sweden the Group owns the Tennant Insurance Group, which offers insurance and related services in both the private and commercial markets. m a n ag emen t p22 General insurance Baltics In Estonia, Latvia and Lithuania the Group offers insurance products under the trade name Gjensidige Baltic. (Parekss until 31 December 2007.) p24 Pension and savings The Group’s pension and savings operations started up in 2006. The products that are offered include, for example, mandatory occupational pensions, individual pension savings, and the management of paid-up policies and fund savings. p26 Retail banking services In 2007 Gjensidige started its own bank – Gjensidige Bank – which offers Internet-based banking services to private customers in Norway. NORWAY resul p28 Health services Gjensidige offers health services in Norway under the trade name Hjelp24. The offerings t s include corporate health services and personal SWEDEN security alarms. After the acquisition of NIMI in November 2007, Hjelp24 possesses a hospital licence and can offer outpatient surgery. ESTONIA

LATVIA

DENMARK LITHUANIA 4 | Gjensidige annual report 2007

combined ratio development Equity and solvency capital return on equity before tax

Per cent NOK million Equity Per cent 100 25000 Solvency capital 40

80 20000 30 60 15000 20 40 10000 10 20 5000

0 0 0 2007 2006 2007 2006 2007 2006

Combined ratio Solvency capital = Net subordinated capital including share Combined Ratio = Loss ratio of security provisions (based on the company accounts for Return on equity before tax = Profit before tax for the loss ratio + cost ratio Cost ratio Gjensidige Forsikring BA in accordance with NGAAP) period / average adjusted equity for the period.

Financial key figures profit and loss 2007 2006 Gross premiums written NOK million 15,726.5 13,787.2 Earned premiums, net of reinsurance NOK million 14,875.9 13,193.2 Claims incurred, net of reinsurance NOK million 11,695.8 10,014.9 Operating expenses NOK million 2,684.3 2,561.6 Technical result general insurance, before amortisation of excess value1 NOK million 2,027.6 1,676.9 Net income and costs from financial assets NOK million 2,820.3 3,711.1 Profit for the year NOK million 2,479.0 4,091.9 Underwriting result general insurance2 NOK million 552.6 668.9

Combined ratio3 Per cent 96.1 94.8 Loss ratio, net of reinsurance4 Per cent 78.6 75.9 Cost ratio, net of reinsurance5 Per cent 17.5 18.9 Premiums, net of reinsurance6 Per cent 98.4 97.6

Balance 2007 2006 Investments assets7 NOK million 46,803.0 41,966.0 Provisions for unearned premiums, gross NOK million 6,060.2 5,737.9 Claims provisions, gross NOK million 23,147.1 17,556.7 Equity NOK million 20,302.5 19,017.3 Total equity and liabilities NOK million 58,120.3 47,112.7

Solvency capital8 NOK million 13,423.5 14,760.3 Solvency margin9 Per cent 561.3 645.2 Capital adequacy10 Per cent 26.1 41.6

return 2007 2006 Return on investment assets (ROI)11 Per cent 6.3 9.2 Return on equity, before tax (ROE)12 Per cent 15.4 24.2

DEFINITIONS: 7 Financial assets including property, excluding customer assets under management in 1 Earned premiums, net of reinsurance + allocated return on investment – claims incurred, Gjensidige Bank and Gjensidige Pensjon og Sparing net of reinsurance – premium discounts and other profit agreements - insurance- 8 Net subordinated capital including share of security provisions (based on the company related operating expenses. The allocated return on investment for the underwriting accounts for Gjensidige Forsikring BA in accordance with NGAAP) reserves is based on the government-dictated interest rate for the period. 9 Solvency capital as a percentage of the minimum solvency capital requirements calcu- 2 Earned premiums, net of reinsurance - claims incurred, net of reinsurance – premium lated in accordance with the requirements of the Financial Supervisory Authority of discounts and other profit agreements - insurance-related operating expenses Norway (based on Solvency I) 3 Loss ratio, net of reinsurance + cost ratio, net of reinsurance (general insurance operations) 10 Net subordinated capital / risk-weighted calculation basis (based on the consolidated 4 Claims incurred, net of reinsurance / earned premiums, net of reinsurance (general insur- accounts in accordance with NGAAP). The Financial Supervisory Authority of Norway ance operations) requires a minimum ratio of 8 per cent. 5 Insurance-related operating expenses / earned premiums, net of reinsurance (general 11 Net financial income as a percentage of the average financial assets (excluding funds insurance operations) 6 Premiums written, net of reinsurance / gross premiums written (general insurance managed by Gjensidige Bank and Gjensidige Pensjon og Sparing). operations) 12 Profit before tax for the period / average adjusted equity for the period Gjensidige annual report 2007 | 5

employees per country Employees by business area t his is

Numbers Numbers 32 323 45 105 15

398 622 oper at ions g jensidi e

General insurance Norway Hjelp24 Baltics Pension and savings Denmark Banking 2,846 Sweden 2,686 Others

The Group had a total of 3,460 employees at the end of 2007.

Non-financial key figures health, safety and environment 2007 2006 Sickness absence, Gjensidige Forsikring Per cent 5.2 5.0 Injuries, Gjensidige Forsikring Number 0 0 Turnover employees, Gjensidige Forsikring Per cent 19.6 10.0 employees 2007 2006 Group, as a whole Number 3,460 2,033 Average age, Gjensidige Forsikring Year 45.7 45.9 Average number of years of education NOK 9,300 10,000 Participation in a training programme Days 2,485 2,500 m a n ag emen t

Financial targets Area Target time horizon Realised 2007 comments Group level Combined ratio < 97 per cent Period 2007-2010 Combined ratio of 96.1 per cent Return on equity before tax > 15 per cent Period 2007-2010 Return on equity (before tax) of 15.4 per cent Maintain single A rating Rating of single A Rating Period 2007-2010 from Standard & Poors' (October 2007) Proposed dividend of NOK 1,021.4 million, 50-80 per cent of the Dividends 2007 π corresponding to 41.2 per cent of the profit profit for the year for the year General insurance Norway Reduction of nominal Reduction of NOK 351 million in relation resul Reduction of By the end of costs compared with the to the 2006 level at the end of 2007, NOK 350 million 2008 2005 level (NGAAP) progress is ahead of plan Market share of 31.0 per cent (source: Market share 30-35 per cent 2007 π t s Norwegian Financial Services Association)

Pension and savings Assets under Annual N/A (growth target Assets under management of 2008-2010 management doubling based on 2007 level) NOK 1,187 million at the end of 2007

Banking Number of Quarterly increase N/A (growth target 2008 22,200 customers at the end of 2007 customers between 5,000 and 6,000 for 2008)

Hjelp24 EBITA margin 6-8 per cent 2007-2010 Ebita margin of 7.9 per cent in 2007 6 | Gjensidige annual report 2007

future growth and development A larger range of products and expanded geographic scope for the insurance operations, as well as preparations for the listing of the company, are important key words that can be used to sum up 2007 . During the last two years Gjensidige has developed from a purely Norwegian insurance company to a financial group with a complete range of financial services in Norway, in addition to insurance operations in the Nordic region and the Baltics .

The financial results in the general insurance area are satisfactory. the acquisition of Tennant Insurance AB in Sweden. Tennant will also be Restructuring measures have helped improve the efficiency of our opera- responsible for the Group’s focus on the partner (white label) insurance tions. Gjensidige is meeting the competition in Norway and abroad with market. Combined, the international activities give the Group substantial an organisation that has been adapted through the necessary efficiency insurance operations outside Norway and contribute to a broader base for improvement measures and organisational changes. the insurance operations in 2008. Over time this will help ensure better products and competitive prices for our Norwegian insurance customers. The profitability measures that have been implemented in recent years are on course in relation to the target of reducing costs by NOK 350 million In 2007 we intensified our efforts in the area of skills and management (measured nominally) by the end of 2008, compared with 2005/2006. development. This is a strategic focus for the company, and our ambition is to be a modern workplace with the strongest and most attractive insur- In 2007 we celebrated the 75th anniversary of the company’s watch- ance environment in Norway. man trademark. The watchman symbolises the key elements of what we stand for: security, a local presence, reliability and punctuality. Reputation The competition in the financial market continues in new arenas. Several surveys also confirm that Gjensidige has a good top of mind awareness banks are focusing more on the sale of general insurance to their custom- among people, which is attributed, for example, to our customer-orienta- ers. Our distribution model will be developed further, and there will be a tion. focus on uniting the sales representatives at the sales centres with a high level of outward activity. In addition to general insurance, the centres A good reputation and trust in the market is becoming an ever more will focus more on the sale of new services such as banking, savings and important asset for Gjensidige, as is also the case for the other players in pension products. the financial industry. For the company it is therefore natural to give our full support to measures that the Norwegian Financial Services Association Our ambition is to maintain our position as the supplier that is the closest is working on in order to improve the reputation of the industry. to its customers with the longest average customer relationship duration. This will require the best self-service solutions and the most in-demand More than 22,000 persons registered as retail customers during Gjensidige and predictable products. In addition, the solutions must be simple and Bank’s first year of operations. The bank has asserted itself in the market adapted to web distribution, where there will be substantial require- by simple and efficient solutions with competitive prices. ments for fast and effective customer service. It is also important that we strengthen our profile as an environmentally aware company that is Gjensidige Pensjon og Sparing (GPS) has been adapted to the develop- maintaining its strong position in loss prevention. ment and distribution of pension and savings products and is entering its third year of operations with an organisation that can handle a substantial The Gjensidige Foundation was established in November 2007. It is an volume of business. At the start of 2008, GPS is in a position where it can independent and democratic charitable foundation for the promotion of focus on new products, such as fund pensions and paid-up policies that security and health. It is the customers of Gjensidige Forsikring BA (around are customised for sale through the general insurance sales organisation. a million eligible voters) who will indirectly elect the foundation’s general meeting through open and electronic elections. The foundation will be one The health operation has positioned Gjensidige as a modern and future- of the largest in Norway, and it will continue to fulfil Gjensidige’s social oriented supplier of health services to both individuals and companies. commitment and role in Norwegian society in a special way and in accord- We are focusing both directly through Hjelp24 and in cooperation with ance with the company’s historical foundation. the parent company. A number of companies have been acquired, and Gjensidige can now offer a complete health value chain, including hospital The planned stock exchange listing will give greater strength and flexibility services, after the acquisition of NIMI. when we continue our efforts to realise the strategy established for the Group in 2008. The preparations for a stock exchange listing have occu- The international activities, which include general insurance in the Nordic pied a number of employees in the company and the entire representative region and the Baltics, are a separate business area in Gjensidige. Gjensi- organisation. The management and control structure of the company will dige and the watchman are also represented on the Swedish market after change as a direct consequence of the planned stock exchange listing. The Gjensidige annual report 2007 |7 t his is oper at ions g jensidi e

«In spite of our stock exchange listing plans and growth ambitions, Gjensidige will remain a Norwegian- based, customer-managed insurance company .» m a n ag emen t

regional governing bodies have been replaced by owner committees, and The general insurance operations have created the assets on which the the ownership role of our elected representatives has been made clearer. company’s operations are based. The focus on general insurance abroad These changes have been implemented after an extensive democratic will lay the foundation for economies of scale, and it will lead, over time, resul process and a unanimous decision. to better products and competitive prices for our Norwegian insurance customers. The focus on new product areas will give us an opportunity A stock exchange listing will be of significance to our customers, employ- to continuously offer new products and services under one of Norway’s t s ees and investors. In addition to clearer corporate governance, the amend- strongest trademarks – Gjensidige and the Watchman. ed articles of association has made it possible for the Board of Directors to propose distribution of individual dividends to our customers based on the results in 2007. The employees will experience a workplace with a higher profile, and they will be able to follow the development of the company on a day-to-day basis. Investors will have an opportunity to invest in an exciting, leading insurance company that is growing and developing.

Gjensidige will continue to grow, and this will take place through acquisitions and organic growth. The acquisition of the Baltic insurance company Helge Leiro Baastad RESO Europa in January 2008 is a direct consequence of this strategy. CEO 8 | Gjensidige annual report 2007

HISTORY OF GJENSIDIGE 1820–2007 Gjensidige has safeguarded property since the first mutual fire insurer was established . Today Gjensidige emerges as a modern financial group with product offerings that include all types of insurance, banking, savings and pensions .

1820–1920

Gjensidige mutual fire insurers were establis hed throughout the country. As many as 260 were in operation toward the year 1920. The objective was to provide favourable insurance conditions and low premiums. Life insurance business was carried out from 1847.

1921–1985 Samtrygd was established as a joint reinsur ance company for the mutual fire insurers in 1922. Many mutual fire insurers had risk levels that far exceeded their economic capacity.

The watchman and slogan “Time passes, Gjensidige endures”, was used in 1932 for the first time and quickly became a well recognised brand. In 1958 Samtrygd was granted a licence to engage in insurance business in all sectors with the exception of credit insurance. 1999–2007

Cooperation between Gjensidige Liv and Gjensidige Forsikring and Sparebanken NOR The cooperation between DnB NOR and Gjensi- Samtrygd started in 1974. Samtrygd changed combined their business operations in the new dige NOR Forsikring was terminated in 2005. its name to Gjensidige Skadeforsikring. The financial group Gjensidige NOR. companies were placed under joint manage- Use of the Gjensidige brand name was resumed. ment from 1985. The objective was to create a powerful and efficient financial group in the areas of banking, The insurance operations were expanded into general and life insurance, and real estate. Denmark, Sweden and the Baltics through 1986–1998 acquisitions. In 2002 the business was divided into two Gjensidige developed into a financial group, cooperating groups, the general insurance Gjensidige entered the competition for company offering a full range of general, life and pen- group Gjensidige NOR Forsikring and the stock pensions, savings and investments through the sion insurance products, as well as banking exchange listed banking and savings group company Gjensidige Pensjon og Sparing. and financial products. Gjensidige NOR ASA. Gjensidige Bank is launched. The business expanded significantly through Gjensidige NOR ASA merged with DnB, under the acquisition of the Forenede Group in the name DnB NOR. Equity certificates were issued and the stock 1993. exchange listing was approved. DEthisTT isE ERgjensidi GJENSIDIgeGE VIRKSOMHE operationsTEN MENNESKENEmanagement REresulGNSKtsAP | 9

2007 t l repor a nnu a e g jensidi G in the settlement system Large business customers and brokers can view detailed information on information detailed view can brokers and customers business Large their insurance policies on the Næringsnett website. Næringsnett is an Internet solution for business customers, which gives customers a full maintain and change to them allows and relationships their summaryof for inquiries price make and claims, report policies, insurance existing their new insurance policies. Tag Golden the at portal best second the as awarded was Gjensidige.no for2007 the user-friendliness the of portal and its well-integrated solutions. Some key figuresfor gjensidige.no: • 100,000 customers have access to "My Page" • 29,000 claims notices, 40 per cent which of are registered automatically . no developed into a financial portal where the customers can view a view can customers the where portal a financial into no developed .

n 2007 gjensidige n 2007

l porta al Financi ge Gjensidi I insurance, banking, includes that Gjensidige with relationship overall their summary of savings and pensions The portal is fully integrated with Gjensidige's other systems. Customers systems. other Gjensidige's with integrated fully portalis The request also can information and inquiries price for gjensidige.no use that to be called by a customer advisor. Private customers can log on which to "My is the Page", customers' own and relationship, customer overall their summaryof a includes that website and pensions banking, insurance, to related services of use make can they savings. The portal acts as a new sales channel, relationship channel and a service and information channel. The channel is cost-effective for both Gjensidige and the customer, and for private insurance products a discount 5 per of cent is allowed for purchases made through the portal. 10 | Gjensidige annual report 2007

Preparing for the future

The market knows Gjensidige, and we know the market. We will continue our respect for our customers and our curiosity for the future, because we are preparing for what our customers want next year, in three years and in fifteen years. Gjensidige shall endure as the most future-oriented insurance company – in Norway, the Nordic region and the Baltic States. this is gjensidige operations management results 11 | 2007 t l repor a nnu a e g jensidi G 12 | Gjensidige annual report 2007

general insurance Private Gjensidige is a complete supplier of general insurance products to private consumers in Norway . The company is a market leader in motor vehicle insurance and insurances of the person, and it also has a solid position in other types of private insurance .

MAIN PRODUCTS the Confederation of Vocational Unions (YS), the Norwegian Society of General Insurance – Private provides insurance products in the main Engineers and Technologists (NITO) and Tekna. categories: • Property (home, holiday home, private contents) High customer satisfaction • Motor vehicle (cars, motorcycles) Gjensidige measures customer satisfaction in the various customer seg- • Agriculture (buildings, contents, chattels, animals, machines) ments annually. Overall the satisfaction of the private customers and their • Insurances of the person loyalty to the company have been stable and high in recent years. The • Other surveys show that loyalty programme customers are more satisfied than customers without agreements. The surveys also show that customers Customers can choose between product solutions that either provide with agreements through their employers and affinity groups generally solid basic cover for the most important insurance requirements or more express a high level of satisfaction with the company. comprehensive solutions adapted to those who want the best possible insurance cover. Customer satisfaction is also stable and high in the agricultural segment. Most agricultural customers are members of either the Norwegian Farm- OPERATIONS ers’ Union or the Norwegian Farmers’ and Smallholders’ Union. Agricultural Comprehensive customer programme customers have strong links to Gjensidige and are good ambassadors for Almost one million customers had a customer relationship with Gjensidige the company. at the end of 2007. Around 370,000 of these customers are part of our customer loyalty programme, Gjensidige FORDEL, where customers earn, Our close cooperation with the Norwegian Farmers’ Union will help create in addition to a customer discount based on their overall relationship, a a continuous development that will ensure that the farmers’ insurance number of benefits. Customers who have three qualifying insurances, needs are met. It is also satisfying to note that customers remain with where at least one is defined as a main product, qualify for membership in Gjensidige even when they stop farming. the loyalty programme. Home/private contents insurance, car insurance, insurances of the person and a capital insurance product (savings or loan) Gjensidige also surveys the market continuously to measure the company’s are regarded as main products. The number of different main products de- position in relation to its competitors. The measurements confirm the find- termines which of the three levels of the loyalty programme the customer ings from other surveys. Gjensidige has a solid position in the private mar- qualifies for. ket, and it is the company that is mentioned first most often in surveys. The surveys also show that Gjensidige is the best liked company in the The loyalty programme showed a positive development in 2007. By market. This is a position the company has maintained throughout 2007. building on the loyalty programmes, the depth and breadth of existing customer relationships can be expanded. In the spring of 2007 the Leading market position customer programme was expanded to include banking, savings and Gjensidige’s market share in the private and agricultural segment was 30.4 individual pensions. This helps reduce the loss of business and increases per cent in 2007, which is an increase of 0.4 percentage points compared the effectiveness of various measures to sell banking, pension and savings with 2006. In the motor vehicle segment, Gjensidige is the market leader products to insurance customers. Gjensidige emerges thus as a player with with a market share of 30.6 per cent, measured as the number of insur- a broad range of products in relation to this important segment. ance policies the corresponding figure is 31.2 per cent. In the agricultural segment, Gjensidige is a dominant player with over 70 per cent of the In 2007 the technology and workforce were strengthened to develop market. good CRM solutions to the benefit of the customers. Broad distribution Around 300,000 of the remaining customers participate in the “loyalty All products and services under the brand name Gjensidige are distributed programmes” that Gjensidige offers with affinity groups such as the through a decentralised distribution system linked to the company’s five Norwegian Farmers’ Union, the Norwegian Farmers’ and Smallholders’ geographical regions. Exceptions here include areas where the need for Union and the Norwegian Fishermen’s Union, and the labour organisations competence or economies of scale entails that central distribution is more Gjensidige annual report 2007 | 13

MARKET SHARES, PRIVATE CUSTOMER SATISFACTION, Private TOP OF MIND t his is

Per cent Per cent NOK millionNOK million 35 80 40 Sparebank1 70 30 Vesta 35 60 If 30 oper at ions g jensidi e 25 50 40 Gjensidige 25 20 30 20 20 15 10 15 10 0 10 2003 2004 2005 2006 2007 2005 2006 2007 2003 2004 2005 2006 2007

Total non-marine insurance, excluding Gjensidige Source: Customer satisfaction Loyalty programmes Source: Brand tracker self- Vesta Organisation market Gjensidige insurances of the person, but including If survey, self-initiated customer No agreement initiated brand survey, conducted Vesta the Tennant portfolio Sparebank1 analysis, conducted by TNS Gallup Total by TNS Gallup If

appropriate or where Gjensidige chooses to distribute through external been expanded greatly. This provides better opportunities for satisfy- partners. ing the portion of the market that desires a total solution with a single supplier. This expansion also encompasses many of the agreements with Breadth in customer relationships the trade organisations. Development of the company’s existing customer relationships has been a key task in 2007. The goal has been to increase the number of customers CHANGES IN FRAMEWORK CONDITIONS who have a large number of general insurance policies with the company, in New regulations for the free transfer of insurance policies outside the an- addition to contributing to the establishment of banking, pension and sav- nual renewal date took full effect in 2007, and many players in the insur- ings relationships for these customers. A broad customer relationship often ance industry expected a significant increase in the number of customers results in a longer duration and better risk selection, which entails lower changing their insurance providers. It is therefore gratifying to report that premiums for the customers and better profitability for the company. Gjensidige has only experienced a limited effect of this change, and least of all with the customers who are part of the aforementioned customer In 2007 distribution measures were introduced to ensure that Gjensidige is programmes. This indicates that Gjensidige’s customers appreciate the able to live up to the customers’ expectations, and to further strengthen advantages that can be achieved through the customer programmes and m a n ag emen t the company’s follow-up of its customers. that the service provided, both when entering into the contract and any subsequent claims settlement, is appreciated. Product launchings As a complete product supplier, improvement and further development From 1 January 2008 the companies are required to report any change of our products will be a continuous process, and both small and major in the insurance premiums from the last annual renewal date. Gjensidige improvements were made in most product areas in 2007. supports this legislative amendment and has chosen to adapt to the amendment by making the entire customer relationship in the private In 2007 Gjensidige launched a new child and youth product that, in addi- market subject to such a duty of disclosure. This also includes changes tion to ordinary cover with lump sum benefits for accidents and illnesses, to premiums for the insurances of the person, which have been excluded has been expanded to include the option of including disability cover. This from the statutory requirements. expansion of cover has been in great demand and provides better and more permanent cover for those who are disabled at a young age. In ad- It is anticipated that a legislative amendment will be introduced in 2008 that dition, a decision has been made to make the product more modular, with will regulate the insurance companies’ obligation to offer customers insur- the intention of giving more children access to portions of the cover, even ance cover, especially for basic products such as car, home, contents, travel if they have congenital health problems and would not normally be eligible and accident insurance. Stricter documentation requirements will apply when for any cover. customers are denied the cover they have applied for. It will be permissible to resul differentiate the premium level in relation to the risk that is assumed, but not In 2007 Gjensidige launched a new product for pleasure craft with a to such an extent that it can be perceived as a “hidden” discount. Gjensidige number of product improvements and a price model that reflects the is positive to such a legislative amendment, which is largely in accordance t s boat’s risk to a greater degree. A new register for boat manufacturers with the practice that has already been established. It is, however, important has been established. The boat’s “top speed” as a price criterion and new that the authorities provide equal framework conditions for all the players in regional divisions have been introduced. “Plus cover” has been introduced the market, so that they can compete on equal terms. with content that Gjensidige is probably the only company to offer in Europe, as well as new motor damage cover for motors up to 15 years Results without any required external influences, which the company is also the Earned premiums, net of reinsurance, were NOK 7,729.8 million in 2007, only one to offer in Norway. an increase of 5.4 per cent from the previous year. This is a very satisfactory development in a market characterised by low growth and strong New markets competition between the players. The greatest growth in premiums was With the establishment of Gjensidige Bank and Gjensidige Pensjon og for car insurance. Sparing, the Group’s range of products aimed at the private market has 14 | Gjensidige annual report 2007

GROSS PREMIUMS written, PRIVATE COMBINED RATIO, PRIVATE

Per cent Per cent 12 100

80 16 44 60 Motor Property 40 8 Personal accident Agriculture Other 20 20 0 2007 2006

Combined ratio Percentage distribution of gross premiums written Combined Ratio general insurance Loss ratio in the private segment, including agriculture. private, including agriculture. Cost ratio

The loss ratio was 74.3 in 2007, compared with 65.5 in 2006. The claim Strategy frequency is at the same level as before. There has been increasing claims In 2007 Gjensidige has focused on developing the individual customers’ inflation and consequently higher average claims due, among other relationship with the company through the introduction of additional factors, to higher repair prices. This applies especially to car insurance. general insurance products and the promotion of banking, savings and Premium measures and other measures have therefore been implemented pension agreements. The loyalty programmes have been improved by to ensure satisfactory profitability. The development of claims for home awarding the customers who have an expanded customer relationship, and and agricultural insurance has been satisfactory in 2007. The good results this focus will continue in 2008. can to a certain extent be attributed to many years of goal-oriented loss prevention efforts and incentives for the customers through reduced outlook premiums for those who implement their own loss reducing measures. The authorities’ establishment of the Financial Portal in January 2008 has made it easier for customers to compare products and prices offered by The cost ratio was 18.7 for 2007, which is a reduction of 2.4 percentage the various companies. This, together with an increased opportunity to points compared with the previous year. The ongoing efficiency enhance- change insurance companies outside the annual renewal date, is expected ment programme will yield cost savings in both the distribution and staff/ to give greater mobility among customers. Increased use of the Internet, support areas. The changes will be in full effect from 2008, and the new both for information gathering and for insurance purchases, will amplify service concepts are expected to strengthen the sales power at the same this trend. time. The customers paying more attention will also give the companies an The combined ratio for 2007 was 93.0 per cent, compared with 86.6 in opportunity to point out the quality and scope of cover offered by their 2006. The underwriting result in 2007 totalled NOK 528.2 million, com- products. This will illustrate to a greater extent that the choice of an pared with NOK 958.0 million in 2006. insurance provider entails more than just an evaluation of price. Gjensidige will therefore continue its product strategy that provides customers the opportunity to choose more comprehensive cover than the standard solution if they so desire.

Key figures Competition in the market increased in 2007 due to several new players NOK million 2007 2006 and the fact that several years of satisfactory profitability has strength- Gross premiums written 7,910.6 7,619.8 ened competitiveness. This development is expected to increase in 2008 Earned premiums, net of reinsurance 7,729.8 7,337.5 due to the fact that the number of players will increase and the number of Allocated return on investments 587.1 408.3 points of sale will increase significantly since more banks will be focusing Claims, net of reinsurance (5,746.3) (4,806.2) on bank insurance. Premium discounts and other profit agreements (10.9) (21.7) Insurance-related operating expenses (1,444.5) (1,551.3) Technical result 1,115 .3 1,366 6.

Underwriting result1 528 .2 958 .0

Loss ratio, net of reinsurance 74.3 % 65.5 % Cost ratio, net of reinsurance 18.7 % 21.1 % Combined ratio, net of reinsurance 93.0 % 86.6 %

Definitions: 1 Underwriting result = earned premiums, net of reinsurance – claims, net of reinsurance – premium discounts and other profit agreements – insurance-related operating expenses Gjensidige annual report 2007 | 15 t his is oper at ions g jensidi e

Distribution – Private segment The distribution model for the private market (multi-channel strategy) entails that the customers themselves can choose the form of contact with the company that the customer finds the most appropriate . The customers can choose between contacting a customer centre, visiting an insurance office or using the company’s financial portal, gjensidige no. .

A large number of customers choose to use a combination of channels, Sales centres depending on the nature of their inquiries. One goal is to ensure that the Gjensidige is in the process of establishing sales centres that specialise in existing customers are quickly recognised so that they can be served in the outward sales and the promotion of further growth for Gjensidige. best possible manner regardless of the channel they choose. m a n ag emen t Gjensidige no. Insurance offices The Financial Portal gjensidige.no is becoming an ever more important dis- Gjensidige has around 100 insurance offices in five geographic regions. tribution channel for Gjensidige’s contact with private customers. Custom- The insurance offices are responsible for functions where local knowledge, ers can choose full self-service on the Internet or utilise the financial portal a one-on-one relationship and personal contact are appropriate. as a supplement to the other forms of service. Gjensidige.no is described in more detail on page 9. The offices are responsible for active customer development and advisory services for total customers, as well as new sales. All local offices offer Organisation market the Group’s entire range of products, but with different degrees of local Gjensidige has agreements with several large labour and affinity groups, expertise. and it offers good insurance solutions to the members of the organisations. Gjensidige cooperates with 20 mutual fire insurers throughout the country. They have their own insurance offices that operate in the same Agents manner as the Gjensidige Insurance offices. As a supplemental channel to Gjensidige’s own channels, products are distributed through agents and agencies. Financial offices resul The Group’s development of its range of products is followed up by Distribution in the agricultural market changes in its distribution model to ensure optimal distribution of the The agricultural market is serviced by agricultural centres in each region. entire range of products from Hjelp24, Gjensidige Bank and Gjensidige Agricultural centres are a complete information, distribution and relation- t s Pensjon and Sparing. Four pilot offices have been established for financial ship channel that serves incoming inquiries from agricultural customers, distribution. and they perform outward services and sales to customer segments in the agriculture sector. An agricultural insurer is attached to each agricultural Customer centres centre. In addition to the local offices, each region has a customer centre that receives customer inquiries over the phone and via the Internet. Customer Gjensidige has, among others, agreements with the Norwegian Farmers’ Centres for the private market are open in the evening, and they are a Union and the Norwegian Farmers’ and Smallholders’ Union that provide complete information, distribution and relationship channel that serves their members with good insurance schemes.. private customers. 16 | Gjensidige annual report 2007

general insurance commercial Gjensidige is a complete provider of general and life insurance products for Norwegian businesses . The company has a particularly strong position in the market segment for medium-sized enterprises, and it is the clear market leader for insurances of the person .

MAIN PRODUCTS The marine product showed significant growth in 2007 when Gjensidige General Insurance Commercial provides insurance products in the following entered into a cooperation agreement with five marine insurance compa- main categories: nies at the end of 2006. • Insurances of the person • Motor vehicles Customer-adapted distribution • Buildings (including assets, operating losses) The company’s distribution model for the commercial segment was main- • Liability tained in 2007, but the service channels’ respective roles have been revised • Marine/transport (aquaculture, coastal and fishing) with a focus on availability to the customer and the efficiency of the sales and service processes. The business customers are assigned a service In addition to traditional personnel insurance such as occupational channel based on size, risk and complexity. accident/disease, group life for the commercial market and personnel guarantees, the company provides health insurance, critical illness, sickness Customers belonging to Norway’s 500 largest companies and broker- benefits and key personnel and partner insurance. Combined this makes ages are serviced from a separate organisational unit. Other business Gjensidige a complete provider for the Norwegian business community. customers are served through the regional distribution system. In addition to distribution through the primary channels, an increasing number of Operations business customers also have access to the company’s extranet solution – 90,000 customers Næringsnett. Almost 80,000 businesses and 10,000 clubs and associations had a customer relationship with Gjensidige in 2007, and each business had close to Focus in 2007 three insurance products on average. Around 2,000 customers are served A major technological lift was carried out in 2007 to establish an improved indirectly through insurance brokers, while the other customers are served system and administration solution for insurances of the person within the by the company’s direct distribution system. same system as other property loss or damage.

Satisfied commercial customers Customer satisfaction among commercial customers is very good, and higher in 2007 than the two previous years. Gjensidige’s measurement of Key figures NOK million 2007 2006 customer satisfaction shows that it is highest among the largest customers, and higher among the customers who have a direct relationship with Gross premiums written 5,464.7 5,705.0 Gjensidige and not through a broker. Earned premiums, net of reinsruance 5,072.7 5,527.2 Allocated return on investments 802.2 587.6 The company continuously surveys the market to measure Gjensidige’s Claims, net of reinsurance (4,324.3) (5,015.0) position relative to its competitors. Throughout 2007 Gjensidige, together Premium discounts and other profit agreements (7.1) 0.0 with one of its main competitors, was the company that was most often Insurance-related operating expenses (679.8) (746.9) mentioned first, which is a very good position. Technical result 863 .7 352 .9

Market leader Underwriting result 1 61 .5 (234 .4) Gjensidige had a market share in the commercial segment of 32.7 per Loss ratio, net of reinsurance 85.2 % 90.7 % cent in 2007, which is somewhat lower than in 2006. This decline is Cost ratio, net of reinsurance 13.4 % 13.5 % primarily related to the change in the portfolio composition, with a lower Combined ratio, net of reinsurance 98.6 % 104.2 % share of insurances of the person, but it is also attributed to the fact that premium growth in Gjensidige was somewhat weaker than the over- Definitions: all market in 2007. However, the company is still a clear market leader for 1 Underwriting result = earned premiums, net of reinsurance – claims, net of products such as company cars and occupational accident, with market reinsurance – premium discounts and other profit agreements – insurance-related operating expenses shares of 36.8 and 34.8 per cent, respectively. Gjensidige annual report 2007 | 17

market shares, Commercial customer satisfaction, commercial TOP OF MIND t his is

Per cent Per cent Per cent 35 80 40 70 30 35 60

25 oper at ions g jensidi e 50 30 20 40 25 15 30 20 10 20 5 10 15 0 0 10 2003 2004 2005 2006 2007 2005 2006 2007 2003 2004 2005 2006 2007

Percentage distribution of Gjensidige Source: Customer satisfaction Loyalty programmes Source: Brand tracker self- Vesta Organisation market Gjensidige gross premiums in the business If survey, self-initiated customer No agreement initiated brand survey, conducted Vesta segment Sparebank1 analysis, conducted by TNS Gallup Total by TNS Gallup If

Better cover Gjensidige now provides, probably as the only insurance company, project insurance that also covers the contractors’ operating losses. With the new Distribution in product, operating loss cover for the client has been made available to new customer groups. the commercial market The distribution model in the commercial market Gjensidige can also provide full cover/all risk policies for all customer types. This insurance ensures that assets or the cause of loss or damage are not is based on a division of the customers based on found to be uncovered in the event of a claim. size, risk and complexity .

In 2007 Gjensidige has also improved its critical illness product by expand- The commercial customers increasingly prefer interactive channels, ing the scope of cover. In addition, a new price model has been launched and this has contributed to a greater focus on interaction between for occupational injury insurance, which will hopefully result in a more the company's physical and interactive service concepts. correct price for the risk that is accepted. m a n ag emen t Business centres A new product with a new and better price has been launched for pas- Gjensidige has five regional business centres that are complete senger, delivery and combined vehicles in the business sector. sales and service channels for small and medium-sized commercial customers. CHANGES IN FRAMEWORK CONDITIONS In the commercial market it has been an established industry standard for SME market some years that no commission is paid to the broker for placing an insur- The SME market channel consists of insurers with a close ance contract with a company. Remuneration has been provided instead geographical link to their customers, and it is the primary contact through reduced prices (broker-assisted prices). The broker’s expenses are channel for the customers for both sales and service. covered directly by the customer. Corporate customers/brokered customers The authorities have notified that the relevant standard will be formalised Customers among Norway's 500 largest companies are served by a through separate regulations in 2008, and that the regulations will also corporate customer department. In addition, the company's larger encompass life and pension insurance in addition to general insurance, commercial customers use insurance brokers that are served by the which is covered by the current practice. Gjensidige has been one of the company's broker department. promoters for this industry standard, and we are positive to the fact that resul the established practice is being expanded and formalised now through Affinity groups legislation. Gjensidige has agreements with several large affinity groups, and

it offers custom insurance solutions to the members of these t s Results organisations. Premiums earned, net of reinsurance, were NOK 5,072.7 million in 2007, a reduction of 8.2 per cent from the previous year. This reduction is due Agents to a deliberate consolidation in insurances of the person, where we have Gjensidige has also agreements with agents that distribute the focused on profitability, both in the short and long term, instead of main- company's products in selected geographic regions on the business taining the premium volume. market side, like it does on the private segment side.

In addition, the Norwegian municipal portfolio from 2007 has been transferred to KommuneForsikring through reinsurance, which reduces premiums earned, net of reinsurance, for the segment by NOK 280.0 million in 2007. The market is also marked by continued hard competition, 18 | Gjensidige annual report 2007

gross premiums written, COMBINED RATIO, commercial commercial, norway Per cent Per cent 6 9 120 100

39 80 19 Person 60 Property Motor vehicles 40 Marine/Transport Liability 20 27 0 2007 2006

Combined ratio Percentage distribution of gross premiums written Combined Ratio, Loss ratio in the commercial segment general insurance commercial Cost ratio

with new players that want to gain access to the market and primarily use In addition, the company will focus on streamlining the roles of the distri- price as a means of achieving this. This has resulted in a reduction of the bution channels and develop the service concepts further in 2008. premium rates in 2007. outlook The loss ratio for the segment was 85.2 in 2007, compared with 90.7 in The competition in the commercial market will continue to be tough. 2006. Portions of this positive development can be explained by the re- International developments show that there is a limited growth potential duction in insurances of the person component. There have been a greater in the form of new products and cover areas. An increased focus on risk number of major losses in the segment in 2007, compared with 2006. The selection, pricing and loss prevention in close cooperation with customers average motor vehicle insurance claim is, for example, also increasing. Pre- will be important criteria for success to ensure long-term profitability and mium increases have therefore been implemented to ensure satisfactory growth. profitability in the future. The increase in the building index for 2008 is just over nine per cent, which The cost ratio was 13.4 for 2007, which is a reduction of 0.1 percentage will place a great deal of pressure on prices for a period of time. Fewer points compared with the previous year. The ongoing efficiency improve- major losses in past years have resulted in a decline in the premium rates ment programme will provide further cost savings from 2008. in the market, but a normalised loss level is expected to lead to premium increases to ensure the required level of earnings. With its stable price The combined ratio for 2007 was 98.6 per cent, compared with 104.2 in policy Gjensidige will be well-positioned for such a development. 2006. The segment had an underwriting result of NOK 61.5 million in 2007, compared with a negative underwriting result of NOK 234.4 million in 2006. For insurances of the person, the premiums will be regulated in accordance with the change in the National Insurance base amount at the renewal Strategy date. In 2007 there was a particularly large increase of 6.2 per cent, and A long-term customer relationship provides good profitability and stable the impact of this on the premiums will materialise essentially in 2008. prices, for both the customer and the insurance company. In 2007 Gjensidige also anticipates that there will be stiff competition in 2008 with Gjensidige has maintained its strategy of long-term stable prices, and we several players desiring to capture market shares in this segment, which have therefore chosen not to participate in the significant price reduction will put pressure on the premium rates. that has been experienced in segments of the market. This has resulted in a certain reduction of the premium volume, but it has also provided It is expected that the business sector will also experience an increased of- improved profitability and a good point of departure for a stable price level fer of advisory concepts on the Internet, which will also include opportuni- for the years to come. ties to purchase individual products. We have already seen examples of this internationally. Gjensidige will participate actively in this development In 2007 Gjensidige focused on introductory sales of the Group’s pension and adapt itself to the business customers’ desire for self-service solutions and savings products for general insurance commercial customers, and on the Internet, in addition to ensuring efficient advisory and service we will continue to focus on this in 2008. Correspondingly, the company’s concepts that can contribute to competitive prices. focus on health will make better use of the opportunities that lie in the crossroads between corporate health services, provided by Hjelp24, and the Group’s insurance and pension solutions. Gjensidige annual report 2007 | 19 t his is

NOK million NOK million NOK million oper at ions g jensidi e

Claims Gjensidige continuously works to develop new settlement concepts related to the internal processes and dialogue with the customer, and in connection with purchases and procurement .

In 2007 Gjensidige combined certain material claims settlement processes For losses where the administrative procedures take longer, the customer in a central claims environment to improve the efficiency of certain frequent shall be kept informed of the status and progress of the case. This applies in losses, and to combine the processing of complex and major losses in an particular for settlements for personal injuries. Settlement employees shall environment with a high level of expertise. Processing of personal injuries be active in communication with the customer, and the company’s loss ad- is centralised, as before. Other claims settlement processes are organised justment unit shall arrive quickly at the place of loss. regionally in accordance with the company’s regional structure. m a n ag emen t A local presence and availability in a loss situation is a key element. In a Faster claims settlement is a priority. Electronic claims notices on the Inter- loss adjustment situation the company’s presence is of decisive im- net and the use of the telephone for claims settlement are key elements portance to both the customer and the company. Gjensidige therefore in our efforts to improve the efficiency of our settlement processes. The attaches importance to the follow-up of construction projects. Local sup- company enforces strict service requirements for customers who call 03100 plier networks shall ensure that availability, quality and competitive terms and contact us via the Internet. Customers who contact the company for are given priority. claims settlement shall experience quick and professional service. With regard to motor policies, the ”Alltid Bil” concept has a solid position. The insurance industry’s primary task is to compensate the financial losses The concept’s primary goal is to solve all the customer’s needs at a single the claimant has incurred, often in the form of a cash settlement. In other location, and it encompasses adjustment of the loss, provision of a rental cases the customer and company may be better served by a claims settle- car, delivery to the garage, quality control of the garage and repairs, repair ment that consists of the provision of a service, which may be greater than guarantee and return to the customer. the economic loss in some instances. Gjensidige’s administrative claims settlement and rehabilitation concept “Ac- As a service provider, Gjensidige will seek to adapt its claims settlement tive Personal Injury Management” is an important element in personal injury process to the needs of the individual customers. claims. The aim is to settle claims promptly and to provide rehabilitation in resul such a way that the need for compensation is reduced, while ensuring that the customer is satisfied with the service provided at the same time. t s 20 | Gjensidige annual report 2007

General insurance Other Nordic Gjensidige is also established on the Swedish market through the acquisition of Tennant Insurance Group in 2007 . Gjensidige’s operations in Denmark and Sweden are well-equipped for continued growth, both regionally and in the Nordic countries .

MAIN products The private segment in Denmark has 65,000 customers and 165,000 The Other Nordic segment provides insurance products in the main insurance policies. Sales take place primarily over the telephone. The main categories: product is car insurance, which represents 56 per cent of the portfolio. • Buildings (including contents) • Motor vehicles Tennant has 95,000 customers and 124,000 policies. This represents an • Occupational injury increase of eight per cent compared with 2006. The main product is car • Other insurance, which represents 68 per cent of the portfolio. Tenant Sweden primarily distributes private insurance via the Internet, customer service The operations in Sweden are primarily as a complete provider aimed and agents and partners. Around 24 per cent of the sales are concluded at the private segment, and expansion is planned with the addition of over the Internet. In March 2007 Tennant in Sweden launched the mar- products for insurances of the person and commercial insurances in the ket’s first climate-neutral car insurance for environmental cars in Sweden. second quarter of 2008. In Denmark the operations are as a complete service provider aimed at all the segments of the private and commercial In Tennant’s Norwegian operations a large portion of the insurance is markets with the exception of agriculture, in addition to the provision distributed via partners and agents. Tennant is also responsible for the of insurance solutions for municipalities in the Danish, Norwegian and management of Toyota Insurance in the Norwegian market. Swedish markets.

OPERATIONS Gjensidige’s operations in Denmark are organised under the subsidiary Fair Forsikring A/S. The Gjensidige logo was implemented in the Danish market from 2007. Key figures Fair Forsikring provides general insurance to the private and commercial NOK million 2007 2006 markets, while the subsidiary KommuneForsikring is the market leader in the Danish municipal market. Gross premiums written 1,810.4 273.3 Earned premiums, net of reinsruance 1,685.3 257.4 The acquisition of the Swedish general insurance company Tennant Allocated return on investments 74.4 10.6 Insurance Group AB became effective on 1 August 2007. Tenant is a Claims, net of reinsurance (1,376.3) (144.3) relatively small, but fast growing general insurance company with offices in Premium discounts and other profit agreements (0.5) Stockholm and Oslo. Tennant sells insurance to the private market via the Insurance-related operating expenses (360.8) (166.0) Technical result before Internet and partners. The company also has a small commercial portfolio. 22 .1 (42 .3) amortisation of excess value The acquisition of Tennant Insurance Group is a further reinforcement Amortisation of intangible assets (85.7) (16.4) Technical result after of Gjensidige’s Nordic platform. Gjensidige has laid the foundation for (63 .6) (58 .7) amortisation of excess value further growth in the Swedish market through this acquisition, while the Norwegian operations in Tennant will also be the point of departure for Underwriting result 1 (52 .3) (52 .9) Gjensidige’s development of “White Label” solutions (partner insurance) Loss ratio, net of reinsurance 87.1 % 56.1 % for the Norwegian and Nordic market. Cost ratio, net of reinsurance 21.4 % 64.5 % Customers and distribution Combined ratio, net of reinsurance 103.1 % 120.6 % Despite the merger of municipalities in Denmark effective 1 January 2007, Definitions: KommuneForsikring has maintained its strong position as a market leader 1 Underwriting result = earned premiums, net of reinsurance – claims, net of in this segment. In 2007 KommuneForsikring also received its first custom- reinsurance – premium discounts and other profit agreements – insurance-related operating expenses ers in the municipal sector in Sweden. Gjensidige annual report 2007 | 21

Gross premiums written, COMBINED RATIO, other nordic other nordic t his is Per cent Per cent 7 4 150

32 120 oper at ions g jensidi e 25 90

Person 60 Motor Property Liability 30 32 Other 0 2007 2006

Percentage distribution of gross premiums written in the other Nordic segment Combined ratio in the other Nordic segment

results The earned premiums, net of reinsurance, were NOK 1,685.3 million in 2007, an increase from NOK 257.4 million from the previous year. This increase is Gjensidige in Denmark primarily due to the fact that KommuneForsikring and Tennant are included KommuneForsikring is Gjensidige’s competence in the consolidated accounts from January and August 2007, respectively. centre for all municipal insurance in the Nordic The loss ratio for the segment was 81.7 in 2007, compared with 56.1 in countries . 2006. The year 2007 was a turbulent year for the operations in Denmark, and the number of major losses in the public sector in particular has had KommuneForsikring consists of KommuneForsikring A/S and a negative impact on the results. There have been several major fires, Kommunernes Arbejdsskadeforsikring A/S. KommuneForsikring is and the number of major losses for other product types has been well Denmark’s oldest and largest provider of insurance solutions to the above the average. The claim frequency is as expected, but average claims public sector – including Danish municipalities and regions (formerly increased in Fair Forsikring. counties). m a n ag emen t The cost ratio was 21.4 for 2007, which is a reduction of 43.1 percentage The municipal sector in Denmark has undergone a comprehensive points compared with the previous year. The combined ratio for 2007 was structural reform programme, which has reduced the number of 103.1 per cent, compared with 120.6 in 2006. The other Nordic segment municipalities from 271 to 98, and the 13 Danish counties have had a negative underwriting result of NOK 52.3 million in 2007, compared become five regions. Despite fewer and larger municipalities, Kom- with a negative result of NOK 52.9 million in 2006. muneForsikring maintained its market share of two-thirds of the public market in 2007. Strategy In the municipal segment the Danish operations will function as Gjensi- KommuneForsikring is the market leader in Denmark, and it has a dige’s competence centre and be responsible for the focus on this seg- market share of 30 per cent in the Norwegian municipal market. In ment across national borders. Sweden, Gjensidige is on its way to realising its goal of becoming number three. After Gjensidige’s acquisition of Tennant, the company implemented a number of strategic changes. In Sweden, Gjensidige’s trademark will be in- The public insurance market is centred to a great extent on public troduced, and the operations will expand their focus on insurances of the tenders, and this is also reflected in the business model. Kommune- person and business insurance. The Nordic “White Label” strategy entails Forsikring is capable of handling major portfolios with complex that several partners will be established in both Norway and Sweden. risks. The position that has been created in the public market has resul been transferred, with great success, to commercial and industrial Future outlook insurance. The foundation has been laid for a solid position, which In the Danish commercial market the company will concentrate on exploit- will be developed further in the coming years. t s ing and developing the many broker relationships, and there is optimism related to the opportunities for 2008. Fair Forsikring A/S

Efficiency enhancement efforts for the operations in Denmark were initiated, with a special focus on Fair Forsikring. Restructuring and the KommuneForsikring A/S Fair Invest A/S introduction of a new operating model for the private market is expected to give cost savings and increased sales efficiency. Kommunernes Arbejdsskadeforsikring A/S Synergies with Gjensidige have been identified and are in the process of being realised. The parent company has provided capital to strengthen the capital base. 22 | Gjensidige annual report 2007

general insurance Baltics The Baltic insurance market is in an early development phase and a significant share of the market is still uninsured . Gjensi- dige Baltic is well-positioned to take its share of the strong growth that is anticipated .

MAIN products great deal of effort has been put into technical sales support solutions. General Insurance Baltics provides insurance products in the main catego- The company’s competitiveness has improved as a result of the fact that ries: Gjensidige Baltic is included in the Group’s reinsurance programme now. • Motor vehicles • Buildings Restructuring • Insurances of the person Significant changes were made to the company’s operations in Lithuania in • Marine/transport 2007. Gjensidige Baltic registered its branch in Lithuania in the beginning • Liability of 2007, and the portfolio transfer and merger process for the former • Other Lithuanian subsidiary Baltic Polis was completed on 30 June 2007. The insurance company RESO was aquired in January 2008. General insurance is offered to the private and commercial markets in Latvia, Lithuania and Estonia. Results The earned premiums, net of reinsurance were NOK 360.2 million in 2007, Operations a strong increase from NOK 66.5 million in 2006. This increase is due to Gjensidige engages in the general insurance business in the Baltic States the fact that the figures for 2006 only include the fourth quarter 2006. through the subsidiary Gjensidige Baltic (formerly Parekss Insurance There has also been very good price and volume development in 2007. Company). The Baltic insurance market shows strong growth

The head office is located in Riga, Latvia, while the operations in Lithuania and Estonia are managed through branches of Gjensidige Baltic. The company was acquired in September 2006. Key figures The company is strongest in car insurance, which is the most widespread NOK million 2007 2006 activity in the Baltic States. The target customers are persons with medium to high incomes in the private market and small and medium-sized Gross premiums written 432.6 81.4 enterprises in the commercial market. The most important distribution Earned premiums, net of reinsurance 360.2 66.5 channels are direct sales, agent sales and brokers. In addition, Statoil Allocated return on investments 11.4 1.6 service stations are important distribution channels in Latvia. Claims, net of reinsurance (229.3) (45.3) Premium discounts and other profit agreements (1.5) Strong growth Insurance-related operating expenses (113.9) (23.0) Technical result before The strong growth in the general insurance market in the Baltic States 26 .6 (0 3). amortisation of excess value continued in 2007. The growth in the market as a whole was 32 per cent. The growth was greatest in Latvia (48 per cent) and Lithuania (26 per Amortisation of intangible assets (17.6) (4.4) Technical result after cent), and slightly more moderate in Estonia (19 per cent). 9 .0 (4 .7) amortisation of excess value

In 2007 Gjensidige Baltic strengthened its position in the Baltic States as Underwriting-result 1 15 .2 (1 .9) a whole, and increased its market share in the region from 4.9 per cent to Loss ratio, net of reinsurance 63.7 % 68.1 % 5.5 per cent. The company has continued its strong position in Latvia, and Cost ratio, net of reinsurance 31.6 % 34.7 % it is the third largest general insurance player. Combined ratio, net of reinsurance 95.4 % 102.8 %

The strong growth in 2007 is attributed to successful sales strategies and Definitions: good sales campaigns. The company continued its development of core in- 1 Underwriting result = earned premiums, net of reinsurance – claims, surance products in 2007. Both the comprehensive and property insurance net of reinsurance – premium discounts and other profit agreements – insurance-related operating expenses products have been improved significantly to meet new customer needs. A Gjensidige annual report 2007 | 23

Gross premiums written, baltics COMBINDED RATIO, baltics MARKEt growth, BALTIcs t his is

Per cent Per cent EUR million 12 2 4 120 1000 11 100 800

80 oper at ions g jensidi e 600 Motor 60 Property 400 Person 40 Marine/Transport 200 80 Liability 20 Other 0 0 2007 2006 Estland Latvia Litauen Baltikum

Volume increase in the Baltic States is attributed Percentage distribution of gross to growth in property and car insurance, and to 2007 premiums written in the Baltic segment Combined ratio in the Baltic segment some extent lenders requiring insurance. 2006

The company’s growth is stronger than the market growth in all three countries. The strongest growth was in Estonia, where we completed our The Baltic insurance markets second year of operations in 2007. Product-wise the growth was strong- The markets in the individual Baltic States are quite est in comprehensive (car) insurance and property insurance. different . They differ not only in their develop- The loss ratio for the operations in the Baltics was 63.7 in 2007, compared ment stages and growth potential, but also in their with 68.1 in 2006. Inflation in these countries is high, and the company market concentration, largest players, combined focuses continuously on what the right premium level is in relation to the number of competitors and products . claim costs. While the Estonian market has historically had the fewest players, The cost ratio was 31.6 for 2007, which is an improvement of 3.7 percent- the Lithuanian market has attracted a large number of small gen- age points compared with the previous year. Compared with competitors eral insurance companies. in the Baltic States, Gjensidige Baltic has a low cost ratio. m a n ag emen t The industry is relatively consolidated in the three markets – the The combined ratio for 2007 was 95.4 per cent, compared with 102.8 in four largest companies had 83 per cent of the market in Estonia, 2006. The underwriting result in 2007 was NOK 15.2 million, compared 77 per cent of the market in Lithuania and 67 per cent of the with a negative underwriting result of NOK 1.9 million in 2006. market in Latvia.

Strategy The rapid market growth and relatively limited size of the com- The growth in the Baltic insurance market is expected to remain relatively panies in the Baltic States, despite the market concentration, has high for 2008 as well, and Gjensidige Baltic has ambitions for organic resulted in relatively high costs. Therefore the profitability has been growth greater than the market growth. The profitability of the operations low for the last few years, especially in Latvia and Lithuania. and maintenance of a combined ratio of 97-98 per cent have at the same time the highest priority. It is important to note that the available market statistics do not illustrate the exact size of each market. The premium volume for To achieve the ambitious sales targets for 2008, greater emphasis will be companies selling insurance in other Baltic States through their placed on the development of core products, efficiency of the sales chan- branches is accounted for in the country where their head office nels and development of loyalty programmes. A new company website will is based. lead customer contacts to a new technological, more customer-friendly resul level. The claims handling process will also be improved. The largest players on the Baltic market are Codan, If, ERGO, BTA (including BTA Draudimas), Seesam and Gjensidige, who all operate outlook in more than one Baltic country with market shares of 21.5, 15.1, t s The Baltic markets are still in an early development phase, and given the 14.3, 13.7, 6.3 and 5.5 per cent, respectively, in 2007. Gjensidige significant share of both the private and commercial markets that are still is thus the sixth largest company in the Baltic insurance market uninsured, stronger growth can be expected in the future. Measured in overall. gross premiums compared with the GNP, and gross premiums per inhabit- ant, the market in Estonia is the most developed market. The market with The present growth in the insurance market is based primarily on the greatest growth potential is still Lithuania. With the largest popula- the dynamic growth of the property and car sales in the region, tion (3.4 million compared with 2.3 and 1.3 million in Latvia and Estonia and the fact that the banks require customers to insure cars and respectively), the market in Lithuania has the potential of becoming the property that are financed by loans or leasing. largest in the region. 24 | Gjensidige annual report 2007

PENSION AND SAVINGS Gjensidige offers a broad range of pension, investment and savings products for both the private and commercial markets .

MAIN PRODUCTS in 2007. The Vekter funds, combination funds adapted to the customer’s Gjensidige Pensjon og Sparing delivers products in the following main investment horizon and desired risk, are the company’s main products categories: in the broad portion of the private market. The funds are the company’s • Individual pensions greatest sales success, and more information can be found at www. • Group pensions gjensidige.no/sparing. • Savings and investments Gjensidige Investeringsrådgivning’s policy dictates that all products shall be The products are offered to both private and commercial markets. as transparent and understandable as possible. This is in harmony with the new EU MiFID directive, which the company has implemented throughout Operations the organisation. In addition, the company has placed emphasis on making Gjensidige’s operations in the Pension and Savings business are organised the advisors’ remuneration system neutral with regard to the products. with Gjensidige Pensjon og Sparing Holding AS as the holding company for Gjensidige Pensjonsforsikring AS (GPF) and Gjensidige Investeringsrådgivn- Several new investment advisors and a few new managers were recruited ing ASA (GIR). in 2007. In addition, 14 investment centres were established in the largest cities to create good sales and training environments. A separate group of The management concept on which this is based is unique compared with experienced advisors has also been established to work with institutional the other players on the market, since Gjensidige Pensjon og Sparing (GPS) customers and large customers. Cooperation agreements have been entered is an independent advisor and only offers externally managed funds. into with a number of affinity groups, such as TEKNA and the Confederation of Vocational Unions (YS), in the same manner as the pensions area. Pensions Gjensidige Pensjonsforsikring (GPF) offers individual and group pension CHANGES IN FRAMEWORK CONDITIONS products with emphasis on defined contribution pensions. The company New regulations for new individual pension schemes will be introduced in offers the following products: mandatory occupational pensions (OTP), Norway in 2008. IPS provides an opportunity for maximum annual savings pensions for the self-employed, disability pensions, paid-up policies, fund pensions (IPA Link product for transferring existing schemes), in addition to ordinary group defined contribution pensions. The products are distributed through a separate sales force and through the Group’s insurance operations Key figures NOK million 2007 2006 and partners. Many special benefit agreements have been entered into with chains and affinity groups. Gross premiums written 496.4 107.7 Earned premiums, net of reinsruance 27.9 6.4 The year 2007 has been marked by the development of a comprehensive Claims, net of reinsurance (19.3) (4.1) product range and extensive training of the sales force. Paid-up policies Insurance-related operating expenses (84.9) (76.1) were launched towards the end of the year. Gjensidige Pensjon og Sparing Technical result (76 .3) (73 .8) recruited several new pension advisors with long experience in 2007. In Other income, including management income 9.4 1.0 2007 the company was active on the transfer market for defined contri- Net other expenses (56.1) (44.1) bution schemes and on the growing market for conversion from defined Profit before tax for the period (123 .0) (116 .9) benefit to defined contribution schemes. Profit margin, %1 2.5 2.7 Gjensidige Pensjonsforsikring had a market share of around 10 per cent Assets under management, GPF 574.0 188.0 of the new subscription volume for group defined contribution pensions Assets under management, GIR 613.0 53.0 in 2007. Definitions: 1 Profit margin = (premium income – claims + management income for the period) Savings / average capital under management for the period A broad product range was developed in the savings and investment area Gjensidige annual report 2007 | 25

assets UNDER MANAGEMENT t his is

NOK million oper at ions g jensidi e

574 613

Pensions Savings

Pension and savings assets under management

of NOK 15,000, under the same tax rules as former IPA-schemes.

Results MiFID Gross premiums written in 2007 totalled NOK 496.4 million, compared On 1 November 2007 the EU Markets in Financial with NOK 107.7 million in 2006. Gross premiums consist of savings deposits for private group pensions and premiums for risk products related Instruments Directive (MiFID) entered into force . to group and individual pensions, as well as premium reserves transferred from other companies for transferred contracts. Earned premiums, net of This directive establishes a single market in Europe for financial reinsurance, totalled NOK 27.9 million in 2007, compared with NOK 6.4 services, and its objectives include ensuring that investment million in 2006. services and financial products that are offered to private customers are well-adapted to their needs, knowledge and financial Premiums in force at the end of 2007 can be broken down into NOK 346 situation. million for group pensions and NOK 23 million for individual pensions. Assets under management increased by almost 400 per cent in 2007 MiFID includes, for example, the following new requirements for m a n ag emen t to NOK 1,187 million. This breaks down into NOK 574 million in pension investment advice: funds and NOK 613 million in savings products. • Investment advice requires a licence • Classification of all customers as either professional or non- Total expenses were NOK 141.0 million in 2007, NOK 84.9 million of professional which were insurance-related expenses. The loss before tax was NOK • Collection of information from customers – identification of 123.0 million for 2007. The operations are in a development phase, and customer profiles the results are as expected. • Greater duty of disclosure to the customer • Identification of conflicts of interest STRATEGY An increase in the range of products for existing general insurance cus- MiFID entails that it is not enough to offer the customer a good tomers is an important objective for the Group. The Group’s substantial investment product. The advisor shall also evaluate whether the customer base represents a unique opportunity to succeed with profitable product suits the individual customer. In practice this means that growth through the cross-sale of products in pensions and savings. Fur- in some instances, we must say no to customers or advise against ther development of the staff of advisors in Gjensidige Pensjon og Sparing investing. and the cooperating distribution channels will be a key focus area in 2008. In Norway MiFID has been implemented in a new Securities resul outlook Trading Act. The new regulations are considered to be positive In the business segment the focus in 2008 will primarily be on the transfer for Gjensidige, and the new regulations have been implemented market for group defined contribution schemes, the market for conversion throughout the entire organisation. As an independent supplier t s from defined benefit to defined contribution schemes, as well as manda- with a focus on individual advice, the benefits of the company's tory occupational pension (OTP) transfers. The tempo is increasing and advice concept will be clearer. even more companies desire at the same time offers from Gjensidige for existing defined contribution schemes. We will also focus on savings and investments for the business sector.

In the private market we will focus on the transfer of IPA funds to the fund pension product, transfer of paid-up policies, securities funds and other savings products. New regulations for individual pension schemes in Norway will also allow the launch of new products in this market in the future, and this will be important to Gjensidige. 26 | Gjensidige annual report 2007

Gjensidige Bank Gjensidige Bank is a nationwide Internet bank aimed at the private and affinity group markets . The bank offers traditional banking products adapted to electronic distribution .

MAIN PRODUCTS Various service models were developed in 2007 to improve the cost-effec- Gjensidige Bank is a bank for retail customers with distribution through tiveness of using the Group’s distribution system for customer acquisition the Internet and telephone support. and sales. During the year a great deal of importance has been attached to cost-effective operations and continuous process development. operations Gjensidige Bank ASA is wholly owned by Gjensidige Bank Holding AS, The influx of new customers has increased steadily throughout the year. which is in turn wholly owned by Gjensidige Forsikring BA. Overall 30 per cent of the customers are linked to the affinity group programme, 10 per cent are linked to the loyalty programme, 10 per cent are The bank’s head office is in Førde, and it has entered into long-term employed in the Gjensidige Group and 50 per cent are private customers. strategic cooperation with Sparebanken Sogn og Fjordane, which provides The graphic presentation illustrates the development of the customer base technical banking and staff-related services. in 2007. At the end of 2007 the bank had around 22,200 customers, and 11,000 of these customers were also insurance customers. The bank was launched on 2 January 2007. The bank offers a self-service concept with attractive terms and simple customer processes that provide CHANGES IN FRAMEWORK CONDITIONS good customer experiences on the Internet. The distribution is primarily The bank has adapted to the Basel II regulations that apply to the bank through the corporate portal gjensidige.no and via the bank’s own cus- from 1 January 2008. The new regulations build on the principles stated tomer centre. in the “International Convergence of Capital Measurement and Capital Standards” report. The bank differentiates itself from other players in the market through its relationship with the Gjensidige Group’s brand, customer base and The Basel II regulations allow institutions to adapt the reporting of capital distribution system. Gjensidige Bank has agreements with Tekna, Confed- adequacy according to how advanced the bank’s own measurement eration of Vocational Unions (YS) and Norwegian Society of Engineers and methods for the quantification of risk are. Gjensidige Bank has notified the Technologists (NITO) relating to the delivery of products to the organisations’ members. The bank’s products are also included in the Group’s loyalty programme. Key figures NOK million 2007 2006* Good customer influx In 2007 the bank focused on customer acquisition. In the beginning the Net interest and credit commission income 11.3 I/A bank was marketed to selected organisation customers before the broad Other income 6.1 I/A national launch in May. The marketing utilised advertisements in national Total costs (126.5) I/A and regional newspapers, magazines and direct marketing, as well as Loss on loans/guaranties (6.7) I/A advertising on the Internet and radio. Profit before tax for the period (115 .8) I/A

1 The agreements with Tekna and the Confederation of Vocational Unions (YS) Deposit to-loan ratio 50.3 I/A entered into force on 2 January 2007 and 1 February 2007, respectively. In Net interest income2 0.71 I/A December the bank entered into an agreement with the Norwegian Society Gross lending 3,381.4 I/A of Engineers and Technologists (NITO), which is valid from 1 January 2008. Deposits 1,701.1 I/A The media has called the bank’s organisation agreements the best organisa- Definitions: tion agreements in Norway. In September the bank established a project 1 Deposit-to-loan ratio = deposits as a percentage of gross lending aimed at launching products for the agricultural industry during the first half 2 Net interest income percentage = (Interest income – interest expenses) of 2008. In May Gjensidige’s loyalty programme was expanded to include / average total assets banking products. * The bank was established in January 2007 and therefore there are no comparison figures for 2006. Gjensidige annual report 2007 | 27

Total customers accumulated CUSTOMER BREAKDOWN t his is

Number Per cent 25,000 10

20,000 oper at ions g jensidi e 15,000 50 30 10,000 Private Loyalty customers 5,000 Affinity groups Employees 10 0 1st quarter 2nd quarter 3rd quarter 4th quarter Antall kunder

At the end of 2007 Gjensidige Bank had around 22,000 registered customers

Financial Supervisory Authority of Norway that the bank will be applying for approval to report credit risk using the IRB method. Banking products for Results Net interest and credit commission income totalled NOK 11.3 million for the agricultural market 2007. Net interest measured against the average total assets totalled 0.71 The bank will offer attractive banking products per cent. for the agricultural market from the autumn of The bank experienced strong growth in 2007. Lending totalled NOK 3,381 2008 . The launch of these products is one of the million and customer deposits totalled NOK 1,701 million at the end of the bank’s focus areas and an important expansion of year. This gives the bank a deposit-to-loan ratio of 50.3 per cent. Lending consists primarily of loans with adjustable rates. the product and service offerings to Gjensidige’s many agricultural customers . Operating expenses totalled NOK 126.5 million in 2007. This development m a n ag emen t is in accordance with the expectations. Gjensidige is currently the agricultural sector’s preferred insurance company with a market share of over 70 per cent. The company The loss before tax was NOK 115.8 million. The operations are in a start- has built up a large customer base over many years by offering up phase and losses have consequently been budgeted during this phase. attractive products, a high level of expertise in the local distribution organisation and good relationships with both customers The capital ratio at the end of 2007 was 20.8 per cent. and agricultural organisations.

Strategy The bank’s ambition is to offer the agricultural market favourably The bank shall contribute to strengthening relationships with existing priced banking products adapted to electronic distribution. In insurance customers and protect the Group’s market shares against addition to the bank’s existing savings and day-to-day banking competition from bank insurance. The bank shall be profitable on its own offerings, basic banking products will be offered from the start. and attract new customer groups to the Group. Cross sales are the key to The bank offerings will be aimed at private agricultural customers succeeding with this. in different production industries. The offerings will be made available through the gjensidige.no portal. Customers shall have access to all the bank products distributed electronically through the corporate portal gjensidige.no. After this expansion Gjensidige will emerge as a broad supplier of resul financial services to agricultural customers. outlook The bank’s adopted strategy will continue and be developed during the t s coming year. There will be a special focus on product development and the improvement of customer processes to remain competitive. Efforts to adapt the bank to the new capital adequacy requirements (Basel II) and enhancement of the efficiency of internal processes will continue.

In 2007 the bank decided to start a pilot project in financial distribution to evaluate different service models that can improve the efficiency of the Group’s distribution system. This work will continue in 2008.

Recruitment of new employees in step with the bank’s growth and development will also be a priority area in 2008. 28 | Gjensidige annual report 2007

hjelp24 HEALTH SERVICES In May 2007 Hjelp24 was acclaimed as a gazelle company for having delivered a combination of strong growth and profitable operations . Acquisitions in 2007 strengthened Hjelp24’s position as Norway’s largest supplier of corporate health services by far .

main products Nationwide services Hjelp24 delivers services in the following main categories: In HSE and corporate health services Hjelp24 has 4,400 corporate cus- • Corporate health services (Hjelp24 HSE) tomers with more than 240,000 customer employees, and it is the only • Personal security alarm services (Hjelp24 Respons) company that can provide uniform and equivalent service at 35 locations • Private hospital and specialist centre for muscle and skeletal diseases nationwide. (Hjelp24 NIMI) The response centre handles over 1,200 inquiries daily from almost The services are delivered to private customers, businesses and the public 30,000 personal security alarm users. The response centre also handles sector. casualty clinic referrals for 12 municipalities (a statutory municipal duty) around the clock. This is provided by means of a unique technological Operations solution that allows us to offer this service as a very cost-effective solu- A complete health service provider tion to the municipalities in combination with the 24-hour response centre Hjelp24 represents Gjensidige’s focus on the health sector and is managed manned by health personnel. completely independently of Gjensidige’s insurance operations. Hjelp24 currently has substantial health service operations serving private and The response centre also delivers reception services for the crisis and public customers, including: psychological service for companies and organisations that is provided by a • Norway’s largest and leading corporate health service with nationwide nationwide network of psychologists organised by Hjelp24. coverage • Norway’s largest supplier of personal security alarm services Hjelp24 Respons conducted a customer satisfaction survey in November • A nationwide crisis and psychological service that is manned 24 hours a 2007. It provided an overall assessment of Hjelp24 as a good supplier with day by health professionals a CSI (Customer Satisfaction Index) of 86 per cent, which is one percent- • A unique casualty clinic referral service and other health-related services age point above the company’s internal target. Hjelp24 received the high- based on 24/365 operations est scores in the availability and beneficial value categories.

Hjelp24 is established in 35 locations across the country. Increased overall market In the health services market Hjelp24 delivers primarily services to public Hjelp24 NIMI is a private hospital and specialist centre that was estab- and private enterprises. The health market is increasing and the private lished in 1984 for patients with muscle and skeletal injuries and diseases. portion of the market is significantly larger in other countries that are The hospital’s operations are characterised by interdisciplinary cooperation naturally comparable with Norway. The demand for health services is among physicians with various specialisations, psychologists, physiothera- increasing, and Hjelp24 is positioned to handle an increasing market share pists, chiropractors, and test/screening and training departments. A total and growth as a result of this increased demand. of 280 people are affiliated with the operations. Satisfied employees Hjelp24 NIMI conducts significant research activities in cooperation with At the end of 2007 Hjelp24 had around 600 permanent employees in Helse Sør-Øst and Ullevål University Hospital, and it has amassed top three business areas (Hjelp24 HSE, Hjelp24 Respons and Hjelp24 NIMI). expertise at its rehabilitation centre at Ringerike. Orthopaedic patients Hjelp24 is the only nationwide player in the first two business areas. and the growing group of patients who are seriously overweight are also offered treatment. An employee survey was conducted in late autumn of 2007, and this confirmed that our employees are in general very satisfied with their work at Hjelp24’s principal operations, the delivery of corporate health services, Hjelp24. represent one of Norway’s largest consulting environments with over 320 HSE consultants. These consultants have special expertise in advis- The “Active”-consept ing organisations how to reduce sickness absence, improve the working In the autumn of 2007 the «Active»-concept was established as a new environment and increase workplace satisfaction. service in Hjelp24. Injured persons will be helped to receive speedier and Gjensidige annual report 2007 | 29

operating income EBITA margin t his is

NOK million Per cent 350 8 300 7 6

250 oper at ions g jensidi e 5 200 4 150 3 100 2 50 1 0 0 2007 2006 2007 2006

EBITA margin = EBITA / operating income

more correct treatment through an active assistance role from A to Z EBITA increased by around 240 per cent to NOK 26.4 million in 2007. This for the customer. Hjelp24 envisions a great business potential in having gives an EBITA margin of 7.9 per cent for 2007, compared with 2.9 per cent first-hand knowledge of the shortest treatment times in the public health in 2006. service and a network of private providers that can offer fast treatment. The increase is primarily related to a strong improvement in earnings for Acquisition and new offices the consulting area (HSE) as a result of the realisation of measures to In the summer of 2007 the acquisition of the Oslo competitor, Bedrifts improve profitability after the acquisitions. helse Norge AS, was approved by the Norwegian Competition Authority. The takeover became effective on 1 June 2007. The acquisition strength- Strategy ened Hjelp24’s position in the Oslo market through 50 new advisors. Hjelp24 represents an important venture in relation-building services for Hjelp24 will develop a larger medical centre at the premises in central Oslo. the Gjensidige Group. This will contribute to strengthening the Group’s This will be a service that the employees of Gjensidiges member companies competitiveness and developing the Group as a customer-centric player. can use for medical consultations in an emergency. Hjelp24 also plays an important role in injury prevention and control in m a n ag emen t Hjelp24 also established its own offices in Hamar and Tromsø in 2007. The connection with the insurances of the person that the Group offers. next office will be established in Haugesund, and it will open early in 2008. Our goal is to become a leading private health provider that contributes to In November 2007 Hjelp24 acquired the private hospital Norsk Idretts- ensuring that businesses, organisations and public enterprises realise the medisinsk Institutt (NIMI). After this acquisition Hjelp24 is the only greatest possible predictability in their operations through low sickness private health provider that can offer a comprehensive treatment chain. absence rates and good working conditions. Hjelp24’s services shall help The acquisition was made to provide our customers quick access to one ensure that sickness absence is as short as possible when an accident or of the most competent environments for muscle and skeletal diseases in illnesses has occurred. Norway. The goal is to develop a nationwide chain that offers comprehensive Results treatment in the largest cities. Gjensidige and Hjelp24 have a unique op- Hjelp24 increased its operating income by 26 per cent from 2006 to portunity to establish a complete health service by developing the health 2007. Operating income totalled NOK 335.5 million in 2007. This strong care providing concept further. Acquisitions and alliances shall form the operating income growth is attributed to a combination of acquisitions foundation for the establishment of a treatment chain and strengthening and organic growth. of Gjensidige’s market position. resul

outlook A group appointed by the Government has published a report that recommends an expansion of the trade regulations for corporate health services, t s Key figures which could expand our market base by up to 20 per cent (corresponding NOK million 2007 2006 to NOK 300 million). Hjelp24 is well-positioned to handle a large share of this growth potential. Operating income 335.5 265.8 Operating expenses 309.1 258.0 The aging of the population and increasing degree of inactivity among the EBITA1 26 .4 7 .8 population are strong drivers of the demand for private health and lifestyle EBITA margin2 7.9% 2.9% services. In addition, a historically tight labour market entails an increase in the need for services that reduce sickness absence and services that Definitions: contribute to fast diagnosis and treatment. 1 EBITA = Earnings before interest, taxes and amortisation 2 EBITA margin = EBITA / operating income 30 | Gjensidige annual report 2007

asset management Investments Gjensidige invests in a number of asset classes, such as property, shares, bonds, private equity, etc ,. both in Norway and abroad .

strategic and tactical allocation Due to the fact that the banks have also had very high exposure to Investments are made primarily to cover the technical insurance provisions, credit products in relation to the capitalisation, this has become a capital but the company is in a capital situation that allows it to invest based on problem. the maximum return given the company's risk tolerance for its equity. The strategic allocation makes provisions for a well-diversified portfolio to Weakened confidence in the US economy and a strong economic develop- achieve the best risk-adjusted return over time. ment in the major emerging economies such as China, India, Russia and Brazil, entailed major currency rate fluctuations, and the US dollar has The investment department implements the strategic allocation within been retreating. The strong global economic growth over several years has given degrees of freedom. This is to exploit the market opportunities and resulted in strong price increases for commodities such as oil, coal, agricul- active management of the various asset classes. The implementation is tural goods and industrial metals. This appears to be a more lasting trend based on extended use of the external managers, as well as some internal due to the strong growth in demand and some scarcity on the supply side management for Nordic equities and tactical allocation. Real estate invest- for some commodities. ments in Norway are made through the wholly-owned property management company Oslo Areal. Due to high price increases for commodities and high capacity utilisation in the OECD area, the focus on the risk of inflation increased throughout the Highlights of the capital markets in 2007 year. In spite of this there was only a modest rise in the long government The development of the return on the various asset classes reflected a rates, and they even declined in the USA. strong economic development in emerging economies and strong price inflation for commodities. Developed and emerging countries experienced As a result of the high level of activity in both Norway and internationally, quite a similar development for equities during the first half of the year. In there was in general good appreciation in the real estate market, and for the second half emerging countries performed significantly better. commercial property in particular. The exceptions were certain countries such as the USA and Spain. Towards the end of the year this development After several years with a strong return on various asset classes, a signifi- slowed somewhat as a result of difficult access to and a higher price for cant repricing of some of the risk premiums took place in 2007. credit.

This was triggered by a significant change in the price of credit, initially in In general, we saw increasing fluctuations in the prices of assets through- the USA. The reason for this change was the drop in confidence for some out the year, and this is a reflection of the fact that the investors are credits, in particular credits related to the real estate market in USA. somewhat more uncertain about the future.

In recent years a large volume of structured financial products have been Gjensidige's investment portfolio issued, where the total credit exposure is many times the amount invested. The Gjensidige Group's investment portfolio increased by around NOK 6 billion throughout the year. This was due to the inclusion of operations in Many investors have had inadequate knowledge of the properties of the Denmark and the Baltic States. The investment portfolio of the Group at products, and this has contributed to a worsening of the situation. In gener- the end of the year is illustrated in a graph on the opposite page. al, low interest rates over a long period of time with generally good growth stimulated a strong increase in credit in both Norway and internationally. The exposure to equities was reduced throughout the year at the same time as the fixed income portfolio exposure was increased. From low ex- The credit challenges triggered significant liquidity problems throughout posure to international credit at the start of the year, the level of exposure 2007. This is a result of investors sceptisism to the credit quality, and flight increased throughout the year, particularly in the last quarter of 2007. to secure investments like government bonds. The Group's credit exposure is not in structured products or the subprime market.

Gjensidige invests in hedge funds, and these funds have only limited exposure to the subprime market. Gjensidige annual report 2007 | 31

Asset allocation return by Asset classes t his is

Per cent Per cent

Aksjer Shares 15 Money market Eiendom

12 oper at ions g jensidi e Real estate Hedgefond etc Obligasjoner9 Pengemarakjed Hedge 6 fund etc Prosent Bonds 3

Shares Bonds Gjensidige’s investment portfolio Money market Real estate split in the various asset classes HTM bonds Hedge fund and others

The investment portfolio is almost fully hedged against foreign exchange risks. The largest individual exposures in the portfolio are the share holdings in Storebrand and Gjensidige's head office at Sollerud in Oslo, as well Ethical investment criteria as other office property in Oslo. After the end of the year the head office Gjensidige has defined a set of ethical criteria building was sold to KLP Eiendom, which will result in the realisation of a capital gain of over NOK 700 million in the first quarter of 2008. that specifies what the companies invested in should not engage in . Results Despite the high level of unrest in the markets, the investment portfolio Together with other large investors, Gjensidige can contribute managed to achieve the overall return target for the year. The return was to drawing attention to companies that do no satisfy our ethi- 6.3 per cent compared with 9.2 per cent in 2006. Excluding the gain on cal business requirements and give them an incentive to change the sale of shares in DnB NOR in 2006, the financial return in 2006 was their conduct. 6.2 per cent. The criteria are presented to capital managers who are given m a n ag emen t Good portfolio diversification and a careful approach to market risk management mandates. For all discretionary mandates (i.e. throughout the year contributed to this. The financial return was good where Gjensidige's funds are managed in a separate portfolio) for equities, private equity and real estate in particular, but it was weaker the criteria are absolute requirements. for hedge funds. The investment mandates can be controlled in the same manner Most of the hedge fund investments are in the form of funds of hedge in cases where Gjensidige invests in an existing fund together funds. The primary objective of investing in funds of hedge funds is with other investors. In such cases Gjensidige attempts to use to achieve a return beyond the risk-free interest rate with relatively its influence to achieve changes, and sometimes it chooses low market risk. The results delivered by the external managers varied another manager. significantly in 2007. Examples of the criteria include the Convention on the Rights The investment department's limits for active risk are based on the risk of a Child, workplace discrimination based on gender or race, relative to the strategic asset allocation, and they are measured against child labour and a breach of the right to organise or engage in the return that a passive approach to strategic asset allocation would collective wage negotiations. have given. The contribution from active risk was positive in 2007. The environmental criteria focus primarily on the dumping resul of hazardous waste and responsible transport of the same. Ignoring the environmental impact in connection with major development projects, for example, is also included. t s

The corruption criteria concern primarily active public sector corruption, as well as the bribery of public officials. In the weapons industry, it is the production of antipersonnel land- mines, cluster bombs and nuclear weapons that are excluded. 32 | Gjensidige annual report 2007

GJENSIDIGE’S PEOPLE Gjensidige focuses on maintaining its position as the leading insurance player in Norway, while seeking to win positions in banking, pensions, savings and health . Improving our efficiency and management and employee development are key measures in this work .

At the end of the year the Group had a total of 3,460 employees. Of these Evaluations showed that the support activities had helped the local man- employees 2,033 were in the general insurance operations in Norway, 32 agers, HR employees and representatives from the Finance Sector Union were in Gjensidige Bank, 105 were in Gjensidige Pensjon og Sparing, and of Norway. 622 were in Hjelp24. There were 283 employees in Denmark, 85 employees in Sweden and 300 employees in the Baltic States (excluding agents). As a result of the efficiency improvement programme, the workforce is reduced by 209 persons during 2007. EFFICIENCY IMPROVEMENT PROGRAMME In 2007 Gjensidige completed an efficiency improvement programme that Management DEVELOPMENT has represented a major change in both distribution and internal efficiency. Management is a key factor in the ability to translate strategy into action The efficiency improvement programme placed very high demands on and to create the future culture we desire at Gjensidige. Management the managers. Therefore an active effort was made to ensure that all the development is therefore an important element in Gjensidige’s organisa- managers had the required basic knowledge and to prepare templates for tional development work. Gjensidige’s management development work has the processes that were carried out. accordingly a strong internal foundation, and Gjensidige works compre- hensively with management development from analysis to execution. Representatives from the HR (Human Resources) area at Gjensidige, Finance Sector Union of Norway and Right Management (a consulting firm Management is created through interaction between managers and in the Manpower Group with a great deal of experience with such proc- employees, and the employees are therefore also an important part of esses) worked together to establish the necessary processes and tools. modern management. Gjensidige has therefore developed a management These aids were used in the follow-up of the project. platform that focuses on the manager as an inspirer and the relationship between the manager and the employees. Good cooperation between Gjensidige and the Finance Sector Union of Norway resulted in a broad consensus on the content of the processes. The management platform is a symbol of the desired management at Descriptions were prepared for everything from how the first information Gjensidige, and it consists of three components, each of which represent meeting was to be organised to how one could best care for the employ- important manager elements – Inspirer, Facilitator and Doer. ees who were not given a place in the “new” organisation. TRAINEE PROGRAMME “THE DIFFICULT CONVERSATION” Gjensidige has recruited 3-4 trainees since 2001. Few trainees are In addition to giving the managers templates and descriptions of the recruited and all of them have great potential. They are followed up closely actual process, a one-day course, “The Difficult Conversation” was also and given genuine career opportunities. Trainees at Gjensidige are given developed. The object of this course was to give managers a review of a lot of responsibility and face major challenges. They also have a large the tools that were developed and training in carrying out conversations network to support them. related to reorganisation. The response to the course was very good, and it gave the managers knowledge of how to handle such processes. Gjensidige annual report 2007 | 33

Number of employees average employees age employee Gender distribution t his is

Number Years Per cent 2500 50 80 70 2000 40 60 oper at ions g jensidi e 1500 30 50 40 1000 20 30 20 500 10 10 0 0 0 2007 2006 2005 2004 2003 2002 2007 2006 2005 2004 2003 2007 2006 2005 2004 2003

Male Male Female Development in number of employees Development of average employee Female Gender distribution for employees Male management in Gjensidige Forsikring. age in Gjensidige Forsikring. Management in Gjensidige Forsikring. Female management

The programme is firmly rooted with the senior management. All the trainees have their own mentor in the Group management and a sponsor selected from among the company’s most capable managers. The Professional diversity at programme provides solid insight into Gjensidige’s strategy, operations and culture. The trainees shall also function as change agents internally Gjensidige through challenging the organisations established truths. Gjensidige recruits many professions in addi-

The trainee programme runs over a period of 15-16 months. The trainees tion to economists . The company hires different are placed in different areas and regions throughout the traineeship professions ranging from policemen and lawyers, period. At least one placement will be with our subsidiaries in Copenhagen to physicians, nurses, engineers, car mechanics, or Stockholm. auditors and agronomists . DIVERSITY As an insurance company Gjensidige requires special expertise in Based on acknowledgement of the fact that Gjensidige’s employees very many fields. Health personnel make assessments in connec- m a n ag emen t primarily have an ethnic Norwegian background, Gjensidige’s manage- tion with injuries and engineers work with loss prevention, for ment has decided that the company requires greater diversity. In addtion example. to reestablishment of the organisation’s equal opportunity committee, a “Culture-Ethnicity-Insurance” project has also startet up. Technological developments also bring about requirements for new and different expertise.

The meeting places with respect to customers have changed radically in recent years. More and more of the communication between the customer and company is by telephone and the Internet. This requires capable employees for the development of IT systems and websites. As a result of this there are employees in the company's Internet department who have a degree in Norwegian and work with language and communication. It is not just all about technology, it is about how to communicate as best as possible over this interface. resul Gjensidige is also building up operations in Denmark, Sweden and the Baltic States. This opens up the possibility of new and exciting work opportunities, and this includes the internal labour t s market for employees in the Group. As a result of these ventures, the Group has a need for manpower that is increasing outside Norway. In 2007 Gjensidige recruited almost 250 new employees, and a total of 3,460 persons are currently employed by the Group. This includes the operations in Sweden, Denmark and the Baltic States. 34 | Gjensidige annual report 2007

Corporate Social Responsibility Gjensidige has an important corporate social responsibility in executing its primary task of safeguarding life, health and property . The company has therefore long traditions of being a significant participant in society, and all its contributions to society shall be rooted in the company’s principal task .

For Gjensidige corporate social responsibility means making a positive this. One of the company’s most important measures to stop an unfortu- contribution to society. Gjensidige corporate social responsibility covers nate development is to react strongly to fraud among young people, even all parts of the company, the Group and the subsidiaries. As part of the in relatively minor cases. When fraud is revealed we also make it known day-to-day operations, the management and governance of the company, through the media as an important preventative measure. people and skills, administration, operations and business development are affected. Gjensidige has conducted social surveys in the general population and business community over the last five years. This gives the company The core values of being helpful and available shall be reflected in eve- knowledge of the views and attitudes of people and business managers. rything the company does. Gjensidige takes active responsibility for loss In the surveys the company studies a number of issues that are relevant to prevention among its insurance customers and in society in general, where the business areas, such as insurance fraud, corruption, people’s worries support for loss prevention measures has always been a key factor. The about losses and conduct related to loss prevention. The company can company has been an active contributor to local communities since the thus start to see developments over time in important areas. mutual fire insurers were established in 1816. GJENSIDIGE TAKES CLIMATE CHANGE SERIOUSLY Gjensidige shall offer products and services required by society and Climate change is the greatest challenge of our time to mankind. Gjensi- contribute to society at the same time through sponsorship activities, co- dige’s core operations will be affected directly by climate change through operation agreements and alliances. The company shall fulfil its obligations the claims trend. It is therefore natural that Gjensidige play an active role and duties imposed by society properly within the applicable legislation. in the reduction of climate gas emissions, prevent the consequences and Conduct and actions shall be in accordance with the general perception of help the customers make good environmental choices. Customers and justice and fairness, and in accordance with our own code of ethics. employees shall experience that Gjensidige cares and that we also care about the environment. gjensidige is marked by high ethical standardS Ethics and morals are a basic prerequisite for our operations, and our The company’s strong history related to loss prevention and corporate operations shall reflect mutual honesty and respect. Gjensidige’s decisions social responsibility is a good point of departure for a commitment to the and actions shall be controlled by norms, values and ethical rules that are environment. Gjensidige is of course an office-based company with mod- in accordance with the general interpretation of the law and the position est climate gas emissions, but we have the influence and competence to of Gjensidige as a substantial contributor to society. All of the activities at contribute to national climate efforts. Gjensidige shall withstand the light of day. It is still unclear exactly how increased environmental awareness will Gjensidige’s operations are dependent on trust from all quarters. Trust is change the conduct of consumers and how political measures will affect not anything that can be decided on, it must be earned. It is expected that society. It is clear, however, that society will undergo changes in the com- employees and elected representatives act with care, integrity and respect, ing years as a result of the climate threat. Gjensidige desires to implement and in accordance with the norms, rules and laws that apply in society. measures to reduce global warming and prevent the consequences of climate change. An environmental strategy shall be rooted in the company. Educational efforts are a natural part of Gjensidige’s corporate social responsibility. Every year the company uses a great deal of resources to uncover The Group has an opportunity to implement measures and contribute insurance fraud. Gjensidige surveys the attitudes of Norwegians over a to a reduction in emissions in a number of areas. Therefore we organ- number of years and documents that insurance fraud is a social problem. ised Gjensidige an Environmental Project in 2007, which established, for example, a number of working groups of employees to come up with The company has noted, for example, that fewer people consider adding various environmental measures. The first part of this work was completed a little extra to an insurance claim as fraud. The greatest decline is among in December 2007, and various measures have been assessed. This gives young people, and this is particularly worrying. This indicates that the us a good foundation to build on in the company’s efforts to implement educational efforts focusing on insurance fraud must continue, and that specific short-term and long-term climate measures. The company has an Gjensidige must take its share of the responsibility to do something about ambition to be climate neutral by the end of 2008. Gjensidige annual report 2007 | 35 t his is oper at ions g jensidi e

Measures that reduce the environmental impact of our own operations will tradition of generosity be given priority. The company will therefore continue to clean up its own Several years of supporting local communities was systemised in 2007 house, including Gjensidige’s own operations, office operations, transport when the Gjensidige Fund was established. The Gjensidige Fund received and document processing. The company continues to work on reducing its an endowment of NOK 300 million in 2007 targeted at charitable causes paper consumption internally and externally, and it hopes that even more with special emphasis on health and safety. customers will go over to an electronic consent solution and e-documents. In cooperation with committed individuals, resident associations and By making clear environmental demands in connection with purchases sports clubs, Gjensidige has honoured everyday heroes, provided good and influencing the largest suppliers, Gjensidige can achieve a substantial seamanship training, and improved peoples’ skills behind the wheel. Ex- environmental impact. As an investor and property owner, Gjensidige can, amples of grants from the fund include: Street lighting in a housing estate for example, implement energy conservation measures and reduce energy in Spillum, securing a football pitch in Trofors, a footpath in Åsgårdstrand consumption in its property portfolio. and speed bumps in Ringsaker.

Gjensidige’s competence and resources can also help customers make Examples of projects that were supported in the health and safety area m a n ag emen t environmental choices. Gjensidige can stimulate, as a natural part of its include: Sunnås Foundation, Trygg Trafikk (Safe Traffic), Grønn Hverdag operations, private individuals, companies and municipalities to implement (Green Daily Life), ATLET Foundation and Hunt 3 received funds for environmental measures. research and projects.

Fire and THE ELDERLY Common to all the causes to which the Gjensidige Fund has given money Gjensidige took an initiative to safeguard those who have the highest is the fact that they benefit many people and make the local community fire risk in Oslo as early as 1998. Persons over the age of 67 have a risk safer. To be eligible for funding a project must be a preventative, stimulat- of dying in a house fire that is three times greater than the rest of the ing, activity-promoting and community-building project. population. Fresh fire statistics also show that the number of people who die in fires is increasing in Norway. The Gjensidige Fund is now part of the Gjensidige Foundation. The foundation was established on 1 November 2007, and it is an independent and Gjensidige established cooperation with the Oslo Fire and Rescue Depart- democratic charitable foundation. This foundation will continue to fulfil ment, Home Care Service and the Town Hall to safeguard those who Gjensidige’s social commitment and role in Norwegian society in accord- needed assistance from the Home Care Service. Some of the district ance with the company’s historical foundation. administrations also got involved after a while. COMMITMENT TO HANDBALL resul The final breakthrough came when Gjensidige established a binding coopera- Gjensidige is the main sponsor of the Norwegian Handball Association tion agreement with the City of Oslo with the help of the media and politi- (NHF) and the women’s national handball team, as well as a children’s cians. The agreement is valid at present for the years 2007 and 2008 and handball project. The agreement with the Norwegian Handball Association t s clearly defines the obligations of the various parties. All the 16,000 users of was entered into in 1993 and has been extended until after the Beijing the Home Care Service in Oslo receive a free fire safety inspection of their Olympics in 2008. In 2007 the company celebrated 15 years as the main home annually, and the Fire Department teaches the home care assistants sponsor of the Norwegian women’s handball team. how to perform the fire safety inspections. Gjensidige covers some of the expenses and has managed the cooperation group from the very beginning. As the flagship for team sports in Norway, and as fantastic sports ambassadors, the handball girls give Gjensidige extensive media exposure. The Since society is planning for the elderly to live at home longer, Gjensidige handball girls have won several championships and titles throughout the believes that it is the responsibility of society to provide them with satis- years, most recently a World Championship silver medal in 2007. factory fire safety. With experience from the agreement with the City of Oslo, Gjensidige will attempt to influence national politicians, local politi- Gjensidige is one of the promoters of a children’s handball project. The cians and others in order to make similar protection available nationwide. object of the project is to safeguard recruitment to handball through an 36 | Gjensidige annual report 2007

ENERGY CONSUMPTION OF energy savings at sollerud GJEnsidige's climate accounts

Gjensidige'S BUILDINGS 2 KvH/m2 1000 kroner Tonnes CO 350 6000 1500 300 5000 1200 250 4000 200 900 3000 150 600 2000 100 300 50 1000 0 0 0 1998199920002001200220032004200520062007 1998199920002001200220032004200520062007 Ofﬁce building power Air travel Car driving

Energy savings per year at Gjensidige's head office at Lysaker due The climate accounts of Gjensidige in Norway show greenhouse gas Energy consumption per square meter in to lighting and blind control, recirculated air in glass gate, rebuild emissions of 1-1.5 tonnes of CO2 per employee. Sustainable emissions buildings owned by Gjensidige of heating pump system and replacement of seawater pumps, etc. according to the UN Climate Panel are 1.1 tonnes of CO2 per person.

active focus on tournaments and handball schools for children and young equipped to tackle a busy life at home, at work and in their leisure time. people. From 2002 the project has become the Norwegian Handball As- A healthy lifestyle shall give each individual employee a greater level of sociation’s official recruitment programme. satisfaction. This programme has resulted in a proactive attitude that permeates the entire organisation. A Change of Pace has inspired many In 2007 Gjensidige and the Norwegian Handball Association jointly employees in the company to “get off the sofa”. established the Gjensidige Handball School. The object of the Gjensidige Handball School is to promote recruitment and activities for children and The object of the company’s new exercise project in 2007, GoBeijing08, young people. The schools shall be open to children between the ages of is to get all of Gjensidige’s employees in form before the Beijing Olym- 6 and 13. pics in August 2008. In this project the employees record their physical activities on a website. These activities are then converted to points that The Gjensidige Handball School generates a lot of activity and the are displayed on the Great Wall of China. During the campaign period ten Norwegian Handball Association provides a thorough and professionally employees will win a trip to the Beijing Olympics. GoBeijing08 is part of A competent training programme. Gjensidige contributes, for example, a Change of Pace, and everyone can participate regardless of what sort of free equipment package to all the children who participate at the handball shape they are in. school. The school is organised during school holidays, and the duration of the school is three to five days. The target is to establish 100 handball In GoBeijing08 the company also uses a health test that is called the schools with up to 50 participants per school during a two-year period. Gjensidige Test. The test gives the employees an opportunity to review the condition of their health and their diet, and to receive individual tips MORE ENERGY IN DAILY LIFE WITH A CHANGE OF PACE and advice. It is anonymous. Only the individual employees themselves are A Change of Pace is Gjensidige’s internal programme to give the employees notified of their condition. After three months the test can be taken again an opportunity to increase their energy levels. This shall make them better to check whether there has been any improvement. Gjensidige annual report 2007 | 37 t his is oper at ions g jensidi e

Climate work in 2007 and beyond As an insurance company Gjensidige plays an important role of contributing to greater knowledge on the effect of climate changes . We must understand the effect of climate changes on homes, businesses and municipalities, and how a change in the claims trend will affect Gjensidige’s core operations .

Gjensidige is acquiring valuable insight into the consequences of climate • persuading customers and business associates to also make a contribu- change in Norway through a climate project with the Norwegian Comput- tion by reducing its emissions ing Centre (NR). The object of this cooperation is to survey the importance • compensating for our own emissions in full or in part through climate of various weather elements to the water claims trend for buildings and quota trading how extensive the losses will be. This work has been carried out through- m a n ag emen t out all of 2007 and is in its final phase now. The most important measures to reduce our own climate emissions at Gjensidige are to reduce our consumption of electricity and limit travel by The climate project has revealed some significant regional differences in airplanes and cars. These are measures that can also provide cost savings. the vulnerability of the buildings to climate change. By linking loss models to future climate forecasts based on actual climate model runs, we can Gjensidige has focused on energy conservation measures for a number of estimate what claims situation Gjensidige will be facing in the future. Such years and achieved a significant reduction in its consumption of electricity loss scenarios will be an important tool for us in our efforts to develop in its own office operations. In addition, video conferencing is frequently focused and geographically adapted loss prevention measures. used as a replacement for a growing number of trips by airplane or car. Our subsidiary Oslo Areal has a high level of competence in office and property As a result of our cooperation with the Norwegian Computing Centre, the management. Their target for 2008 is to reduce the consumption of EU has granted support for a four-year cooperation project on the risk of electricity by a minimum of five per cent for each property and to monitor climate changes in the insurance sector, where Gjensidige is participating energy consumption continuously. together with the Norwegian Computing Centre, Lloyds Insurance and the London School of Economics in the UK. In addition, Gjensidige will be Tennant Forsikring AB became part of the Group in August 2007. Tennant organising a major international seminar on climate change and insurance launched “climate neutral” car insurance for environmental cars in Sweden, in cooperation with the Norwegian Computing Centre in November 2008. and they received a great deal of attention for this. resul

Gjensidige also participates in the Climate Lift, which is the Ministry of the Gjensidige has set a target to be climate neutral in 2008. The company is Environment’s initiative to encourage voluntary emission reductions. We also starting a process now that aims at achieving environmental certifica- t s undertake here to follow up national climate targets actively by: tion. In January 2008 the company employed a climate researcher to work • having climate action plans and accounts in our own organisation on surveying climate vulnerability and measures for Gjensidige’s customers. • increasing the knowledge of climate and implement measures in our own organisation 38 | Gjensidige annual report 2007

LEADING AND FORMING THE INDUSTRY

Gjensidige is demonstrating its willingness to change by the planned stock exchange listing. We offer a complete range of financial services in Norway, and we are expanding our health business and strengthening our interests in the Nordic region and the Baltic States. Now we will have greater freedom of action and obtain the flexibility required for active participation in the major changes that mark the industry. Gjensidige endures with ambitions to grow and create exciting opportunities for customers, employees, owners and investors. this is gjensidige operations management results 39 | 2007 t l repor a nnu a e g jensidi G 40 | Gjensidige annual report 2007

risk and capital management Risk management is an integrated part of Gjensidige's day-to-day operations . Comprehensive and strong risk management is an important strategic tool for increasing value creation as it enables the Group to handle uncertainty, threats and negative outcomes, as well as utilize the Group's risk capacity in an optimal manner .

As a financial group with core business operations in general insurance, tions are allocated to individual products based on their contribution to the risk and risk management are a natural and critical part of Gjensidige's overall risk. This forms the basis for measurement of profitability beyond the operations. pure technical insurance results, taking into account financial income and cost of capital. This is performed on the basis of a long-term perspective Capital management over a complete cycle in the insurance market. The profitability targets for Managing the company's risk through measurement, management and individual years in the budget will also be influenced by the current market control is essential for an insurance company. The insurance company must situation. The same approach is also used in the internal performance have adequate capital to bear risk, and the company's financial strength reports for the organisational units. should therefore be an important factor for customers. On the other hand, equity is costly, and it is therefore also important for the company to keep The capital management department is part of the Finance department, the cost of capital as low as possible. A key element of capital management Strategy and Business Development, which is led by the Deputy Chief in the Gjensidige Group is to balance these two aspects. Executive Officer. The work associated with capital management involves, however, a number of functions, such as actuarial calculations, reinsurance, How much capital is required can be determined based on three different investment, product departments, and investments and accounting. These perspectives: functions have also participated in preparation of the company's internal • Statutory requirements by regulatory authorities models. • Rating company requirements Additional information and figures concerning risk and capitalisation can • Requirements based on internal risk models be found in Note 3 to the annual accounts.

Gjensidige is very well-capitalised, regardless of which of the aforementioned STRATEGIC Asset Allocation perspectives taken. In order to avvoid charging the insurance business an ex- Work associated with the company's investments is two-fold: Strategic cessive capital cost, only the capital that is required based on internal models asset allocation and the implementation of this allocation within given is allocated. The rest of the capital is either held as a buffer for additional degrees of freedom. capital requirements in the insurance business or for strategic purposes. The strategic asset allocation for the Gjensidige Group and subsidiaries is The credit rating company Standard and Poor’s also considers the Group approved annually by the Group board of directors and the respective com- to be very well-capitalised, and it has assigned the Company an "A" rating pany board of directors. The capital management department is responsible with a stable outlook, most recently in October 2007. The company has for preparation of the decision-making basis for this. The strategic asset held this rating since 1999. allocation shall give the best possible balance between the expected return and risk based on the needs of the insurance operations to balance the The internal capital requirement is calculated on the basis of Gjensidige's expected future payments with cash flows from investments, while other proprietary simulation model. The model is an advanced stochastic simula- funds are invested to optimise the return in relation to risk. tion model of Gjensidige's insurance and investment operations. It is used to measure the overall impact of several different types of risk, and how In addition to approve the strategic asset allocation, the board of directors this capital requirement can be allocated to different parts of the business also approves limits for deviation for the actual asset allocation in relation according to the contribution of the individual areas or sources of risk to to the reference portfolio. the overall risk. The investment department uses this strategic asset allocation basis and is The internal risk model is quite essential to the preparation of the Group's responsible for making adjustments based on market view and the defined reinsurance programme and determination of the asset allocation. Based on limits and restrictions. This means selecting the best actual asset allocation the cost of capital perspective and estimation of economic value creation, at any given time (tactical asset allocation) and deciding which managers are the various asset allocations and reinsurance alternatives are analysed in a to be used and how the management mandates shall be formulated. As part consistent manner according to a risk-based and economic perspective. of the ongoing dynamic risk management, the risk is measured by calculating The capital requirement that have been calculated for the insurance opera- the probability of achieving a given minimum level of earnings for the ac- Gjensidige annual report 2007 | 41

Development of capital require- EQUITY REQUIREMENTS – GROUP ments and equity – parent company t his is NOK million NOK million Per cent 20000 40000 50

40 15000 30000 oper at ions g jensidi e 30 10000 20000 20

5000 10000 10

0 0 0 2007 2006 2007 2006 Capital adequacy ratio Solvency requirements, risk-based Development in relation Minimum required ratio requirements and book equity Solvency requirements to the capital adequacy requirements for the parent Risk-based requirements requirements for the Net primary capital company Gjensidige Forsikring. Book equity Gjensidige Forsikring Group Risk-weighted basis

counting year. Limits with respect to the probability and the minimum level of earnings are set by the board of directors. In the event of poor financial performance, the company will lower the level of risk, primarily by reducing Development of capital the weighting of equities. The exposure will be increased correspondingly in the event of good financial performance, following an assessment of requirements and equity the market situation. This ensures dynamic asset allocation during the year within the limits set by the board of directors. The graph above to the left illustrates how the equity capital requirements have developed based on the solvency margin In addition to dynamic risk management, absolute risk monitoring is requirements (statutory) and risk-based internal requirements performed by means of stress testing. This entails the calculation of losses in relation to the book equity (figures for the parent company for the actual asset allocation given a negative market scenario, viewed Gjensidige Forsikring, NGAAP). in relation to a continued positive margin against the statutory capital requirements. With Gjensidige's financial strength, there is a significant The increase in the solvency requirements is due primarily to the margin with respect to this requirement. investment in Storebrand, which entails that the share of book m a n ag emen t equity that can be included, has been reduced. sTATUTORY CAPITAL REQUIREMENTS AND PREPERATION FOR FUTURE CHANGES The risk-based requirement only takes into account the ordinary All financial institutions, including Gjensidige and its subsidiaries, must insurance operations, including the allocated financial assets (not meet certain statutory capital requirements. All the companies in the including the Storebrand investment), and it has remained practi- Group have met these requirements throughout 2007. cally unchanged. Gjensidige has a very strong capital position and the growth capacity is still strong. There is an ongoing Solvency II project under the direction of the EU, and this project will entail a completely new standard for capital adequacy and The graph above to the right shows the development at Group regulation of European insurance companies. Solvency II will contribute to level where the capital adequacy (BIS) rules apply. The capital improving the quantification of risk and capital requirements for insurance adequacy is calculated as the quotient of the net primary capital companies, and it will strengthen risk management in general. The new and the risk-weighted basis, and the minimum requirement is 8 regulations, which are expected to enter into force in 2012, will give the per cent. This buffer has been reduced from 2006 due to acquisi- companies a greater incentive to measure and manage all risks in a consist- tions and upweighting in Storebrand, but Gjensidige is also very ent manner. Gjensidige, including its subsidiaries, are actively following the well capitalised from a group perspective, and the net primary developments, and they have participated, for example, in the quantitative capital is more than three times the minimum level. resul impact studies. Solvency II will also entail new requirements for how risk management is organised and performed, as well as reporting requirements towards both the supervisory authorities and externally. This trend t s can also be observed in the credit rating companies' increased focus on enterprise risk management when ratings are to be assigned.

As part of this development, the Financial Supervisory Authority of Norway has prepared new guidelines for risk-based supervision, including a stress test model, which will apply in 2008. Gjensidige has participated and provided feedback in the consultation round in 2007. In Denmark the authorities have started the adaption through introduction of an individual solvency test, which Gjensidige in Denmark is using for reporting for the first time in 2008. Similar is taking place in Sweden, and Gjensidige's subsidiary Tennant started reporting in accordance with the Swedish "traffic light" model in 2007. 42 | Gjensidige annual report 2007

Corporate governance The board of directors of Gjensidige Forsikring has decided to comply with the Norwegian recommendation for corporate governance dated 4 December 2007 to the extent it is appropriate to a mutual insurance company .

Gjensidige Forsikring has made major changes to its management model in board of directors who has and exercises responsibility for ensuring that 2007, and it has also issued equity certificates (in accordance with the Pri- the company's corporate governance is in accordance with the current mary Capital Certificate Regulations) for a newly established non-profit -or “Norwegian Code of Practice for Corporate Governance” at any given time ganisation called the “Gjensidige Foundation”. The foundation is required to sell the equity certificates as instructed by Gjensidige Forsikring, and the plan core values and ethical guidelines is to sell these in conjunction with the listing of the certificates on Oslo Børs. The company’s core values have historical roots in the international cooper ative society principles. The operations are still characterised by the key ele An open general meeting has now been established as the company’s ments of these principles, but the organisation and structure of the operations highest governing body in line with any other public limited company. The have been adapted to the generally accepted corporate governance principles structure of other bodies under the general meeting follows the structure in the equity capital market so that the company emerges as democratic in of financial institutions in Norway. relation to the equity certificate holders, and there is a common financial and rational platform for the operations for the company’s stakeholders. The customers of Gjensidige Forsikring (parent company) have certain special rights in the company. They have a right to manage and can receive dividends Gjensidige defines ethics and reputation as a basic prerequisite for its in accordance with the rules determined by the general meeting at any given operations, and the operations shall reflect mutual honesty and respect. time. The rights are gained by virtue of the customers being customers, and they are lost when the customer relationships end. There are thus no deposit Gjensidige’s decisions and actions shall be controlled by norms, values and requirements of any type, and the customer does not assume any liability ethical rules that are in accordance with the general interpretation of the beyond the obligations they have as a customer. The rights as a customer law and the position of Gjensidige as a substantial contributor to society. cannot be assigned or otherwise administered legally, and they cease to exist as soon as the customer relationship ends. Each customer has one vote Gjensidige’s operations are dependent on trust from all quarters. Trust is regardless of the size of the customer relationship, while dividends will be dis- not anything that can be decided on, it must be earned. It is expected that tributed among the customers based on the size of the customer relationship. employees and elected representatives act with care, integrity and respect. All of the activities at Gjensidige shall withstand the light of day. The voting and dividend rights of the equity certificate holders follow the equity certificates, which are freely transferable. They vote for a total of operations 25 per cent of the votes at the general meeting, and the equity certificate The object of the company is established in the articles of the association. holders present at the meeting have one vote per certificate. The primary object is to meet the customers’ need for security by offering competitive insurance products and other services that are naturally as- The customers vote correspondingly always for 75 per cent of the votes at sociated with this. the general meeting. The voting rights of the equity certificate holders are diluted when equity certificates are issued, unless the legislation permits In accordance with the articles of association, the company can own an expansion of the voting rights and it is approved by the general meet- companies that are engaged in activities involving general insurance, life in- ing. The equity certificate holders have better protection of their capital surance, banking, financing and securities; other companies in accordance (Class I capital). The equity capital built up by the customers through gen- with the Act on Financing Activity and Financial Institutions or the Insur- erations (Class II capital) is subject to a greater risk. This is the reason for ance Act; or other companies that are naturally associated with this. the unequal division of the organisational rights. The capital classes have, however, the same dividend rights. This is the basis on which external In accordance with the articles of association, it is the supervisory board capital interests are invited to participate in the growth and development that establishes, and has established, the guidelines for the company's of the company. The customers and the equity certificate holders have a operations, and the board of directors that defines, and has defined, the common financial incentive – through the dividend scheme – to ensure strategy to achieve the company's targets. optimal management of the company. Equity CAPITal and dividends To the right there is an illustration of the management structure. It is the On 30 October 2007 the company decided to reclassify its equity capital Gjensidige annual report 2007 | 43 t his is Delegates elected by customers Delegates elected by customers Equity certiﬁcate holders through the mutual ﬁre insurers through the Owner Committees Around 7 per cent of the votes Around 68 per cent of the votes 25 per cent of the votes oper at ions g jensidi e

GENERAL MEETING Supervisory Board 3/6 elected by the customer Is open Chairman owners SUPERVISORY BOARD 5 elected by the 1/6 elected by the equity 60 persons customer owners certiﬁcate holders 2 elected by the equity 2/6 elected by the employees BOARD OF DIRECTORS 12 persons (4 are employee-elected) certiﬁcate holders Nomination committee

and establish two classes of equity capital, Class I capital (primary capital) Board members and executive management must give notice if they have and Class II capital (other equity capital). any direct or indirect significant interest in an agreement before it is entered into by the company. Normally such agreements will not be accepted, and no Class I capital consists of: such agreements exist to the best knowledge of the board of directors. 1. Nominal value of the equity certificate capital 2. Premium reserve of the Class I-capital Free TRANSFERABILITY 3. Equalisation fund The equity certificates are freely transferable in accordance with the articles 4. Other equity of the Class I-capital of association. The customers’ rights cannot be assigned or otherwise administered legally. They cease to exist when the customer relationship ends. Class II capital consists of: a) Retained earnings of the Class II-capital General Meeting b) Premium reserve of the Class II-capital (name will be changed) The general meeting will be open and available to anyone with voting c) Other equity of the Class II-capital rights and their proxies. The current articles of association stipulate that at least two weeks’ notice of meetings shall be given. An extension of this m a n ag emen t The company’s ownership fraction represents the ratio between Class I period will be proposed at the next general meeting. capital and the sum total of Class I capital and Class II capital based on the most recent audited company accounts approved by the general meeting. The general meeting will be arranged in accordance with the recommendation, and the deadlines for equity certificate holders’ registration and partici- The board of directors bases its annual dividend proposal on the com- pation are based solely on practical considerations for the arrangement of the pany’s need to retain dividends in light of the company’s capital situation general meeting. The equity certificate holders may be represented by proxy. and imminent plans. The dividend that is approved for distribution in accordance with the articles of association between the customers and the The customers are represented by representatives. The representatives are equity certificate holders is in accordance with the ownership fraction. The elected by five so-called owner committees, one for the customers in the internal distribution of what passes to the customers in accordance with Region Øst, Region Innlandet, Region Syd, Region Vestlandet and Region the ownership fraction is distributed between the customers in accord- Nord. Mutual fire insurers represent the customers in their geographic ance with the rules and principles determined by the general meeting. regions. The owner committees are elected in open, democratic elections and over one million customers have voting rights. These elections are The board of directors has formulated a dividend policy. The policy is com- held in the autumn. Participation in the election is low, and the company is mented upon in the board of director's report, together with the board seeking to increase this participation. of director's dividend proposal for 2007. The board of directors does not resul currently have any granted authority to increase the company's capital or The company places emphasis on ensuring that the agenda papers contain purchase the company's own equity capital certificates. enough detail so that a decision can be made on all the matters to be considered. t s Equal Treatment Gjensidige Forsikring has two classes of equity due to the structure of nomination Committee the company. The classes are treated equally financially, but the equity The nomination committee plays a key role at Gjensidige, and it is stipu- certificate holders (Class I) will have priority over the other equity capital lated in the articles of association. The nomination committee chairman (Class II) in the event of liquidation. The organisational rights are currently is the supervisory board chairman and shall be elected by the general distributed evenly proportionate to the share of capital in the company. meeting. The equity certificate holders are guaranteed representation on However, in accordance with the current legislation, the equity certificate the nomination committee, and they are elected by the equity certificate holders’ organisational rights will be diluted in the event of new issues. holders at the general meeting. The other stakeholders in the company The Class II capital is subject to a greater risk, and this is the reason for the represented by the mutual fire insurers and the customers in the five re- unequal division of the organisational rights. gions in Norway each elect their own representative. All the members are independent of the board of directors and the executive management. No 44 | Gjensidige annual report 2007

one can be the supervisory board chairman – and thus the chairman of the placement of Gjensidige’s auditor, which was carried out after an extensive nomination committee – for more than six years. In Gjensidige the nomina- competitive tendering process. tion committee continuously evaluates the external auditor and nominates The board of directors performs an annual self-evaluation and have pre- auditor candidates for election. In Gjensidige’s view the board of directors pared an instruction for the CEO. itself, or the audit committee (members of the board of directors), cannot nominate candidates for the election of an external auditor. In Gjensidige's Risk management and internal control view the board of directors itself, or the audit committee (members of The board of directors is concerned about risk management and internal the board of directors), cannot nominate candidates for the election of an control, and this is included in the board’s planned work. This is described in external auditor. The auditor has a control function in relation to the board greater detail in several other places in this annual report, and reference is of directors and, in the opinion of Gjensidige, the board of directors, or made to these places. Financial institutions are required to have their own part of the board of directors, should therefore not make preparations for elected control committee. The control committee is independent of the or nominate candidates for the election of an external auditor. board of directors and administration and meets regularly. Gjensidige has an elected control committee consisting of three members, and they shall en- SUPERVISORY BOARD AND BOARD OF DIRECTORS sure that the operations throughout the Group are managed in an appropri- – COMPOSITION AND independence ate and satisfactory manner. They shall ensure that the company follows the The supervisory board and board of directors have a diversified composi- current laws, regulations and other rules laid down by the authorities, the tion, and the majority are independent of any special interests (direct, company’s articles of association and resolutions by decision-making bodies. indirect or through employment) in the company. In financial institutions The committee has full access to the operations and meets regularly. the law requires that the board of directors be elected by the supervisory board. The chairman of the board of directors shall be elected by the su- Remuneration of the Board of Directors pervisory board. No member of the day-to-day management is a member Reference is made to a separate note in the accounts. No one on the board of the board of directors. of directors has any special duties for the company, but the members of the board participate, together with other elected representatives in Gjensidige, The company does not have any “principal shareholders”, and the custom- in special working groups appointed by the board of directors to study vari- ers’ organisational rights are distributed across many units that function ous owner questions, including the organisation of ownership and dividends independently of each other. When the equity certificates are listed on the to customers. Remuneration is provided for this in accordance with the stock exchange, the new ownership interests will be given an opportunity principles and rates determined by the supervisory board. The remuneration to elect their own representatives into the management structure. is not performance related, nor do board members own options.

Work of the Board of directors Remuneration of the executive management The work of the board of directors follows a fixed annual plan and is Reference is made to a separate statement in note 21 in the accounts. conducted in accordance with established rules of procedure. The board of directors holds physical meetings regularly and they have agreed in ad- Information and communication vance on 11 meetings each year. Additional meetings are held depending The company has been preparing for a stock exchange listing and the rules of the matters to be considered and the situation. These meetings may be that must be observed for the handling of information internally and in held as telephone meetings. relation to the market for some time. The most important tool for providing information that is identical and relevant is an active website. The The board of directors has established two working committees – a remu- company has established a separate IR function, which has a prominent neration committee and an audit committee. The composition and work position in the central management and a goal of ensuring that the infor- of the committees are organised in accordance with the recommendation mation work is always in accordance with the best practice. with one exception. corporate takeoverS The Norwegian recommendation proposes that the audit committee shall Gjensidige cannot be taken over. The equity certificates follow the rules nominate auditor candidates. As mentioned under the heading “Electoral laid down in the Primary Capital Certificate Regulations and the ownership Committee”, this is wrong in principle in Gjensidige’s view. The auditor restrictions that are stipulated in the regulations. The company has there- must not have such a dependency, and the auditor shall only be liable to fore not prepared any main principles for use in connection with possible the body that has elected the auditor. In Gjensidige it is the supervisory takeover offers. board that elects the auditor – in accordance with the legislation for insurance companies - and it is the nomination committee who nominates Auditor candidates for such elections. Gjensidige has good experience with this. The auditor’s role, work, follow-up and control of the operations are in The nomination committee led the work in connection with the last re- accordance with the recommendation. Gjensidige annual report 2007 | 45 t his is oper at ions g jensidi e

MANAGEMENT MODEL AND INTERNAL AUDITING The premises for operational management are based on the company’s vision and strategy . The company’s overall goals and strategies are used to prepare business plans for the various business areas .

As an integral part of this, risk management processes are implemented External reports are prepared quarterly in line with Norwegian Accounting at every level of the organisation. These are communicated and anchored Standards and regulations issued by the Financial Supervisory Authority of internally. Norway. These reports are approved by the board of directors.

Operational management Internal auditing m a n ag emen t Personal scorecards have been prepared for the company’s employees. The company has its own internal auditing unit. Group Auditing is an These set out key performance indicators, targets and actions that impact independent and objective supervisory function which, on behalf of the on the Group’s earnings and value creation. Budgets, various financial and board of directors and senior management, reviews and assesses whether non-financial measurement criteria, powers of authority and trend analy- adequate, effective and appropriate management and controls have been ses are also used in the management of the Group. A dedicated Internet established and implemented at the company. The unit is also responsible portal has been developed where the company’s management information for investigating any internal irregularities. Group Auditing was set up and has been collected and made available. functions in accordance with international standards and the requirements laid down in the Financial Supervisory Authority of Norway’s Internal The strategic plan is an important premise for the scorecards. Consider- Control Regulations. able importance is attached to the indicators being balanced and covering matters of a financial, operational and organisational nature, including the Group Auditing reports to the board of directors, attends board meetings, individual’s need for skills development. and submits reports on risk management and internal controls. The audit reports are also presented to the audit committee and the external audi- The return on equity is the company’s key profitability measure. Equity and tor. return requirements have been assigned to various parts of the business. Any earnings over and above the company’s required rate of return are a The board of directors approves Group Auditing’s resources and annual resul measure of real value creation. plans. The head of Group Auditing is appointed and dismissed by the board of directors. Reporting t s Internal reports are prepared for the board of directors and management each month.

These reports cover both financial and non-financial measurement criteria, and provide a basis for decisions on actions and responsibilities to ensure that targets are met. This monthly reporting is based on a budget approved by the board of directors.

The chief executive officer holds regular performance review meetings with the managers who report to him, where the focus is on future measures to safeguard results and performance. 46 | Gjensidige annual report 2007

gjensidige’s Board of Directors The board of directors has 12 members, four of whom are elected by and from among the employees . The board's chairman and deputy chairman are elected by the supervisory board . The composition of the board of directors shall be in accordance with the general requirements (expertise, gender and location) stated in the company's articles of association .

Jørgen Tømmerås, Marianne Lie, Cato Litangen, chairman member member

Tømmerås became the chairman of the board in Lie became a member of the board of directors Litangen became a member of the board of Gjensidige in 2002. He has been on the board of Gjensidige in 2007. She was the managing directors of Gjensidige in 2007. Litangen is the of directors since 1999. Tømmerås is a farmer director of the Norwegian Shipowners’ Associa- managing director of Svaberg AS. He was for- and has been employed by the Norwegian tion until 1 February 2008. She also sits on a merly the managing director of the advertising Armed Forces. He has held a number of offices, number of other boards, including Kverneland agency Innoventi Reklamebyrå, a department including the mayor of the municipality of ASA, Green Award, Arendals Fossekompani, manager at UNEP/Grid-Arendal and the manag- Overhalla for 18 years. Tømmerås is the chair- Fortum Corporation, Finland, ISCO Group and ing director of Styrsvigen AS. Litangen is the man of the board of Namdal Bomveiselskap AS, Cosmos Markets ASA, and she is the board board chairman of Svaberg AS and sits on the Aqua Joma AS and Overhalla Klonavlsenter AS, chairman of PunktØ. Arendal Tourist Board. and he sits on the board of Joma Næringspark AS, the Foundation for Salmon and Water Environments and the Norwegian Automobile Tor Øwre, member Randi B. SæteRS- Association (NAF). He is an alternate member hagen, member on the board of Norsk Landbrukssamvirke AS. Tømmerås is the chairman of the supervisory board of Gjensidige Bank ASA and Gjensidige Bank Holding AS.

Jorund Stellberg, Øwre became a member of the board of direc- Sætershagen became a member of the board Deputy chairman tors of Gjensidige in 2003. He has experience of directors of Gjensidige in 2005. She is the from management, sales, system development managing director of Swix Sport AS. Sæter- and programming, and he has been a senior vice hagen has 20 years of experience from various president with IBM. Øwre also sits on the board companies in brand building and sales/market- of Tindtunellen AS. Øwre is a business econo- ing, and she has, for example, been a customer mist with a degree from the Norwegian School representative for Gjensidige since 1999. From of Management (BI) and North Norwegian 1986 to 1990 she was a regional director with Stellberg became the deputy chairman of Management Development (NNL). ELCON Finans (a former subsidiary of Gjensi- Gjensidige’s board of directors in 2006. She has dige), and she has been the marketing director been on the board of directors since 1999. She of Norsk Tipping. Sæterhagen is a business is the board chairman of Nordhordland Revisjon economist (siviløkonom) with a degree from the IKS and a member of the Western Region Norwegian School of Management (BI). Board. Stellberg is a registered public accountant with a degree from the University of Stavanger (formerly Rogaland Regional College). Gjensidige annual report 2007 | 47 t his is oper at ions g jensidi e

Hans Ellef Gunnar Mjåtvedt, Odd Kristian Wettre, member member Hamborg, member

Wettre became a member of the board of direc- Mjåtvedt became an employee representative Hamborg became an employee representative tors of Gjensidige in 2005 as a representative on the board of directors of Gjensidige in 2007. on the board of directors of Gjensidige in 1999. for the Norwegian Farmers’ Union in accordance He became Gjensidige’s senior employee repre- He is a licensed appraiser and has been with with the agreement between the Norwegian sentative in 2007. Mjåtvedt is a former insur- Gjensidige since 1982. He was the leader of the Farmers’ Union and Gjensidige. Wettre is the ance agent and senior consultant, with almost Finance Sector Union of Norway at Gjensidige first deputy chairman of the Norwegian Farm- 20 years of experience from the industry. from 1997 to March 2007 and the senior em- m a n ag emen t ers’ Union. ployee representative at Gjensidige during the same period. Hamborg has studied law at the Marianne Bø University of Oslo and has taken a number of Magne Revheim, Engebretsen, customer relationship management courses at member member the Norwegian School of Management (BI).

Alternate members for Litangen, Stellberg, Sætershagen, Tømmerås and Øwre: 1 Valborg Lippestad, Hobøl Gjensidige Brannkasse 2 Tove Jebens, Northern Region Revheim became a Engebretsen became an employee representa- member of the board of directors of Gjensidige tive on the board of directors of Gjensidige in Alternate members for Engebretsen, Hamborg, in 2004. He has been a lawyer with Secher & 2007. She is the manager of Sikkerhetsbutikken, Mjåtvedt and Aasen: Co, Lind Stabell Horten and DLA Piper Norway Gjensidige’s safety product store, and she is 1 Kjetil Kristensen, Northern Region DA since 1978. Revheim is also the president Gjensidige’s employee representative for the 2 Ingvild Sollie Andersen, Eastern Region of the Norwegian Automobile Association and Finance Sector Union of Norway at Gjensidige. resul board chairman of Sportsklubben Brann. Engebretsen has also worked with marketing Personal alternative member for Revheim: and product development at Gjensidige. She is Odd Samuelsen the deputy chairman of the board of the Nit- t s Petter Aasen, tedal Housing Cooperative. Engebretsen has a Personal alternative member for Wettre: member BA in marketing communication. Harald Milli

At the extraordinary supervisory board meeting of 8 November 2007 Hans-Erik Andersson was elected as a new member and John Ove Ottestad was elected as a new alternative member by the Became an employee representative on the equity certificate holders. This election is valid from the date when the equity certificates are listed board of directors of Gjensidige in 2007. He is a on Oslo Børs. The Norwegian Automobile Association’s member and alternate will step down from licensed claims representative. the central board of directors at the same point in time. 48 | Gjensidige annual report 2007

GJENSIDIGE’S GROUP MANAGEMENT Gjensidige’s senior management consists of 13 persons who have an average of 15 years of industry experience, nine of whom have led the company during the last eight years . During this period Gjensidige has developed into a leading, Nordic insurance company .

Helge L. Baastad, 1999. He also sits on the board of a number of AS, deputy board chairman of Gjensidige Bank AS cheif executive subsidiaries and other companies associated with and a member of the board of Integrasjonspar- officer Gjensidige, including Lindorff Group AB. Lønnum tner AS. Delbekk is a graduate economist and Baastad was appointed has a state-authorised public accountant degree has a Master of Management degree from the as the chief execu- from the Norwegian School of Economics and Norwegian School of Management (BI). tive officer in 2003. Business Administration (NHH) and a public He joined Gjensidige accountant degree from the Norwegian School Jørgen Ringdal, in 1998 as a director of Management (BI), in addition to an executive EXECUTIVE VICE in Gjensidige Forsikring. He has held various MBA from the University of Bristol and Ecole PRESIDENT, GROUP managerial positions in the Group, including being Nationale des Ponts et Chaussées. SUPPORT/GENERAL a executive vice president in Gjensidige Forsikring. SERVICES Baastad has been a member of the senior man- Bjørn Asp, Ringdal was appointed agement since 2001. Before he joined Gjensidige EXECUTIVE VICE as the executive vice he held various positions with Jordan AS from PRESIDENT, pension president for Group 1987 to 1998, and with Denofa og Lilleborg Fab- & savings Support/General Services in 2006. He joined rikker, a unit of Orkla ASA, from 1984 to 1987. Asp was appointed Gjensidige in 1996 and has been a member of Baastad sits on a number of boards, including as the executive vice the senior management since 1996 as the chief the Norwegian Financial Services Association, president for Pension financial officer. Before he joined Gjensidige he Jordan AS and Borg AS. In addition, he is the and Savings in 2005. held various managerial positions, including being board chairman of Gjensidige Bank Holding ASA, He joined Gjensidige in 1982 and has held vari- an assistant chief auditor with Norges Bank from Gjensidige Pensjon og Sparing Holding ASA, Gjen- ous managerial positions in the Group. Asp has 1989 to 1993 and a director with KPMG from sidige Pensjonsforsikring AS and Glitne Invest AS. been a member of the senior management since 1993 to 1996. He is the board chairman of the Baastad is a business economist (siviløkonom) 2001. He sits on the board of Viking Venture, Gjensidige Pension Fund and a member of the with a degree from the Norwegian School of Steinkjer Næringsselskap and Marine Vekst. boards of Glitne Invest AS and Gjensidige Bank Economics and Business Administration. Asp has a business economist degree from Oslo Holding AS. Ringdal is a business economist (siv- Business Academy. iløkonom) and state-authorized public accountant Tor M. Lønnum, with degrees from the Norwegian School of DEPUTY CHIEF Trond Delbekk, Economics and Business Administration. EXECUTIVE OFFICER, EXECUTIVE VICE CHIEF FINANCIAL PRESIDENT, STRATE- Geir Bergskaug, OFFICER GIC MANAGEMENT EXECUTIVE VICE Lønnum was appointed Delbekk was appointed PRESIDENT, as the deputy chief as the executive vice REGION øst executive officer and president for Strategic Bergskaug was ap- chief financial officer in 2004. He joined Gjen- Management in 2006. pointed as the execu- sidige in 1999 and has held various managerial He joined Gjensidige in 1996 and has held vari- tive vice president for positions in the Group, including being a deputy ous managerial positions in the Group. Delbekk the Eastern Region in chief executive officer and director of strategy has been a member of the senior management 2006. He joined Gjensidige in 1999 and has held and business development. Lønnum has been a since 2001. Before he joined Gjensidige, he held various managerial positions in the Group. He member of the senior management since 2001. various managerial positions, including being a has been a member of the senior management Before he joined Gjensidige he held various managing director and director of the bank- since 2004. Before he joined Gjensidige, he was managerial positions, including being the finance ing and insurance departments of Nordea and a project manager with Aftenposten from 1985 director of Skipper Electronics AS from 1991 to Sparebanken NOR, respectively. He is the board to 1987, a director at ABC-bank from 1987 to 1993 and a director with KPMG from 1996 to chairman of Hjelp24 ASA and Fredrikstad Stadion 1990 and a bank manager with Sparebanken Gjensidige annual report 2007 | 49 t his is oper at ions g jensidi e

NOR from 1991 to 1999. Bergskaug is a business member of the senior 1975 to 1986. He sits on the board of Daldata economist (siviløkonom) with a degree from the management since AS. Røste has a degree from Trondheim Univer- Norwegian School of Economics and Business 2006. She has held a sity College (TØH). Administration. He has an MBA from INSEAD number of positions (Fountainebleau) and has completed the Harvard in research, sales and Bjørn Walle, Business School’s General Manager Program. management in the EXECUTIVE VICE Group. She sits on the PRESIDENT, Erica Blakstad, boards of Sintef NBL region sør EXECUTIVE VICE and NorInnova. Toft Karlsen is a lawyer with a Walle joined Gjen- PRESIDENT, GEN- degree in law from the University of Bergen. sidige in 2003 as a ERAL INSURANCE executive vice presi- Blakstad was appointed Petter Bøhler, dent for the Southern as the executive vice EXECUTIVE VICE Region. Before he joined Gjensidige he held vari- president for General ous managerial positions in the public and private PRESIDENT, m a n ag emen t Insurance in 2007. She INTERNATIONAL sectors, including being a county executive in joined Gjensidige in 2004 and has been a mem- GENERAL Vestfold from 1988 to 1993 and a managing ber of the senior management since 2006, when INSURANCE director with Sparebanken NOR/Gjensidige NOR she took over as head of Gjensidige’s corporate Bøhler was appointed Sparebank from 1998 to 2000. He is also the customer activities. She has previously held a as the executive vice board chairman of Larvik Næringsforening and number of managerial positions with Storebrand president for International General Insurance in Bergene-Holm AS, in addition to a member of the and If. Blakstad has a degree in law. 2007. He joined Gjensidige in 1988 and has been boards of Vestfold Hospital and Såkorn Invest a member of the senior management since 2004. SØR. Walle is a business economist (siviløkonom) Nils Arne Fagerli, He has held various managerial positions in the with a degree from the Norwegian School of EXECUTIVE VICE Group. Before he joined Gjensidige he held vari- Economics and Business Administration. PRESIDENT, Corpo- ous managerial positions with Samvirke Forsikring rate Customers/ from 1989 to 1998. He sits on the boards of Ove Ådland, Brokers various group companies and holds key positions EXECUTIVE VICE Fagerli was appointed with the Norwegian Financial Services Associa- PRESIDENT, as the executive vice tion. Bøhler has a cand.mag. degree in statistics region vest president for Corporate from the University of Oslo. Ådland was appointed resul Customers/Brokers in 2007. He joined Gjensidige as the executive vice in 1994 and has been a member of the senior Odd Røste, president for the management since 2007. He has held various EXECUTIVE VICE Western Region in t s managerial positions in the Group. Fagerli is a PRESIDENT, 2003. He joined Gjensidige in 1986 and has graduate engineer with a degree from the Nor- region innlandet been a member of the senior management since wegian Institute of Technology at the University Røste was appointed 2001. He has previous experience as a regional of Trondheim. He has completed the Solstrand as the executive vice director with ELCON Finans (a former subsidiary Programme for Managers. president for the of Gjensidige) from 1986 to 1990 and from 1993 Inland Region in 2003. to 2001. From 1990 to 1993 Ådland was the Hege Toft Karlsen, EXECUTIVE VICE He joined Gjensidige in 1975 and has held various managing director of Vesta Finans. He sits on the PRESIDENT, REGION nord managerial positions in the Group. Røste has board of the Church City Mission in Bergen. Åd- Toft Karlsen was appointed as the executive been a member of the senior management since land has a Master of Management degree from vice president for the Northern Region in 2006. 2001. He was the managing director of Tolga-Os the Norwegian School of Management (BI). She joined Gjensidige in 1988 and has been a Brannkasse, one of the mutual fire insurers, from 50 | Gjensidige annual report 2007

supervisory board, control committee and nomination committee

Supervisory Board Arne Mohn, personal alternate member The supervisory board was expanded from 57 to 60 members at the Margrete Ruud Skjeseth extraordinary general meeting of 30 October 2007. This expansion will Asbjørn Jørstad, personal alternate member apply from the point in time when the equity certificates are listed on Oslo Børs. At the same meeting the general meeting elected the following two Region Syd members and alternate members to represent the equity certificate holders: Terje Borsheim Knut Ringvold, personal alternate member Member Personal alternate member Anlaug Hoen Leif Frode Onarheim Anton Ernst Tronstad Hanne S. Fretheim, personal alternate member Hege Yli Melhus Marte Kvaalen Ivar Kvinlaug Karl Tore Pedersen, personal alternate member As a result of the expansion of the number of members on the supervisory Ingunn Vik board, the employees will have an additional member. Until a new election Tone Standal, personal alternate member is held in the spring of 2008, the candidate who had the most votes after the candidates who were elected as members to the supervisory board in Region Vestlandet the last election and is the first alternative member will become a member. Per Arne Bjørge The other alternative members will move up one position. A new fifth Anne Lise Hessen Følsvik, personal alternate member alternate member will be the candidate who received the most votes after Ernst A. Eik the candidates who were elected as members and alternate members in Tone Marie Ramslie, personal alternate member the last election. Astrid Grimstvedt Anne Beth Enes, personal alternate member Member New fifth personal alternate Ragnhild Skjerveggen Siv Dammyr Mette Lindskog Anne Sofie Hilland, personal alternate member Even Søfteland Customer-elected members on the supervisory board Geir A Haugum, personal alternate member from the election regions: Oddbjørn Svarthumle Region Øst Magny Husetuft Myklebust, personal alternate member Randi Braathe, chairman Trond Andersen Region Nord Rolf Ole Tomter, personal alternate member Gisle Loso Svein-Håkon Bottolfsen Per Martin Haugen, personal alternate member Kim Maarud Høistad, personal alternate member Berit Tiller Eli Molteberg Ensrud, personal alternate member Liv Kjeldstad Sundal, personal alternate member Wenche Celiussen Trine Vekseth Anne Marie Storli, personal alternate member Hans Petter Haukø, personal alternate member Marit Frogner Jon Øverås Sissel Monsvold, personal alternate member Ronald Søbstad, personal alternate member

Region Innlandet Mutual fire insurers Trond Bakke, deputy chairman Svein Mellem, Hobøl Gjensidige Brandkasse Hans Løvehaug, personal alternate member Jan Skaug, Andebu Gjensidige Brannkasse, personal alternate member Clara Eline Faraasen Ola Skålvik, Halsa Gjensidige Brannkasse Tone Merete Lauten Skaar, personal alternate member Lars Muribø, Indre Sunnmøre Gjensidige Branntrygdelag, personal alter- Eva Krageberg nate member Gjensidige annual report 2007 | 51 t his is oper at ions g jensidi e

Gunn Ellen Dybvik, Eidsberg Gjensidige Brannkasse Bjørn Alex Buhs, Sollerud Astrid Myro Rust, Gjensidige Brannkasse, personal alternate member Siv Dammyr, Sollerud Ellen Enger, Region Syd Customer-elected members on the supervisory board from partner Morten Eriksen, Sollerud organisations: Anne Morken Hassel, Søndre gate Norwegian Automobile Association (NAF) Berit Jonassen, Region Vestlandet Jarl E. Jakobsen Harry Helmersen, Region Innlandet Robert Svanemyr, personal alternate member Harald Kilvær, Region Innlandet Kjersti Løge Karl-Erling Nordlund, Region Nord Tore Pettersen, personal alternate member Margrete Rutledal, Region Vestlandet Kåre Offerdal Helen Sandum, Region Øst Astrid Hogseth, personal alternate member Tore Vågsmyr, Region Syd Svein Rasen Roger Warud, Region Syd Knut F. Jenssen, personal alternate member m a n ag emen t Alternate members Norwegian Farmers’ Union 1. Anne Marie Skårnes, Region Syd Knut Hoff 2. Jan Fr. Flock, Region Øst Veronica Andersen, personal alternate member 3. Per-Chr. Fossen, Region Øst Åse Ingebjørg Homme 4. Karianne Raad Wanggaard, Sollerud Arna Høyland, personal alternate member 5. Mette Lindskog, Region Øst Eli Reistad Jon Trøite, personal alternate member CONTROL Committee Liv Julie Wågan Kåre Lund, chairman Birte Usland, personal alternate member Marit Tønsberg, deputy chairman Tove Melgård NITO Erik Prytz Alternate member Odd Brede Gundersen, personal alternate member Snorre Inge Roald

Norwegian Farmers’ and Smallholders’ Union nomination committee resul Anne-Lise Aass Kirsten Indgjerd Værdal, chairman John Petter Løvstad, personal alternate member Knut Sjømæling, personal alternate member Ivar Molteberg, Region Øst t s Confederation of Vocational Unions (YS) Håvard Hynne, personal alternate member Tore Holme Karen Inger Aarnes, Region Innlandet Bjørn Tore Stølen, personal alternate member Tine Hauge Lien, personal alternate member Tore Eugen Kvalheim Anne Cathrine Koren Larsen, Region Syd Wenche Paulsrud, personal alternate member Arild Tomter, personal alternate member Dag Arne Helle, Region Vestlandet Employee-elected members on the supervisory board Anne Lise Hessen Følsvik, personal alternate member Gunnhild Andersen, Region Øst Mette Rostad, Region Nord Jon Aniksdal, Søndre gate Arne Julius Maske, personal alternate member Kari Balke, Region Innlandet Ottar Bergsrønning, Region Nord Grete Bratbakk, Region Nord 52 | Gjensidige annual report 2007

Gjensidige’s equity certificateS Gjensidige's equity certificates give investors an ownership interest in the largest Norwegian- based general insurance company in the market . Equity certificates are a negotiable security with characteristics that are known from shares .

ownership fraction RIGHT TO DIVIDENDS Gjensidige has reclassified 25 per cent of the customer-managed capital In the same manner as shares, the equity certificates entitle the holders as equity certificate capital. This entails that 25 per cent of the company to a proportionate share of the company's profit for the year correspond- is owned by the equity certificate holders, while 75 per cent of the coming to the ownership fraction. The equity certificate holders' share of the pany's capital is controlled by the Norwegian general insurance customers. profit for the year will be distributed as dividends, if they are approved, or allocated to the equity certificate holders' equalisation fund. After the issuance of the equity certificates, Gjensidige has two equity capital classes: The size of the dividend will be proposed by the board of directors and will • Equity capital attributable to the equity certificate holders, Class I be in accordance with Gjensidige's dividend policy. The company's aim is to capital distribute between 50 and 80 per cent of the profit after tax as dividends. • Equity capital attributable to the customer-managed capital, Class II The dividends will be divided between the equity certificate holders and capital the insurance customers in accordance with the ownership fraction.

The ownership ratio between the two groups is referred to as the owner- BETTER PROTECTION OF THE CAPITAL ship fraction. The ownership fraction specifies how much of the capital If Gjensidige realises negative earnings for the year, the loss will be charged is owned by the equity certificate holders, and it represents the ratio primarily to the customer-managed capital. This is because the loss is between Class I capital and the sum total of Class I and Class II capital. distributed proportionately between the two equity capital classes within the three main capital groups. For the purpose of illustration we have The calculation is made based on the most recent audited company ac- used the distribution of the equity capital among the various equity capital counts that are approved by the General Meeting. classes and main capital groups at the time of reclassification as our point of departure (figures in NOK million): EQUITY CAPITAL CLASSES The equity is divided into three main capital groups. The order of priority EQUITY CAPITAL CLASSES for the various capital elements is illustrated below: Customer-managed Equity certificate capital Priority capital EQUITY CAPITAL CLASSES Nominal value of equity Customer-managed certificate capital 3 .860 Equity certificate capital Priority capital Main Premium reserve 0 Premium reserve 0 Nominal value of equity capital certificate capital groups Retained Main Equalisation fund 0 earnings 0 capital Premium reserve Premium reserve Other groups Equalisation fund Retained earnings Other equity equity 11 .580

Other equity Other equity As is illustrated in the figure, in a loss situation the equity certificate hold- The ownership fraction may change over time, due, for example, to the ers will not be charged in this case for any portion of the loss for the year following: unless it exceeds NOK 11,580 million. • Capital increase through the issuance of new equity certificates • Merger with another mutual company An effect of the fact that losses are not distributed between the two • Buyback of equity certificates capital classes in accordance with the ownership fraction is a change in the • Loss for the year ownership fraction.

To counteract this effect the Articles of Association contain provisions allowing the customer-managed capital to rebuild its ownership interest Gjensidige annual report 2007 | 53 t his is oper at ions g jensidi e

through letting all or part of its share of the annual dividends remain in the company, limited to a maximum period of three years. Share-like securities RIGHT TO ATTEND THE GENERAL MEETING The equity certificates have been issued in ac- The equity certificate holders are entitled to attend the General Meet- cordance with the Primary Capital Certificate ing and will control 25 per cent of the votes at the General Meeting at any given time. The individual equity certificate holders vote for their Regulations . The equity certificates have been proportionate share of the 25 per cent of the votes, either by attending structured through provisions in the Articles of themselves or by proxy. The voting share of the equity certificate holders Association so that they have the same characte- will be distributed proportionately between the equity certificate holders ristics as shares to the greatest extent possible as that attend the General Meeting, so that they collectively represent 25 per cent of the votes. permitted by the law .

The equity certificates deviate from shares in a few significant No DILUTION PROBLEMS m a n ag emen t As is the case with traditional primary capital certificates, there will not areas due to the solutions provided in the legislation. be any financial dilution of the owner-managed company capital or of the equity certificate holders when new equity certificate capital is increased • The equity certificate capital has better protection than share or dividends are paid. capital in a loss situation. The order of priority for the write- down of capital entails that any losses will be charged to the In the event of capital increases, the premium will be distributed pro- customer-managed capital and the equity owners' equalisation portionately between the two equity capital classes and not allocated fund first. The loss will be charged on a pro rata basis between exclusively to the equity certificate capital. This means that changes in the these two capital elements, before any other capital elements ownership fraction will reflect the economic realities of the transaction. must be charged. Read more about this under the "Better Protection of the Capital" section. Dividends will be paid to both equity capital classes. This allows us to avoid that one of the equity capital classes (the customer-managed capital) can • The equity certificate holders will have 25 per cent of the "buy" interests in the company at book value by allowing dividends to re- votes at the General Meeting, regardless of their ownership in- main in the company. There is one exception to this rule: In loss situations terest. This means that the equity certificate holders may have the customer-managed capital is charged for a proportionately greater a greater or lesser share of the votes at the General Meeting share of the loss for the year than indicated by its ownership fraction. As than indicated by their ownership interest. resul described above, the Articles of Association permit the customer-managed capital to keep all or part of its dividends in the company for a maximum period of three years to keep the ownership fraction at the same level as t s before the loss for the year. 54 | Gjensidige annual report 2007

SAFEGUARDING Life, health and PROPERTY

Gjensidige has been present in and helped local communities for almost 190 years. We have long had a close relationship with volunteerism in Norway, and our contributions to health and safety will continue. Last year the new endowment fund managed NOK 300 million for charitable causes. Gjensidige will continue its efforts to safeguard life, health and property. this is gjensidige operations management results 55 | 2007 t l repor a nnu a e g jensidi G 56 | GJensidige annual report 2007

REPORT OF THE Board of Directors The year 2007 was a year with a high level of activity and good profitability for Gjensidige. After a successful launch of Gjensidige Bank in January, the Group can now offer its customers a complete range of financial services that include insurance, banking and savings, in addition to health services.

Insurance operations have grown geographically through acquisitions in the target is the fact that the Group will give priority to profitability over market Danish and Swedish markets. The Health division Hjelp24 was strengthened shares. Further development of the loyalty programmes is an important tool further through the acquisition of Norsk Bedriftshelsetjeneste and NIMI in the Group’s efforts to optimise the core operations in Norway. By building (Norsk Idrettsmedisinsk Institutt). The Group achieved a profit before tax of on the loyalty programmes, the depth and breadth of existing customer NOK 3,020.3 million. The combined ratio for the general insurance operations relationships can be expanded. This helps create more satisfied customers was 96.1 per cent and the return on investment was 6.3 per cent for the year. and reduce the loss of commercial, and it supports various measures to sell The Board of Directors proposes that a dividend of NOK 1,021.5 million will banking, pension and savings products to insurance customers. be paid for 2007. Variation and breadth in the distribution channels shall be maintained to sa- OPERATIONS tisfy the preferences of the various customer groups and to handle new sales, Gjensidige Forsikring, hereinafter referred to as Gjensidige, has its head office renewals and cross-sales activities better. The Group has invested significant in Oslo. The object of the company is to meet the customers’ need for secu- resources in the development of technology-based and more efficient distri- rity by offering competitive insurance products and other services that are bution channels, such as telephone-based sales and customer centres, and an naturally related thereto. Gjensidige’s core operations consists of the general integrated Internet portal. Onward new sales activities will to a greater extent insurance business in Norway. The company is the largest Norwegian owned take place through this type of distribution channel. general insurance company operating in the Norwegian, Danish, Swedish and Baltic general insurance markets. In the private market, the Group offers Strengthening the competiveness in the Norwegian general insurance opera- products for motor vehicles, homes, insurances of the person, agriculture and tions is ensured through a continuous focus on cost reductions and efficiency other sectors such as travel and leisure; while in the commercial market, the improvement measures. The efficiency improvement programme that was Group offers products for motor vehicles, property, insurances of the person, implemented in 2006 is part of this focus. liability and marine / transport. Growth in general insurance in the Nordic region and Baltic States shall provide In Norway Gjensidige also offers pension and savings products, as well as cost and income synergies over time that will ensure long-term returns and banking services for private individuals. In addition, health services are of- competitive power through access to new customers and greater risk diversi- fered under the trade name Hjelp24. These services include corporate health fication. Cost synergies will be realised in particular in the areas of reinsu- services, personal security alarms and private hospital services. rance, coordination of the insurance products that are offered, underwriting guidelines, more efficient capital allocation and common ICT solutions. There Strategy are also synergies on the income side. KommuneForsikring’s leading expertise Gjensidige’s principal objective is to be a leading and profitable general insu- in the municipal sector represents, for example, a valuable platform for the rance company in the Norwegian insurance market. The Group’s other focus development of corresponding offers in the other Nordic countries. In addition, areas shall contribute to positive earnings that support the Norwegian general Gjensidige’s expertise in the development of multi-distribution channels will be insurance operations. a competitive advantage that can be exploited in other markets. In addition to organic growth, Gjensidige will also seek growth through acquisition of general Priority has been assigned to offering a broad range of general insurance pro- insurance companies in the relevant markets, provided the transactions satisfy ducts to the customers to develop the core operations further. The Group’s the Group’s long-term required rate of return of 15 per cent before tax. target is an average combined ratio of 97.0 per cent for the general insurance operations in Norway for the four-year period from 2007 to 2010. To achieve The Group’s focus on the more relationship-building product and service this, the insurance risk that Gjensidige assumes and the associated premium areas banking, pension and savings, as well as health services, shall strengt- levels are monitored closely. In addition, a continuous focus is maintained on hen the competitiveness and contribute to development of the Group as a cost reductions and the introduction of efficiency improvement measures customer-centric player. The Group’s substantial customer base represents in line with the introduction of new technology and new service concept a unique opportunity to succeed with profitable growth through the cross- solutions. The combination of the largest market share, long experience and sale of new services to general insurance customers. A diversified product substantial general insurance knowledge helps ensure that the insurance ope- portfolio will allow the Group to capitalise to a greater extent on the value of rations show positive earnings. An important consequence of the earnings its distribution platform. GJensidige annual report 2007 |57

MARKEt shares total this is GJ ENSI D I G E

Per cent 35 31,0 29,8 30 25 20 18,1 15 10,0 10 5 0 Gjensidige If Vesta Sparebank1 operations

A disciplined approach to capital management is based on the fact that the Gjensidige surveys customer satisfaction and loyalty annually in the various Group’s internal risk-based capital model shall ensure that the cost of capital customer segments in Norway. The surveys show that Gjensidige is the insu- is taken into account when making decisions on the allocation of capital. This rance company in the market with the best overall rating by both the private allows Gjensidige to evaluate the relationship between risk in the investment and commercial segments. and insurance operations, respectively, and at the same time ensuring that the pricing of the insurance products reflects the cost of capital and the long- Overall, within the private segment, the level of customer satisfaction and term profitability requirements. customer loyalty to the company have been stable and high in recent years. The surveys also show that the loyalty programme customers have a higher Gjensidige is and shall be a workplace that attracts, develops and challenges degree of satisfaction than the customers that are not part of the loyalty motivated and competent employees and managers. This is achieved through programme. Customers who have agreements through their employers’ orga- a strong focus on management and employee development, the development nisations and affinity groups have in general a high level of satisfaction. of good and fair reward models and a systematic effort to develop skills within the organisation. Customer satisfaction in the commercial segment is very good, and higher in 2007 than the previous two years. The surveys show that customer satisfac- mana To ensure access to capital to finance future growth and development, the tion is highest among the largest customers, and higher among the customers Board of Directors has decided to issue equity certificates through reclassifica- who have a direct relationship with Gjensidige rather than a broker. tion of 25 per cent of the equity as equity capital certificate capital. Gjensidige

plans to list the equity certificates on the Oslo Børs (the Oslo Stock Exchange) in Distribution results g ement 2008. The purpose of issuing listed equity certificates is to give the Group grea- Gjensidige has more than one million customers in Norway. The customers ter freedom of action and opportunities to participate in the structural changes are served through a variety of distribution channels, such as local offices, that affect the financial industry in the Nordic region. A stock exchange listing private and commercial market call centres, and the Internet. To increase the of the equity certificates will give the company an equity instrument that can distribution efficiency, as well as the level of customer service, Gjensidige has be used for possible acquisitions or otherwise as a means of financing the worked on restructuring the distribution channels. The distribution of the company’s strategy of geographical and product growth, in addition to placing roles between the various private market channels has therefore changed. a value on Gjensidige. This has entailed a reduction in the number of local offices, as well as the establishment of sales centres to accommodate new sales. The focus on Also, it has been established an opening for distribution of dividends to the good, efficient sales solutions through the Internet has been maintained. Norwegian insurance customers. After the issuance of the equity certificates in December 2007, the Norwegian general insurance and insurances of the In 2007 gjensidige.no was launched as a complete financial portal for insu- person customers hold 75 per cent of the financial interests in the company. rance, banking, pensions and savings. The customers have access to all their products and services at a single location through “My Page” with a single Market position signon. For insurance products, electronic claims notices have been introdu- Gjensidige was the leading non-marine general insurance player in Norway ced now so that most losses and injuries can be reported electronically. in 2007 with a market share of 31.0 per cent in an overall market of NOK 36,673 million. (Source: Norwegian Financial Services Association, FNH.) New price calculators have also been developed that give the customers Compared with 2006 the Group’s market share declined by 0.2 percentage prices for defined products and an opportunity to purchase the products via points. This change is marked primarily by the controlled downsizing of the Internet. Customers can perform a simple needs assessment themselves. insurances of the person in the commercial market. The market share in the Calculators are available for car insurance, home and contents insurance, commercial segment was 32.7 per cent at the end of the year. In the private travel insurance and holiday home insurance. Customers who have questions segment, which also includes agricultural insurance products, the company or problems during the process can use the “call back” service and request a had a market share of 30.4 per cent. In the agricultural market, our market call from a customer adviser. share was 74.1 per cent in an overall market of NOK 1,082 million. A more detailed description of the market shares for the commercial areas is given A total of 2.35 million users visited gjensidige.no in 2007, an increase of 49 in the commercial description of the respective areas in the annual report. per cent over 2006. Sales through the Internet increased by 17.2 per cent 58 | GJensidige annual report 2007

from 2006 to 2007. Continued strong growth in this distribution channel is acquisitions of the Danish company KommuneForsikring and the Swedish anticipated, and the Internet services will be developed continuously in line company Tennant Insurance Group in January and August, respectively. with the customers’ needs and demands. The Danish operations were coordinated in 2007. In addition, continued efforts In the Danish insurance market distribution in the private market is primarily have been made to achieve additional economies of scale in the Group related to through direct telephone sales and the Internet, while distribution in the com- these international ventures. In August the foreign operations were organised as a mercial market takes place primarily through insurance brokers. In the Swedish separate unit with its own executive vice president responsible for the area. market most of the operations are in the private market and the distribution in this market is through the Internet. Gjensidige has positioned itself for the In spite of the new business areas, the first priority has been to ensure the com- delivery of products adapted to the individual distribution channels in Norway petitiveness of the company’s general insurance operations in Norway. A number and the Nordic region through the acquisition of Tennant. The distribution of measures have been implemented as part of the company’s efficiency im- takes place through strategic partners who sell the products under their own provement programme. The target is to reduce the nominal operating expenses trade name. by NOK 350 million in relation to the cost level in accordance with the generally accepted accounting principles in Norway (NGAAP) at the end of 2005, with full The Baltic market functions differently than the Nordic markets. Distribution effect in the accounts as of 2008. The implementation is developing according takes place through local offices, agents and brokers, and through agre- to plan, and it is expected that the target will be reached on schedule. ements with petrol stations for the sale of motor vehicle insurance. As part of the efficiency improvement programme, the number of employees YEAR 2007 in the general insurance operations in Norway was reduced from 2,242 at Important events the end of 2006 to 2,033 at the end of 2007, which is a reduction of around The focus in pension and savings is managed through the two operative 9 per cent. In addition to the restructuring of the distribution, cost-reducing companies Gjensidige Pensjonsforsikring and Gjensidige Investeringsrådgivning. measures have been carried out in the product and settlement areas, ICT, and Gjensidige Pensjonsforsikring obtained a life insurance company licence at the other staff and support functions. end of 2005 and completed its first full year of operations in 2006. Last year the company reinforced its position as a solid player in its market. The company Changes in the regulatory framework has over 22,000 customers, and it entered into around 3,700 new group New regulations that allow the free transfer of insurance policies at any time contracts and 6,600 new individual contracts. during the year took full effect in 2007. The insurance industry expected a significant increase in the number of customers wanting to change their The savings operations also experienced a good year in 2007. Gjensidige insurance company. The competition is working, and there are many transfers Investeringsrådgivning is an independent adviser and does not offer its own in general between the companies. Gjensidige has only noted small changes in funds. The company’s range of products consists of fund-in-fund solutions that the loss of commercial as a result of this change. include the best funds. At the end of the year Gjensidige Pensjon og Sparing had NOK 1,187 million in funds under management, divided between comments ON THE ANNUAL ACCOUNTS NOK 574 million in pension funds and NOK 613 million in savings funds. Up until the financial year 2006 Gjensidige reported consolidated financial information in accordance with the Norwegian accounting standards (NGAAP). Gjensidige Bank started its operations in January 2007. The bank offers As a result of the planned stock exchange listing, the consolidated accounts Internet-based banking services to private customers in Norway, and it has will be reported in accordance with the International Financial Accounting been well received by the market. During its first year of operations the bank Standards (IFRS) from 2007 onwards. acquired a total of 22,244 customers or registered “customer applications”. The transition to IFRS is described in a separate document, the Transition Gjensidige’s goal is to grow in the general insurance sector in the Nordic Document, which is available from the company’s website, Gjensidige.no. The region and Baltic States. The geographic expansion started in 2006 through general guidelines from the Transition Document have also been included in the acquisition of Fair Forsikring in Denmark and the Parekss Insurance Group Note 35 to the accounts. Comparison figures have been prepared for 2006 in in the Baltic States. The Nordic expansion continued in 2007 through the accordance with IFRS. GJensidige annual report 2007 | 59

profit before tax this is GJ ENSI D I G E

NOK million 5000

4000

3000

2000

1000

0 2007 2006

Gain on selloff of shares in DnB NOR operations

The most important effects of the transition to IFRS are an increase in the eq- performance in the various segments is described in greater detail under the uity as a result of a change in the valuation principles for investment property, commercial areas later on in this report. as well as a change in the classification of the security provisions, guarantee fund, natural perils fund, etc. A change in the principles for the calculation of Claims pension liabilities, as well as the effect of deferred tax on the changes, reduces Claims, net of reinsurance, amounted to NOK 11,695.8 million, an increase the equity. As of 31 December 2006 the overall effect of the transition from of 16.8 per cent compared with 2006. The loss ratio increased by 2.7 per NGAAP to IFRS was a net increase of 3,576.4 million in equity. centage points compared with 2006 and ended up at 78.6 per cent. The increase in the claim costs is attributed primarily to the consolidation of acqui- In accordance with the requirements of the Norwegian accounting legislation, red operations and also an increase in the average claim cost, particularly for the Board of Directors confirms that the prerequisites have been met for property and motor vehicle insurance. preparation of the accounts under the assumption that the company will continue as a going concern and that the annual accounts have been prepared Claims levels were in general satisfactory in most sectors. The increase in the under this assumption. number of people with disabilities still gives cause for concern and contributes to weaker results for insurance that covers sickness and disability than other mana Results insurance sectors. Gjensidige’s market share in this area fell in 2006 and 2007. Gjensidige Forsikring reported a consolidated underwriting result for the general insurance operations of NOK 552.6 million in 2007, compared with NOK There have been fewer medium-sized and large losses than would normally

668.9 million in 2006. The Group’s profit after tax was NOK 2,479.0 million, be expected in the private insurance segment. There have, however, results been a g ement compared with NOK 4,091.9 million in 2006, which included a non-recurring somewhat greater number of major losses in the commercial market in 2007, gain of NOK 1,285 million related to the sale of shares in DnB NOR. The profit compared with 2006. This applies in particular to the first half of the year, for the year corresponds to a return on equity before tax of 15.4 per cent. when claim costs of around NOK 120 million were charged to the accounts in The corresponding figure for 2006 was 24.2 per cent. connection with the loss of the Bourbon Dolphin off the coast of Shetland in April and around NOK 80 million was charged in connection with a major fire The combined ratio (claims and operating expenses relative to premiums) was in Oslo in February. 96.1 per cent, compared with 94.8 per cent in 2006. The Group reported only small gains / losses for previous insurance years. In The strong results are attributed both to good underlying insurance results 2007 there was a net liquidation gain of NOK 51.8 million, 0.3 per cent of the and high returns on the Group’s investment activities in spite of the turbulent premiums earned, net of reinsurance. financial markets in the second half of 2007. In 2006 and 2007 an effort has been made to develop the settlement pro- Premiums cesses further. The goal is to improve the level of customer satisfaction and The gross premiums were NOK 15,726.5 million. The increase of 14.1 per cent reduce the company’s total claims payments at the same time. This will be compared with 2006 makes the Group one of the Nordic region’s fastest achieved, for example, by contacting customers more quickly after a loss or growing insurance companies. The increase is attributed primarily to the injury has occurred, while reducing the processing time significantly through consolidation of the Danish company KommuneForsikring from January 2007 improved internal processes. From 2007 most claims can be reported by and the Swedish company Tennant from August 2007. In addition, the gene- electronic claims notice forms. ral insurance operations in Gjensidige Baltic (formerly Parekss) were not consolidated until September 2006, while Fair Forsikring was consolidated from Operating expenses March 2006. Overall the foreign companies contributed to gross premiums of Insurance-related operating expenses in relation to the premiums earned, net NOK 2,243.0 million in 2007, compared with NOK 354.7 million in 2006. of reinsurance (the cost ratio) was 17.5 per cent in 2007, compared with 18.9 per cent for the previous year. Premium income, net of reinsurance, amounted to NOK 14,875.9 million, compared with NOK 13,193.2 million in 2006, an increase of 12.8 per cent. The insurance-related operating expenses amounted to NOK 2,684.3 million, The growth in volume was good, particularly in motor vehicle insurance. The compared with NOK 2,561.6 million in 2006, an increase of 4.8 per cent. 60 | GJensidige annual report 2007

net income from financial assets

NOK million 5000

4000

3000

2000

1000

0 2007 2006

Gain on selloff of shares in DnB NOR

This cost increase is low in connection with premium income growth, net of Equities yielded a return of 14.5 per cent in 2007 (excluding the return on reinsurance, of almost 13 per cent, due, among other factors, to the consoli- the company’s ownership interest in Storebrand), bonds yielded 3.6 per cent dation of new operations in Denmark, the Baltic States and Sweden in 2006 (excluding hold-to-maturity bonds), money market funds yielded 4.7 per cent, and 2007. The operating expenses in 2006 included accounting provisions of and real estate yielded 10.3 per cent. Hold-to-maturity bonds yielded a return NOK 213.6 million to cover bonus payments to all the employees and reor- of 4.0 per cent in 2007. ganisation in connection with the efficiency improvement programme in the Norwegian general insurance operations. The operating expenses for 2006 Other income and expenses were reduced at the same time through the recognition of NOK 183.3 million Pensions, savings and banking are still in a start-up phase. The pension and in income (non-recurring effect) due to a plan change implemented by the savings operations reported negative earnings before tax of NOK 123.0 company in the defined benefit pension scheme. Both of these non-recurring million (compared with negative earnings before tax of NOK 116.9 million effects must be taken into account when the operating expenses for 2007 in 2006), while the corresponding figure for the banking operations was are compared with the corresponding figures for 2006. negative earnings of NOK 115.8 million.

In 2007 the parent company focused on implementing cost-reducing measu- Taxes res in the efficiency improvement programme. At the end of 2007 Gjensidige The tax charge amonuted to NOK 541.3 million, compared with NOK 138.7 Forsikring BA’s nominal costs were reduced by NOK 351 million, compared million in 2006. This represents effective tax rates of 17.9 percent and 3.3 per with the cost level in 2006. This exceeds the original target. cent, respectively.

No research and development expenses have been charged to Gjensidige’s Gjensidige has a tax exemption for income and assets attributable to fire and consolidated accounts in 2007. No such expenses were capitalised during the livestock insurance. The company has applied the Financial Supervisory Autho- financial year either. rity of Norway’s sector categories for combined insurance for the calculation of the tax exemption. The Central Taxation Office for Large-Sized Enterprises Net income and costs from financial assets contests the company’s division between taxable and tax-exempt operations Net financial income amounted to NOK 2,820.3 million, compared with and has given notice of a change in the assessment for the years 2004 to NOK 3,711.1 million in the previous year. The net financial income for 2006 2006. Gjensidige contests this claim, but it has decided to make ongoing includes a realised gain of NOK 1,285 million related to the selloff of shares provisions to cover any increased tax charge from the point of time when the in DnB NOR. authorities notified the company about its new opinion. The accounting provisions amounts to NOK 180 million and cover the years 2006 and 2007. The return on assets was 6.3 per cent. The return on assets is calculated as the net financial income as a percentage of the financial assets (excluding Gjensidige expects that the average effective tax rate will be between 16 and funds managed by Gjensidige Bank and Gjensidige Pensjon og Sparing). The 18 per cent going forward. corresponding figure for 2006 was 9.2 per cent (including the gain realised on the investment in DnB NOR). Excluding the gain on the sale of shares in DnB Balance sheet and capital base NOR, the return on assets for 2006 was 6.2 per cent. At the end of 2007 the Group’s balance sheet amounted to NOK 58,120.3 million, compared with NOK 47,112.7 million in 2006. The growth is attribu- The financial income is marked by the turbulent financial markets in the ted primarily to the acquisition of the Danish company KommuneForsikring second half of the year. The return on investment was satisfactory in spite of and the Swedish company Tennant Insurance Group. this. At the end of 2007, 14.7 per cent of the capital was invested in shares. A total of 25.5 per cent is invested in the money market, 37.0 per cent in bonds, Gjensidige’s equity amounted to NOK 20,302.5 million as of 31 December 15.5 per cent in real estate, and 7.3 per cent in hedge funds and other finan- 2007, compared with NOK 19,017.3 million at the end of the previous year. cial assets. Exposure to the equity markets was reduced gradually throughout This represents an increase of 6.8 per cent. the year. The Group has no direct exposure to investments associated with the subprime home loan market in the USA. There are, however, some small The Group’s capital ratio was 26.1 per cent at the end of 2007, compared investments through funds of hedge funds. with 41.6 per cent at the end of 2006. The statutory requirement is 8 per GJensidige annual report 2007 | 61 this is GJ ENSI D I G E operations cent. The company has an A rating from Standard and Poor’s. before. There has been increasing claims inflation and consequently higher average claims due, among other factors, to higher repair prices. Premium The Board of Directors considers the Group’s capital position and financial measures and other measures have therefore been implemented to ensure strength to be excellent. satisfactory profitability.

Off-balance sheet obligations and derivatives The cost ratio was 18.7 per cent, which is a reduction of 2.4 percentage points As part of the Group’s investment operations, an agreement has been compared with last year. This improvement is attributed to both higher premi- entered into relating to the investment of a maximum of NOK 1,222 million ums and reduced costs. The efficiency enhancement programme will yield cost in various private equity investments beyond the amounts recorded on the savings in both the private segment distribution and staff / support areas. The balance sheet. changes will not be in full effect until 2008, and the new service concepts are expected to strengthen the Group’s sales power at the same time. To increase the efficiency of the asset allocation and risk management, the Group enters into financial derivative contracts on a regular basis. These The combined ratio for 2007 was 93.0 per cent, compared with 86.6 in 2006. contracts are described in greater detail in the notes to the accounts. The segment had an underwriting result of NOK 528.2 million, compared with mana NOK 958.0 million in 2006. Cash flow Net cash flow from operational activities was NOK 3,045.7 million in 2007, General insurance – commercial Norway

compared with NOK 1,828.6 million in 2006. The net cash flow from opera- Gjensidige is a key player in the commercial market with high market results shares, g ement tional activities consists primarily of receipts in the form of premium income particularly for insurances of the person. Liability insurance, property and consideration for the sale of investment assets and payments in the form insurance, insurances of the person (including occupational injury insurance) of claim settlement costs, purchase of reinsurance, administrative expenses and motor insurance, as well as marine / transport insurance, are offered. and taxes. The customer-oriented activities for small and medium-sized enterprises are organised into five geographic regions, while large and brokered customers Net cash flow from investment activities was negative NOK 2,025.1 million in are served by a separate unit, Corporate Clients and brokerage. 2007, compared with negative NOK 539.4 million in 2006. Premium income, net of reinsurance, amounted to NOK 5,072.7 million in 2007, Net cash flow from financing activities was NOK 663.4 million in 2007, com- a reduction of 8.2 per cent from the previous year. The reduction in premium pared with negative NOK 1,724.6 million in 2006. The repayment of a loan in volume is due primarily to two factors. One factor is a reduction in the portfolio the subsidiary Oslo Areal affected the net cash flow in 2006. with a lower percentage of insurances of the person for the commercial market due to increased competition and a planned reduction of the exposure. Secon- Commercial AREAS dly, the Norwegian municipal portfolio has been transferred to KommuneFor- General insurance – private Norway sikring through an internal reinsurance agreement, which reduces premiums The Norwegian general insurance operations are managed through the parent earned, net of reinsurance, for the segment by NOK 280.0 million in 2007. company Gjensidige Forsikring BA. The customer-oriented operations are or ganised into five geographic regions, in addition to Internet sales. The private The loss ratio for the segment was 85.2 in 2007, compared with 90.7 in 2006. segment encompasses primarily insurance related to property and leisure, Some of this positive claims development can be explained by the reduction motor vehicles, insurances of the person and agriculture. of the exposure to insurances of the person within the segment. This makes a positive contribution to the claims development. There have been a greater Premium income, net of reinsurance, amounted to NOK 7,729.8 million in number of major losses in the segment in 2007, compared with 2006. Claim 2007, an increase of 5.4 percentage points over the previous year. This is a costs of around 200 million have been charged to the accounts in connection very satisfactory development in a market characterised by low growth and with the loss of the Bourbon Dolphin and a major fire in Oslo. The amount strong competition between the players. The greatest growth in premiums of the average motor vehicle insurance claim, amoung other, has increased. was for motor vehicle insurance. The loss ratio for the segment was 74.3, Premium increases have therefore been implemented to ensure satisfactory compared with 65.5 in 2006. The claim frequency is at the same level as profitability in the future. 62 | GJensidige annual report 2007

The cost ratio was 13.4 for 2007, which is a reduction of 0.1 percentage ded. The cost ratio is marked by extraordinary expenses related to coordina- points compared with the previous year. The ongoing efficiency improvement tion of the Danish operations. NOK 19 million in extraordinary impairment programme will provide further cost savings in 2008. in the private segment has also been charged to the accounts. Efficiency enhancement efforts in Denmark were initiated, with a special focus on Fair The combined ratio for 2007 was 98.6 per cent, compared with 104.2 in Forsikring. Restructuring and the introduction of a new operating model 2006. The segment had an underwriting result of NOK 61.5 million, compa- for the private segment is expected to give cost savings and increased sales red with a negative underwriting result of NOK 234.4 million in 2006. efficiency.

General insurance – other Nordic The combined ratio for 2007 was 103.1 per cent, compared with 120.6 per Gjensidige has two subsidiaries in Denmark: KommuneForsikring and Fair cent in 2006. The segment had a negative underwriting result of NOK 52.3 Forsikring. The companies were consolidated in January 2007 and April 2006, million, compared with a negative underwriting result of NOK 52.9 million in respectively. The Danish companies are organised as a separate group with 2006. common management. Both companies operate in the general insurance segment. The Gjensidige logo was implemented in the Danish market from 2008. General insurance – the Baltic Gjensidige engages in the general insurance commercial in the Baltic States Gjensidige offers general insurance to the private market in Denmark through the subsidiary Gjensidige Baltic (formerly Parekss Insurance Com- under the trade name Fair. KommuneForsikring is the market leader in the pany). Gjensidige Baltic offers private and commercial insurance, and it has Danish municipal market and also focuses on the commercial segment. The operations in Latvia, Lithuania and Estonia. The head office is located in Riga, Norwegian municipal portfolio was transferred to KommuneForsikring in Latvia, while the operations in Lithuania and Estonia are managed through 2007 through reinsurance, and KommuneForsikring will be underwriting the branches of Gjensidige Baltic. The company was acquired in September 2006. portfolio from 2008. The premium income, net of reinsurance amounted to NOK 360.2 million in From 1 August 2007 the Swedish general insurance company Tennant 2007, a strong increase from NOK 66.5 million in 2006. This increase is prima- Insurance Group has also been included in the Group’s accounts. Tennant is rily due to the fact that the figures for 2006 only include the fourth quarter. a relatively small, but fast growing general insurance company with offices There has also been very good price and volume development in 2007. The in Stockholm and Oslo. Tennant sells insurance to the private market via the Baltic insurance market shows strong growth. Inflation in these countries is Internet and partners. The company also has a small commercial portfolio. high, and the company focuses continuously on what the right premium level is in relation to the claim costs. Premium income, net of reinsurance, amounted to NOK 1,685.3 million in 2007, an increase of 257.4 million over the previous year. This increase is primarily due The loss ratio for the segment was 63.7 in 2007, compared with 68.1 in 2006. to the fact that KommuneForsikring and Tennant are included in the consolidated accounts from January and August 2007, respectfully. In addition, the The cost ratio was 31.6 for 2007, which is an improvement of 3.7 percentage Norwegian municipal portfolio was transferred to KommuneForsikring in 2007 points compared with the previous year. Compared with competitors in the through reinsurance, which increased the premium income, net of reinsurance, Baltic States, Gjensidige Baltic has a low cost ratio. for the segment by NOK 280.0 million in 2007. The development of the premiums in the Danish operations has been in accordance with the expectations. The combined ratio for 2007 was 95.4 per cent, compared with 102.8 per cent in 2006. The segment had an underwriting result of NOK 15.2 million, The loss ratio for the segment was 81.7 in 2007, compared with 56.1 in compared with a negative underwriting result of NOK 1.9 million in 2006. 2006. The loss ratio is marked by a greater than usual number of major property losses in KommuneForsikring. The claim frequency is as expected, but Pension and savings the amount of the average claim increased in the private segment. Gjensidige’s operations in the pension and savings business is organised with Gjensidige Pensjon og Sparing Holding AS (GPS) as the holding company for The cost ratio was 21.4 for 2007, which is a reduction of 43.1 percentage Gjensidige Pensjonsforsikring AS (GPF) and Gjensidige Investeringsrådgiv- points compared with the previous year when only Fair Forsikring was inclu- ning ASA (GIR). The companies started their operations in 2006. GPF offers GJensidige annual report 2007 | 63 this is GJ ENSI D I G E operations individual and group pension products with a focus on defined contribution The bank will focus strongly on marketing in the time to come to ensure pensions. GIR has established a broad range of savings products, and the stable customer growth. A number of the bank’s products are included in Vekter Funds make up the core. The company’s concept is to be an inde- Gjensidige Forsikring’s loyalty programmes. pendent adviser. This means that the company does not have its own funds and enters instead into agreements with fund providers that the company Operating expenses amounted to NOK 126.5 million in 2007. This develop- believes can deliver a high return over time. ment is in accordance with the expectations. Losses on loans / guarantees of NOK 6.7 million are a general group impairment. Funds under management increased by almost 400 per cent in 2007 to NOK 1,187 million. Gross premiums in GPF in 2007 amounted to NOK 496.4 mil- The loss before tax for the year was NOK 115.8 million. The operations are in lion, compared with NOK 107.7 million in 2006. In August the “Fund Pension” a start-up phase and as a consequence losses have been budgeted during this product for the transfer of former IPA fund savings was introduced. Premi- phase. The capital ratio at the end of 2007 was 20.8 per cent. ums in force at the end of 2007 can be broken down into NOK 342 million for group pensions and NOK 6 million for individual pensions. Other operations / Hjelp24 Other operations consist of income and expenses beyond the Group’s mana GPS had about 22,000 customers at the end of 2007, 81.6 per cent of which financial and insurance-related investments, and the health division Hjelp24 are also general insurance customers. represents the most important contribution here.

Total expenses amounted to NOK 141.0 million in 2007, NOK 84.9 million Hjelp24, which is the leading corporate health service company in Norway, results g ement of which were insurance-related expenses. The cost development was as reported operating income of NOK 335.5 million and an EBITA of NOK 26.4 expected. million in 2007. Growth in sales was 26.2 per cent compared with 2006.

The loss before tax amounted to NOK 123.0 million for 2007. The operations Bedriftshelse Norge AS was also incorporated into the consolidated accounts are in a development phase and the profit performance is as expected. from the third quarter of 2007. In November the private hospital Norsk Idrettsmedisinsk Institutt (NIMI) was acquired. Hjelp24 reinforced accordingly Banking its position as the most complete private health service provider, and it has Gjensidige Bank was launched on 2 January 2007. The company’s head office acquired substantial expertise in muscle and skeletal diseases, among other is located in Førde, and it has entered into a long-term strategic cooperation things. NIMI was consolidated with effect from November 2007. with Sparebanken Sogn og Fjordane. Gjensidige Bank is a full service bank for private customers, and the bank’s distribution is through the Internet with RISK FACTORS telephone support. Risks are managed by various parts and levels of the organisation. The Group has a moderate risk profile, and, in the opinion of the Board of Directors, no In the initial phase the bank was marketed to organisation customers, before single event could seriously damage the company’s financial position. the broad national launch in May. At the end of 2007 the bank had around 22,200 customers or registered applications. Strategic risks The company’s strategy is regularly reviewed in the light of its results and Net interest and credit commission income amounted to NOK 11.3 million for changes in the market, competition and legislation. There is a particular 2007. Net interest measured against the average total assets was 0.71 per cent. focus on factors identified as critical to the company achieving its goals. Strategic risks are managed through continuous surveillance of competitors The bank is experiencing a steady increase in lending, and gross lending total- and markets, product development and planning processes to ensure that led NOK 3,381.4 million at the end of 2007. The lending consists primarily of the company is at the forefront of developments in general insurance. loans with adjustable rates. The bank lends only to private customers. The bank’s deposits amounted to NOK 1,701.1 million at the end of 2007. The Gjensidige can look back on years of good profitability and considerable bank is experiencing good growth in deposits, and the deposit-to-loan ratio growth. In the market Gjensidige is challenged both by traditional Norwegian was 50.3 per cent at the end of the year. financial institutions that focus to an increasing extent on general insurance, 64 | GJensidige annual report 2007

and by new players. Loss of business combined with weaker underwriting re- The strategic asset allocation and dynamic risk management model adopted sults will impact negatively on the company’s return on equity and other key by the Board of Directors establishes a framework that facilitate rapid adjus- figures. In this situation there is a risk of the company not adapting quickly tment to changes in macroeconomic assumptions, while ensuring compliance enough to the consumers’ demands to be served through new channels, or with statutory requirements. not making effective use of modern technology and support systems. An ongoing effort is therefore being made to develop new and customised pro- Exposure to price, interest rate and exchange rate risks is monitored partly ducts and service concepts, at the same time as processes and value chains through stress tests to ensure that the company’s buffer capital is always are being reviewed and standardised to cut costs and increase efficiency. sufficient to withstand simultaneous sharp falls in equity and bond prices. Reference is made to note 3 in the annual accounts for further information Customers are increasingly demanding more expertise on the part of the on the interest rate risk and stress tests. company’s employees. There is a risk of insufficient or outdated expertise reducing the company’s chances of realising its commercial and strategic aims. Directives have been defined for necessary access to liquid funds. These In addition, a tight labour market entails sharpened competition to attract are taken into account in the strategic asset allocation. The liquidity risk is and hold on to capable employees. The company is therefore working actively believed to be very low. on skills development at every level of the organisation. The skills required by different roles are defined, and personal scorecards have been introduced for The Group is also exposed to credit risks through investments in the bond the company’s employees. New performance-based reward schemes have and money markets and through its lending activities. The Board of Directors been introduced for certain employee groups, and they will gradually be intro- has set limits for credit activities. Credit losses have been immaterial to date. duced to other parts of the organisation. A focused effort is being made in the area of management development and the establishment of requirements Claims outstanding against the company’s reinsurers can represent a substantial and expectations for managers and employees at Gjensidige. credit risk. Counterparty risk in the reinsurance market is assessed regularly. The company’s reinsurers must have a minimum rating of A from Standard & Poor’s Insurance risks or an equivalent rating from another well reputed rating agency. The Board Insurance risks associated with major individual losses or events are managed of Directors has considered the risk of losses on loans, guarantees and other through the ordinary commercial’s powers and reporting lines. Clear guideli- receivables, and the appropriate provisions have been made in the accounts. nes have been established for which insurances that may be underwritten. Operational risks Each year the Board of Directors sets out the limits for the Group’s reinsur- Operational risks are the risks of losses due to weaknesses or errors in pro- ance programme. The limits are determined on the basis of the need to cesses and systems, errors made by employees, or external events. To reduce protect equity against losses beyond a level that can be deemed acceptable, this risk, importance has been attached to organising the commercial on the and the need to limit fluctuations in earnings. Insurance risks are deemed to basis of well-defined and clear reporting lines and responsibilities. Set proce- be moderate with the reinsurance cover the Group has in place. dures have been established for risk assessment, and the Board of Directors assesses the status of the established internal controls each year. Financial risks Gjensidige has financial investments worth around NOK 47 billion. These con- Ethical issues are discussed by management groups and at employee me- sist primarily of interest-bearing investments, property, equities and strategic etings. This is expected to reduce the risk of non-compliance with procedures holdings in subsidiaries and associated companies, and they are exposed to and guidelines, and also to help create a good working environment. changes in economic factors. The company’s internal auditing unit is responsible for the role of reviewing After several years of good, stable growth globally, the situation is now mar- and assessing whether risk management and the internal controls are functio- ked by a great deal of uncertainty, declining growth and turbulent financial ning as intended on behalf of the Board of Directors. markets. The equity markets have therefore fallen significantly in the last part of 2007 and the start of 2008. Norway is one of the countries that has For further information on the company’s risk management activities, reference benefited the most from strong international growth. is made to the Risk and Capital Management section of the annual report. GJensidige annual report 2007 | 65 this is GJ ENSI D I G E operations good corporate governance The Board of Directors is not aware of any products containing PCBs in Good corporate governance is a priority for the Board of Directors. In connec- Gjensidige’s buildings and real estate. tion with the issuance of equity capital certificates and preparations for the planned stock exchange listing in 2008, the company significantly restruc- With regard to the company’s environmental work and measures, reference is tured its management model last year. An extensive effort has been made made to a separate description in the annual report. to adapt Gjensidige’s management model and articles of association to the new situation with new owners and transparency requirements. The Board of HUMAN RESOURCES Directors has decided to base its efforts on the Norwegian recommendation Demographics and equal opportunities for corporate governance dated 4 December 2007, and it has observed the The Gjensidige Group had a total of 3,460 employees at the end of 2007. In recommendation in all areas whenever possible. A great deal of importance the Norwegian general insurance operations the number of employees was has been made to ensure equal financially treatment of the two owner reduced by 9 per cent from the end of 2006 to 2,033 employees as of 31 groups: Norwegian general insurance customers and equity certificate hol- December 2007. The change is otherwise attributed to the acquisition of new ders. Appropriate mechanisms for the protection of minority interests have companies in Norway, Denmark and Sweden. been incorporated. The equity certificate holders have better protection for mana the capital they have contributed than the retained earnings in the company. Gender distribution in Gjensidige Forsikring is 50.27 per cent men and 49.73 per cent women. The percentage of men increased somewhat compared with The company’s observance of the Norwegian recommendation is described in 2006. In 2007, 199 new employees were recruited (not including employees

greater detail in a separate section of the annual report. in acquired commerciales). Among the new employees, 98 were men results and g ement 101 were women, with an average age of 33.3. During the same period, 400 CORPORATE SOCIAL RESPONSIBILITY employees (213 women and 187 men) left the company, which gives a staff Gjensidige’s corporate social responsibility affects the management and turnover rate of 19.6 per cent. governance of the Group, people and skills, administration, operations and commercial development. The company shall be distinguished by high ethical Staff level Gjensidige Gjensidige Group standards. 2007 2,033 3,460 2006 2,242 3,497 The company’s corporate social responsibility is based on the fundamental 2005 2,272 2,611 idea for the creation of the company, to provide financial security and protec- 2004 2,261 2,451 tion for the company’s customers. The average age of employees is 45.7 (45.9 in 2006), and the average senio- A description of the company’s social and environmental contribution to rity is 13.8 years (12.8 in 2006). society can be found in a separate section of the annual report. Cooperation with the employees and the Finance Sector Union of Norway has been environment good. The Cooperation and Working Environment Committee convened regularly. The Group’s activities result in minimal pollution of the environment. The The Board of Directors considers the working environment to be very good. Group’s environmental work focuses on energy efficiency, reducing travel through increased use of videoconferencing, standardised printers and copi- The company’s aim is to increase the percentage of female managers in the ers that print on both sides of the paper, and responsible waste management. highest management groups. Several women at Gjensidige have therefore To reduce the consumption of paper an effort is also being made to increase participated in Futura, which is the financial industry’s own management the share of customers who use electronic insurance documents. development programme for senior female managers. Gjensidige has made an effort to acquire knowledge of climate change and Out of a total of 13 group management members, two are women, and the consequences it may entail. The company has employed its own climate this corresponds to 15 per cent. The proportion of women on the Board of researcher, and Gjensidige has a goal of being climate neutral in Norway by the Directors remains unchanged compared with last year, and five out of 12 end of 2008. members are women. Out of a total of 207 middle managers, over 35.2 per cent are women. 66 | GJensidige annual report 2007

Diversity individuals have participated in more than one course. In average around NOK Based on acknowledgement of the fact that Gjensidige’s employees primarily 9,300 was used for skills development measures for each individual employee. have an ethnic Norwegian background, the company requires greater diversity. This has resulted initially in four specific actions: There has been a high level of course activity with a total of 2,485 course • Reestablishment of the organisation’s equal opportunity committee. The days. In addition, there are e-learning courses. A total of 46 courses have committee has changed its name to the Equal Opportunities and Inclusive been established, and they have been used for a total of 14,000 hours. Workforce Committee. • Initiation of the project “Culture-Ethnicity-Insurance: From myths and opi- Management nions to knowledge and facts”, where knowledge of diversity and an in- Good management is an important prerequisite for being able to realise the clusive workforce shall help focus on the value of diversity in Gjensidige’s company’s goals and strategies. Gjensidige has therefore gathered all the organisation to reflect the society and customers. Group’s managers together at several gatherings in 2007. The gatherings are • Gjensidige has changed the introductory text in its job advertisements. based on a newly developed management programme, the object of which This text now describes the diversity the company seeks to achieve: “As an is to enable the managers to motivate for and contribute to ongoing growth Inclusive Working Life company we seek to recruit more employees with a and development in the desired future corporate culture. The programme will reduced functional ability. We are interested in stimulating diversity through be continued in 2008. A new management platform for the Group has been balanced age and gender distribution and a broad range of ethnicity.” developed as part of the programme. • In 2007 Gjensidige participated in cooperation between IMDi (Integration and Diversity Directorate) and several large Norwegian enterprises to study Health, safety and environment the opportunities for increased cooperation between the public and private The HSE network in Gjensidige was improved further in 2007, and there are sectors for work in the area of integration and an inclusive workforce. dedicated employees at various locations within the Group who are responsible for following up this work. Equal Opportunities and Inclusive Workforce Committee In accordance with the plan of action the committee has worked on measures An initiative has started to look at and consider modernisation of the internal to increase equality between the genders, a senior policy, and measures to HSE-control. This work will continue in 2008. Gjensidige’s agreement with increase the percentage of employees with different ethnic backgrounds. A Hjelp24 for the delivery of a nationwide and quality assured corporate health system for informing and protecting the rights of whistle blowers has been service was renegotiated and improved. developed further. The company’s own training programme with a training diary, Change of Pace, Gjensidige’s ethical rules have been revised, and preliminary work has been com- has been developed further. This is a continuation of the good work perfor- pleted on a “whistle blowing poster” for the organisation. Matters that are re- med in the organisation to strengthen and maintain the health and quality of ceived in the newly established Ethics Mailbox are dealt with on an ongoing basis. life of the individual employees. This work is carried out, among other things, in cooperation with Olympiatoppen. Cooperation with nationwide training In 2008 the committee will work, among other things, on measures to centres has also continued, and feedback shows that there are more and improve the exploitation of senior resources, follow up its diversity work and more employees from Gjensidige who are making use of the agreements. promote equal wages in the financial industry. Sickness absence Sickness absence has been followed up well. The collaboration between ma- Skills nagers, Hjelp24 and the HSE function has experienced a continuous positive In 2007 Gjensidige invested around NOK 19.3 million in skills development development, especially through the preparation of follow-up plans. On the measures. Internal and external courses are provided, and some of these basis of this work, several departments have achieved significant reductions courses give higher education credits. In total more than NOK 4 million was in their overall sickness absence during the last few years. spent on courses giving higher education credits. Most of these courses were under the direction of the Norwegian School of Management (BI). At BI The dialogue between the company’s own HSE network, Inclusive Working Insurance the company has had participants in around 450 courses, and some Life contacts and the Norwegian Labour and Welfare Organisation (NAV) GJensidige annual report 2007 | 67 this is GJ ENSI D I G E operations office has been strengthened further, and the coordination and quality of Primary Capital Certificate Regulations). The equity certificates were issued sickness absence follow-up shows a positive development. to the newly established non-profit foundation, the Gjensidige Foundation. The foundation is required to sell the equity certificates as instructed by Average sickness absence was 5.2 per cent at the end of 2007. This is an in- Gjensidige. The plan is to sell these in combination with the listing of the crease of 0.2 percent over the previous year. The sickness absence target is a certificates on the Oslo Børs in 2008. A listed equity instrument will increase maximum of 4 per cent. Measures to reduce sickness absence are implemen- the company’s flexibility with regard to financing further growth. ted in cooperation with the corporate health service. A change in the regulatory framework in general may affect Gjensidige’s There were no material personal injuries, property damage or accidents in the operations. The new Asset Management Regulations will come into force Group in 2007. in 2008. The regulations stipulate clearer requirements for the organisation of the asset management operations, and Gjensidige finds them to be com- outlook mercially sensible and unproblematic to implement. In addition, the stress Growth in general insurance is expected primarily from the operations outside tests will be somewhat more stringent. The quantitative restrictions on asset Norway. The Baltic general insurance market shows strong growth, and allocation are reduced somewhat. It is assumed that the changes will not have mana Gjensidige’s Baltic and Nordic operations are also expected to show good any effect on Gjensidige’s earnings. volume growth in the future. For the Norwegian general insurance market, premium volume growth is expected primarily from premium measures that There is ongoing legislative work in several areas that affect Gjensidige’s ope-

have already been implemented. The underwriting profitability for 2008 is rations. This applies to mandatory insurance rules, cover for primary results capital g ement expected to be good and at least on par with 2007. certificates regulations, a new finance act, a new insurance act and other rules that establish the regulatory framework for Gjensidige’s operations. It is The established pension, savings and banking operations have developed in not expected that the new rules will have a negative effect on the company. accordance with our expectations, and they will strengthen the company’s The greatest uncertainty is linked to the authorities’ ambition to centralise position and foundation for growth in Norway, in the longer term. Gjensidige settlement for occupational injuries by means of a separate settlement office. will continue to work on tools to ensure that the new products become a natural part of the customer dialogue with the parent company’s one million Normally there is a great deal of uncertainty regarding forward-looking mat- customers. ters, but it is the Board of Directors opinion that the Group is well-equipped to meet the competition in the years to come. The return from the financial markets was satisfactory in 2007, but the development has been negative and extremely volatile so far in 2008. Due to EVENTS AFTER THE BALANCE SHEET DATE a lower growth rate in the major economies there is considerable uncertainty In accordance with Gjensidige’s geographic expansion strategy, an agreement about the future. The unrest in the financial markets since the end of last was entered into to purchase the Lithuanian general insurance company RESO year will have an impact on Gjensidige’s results in 2008. In spite of reducing Europa early in 2008. In 2007 the company had a market share of around 5 per the equities component before the end of last year, Gjensidige is experiencing cent in Lithuania, and it is the sixth largest insurance company in the country. a lower than expected financial return so far this year. The company had a premium volume of around NOK 135 million in 2007.

The technological developments and new customer requirements provide the In January 2008 Gjensidige entered into an agreement to sell the head office foundation for ongoing efficiency improvement, new forms of coopera- building at Sollerud in Oslo to KLP Eiendom. The sales agreement contains a tion between companies and new service concepts. A growing number of leaseback agreement for a period of at least six years with a perpetual right customers prefer a combination of Internet and telephone as their purchasing to extend the agreement. The Group will realise a capital gain of more than and service channels. Gjensidige will develop its own service channels on an NOK 700 million in the first quarter of 2008 through the sale and leaseback ongoing basis based on how the customers would like to be served. arrangement.

In December 2007, 25 per cent of the company’s equity capital was reclas- The market value of Gjensidige’s ownership interest in Storebrand has sified as equity certificate capital (primary capital in accordance with the declined during the period after the end of the year, and this may have a 68 | GJensidige annual report 2007

significant impact on the Group’s net financial income for the first quarter in policy shall be competitive with comparable investments. In determining the the form of an impairment. size of the annual dividend, the Group’s need for capital, including the capital adequacy requirements and the Group’s goals and strategic plans, shall be distribution of profit taken into account. Unless otherwise indicated by the need for capital, the Charitable donations through the year-end distribution of profit were allowed Board of Directors’ target is to distribute 50 to 80 per cent of the profit after in 2006. As a result of this the Annual General Meeting in 2007 resolved to tax for the year as dividend. allocate NOK 300 million to an endowment fund. This endowment fund was subsequently transferred as the formation capital in connection with the The Board of Directors recommends that NOK 1,021.5 million of the annual establishment of the Gjensidige Foundation. profit of NOK 1,919.2 million reported by Gjensidige Forsikring BA to be allocated as dividends, NOK 255.4 million of which shall be distributed to the The Board of Directors will propose the distribution of a dividend to the equity certificate holders and NOK 766.1 million of which shall be distributed customers for the first time in 2008. In October 2007 the General Meeting to the general insurance customers eligible to vote. Of the remaining amount, resolved to amend the articles of association to allow individual dividends NOK 30.2 million shall be transferred to the fund for unrealised gains (other to the Norwegian general insurance customers. After the issuance of the equity Class I-capital), NOK 194.2 million shall be transferred to the equalisa- equity capital certificates in December 2007, the Norwegian general insurance tion fund (Class I-capital), NOK 90.5 million shall be transferred to the fund customers hold 75 per cent of the financial interests in the company, while for unrealised gains (other equity, Class II-capital) and NOK 582.8 million shall the Gjensidige Foundation holds 25 per cent. Dividends will be distributed ba- be transferred to retained earnings (Class II-capital). sed on the company’s profit for the year and divided between the customers and the equity capital certificate holders in accordance with their ownership After the distribution of the profit for the year, the parent company’s distribu- interest (i.e. ownership fraction). table equity amounts to NOK 11,116.8 million.

The Board of Directors has adopted a dividend policy that will establish the The Board of Directors would also like to thank all the Group’s employees for basis for dividend proposals to the General Meeting. Gjensidige’s dividend their efforts and contributions to the results in 2007.

7 March 2008 Board of Directors of Gjensidige Forsikring BA

Jørgen Tømmerås Jorund Stellberg Marianne Bø Engebretsen Odd Kristian Hamborg Chairman Deputy chairman

Marianne Lie Cato Litangen Gunnar Mjåtvedt Magne Revheim

Randi B. Sætershagen Hans Ellef Wettre Tor Øwre Petter Aasen

Helge Leiro Baastad CEO GJensidige annual report 2007 | 69

accounts and notes 2007 this is GJ ENSI D I G E

Gjensidige Forsikring consolidated – IFRS Gjensidige Forsikring BA – NGAAP Page Page Consolidated income statement...... 70 Income statement...... 142 Consolidated statement of recognised income and expense...... 71 Balance sheet...... 144 Consolidated balance sheet...... 72 Cash flow statement...... 146 Consolidated cash flow statement...... 74

Note Note

1 Accounting principles...... 75 1 Accounting principles...... 147 operations 2 Use of estimates...... 81 2 Shares in subsidiaries and associates...... 149 3 Management of insurance and financial risk...... 82 3 Related party transactions...... 150 4 Segment information...... 98 4 Underwriting result...... 152 5 Intangible assets...... 100 5 Insurance related sales and operating expenses...... 155 6 Investment in associates...... 101 6 Financial fixed assets...... 155 7 Property, plant and equipment...... 102 7 Shares and similar interests...... 157 8 Investment property...... 103 8 Bonds and other fixed interest securities...... 163 9 Financial assets...... 104 9 Financial derivatives...... 164 10 Loans and receivables...... 106 10 Financial risk...... 165 11 Financial derivatives...... 107 11 Losses and provisions for losses and guarantees...... 166 12 Reinsurance assets...... 108 12 Loans and guarantees...... 167 13 Receivables, provisions and other liabilities...... 108 13 Buildings and real estate...... 167 14 Cash and cash equivalents...... 108 14 Buildings for own use, tangible fixed assets and intangible assets....168 15 Consolidated statement of changes in equity...... 109 15 Properties for own use and investment property...... 169 16 Insurance liabilities and reinsurance assets...... 110 16 Pensions...... 170 mana 17 Pensions...... 111 17 Tax...... 172 18 Amounts owed to financial institutions and other liabilities...... 114 18 Change in equity...... 174 19 Income tax...... 114 19 Capital ratio...... 175

20 Expenses...... 116 20 Solvency margin...... results 175 g ement 21 Salaries and general administration expenses...... 116 21 Salaries and general administration expenses...... 176 22 Net financial income...... 119 22 Blocked funds...... 178 23 Foreign exchange gains and losses...... 120 23 Contingent assets and liabilities...... 178 24 Other expenses...... 120 24 Balance sheet components...... 178 25 Other income...... 120 26 Commitments...... 121 27 Business combinations...... 121 Auditor’s report...... 180 28 Related parties...... 123 Statement by the control committee...... 181 29 Events after the balance sheet date...... 125 Statement by the supervisory board...... 182 30 Capital ratio...... 126 31 Solvency margin and capital requirement in subsidiaries...... 127 32 Restricted funds...... 127 33 Buildings for own use and investment property...... 128 34 Shares and similar interests...... 128 35 Transition to International Financial Reporting Standard (IFRS)...... 135 70 | GJensidige annual report 2007

consolidated income statement

1.1-31.12 1.1-31.12 NOK million Notes 2007 2006 Premiums Gross premiums written 15,726.5 13,787.2 Ceded reinsurance premiums (250.3) (331.5) Premiums written, net of reinsurance 15,476.2 13,455.7 Change in the gross provision for unearned premiums (658.6) (268.2) Change in the provision for unearned premiums, reinsurers´ share 58.3 5.8 Earned premiums, net of reinsurance 14,875.9 13,193.2 Allocated return on investments transferred from the non-technical account 1,475.1 1,008.1 Claims Gross paid claims (10,156.3) (8,287.9) Paid claims, reinsurers´ share 206.4 149.4 Change in the provision for claims, gross (1,533.5) (1,858.8) Change in the provision for claims, reinsurers´ share (212.5) (17.6) Claims incurred, net of reinsurance (11,695.8) (10,014.9) Premium discounts and other profit agreements (20.0) (21.7) Administrative expenses including sales expenses 17,20,21 (2,720.9) (2,566.6) Reinsurance commissions 36.6 4.9 Change in provisions for insufficient premium level 0.1 Net operating expenses (2,684.3) (2,561.6) Technical result before amortisation of excess value 1,950.8 1,603.2 Amortisation of excess value (103.3) (20.8) Technical result 1,847.5 1,582.4 Financial income Income from associates 39.6 35.4 Income from buildings and real estate 8 881.4 1,118.4 Income from other financial assets 1,597.7 1,492.4 Unrealised gains and reversal of unrealised losses on financial assets 82.8 143.4 Gain on sale of securities 3,645.8 2,681.6 Total financial income 22 6,247.2 5,471.2 Financial costs Administration costs on buildings and real estate (137.7) (288.9) Administration costs related to financial assets (56.9) (55.0) Interest costs (619.7) (500.1) Other costs related to financial assets (71.7) (108.5) Unrealised losses and reversal of unrealised gains on financial assets (940.4) (6.4) Loss on sale of securities (1,600.6) (801.2) Total financial costs 22 (3,427.0) (1,760.1) Net income and costs from financial assets 22 2,820.3 3,711.1 Allocated return on investments transferred to the technical account (1,475.1) (1,008.1) Other income 25 380.0 313.9 Other costs 24 (552.4) (368.7) Profit before tax 3,020.3 4,230.5 Tax 19 (541.3) (138.7) Profit for the year 2,479.0 4,091.9 Earnings per equity certificate 8.03 GJensidige annual report 2007 | 71

Consolidated statement this is GJ ENSI D I G E of recognised income and expense

1.1-31.12 1.1-31.12 NOK million 2007 2006

Translation differences (137.1) (8.1) Changes in assets available for sale (430.6) (861.7) Actuarial gains/losses on pensions (326.0) (205.8) Other adjustments 0.0 36.2 Income and expenses recognised directly in equity (893.7) (1,039.4)

Profit for the period 2,479.0 4,091.9 operations

Total recognised income and expense 1,585.3 3,052.5 mana mn results g ement 72 | GJensidige annual report 2007

Consolidated balance sheet

NOK million Notes 31.12.2007 31.12.2006

ASSETS Goodwill 5 1,424.8 557.2 Intangible assets 5 1,022.3 586.9 Investments in associates 6 186.6 151.1 Buildings and real estate 7,33 1,017.5 930.9 Tangible fixed assets other than buildings and real estate 7,33 366.9 252.1 Investment property 8 6,041.7 7,157.9

Financial assets Financial derivatives 9,11 239.5 (90.5) Financial assets at fair value through profit or loss 9 23,361.8 20,701.6 Financial assets held to maturity 9 8,885.6 7,537.4 Loans and other receivables 9,10 3,850.0 539.6 Financial assets available for sale 9 2,765.9 2,434.1 Assets in life insurance with investment options 497.5 52.5 Reinsurance deposits 0.6 0.6 Reinsurance assets 12,16 302.6 414.6 Receivables arising out of direct insurance operations 10 3,159.3 2,794.0 Other receivables 10 376.7 542.0 Prepaid expenses and accrued interest 10 528.7 279.3 Cash and cash equivalents 14,32 4,092.3 2,271.3 TOTAL ASSETS 58,120.3 47,112.7 GJensidige annual report 2007 | 73 this is GJ ENSI D I G E

NOK million Notes 31.12.2007 31.12.2006

EQUITY AND LIABILITIES Equity Equity certificates 3,860.0 Other equity 16,442.5 18,717.3 Gjensidige fund 300.0 Total equity 15 20,302.5 19,017.3 operations

Liabilities Provision for unearned premiums, gross 16 6,060.2 5,737.9 Claims provisions, gross 16 23,147.1 17,556.7 Provisions for premium discounts 38.4 25.2 Pension liabilities 17 1,233.3 946.7 Other provisions 13 248.7 306.6

Financial liabilities Other liabilities 18 4,697.0 1,977.7 Deferred tax 19 1,424.1 1,134.4 Liabilities arising out of direct insurance operations 13 269.2 201.2 mana Accrued expenses and prepaid income 13 497.5 52.5 Liabilities in life insurance with investment options 13 202.3 156.5 TOTAL EQUITY AND LIABILITIES 58,120.3 47,112.7 mn results g ement

7 March 2008 The board of directors of Gjensidige Forsikring BA

Jørgen Tømmerås Jorund Stellberg Marianne Bø Engebretsen Odd Kristian Hamborg Chairman Deputy chairman

Marianne Lie Cato Litangen Gunnar Mjåtvedt Magne Revheim

Randi B. Sætershagen Hans Ellef Wettre Tor Øwre Petter Aasen

Helge Leiro Baastad CEO 74 | GJensidige annual report 2007

Consolidated Cash flow statement

1.1-31.12 1.1-31.12 NOK million 2007 2006

Net cash flow from operational activities Premiums received, net of reinsurance 15,295.2 12,629.0 Claims paid, net of reinsurance (9,952.1) (7,985.4) Operating expenses paid, including commission (2,602.1) (2,172.4)

Net receipts/payments on lendings and deposits (1,611.7) (143.0)

Net cash flow from investments Shares and other equity participations 367.3 (2,769.3) Bonds and other fixed-income securities (294.9) (403.2) Financial derivatives and other financial instruments 620.2 (642.2) Investment property 1,214.8 163.1 Group contribution and liquidation dividend 45.4 Interest and other financial income 772.5 2,899.5 Interest and fees received from customers 32.0 11.2 Net receipts/payments - real estate activities 337.2 202.0 Net receipts/payments - other income 12.2 6.3 Tax paid (23.1) (12.5) Net cash flow from operational activities 4,167.5 1,828.6

Cash flow from investment activities Payments on purchase of subsidiaries (2,769.6) (441.7) Net receipts/payments on real estate for own use 3.3 43.7 Net receipts/payments on sale/purchase of equipment (380.5) (141.4) Net cash flow from investment activities (3,146.8) (539.4)

Cash flow from financing activities Payment of the general insurance company’s guarantee scheme 31.0 Interest payments on borrowings (46.8) Repayment of long term borrowings (790.1) (1,862.4) Receipts from term loans 1,500.3 88.7 Net cash flow from financing activities 663.4 (1,742.6)

Net cash flow for the period 1,684.1 (453.4)

Effect of currency fluctuations on cash and cash equivalents (0.8) 6.6

Net movement in cash and cash equivalents 1,683.3 (446.8)

Cash and cash equivalents at the start of the period 2,271.3 2,663.1 Merged, added and disposed companies 137.8 55.1 Adjusted holdings at the beginning of the period 2,409.1 2,718.2 Cash and cash equivalents at the end of the period 4,092.3 2,271.3

Net movement in cash and cash equivalents 1,683.3 (446.8) GJensidige annual report 2007 | 75

Notes this is GJ ENSI D I G E

Note 1 – ACCOUNTING POLICIES IFRS

GENERAL INFORMATION of other segments. Segment information is presented in respect of the The Gjensidige Forsikring Group (the Group) consists of Gjensidige Forsikring Group’s business and geographical segments. BA (Gjensidige) and its subsidiaries. Gjensidige is a mutually-owned company domiciled in Norway. The company’s head office is located at Drammensveien The Group’s primary format for segment reporting is based on business seg- 288, Oslo, Norway. The activities of the Group consist of general insurance, ments. The Group is organised into general insurance, private and commercial

pensions and savings, banking, and health-related services. The Group does markets, pensions and savings, and banking segments. General insurance is operations business in Norway, Sweden, Denmark, Latvia, Lithuania and Estonia. the dominating segment in relation to the other segments. This division best reflects how the business is monitored by the Group’s management. The The accounting policies applied in the consolidated accounts are described Group’s secondary format for segment reporting is based on geographical below. The policies are used consistently throughout the entire Group with segments, and is divided into Norway, Nordic countries, and Baltic countries. the exception of one difference that is permitted in accordance with IFRS 4. See the description below under the section on Claims provisions for general Inter-segment pricing is determined on an arm’s length basis. insurance. CONSOLIDATION POLICIES BASIS OF PRESENTATION Consolidation of subsidiaries The consolidated accounts have been prepared in accordance with the Nor- The consolidated financial statements include Gjensidige and subsidiaries in wegian Accounting Act and International Financial Reporting Standards (IFRS) which Gjensidige has a controlling influence, which will apply to companies as adopted by the European Union. This is the Group’s first financial accounts where Gjensidige owns more than 50 per cent of the voting shares, either under IFRS, and IFRS 1 has been used for the preparation of the transition to directly or indirectly through subsidiaries. Subsidiaries are consolidated from IFRS as of 1 January 2006. The transition from generally accepted accounting the point in time when control is established. The consolidated financial principles in Norway to IFRS is stated in note 35. All amounts in the notes are statements have been prepared using the purchase method, and they present mana shown in millions of NOK, unless otherwise stated. Due to rounding differen- the Group as a single economic entity. Balances and transactions between ces, figures or percentages may not add up to the total. companies within the Group are eliminated in the consolidated financial statements. In addition, gains and losses arising from transactions between

The consolidated accounts have been prepared in accordance with the Nor- companies in the Group are also eliminated. results g ement wegian Accounting Act, IFRS and interpretations, that should be adopted as at 31 December 2007. The IFRS standards and interpretations published up Associated companies to 25 February 2008 and not mandatory to adopt as at 31 December 2007, Holdings in companies in which the Group has a significant, but not a control- that is IFRS 8, revised IAS 23, new IAS 1, revised IFRS 3, revised IAS 27, IFRIC ling, influence are reported using the equity method. Normally these will be 11, 12, 13 and 14, are assumed, based on discussions made so far, not to companies where the Group has an ownership interest of between 20 and 50 have material impact on the reported numbers, except for IFRS 8 which may per cent and has significant influence. Under the equity method the Group’s lead to changes in the segment reporting. The Group has in 2007 adopted share of the earnings for the year, amortisation and impairment of goodwill, IFRS 7, revised IAS 1, IFRIC 7, 8, 9 and 10 without material impact on the and capital gains and losses, is reported on a separate line of the profit and reported numbers. The IFRS 7 and revised IAS 1 have on the other hand led loss account. In the consolidated balance sheet, investments in associated to several new disclosure requirements. As at 25 February 2008 the EU had companies are reported as the Group’s share of the companies’ equity adjus- not approved the revised IAS 23, new IAS 1, revised IFRS 3, revised IAS 27, ted for fair value adjustments including goodwill. IFRIC 11, 12, 13 and 14. Business combinations The consolidated accounts have been prepared based on the historical cost The acquisition of subsidiaries and businesses is accounted for using the pur- principle with the following exceptions: chase method of accounting. The historical cost of business combinations is • financial derivatives are measured at fair value measured at the fair value (on the date of the acquisition) of acquired assets, • financial assets at fair value through the income statement are measured incurred liabilities and equity instruments issued by the Group in exchange at fair value for control and includes any costs directly attributable to the business combi- • financial assets available for sale are measured at fair value nation. The acquired company’s identifiable assets, liabilities and contingent • Investment properties are measured at fair value liabilities that meet the requirements for recognition under IFRS 3 Business Combinations are recorded at fair value at the time of the acquisition. Segment REPORTING A segment is a distinguishable component of the Group that is engaged either If, after a reassessment of the Group’s share in the net fair value of identifia- in providing related products or services (business segment), or providing ble assets, liabilities and contingent liabilities exceeds the historical cost of the products or services within a particular economic environment (geographical business combination, the excess amount will be recognised immediately in segment), which is subject to risks and returns that are different from those the profit and loss account. 76 | GJensidige annual report 2007

Goodwill that have another functional currency are translated into NOK by translating Goodwill that arises from the acquisition of subsidiaries represents the cost the profit and loss account according to an average rate for the month of price of the acquisition in excess of the Group’s share of the net fair value of activity, and the balance sheet by a rate at the end of the accounting period. identifiable assets, liabilities and contingent liabilities in the subsidiary at the Any translation differences are recognised directly in equity, and are taken time of acquisition. Goodwill is recognised initially at cost and subsequently into account in the calculation of gains / losses on a subsequent sale. recorded at historical cost less accumulated impairment losses. Upon recognition, transactions in foreign currencies are recorded in the unit’s RECOGNITION OF REVENUE AND EXPENSES functional currency at the currency rate on the date of the transaction. Insurance premiums for general insurance Insurance premiums are recognised over the term of the policy. Gross pre- Balance sheet items denominated in foreign currencies are translated into miums written include all the amounts the company has received or is owed functional currencies at the rate of exchange on the balance sheet date, and for insurance contracts where the insurance period starts before the end of the related gains and losses from translation are recognised in the profit the period. At the end of the period accruals are recorded, and the premiums and loss account. The exchange rate risk associated with foreign securities is written that relate to subsequent periods will be accrued under “change in largely eliminated through hedging transactions. provisions for gross premiums written”. TANGIBLE ASSETS Reinsurance Property, plant and equipment Premiums for ceded reinsurance reduce the gross premiums written and are Items of property, plant and equipment are measured at historical cost less accrued according to the insurance period. Premiums for inward reinsurance accumulated depreciation and accumulated impairment losses. Historical are classified as gross premiums written and are earned according to the cost includes expenditure that is directly attributable to the acquisition of the insurance period. items. In cases where equipment or significant components have a different useful life, they are depreciated separately. Insurance premiums for life insurance Premium income consists of the Total Gross premiums written related to Buildings and real estate for own use is measured at historical cost less contribution pension schemes, risk premium and administration fee. From accumulated depreciation and accumulated impairment losses. Property for this total the allocation to the premium reserve is extracted and the premium own use is defined as property that is used by Gjensidige for conducting its amount consists of the remaining balance. business. If the buildings are used both for the company’s own use and as investment property, the division is based on the actual use of the properties. Interest income and expenses from financial instruments For all financial instruments measured at amortised cost, interest income and Subsequent costs are included in the asset’s carrying amount or recognised expenses are recognised using the effective interest method and includes as a separate asset, as appropritate, only when it is probable that future all fee income and incremental directly attributable costs that are an integral economic benefits associated with the item will flow to the Group, and the part of the effective interest rate. cost of the item can be measured realiably. All other repairs and maintenances are charged to the income statement during the financial period in which Allocated return on investments they are incurred. If the subsequent cost is a replacement cost for part of an The allocated return on investments is calculated based on the average item of property, plant and equipment, the cost is capitalized and the carrying technical provisions throughout the year. The average yield on government amount of what has been replaced is derecognised. bonds with three years remaining until maturity is used for the calculation. The Financial Supervisory Authority of Norway has calculated the average Gjensidige may engage in refurbishment, major upgrades or new building technical yield for 2006 and 2007 to be 3,7 and 4,8 per cent, respectively. projects. Cost of these are recognised using the same principles as for an The allocated return on investments is transferred from the non-technical acquired asset. accounts to the technical accounts. Depreciation is recognised in profit or loss on a straight-line basis over the Claims incurred estimated useful lives of each component of an item of property, plant and Claims incurred consist of the gross claims paid less the reinsurers’ share, equipment. in addition to a change in the gross claims provisions, also reduced by the reinsurers’ share. Direct and indirect claims processing costs are included in Depreciation methods, expected useful life and residual values are reassessed claims incurred. The claims incurred contain settlement gains / losses based annually. An asset’s carrying amount is impaired if the recoverable amount is on previous provisions. less than the carrying amount.

Total operating expenses Investment property Total operating expenses consist of administrative expenses and selling Property that is rented to tenants outside the Group is classified as invest- expenses less commissions received for ceded reinsurance. The administra- ment property. With regard to property where parts of the property are used tive expenses are accrued and charged as an expense during the accounting by the Group for its own use and other parts are rented out, the rental por- period. tions that are segregated from own use is classified as investment property. Investment property is measured at fair value and measured at each reporting FOREIGN CURRENCY date. Changes in fair value are recognised through the profit and loss account The Group’s reporting currency and the parent company’s functional currency in the period in which the profit/loss relates. Fair value is based on market are Norwegian kroner (NOK). Every company in the Group determines its prices, after consideration of differences in the type, location or condition of functional currency, and transactions in the entities’ financial statements are the individual property. measured in the functional currency of the subsidiary. Foreign subsidiaries GJensidige annual report 2007 | 77

If market prices are not available, the property will be assessed individually by Impairment OF NON-FINANCIAL ASSETS OTHER THAN GOODWILL this is GJ ENSI D I G E discounting the expected future cash flows by the required rate of return for The Group assesses indicators for impairment loss on the carrying value of the individual investment (the Capitalisation Method). The cash flow takes tangible and intangible assets annually or more often if there are events or into account the existing and future loss of income as a result of vacancies, changes in assumptions indicating that the carrying value is not recoverable. investments and an assessment of the future development of the rental mar- Indicators that are assessed as significant by the Group and can trigger ket. The required rate of return is determined based on the expected future testing for an impairment loss are as follows: risk-free interest rate and individually assessed risk premium based on the • significant reduction in earnings in relation to historical or expected future rental situation and the location and standard of the building. An assessment earnings is also made based on the market prices observed. The valuation is carried • significant changes in the Group’s use of assets or overall strategy for the out by both external and internal expertise, who have substantial experience business in valuing these types of properties in geographical areas where the Group’s • significant negative trends for the industry or economy investment properties are located. The recoverable amount for an asset or a cash-generating unit is the higher Investment properties are measured initially at their cost, i.e. the purchase of the fair value less the selling costs or value in use. When it has been price including any directly attributable costs associated with the purchase. established that the carrying value for assets and intangible assets is not re-

coverable based on one or more of the above indicators of an impairment loss operations Investment properties are not depreciated. being present, the impairment loss will be calculated based on the discounted future cash flows by means of the pre-tax discount rate. The impairment loss INTANGIBLE ASSETS will be recognised if the carrying value of an asset or cash-generating unit Goodwill exceeds the recoverable amount. Goodwill that arises from the acquisition of subsidiaries represents the cost price of the acquisition in excess of the Group’s share of the net fair value of With the exception of goodwill, impairments in value recognised previously identifiable assets, liabilities and contingent liabilities in the subsidiary at the will be reversed if the prerequisites for an impairment loss are no longer pre- time of acquisition. Goodwill is recognised initially at cost and subsequently sent. The impairment loss will only be reversed if the carrying amount does recorded at historical cost less accumulated impairment losses. In respect of not exceed the amount that would have been the net book value at the time equity accounted investees, the carrying amount of goodwill is included in the of the reversal if the impairment loss had not been recognised. carrying amount of the investment. TECHNICAL PROVISIONS Customer relations, trademarks and other intangible assets Provisions for unearned premiums Customer relations, trademarks and other intangible assets that are acquired The provisions for unearned premiums reflect the accrual of premiums writ- separately or as a group are recognised at historical cost less accumulated ten. The provisions correspond to the unearned portions of the premiums mana amortisation and accumulated impairment losses. If new intangible assets written. No deduction is made for any expenses before the premiums written are recognised it must be probable that future economic benefits associated are accrued. with the asset will flow to the group and be able to estimate the cost price

of the asset reliably. Other intangible assets consist of the Group’s custom In the case of group life insurance for the commercial market, the premium results g ement proprietary software. Development of such software involves a plan or design provisions also include provisions for fully paid whole-life cover (after the for the production of new or substantially improved products and proces- payment of disability capital) and an option fund (provisions for the right to ses. Development expenditure (both internally and externally generated) is renew without supplying a new health certificate). capitalised only if development costs can be measured reliably, the product or process is technically and commercially feasible, future economic benefits are Claims provisions for general insurance probable, and the Group intends to and has sufficient resources to complete Claims provisions comprise provisions for anticipated future claims payments development and to use or sell the asset. in respect of claims incurred, but not fully settled at the end of the accounting period. These include both claims that have been reported to the Amortisation is recognised within the income statement on a straight-line company (RBNS – reported but not settled) and those that have not yet been basis over the estimated useful life of each intangible assets. reported (IBNR – incurred but not reported). The provisions related to reported claims are assessed individually by the claims settlement system, while The amortisation period and amortisation method are reassessed annually. An IBNR provisions are based on empirical data, where the point of departure asset’s carrying amount is impaired if the recoverable amount is less than the is the time it takes from a loss or injury occurring (date of loss or injury) until carrying amount. it is reported (date reported). Based on experience and the development of the portfolio, a statistical model is prepared to calculate the scope of post- IMPAIRMENT OF GOODWILL reported losses or injuries. The appropriateness of the model is measured For the purpose of impairment testing, goodwill is allocated to each of by looking at the deviation between earlier post-reported claims and those the Group’s cash-generating units expected to benefit from the business estimated by the model. combination. Cash-generating units to which goodwill has been allocated will be tested for impairment annually or more often in the event of impairment Claims provisions are not normally discounted. For contracts in Denmark indicators. If the recoverable amount of the cash-generating unit is less than with annuity payments over a long horizon, discounting is performed. IFRS 4 the carrying amount of the unit, the impairment loss will be allocated first to permits the use of different policies within the Group in this area. the goodwill and then proportionally to the carrying amount of each asset in the unit. An impairment loss recognised for goodwill will not be reversed in Claims provisions contain an element that is to cover administrative expenses a subsequent period. On disposal of a cash generating unit, the attributable incurred in settling claims. goodwill will be included in the determination of the gain or loss on disposal. 78 | GJensidige annual report 2007

Liability adequacy test Financial assets at fair value through the income statement are measured at At each reporting date a liability adequacy test is performed to check whether fair value at the balance sheet date. Changes in the fair value are recognised the level of the provisions are adequate. Current estimates for future claim through the income statement. payments for the company’s insurance liability on the date of the balance sheet, as well as related cash flows, are used to perform the test. This inclu- Available for sale des both claims incurred before the balance sheet date (claims provisions) and Securities available for sale are non-derivative financial assets that have been claims that will occur from the date of the balance sheet until the next annual placed in this category by choice or are not classified in any other category. renewal (premium provisions). Any negative discrepancy between the original Securities in this category are measured at fair value, and the change in value provisions and the liability adequacy test will entail provisions for unexpired is recognised against the equity provided the change is not material. risk. Investments held to maturity Provisions for life insurance Investments that are held to maturity are non-derivative financial assets with The technical provisions related to the insurance contracts are determined by payments that are fixed or can be determined, as well as a fixed maturity the market value of the financial assets. The defined contribution products date that a business has the intent and ability to hold until maturity with the are not exposed to an investment risk related to the customer assets since no exception of: return on the assets are guaranteed to the customers. In addition, provisions • those that the business designates as at fair value through the income are allocated to a statutory security reserve to ensure that unexpected losses statement upon initial recognition in the insurance business can be sustained. • those that meet the definition of loans and receivables

Reinsurance assets Held to maturity assets are accounted for at amortised cost using the ef- Reinsurance assets are classified as assets on the balance sheet. The assets fective interest method. are reduced by the expected losses on claims based on objective evidence of an impairment loss. Loans and receivables Loans and receivables are non-derivative financial assets with payments that FINANCIAL INSTRUMENTS are fixed or determinable. Loans and receivables are accounted for at fair va- Recognition and derecognition lue upon initial recognition and at amortised cost using the effective interest Financial assets and liabilities are recognised in the balance sheet when method in subsequent periods. Gjensidige becomes a party to the instrument’s contractual terms. Purchases and sales of financial instruments are recognised in the accounts on the date Interest-free loans are issued to finance fire alarm systems in agriculture for of the transaction. When a financial asset or liability is recognised initially (as- loss prevention purposes. These loans are repaid using the discount granted set / liability not recognised at fair value through the income statement) it is on the main policy when the alarm system is installed. measured at fair value plus transaction expenses that are directly attributable to the acquisition or issuance of the financial asset or liability. Derivatives Financial derivatives are used in the management of exposure to equities, Financial assets are derecognised when the contractual rights to the cash bonds and foreign exchange in order to achieve the desired level of risk and flows from the financial asset expire, or when the business transfers the return. These instruments are used both for trading purposes and for hedging financial asset in a transaction where all or practically all the risk and rewards balance sheet items. related to ownership of the asset are transferred. The trading of financial derivatives is subject to strict limitations. All deriva- Financial assets are classified in one of the following categories: tives are recognised at fair value on the contract date with subsequent re- • at fair value through the income statement measurement at fair value when values fluctuate. The fair value of derivatives • available for sale is based on quoted prices when such prices are available. Otherwise the • investments held to maturity Group estimates the fair value based on valuation models that use observable • loans and receivables market data. • derivatives The Group has not implemented hedge accounting. The Group uses financial At fair value through the income statement derivatives amongst others to hedge currency risk arising from the ownership When IFRS is implemented and upon initial recognition in subsequent periods, of subsidiaries with other functional currencies. As the group has not yet all financial assets and liabilities can be designated at fair value through the implemented hedge accounting, this implies a divergent treatment of the income statement if: hedged object and the hedge instrument used. • the classification reduces a mismatch in the measurement or recognition that would have arisen otherwise as a result of different rules for the Fair value measurement of assets and liabilities Fair value is the amount an asset can be sold or a liability can be settled by a • the financial assets are included in a portfolio that is managed and evalua- transaction at arm’s length between well-informed, willing parties. For finan- ted regularly at fair value cial assets that are listed on a stock exchange or other regulated marketplace, the fair value will be set at the bid price on the last trading day prior to the Gjensidige holds a portfolio that is managed and evaluated regularly at fair balance sheet date, and for an asset that is to be acquired or a liability held it value. This is according to the board approved risk management and inves- will be set at the offer price. tment strategy, and information based on fair value is provided regularly to management and the board. GJensidige annual report 2007 | 79

If the market for a financial instrument is not active, the fair value will be DIVIDENDS this is GJ ENSI D I G E established by valuation methods. The valuation methods include the use of Dividends from investments are recognised when the Group has an uncondi- market transactions recently carried out at arm’s length between well-infor- tional right to receive dividends. Dividends are recognised as liabilities at the med, willing parties, if such are available; reference to the current fair value of point in time when the general meeting approves the payment of dividends. another similar instrument, discounted cash flows or option pricing models. If there is a valuation method for pricing the instrument that is in normal use by Accounting provisions participants in a market, and this method has proven to provide reliable esti- Provisions are recognised when the Group has a legal or implied liability as the mates of the prices achieved in actual market transactions, then this method result of a prior incident and it is probable that this will entail the payment or will be utilised. The inputs to the valuation methods are mainly observable, transfer of other assets to settle the liability. but will in some cases be based on estimates. Restructuring For unlisted debt instruments, valuations are based on contractual cash flows, Provisions for restructuring are recognised when the Group has approved a observable yield curves and estimated credit spreads for the relevant issues. detailed and formal restructuring plan which has commenced or has been For private equity investments, the valuations are carried out by the mana- announced. Provisions are not made for future expenses attributed to the gers, according to EVCA principles, implying that actual earnings and book operations.

equity figures are applied to observable pricing multiples with a discount..For operations hedgefunds, the net asset value for each fund is provided by independent PENSIONS administrators. Gjensidige has both defined contribution and defined benefit pension schemes for its employees. The defined benefit scheme in Norway has been Amortised cost placed in a separate pension fund and is closed to new employees. After initial recognition, held-to-maturity investments, loans and receivables and financial liabilities that are not measured at fair value will be measured Liabilities to make contributions to defined contribution pension schemes are at amortised cost using the effective interest method. When calculating the recognised as expenses in the income statement when they are incurred. effective interest rate, the timing of cash flows are estimated and all the contractual terms of the financial instruments are taken into consideration. Fees The defined benefit scheme entitles employees to contractual future pension or points paid or received between the parties in the contract and transaction benefits. Pension liabilities are determined on the basis of linear accrual and costs that are incremental and directly attributable to the acquisition, issue or using assumptions for length of service, discount rate, future return on pen- disposal of a financial asset or liability are included as an integral component sion funds, and future growth in wages, pensions and social security benefits, of determining the effective interest rate. and estimates for mortality and staff turnover, etc.

IMPAIRMENT OF FINANCIAL ASSETS Pension assets are carried at fair value, and are deducted from liabilities in mana Loans, receivables and investments held to maturity the net pension liabilities presented on the balance sheet. Any overfunding For financial assets that are not accounted for at fair value, an assessment is recognised if it is likely that it can be used to reduce future pension contri- of whether there is objective evidence that there has been a reduction in the butions.

value of a financial asset or group of assets is made on each balance sheet results g ement date. Objective evidence includes information on credit report alerts, defaults, Actuarial gains or losses on defined benefit pension plans are recognised an issuer or borrower suffering significant financial difficulties, bankruptcy or directly against equity. observable data indicating that there is a measurable reduction in future cash flows from a group of financial assets, even though the reduction cannot yet TAX be linked to an individual asset in the group. The tax charge represents the total of the tax payable and change in deferred taxes included in the profit and loss account. An assessment will be made first as to whether there is any objective evidence of an impairment loss for financial assets that are individually significant. Current tax Financial assets that are not individually significant or are assessed individu- Current tax is tax payable on the taxable profit for the year. ally, but not impaired, will be assessed in groups with respect to impairment losses. Assets with similar credit risk characteristics will be grouped together. Deferred tax Deferred tax is determined based on differences between the carrying value If there is objective evidence of an impairment loss, the loss will be calculated of assets and liabilities in the accounts and their corresponding tax basis. as the difference between the asset’s carrying value and the present value of Deferred tax liabilities are generally recognised for all taxable temporary estimated future cash flows. differences. Deferred tax assets are generally recognised for all deductible temporary differences to the extent that it is probable they will offset taxable Available for sale income. If deferred tax arises in connection with the initial recognition of a lia- Each quarter an assessment is made as to whether an impairment loss has bility or asset in a transaction that is not a business combination, and it does occurred. If a decline in fair value of an equity instrument below cost is not affect the financial or taxable profit/loss at the time of the transaction, significant (20%) or has lasted longer than nine months, the combined loss – then it will not be recognised on the balance sheet. measured as the difference between the historical cost and fair value, less any reduction in value of the financial asset that has been recognised earlier in the Deferred tax liabilities are recognised for temporary differences resulting from profit and loss account - will be removed from the equity and recognised in investments in subsidiaries, associated companies and joint ventures, except the profit and loss account. An impairment loss for shares and corresponding in cases where the Group is able to control the reversal of temporary dif- instruments that has been recognised in the profit and loss account is not ferences and it is probable that the temporary difference will not be reversed reversed. in the foreseeable future. Deferred tax assets that arise from deductible 80 | GJensidige annual report 2007

temporary differences for such investments are only recognised to the extent INTERCOMPANY purchases and sales that it is probable that there will be sufficient taxable income to utilise the Intercompany purchases and sales are carried out in accordance with the asset from the temporary difference and they are expected to reverse in the arm’s length principle, and are eliminated in the consolidated accounts. foreseeable future. transactions with affiliated companies Current and deferred tax Commissions Current tax and deferred tax are recognised as an expense or income in the The mutual fire insurers receive commission payments for performing a income statement, with the exception of deferred tax on items that are number of functions on behalf of Gjensidige Forsikring. These payments are recognised directly against equity or in cases where deferred tax arises as a offset for those services that Gjensidige Forsikring provides for the mutual result of a business combination. For business combinations, the deferred fire insurers. Due to the fire policy reinsurance plan, Gjensidige Forsikring taxes are calculated on the difference between the fair value of the acquired also manages assets on behalf of the mutual fire insurers who are credited assets and liabilities and their tax basis. interest for interest earned. GJensidige annual report 2007 | 81

Note 2 – Use of estimates this is GJ ENSI D I G E

General The preparation of the consolidated financial statements under IFRS and Technical provisions the application of the adopted accounting policies require that management Insurance products are divided in general into two main categories: lines make assessments, prepare estimates and apply assumptions that affect the with short or long settlement periods. The settlement period is defined as reported amounts of assets, liabilities, income and expenses. The estimates the length of time which passes from a loss or injury occurring (date of loss) and the associated assumptions are based on experience and other factors until the claim is reported and then paid and settled. Short-tail lines are e.g. that are assessed as being justifiable based on the underlying conditions. The property insurance, while long-tail lines involve primarily insurances of the actual figures may deviate from these estimates. The estimates and the as- person. The uncertainty in short-tailed lines of business is linked primarily to sociated prerequisites are reviewed regularly. Changes in accounting estimates the size of the loss. are recognised in the period the estimates are revised if the change only affects this period, or in the period the estimates change and future periods For long-tail lines the risk is linked to the fact that the ultimate claim costs if the changes affect both the existing and future periods. must be estimated based on experience and empirical data. For certain

insurances of the person it may take 10 to 15 years before all the claims that operations The accounting policies that are used by Gjensidige in which the assessments, occurred in a calendar year are reported to the company. In addition, there estimates and prerequisites may deviate significantly from the actual results will be many instances where information reported in a claim is inadequate to are discussed below. calculate the provisions. This may be due to ambiguity concerning the causal relationship and uncertainty about the injured party’s future work capacity Investment property etc. Many personal injury claims are tried in the court system, and over time Fair value is based on market prices and generally accepted valuation models the level of compensation for such claims has increased. This will also be of where there are no market prices. A key parameter of the valuation is consequence to claims that occurred in prior years and have not yet been the long-term required rate of return for the individual property.. Further settled. The risk linked to provisions for lines related to insurances of the per- description of the real estate price risk and a sensitivity analysis of investment son is thus affected by external conditions. To reduce this risk, the company property is given in note 3. The carrying amount of investment property at 31 calculates its claims liability based on various methods and follows up that the December 2007 is NOK 6,041.7 million. See note 8. registered provisions linked to ongoing claims cases are updated at all times based on the current calculation rules. Equipment and intangible assets Equipment and intangible assets are assessed annually to ensure that the The carrying amount of the claims provisions, gross at 31 December 2007 is depreciation method and period used are in accordance with the financial NOK 23,147.1 million. See note 16 mana realities. This applies correspondingly to the residual value. Impairments will be recorded when there is an impairment loss. An ongoing assessment of Pensions these assets is made in the same manner as investment property. The present value of pension liabilities is calculated based on several actuarial

and financial assumptions. Any change in the assumptions affects results the g ement Goodwill is tested annually for an impairment loss, or more often if there are estimated liability. Changes in the discount rate have the most significant indications that the amounts may be subject to an impairment loss. Testing impact. The discount rate and other assumptions are normally reviewed once an impairment loss entails determining the recoverable amount for the a year when the actuarial calculations are performed unless there have been cash-generating unit. Normally the recoverable amount will be determined by significant changes during the year. means of discounted cash flows that are based on business plans. The plans are based on prior experience and the expected market development. The carrying value of the pension liabilities at 31 December 2007 is NOK 1,233.3 million. See note 17 The carrying amount of equipment at 31 December 2007 is NOK 366.9 million, goodwill is 1,424.8 million and intangible assets are NOK 1,022.3 million. A one percent change in the discount rate and expected salary growth would See note 5 and 7. change the pension benefits accrued during the year and pension liability in the following manner: Fair value of financial instruments +1 % -1% +1 % -1 % The fair value of financial instruments that are not traded in an active market discount discount salary salary (such as unlisted shares) is determined by means of generally accepted va- SENSITIVITY rate rate adjustment adjustment luation methods. These valuation methods are based primarily on the market conditions at the reporting date. 2006 Change pension benefits Impairment of financial assets accrued during the year -17 % 21 % 15 % -18 % For financial assets that are not measured at fair value, an assessment of Change pension liability -16 % 20 % 11 % -12 % whether there is objective evidence that there has been a reduction in the 2007 value of a financial asset or group is made on each balance sheet date. The Change pension benefits group uses both individual and group write-downs of loans. The carrying accrued during the year -20 % 27 % 22 % -17 % amount of loans and other receivables at 31 December 2007 is NOK 3,850.0 Change pension liability -14 % 18 % 9 % -7 % million. See note 10. 82 | GJensidige annual report 2007

Note 3 –Management of insurance and financial risk

Overview ment process, risks are identified, analysed, measured, managed and control- Management of risks is a part of the daily operations of Gjensidige. As a led not only with the purpose of reducing uncertainty and avoiding extreme financial group, monitoring, quantification, management and control of the losses, but also to maximize the return in relation to the risk. risk exposure, as well as analysing effect of potential strategic decisions, is an essential part of the business activities in order to ensure an appropriate level General insurance constitutes a major part of the business and risks of the of risk taking and enhance value creation. Group, through Gjensidige Forsikring in Norway, and its foreign subsidiaries in Sweden, Denmark and the Baltics. An overall management of risks ensures that risks are assessed and handled in a consistent way. The purpose of risk management in Gjensidige is firstly to Gjensidige also offers company pensions, savings and investment advice ensure that the risk exposure does not exceed the capacity, and secondly, but through the subsidiaries in Gjensidige Pensjon og Sparing. From January 2007 equally important, to contribute to value creation. By a strong risk manage- banking services is offered through Gjensidige Bank.

Operational structure Figure 1 CEO

Group Finance services

Strategic Group management audit staff

Corporate International General Pension and Banking clients and general insurance Savings brokerage insurance

legal structure Figure 2

NORWAY DENMARK SWEDEN BALTICS

Gjensidige Forsikring

100 % 100 % 100 % 100 % 100 % 100 % 100 % 100 %

Gjensidige Misc Gjensidige Tennant Pensjon og Oslo Areal Glitne Bank Fair Gjensidige ASA real estate Insurance Baltic Sparing companies Invest AS Holding AS Forsikring A/S Holding AS Group AB

100 % 100 % 100 % 20 % 100 % 100 %

Gjensidige Gjensidige Investerings- Gjensidige Kommune- Pensjons- Forsikring A/S forsikring AS rådgivning ASA Bank ASA GJensidige annual report 2007 | 83

The basis of insurance is transfer of risk, from the insured to the insurer. The unit proposing the strategic asset allocation and overall risk measures to the this is GJ ENSI D I G E Group receives insurance premiums from a large number of policy holders Board of Directors. and commits to compensate in case an insured event occurs. Naturally, therefore, insurance risk is a major risk for the Group. Premiums are received Capital Management to cover future claims. The technical provisions, combined with the Group’s The core of insurance is transfer of risk, and the Group is exposed to risks own funds are invested and consequently the Group is exposed to market both in the insurance and investment operations. Identification, measure- and credit risk as well. The Group offers a broad range of non-life insurance ment and management of risks are essential parts of the operations. Risk products in the markets it is represented, to both private, agricultural and and capital is and must be interlinked. Any insurance company must hold a commercial segments. Gjensidige Forsikring is the largest non-life insurance sufficient amount of capital to bear the aggregate risk exposure. Insurance company in Norway. Gjensidige also provides general insurance in Denmark, companies must maintain a sufficient amount of solvency capital as a through the coordinated operations in KommuneForsikring and Fair buffer to meet possible adverse outcomes depending on the risk exposure. Forsikring, and in the Baltic States through the subsidiary Parekss (renamed On the other hand, solvency or risk capital has a cost. A key objective of Gjensidige Baltic from January 1, 2008). In January 2008, Gjensidige Baltic capital management is to balance these two aspects. Gjensidige’s overall acquired the Lithuanian insurance company Reso, the acquisition is still awai- capital management objective is firstly to ensure that the capitalization of ting regulatory approval. In August 2007 Gjensidige acquired the Swedish the Group can sustain an adverse outcome without creating a financially

non-life insurance company Tennant, which has operations in Sweden and distressed situation, and secondly that the Group’s capital is used in the operations Norway. most efficient way.

Through the subsidiary Gjensidige Pensjon og Sparing (GPS) the Group offers Gjensidige’s minimum capitalization is determined by three criteria: regula- occupational pensions, as well as savings and investment advice in Norway. tory requirements, rating requirements and internal risk-based requirement. Within the savings and investment advice operations GPS acts as an inde- The Group has a very strong capitalization position, no matter which view is pendent advisor using only external funds and managers. GPS offers mainly taken. defined contribution occupational pensions, with related risk coverages such as disability insurance, disability pension, child and spouse pensions. Death Insurance and banking are regulated businesses. Capital adequacy and and disability risks are the two main insurance risks within GPS. solvency positions are reported for the Group and subsidiaries to the financial supervisory authorities. The Group follows the capital adequacy The Internet bank Gjensidige Bank was established January 2nd 2007 and rules (BIS-rules), and per 31.12.2007 the excess capital was 6,632 MNOK, offers banking products primarily to private individuals and organisations in corresponding to a capital adequacy ratio of 26,1%. For the insurance the Norwegian market. Gjensidige Bank is primarily exposed to credit and operations, at entity level, Gjensidige Forsikring and its subsidiaries follow liquidity risk. the prevailing solvency margin capital requirement, Solvency I. Gjensidige Forsikring had a regulatory solvency ratio of 561% per 31.12.2007, giving an mana In addition to the insurance and banking operations the Group has through excess capital of 11,032 MNOK. Parekss had a regulatory solvency ratio of its subsidiary Hjelp24 a leading position within occupational health services. 129% per 31.12.2007, giving an excess capital of 22 MNOK. Gjensidige Den- Hjelp24 is Norway’s largest provider of security services for elderly persons mark (Group) had a regulatory solvency ratio of 461% per 31.12.2007, giving

living at home and people requiring care. The health operations are estab- an excess capital of 1,204 MNOK. Tennant had a regulatory solvency results ratio g ement lished as a key relationship effort to strengthen the Group’s competitive of 315% per 31.12.2007, giving an excess capital of 107 MNOK. Gjensidige strength as a complete supplier within safety and private health care . The Bank had a capital adequacy ratio of 20,8 % (Gjensidige Bank ASA) against a main risk for Hjelp24 is more or less the same business risks as found in any legal requirement of 8%. Gjensidige Pensjon og Sparing (Group) had a capital other service provider, i.e. generating enough business volume to cover fixed adequacy ratio of 77% against a legal requirement of 8%. Gjensidige Forsikring costs with sufficient margins. and all subsidiaries fulfilled regulatory capital requirements during 2007.

Organisation Gjensidige Forsikring’s target financial strength rating is ‘A’ (single A) from The Deputy CEO is responsible for overall risk management, including capital Standard & Poor’s or equivalent from another rating institution. The actual and investment management. This involves a number of corporate functions rating is ‘A’ (Stable) from Standard & Poor’s, unchanged since 1999. The such as actuary, reinsurance and corporate control. Other specialist units rating is subject to an annual review. The subsidiaries are not rated, although such as product and claims departments and accounting department also the rating itself is based on the Group’s financial position. have their formal functions in the risk and capital management. The internal requirement is so far only measured at parent company level, and Within each company in the Group there is a separate CFO function, and is set so that the company even in the worst 1% of outcomes expects to fulfil all insurance entities have an appointed actuary. All risk policies (including the minimum solvency requirements, and hence combines the regulatory and strategic asset allocation and limitations on the various risk types) are internal perspectives. This is measured using Gjensidige’s internal stochastic subject to board approval in each company. However, the central capital and simulation model, measured over a time horizon of two years. The measure- investment management functions are responsible for coordinating these ment only includes the amount of financial assets allocated to the insurance policies and preparing them ahead of board approval, as well as coordinating business, consistent with the share of capital needed to support it. the purchase of asset management services and capital evaluation throughout the Group. Gjensidige has developed an internal stochastic simulation model for its insurance operations, based on state-of-the-art modelling software. This Within the organisation of the Deputy CEO, the responsibility of execution model, called an ALM- (Asset Liability Management) or DFA- (Dynamic of the investments on one hand and the monitoring and reporting on the Financial Analysis) model, has been developed over several years. The model other is split into two different organisational units to ensure independent is customised to Gjensidige’s risk profile and provides fully stochastic simula- follow-up. The unit responsible for execution is also independent from the tions of both insurance and investment operations. This model is a key tool 84 | GJensidige annual report 2007

for aggregated risk measurement and capital management as it provides an General insurance overview of the aggregated risk profile. The main areas of use of the internal Frequency and severity of claims model are: The frequency and severity of claims can be affected by several factors. • Overall risk profile and capital need The different factors will depend on the products, or lines of business (LOB) • Capital allocation considered. An increase in the frequency of claims can be due to seasonal • Strategic asset allocation effects and more sustainable effects. During winter season snow and cold • Requirements and optimization of reinsurance purchase weather will cause an increase in the frequency of claims in Motor insurance. In Property insurance cold winter will cause an increase in the frequency of Using the internal model, with the definition of internal capital as stated claims due to frozen water pipes and increased use of electrical power and above, the internal capital requirement (measured as NGAAP book equity) open fire places for heating of the houses. More permanent shift in the level for the parent company was set at 3,500 MNOK at the end of 2007, of frequency of claims may occur due to e g change of customer behaviour compared to 3,800 MNOK per end of 2006. The reduction was due to a and new types of claims. The effect on the profitability of a permanent more conservative asset allocation going into 2008. It is this capital that is change in the level of the frequency of claims will be high. In Motor insurance allocated to the insurance business, in order to set a more correct cost of in Norway, for example, an increase in the level of the frequency of claims capital in the pricing of insurance business. The remaining capital is regarded with 1 %-point will increase the loss ratio by 4 %-points. as an additional buffer and available to finance the Group’s strategic growth targets. The capital needed for the insurance operations is allocated further The severity of claims is affected by several factors. In some LOBs, with to products and business units according to their contribution to overall risk. relatively few claims, the severity may be heavily influenced by large claims. By allocating capital to lines of business depending on risk, Gjensidige is able The number of incurred large claims during a year varies significantly from one to price cost of capital in the different products in a more correct way. year to another. This is typically for the commercial market. In most LOBs the underlying development of the severity of claims is influenced by inflation. The internal model is a key element in the analyses and decisions concer- The inflation may be driven by the development of consumer price index ning strategic asset allocation and purchase of reinsurance. By use of the (CPI), salary increases, social inflation and the price for material and services internal model the effect, in terms of both risk and return, of a large number purchased with claims settlement. In Property insurance the inflation will of different asset allocations or various retention limits may be analysed consist of CPI and an increase in building costs, which in the past has been and evaluated. In the evaluation of various asset allocations or reinsurance slightly higher than CPI. For insurances of the person the insurance policies structures, the cost of capital perspective is taken into account and the key are divided into two main groups, one with fixed sum insured and another objective is to optimize the economic value for the company. part were the compensation is adjusted by a public/government index. This is for instance the case in Workers’ Compensation. The Group writes Workers’ Insurance risk Compensation in Norway and Denmark. The regulation for this LOB is quite The risk under any one insurance contract is the probability that the insured different in these countries. In Norway Workers’ Compensation covers both event occurs and the uncertainty of the amount of the resulting claim. By accident and diseases, in Denmark diseases are covered by a governmental the very nature of an insurance contract, this risk is random and therefore body. The compensation in Norway is exclusively restricted to lump sums, unpredictable. in Denmark the compensation is both lump sums and annuity payments. Annuity payments are calculated according to assumptions about mortality, For a portfolio of insurance contracts where the theory of probability is interest rate and retirement age. For bodily injuries the severity of claims is applied to pricing and provisioning, the principal risk that the Group faces also influenced by court awards, which tend to increase the compensation under its insurance contracts is that the actual claims and benefit payments more than the general inflation. This is also a significant factor, due to the exceed the carrying amount of the insurance liabilities. This could occur be- long period typically required to settle these cases. cause the frequency and/ or severity of claims and benefits are greater than estimated. Insurance events are random, and the actual number and amount Gjensidige manages these risks mainly through closely supervision of the de- of claims and benefits will vary from year to year from the level established velopment for each LOB, underwriting strategy and proactive claims handling. using statistical techniques. The monthly supervision of the results by each LOB contains an overview of both premium and loss development. If there is an adverse development of Experience shows that the larger the portfolio of similar insurance contracts, the profitability, sufficient efforts will be put in force. This includes necessary the smaller the relative variability about the expected outcome will be. In premium increases to ensure that the profitability is within the accepted level. addition, a more diversified portfolio is less likely to be affected by a change The analysis of the profitability can be tracked further to different groups of in any subset of the portfolio. The Group has developed its insurance under- customers and segments. The underwriting strategy attempts to ensure that writing strategy to diversify the types of insurance risks accepted and within the underwritten risks are well diversified in terms of type and amount of risk, each of these categories to achieve a sufficiently large population of risks to industry and location of the risks. For location of the risks, for the time being reduce the variability of the expected outcome. restricted to Norway, Gjensidige has installed a map system, which keeps track of the location of properties by a unique id-number. Underwriting limits Factors that aggravate insurance risk include lack of risk diversification in are in place to enforce appropriate risk selection criteria and ensure that ac- terms of type and amount of risk, geographical location and type of industry cepted risks are within the limits of our reinsurance contracts. Gjensidige has covered. Gjensidige Forsikring writes general insurance in Norway and further the right not to renew individual policies, it can impose deductibles through the foreign subsidiaries in Sweden, Denmark and the Baltic. General and it has the right to reject the payment of a fraudulent claim. Insurance insurance in those countries has a lot of similarities. The description of risks contracts also entitle Gjensidige to pursue third parties for payment of some related to the insurance business is, with a few exceptions, common for the or all costs (for example, subrogation). Group. In case of significant deviations between the countries, they are com- The underwriting guidelines are in all companies within the common accep- mented separately. tance of risk level. GJensidige annual report 2007 | 85

The claims handling procedures also include a clear strategy and routines for As from 2007 Gjensidige Forsikring is the main reinsurer for its subsidiaries, this is GJ ENSI D I G E purchasing material and services in an optimal manner. The routines are to and the subsidiaries’ reinsurance exposure is included in the outwards reinsu- use purchase agreements to ensure the quality of our benefits to our custo- rance programme for the Gjensidige group. mers and to reduce the inflation risk. Sources of uncertainty in the estimation of future claims payments Concentration of insurance risk Claims on all insurance contracts are payable on a claims-occurrence basis. In 2007 the insurance portfolio of the Gjensidige group still has its concen- Gjensidige is liable for insured events that occurred during the term of the tration in the Norwegian general insurance market, with operations in other contract, even if the loss is discovered after the end of the contract term. As Nordic countries and the Baltic. a result, claims are settled over a long period of time, and an element of the claims provision relates to incurred but not reported claims (IBNR). Table 1 – Gross written premium per geographical area There are several variables that affect the amount and timing of cash flows Written Written from the insurance contracts. These mainly relate to the characteristics premium Per cent premium Per cent of the different types of risks covered and the applied risk management NOK million 2007 of total 2006 of total procedures. The compensation paid is according to the terms specified in the

Norway Private 7,911 50 % 7,620 55 % insurance contract. Compensation for claims with respect of bodily injuries operations Norway Commercial 5,414 34 % 5,705 41 % are calculated as the present value of lost earnings, rehabilitation expenses Total general insurance Norway 13,325 85 % 13,325 97 % and other expenses that the injured party will incur as a result of the accident Gjensidige Pensjon og Sparing 496 3 % 108 1 % or disease. In most cases in Norway, and also in the other countries where Other Nordic 1,473 9 % 273 2 % Gjensidige operates, personal injury claims are paid as a lump-sum. An excep- Baltics 433 3 % 81 1 % tion from this is Workers’ Compensation claims in Denmark, where claims may Total 15,727 100 % 13,787 100 % be paid as annuity payments. the calculations for those claims will include information about the severity of the loss, mortality rates, the number of ye- Table 2 – Gross written premium per product group ars until retirement age and assumptions about future social welfare inflation. Mortality rates are from tables approved by the supervisory authorities. Written Written premium Per cent premium Per cent The estimated cost of claims includes direct expenses to be incurred in sett- NOK million 2007 of total 2006 of total ling claims, net of the expected subrogation value and other recoveries. Gjen- Accident and health sidige takes all reasonable steps to ensure that it has appropriate information workers’ compensation 1,380 9 % 949 7 % regarding its claims exposures. However, given the uncertainty in establishing Other insurances of the person 2,551 16 % 2,723 20 % claims provisions, it is likely that the final outcome will prove to be different mana Motor, third party liability 2,300 15 % 1,993 14 % from the original liability established. The liability for these contracts comprise Motor, other classes 3,048 19 % 2,581 19 % a provision for IBNR, a provision for reported claims not yet paid (RBNS) and a Marine, aviation and transport 404 3 % 295 2 % provision for unexpired risks at the balance sheet date. The amount for bodily

Fire and other damage to property 4,234 27 % 3,935 29 % injury claims is particularly sensitive to the level of court awards and results to the g ement Third-party liability 354 2 % 285 2 % development of legal precedence on matters of contract and tort. Liability Other general insurance 959 6 % 918 7 % contracts are also subject to the emergence of new types of latent claims, but Gjensidige Pensjon og Sparing 496 3 % 108 1 % no allowance is included for this at the balance sheet date. Total 15,727 100 % 13,787 100 % The estimation of IBNR is generally subject to a greater degree of uncertainty than the estimation of the cost of settling claims already notified (RBNS), The 2007 amounts in tables 1 and 2 are adjusted for internal reinsurance. where information about the claim is available. IBNR claims may not be ap- parent to the insured until many years after the event that gave rise to the The reinsurance programme for the Gjensidige group, mainly non-propor- claims. tional reinsurance, is based on calculations of exposure, claims history, and capital structure. The limits for the reinsurance programme for each year are In estimating the liability for the cost of reported claims not yet paid, Gjensi- set out by the Board of Directors. Gjensidige Forsikring administers the rein- dige considers any information available from loss adjusters and information surance programme for fire insurance, which also includes fire insurance for on the cost of settling claims with similar characteristics in previous periods. the mutual fire insurers. In Norway the exposure to Natural disasters is limited All claims are assessed on a case-by-case basis by a claims handler. Claims through Gjensidige’s compulsory membership in the Norwegian Natural Perils with potential for distortive effects of their development are handled sepa- pool. the pool has its own reinsurance programme, which further reduces the rately and projected to their ultimate by an additional provision (e g bodily risk exposure. Insurance risks are deemed to be moderate with the reinsu- injury claims in Motor Insurance). Where possible, Gjensidige adopts multiple rance cover the group has in place. techniques to estimate the required level of provisions. This provides a greater understanding of the trends inherent in the experience being projected. The Other concentration risk is aggregation of fire risks within Property and projections given by the various methodologies also assist in estimating the aggregation of personal risk in Workers’ Compensation. These risks are also range of possible outcomes. The most appropriate estimation technique is measured by analysing historical events, studying the insurance values expo- selected taking into account the characteristics of the business class and the sed, and managed by reinsurance programmes. extent of the development of each accident year.

The development of the estimate of ultimate claim cost for claims incurred in a given year is presented in table 4. This gives an indication of the accuracy of 86 | GJensidige annual report 2007

Gjensidige’s estimation technique for claims payments. The key statistical methods used are:

Insurance contracts are often classified as risks that are short-tail and risks • Log-linear methods, which use exposure data and historical data to esti- that are long-tail. Short-tail risk is characterized by that the period between mate the pattern of late reported claims, to estimate the IBNR provision. the occurrences, reporting and final settlement of claims is short. Long- • Chain ladder methods, which use historical data to estimate the paid and tail risk is the opposite. the period between the occurrence, reporting and incurred to date proportions of the ultimate claim costs. settlement of claims is long. In Property and Motor insurance (excluding • Expected loss ratio methods (Bornhuetter-Ferguson), which use bodily injury claims) the claims are reported soon after occurrence, while for Gjensidige’s expectation of the loss ratio for a class of business. insurances of the person the claims may be reported several years after the occurrence and settled several years after they were reported. The provisions The methods used will depend on the LOBs and the time period of data for IBNR for short-tail risks are relatively small, for long-tail risks the provisions available. To the extent that these methods use historical claims development for IBNR may constitute a substantial part of the total loss provision. information. they assume that the historical claims development pattern will occur in the future. There are reasons why this may not be the case. which, The duration (time between the occurrences of claims until finally settled) insofar as they can be identified, have been allowed for by modifying the differs significantly between the types of risk considered. Long duration will models. Such reasons include: increase the company’s exposure to inflation. In Motor, physical damage, the duration is less than a year, while in Motor bodily injury claims the average • Economical, legal and social trends (e g a shift in court awards). duration is almost 8 years. In Property insurance the average duration is 1-2 • Changes in the mix of insurance contracts incepted. years, in Workers’ Compensation in Norway the average duration is 6 years. • The impact of large losses. In Group Life business the duration differs significantly between death and disability coverage. Workers’ Compensation in Denmark has a particularly long IBNR provisions and provisions for outstanding claims are initially estimated at duration due to the annuity part. For the other LOBs in the subsidiaries the a gross level, and a separate calculation is carried out to estimate the size of duration is in line with the similar LOBs in Norway. In the Baltic the duration is reinsurance recoveries. Gjensidige purchases almost exclusively excess of loss significantly shorter due to few bodily injury claims. reinsurance contracts with sufficiently high retentions for only relatively few, large claims to be recoverable. Average duration for insurance products in the Group Figure 3. The actuaries in the Group working with technical provisions meet regularly as Motor, PD a part of keeping a high professional level, and they all have access to a com- Motor, BI mon actuarial software system for calculating loss provisions. Workers’ Compensation (NO) Workers’ Compensation (DK) Liability Gjensidige has also recently used external actuarial firms to make a best Accident estimate of the technical provisions. This is done to get a second opinion of Group Life, Death Group Life, Disability the level of the provisions. The deviation between the internal and external Property, Private estimates of the loss provisions is in the range 1-2 % on a consolidated basis. Property, Commercial Marine / Cargo Sensitivity analysis – underwriting risk 0 2 4 6 8 10 Years Underwriting risk and provision risk are important elements in insurance risk for an insurance undertaker. Underwriting risk is the risk that an insurer does Process used to decide on assumptions not charge premiums appropriate for the insurance contracts. The pricing The risks associated with insurance contracts are complex and subject to a processes for the different insurance products involve estimates of future number of variables that complicate quantitative sensitivity analysis. frequency and severity of claims, based on statistics from internal and external sources. Even if the underwriting criteria are adequate and the premium The Gjensidige group uses standard actuarial models based on statistical in- calculations are performed on a good statistical basis, the claims cost may de- formation. The provisions related to reported claims are assessed individually viate from the expected level, – due to large claims, natural catastrophes etc. by a claims-handler and registered into the claims system. The development of provisions for notified claims is supervised by the claims managers. In case Gjensidige Forsikring and its subsidiaries have detailed underwriting guideli- of adverse development necessary efforts are put in force. IBNR provisions nes, intended to ensure good quality in the assessment and quantification are based on empirical data, where the basis is the time it takes from a loss of insured risks, define risk types and limits for sums insured that may be or injury occurring (date of loss or injury) until it is reported (date reported). accepted, thus ensure control of the risk exposure in the insurance portfolio. Based on experience and the development of the portfolio statistical models are prepared to calculate the scope of post-reported claims. The fit of the See Table 3 below for a sensitivity analysis of the underwriting risk at 31 model is measured by looking at the deviation between earlier post-reported December 2007. The table shows the impact, before tax, on profit or loss for claims and those estimated by the model. the year and equity at the end of the year of changes in Combined Ratio (CR). CR is the key measure of profitability in the non-life insurance business. The calculations show the effect of a change of 1 %-percentage in CR for each segment. An increase in CR will be caused by an increase in the loss frequency and/or an increase in the severity. In some LOBs there is a risk that the loss frequency and the severity of claims are correlated so that an increase in the underlying insurance risk may affect both the frequency and severity of claims. GJensidige annual report 2007 | 87

Table 3 – Sensitivity analysis, insurance risk Sensitivity analysis – provision risk this is GJ ENSI D I G E The estimation of technical provisions for an insurance portfolio represents NOK million an approximation of future cash flow for the claims payments, and there will Change in CR (1%-percentage) 2007 2006 always be an element of uncertainty in such calculations. Provision risks relate Norway, Private 77.3 73.4 to this kind of uncertainty. The uncertainty depends on the nature of the Norway, Commercial 50.7 55.3 risk. Risks with a short duration are less exposed to changes that will affect Other Nordic 16.9 2.6 the future payments. Bodily injury claims are on the other hand very sensitive Baltics 3.6 0.7 regarding changes in e g inflation and court awards. The effect of court awards are taken into account as soon as they are known. In cases when a Gjensidige Pensjon og Sparing 0.3 0.1 judgement is not yet final and legally binding, the effect on the loss provision Total 148.8 132.0 is based on a probability weighted estimate of the possible outcomes. The effect of a change in the frequency and severity of claims (for the Nor- wegian business) are shown in the tables below. For LOBs with nominal long-tailed provisions the effect of a 1 %-point increase in inflation is proportional to the average duration (in number of years). Change in loss frequency (1 %-percentage) If the average duration is 5 years, the loss provision will increase by 5 %. NOK million 2007 2006 operations

Norway, Private 809 644 For the nominal long-tailed provisions in Norway an increase in the assumptions regarding future inflation by 1 %-percentage will cause an increase in the Norway, Commercial 896 1.093 loss provision of 595 MNOK (571 MNOK in 2006). Total Norway 1,704 1,737

Change in severity of claims (+10 %) Interest risk is a significant risk factor associated with Workers’ Compen- sation business in Denmark. This risk is an expression for loss/profit due to NOK million 2007 2006 changes in market rates. There is interest- and inflation risk associated with Norway, Private 575 481 the liabilities (technical provisions). The risk is hedged by use of interest and Norway, Commercial 432 502 inflation swaps. Total Norway 1,007 982 Due to the size and limited exposure to bodily injury claims within the other Gjensidige has a reduced portfolio of insurances of the person, especially in companies in the Group the total exposure to inflation risk is just slightly Commercial, Norway, in 2007 compared to 2006. This implies that the claims higher than the exposure in Norway at a group level. frequency for the Commercial segment has increased from 2006 to 2007, but the average claim has actually decreased. The effect of an increase in mana both the loss frequency of losses and the severity will then have less effect in 2007 than in 2006. mn results g ement Table 4 – Analysis of claims development

Gross of reinsurance – Accident year NOK million 2002 2003 2004 2005 2006 2007 Total

Estimated claims cost At the end of the accident year 8,605 9,505 9,775 10,663 10,859 11,465 - One year later 8,639 9,569 9,741 10,649 10,799 - Two years later 8,655 9,574 9,754 10,648 - Three years later 8,671 9,611 9,713 - Four years later 8,723 9,566 - Five years later 8,722

Estimate as at 31.12.2007 8,722 9,566 9,713 10,648 10,799 11,465 Total disbursed (7,669) (8,235) (7,361) (7,389) (6,377) (4,866) Loss provision 1,054 1,331 2,352 3,259 4,422 6,599 19,017 Prior years loss provision (before 2002) 2,906 Gjensidige Baltic 87 Claims handling expenses 1,136 Total 23,147 88 | GJensidige annual report 2007

Table 4 – Analysis of claims development (cont.)

Ceded reinsurance –Accident year 2002 2003 2004 2005 2006 2007 Total

Estimated claims cost At the end of the accident year (535) (207) (105) (174) (76) (188) - One year later (579) (226) (114) (174) (81) - Two years later (550) (222) (139) (179) - Three years later (564) (215) (135) - Four years later (584) (211) - Five years later (567)

Estimate as at 31.12.2007 (567) (211) (135) (179) (81) (188) Total disbursed 498 205 128 147 61 63 Loss provision (68) (6) (7) (32) (21) (124) (258) Prior years loss provision (before 2002) (30) Gjensidige Baltic (10) Claims handling expensese 0 Total (298)

Own account – Accident year 2002 2003 2004 2005 2006 2007 Total

Estimated claims cost At the end of the accident year 8,070 9,298 9,671 10,488 10,783 11,278 - One year later 8,060 9,343 9,627 10,475 10,718 - Two years later 8,105 9,352 9,616 10,470 - Three years later 8,107 9,396 9,579 - Four years later 8,139 9,355 - Five years later 8,156

Estimate as at 31.12.2007 8,156 9,355 9,579 10,470 10,718 11,278 Total disbursed (7,170) (8,030) (7,234) (7,242) (6,317) (4,803) Loss provision 985 1,325 2,345 3,228 4,401 6,475 18,759 Prior years loss provision (before 2002) 2,876 Gjensidige Baltic 77 Claims handling expenses 1,136 Total 22,849

The subsidiaries in Denmark and Sweden are contained in the table, from 2002. The loss provision in Gjensidige Baltic, as at 31 December 2007, is shown separately.

Life insurance based on tables of expectations regarding marital status, number of children, Gjensidige Pensjonsforsikring (GPF) started its operations as a new life insu- age, etc. Such premium calculations in GPF are based on assumptions from rance company in 2006. By the end of 2007 the life insurance risks organised the new K2005, together with current updated mortality tables. in GPF are mainly divided into two parts: This risk portfolio is so far limited. it includes a total amount of members slightly above 2,000 as per 31 December 2007 (600 as per 31 December • Risk riders (death and disability) related to group pension plan (defined 2006). contribution plan exclusively designed for employees) • Stand alone individual disability risk Total sum at risk – death among these as at 31.12.2007 was NOK 950 mill (2006: 409 mill), with average sum NOK 455 thousands among these (2006: Death 69 thousands). It is assumed that the claims are reported shortly after the The risks regarding mortality are related to potential spouse- and child event. By the end of 2007 no claims were reported. pension in case of death of a member in the pension scheme. The period of risk is further limited to the member’s time in service and also to a maximum Disability age of 67. These risks are related to disability pension and/or waiver of premium according to contribution plan. The payments are at latest finished when reaching The sum at risk for each event depends on the specified pension plan regular pension age. This normally occurs at age of 67. (amount), total period of yearly payment and number of beneficiaries. The child pensions are normally paid until reaching age of 21, and the spouse The potential claims will normally encounter after a period of twelve month of pensions for life. No specified information of relatives is given for any of the continuous sick leave. members of the pension scheme. Therefore the risk premium calculations are GJensidige annual report 2007 | 89

The sum at risk for each event depends on the specified pension plan programme, with this exposure included in the Group’s general outward this is GJ ENSI D I G E (amount) and total period of yearly payment. GPF uses assumptions from reinsurance programme, resulting in synergies of scale and diversification in the new K2005 together with developed disability tables based on recent the Group’s programme. In the other countries the group is operating, natural updated statistics from the Norwegian insurance business in general. In the catastrophe claims are included in the ordinary property reinsurance covers. premium calculation implementation of different risk classes related to the An event resulting in claims in several countries will be aggregated into one employer is also in effect. event in respect of the reinsurance covers.

The portfolio content of around 56,000 members and total sum at risk – Overall management of financial risk disability as at 31.12.2007 was NOK17,300 mill (2006: 4,200 mill), and with Financial risks is a collective term of various risks related to financial assets. an average individual risk of NOK 309 thousands (2006: 154 thousands). It is Financial risk can be broken down into market, credit and liquidity risk. These assumed that most of the claims are reported shortly after end of the twelve risks arise in the investment activities in the Group, and managed in an ag- month period of sick leave. This insurance risk was mainly not in effect before gregated view and controlled in the investment policies of the Group and its the beginning of 2007. By the end of 2007 less than 10 claims were reported. subsidiaries. One exception is credit risk related to reinsurance receivables and all of the claims were related to the 2006 risk. This was also according to reinsurers’ share of claims provisions. expectation.

In the pensions and savings business, due to the focus on defined contribu- operations Frequency and severity of claims tion products and savings advice, the exposure to financial risks as mentioned The frequency of claims can be affected by several factors. A large increase above is limited. Due to capital in- and outflows there will be a small trading in the frequency of claims regarding disability is expected to be due to social portfolio (12 MNOK as at 31.12.2007) acting as a buffer against these flows. effects. However, this will develop during a period of several years and can be Furthermore, there is a small portfolio of paid-up policies / cash-equivalent handled with an increase in premium level in the future, since GPF operates transfer values (90 MNOK as at 31.12.2007) where there is a guaranteed with annual risk premium. minimum return to the policyholders and thus a financial risk to the Group. The average guaranteed minimum return was 3.8 % as at 31.12.2007. Since the business is fairly new GPS manages risks at this stage mainly through supervising the development of the portfolio and monitoring under- The banking business is exposed to credit risk in its loan portfolio and liquidity writing policy and interest rate risk through any mismatches between assets and liabilities.

GPF has an aggregate stop loss reinsurance programme with Gjensidige The Group’s insurance companies hold financial assets financed partly from Forsikring. pending claims payments and partly from own funds. The assets are likewise held partly to match inflation and interest rate risk related to the value of fu- Reinsurance ture claims payments, partly to generate a competitive return at an acceptable mana Gjensidige purchases reinsurance to protect the Group’s capital position, and level of risk. Through these assets, the Group is exposed to a wide range of it is thus a capital management tool. The analysis of which reinsurance pro- financial risks. The key risk is that the return on the financial assets is insuf- grams to purchase utilises the same models and methodology as for setting ficient to meet the Group’s financial targets. The most important components

the strategic asset allocation and the internal, risk based capital requirement. of this financial risk are equity price risk, real estate price risk, interest results rate risk g ement The maximum retention levels are set by the Board of Directors, whereas and credit risk. Although the investment of assets and the handling of these the Reinsurance department handles the purchasing and follow-up of the risks are subject to continuous improvements, the Group has not materially reinsurance activities. changed the processes used to manage its risks from previous periods. The asset allocation and other risk management policies are approved by the Gjensidige’s reinsurance programme, due to its focus on capital management, Board of Directors in each company. is solely non-proportional reinsurance. The maximum retention level as set by the Board is currently 250 MNOK, but as a rule the company purchases The various risk exposures in the insurance business are presented to the reinsurance to limit any single claim or event to 100 MNOK. Given the cur- Board of Directors annually in connection with setting the strategic asset rent market conditions in the reinsurance market, covers are frequently also allocation. The strategic asset allocation represents the reference for the bought with lower retentions, so that the retention level varies from 25 to administration, and the Board also sets upper and lower limits per asset class 100 MNOK depending on line of business. It is based on analysis of exposure, within which the actual asset allocation needs to be at any time. The table claims history, and Gjensidige’s capital structure. Gjensidige Forsikring handles below gives the main overview of the asset allocation for Gjensidige Forsikring the reinsurance for the whole Gjensidige Group, by acting as reinsurer to the at year-end 2006 and 2007. The actual asset allocation will vary throughout subsidiaries and including this inward reinsurance in the reinsurance covers the year according to market movements, tactical allocation and the risk si- purchased externally (outward reinsurance). The reinsurance programme for tuation. Specifically, in the second half of 2007 the allocation to equities was property insurance also includes the mutual fire insurers. The subsidiaries’ reduced, and the allocation to fixed income instruments increased. Within reinsurance programmes generally have a lower retention, due to their smaller the fixed income portfolio the allocation to global credit risk was increased, size and capitalization. The difference between the retention levels is risk held through investments in global investment grade and high yield bonds. For the for own account in Gjensidige Forsikring. first half of 2007, the allocation was fairly stable, although there was a shift out of real estate and into fixed income. In Norway the exposure to Natural disasters is handled through the compulsory membership in the Norwegian Natural Perils pool. Through this arran- In terms of concentration risk, the main risks for the Group remain the shares gement, Gjensidige Forsikring is exposed to the company’s share of the claim in Storebrand and the exposure to office properties in the Oslo area. Concen- for the market as a whole, instead of the claims hitting Gjensidige’s customers tration risk is further analysed under the various market risk factors. only. The pool has its own reinsurance programme, which further reduces the risk exposure. Starting 2008, Gjensidige self-reinsures 10% of the pool’s 90 | GJensidige annual report 2007

Table 5 – Asset allocation In addition stress testing is done on the investment assets relative to the 31.12.2007 31.12.2006 buffer capital (defined as capital above legal minimum requirements), and NOK million %-share NOK million %-share reported regularly to the Board of Directors. The purpose of the stress test Money market 11,952 25.5 % 13,205 31.5 % is not to analyse the effect on profit & loss nor book equity, but rather the effect on the capital buffer. Bonds HTM 9,248 19.8 % 7,693 18.3 % Bonds other 8,076 17.3 % 669 1.6 % This stress test as of year end is shown below (Group figures). The capital Equities 6,876 14.7 % 8,506 20.3 % buffer is here relative to the capital adequacy requirement for the Group, Real estate 7,256 15.5 % 8,235 19.6 % which is calculated according to Norwegian GAAP. In the calculation of capital Hedge funds 2,920 6.2 % 3,065 7.3 % adequacy there is a reduction in the core capital related to ownership of other Other 477 1.0 % 594 1.4 % financial institutions as well as for unrealized gains on investment properties Total 46,803 100.0 % 41,966 100.0 % (2007 only). A fall in the value of these assets will therefore not have full effect on the capital buffer. Specifically, a 30% fall in the value of the shares Equity price risk is defined as a loss in value from a fall in equity prices. This in Storebrand has no effect on the capital buffer. Furthermore, the market is analogue for real estate price risk. See stress test and sensitivity analysis value of properties for own use is far larger than their book value (see table below for quantification. 15), implying that a 15% fall in the value of these would have no effect on the capital buffer either. Tax effects are not included, neither is the effect on Interest rate risk is defined as the loss in value resulting from a change in inte- risk-weighted assets from the stress test scenario. rest rates, and is viewed both from the asset-only perspective and in relation to the interest rate sensitivity of the liabilities. The Board sets a limit on the The stress test does not include any scenario for the non-insurance part of interest rate risk in the total fixed income portfolio (excluding the HTM bond the Group. For 2008 the stress test will be amended to include a.o. this and portfolio), both for 2006 and 2007 at 300 MNOK (loss given a 100 bps shift the effect of credit risk. Private equity investments are predominantly in in the yield curve) for Gjensidige Forsikring excluding subsidiaries. Norway, and are thus given a 30% fall in value. Hedge funds are included in other assets (10%). Lindorff is associated company booked according to the Currency risk is defined as the loss given an adverse movement in exchange equity method and not included in the stress test. rates. Generally, currency risk in the investment portfolio is hedged close to 100%, except for smaller mandates where active currency management is a The large capital surplus is representative for the situation throughout part. the year, although the precise figures will vary along with changes in asset allocation and year-to-date profit. The reduction in the capital buffer from Credit risk is defined as the loss arising from an issuer defaulting on its obliga- 2006 to 2007 is mainly due to increased intangible assets related to the tions. Credit risk is managed both via credit lines for named counterparties as acquisitions of KommuneForsikring and Tennant and the increased ownership well as lines based on official credit ratings, as well as diversification require- in Storebrand. ments on mandates for corporate bonds. Credit risk in relation to reinsurance is handled through minimum rating requirements for reinsurance companies Table 6 – Stress test financial assets and close follow-up of outstanding claims. Event Liquidity risk is defined as the inability to meet payments at due date, or NOK million 31.12.2007 31.12.2006 the need to at a high cost realize investments to meet payments. The Board 30% fall Nordic/Baltic equities (393) (279) of Directors has set minimum limits for the amount of assets to be realized 20% fall global equities (408) (908) without undue transaction costs within various time frames, based on an 100 bps parallell shift up in interest rates (561) (225) analysis of the insurance operations. The actual asset allocation is significan- 15% drop in estate value (380) (1,096) tly more liquid than the board-approved limits. 10% drop value other assets (339) (366) Decrease in value of stress test (2,080) (2,874) Gjensidige’s strategic asset allocation is determined annually by the board of directors. The main goal of the strategic asset allocation is to optimize the Capital buffer 6,632 9,766 balance between expected financial returns and risks. The starting point is the Capital surplus in stress scenario 4,552 6,892 insurance business’ need to balance expected future outflows against inflows from investments, while other funds in the insurance business are invested to optimize return on equity in a well-diversified manner. Market Risk Market risk can be divided into equity price risk, interest rate risk, commodity The overall risk for the annual net profit for Gjensidige Forsikring is measured price risk, property price risk and foreign exchange risk. continuously through an internally developed simulation model against targets set by the Board of Directors, and if the risk is deemed too high the Equity price risk strategic asset allocation is changed. This implies that if, intra-year, there is The equity portfolio of Gjensidige is globally diversified, including emerging a prolonged period of negative returns, or a sharp fall in asset values, the markets and unlisted (private) equity. Except from the long-term holding in allocation to equities will be reduced and the allocation to fixed income Storebrand there are no significant single holdings, see the table on concen- increased. The risk of falling below this minimum annual net profit is reported tration risk below: regularly to top management and the Board. In 2007 this was part of the reason for reducing the equity allocation throughout the year. GJensidige annual report 2007 | 91

Table 7 – Top 10 equity exposure as at 31.12.2007 Table 9 – Scenario test of equity portfolio this is GJ ENSI D I G E Event impact on book equity NOK million Book value NOK million 31.12.2007 31.12.2006 Company 10 % drop in equity prices (670) (836) Storebrand 2,766.0 10 % increase in equity prices 670 836 Lindorff 180.3 Sector Asset Management 34.5 Gjensidige invests in a number of private equity funds as well as fund-of- Orkla 31.4 funds. The total number of funds as at 31.12.2007 is 36 private equity and StatoilHydro ASA 29.5 property funds, with a total invested amount of 1,017 MNOK and in addition Gazprom 29.0 committed capital, not-invested, of 1,222 MNOK. The investments have been Exxon Mobil 27.3 made over several years with an expected realization over the next 1-10 years. PetroBras 25.4 Focus has so far been in the Nordic region. Gjensidige will seek to take an General Electric 24.0 active role through a place on the board or advisory committee of the diffe- EON 21.4 rent funds. All commitments to funds are based on a thorough due-diligence Total 10 largest 3,168.8 process of management, as well financial and legal conditions of the individual operations Total equities 6,875.7 private equity manager. The portfolio consists of a mixture of venture and buy-out strategies. For investments outside the Nordic region, Gjensidige will Table 8 – Top 10 equity exposure as at 31.12.2006 generally seek to invest through fund-of-funds, in order to obtain an additional quality assurance in the fund manager selection. NOK million Book value

Company Table 10 – Largest private equity funds Storebrand 1,979.1 NOK million Book value DnB NOR ASA 509.2 Lindorff 144.0 Fund Deutsche Bank DJ EURO STOXX 50 DVG ETF 113.7 HitecVision Private Equity IV LP 103 Norsk Hydro 98.8 HitecVision Private Equity III AS 101 Exxon Mobil 58.2 Norvestor IV LP 77 Orkla 53.7 Teknoinvest VIII KS (inkl. Teknoinv. VIII (GP) KS) 75 Statoil 50.4 FSN Capital II LP 65

General Electric 48.8 Total 5 largest PE funds 420 mana Telenor 37.5 Total equities 6,876 Total 10 largest 3,093.4 Interest rate risk Total equities 8,505.5

Within the Group’s insurance companies overall exposure to interest results rate risk g ement In terms of geographical exposure, the equity portfolio is highly geared is managed by matching the overall duration and approximately the payment towards Norway, as shown in the following figure. However, excluding the pattern of the insurance liabilities through a portfolio of fixed income instru- long-term investment in Storebrand, it is a very well diversified across develo- ments, mainly money market instruments and held-to-maturity bonds. Since ped and emerging markets. insurance liabilities are generally undiscounted in the accounts, this implies that from an accounting perspective insurance liabilities are exposed to chan- Figure 4 – Equity exposure per geography (Group figures as at 31.12.2007) ges in inflation (but not to interest rates). An economic perspective, however, argues for hedging of interest rate risk, as the present value of liabilities are 11% exposed to changes in the real interest rate. From an accounting perspective the risk from choosing this hedging strategy is reduced, as a major part of the bond portfolio is classified as held-to-maturity. Furthermore, from an overall 29% economic perspective the inflation risk is partly reduced by holding real assets Norway (i.e. property). The market for real interest rate (inflation protected) bonds 58% Other Nordic and Baltics World (developed markets) in NOK is not yet well enough developed that the company can hedge this Emerging markets 2% inflation risk directly.

In the Danish operations of Kommunernes Arbejdsskadeforsikring, the long To show the sensitivity of the equity portfolio to a fall in equity prices, the ta- tail workers’ compensation line of business is hedged against changes in the ble below shows a reasonably possible scenario. The figures show the effect real interest rate through swap contracts. The risk relates to outstanding on equity, but do not take into account taxation effects. It includes shares premium- and claims provisions of approx. 3,000 MNOK, where the claims both in the trading portfolio and available-for-sale. As the table demonstra- are paid out as annuities whose payments are linked to Danish CPI. The risk tes, the sensitivity is lower at year-end than at the beginning of 2007 due to to the present value of these annuities is hedged through a series of swap the above-mentioned reduction in allocation to equities in the second half of contracts, stretching out for 40 years, covering inflation and interest rate risk 2007. The P&L effect would have been less due to the shares in Storebrand separately so that in net real interest rate risk is removed. The swap contracts being classified as available for sale. As at 31.12.2007 (31.12.2006) the are reset each year, reducing counterparty risk. effect would have been -542 MNOK (-638) in case of a drop in equity prices, while the effect of increase of 10% would have been 393 (638). 92 | GJensidige annual report 2007

The table below shows the maturity profile of the Group’s fixed income port- Table 12 – Sensitivity test fixed income folio. It does not include the above-mentioned swap arrangement, which has a NOK million 31.12.2007 31.12.2006 limited book value, but instead the actual fixed income portfolio in Kommuner- nes Arbejdsskadeforsikring: 100 bps parallell shift up (321) (52)

Table 11 – Maturity (years) profile fixed income portfolio The graph below shows the expected payout pattern for the Group’s premium and claims provisions as at 31.12.2007 and 31.12.2006. Approx. one- Book value third of the provisions are paid out within 1 year, and the average duration is NOK million 31.12.2007 31.12.2006 somewhat above 3 years. A subset of the assets will match these cash flows, Maturity but the Group has no formal policy for the maximum allowable deviation. 0-1 13,771 15,555 1-2 5,068 1,333 Figure 5 – Payout pattern of insurance liabilities 2-3 2,909 2,066 NOK million 3-4 2,262 891 10000 4-5 1,602 1,358 5-6 1,249 3 8000 6-7 261 324 7-8 259 6000 8-9 465 110 9-10 1,121 (74) 4000 >10 309 1 2007 2006 Total 29,276 21,566 2000 Years 0 Furthermore the interest rate sensitivity of the fixed income portfolio is shown >202019181716151413121110987654321 in the table below. The sensitivity does not include held-to-maturity bonds. The effect on profit and loss and book equity are the same. No effect on Another way to look at the interest rate risk is through the repricing structure taxation is included, and the effect of the swap is also not included. of the portfolio, and the focus is then not on the immediate effect on value as above, but on the effect of an interest rate change on the interest income over 1 year. This is shown first for the insurance operations, which (from an accounting perspective) have no interest sensitive liabilities except from the Danish workers’ compensation portfolio, which is hedged through swaps. The table thus only includes the asset side. The effect of an immediate 1% point fall in interest rate will reduce the net financial income from instruments with floating interest, nearly only cash, over the next 12 months with approximately 36 MNOK. However this will be offset by an immediate value increase of the fixed income portfolio of 321 MNOK which will effect the P&L. The above calculation does not take into account the effects an interest rate change might have on other financial assets, such as real estate and equities. The calculations are pre-tax.

Table 13 – Contractual maturities insurance operations NOK million Not incl. agreed 0-1 1-3 3 months Financial assets remaining term month months - 1 year 1-5 years Over 5 years Total Bonds and certificates 108.3 62.6 1,344.8 7,061.9 5,470.5 2,327.7 16,375.8 Time deposits 135.0 1,845.2 11.0 152.1 2,143.3 HTM Bonds 12.4 1,351.8 6,277.2 1,367.3 9,008.7 Loans 1.4 469.7 471.0 Shares and similar interests 6,897.8 13.9 6,911.7 Hedge funds 2,919.5 2,919.5 Not classified 8,645.7 11.3 8,657.0 Derivatives (net) 0.7 0.0 217.5 44.4 53.8 316.4 Total 2007 18,707.0 1,907.8 1,585.6 8,621.6 11,802.8 4,178.6 46,803.4 Total 2006 15,832.7 694.0 1,573.8 4,915.0 12,106.8 1,327.3 36,449.6

Financial liabilities Total 2007 Total 2006 786.6 GJensidige annual report 2007 | 93

The same approach is taken to measure the interest rate risk in the banking immediate 1% increase in interest rates on net interest income over the next this is GJ ENSI D I G E operations, but here there are interest rate sensitive liabilities and assets. 12 months is calculated as -4 MNOK, assuming that all loans and deposits are The repricing structure is shown in the table below. Again, the effect of an repriced immediately.

Table 14 – Interest rate risk profile banking operations

Repricing structure of assets and liabilities (interest rate structure) More than NOK million < 1 month 1-3 months 3-12 months 1-5 years 5 years No maturity Total

ASSETS Cash and receivables from central banks 126.4 126.4 Loans to and receivables from credit institutions 72.6 72.6 Loans to and receivables from customers 3,372.2 7.3 1.8 3,381.4 Individual write-downs loans and debtors Group write-downs loans and debtors (6.7) (6.7)

Net loans to customers and credit institutions 199.0 3,372.2 7.3 1.8 (6.7) 3,573.6 operations Interest-bearing securities 79.5 79.5 Shares and participations Derivatives Shares and participations subsidiaries Intangible assets 44.8 44.8 Property, plant and equipment 4.0 4.0 Deferred tax 33.8 33.8 Other assets 10.4 10.4 Prepayments and accrued income Total assets 278.5 3,372.2 7.3 1.8 86.3 3,746.2

Liabilities Liabilities to credit institutions 150.0 150.0 Deposits from and liabilities to customers 1,701.1 1,701.1

Debt securities issue 950.0 400.0 1,350.0 mana Derivatives Deferred tax Tax payable

Other liabilities 29.4 results 29.4 g ement Subordinated debt Total liabilities 1,880.5 950.0 400.0 3,230.5

Loans to customers are placed in the 1-3 months bucket whereas deposits thus reducing substantially the share of property for own use. The real estate from customers are in the <1 month. This is a reflection of the legal regula- portfolio has its largest concentration in offices in the Oslo area, but also tions of the notice period that needs to be given to the customers. A bank may has offices in other major cities in Norway as well as a substantial holding of change its loan and deposit rates as is seemed beneficial for their competitive shopping centres. position, and is not restricted to change these rates only when general market or central bank policy rates shift. Placing the loans and deposits into specific Table 15 – Largest real estate holdings buckets as above is hence slightly arbitrary. NOK million Market value Book value

Real estate price risk Drammensveien 288 1.265 707 Real estate constitutes a significant part of the portfolio of Gjensidige Sørkedalsveien 6 759 759 Forsikring. The motivation for investing in real estate is firstly that it enhances Strandtorget 628 628 the risk-adjusted return of the asset portfolio, through an expected rate of Pilestredet 35 & Ed. Stormsgate 584 584 return between bonds and equities with a modest correlation to both of them. Schweigaardsgate 2-14 350 350 Secondly, real estate is in the long run assumed to increase in value if the real interest rate falls, and is therefore a hedge against the real interest rate risk of the liabilities. Hedge Funds Hedge funds is a common term for funds investing in most types of asset The Group mainly owns its properties directly, although a small part of the classes with few limitations on the use of derivatives, shorting or leverage in portfolio is invested in property funds outside of Norway. The management of order to earn a return that is partly independent from (has a low correlation the directly owned real estate portfolio is done in the wholly owned subsidiary with) traditional asset class indices. Gjensidige utilises hedge funds both as Oslo Areal. The portfolio consists both of property for own use, and invest- an absolute-oriented asset class / set of investment strategies, where the ment properties. In February 2008, the Group’s headquarters in Oslo was sold, expectation is a high probability of yielding more than the risk free rate of 94 | GJensidige annual report 2007

return, and as a way to take active risk as measured against these indices. The Table 17 – Financial assets per currency and open positions major part of the portfolio is invested in fund-of-funds (first 4 investments listed in the table below). The fund-of-fund manager will perform the selection Gross and follow-up of the underlying hedge funds, thus reducing operational risk. Gross positon in Total Total net Total net positon in currency currency position in position The total number of hedge funds in the portfolio is large, and also spread on Currency currency [NOK mill] contract currency [mill NOK] a number of different strategies. The exposure to any single fund is therefore very small, although at times many funds may be sensitive to the same macro AUD 8 38 (8) 0 1 economic factors, as seen in the subprime / credit episodes in 2007. CAD 11 58 (10) 0 2 CHF 17 81 (17) 0 0 Table 16 – Largest hedge fund investments DKK 2,654 2,826 (2,466) 188 200 Fund EEK (15) (8) (15) (8) NOK million Book value EUR 192 1,524 (182) 10 79

Partners Group 1,333 GBP 17 183 (16) 1 6 Russell Alternative Strategies Fund II Plc. 832 HKD 46 32 (44) 2 1 Gottex Market Neutral Pl-2XL Fund 261 LTL (15) (35) (15) (35) Sector Polaris 212 LVL 18 203 18 203 The Winton Evolution Fund 74 JPY 3,610 175 (3,230) 380 19 NZD 0 0 0 0 Foreign exchange risk PLN (0) (0) (0) (0) Foreign exchange risk is defined as the loss given an adverse movement in RUB (1) (0) (1) (0) exchange rates. Generally, currency risk in the investment portfolio is hedged SEK 675 567 (700) (25) (21) close to 100%, except for smaller mandates where active currency manage- SGD 4 16 (4) 0 1 ment is a part. USD 1,277 6,931 (1,255) 22 117 Total 12,592 566 The parent company hedges its investment in subsidiaries against currency risk. For Parekss the hedge is in EUR instead of LVL due to the cost of hedging in LVL and the peg of the LVL against the EUR. On the other hand, Parekss In case of the opposite, a 10 percent weakening of NOK against all currencies has parts of its bond portfolio in EUR. The risk the Group is facing is a devalua- as at 31.12.2007 would have had the equal but opposite effect, on the basis tion of the LVL vs the EUR. A devaluation of 10% is deemed to have a direct that all other variables remain constant. negative pre-tax effect of approximately 20 MNOK. Foreign exchange transactions are conducted within strictly defined limits and The Group writes insurance business in the Scandinavian and Baltic currencies, used both for trading purposes and to hedge financial assets. The table speci- and consequently has insurance liabilities in these currencies. The currency risk, fies gross and net positions in the major currencies. Hedging is performed by both at a Group and company level is in general hedged by matching technical means of currency futures at the portfolio level, and the currency positions provisions with investments in the corresponding currency. are monitored continuously against a total limit.

The table below shows the foreign currency exposure by currency type. The Credit risk gross position is after taking into account the insurance liabilities in the cur- Gjensidige has exposure to credit risk, which is both the risk that a counter- rency, and includes the investment in the subsidiaries as booked in the parent party will be unable to pay amounts in full when due and the risk that credit company. In the net position column, the hedge of the subsidiaries is included. spreads (credit risk premiums) will increase. The Group is exposed to credit risk mainly in the investment operations of the insurance companies, in the A rise in NOK of 10% against all other currencies would lead to a reduced insurance operations through unpaid premiums from customers and the equity of approx. 57 MNOK. However, since the translation effect relating to reinsurers’ share of insurance liabilities and in the banking segment through the foreign subsidiaries at year-end is booked directly against equity, whereas loans. the hedging positions relating to these are booked through P&L, the P&L effect is larger, at approx 298 MNOK. This amount would necessitate e.g. the Credit risk in the investment operations peg between EUR and DKK and other currencies pegged to it to break down. In investment operations the Group structures the levels of credit risk it accepts in several ways. As a starting point there is a credit limit on named counterparties. For issuers with an official rating by a reputable rating agency this is generally used as the criteria. The list of credit limits is approved by the Chief Investment Officer, and is used for all segregated mandates and derivative counterparties. Furthermore, the Board-approved asset allocation puts limits on the allocation to global bonds, both investment and non-investment grade (high yield). The Group’s total fixed income portfolio as at 31.12.2007 (including held-to-maturity bonds, bonds, certificates and deposits) of 29.276 MNOK consisted of 4.041 MNOK issued by a public sector entity and 25.234 MNOK by non-public entities. The majority of non-public entities are other financial institutions. The split is shown in the figure below. GJensidige annual report 2007 | 95

Figure 6 – Fixed income portfolio by sector The following tables show the main concentration risks as at 31.12.2007 and this is GJ ENSI D I G E 31.12.2006 respectively: 14%

Table 20 – Top 10 issuers exposure as at 31.12.2007 14% NOK million Book value

Banks Issuer 72% Corporates Public sector Nordea 1,371 Norwegian Government 1,345 The following tables show the allocation of the fixed income portfolio by SEB 1,106 rating category for 2007 and 2006 (Group): Nykredit 995 BRF 974 Table 18 – Allocation of fixed income per rating category RD 962 DnB NOR Bank 946 book value DANSK LANDBRUGS REALKRF. 663 operations NOK million 31.12.2007 31.12.2006 Sparebanken Rogaland 580 Rating Svenska Handelsbanken 557 AAA 5,604 3,996 Total 10 largest 9,498 AA 8,006 2,616 Total fixed income portfolio 29,276 A 5,586 5,477 Table 21 – Top 10 issuer exposure as at 31.12.2006 BBB 1,131 1,552 BB 306 163 NOK million Book value B 515 2 CCC or lower 161 Issuer No rating 7,967 7,761 Norwegian Government 2,311 Total 29,276 21,567 Statkraft 1,027 Nordea 982 DnB NOR 653 Table 19 – Allocation of fixed income per rating category, internal rating Bergenshalvøens Kommunale Kraftselskap As 552 included Sparebanken Rogaland 543 mana book value Den Danske Stat 460 NOK million 31.12.2007 31.12.2006 Hypo Real Estate Bank International AG 437 Sparebanken Midt-Norge 425 mn results g ement Rating Sparebanken Hedmark 424 AAA 5,604 3,996 Total 10 largest 7,813 AA 8,126 2,769 Total fixed income portfolio 21,567 A 8,548 9,128 BBB 5,303 5,147 For nominal exposure in derivative contracts, see Note 11. BB 306 163 B 515 2 Credit risk in the insurance operations CCC or lower 161 The table below presents the age distribution of the receivables arising out of No rating 714 361 direct insurance operations and the reinsurance receivables. Total 29,276 21,567 Table 22 – Specification of receivables, general insurance A large part of the Norwegian fixed income market consists of issuers without a rating from an official rating company. However, the asset managers Installm. <35 35-90 > 90 and brokerages conduct their own internal rating, assigning rating categories NOK million Total not due days days days in the same way as the rating companies. For completeness, the second table 31.12.2007 includes the allocation also using the internal rating of Gjensidige’s main asset Receiv., direct insur. operations 2,961.5 2,459.8 304.6 104.8 92.3 manager, Storebrand Kapitalforvaltning. Receivables, reinsurance 197.8 11.9 3.8 - 182.1 Total 3,159.3 2,471.7 308.4 104.8 274.4

31.12.2006 Receiv., direct insur. operations 2,506.1 2,032.7 281.9 89.0 102.4 Receivables, reinsurance 176.7 - - - 176.7 Receivables, subsidiaries 111.3 - 111.3 - 0 Total 2,794.1 2,032.7 393.2 89.0 279.1 96 | GJensidige annual report 2007

Reinsurance is used to manage insurance risk. This does not, however, discharge Table 24 – Risk classification banking operations Gjensidige from any liability as primary insurer. If a reinsurer fails to pay a claim Share for any reason, Gjensidige remains liable for the payment to the policyholder. The Group group Commit- write- write- creditworthiness of reinsurers is considered by reviewing their financial strength NOK million ment Share downs downs prior to finalisation of any contract. Routines are in place for assessing the creditworthiness of reinsurers by reviewing financial strength ratings provided Low risk 2,470.0 63.9 % 1.4 20.7 % by rating agencies and other publicly available financial information. Information Medium risk 1,260.0 32.6 % 4.8 71.7 % of recent payment history and the status of any ongoing negotiations between High risk 134.0 3.5 % 0.5 7.5 % Group companies and these third parties is also used to update the reinsurance Total 3,864.0 100.0 % 6.6 100.0 % purchasing strategy. As a general requirement all reinsurers need to be rated ‘A-‘ or better by S&P (or equivalent from Moody’s or AM Best) when entering into Commitment consist of lending balance, undrawn credit facilities and accrued the contract with us. For short-tail lines a ‘BBB’ rating has occasionally been interest accepted. The total amount of outstanding loans to customers as at 31.12.2007 was Figure 7 – Reinsurance premium 2007 split by rating category 3,381 MNOK. The following table shows the amount of overdue payments: 1% 0,5% Table 25 – Payments overdue banking operations

38% NOK million

1-3 months 5.5 AAA 3-6 months 0.3 61% AA A > 6 months 0.3 BBB Total 6.0

The following table provides an overview of split of reinsurance receivables and Non-performing credit card 0.2 reinsurers’ share of outstanding claims per rating category. Approximately 87% of the exposure is towards investment grade counterparties. The exposure in Liquidity risk the not rated category relates to prior years reinsurance arrangements and split Liquidity risk in the insurance operations towards a large number of counterparties. In many cases the companies are now Gjensidige is mainly a general insurer, and as for most general insurers, the in run-off and do not have a rating anymore. liquidity risk is quite limited. Premium income is paid up front and claims paid out at a later stage. Future payments are not based on contractual payment dates, Table 23 – Reinsurance receivables and reinsurers’ share of outstanding but rather on when claims occur and how long the claims handling lasts. See the claims per rating category as at 31.12.2007 expected payment pattern presented above.

Rating NOK million % As a going concern that implies a positive net cash flow under normal cir- AAA 2,6 0,5 % cumstances. Large net outflows will normally arise only from acquisitions, or a AA 240,6 50,1 % recapitalization of a subsidiary. In case of a large claim or catastrophic event, the payments will take place some time after the event, and the reinsurers will cover A 161,5 33,6 % most of the amount within a short time after the payments have been made to BBB 13,7 2,8 % the claimants. In an extreme scenario, reinsurers do not honour their obligations BB - 0,0 % after such a catastrophic event. B 0,0 0,0 % CCC or lower - 0,0 % The Board has, based on such a scenario, set a liquidity requirement of 50 No rating 61,6 12,8 % MNOK in bank deposits, 3,000 MNOK to be realized within 1 week, and 8,000 Total 480,0 100,0 % MNOK within 1 month. These figures apply for the parent company. The focus is on the time to liquidate a position in an orderly manner even when the market is Credit risk in the banking operations suffering a turmoil, and not on the maturity of the underlying security itself. The Credit risk is at the heart of any banking operations, and Gjensidige Bank has current allocation fulfils these requirements. through its cooperation with Sparebanken Sogn og Fjordane developed internal models to score customers, both as they are applying for a loan and as a part of the credit risk measurement on ongoing engagements. The loan portfolio consists only of loans to private customers in Norway.

The risk of the loan portfolio is measured using the internal scoring model each month. The customers are categorised into 3 groups depending on risk. The table below shows this classification as at 31.12.2007, and also includes the amount of general loss provisions in each category (general provisions are in addition to the amount written off on loans where a specific payment problem has been detected). GJensidige annual report 2007 | 97

The table below shows the classification used and amounts as at 31.12.2007 Liquidity risk in the banking operations this is GJ ENSI D I G E (Group figures): In the banking operations the assets and liabilities have contractual maturities. On the liability side, the customers in general may withdraw their deposits Table 26 – Liquidity of investment assets insurance at short notice, resulting in a short time to maturity.

NOK million 1 day <1 week <1 month >1 month Money market Norwegian Hedge funds, instruments, equities, emerging real estate, Bank liquid bonds, market equities, below ac- commodity investment grade investment count certificates, bonds, held to grade bonds, (cash) global equities maturity bonds private equity 31.12.2007 2,890 15,619 14,836 13,459 31.12.2006 1,014 16,348 12,148 12,455 operations

Table 27 – Liquidity profile of banking operations Maturity analysis of assets and liabilities 1-3 3-12 1-5 More than No NOK million < 1 month months months years 5 years maturity Total

Assets Cash and receivables from central banks 126.4 126.4 Loans to and receivables from credit institutions 72.6 72.6 Loans to and receivables from customers 1,273.8 10.2 47.0 262.7 1,787.7 3,381.4 Individual write-downs loans and receivables from customers Group write-downs loans and receivables from customers (6.7) (6.7) Net loans to customers 1,472.8 10.2 47.0 262.7 1,787.7 (6.7) 3,573.6 Interest-bearing securities 79.5 79.5 Shares and participations

Derivatives mana Shares and participations subsidiaries Intangible assets 44.8 44.8 Property, plant and equipment 4.0 4.0 Deferred tax 33.8 results 33.8 g ement Other assets 10.4 10.4 Prepayments and accrued income Total assets 1,552.3 10.2 47.0 262.7 1,787.7 86.3 3,746.2

Liabilities Liabilities to credit institutions 150.0 150.0 Deposits from and liabilities to customers 1,701.1 1,701.1 Debt securities issued 300.0 1,050.0 1,350.0 Derivatives Deferred tax Tax payable Other liabilities 29.4 29.4 Subordinated debt Total liabilities 1,880.5 300.0 1,050.0 3,230.5 98 | GJensidige annual report 2007

Note 4 – segment information

At 31 December 2007 the Group’s operations are controlled and reported General insurance primarily in accordance with Gjensidige’s customer groups, which consist of Items in the column Eliminations, other and finance consists of income and general insurance in the private market, general insurance in the commercial expense, assets, equity and liabilities that is not directly attributable to the market, pension and savings, and banking. Gjensidige’s secondary segment is segment, and the relevant portion of the income and expense that can not reported geographically, and consists of Norway, Nordic countries and Baltic be allocated on a reasonable basis to the segment. Below the line Technical countries. There is no intergroup segment income in 2007 and 2006. result before amortisation of excess value, these items are mainly net financial income related to general insurance. Furthermore, no assets are directly at- PRIMARY REPORTING FORMAT – BUSINESS SEGMENT tributable to the private or commercial segments. For equity and liability, only For general insurance, private and commercial, segment revenue is defined as Technical provisions, gross are directly attributable, or can be allocated on a technical result before amortisation of excess value. For pension and savings, reasonable basis to either the private or the commercial segment. and banking, segment revenue is defined as profit before tax.

General insurance General insurance pension eliminations, private Commercial and savings Banking1 other and finan. 2 Total NOK million 2007 2006 2007 2006 2007 2006 2007 2006 2007 2006 2007 2006

Premiums written Gross premiums written 8,895.4 7,974.5 6,722.9 5,705.0 496.4 107.7 (388.2) 15,726.5 13,787.2 Ceded reinsurance premiums (302.8) (195.7) (335.7) (135.8) (0.1) 0.0 388.2 (250.3) (331.5) Earned premiums, net of reinsurance 8,638.0 7,661.3 6,210.0 5,527.2 27.9 4.7 14,875.9 13,193.2 Allocated return on investments transfer- 615.8 420.5 859.3 587.6 1,475.1 1,008.1 red from the non-technical account Claims incurred, net of reinsurance (6,356.9) (4,995.8) (5,319.6) (5,015.0) (19.3) (4.1) (11,695.8) (10,014.9) Operating expenses in insurance (1,771.7) (1,738.9) (827.3) (747.1) (84.9) (74.4) (0.5) (1.2) (2,684.3) (2,561.6) operations, net of reinsurance Premiums disc. and other profit agreem. (12.4) (21.7) (7.6) (20.0) (21.7) Technical result before amortisation 1,112.8 1,325.4 914.9 352.7 (76.3) (73.8) (0.5) (1.2) 1,950.8 1,603.1 of excess value Amortisation of excess value (103.3) (20.8) (103.3) (20.8) Net of finance income and finance costs 5.7 7.4 10.6 2.3 2,804.0 3,701.4 2,820.3 3,711.1 Allocated return on investments (1,475.1) (1,008.1) (1,475.1) (1,008.1) transferred to the technical account Net of other income and other costs (52.3) (50.5) (126.4) (6.2) 6.4 1.9 (172.4) (54.8) Profit before tax 3 (123.0) (116.9) (115.8) (3.9) 1,231.5 4,351.3 3,020.3 4,230.5

Assets Intangible assets 57.9 31.6 44.9 56.4 2,344.3 1,056.1 2,4 47.1 1,144.1 Investment assets 508.8 57.6 3,455.2 400.8 42,882.8 40,214.3 46,846.7 40,672.7 Reinsurers’ share of technical provision 302.6 414.6 302.6 414.6 Debitors arising out of insurance operations 13.0 48.3 3,146.3 2,745.7 3,159.3 2,794.0 Other assets 397.6 241.2 332.5 65.6 4,634.6 1,780.5 5,364.6 2,087.3 Total assets 977.2 378.7 3,832.6 522.8 53,310.5 46,211.2 58,120.3 47,112.7

Equity fund, provisions and liabilities Equity fund 299.0 236.5 602.0 497.0 19,401.5 18,283.8 20,302.5 19,017.3 Technical provisions, gross 12,241.1 10,548.4 17,24 8.9 12,716.8 101.2 54.6 (333.8) 29,257.4 23,319.8 Provisions for other risks and charges 30.1 5.7 2,877.6 2,382.0 2,907.6 2,387.7 Creditors arising out of insurance operations 256.0 253.7 256.0 253.7 Other creditors 547.1 81.9 3,230.5 25.8 1,619.3 2,026.4 5,396.8 2,134.2 Total equity and liabilities 12,241.1 10,548.4 17,248.9 12,716.8 977.2 378.7 3,832.6 522.8 23,820.5 22,946.0 58,120.3 47,112.7

Other segment items included are as follows: Depreciation (Note 7) 1.1 0.2 0.8 I/A 159.7 80.1 161.6 80.3 Amortisation (Note 5) 11.8 4.0 11.0 I/A 242.5 176.1 265.3 180.1 Capital expenditure (Note 5, 7 and 8) 32.6 38.4 60.5 I/A 2,013.7 1,007.9 2,106.8 1,046.3

1 The bank segment is not included in the line for Technical result before amortisation of excess value in the Group’s income statement. 2 Eliminations, other and finance concists mainly of eliminiations, items of financial income and costs, and assets and liabilities which are not directily attributable to one single segment or can not be allocated on a reasonable basis to the segment. Elimination of NOK 388.2 million consists of ceded reinsurance from Gjensidige Forsikring, of the Norwegian municipal portfolio, to Denmark, and received reinsurace of NOK 51.2 million from Gjensidige Forsikrings subsidiaries. 3 Technical result before amortisation of excess value for general insurance, private and commercial, includes standardised financial income corresponding to the Financial Supervisory Autho- rity of Norway’s allocated return on investment, distributed in accordance with the size of the technical provisions. GJensidige annual report 2007 | 99

DESCRIPTION OF BUSINESS SEGMENTS this is GJ ENSI D I G E

General insurance - private market market, while Sweden and Denmark only has a limited degree of insurance in The segment provides general insurance products related to homes and the commercial market. holiday homes, motor vehicles and insurance of the person in Norway, Den- mark, Sweden, Latvia, Lithuania and Estonia. In Norway, this segment also Pension and savings provides the agricultural market. The concept is based on direct sales via the Gjensidige Pensjonsforsikring AS offers individual and group pension products telephone, the Internet, commercial agents as well as individual pricing. with a focus on defined contribution pensions. Gjensidige Investeringsrådgiv- ning ASA has established a broad range of savings products, and the Vekter General insurance - commercial market Funds comprises the core business. The concept is based on direct sales via Gjensidige is a key player in the commercial market with high market share, the internet and the telephone. particularly for insurances of the person. The Group’s products in Norway are distributed principally through the new common portal for insurance Banking and pensions, which was established in 2006. Products are also distributed Gjensidige Bank ASA is a full service bank for private customers. Distribution through other channels such as Næringsnett – Gjensidige’s extranet solution will be through the Internet with telephone support.

and Professionalisation programme. Baltic States focuses on the private operations

SECONDARY REPORTING FORMAT – GEOGRAPHICAL SEGMENT Norway Other Nordic Baltic Total NOK million 2007 2006 2007 2006 2007 2006 2007 2006

Earned premiums, net of reinsurance 13,110.5 12,869.4 1,405.3 257.4 360.2 66.5 14,875.9 13,193.3 Technical result before amortisation of excess value 1,919.0 1,644.5 5.2 (40.7) 26.6 (0.2) 1,950.8 1,603.6 Amortisation of excess value (85.7) (16.4) (17.6) (4.4) (103.3) (20.8) Net of finance income and finance costs 2,625.8 3,704.8 186.2 3.9 8.2 (2.0) 2,820.3 3,711.1 Net of other income and other costs (166.7) (54.9) (3.8) (1.9) (0.7) (172.4) (55.6) Profit before tax 2,988.9 4,298.5 27.6 (63.8) 3.9 (4.5) 3,020.3 4,230.2

Total assets 48,593.1 45,994.5 9,003.8 682.0 523.4 436.2 58,120.3 47,112.8

Other segment items included are as follows: Capital expenditures (Note 5, 7 and 8) 1,790.4 822.9 305.8 145.2 10.6 78.2 2,106.8 1,046.3 mana mn results g ement 100 | GJensidige annual report 2007

Note 5 – intangible assets Internally Other Customer Trade- developed intangible NOK million Goodwill relations mark software assets Total

Cost As at 1 January 2006 396.6 41.8 973.9 1,412.2 Correction of cost as at 1 January 2006 (7.6) (7.6) Acquisitions through business combinations 203.1 146.0 33.9 81.1 464.1 Internally developed assets 176.8 176.8 Disposals (8.7) (70.2) (78.9) As at 31 Desember 2006 591.0 146.0 33.9 218.6 977.1 1,966.6

As at 1 January 2007 591.0 146.0 33.9 218.6 977.1 1,966.6 Acquisitions through business combinations 954.3 312.3 115.5 176.9 1,559.0 Internally developed assets 128.2 128.2 Disposals (56.1) (6.1) (62.2) Effect of movements in exchanges rates (30.6) (18.1) (6.3) (3.9) (58.9) As at 31 Desember 2007 1,458.6 440.2 143.1 346.8 1,144.1 3,532.8

Amortisation and impairment losses

As at 1 January 2006 (136.8) (633.4) (770.2) Correction of accumulated amortisation previous years 103.0 (24.8) 78.2 Amortisation for the year (8.6) (11.0) (160.4) (180.1) Disposals 49.7 49.7 As at 31 Desember 2006 (33.7) (8.6) (11.0) (4.0) (765.0) (822.4)

As at 1 January 2007 (33.7) (8.6) (11.0) (4.0) (765.0) (822.4) Amortisation for the year (38.7) (34.3) (15.8) (176.5) (265.3) Disposals 1.8 1.8 As at 31 Desember 2007 (33.7) (47.3) (45.3) (19.8) (939.7) (1,085.9)

Carrying amounts As at 1 January 2006 259.8 41.8 340.4 642.0 As at 31 December 2006 557.2 137.4 22.8 214.6 212.1 1,144.1

As at 1 January 2007 557.2 137.4 22.8 214.6 212.1 1,144.1 As at 31 December 2007 1,424.8 392.9 97.7 327.0 204.4 2,447.1

Amortisation method NA Linear Linear Linear Linear Amortisation (%) 10 5-10 12,5-20 10-20 Useful life (years) 10 1-2 5-8 5-10

The Group’s intangible assets are either acquired through business combina- fined as separate cash-generating units (CGU) within the Group. All goodwill tions or internally developed. Goodwill, customer relations and trademarks related to these acquisitions were allocated to the respective CGU. are all acquired through business combinations and are a result of a purchase price allocation of initial cost. Other intangible assets, both acquired through The impairment tests have mainly been carried out by the Gjensidige business combinations and internally generated, are mainly computer systems Forsikring’s corporate finance department. Valuations were performed developed for use in the insurance business. in October 2007 and December 2007. The net present value has been calculated based on the estimated future dividends that could be paid out to Amortisation of aquisitions are recognised on a separate line in the profit and the owners, using a discount rate reflecting the timing of the cash flows and loss account. All other amortisation is included in Administrative expenses the expected risk. The valuation model used is developed by the corporate including sales and Other costs. There were no impairment losses recognized finance department for use in valuation of general insurance companies. in 2007 and 2006. The model has a time horizon of 10 years. It is Gjensidiges opinion that a comparatively long time horizon best will capture the dynamic in an uncertain IMPAIRMENT TESTING OF GOODWILL underwriting cycle. Recognised goodwill in the Group was NOK 1,458.6 million as at 31 Decem- ber 2007. Goodwill is mainly derived from the acquisition of companies which Based on the impairment tests performed, no impairment of goodwill was became subsidiaries in 2006 and 2007. Fair Forsikring AS, Parekss Insurance identified for the years 2007 and 2006. Company Ltd, KommuneForsikring AS and Tennant Forsäkring AB were de- GJensidige annual report 2007 | 101

CASH-GENERATING units potential in the Baltic region. The discount rate used for calculating the net this is GJ ENSI D I G E Future cash flows of CGU have been assumed based on budgets approved present value of the cash flows for the companies in the Nordic region is by the management of the respective subsidiaries.The cash flows are based within the interval 9,6 - 10,0 per cent, and 11,6 per cent in the Baltic region. on the expected continuation from current financial figures for the CGU, re- This is based on local risk free rates of 4,2 - 4,7 per cent in the Nordic region flecting moderate growth in the total market, our expected market share, and and 6,6 per cent in the Baltic region, betas between 1.0 and 1.1 and a risk the pricing and profitability of our products going forward. According to the premium of 5 per cent in both regions. The risk premium is based on empirical management, these assumptions are considered to be reasonable based on data in the period 1900 - 2005. the development of new sales model in the Nordic region and the uninsured

Note 6 – Investments in associates

NOK million 2007 2006

As at 1 January 2007 151.1 114.7 Share of (loss) / profit from associates 39.6 35.4 operations Other equity movements (4.1) 1.0 As at 31 December 2007 186.6 151.1

The Group’s interests in its principal associates, all of which are unlisted, were as follows: Associates owned by Registered Ownership Profit / Carrying amount Gjensidige Forsikring BA office interest Assets Liabilities Revenues (loss) 2007 2006

Bilskadeinstituttet AS Oslo 29.5 % 1.4 0.0 0.1 1.3 1.3 Forsikring og Finans AS Sandnes 34 % 0.1 0.1 0.1 Forsikringskontoret Johansen og Torkelsen AS Sandnes 34 % 0.2 0.2 0.2 Fossmark Assuranse AS Stavanger 34 % 0.1 0.1 0.1 Vervet AS Tromsø 25 % 26.0 24.2 0.2 (0.5) 4.4 5.1 Total owned by Gjensidige Forsikring BA 27.7 24.2 0.3 (0.5) 6.1 6.8

Associates owned by subsidiaries mana Botrygt Prinsegården AS Fetsund 50 % 0.3 0.3 Lindorff AB Stockholm 19.5 % 1,018.8 852.0 488.9 40.1 180.2 144.0 Total owned by subsidiaries 1,018.8 852.0 488.9 40.1 180.5 144.3 mn results g ement Total owned by Gjensidige Group 1,046.5 876.2 489.2 39.6 186.6 151.1 102 | GJensidige annual report 2007

Note 7 – Property, plant and equipment

NOK million Buildings and real estate Equipment* Total

Cost As at 1 January 2006 1,159.8 705.4 1,865.2 Correction of cost as at 1 January 2006 (6.3) (6.3) Acquisitions through business combinations 28.9 28.9 Additions 34.9 67.6 102.5 Disposals (56.3) (54.1) (110.5) As at 31 December 2006 1,138.4 741.4 1,879.8 Uncompleted projects 0.0 21.5 21.5 As at 31 December 2006, inclusive uncompleted projects 1,138.4 763.0 1,901.3

As at 1 January 2007 1,138.4 741.4 1,879.8 Acquisitions through business combinations 89.4 34.1 123.5 Additions 50.7 163.3 214.1 Disposals (12.2) (24.7) (37.0) Effect on movements in exchanges rates (1.2) (0.5) (1.7) As at 31 December 2007 1,265.0 913.7 2,178.7 Uncompleted projects 0.3 70.1 70.4 As at 31 December 2007, inclusive uncompleted projects 1,265.3 983.8 2,249.1

Depreciation and impairment losses As at 1 January 2006 (206.8) (468.3) (675.1) Correction of accumulated depreciations as at 1 January 2006 6.2 6.2 Depreciation for the year (20.8) (80.3) (101.1) Disposals 9.8 31.6 41.4 Previous appreciations 10.3 10.3 As at 31 December 2006 (207.5) (510.8) (718.3)

As at 1 January 2007 (207.5) (510.8) (718.3) Depreciation for the year (44.3) (117.2) (161.5) Disposals 4.0 12.7 16.6 Effect on movements in exchanges rates (0.0) (1.5) (1.5) As at 31 December 2007 (247.8) (616.9) (864.7)

Carrying amounts As at 1 January 2006 953.0 323.1 1,276.1 As at 31 December 2006 930.9 252.1 1,183.0

As at 1 January 2007 930.9 252.1 1,183.0 As at 31 December 2007 1,017.5 366.9 1,384.3

* Equipment consists mainly of machinery, veichles, fixtures and furnitures.

Property, plant and equipment are depreciated based on the straight-line There are no restrictions on property, plant and equipment, nor are property, depreciation method over the useful lives. Each component of buildings is plant and equipment pledged as security for liabilities. grouped into similar categories and depreciated over the useful lives from 2 to 10 per cent with technical installations having the highest depreciation The market value of land and buildings exceed the carrying amount as shown rate. Land is not depreciated. Equipment is depreciated using the straight-line below. For equipment there is no material difference between the carrying method with depreciation rates of 10 to 33 per cent. Major components are amount and the market value. Some equipment, such as furniture, is fully depreciated separately. depreciated, but still in use.

NOK million 2007 2006

Market value of buildings and real estate 1,737.5 1,309.2 Carrying amount of buildings and real estate 1,017.5 930.9 Surplus 720.0 378.3 GJensidige annual report 2007 | 103

Note 8 – Investment properties this is GJ ENSI D I G E

NOK million 2007 2006

Income statement Rental income from investment properties 363.0 532.0 Other income generated from investment properties 1.9 13.6 Direct costs from investment properties generating rental income during the period (73.4) (223.0) Total 291.5 322.6 Net gain (loss) on changes in fair value 369.4 572.9 Total income from investment property 660.8 895.5

Balance sheet As at 1 January 7,157.9 6,800.0 Aquisitions 26.2 Additions and capital improvements 82.0 248.0 operations Disposals (1,567.5) (551.0) Fair value gain (loss) 369.4 738.3 Transfer from investment property to owner-occupied property (104.0) Foreign currency translation effects 0.5 As at 31 December 6,041.7 7,157.9

There are no bank borrowings secured by investment property in 2007. In located in Oslo and its surrounding area. In 2005 and 2006 there was only 2006 bank borrowings were secured on investment property to the value of one investment property outside of Norway. In 2007, there are no investment NOK 786.6 million (Note 18). properties outside of Norway.

Investment properties consist of commercial properties that are rented to At 31 December 2006 all investment properties in the group company Oslo parties outside the Gjensidige Group, or are aquired in accordance with the Areal were valued by external advisors. From 2007, all investment properties company’s capital investment strategy. The average rental period is 5 years, have been valued by external advisors at year end. However, quarterly evalua- mana and the portfolio of commercial properties ranges from offices, shopping tion are performed by internal advisors. centres, parking space, and school buildings. The properties are mainly mn results g ement The average yield applied to the net annual rentals to determine fair value of property where current prices in an active market are unavailable were as follows:

2007 2006

Investment properties in Gjensidige Forsikring and others, excluding Oslo Areal 6.55 % 6.10 % Investement properties in Oslo Areal 6.55 % 6.30 %

There are no restrictions with regard to the sale of the investment properties properties. The Group has no investment properties for leasing or classified as or how income and cash flows generated by the investment properties can be available for sale. used. There are no contractual obligations to buy, build or develop investment 104 | GJensidige annual report 2007

Note 9 – Financial assets

NOK million 2007 2006

Financial derivatives (Note 11) 239.5 (90.5) Financial assets at fair value through profit or loss, initial recognition 23,361.8 20,701.6 Financial assets held to maturity 8,885.6 7,537.4 Loans and receivables (Note 10) 3,850.0 539.6 Financial assets available for sale 2,765.9 2,434.1 Total financial assets 39,102.9 31,122.2

Specification of financial assets at fair value through profit or loss, initial recognition: Equity securities - Listed 4,925.3 8,302.1 - Unlisted 2,180.8 830.5 Total equity securities 7,106.1 9,132.6 Debt securities - Listed 10,136.2 7,960.1 - Unlisted 6,119.5 3,608.9 Total debt securities 16,255.7 11,569.0 Total financial assets at fair value through profit or loss 23,361.8 20,701.6

Financial assets held to maturity, at amortised cost: Debt securities - fixed interest rate - Listed 7,062.7 5,395.2 - Unlisted 1,661.0 1,959.2 - Others assets 48.3 Provision for impairment - Listed 144.0 125.3 - Unlisted 17.9 7.5 - Others 1.8 Total financial assets held to maturity 8,885.6 7,537.4

Financial assets available for sale : Equity securities - Listed 2,765.9 2,434.1 - Unlisted Total equity securities 2,765.9 2,434.1 Debt securities - Listed - Unlisted Total debt securities Total financial assets available for sale 2,765.9 2,434.1

Gain or loss on financial assets carried at amortised cost is recognised in the For unlisted debt instruments, valuations are based on contractual cash flows, income statement when the financial asset is derecognised or impaired, and observable yield curves and estimated credit spreads for the relevant issues. through the amortisation prosess. For private equity investments, the valuations are carried out by the managers, according to EVCA principles, implying that actual earnings and book All financial assets at fair value through profit or loss have been included in equity figures are applied to observable pricing multiples with a discount. For this category upon initial recognition. hedgefunds, the net asset value for each fund is provided by independent administrators. Financial instruments are recognised at fair value through profit or loss based on quoted prices. If the market for a financial instrument is not active, Financial assets held to maturity are not presented on the Group`s balance the fair value will be established by valuation methods. The inputs to the sheet at their fair value. The fair value of the held to maturity assets is NOK valuation methods are mainly observable, but will in some cases be based on 9,070.2 million in 2007 and NOK 7,402.8 million in 2006.The fair value of estimates. these investments are based on quoted prices. GJensidige annual report 2007 | 105

Note 9 – Financial assets (cont.) this is GJ ENSI D I G E

Held to Available Fair value through NOK million maturity for sale profit or loss Total

As at 1 January 2006 6,087.4 2,122.1 19,035.3 27,24 4.8 Exchange differences on monetary assets (8.3) (80.4) (88.7) Additions 1,535.4 1,920.1 1,662.8 5,118.3 Disposals (sale and redemptions) (1,751.8) (1,751.8) Fair value net gains (excluding net realised gains): 143.8 143.8 Designated at fair value through profit or loss upon initial recognition 87.0 87.0

Impairment losses: - Debt securities - listed (77.1) (77.1) - Equity securities - unlisted (3.2) (3.2)

As at 31 December 2006 7,537.4 2,434.1 20,701.6 30,673.1 operations

As at 1 January 2007 7,537.4 2,434.1 20,701.6 30,673.1 Exchange differences on monetary assets (38.7) (38.7) Additions 2,784.3 1,123.1 5,858.6 9,766.0 Disposals (sale and redemptions) (1,352.1) (455.1) (2,412.8) (4,220.0) Fair value net gains (excluding net realised gains): 158.5 158.5 Designated at fair value through profit or loss upon initial recognition

Impairment losses: - Debt securities - listed (56.8) (72.7) (129.5) - Debt securities - unlisted (27.2) (1.7) (28.9) - Equity securities - listed (336.2) (831.2) (1,167.3) As at 31 December 2007 8,885.6 2,765.9 23,361.8 35,013.3 mana mn results g ement 106 | GJensidige annual report 2007

Note 10 – Loans and receivables

NOK million 2007 2006

Loans - Mortgage loans due from contract holders 3,387.0 11.8 - Other loans due from contract holders 448.8 509.4 - Less provision for impairment of receivables from contract holders (11.1) (6.9) - Receivables to related party (Subordinated loans) 25.3 25.2 Total loans 3,850.0 539.6

Receivables - Receivables arising from direct insurance operations 3,159.3 2,794.0 - Other receivables 376.7 542.0 - Prepaid expenses and accrued interest 528.7 279.3 Total receivables 4,064.7 3,615.3

Total loans and receivables 7,914.6 4,154.9

Mortgage loans are primarily loans in Gjensidige Bank ASA. Gjensidige Bank Amounts due from reinsurers are comprised of reinsurance receivables where ASA started up in 2007. Gjensidige Forsikring Group has the right to call a letter of credit given by reinsurers to cover losses on credit insurance provided to policyholders. Other loans are mainly loans to agricultural customers granted exclusively for their installation of fire alarm systems. The loans are not secured, and the Subsequent to initial recognition, loans and receivables are measured at amor- terms vary from 3 to more than 20 years. Applications for these loans un- tised cost calculated using the effective interest method. The book value on dergo a customary credit assessment before being granted. The default rate receivables represents the fair value as receivables have a short remaining due is 0,88 percent in 2007 and 0,85 percent in 2006. As the discounted value of date. For loans granted to agricultural customers there is no liquid market. Fair the loans are lower than the face value at time of recognition the loans have value on these loans cannot be measured reliably, however the amortised cost been impaired in the opening balance. This discount is recognised as income represents a close approximation to the fair value of these loans. over the remaining term of the contracts. The effective interest rate is 4,7per cent per annum on these loans.

NOK million 2007 2006

Receivables arising from insurance and reinsurance contracts - Receivables in connection with direct insurance 2,977.2 2,616.8 - Receivables in connection with reinsurance 182.1 177.2 - Other 0.0 Total receivables arising from insurance and reinsurance contracts 3,159.3 2,794.0

Other receivables - Receivables in connection with real estate 70.0 64.5 - Receivables in connection with asset management 37.5 39.7 - Other receivables 269.2 437.8 Total receivables arising from other receivables 376.7 542.0

Prepaid expenses and accrued interest - Accrued, not received rental income and interest 332.2 247.1 - Other prepaid expenses and accrued interest 196.4 32.2 Total receivables arising from prepaid expenses and accrued interest 528.7 279.3

Effective interest rate Loans to agricultural customers 4.7 % 4.7 %

There is no concentration of credit risk with respect to loans and receivables, As at 31 December 2007 and 2006, loans and receivable at nominal value of as the Group has a large number of contract holders in Norway. For loans NOK 11.1 million and NOK 6.9 million were impaired. All impaired loans and related to the agriculture sector there is a general risk related to change in the receivables were overdue by more than 60 days. political environment, however we do not estimate that a change will affect the ability of our contract holders to repay the loans.

GJensidige annual report 2007 | 107

Note 11 – financial derivatives this is GJ ENSI D I G E

Principal Principal Market Principal Principal Market average value average value NOK million 31.12.07 2007 31.12.07 31.12.06 2006 31.12.06

Interest-related contracts Forward contracts 47,142.8 45,899.9 0.2 41,850.0 57,117.5 0.7 Interest rate futures 44.8 Interest rate options 481.0 Interest rate SWAP 4,750.0 5,741.7 (9.1) 2,842.9 6,378.0 (0.5)

Currency-related contracts Forward contracts 18,348.1 14,077.3 247.6 8,979.5 12,401.3 (91.2) Currency options 156.2 92.1 0.9 124.5 279.9 0.4 operations Equity-related contracts Equity options 1,030.6 2,079.9 2,068.4 Equity contracts 299.7 Equity futures 399.6 671.0 Total derivates 71,827.4 68,561.9 239.5 53,797.0 79,070.6 (90.5)

In each asset class the individual asset managers use appropriate derivatives, - Currency swaps, which are agreements with banks to swap certain and most of the financial derivatives mentioned below are used regularly. The amounts of different currencies at a specified exchange rate and to pay use of derivatives is restricted by the agreement with the individual manager, interest on these amounts for an agreed period. and requirements are made for approved product lists and sufficient expertise - Currency options, which are agreements giving the right / obligation to and systems on the part of the manager. Short positions (in other words purchase or sell currency at a specified exchange rate at a future date. undertakings to sell securities that the company does not already own, or to purchase securities without having sufficient liquid funds to complete the Equity-related contracts consist mainly of: transaction) are not normally permitted. - Equity options, which are agreements giving the right / obligation to buy mana or sell equities at a certain price on or before a future date. The manager in each asset class may never expose the company to a greater - Equity swaps, which are agreements to swap equities at a certain price at amount than specified in the management mandate. a future date.

- Equity futures, which are agreements to buy or sell equities at resultsa certain g ement The company’s overall foreign exchange risk is hedged almost entirely using price on a future date. currency futures. The overall level of risk in the equity portfolio was reduced during the year by buying options on broad indices rather than buying shares. Commodity-related contracts consist mainly of: Interest rate risk in respect of foreign bonds was reduced by selling interest - Commodity options, which are agreements giving the right/obligation rate futures. to buy or sell commodity futures at a certain price on or before a future date. Interest-related contracts consist mainly of: - Interest rate swaps, which are agreements to exchange interest terms on These transactions are carried out mainly with banks as counterparties. nominal amounts with customers or banks. The credit risk from these activities is considered to be marginal. Both interest - Forward rate agreements, which are agreements that set an interest rate related and currency-related transactions are conducted within established on a nominal amount for a future period. position limits. - Interest rate futures (IRF), which are agreements that secure the buyer a particular interest rate on an amount for a future period. - Bond options, which are agreements giving the right / obligation to pur- chaseor sell bonds at a particular price on or before a future date. • Bond futures, which are agreements to purchase or sell bonds at a particular price on a future date.

Currency-related contracts consist mainly of: - Currency futures, which are agreements to purchase or sell a particular amount of currency at a specified exchange rate at a future date. 108 | GJensidige annual report 2007

Note 12 – reinsurance assets

NOK million 2007 2006

Reinsurers’ share of provision for unearned premiums 4.7 23.7 Reinsurers’ share of claims provision 297.9 423.0 Total reinsurers’ share of provision 302.6 446.7 Reinsurance provision, surplus (32.1) Total assets arising from reinsurance contracts 302.6 414.6

There are no assets arising from life reinsurance contracts held by Gjensidige, Amounts due from reinsurers in respect of claims already paid by Gjensi- as there has been no single event that has led to losses that qualify for dige on the contracts that are reinsured are included in note 10, Loans and reimbursement under the reinsurance covers. receivables.

Note 13 – provisions and other liabilities

NOK million 2007 2006

Liabilities in connection with direct insurance 235.1 157.7 Liabilities in connection with reinsurance 34.1 43.5 Total liabilities in connection with insurance 269.2 201.2

Unpaid government fees 186.5 148.6 Other accrued expenses and prepaid income 15.7 8.0 Total accrued expenses and prepaid income 202.3 156.5

Liabilities for life insurance with investment choice 497.5 52.5 Total liabilities for life insurance with investment choice 497.5 52.5

Non-recurring payment to employees 0.0 82.0 Restructuring 120.4 224.6 Other provisions 128.3 Total other provisions 248.7 306.6

Restructuring As at 1 January 224.6 35.0 Additional provisions 224.6 Reversal of unused amounts (30.9) Used during the year (104.2) (4.1) As at 31 December 120.4 224.6

In 2006 management decided to reorganise the company with the ambition During 2007 NOK 104.2 million has been used for severence payments to of reducing operating costs by NOK 350.0 million (NGAAP) with effect from employees and other purposes. The reminder of the provision will most likely 2008. This resulted in a provision at the end of 2006 of NOK 224.6 million. be used within 2008.

Note 14 – cash and cash equivalents

NOK million 2007 2006

Deposits with financial institutions 2,078.6 1,257.4 Cash balances 2,013.7 1,013.9 Total cash and cash equivalents 4,092.3 2,271.3

Cash balances consists of cash and bank deposits available for day to day Weighted average rate for interest earned on cash, bank deposits and other business. Deposits with financial instistutions consists of short term currency short term assets is ca 4.4 per cent (2006: ca 3.8 per cent). deposits and other short term credit deposits. GJensidige annual report 2007 | 109

Note 15a – Consolidated statement of changes in equity this is GJ ENSI D I G E

Exchange rate Fair value of Actuarial Other retained Total NOK million adjustments reserves reserves earnings equity

As at 1 January 2006 (20.2) 1,186.5 (21.4) 14,820.0 15,964.9

Profit for the year 4,091.9 4,091.9 Exchange rate adjustments of foreign entities (8.1) (8.1) Changes in assets available for sale (861.7) (861.7) Actuarial gains / losses on defined benefit pension plans (205.8) (205.8) Other adjustments 36.2 36.2 Total recognised income and expense (8.1) (861.7) (205.8) 4,128.1 3,052.5

As at 31 December 2006 (28.3) 324.8 (227.2) 18,948.1 19,017.3

As at 1 January 2007 (28.3) 324.8 (227.2) 18,948.1 19,017.3 operations

Profit for the year 2,479.0 2,479.0 Exchange rate adjustments of foreign entities (137.1) (137.1) Changes in assets available for sale (430.7) (430.7) Actuarial gains / losses on defined benefit pension plans (326.0) (326.0) Total recognised income and expense (137.1) (430.7) (326.0) 2,479.0 1,585.2 Donation to the Foundation (300.0) (300.0) As at 31 December 2007 (165.4) (105.9) (553.2) 21,127.1 20,302.5

Note 15B – Consolidated statement of changes in equity per class capital

Class I capital Class II capital

Equity Equali- Total- Total mana certi- Premium sation Other Class I Earned Premium Other Class II Total NOK million ficates reserve fund e q u i t y capital equity fund e q u i t y capital e q u i t y

Equity as at 1 January 2007 - 19,017.3 19,017.3 results 19,017.3 g ement Issuance of equity certificates 3,860.0 894.3 4,754.3 (4,754.3) (4,754.3) - Total 3,860.0 894.3 4,754.3 14,263.0 14,263.0 19,017.3

Translation difference (34.3) (34.3) (102.8) (102.8) (137.1) Changes in assets available for sale (107.7) (107.7) (323.0) (323.0) (430.7) Donation to the Foundation (75.0) (75.0) (225.0) (225.0) (300.0) Actuarial gains and losses, pensions (81.5) (81.5) (244.5) (244.5) (326.0) - - Profit for the year 619.7 619.7 963.9 895.3 1,859.2 2,479.0

Equity as at 31 December 2007 3,860.0 619.7 595.9 5,075.6 15,226.9 15,226.9 20,302.5 Ownership fraction 25 % 75 % 110 | GJensidige annual report 2007

Note 16 – Insurance liabilities and reinsurance assets

NOK million 2007 2006

Short-term insurance contracts – general insurance - Claims reported and loss adjustment expenses 11,915.5 9,756.9 - Claims incurred, but not reported 11,231.6 7,799.7 - Unearned premiums 6,060.2 5,737.9 Total insurance liabilities, gross 29,207.3 23,294.6

Short-term insurance contracts - general insurance - Claims reported and loss adjustment expenses 186.7 404.8 - Claims incurred but not reported 111.2 18.2 - Unearned premiums 4.7 23.8 Total reinsurers’ share of insurance liabilities 302.6 446.8

Short-term insurance contracts - general insurance - Claims reported and loss adjustment expenses 11,728.8 9,352.1 - Claims incurred but not reported 11,120.4 7,781.5 - Unearned premiums 6,055.5 5,714.1 Total insurance liabilities, net 28,904.7 22,847.7

Movements in insurance and reinsurance assets 2007 2006 (a) Claims and loss adjustment expenses Gross Reinsurance Net* Gross Reinsurance Net*

Notified claims 9,756.9 (404.8) 9,352.1 8,805.3 (387.7) 8,417.6 Incurred but not reported 7,799.7 (18.2) 7,781.5 6,566.9 (20.0) 6,546.9 Total as at 1 January 17,556.7 (423.0) 17,133.6 15,372.2 (407.7) 14,964.5 Acqusition during the year 4,157.2 (86.9) 4,070.3 Cash paid for prior year claims (4,809.7) 95.7 (4,714.0) (3,528.5) (82.6) (3,445.9)

Increase in liabilities - Arising from current year claims 6,572.8 14.6 6,587.4 5,599.9 (2.9) 5,597.0 - Arising from prior year claims (run-off) (144.2) 92.5 (51.8) 113.1 (95.1) 18.0 Net exchange differences (185.6) 9.3 (176.3) Total as at 31 December 23,147.1 (297.9) 22,849.2 17,556.7 (423.0) 17,133.6

Notified claims 11,915.5 (186.7) 11,728.8 9,756.9 (404.8) 9,352.1 Incurred but not reported 11,231.6 (111.2) 11,120.4 7,799.7 (18.2) 7,781.5 Total as at 31 December 23,147.1 (297.9) 22,849.2 17,556.7 (423.0) 17,133.6

(b) Provisions for unearned premiums and unexpired short term insurance risks Movements for the year are summarised below. Unearned premium provision As at 1 January 5,737.9 (23.7) 5,714.2 5,253.8 (9.0) 5,244.8 Increase in the period 6,060.2 (4.7) 6,055.5 5,737.9 (23.7) 5,714.2 Release in the period (5,737.9) 23.7 (5,714.2) (5,253.8) 9.0 (5,244.8) As at 31 December 6,060.2 (4.7) 6,055.5 5,737.9 (23.7) 5,714.2

Unexpired risk provision As at 1 January 0.1 9.9 Increase in the period 0.1 Release in the period (0.1) (9.9) As at 31 December 0.1 * For own account GJensidige annual report 2007 | 111

Note 17 – Pensions this is GJ ENSI D I G E

Defined benefit pensions Gjensidige Forsikring has an occupational pension insurance scheme pursuant Net pension liabilities are the difference between the present value of gross to the Taxation Act (TPES) with a standard retirement age of 67. Gjensidige pension liabilities and the value of the pension assets. In accordance with IAS is also required to have an occupational pension scheme pursuant to the 19, employer’s contributions are taken into account in periods of underfun- Mandatory Occupational Pension Act. The company’s scheme meets the ding. Net pension liabilities for funded and unfunded schemes are shown in requirements of the Act. A retirement age of 65 apply to underwriters. the balance sheet under other assets in the case of overfunding and under provisions for other risks and liabilities in the case of underfunding. The retirement pension constitutes 70 per cent of the pension base, based on the number ofyears of service and final salary. The scheme also includes The pension scheme was closed to new employees in 2006 and the scheme a pension for surviving spouses, children and a disability pension subject to was transferred to the Gjensidige Pension Fund. The low pension expenses specific rules. In addition, Gjensidige Forsikring has pension liabilities for some in 2006 was due to a plan amendment. The gain associated with the plan employees with a lower retirement age, employees with salaries above 12 amendment was recognised in its entirety in 2006. times the social security base amount, and supplementary pensions.

In 2007 the calculation on a new and revised mortality table. This has resulted operations Employees are entitled to apply for an AFP contractual pension from the age in a one-time effect on actuarial gains / losses amounting to about NOK 200 of 62. AFP is classified as an unfunded scheme. million.

Pension liabilities are valued at the present value of future pension benefits Gjensidige Forsikring’s subsidiaries have different pension schemes, both accrued by the balance sheet date for accounting purposes. Future pension defined benefit schemes and defined cfontribution schemes. The extent of benefits are calculated on the basis of expected final salary. When measuring coverage and assumptions regarding the pension schemes varies considerably. accrued pension liabilities, estimated values on the balance sheet date are used. Pension funds are valued at market value. For the valuation of pension funds, estimated values at the balance sheet date are used. Actuarial gains or losses are recognised directly against equity. mana mn results g ement 112 | GJensidige annual report 2007

Note 17 – Pensions (cont.)

NOK million 2007 2006

Pension expenses recognised in the income statement are as follows: Pension benefits accrued during the year 98.5 134.5 Interest cost on benefit obligations 93.8 117.6 Expected return on plan assets (80.3) (92.7) Defined benefit pension cost before E/O 112.0 159.4 Administration costs 0.6 3.9 Recognised past service cost (271.7) Amortization of actuarial gains / losses (0.4) 0.4 One time effect 27.5 (4.3) Net defined benefit pension cost 139.7 (112.3) Social security costs 15.5 (14.0) Total defined benefit pension cost 155.2 (126.3)

Amounts recognised in the balance sheet are as follows: Present value of the defined benefit obligation 2,746.8 2,177.3 Fair value of plan assets (1,660.5) (1,357.0) Past service cost 9.3 Net defined benefit obligation 1,086.3 829.7 Social securities costs 147.0 117.0 Total defined benefit obligation 1,233.3 946.7

Expected recovery or settlement of the defined benefit obligation is as follows: Current 2,331.6 1,608.7 Non-current 415.2 568.6 Net defined benefit obligation 2,746.8 2,177.3 Funds based obligations 2,218.4 1,894.2 Non funds based obligation 528.4 283.1 Net defined benefit obligation 2,746.8 2,177.3

Movement in the defined benefit obligation is as follows: As at 1 January 946.7 961.2 Actuarial gain/loss, equity transaction 385.8 166.1 Social securities costs of actuarial gain/loss, equity transaction 54.4 36.8 Total defined benefit pension cost 169.8 (112.8) Payment incl expense and social securities cost (268.3) (57.5) Disbursement (54.7) (39.5) Historical divergence 2.7 (7.6) Social securities costs 0.7 Gains/losses (3.7) As at 31 December 1,233.3 946.7 GJensidige annual report 2007 | 113

Note 17 – Pensions (cont.) this is GJ ENSI D I G E

NOK million 2007 2006

Movement in the plan assets is as follows: As at 1 January (1,357.0) (1,797.2) Expected return on plan assets (80.3) (92.7) Contributions by employer (241.6) (56.5) Benefits paid 77.1 (92.7) Actuarial gains / losses (58.7) 682.1 As at 31 December (1,660.5) (1,357.1)

The Group expects to contribute NOK 268.3 million to the defined benefit plan in 2007.

Distribution of the plan assets at balance sheet date is as follows: Treasury bills 18.4 % 20.6 %

Equities 2.7 % 29.7 % operations Corporate bonds 21.1 % 30.0 % Money market funds 40.0 % 4.5 % Properties 12.3 % 12.6 % Other 5.5 % 2.6 % Total plan assets 100.0 % 100.0 %

Expected rates of return on plan assets are as follows: Treasury bills 5.3 % 3.0 % Equities 9.0 % 8.0 % Corporate bonds 6.0 % 4.5 % Money market funds 5.0 % 4.0 % Properties 8.0 % 6.0 % Other 7.0 % 4.3% - 9%

The overall rates of return are based on the expected return within each In calculating the pension costs and net pension liabilities, the following as- mana asset category and on current asset allocations. The expected returns are sumptions have been made. The discount rate is based on government bonds developed in conjunction with external advisers and take into account both in Norway adjusted for the duration of the pension obligation. current and market expectations of future returns when available, and

historical returns. The duration is estimated at 25 years and the adjustment to the discount results rate g ement is calculated based on the difference in 10 and 30 years US Treasury rates in USD. Salary rates, pension adjustments, and G-regulations, are based on historical observations and an expected future inflation of 2.5 per cent.

2007 2006

Discount rate 4.5 % 4.0 % Expected return on plan assets 5.5 % 5.0 % Future salary increases 4.3 % 4.0 % Change in social security base amount 4.3 % 3.8 % Future pension increases 2.0 % 1.6 % Employers contribution rate 14.1 % 14.1 % Staff turnover before/after 40 years Ladder Ladder Probability of AFP early retirement 40.0 % 40.0 %

The discount rate is the assumption that has the largest impact on the value of the liability. Regarding sensitivity analysis see note 2.

NOK million 2007 2006 2005 2004

Amounts for the current and previous periods are as follows: Defined benefit obligation 2,746.8 1,608.7 2,386.9 2,073.7 Plan assets (1,660.5) 568.6 (1,873.7) (1,632.2) Deficit 1,086.3 2,177.3 513.2 441.5

Defined contribution pension The cost of the defined contribution pension is recognised during the financial year. The company’s employees are given contributions in accordance with the limits for tax-free contributions. 114 | GJensidige annual report 2007

Note 18 – Amounts owed to financial institutions and other liabilities

NOK million 2007 2006

Recognised value in the balance sheet: Mortgage loans 786.6 Deposits from financial institutions 150.0 Sellers credit 5.6 Total liabilities to financial institutions 150.0 792.2

Fair value: Mortgage loans 786.6 Deposits from financial institutions 150.0 Sellers credit 5.6 Total liabilities to financial institutions 150.0 792.2

Outstanding accounts fire mutuals 146.1 153.3 Deposits from and liabilities to customers, bank 1,701.1 Certificates and other short term instruments, bank 1,350.0 Acccounts payable 260.2 114.6 Liabilities, real estate 1.2 45.2 Liabilities, asset management 23.8 261.9 Liabilities, public authorities 338.4 310.6 Other liabilities 726.2 300.0 Total other liabilities 4,547.0 1,185.5

Total amounts owed to financial institutions and other liabilities 4,697.0 1,977.7 .

Amounts owed to financial institutions was related to Oslo Areal ASA. On 29 hedging arrangements, as well as all accounts and insurance policies, were December 2006 Oslo Areal ASA repaid loans totalling NOK 1,988.4 million. pledged as collateral. Oslo Areal ASA also guaranteed all loan commitments. The repayment was financed by a short-term loan from Gjensidige. The loan In addition, the permitted loans were pursuant to the rules of the Limited was converted into equity on 11 January 2007. The total interest-bearing Liability Companies Act. debt after the repayment was NOK 786.6 million. The balance sheet value of the properties pledged as collateral was NOK The borrowings by Oslo Areal ASA were secured by a mortgage against inves- 4,424.4 million as at 31 December 2006. tment properties owned by its subsidiaries, as well as shares in its subsidiaries. In addition, receivables under intercompany loans and receivables under

Note 19 – income tax

NOK million 2007 2006

Tax expense Tax payable (59.8) 8.7 Wealth taxes (8.0) (7.0) Adjustment previous years (53.1) (4.3) Changes in deferred tax (420.4) (136.1) Total tax expense (541.3) (138.7)

Deferred tax and deferred tax assets Deferred tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets against current tax liabilities and when the deferred taxes relate to the same fiscal authority. The amounts offset are as follows: Taxable temporary differences: Other financial assets 19.1 0.4 Intangible assets 398.0 163.2 Property 1,782.4 1,637.3 Security reserve etc 5,072.8 4,798.4 Profit and loss account 2.9 48.2 Total taxable temporary differences 7,275.2 6,647.5 GJensidige annual report 2007 | 115

Note 19 – income tax (cont.) this is GJ ENSI D I G E

NOK million 2007 2006

Deductible temporary differences: Shares, bonds and other securities (123.4) (47.3) Loans (81.1) (106.0) Equipment (176.6) (442.5) Provisions (250.2) (331.8) Pensions (1,184.3) (952.2) Total deductible temporary differences (1,815.6) (1,879.8) Tax exempted temporary differences (336.4) (3.6) Net temporary differences before loss carried forward 5,123.2 4,764.1 Loss carried forward (56.3) (17.7) Dividends tax deduction carryforward (695.1) operations Valuation allowance 37.3 Net taxable/(deductible) temporary differences 5,104.2 4,051.3 Deferred tax liability / (deferred tax asset) 1,424.1 1,134.4

Reconciliation of income tax: Profit before tax 3,020.3 4,230.5 Expected income tax (28 %) (845.7) (1,184.5) Tax effects of: - different tax rate and change in tax rate 5.4 - valuation allowance on losses carried forward in foreign subsidiary (10.5) - received dividends 18.8 55.4 - share premium 108.9 307.8 - associated companies 11.1 (0.8) - permanent differences 177.0 694.7 - wealth tax and adjustments to tax previous years (6.3) (11.3) Total income tax (541.3) (138.7) mana Effective rate of income tax 17.9 % 3.3 %

The total loss and dividends tax deduction carryforward falls due as follows:

2010 results 37.3 g ement 2011 131.9 2012 68.0 2013 457.9 Later or no due date 56.3 17.7 Total loss carried forward 56.3 712.8

Change in deferred tax asset/liability: Deferred tax liability as at 1 January 1,134.4 1,006.9 Change in deferred tax on the profit and loss account 420.4 136.1 Booked directly to equity: -pensions (102.8) -companies sold and purchased (21.7) (8.6) Exchange rate difference (6.2) Deferred tax liability as at 31 December 1,424.1 1,134.4

Gjensidige Forsikring has for several years for tax purposes divided the busi- of a change in the assessment for the years 2004 to 2006. Gjensidige ness into taxable and tax exempt operations (fire operations). Two announ- contests this claim, but has nevertheless decided to allocate provisions to cements from the Financial Supervisory Authority of Norway, from 1957 and cover a potensial increased tax payment from the time the authorities 1987 about Gjensidige Forsikring and the tax act have been the basis for this have presented their new opinion. The allocated accounting provision is NOK practise. In 2006 the central taxation Office for Large Sized Enterprises (SFS) 180 NOK million and cover the years 2006 and 2007. has contested whether this practise can be maintained, and has given notice 116 | GJensidige annual report 2007

Note 20 – expenses

NOK million 2007 2006

Depreciation, amortisation and impairment charges ( Note 5 and 7 ) 167.6 113.6 Employee benefit expenses ( Note 21) 1,306.8 1,024.5 Fee for customer representatives 7.3 8.4 Software costs 340.5 381.1 Auditor’s fee * 13.1 4.8 Consultants’ and lawyers’ fees 188.9 201.1 Commissions 319.8 246.2 Other expenses 376.9 586.9 Total expenses 2,720.9 2,566.6

Specification auditor’s fee (incl. VAT ): Statutory audit 8.2 3.5 Other non-assurance services 8.5 1.1 Tax consultant services 0.0 0.2 Total 16.7 4.8

* Only general insurance

Note 21 – Salaries and general administration expenses

a avaraGE NUMBER OF EMPLOYEES 3,467 3,421

b employee BENEFIT EXPENSIONS

NOK million 2007 2006

Wages and salaries, including restructuring costs and termination benefits 1,175.6 958.6 Social security costs 257.4 171.0 Pension costs - defined contribution plans 34.7 14.3 Pension costs - defined benefit plans ( Note 17 ) 155.2 (126.3) Total 1,622.9 1,017.6

c combineD REMUNERATION OF THE EXECUTIVE MANAGEMENT The complexity has increased through establishment of Gjensidige Pensjon og The board of directors’ statement concerning the adoption of salaries and Sparing and Gjensidige Bank. other remuneration of the CEO and executive management. Remuneration of the CEO. Gjensidige’s compensation policy The CEO’s salary and other financial benefits shall be approved by the board In accordance with Gjensidige’s compensation policy, which applies to all of directors based on an overall assessment, in which Gjensidige’s compensa- employees in the Group, it is stated that: tion policy and these guidelines are used as a basis. • Gjensidige shall not be a salary leader, but shall nevertheless have a competitive level of compensation. Bonuses are determined on a discretionary basis based one the CEO’s • Gjensidige expects that the employees have a comprehensive view of achievement of goals, and can not exceed 50 per cent of the fixed annual what Gjensidige offers in the form of salary and benefits. salary. In addition, the CEO may be granted benefits in kind, such as company • The company’s compensation systems shall be open, perfomance-based, car, free broadband, etc. All financial benefits are reported as wages in -ac fair and predictable. cordance with current tax laws. Such benefits must be related to the CEO’s • Compensation shall be linked to achievement of the company’s defined job function. strategic and financial goals. In addition, it is expected that employees espouse the company’s values and act loyally. The retirement age for the CEO is 62 years.

Recommended guidelines for the coming financial year The CEO has pension rights in accordance with Gjensidige’s closed defined General benefit pension scheme. In accordance with his individual employment Gjensidige has undergone a major development from a Norwegian-based ge- contract, he is entitled to a pension of 100 per cent of his annual salary upon neral insurance company to become a player on the Nordic financial marked. retirement at the age of 62, which reduced subsequently to 70 per cent upon GJensidige annual report 2007 | 117

reaching the age of 67 and thereafter. Members of group management have a retirement age of 62. All current this is GJ ENSI D I G E members of group management are members of the closed defined benefit The CEO has an option to retire at age of 60 if the board of directors or pension scheme. himself so desires. There is a corresponding recuction from 100 percent upon retirement to 70 per cent upon reaching the age of 67. Everyone with a full contribution period is entitled to a pension of 70 per cent of their annual salary upon reaching the age of 62. The board of directos will Car schemes and other benefits are maintained until reaching the age of 67. maintain previous individual pension agreements for two memebers in the group management. The CEO has no severance pay agreement if he resigns before reaching retirement age. There is a bonus scheme agreement for one of the members of the group management. Regulation of the CEO’s salary, including award of other financial benefits within the scope of these guidelines is determined by the board of directors There are no severance pay agreements for managers that resign from their upon advice from the central board of directors’ compensation committee. positions in Gjensidige.

Remuneration of other members of the executive management Binding guidelines concerning the allotment of shares etc for the coming operations The CEO determines the financial terms for members of the executive year - cf section 6 - 6a of the Norwegian Public Limited Companies Act. management according to a statement given to the compensation committee. CEO and memebers of the executive management will be allowed to partici- Gjensidige’s compensation policy, which forms part of these guidelines, is pate in subscription programmes for the purchase of equity certificates etc by used as a basis. employees in the same manner as other employees in Gjensidige.

Additional financial benefits may be offered to members of the executive Executive remuneration policy for the previous financial year management depending on marked conditions and taking into account the In the previous year the financial benefits for members of the group mana- fact that the benefit is related to the employee’s job function in Gjensidige. gement, with the exception of the CEO, were determined in accordance with Bonus can be given on discretionary basis accourding to criteria determined Gjensidige’s current compensation policy, in consultation with the chairman by the CEO, as derived from the company’s strategies and goals. of the board.

Possible bonus shall, in addition to the annual salary, ensure that Gjensidige is The CEO’s terms, including salary adjustments, have been determined by the able to attract and hold on to expertise necessary to implement its strategies central board of directors based on Gjensidige’s compensation policy and the and accomplish its goals. assumed salary development for employees in general. mana An upper limit for bonus payments has been set at 30 per cent of the annual Two persons in the group management have had a bonus scheme that are salary. The CEO may under special circumstanses make exceptions to this decided by the CEO in consultation with the chariman of the board. policy in consultation with the compensation committee. mn results g ement

D key management personell compensation Rights earned in finan.year Loans, Calculated accor.to advance total defined- payments, Retire- Fixed and value of benefit guaran. Inte- ment variable non-cash pension (outstanding rest Applicable conditions condi- NOK thousand salary benefits scheme amount) rate7 and installment plan tions

Remuneration of:

Executive Management Helge L. Baastad, CEo 3,622.1 250.5 1,599.2 2 Tor Lønnum, Deputy CEO 2,908.4 208.5 818.9 3 Bjørn Asp, Executive Vice President 2,019.6 159.6 493.0 2,599.2 Last installment 22.11.2032 3 Geir Bergskaug, Executive Vice President 1,656.8 148.8 644.2 3 Erica Blakstad, Executive Vice President 1,619.0 189.5 1,248.1 3 Petter Bøhler, Executive Vice President 1,844.7 201.2 830.5 1,150.2 Last installment 20.05.2012 3 Trond Delbekk, Executive Vice President 1,873.5 180.3 609.6 3 Hege Toft Karlsen, Executive Vice President 1,518.2 168.9 342.0 2,500.0 Last installment 20.04.2017 3 Jørgen Ringdal, Executive Vice President 1,875.0 217.3 684.2 2 Odd Røste, Executive Vice President 1,666.4 143.3 295.1 3 Bjørn Walle, Executive Vice President 1,742.0 149.5 1,574.0 4 Ove Ådland, Executive Vice President 1,675.1 180.0 606.0 3 Nils Arne Fagerli, Executive Vice President (15.08. - 31.12.)1 600.0 55.3 416.4 3,933.9 Last installment 20.09.2033 3 118 | GJensidige annual report 2007

D key management personell compensation (cont.)

Rights earned in finan.year Loans, Calculated accor.to advance total defined- payments, Retire- Fixed and value of benefit guaran. Inte- ment variable non-cash pension (outstanding rest Applicable conditions condi- NOK thousand salary benefits scheme amount) rate7 and installment plan tions Remuneration of: Board of Directors6 Jørgen Tømmerås, chairman 383.0 9.5 Jorund Stellberg, deputy chairman 328.7 14.0 Sverre Groven (01.01. - 21.03) 193.8 1.9 15,4 0 % Last installment 01.11.2010 Magne Revheim 144.0 7.6 Marthe Sondov (01.01. - 21.03) 185.3 0.0 Randi B. Sætershagen 254.5 2.4 Hans Ellef Wettre 147.0 2.3 Tor Øwre 339.5 18.7 Cato Litangen (21.03. - 31.12) 196.8 8.1 Marianne Lie (21.03. - 31.12) 156.3 Odd Kristian Hamborg, employee 135.0 Petter Aasen, employee (30.10.-31.12) 79.1 Marianne Bø Engebretsen, employee (21.03. - 31.12) 101.3 Magnhild Egge, employee (01.01. - 21.03) 33.8 Gunnar Mjåtvedt, employee (21.03. - 31.12) 147.1 Marit Lund, employee (01.01. - 21.03) 88.8 Einar Rist, employee (01.01. - 21.03) 110.8

Board of directors, deputies6 Tove Jebsen 65.0 Harald Milli 10.0 Odd Samuelsen 19.0 Valborg Lippestad (09.10. - 31.12) 5.5 Jonfinn Fløtre (01.01. - 09.10) 43.5 Magnar Kvalvåg, employee (01.01. - 21.03) 8.5 6.2 Rita Karina Møller, employee (01.01. - 21.03) 2.5 3.7 Kjetil Kristensen, employee (21.03. - 31.12) 62.5 Ingvild Solli Andersen, employee (30.10. - 31.12) 1.7 Petter Aasen, employee (21.03. - 30.10)

Control commitee6 Kåre Lund, chairman 131.0 4.5 27,4 0 % Last installment 09.05.2015 Marit Tønsberg, deputy chairman 78.0 0.3 Tove Melgård 69.0 3.8

Commitee of representatives Randi Brathe, chairman (Region Øst) 93.0 2.0 Trond Bakke, deputy chairman (Region Innlandet) 106.0 0.7

In addition: 55 representatives from regions/mutual fire insurers/organisations/employees5

1) The stated numeration applies to the period the individual in question has held the position or office. 2) Age 62, 100 per cent salary reducing gradually to 70 percent at age 67. 3) Age 62, 70 per cent salary until age 67, then Gjensidige Forsikring’s ordinary pension terms will take effect. 4) Age 60, 70 per cent salary until age 67, then Gjensidige Forsikring’s ordinary pension terms will take effect. 5) Annual fee of NOK Thousand 3, in addition to a per meeting fee of NOK Thousand 3. There have been three ordinary meetings in 2007 plus a telephonemeeting to fee NOK Thousand 0,5. 6) The fee includes a fee for subsidiaries. 7) Interest rate is in 5,15 nominell, unless other is stated. GJensidige annual report 2007 | 119

Note 22 – Net financial income this is GJ ENSI D I G E

NOK million 2007 2006

Net income from associated companies 39.6 35.4 Income from buildings and real estate 881.4 1,118.4 Unrealised gain and reversal of unrealised losses on financial assets 82.8 143.4 Fair value gains (loss) on exchange trade currency 12.9 243.3 Realised gain on sale of Available for sale assets 265.8 1,285.3 Dividend income 187.3 288.3 Interest income 1,195.1 859.3 Held to maturity interest income 396.4 334.3 Fair value gains (loss) on sale of financial assets through profit or loss 3,140.9 686.2 Other financial income 45.1 477.3 Total financial income 6,247.2 5,471.2

Administration costs on buildings and real estate (137.7) (288.9) operations Other administration costs (56.9) (55.0) Interest costs (619.7) (500.1) Other costs related to financial assets (71.7) (108.5) Unrealised losses and reversal of unrealised gains of financial assets (940.4) (6.4) Loss on sale of securities (1,600.6) (801.2) Total financial costs (3,427.0) (1,760.1)

Net financial income 2,820.3 3,711.1

Net financial income split per financial asset Net income from buildings and real estate: 557.9 569.6 Unrealised gain on investment properties 323.5 573.0 Administration costs on buildings and real estate (137.7) (288.9) Total 743.7 853.7

Dividend income 187.3 288.3 mana Net interest income 119.6 510.4 Net gain (loss) on sale on shares and other similar assets 1,704.1 855.1 Net gain (loss) on sale on bonds and sertificates 3.6 (62.8) Net gain (loss) on derivatives (774.0) results (109.2) g ement Administration cost (126.1) (175.2) Net income and gains from financial assets through profit and loss: 1,114.4 1,306.7

Net interest income / cost 456.9 (76.3) Net realised gain (loss) on sale of subordinated loans 2.0 0.7 Total 458.9 (75.6)

Net held to maturity interest income 396.4 306.1 Net loss on sale of held to maturiy (27.2) (0.5) 369.2 305.6

Realised gain on disposals of shares available for sale 265.8 1,285.3 Gain on warrant shares 367.6 Unrealised loss on available for sale through profit and loss (538.9) Total 94.5 1,285.3

Net income from associated companies 39.6 35.4

Total net financial income 2,820.3 3,711.1 120 | GJensidige annual report 2007

Note 22 – Net financial income (cont.)

NOK million 2007 2006

Surplus value of shares available for sale, recognised in equity: As at 1 January 324.8 1,186.5 Additions of shares available for sale (through equity) Disposals of shares available for sale (265.8) (1,285.3) Gain on warrent shares (gain through profit and loss) 367.6 Change in values (loss through profit and loss) (538.9) Change in values (gain/loss through equity) (164.8) 423.6 As at 31 December (277.2) 324.8

Specification of interest cost: Interest costs on loans (30.2) (117.1) Interest costs on bonds and securities (100.5) (82.3) Interest costs on derivatives (313.6) (291.3) Other interest costs (175.4) (9.4) Total interest costs (619.7) (500.1)

Note 23 – Foreign exchange gains and losses NOK million 2007 2006

The exchange differences recognised in profit and loss, allocated to the balance sheet items, are as follows: Shares (395.7) (138.8) Equity funds (137.7) (102.0) Bonds (26.4) (12.5) Index bonds (92.6) (22.7) Hedge funds (445.1) (193.3) Certificates 0.6 27.6 Forward contracts 305.3 329.8 Currency swaps 839.8 76.2 Others* (7.1) (12.1) Total foreign exchange gains and losses 40.9 (47.7)

* Included in Others are bank deposits, commission reserves, premium reserves, loss reserves (RBNS), accounts receivable and liabilities

Note 24 – other expenses

NOK million 2007 2006

Other operating expenses 6.1 3.6 Personnel costs 241.5 186.0 Depreciation 21.8 25.3 Other expenses 228.0 126.5 Other expenses 55.0 27.3 Total 552.4 368.7

Note 25 – other income

NOK million 2007 2006

Sales income 339.3 274.3 Rental income 10.8 23.4 Other income 29.9 16.2 Total 380.0 313.9 GJensidige annual report 2007 | 121

Note 26 – Contingent assets and off balance sheet liabiliites this is GJ ENSI D I G E NOK million 2007 2006

Capital expenditures contracted for at the balance sheet date, but not yet incurred is as follows: Gross guarantees 0.6 Commited capital Private Equity investments 1,222.0 850.0

As part of its ongoing financial management, the company has pledged to Contingent assets invest up to NOK 1,222.0 million in various private equity investments and real Receivables of NOK 54.6 million of the total of NOK 57.0 million towards The estate investments, in addition to the amounts entered in the accounts. Foundation is due to costs directly attributable to the sale of equity certificates. The receivables are contingent of listing of all issued equity certificates on Gjensidige Forsikring is responsible externally for any insurance claim arising Oslo Stock Exchange. from the cooperating mutual fire insurers’ operations.

Note 27 – Business combinations operations

KommuneForsikring A/S Gjensidige Forsikring entered into an agreement with Foreningen til Begræns- tangible assets acquired has been integrated as intangible assets and goodwill ning av Skadeutgifter i Kommuner og Regioner f.m.b.a. in the autumn of in the consolidated accounts. 2006 to acquire 100 per cent of the shares in KommuneForsikring AS and European Institute for Risk Management AS (EIRM). The acquisition was At the time of the acquisition EIRM AS had equity of NOK 2.3 million, and contingent on Gjensidige Forsikring being granted a licence to acquire the NOK 2.3 million has been allocated to acquire the company. company by the Norwegian and Danish authorities, which was granted the 19 of January 2007. KommuneForsikring AS reported a profit of over NOK 140 million for 2006. The company had a combined ratio of 95,8 and a cost ratio of 10.0 in 2006. The net result in 2007 in KommuneForsikring AS was NOK 138.1 million. The company had a combined ratio of 96.67 per cent and a cost ratio of 11.88 Gjensidige Forsikring’s share of the profit since the acquisition date included per cent according to DKGAAP in 2007. Kommuneforsikring AS had a total in the income statement for the period is NOK 138.1 million. revenue in 2007 of NOK 762.6 million. Acquisition costs related to the acquisition consists of fees to advisors and mana The purchase method was used for the acquisition. The analysis of the acqui- lawyers. red assets and liabilities is illustrated below. The value in excess of the net

ACQUISITION OF SUBSIDIARY KOMMUNEFORSIKRING AS Carrying results g ement amount at time Fair value Carrying amount NOK million of purchase adjustment after purchase

Trademark 101.6 101.6 Customer relations 284.2 284.2 Software developed in-house 130.1 130.1 Value of employees (part of goodwill) 68.9 68.9 Goodwill 380.4 380.4 Property, plant and equipment 95.3 19.5 114.8 Investments 5,271.1 5,271.1 Other assets 65.8 65.8 Receivables 90.3 90.3 Income paid in advance 140.5 140.5 Total assets 5,663.1 984.6 6,647.8 Total equity 1,352.4 874.0 2,226.4 Technical provisions, gross 4,016.0 4,016.0 Accounts payables 22.3 22.3 Deferred tax 110.7 110.7 Supplier debts and other debts 272.3 272.3 Total equity and liabilities 5,663.1 984.6 6,647.8

Net assets acquired 1,352.4 965.1 2,337.1 EIRM 2.3 Compensation 2,339.4 Investments 2,214.5 Acqisition costs 14.2 Net purchase price 2,228.7 122 | GJensidige annual report 2007

Note 27 – Business combinations (cont.)

Tennant insurance group AB At the time of the acquisition Tennant Group had equity of NOK 68.8 million. Gjensidige Forsikring entered into an agreement with the shareholders of Tennant Group reported a profit of NOK 7.8 million prior to the date of the the Tennant Group in July 2007 to acquire 100 per cent of the shares and acquisition. In addition, the Group had a combined ratio of 98.8 and a cost subscription rights in the Tennant Group. The acquisition was contingent ratio of 11.9. on Gjensidige Forsikring being granted a licence to acquire the company by the Norwegian and Swedish authorities. Gjensidige Forsikring was granted a Gjensidige Forsikring’s share of the loss since the acquisition date included in licence by the Norwegian authorities as of 7 July 2007 and a licence from the the income statement for the period is NOK 17.5 million. Tennant Insurance Swedish authorities as of 30 July 2007. The takeover date was 1 August. Group had a loss for the year 2007 of NOK 9.7 million.

The purchase method was used for the acquisition. The analysis of the ac- Tennant Insurance Group AB had total revenue in 2007 of NOK 326.2 million. quired assets and liabilities is illustrated below. The value in excess of the net The revenue since the acquisition date included in the income statement for tangible assets acquired has been integrated as intangible assets and goodwill the period is NOK 161.9 million. Acquisition costs related to the acquisition in the consolidated accounts. The fair value has been set provisionally since consists of fees to advisors and lawyers. the final assessment has not been completed for all the components of the fair value assessment.

Acquisition of subsidiary Tennant Insurance Group Carrying amount at time Fair value Carrying amount NOK million of purchase adjustment after purchase

Trademark 14.9 14.9 Contracts 40.0 40.0 Customer relations 53.5 53.5 Software developed in-house 21.6 13.0 34.6 Value of employees (part of goodwill) 9.9 9.9 Goodwill 22.4 291.4 313.8 Investments 266.6 266.6 Other assets 51.1 51.1 Receivables 115.0 115.0 Income paid in advance 34.8 34.8 Insurance technical reserves 115.0 115.0 Total assets 626.5 422.7 1,049.2 Total equity 68.8 378.7 4 47.5 Technical provisions, gross 451.8 12.0 463.8 Other provisions 13.5 1.8 15.3 Deferred tax 30.1 30.1 Other risks and liabilities 37.2 37.2 Long-term interest bearing liabilities 34.7 34.7 Incurred expenses and accrued income 20.5 20.5 Total equity and liabilities 626.5 422.7 1,049.2

Net assets acquired 447.5

Compensation Investment 430.0 Acquisition costs 17.5 Net purchase price 4 47.5 GJensidige annual report 2007 | 123

Note 28 – Related party transactions this is GJ ENSI D I G E

OVERWIEV OF RELATED PARTIES Gjensidige Forsikring is the Group’s ultimate parent. As at 31 December 2007 the following companies are the company’s related parties:

Registered office Share

Subsidiaries Fair Forsikring A/S Copenhagen, Denmark 100 % Fair Financial Ireland Limited Copenhagen, Denmark 100 % Gjensidige Bank Holding AS Oslo, Norway 100 % Gjensidige NOR Forsikring Eiendom AS Oslo, Norway 100 % Gjensidige Norge AS Oslo, Norway 100 % Gjensidige Pensjon og Sparing Holding AS (GPS) Oslo, Norway 100 % Glitne Invest AS Oslo, Norway 100 %

Oslo Areal ASA Oslo, Norway 100 % operations Parekss Insurance Company Ltd Riga, Latvia 100 % Samtrygd Eigedom AS Førde, Norway 100 % Storgata 90 AS Tromsø, Norway 100 % Strandtorget Drift AS Lillehammer, Norway 100 % Strandtorget Eiendom AS Lillehammer, Norway 100 % Tennant Insurance Group AB Stockholm, Sweden 100 %

Associates Bilskadeinstituttet AS Oslo, Norway 29.5 % Forsikring og Finans Sandnes AS Sandnes, Norway 34 % Forsikringskontoret Johansen og Torkelsen AS Sandnes, Norway 34 % Fossmark Assuranse AS Stavanger, Norway 34 % Vervet AS Tromsø, Norway 25 %

Other related parties

Fire mutuals All over the country, Norway mana Gjensidige Pensjonskasse Oslo, Norway Gjensidige Pensjonskasse for supplemental payments Oslo, Norway

In all cases the percentage of votes held is the same as the percentage of shares held. results g ement

Transactions with related parties The table below shows a summary of transactions with related parties recognised in the income statement.

2007 2006 NOK million Income Expense Income Expense

Provisions Gjensidige Investeringsrådgivning ASA (owned by GPS) 0.2 Gjensidige Pensjonsforsikring AS (owned by GPS) 3.6 Gjensidige Bank ASA (owned by Gjensidige Bank Holding AS) 0.3

Interests Fair Financial Ireland Limited 3.5 Fair Forsikring A/S 7.9

Aministration cost real estate Oslo Areal ASA 8.2 Total 4.1 11.7 7.9 124 | GJensidige annual report 2007

Note 28 – Related party transactions (cont.)

Group contributions and dividends The table below shows a summary of contributions and dividends received / given from / to subsidiaries.

2007 2006 NOK million Received Given Received Given

Contributions Gjensidige Pensjon og Sparing Holding AS 4.5 9.8 Gjensidige Pensjonsforsikring AS (owned by GPS) 70.3 78.1 Gjensidige Investeringsrådgivning ASA (owned by GPS) 55.3 48.9 Gjensidige Bank ASA (owned by Gjensidige Bank Holding AS) 120.0 Gjensidige Norge AS (previously Norge Forsikring AS) 0.2 Drammen Torget Invest AS (owned by Oslo Areal ASA) 2.9 Oslo Areal ASA 124.0 6.1

Dividends Gjensidige NOR Forsikring Eiendom AS 2.6 HPS Handel AS (owned by Oslo Areal ASA) 7.8 Oslo Areal ASA 66.4 32.4 Gjensidige NOR Forsikring Eiendom AB (sold in 2007) 12.8 Total group contributions and dividends 195.1 245.6 55.6 145.9

Purchase and sale of assets The table below shows a summary of purchases / sales of assets from / to subsidiaries, associates or other related parties.

2007 2006 NOK million Purchases Sales Purchases Sales

Subsidiaries Asset Type Glitne Invest AS Energy Venture l Shares (8 %) 1.6 Gjensidige Bank Holding AS 25.3 (prev. Gj. NOR Kr.fors) Inventories, receivables and liabilities Oslo Areal ASA Drammen Torget Vest AS og Shares (100 %) 577.3 HPS Handel AS Shares (100 %)

Related party balances The table below shows a summary of receivables / payables from / to subsidiaries, associates and other related parties.

2007 2006 NOK million Receivables Payables Receivables Payables

Within the Group Fair Forsikring A/S 275.3 Gjensidige Norge AS 0.0 Gjensidige Bank ASA (owned by Gjensidige Bank Holding AS) 3.1 11.2 Gjensidige Bank Holding AS (previously Gjensidige NOR Kredittforsikring AS) 11.6 Gjensidige Pensjon og Sparing Holding AS 3.1 0.3 Gjensidige Pensjonsforsikring AS (owned by GPS) 0.6 Gjensidige Investeringsrådgivning ASA (owned by GPS) 0.1 0.2 Glitne Invest AS 0.8 Hjelp 24 NIMI AS (owned by Glitne Invest AS) 1.3 HPS Handel AS (owned by Oslo Areal ASA) 7.8 Oslo Areal ASA 12.8 1,956.7 Drammen Torvet Vest AS (owned by Oslo Areal ASA) 140.0 Gjensidige NOR Forsikring Eiendom AS 2.6 Total due for payment in less than one year 7.6 288.1 2,131.6 0.2 Samtrygd Eigedom AS 2.8 2.4 Total due for payment in more than one year 2.8 2.4 Total related party balances within the Group 10.4 288.1 2,134.1 0.2 GJensidige annual report 2007 | 125

Note 28 – Related party transactions (cont.) this is GJ ENSI D I G E

2007 2006 NOK million Receivables Payables Receivables Payables

Other related parties Gjensidige Pensjonskasse 80.0 Gjensidige Pensjonskasse for supplemental payments 1.0 Vervet AS 25.3 25.2 Lindorff AB (associate owned by Glitne Invest AS) 0.3 Total relelated party balances 117.0 288.1 2,159.3 0.2

There is no need for provision for bad debts.

Cooperating companies* Fire mutuals 145.3 153.3 operations * Cooperating companies are defined as companies with which Gjensidige Forsikring has entered into a long-term strategic alliance.

Gurantees Gjensidige Forsikring is responsible externally for any insurance claim arising from the cooperating mutual fire insurers’ fire insurance business.

Note 29 – Events after balance sheet date

Gjensidige Baltic, Gjensidiges operations in the Baltic States, acquired the The market value of Gjensidige’s ownership interest in Storebrand is impaired Lithuanian general insurance company RESO Europe in January 2008. See after the end of the year, and this may have significant impact on the Group’s discussion in the year end report. net financial income for the first quarter in 2008, in the form of an impairment if the market value does not change. Gjensidige’s Board of directors decided to sell the head office at Sollerud, Drammensveien 288. The sales contract includes a leaseback agreement, mana which entails that Gjensidige will continue to use the building as its head office. mn results g ement 126 | GJensidige annual report 2007

Note 30 – capital ratio

NOK million 2007 2006

Equity parent company, NGAAP 15,441.0 15,440.9 Overfunded pension liabilities after tax (435.6) Goodwill (1,302.9) (328.0) Deferred tax benefit (391.1) (331.0) Other intangible assets (1,020.8) (479.0) Investment property, unrealised gains, proportion (620.7) Reinsurance provision, minimum requirement (21.0) Actuarial losses on defined benefit plans, proportion 390.9 Core capital 12,475.4 13,867.3 Primary capital in other financial institutions (2,914.6) (1,778.7) Net primary capital (A) 9,560.8 12,088.6

Assets with a 0 % risk weight 1,949.4 3,094.3 Assets with a 10 % risk weight 54.7 266.1 Assets with a 20 % risk weight 15,417.4 13,578.5 Assets with a 50 % risk weight 3,505.0 641.5 Assets with a 100 % risk weight 34,583.8 27,713.7

Other non-weighted assets Goodwill 1,302.9 328.0 Deferred tax benefit 391.1 331.0 Other intangible assets 1,020.8 479.0 Loss provisions (11.1) (6.9) Derivatives 239.5 (90.5) Total assets 58,453.5 46,334.7

Assets with a 0 % risk weight Assets with a 10 % risk weight 5.5 26.6 Assets with a 20 % risk weight 3,083.5 2,715.7 Assets with a 50 % risk weight 1,752.5 320.8 Assets with a 100 % risk weight 34,583.8 27,713.7 Weighted total assets 39,425.3 30,776.8 Weighted reinvestment cost derivatives 108.2 37.1 Primary capital in other financial institutions (2,914.6) (1,778.7) Loss provisions (11.1) (6.9) Risk weighted calculation base (B) 36,607.6 29,028.3 Capital ratio (A/B) 26.1 % 41.6 % NFSA minimum requirement 8.0 % 8.0 % GJensidige annual report 2007 | 127

Note 31 – SOLVENCY MARGIN AND CAPITAL REQUIREMENT IN SUBSIDIARIES this is GJ ENSI D I G E

Gjensidige Forsikring NGAAP NOK million 2007 2006

Net primary capital 11,802.2 12,701.2 Proportion of security provision 1,088.8 1,025.2 Proportion of reinsurance provision (not applicable from 2007 onwards) 32.1 Natural perils fund (for 2007 only 25 % of the natural perils fund is included) 532.5 1,001.8 Solvency margin capital 13,423.5 14,760.3 Solvency margin minimum requirement 2,391.7 2,287.9 In excess of requirement 11,031.8 12,472.4 Solvency margin capital in per cent of requirement 561.3 % 645.2 %

Solvency margin is reported only on the statutory accounts, according to NGAAP.

Fair Group DKGAAP operations NOK million 2007 2006

Equity 2,419.8 420.1 Intangible assets (720.2) (255.2) Deferred tax asset (93.3) (29.0) Discounting (67.7) (9.4) Basis capital, gross 1,538.6 126.5 Capital requirement 334.1 22.3 In excess of requirement 1,204.5 104.2

As from 2007 the figures also includes KommuneForsikring AS.

Tennant Insurance Company SEGAAP NOK million 2007 2006

Equity 170.9 101.7 mana Intangible assets (1.2) (1.6) Deferred tax asset Discounting (12.5)

Basis capital, gross 157.2 results 100.1 g ement Capital requirement 49.9 49.2 In excess of requirement 107.3 50.9

Gjensidige aqcuired Tennant Insurance Group in 2007.

Gjensidige Baltic According to the requirements of the ”Law on Insurance Companies and their the solvency norm. At the end of the reporting year, the minimum amount supervision”, in order to ensure the stability of the insurer’s financial activities, of guarantee fund fixed in the law was LVL 2.1 million or EUR 3.0 million. The the insurance company should constantly have at its disposal own funds, which equity of Gjensidige Baltic as at 31 December 2007 was LVL 8.5 million should be at least the minimum amount of guarantee fund fixed in the law and and at 31 December 2006 LVL 6.8 million.

Note 32 – restricted funds

NOK million 2007 2006

Restricted bank deposits Source-deductible tax accounts 71.4 69.8 Securities placed as security for insurance operations 14.2 15.9 Deposits placed as security for insurance operations 8.2 37.5 Total 93.8 123.3 128 | GJensidige annual report 2007

Note 33 – Buildings for own use and investment properties

A. General information The tables below gives additional information about, in all material aspects, the Gjensidige Group’s buldings for own use and investment properties.

Total Average life Average Average area in Book Market of contracts rent per index adjust- Own NOK million sq. meters value value in years sq. metre ments % use

Type of property Offices 286,178.0 5,160.0 5,891.3 3.2 1,250 96 % 25 % Shopping center 68,971.0 1,168.4 1,168.5 6.0 1,008 100 % 0 % Other 27,395.0 618.0 607.3 4.6 1,228 97 % 57 % Total 382,544.0 6,946.4 7,667.1 4.4 1,161 97 % 28 %

Geographical allocation Stor-Oslo 248,895.0 4,890.5 5,461.8 5.5 1,318 97 % 20 % Stavanger 27,230.0 335.0 367.7 6.6 1,203 100 % 49 % Bergen 16,105.0 180.0 228.4 2.9 871 96 % 22 % Trondheim 8,539.0 210.7 210.7 3.2 1,556 100 % 0 % Other cities 75,667.0 1,253.6 1,319.6 4.5 1,023 96 % 26 % Rest of the country 6,108.0 76.6 78.9 0.7 596 96 % 59 % Total 382,544.0 6,946.4 7,667.1 4.4 1,161 97 % 28 %

Areas used for parking and storage are included when calculating the average rent per square metre.

Own use of property Properties for own use have rental contracts based on market rental data. Own use is rental within Gjensidige Forsikring Group and cooperating mutual fire insurance companies.

b. additions and disposals NOK million 2007 2006 2005 2004 2003

Additions 133.0 343.4 3,943.2 339.2 303.7 Disposals 1,589.5 742.8 72.8 171.7 605.0

In 2007, additions and disposals of investment properties amounted to NOK buildings for own use amounted to NOK 50.7 million and NOK 11.2 million 82.0 million and NOK 1,578.3 million respectively. Additions and disposals of respectively. It has not been possible to make allocations for earlier periods.

Note 34 – Shares and similar interests

Norwegian shares Number Owner Cost Market NOK million of shares share value

Gjensidige Forsikring BA Norwegian financial shares Indre Sogn Sparebank 4,500 0.7% 0.5 0.5 Total Norwegian financial shares 0.5 0.5

Other Norwegian shares BTV Investeringsfond AS 6,000,000 6.0 6.0 Convexa Capital IV AS 7.1% 7.5 11.4 Convexa Capital VI AS - klasse A 25,317 0.1% 0.0 5.1 Convexa Capital VI AS - klasse B 5,695,714 12.6% 11.6 11.9 Convexa Capital VIII AS - klasse B 9,957,632 11.0% 20.0 19.2 EDB Business Partner 260,800 0.3% 13.5 10.6 Ementor 92,000 0.1% 3.5 3.8 Fjord Invest AS 17,897,950 17.9 17.9 GJensidige annual report 2007 | 129

Note 34 – Shares and similar interests (cont.) this is GJ ENSI D I G E

Norwegian shares Number Owner Cost Market NOK million of shares share value

Fred. Olsen Energy 26,960 0.0% 7.6 8.0 Hafslund B 45,000 0.0% 6.5 7.0 Helgeland Vekst AS 4,000,000 4.0 4.0 Kongsberg Automotive Holding 198,100 0.4% 8.5 7.9 MPU Offshore Lift 600,000 1.3% 6.2 4.8 Norchip AS 168,260 0.0% 3.1 2.5 Norinnova 3,001,554 3.0 3.0 Norsk Hydro 169,588 0.0% 12.2 13.2 Norske Skogindustrier A 89,000 0.0% 3.3 4.0 Orkla 323,919 0.0% 30.3 34.1 Sikon Øst ASA 17,933,000 22.6 17.9 operations SeaDrill Ltd 56,500 0.0% 6.9 7.5 StatoilHydro ASA 191,202 0.0% 33.4 32.3 Telenor 113,958 0.0% 12.8 14.8 TGS Wavefield ASA 150,000 0.1% 11.2 11.2 Tomra Systems 189,900 0.1% 8.2 7.3 Tun Media (Landbrukets Medieselskap AS) 3,668,700 3.7 3.7 Verdane Capital II 3,009 1.3% 0.5 0.1 Verdane Capital III 750 0.8% - 0.0 Viking Venture AS 135,044 6.6% 13.5 24.3 Viking Venture II AS 400,000 13.9% 40.0 62.0 Viking Venture Management AS 45 4.5% 0.0 0.0 Vmetro 249,000 1.1% 4.0 2.8 Yara International 31,650 0.0% 5.1 8.0 Unspecified 41.4 16.2 mana Total other Norwegian shares 367.9 382.6

Energy Ventures IS 17.5% 16.2 24.0 Energy Ventures II KS 8.5% 32.1 38.1 mn results g ement HitecVision Private Equity III AS 12.6% 81.3 100.8 Teknoinvest VIII KS (inkl. Teknoinv. VIII (GP) KS) 13.9% 50.0 74.7 Teknoinvest VIII B DIS 15.7% 4.1 4.3 Total Norwegian shares 183.8 241.8 Total Norwegian shares and similar interest in Gjensidige Forsikring BA 552.2 624.9 Of which listed 171.4 176.2

Other group companies Norwegian shares and similar interests held by Gjensidige Bank Holding AS 79.5 79.5 Norwegian shares and similar interests held by Gjensidige Pensjon og Sparing AS 9.6 9.2 Norwegian shares and similar interests held by Oslo Areal ASA 14.3 14.3 Norwegian shares and similar interests held by Glitne Invest AS 24.8 24.8 Total Norwegian shares and similar interest held by group companies 128.1 127.8

Total Norwegian shares and similar interests in Gjendisige Forsikring Consolidated 680.3 752.7

The shares classified as short-term investments include both listed and unli- term than listed shares. The portfolio of listed short-term equity investments sted shares. Unlisted shares, or private equity, is an asset class that is under is a well diversified global portfolio. The greatest share is under passive index development administratively at Gjensidige. Private equity is less liquid than management with Storebrand Kapitalforvaltning. The rest of the portfolio is other shares, and it is expected to have a higher risk and return in the long- spread across a number of reputable managers. 130 | GJensidige annual report 2007

Note 34 – Shares and similar interests (cont.)

foreign shares No. of shares Cost Market NOK million or % ownership value

Gjensidige Forsikring BA Australia BHP Billiton 37,559 5.5 7.2 Woolworth Australia 20,940 2.9 3.4 Commonwealth Bank of Australia 11,057 2.8 3.1 Westpac Banking Corp 20,978 2.5 2.8 National Australian Bank 15,434 2.9 2.8 Total 16.6 19.3 Belgium Fortis B 18,817 2.2 2.7 Total 2.2 2.7 Bermuda BW Offshore 503,300 13.2 11.5 Total 13.2 11.5 Canada Potash Corp Saskatchewan 4,664 1.5 3.7 Manulife Financial 14,985 3.2 3.3 Royal Bank of Canada 11,773 3.5 3.3 Encana 8,083 2.9 3.0 Suncor Energy 4,829 2.5 2.9 Sun Life Financial Inc 9,044 2.4 2.8 Bank of Nova Scotia 9,256 2.6 2.6 Total 18.5 21.5 Denmark Danisco 11,626 5.7 4.5 Total 5.7 4.5 Finland Nokia A 46,129 7.0 9.7 Sampo Leonia Plc 59,500 10.8 8.5 Total 17.8 18.3 France BNP Paribas 9,119 6.6 5.4 Vivendi 20,189 5.3 5.0 Arcelor (fransk line) NVP 11,685 3.8 4.9 Sanofi-Aventis 9,660 5.6 4.8 France Telecom 19,602 3.5 3.8 Axa 17,116 4.0 3.7 Suez (FR-line) 9,975 2.9 3.7 L Oreal 3,818 2.5 3.0 Carrefour 6,898 2.9 2.9 Danone 5,740 2.7 2.8 Societe Generale 3,282 3.5 2.6 Total 43.3 42.7 Greece National Bank of Greece 7,582 2.5 2.8 Total 2.5 2.8 Hong Kong Cheung Kong Holdings 26,000 1.9 2.6 Total 1.9 2.6 Italy ENI 46,032 9.4 9.2 Enel 66,589 4.6 4.3 UniCredito Italiano 89,488 4.3 4.0 Intesa SanPaolo 79,701 3.6 3.4 Total 21.9 20.9 GJensidige annual report 2007 | 131

Note 34 – Shares and similar interests (cont.) this is GJ ENSI D I G E foreign shares No. of shares Cost Market NOK million or % ownership value

Netherlands ING Group 17,855 5.1 3.8 Philips Electronics (Koninklijke) 14,660 3.4 3.4 Unilever NL 16,000 2.8 3.2 Total 11.2 10.4 Spain Telefonica 43,457 5.7 7.7 Banco Santander 61,180 7.0 7.2 BBVA (Bilbao Vizcaya Argentaria) 38,177 5.9 5.1 Total 18.6 19.9 Great Britain operations BP Plc 186,877 13.3 12.4 Royal Dutch Shell A ord 49,070 11.0 11.2 Vodafone Group 539,746 9.7 11.0 Axis-Shield 400,000 13.7 10.6 HSBC Holdings GB 109,042 13.0 9.9 GlaxoSmithkline 52,460 8.9 7.3 Imperial Chemical Industries 77,150 3.2 5.6 Rio Tinto 9,527 3.2 5.5 Royal Bank of Scotland 104,509 12.3 5.0 Anglo American Plc 14,122 4.8 4.7 BG Group 35,531 3.0 4.4 Brit Amer Tobacco 19,309 4.0 4.1 BHP Billiton 23,935 3.0 4.0 Tesco 76,076 3.4 3.9 mana Barclays Bank 69,035 6.1 3.8 Astrazeneca 15,925 5.5 3.7 Diageo 30,755 3.9 3.6

Unilever GB 17,396 3.3 results 3.6 g ement HBOS 40,848 5.5 3.2 Royal Dutch Shell B shares 14,178 3.2 3.2 Rolls Royce 51,137 2.4 3.0 Xstrata 7,574 2.1 2.9 Lloyds Bank 52,145 3.5 2.7 BT Group 89,309 2.9 2.6 Reuters Group 36,790 2.1 2.5 Total 146.9 134.4 Switzerland Nestlé 3,663 8.5 9.1 Novartis 21,815 8.1 6.5 Roche Holding Genuss 6,909 7.9 6.5 UBS 20,516 8.3 5.2 Credit Suisse Group RG 13,447 5.9 4.4 Holcim 4,952 2.7 2.9 Compagnie Financie 7,535 2.7 2.8 Total 43.9 37.4 Sweden Svenska Handelsbanken A 54,827 9.5 9.5 Total 9.5 9.5 Germany EON 7,090 6.8 8.2 Bayer 11,424 5.0 5.7 Allianz SE (Societas Europeae) 4,504 6.0 5.3 Basf 4,991 3.2 4.0 132 | GJensidige annual report 2007

Note 34 – Shares and similar interests (cont.)

foreign shares No. of shares Cost Market NOK million or % ownership value

Germany (cont.) Rwe 5,055 3.2 3.9 Volkswagen 2,963 2.1 3.7 Deutsche Telecom 29,275 3.0 3.5 Deutsche Bank 4,859 3.9 3.4 Deutsche Boerse 2,878 1.8 3.1 Sap AG 10,472 3.4 3.0 Total 38.4 43.7 USA Exxon Mobil 53,706 25.3 27.3 General Electric 93,268 21.6 18.8 Microsoft 79,367 14.9 15.3 AT&T Inc 55,480 12.7 12.5 Procter & Gamble 29,325 11.8 11.7 Chevron Corp 21,059 9.8 10.7 Johnsen & Johnsen 25,948 10.6 9.4 Apple Inc 8,655 5.4 9.3 Google Class A 2,321 7.0 8.7 Altria Group Inc 20,109 8.3 8.3 Intel 56,899 8.0 8.2 Bank of America Corp 36,092 12.0 8.1 Cisco Systems 53,943 9.0 7.9 International Business Machine (IBM)) 13,176 8.2 7.7 Pfizer 58,942 10.2 7.3 J.P Morgan Chase and Co 29,749 9.1 7.1 Citigroup 43,945 14.5 7.0 Merck & Co 21,475 6.3 6.8 Hewlett-Packard Co 24,651 5.4 6.8 Coca-Cola 19,811 6.0 6.6 Verizon Communications 26,430 6.1 6.3 Pepsico Inc 15,177 6.3 6.3 American International Group 19,513 8.6 6.2 Schlumberger 10,456 4.6 5.6 Oracle Corporation 44,463 5.3 5.5 Wells Fargo 29,376 6.7 4.8 Abbott Laboratories 15,584 5.2 4.8 Goldman Sachs 3,884 4.4 4.5 Monsanto 7,231 2.2 4.4 Exelon 9,679 4.6 4.3 McDonalds 12,714 2.7 4.1 United Health Group 12,081 4.0 3.8 Qualcomm 17,625 4.6 3.8 Wachovia Corp 17,625 6.2 3.6 CVS/Caremark 16,390 3.8 3.5 Rockwell Collins 8,796 3.0 3.4 Emerson Electric 10,978 3.2 3.4 Occidental Petroleum 7,783 2.4 3.2 Lilly Eli 11,173 4.1 3.2 3M CO 7,068 3.6 3.2 Deere & Co 6,295 2.3 3.2 Caterpillar 8,029 3.8 3.2 Bristol-Myers Squibb 21,918 3.9 3.2 American Express 11,110 4.4 3.1 Amgen 12,350 4.9 3.1 Research in Motion 4,978 1.2 3.1 GJensidige annual report 2007 | 133

Note 34 – Shares and similar interests (cont.) this is GJ ENSI D I G E foreign shares No. of shares Cost Market NOK million or % ownership value

USA (cont) Wyeth 12,827 4.3 3.1 Bank of New York Mellon 11,554 2.8 3.1 Kraft Foods 16,490 3.3 2.9 Texas Instruments 16,079 3.1 2.9 Prudential Financial Inc 5,770 3.6 2.9 Wellpoint Inc 6,108 3.1 2.9 Time Warner 32,005 4.1 2.9 News Corporation B 24,766 3.4 2.9 Gilead Sciences Inc 11,276 2.1 2.8 Medtronic 10,296 3.4 2.8 Textron 7,195 2.2 2.8 operations Anadarko Petroleum 7,659 2.3 2.7 EMC 26,872 2.3 2.7 Metlife 7,84 8 2.9 2.6 Dell Inc. 19,657 3.2 2.6 US Bancorp 14,939 3.3 2.6 Morgan Stanley 8,882 3.7 2.6 Nike B 7,263 2.1 2.5 Johnson Controls 12,747 2.8 2.5 Total 386.2 365.0 Other countries Asia/Oceania 32.6 35.8 Europe 178.8 171.6 North Amerika 397.7 340.5 Other countries 8.9 10.6 mana

Total foreign shares 1,416.2 1,325.5 Of which listed 1,414.9 1,325.5

Equity funds and similar interests results g ement Altor Fund II LP 0.9 % 28.0 29.5 BaltCap PEF LP 8.6 % 0.0 0.0 Cerep I 3.5 % 72.8 90.4 Cerep II 3.7 % 100.7 106.6 Energy Ventures III LP 5.6 % 0.7 0.7 FSN Capital II LP 6.9 % 52.4 64.7 Fortis Equity World Emerging 79,549 380.8 375.4 Fortis L Fund Equity Environmental Sustain. World 121,733 118.3 118.2 Genesis Emerging Markets Invest 733,672 123.1 178.4 Goldman Sachs SICAV - Global Emerging Mrk.Inst. Ac 1,893,501 128.7 157.9 Gottex Market Neutral Pl-2XL Fund 491,642 287.1 260.9 HitecVision Private Equity IV LP 6.7 % 67.1 103.3 HitecVision Private Equity V LP 5.6 % 0.0 0.0 LGT Crown European Private Equity PLC 0.8 % 10.2 10.1 NeoMed Innovation IV LP 2.9 % 10.4 10.3 Northzone IV K/S 10.8 % 61.8 59.2 Northzone V K/S 5.7 % 19.4 15.6 Norvestor IV LP 14.6 % 53.0 76.6 Norvestor V LP 14.1 % 18.4 18.4 Partners Group Direct Investments 2006 LP 1.0 % 26.2 26.1 Partners Group European Buyout 2005 (A) LP 2.7 % 31.1 28.2 Partners Group Fond av Hedgefond 1,983,219 1,396.5 1,333.5 Russell Alternative Strategies Fund II Plc. 133,510 912.8 831.6 Russell Japan Fund 164,478 197.4 169.3 Sector Polaris 330,377 223.1 211.5 134 | GJensidige annual report 2007

Note 34 – Shares and similar interests (cont.)

foreign shares No. of shares Cost Market NOK million or % ownership value

Equity funds and similar interests (cont.) Sector EuroPower Fund Class A EUR 73,437 61.5 64.6 Sector Healthcare - A USD 76,265 59.2 56.6 Sector Speculare III Fund Class A USD 50,000 29.9 32.0 Sector Speculare II Fund Class A USD 12,050 8.1 22.6 The Winton Evolution Fund 7,457 63.6 73.8 UBS (LUX) EQUITY FUND - GLOBAL INNOVATORS B 172,413 118.7 121.2 Verdane Capital V B K/S 3.7 % 11.6 14.4 Verdane Capital VI K/S 10 % 12.3 10.5 Not specified/other private equity investments 0.1 0.2 Total foreign equity funds and similar interests 4,685.0 4,672.1 Of which listed 3,070.1 3,259.1

Total foreign shares and similar interests in Gjensidige Forsikring 6,101.2 5,997.6

other subsidiaries Foreign shares and similar interests owned by Fair Group 227.7 305.7 Foreign shares and similar interests owned by Parekss Insurance Company 36.9 37.4 Foreign shares and similar interests held by Gjensidige Pensjon og sparing 2.5 1.7 Foreign shares and similar interests owned by Glitne Invest 9.7 9.7

Total foreign shares and similar interests held by Group companies 276.8 354.4

Total foreign shares held by Gjensidige Forsikring consolidated 6,378.0 6,352.0

Total shares and similar interests Gjensidige Forsikring consolidated 7,058.3 7,104.7

The company’s foreign shares are managed using a set of “MSCI World Net Dividends Index“ as benchmarks. Norwegian shares are managed using “OSEBX”. Adjustment is made for bid-ask quoted prices. GJensidige annual report 2007 | 135

Note 35 – Transition to International Financial Reporting Standards (IFRS) this is GJ ENSI D I G E opening balance SHEET AS OF 1 january 2006 Gjensidige does not discount claims provisions with the exception of Gjensidige’s annual accounts for 2006 were prepared in accordance with contracts in Denmark with annuity payments over a long time horizon. The the Norwegian Financial Reporting Act, the Norwegian Financial Reporting company chooses to continue this practice under IFRS. Regulations for Insurance Companies, and the generally accepted accounting principles in Norway (NGAAP). With effect from the 2007 financial year Phase 2 of the work on IFRS for insurance contracts continues, and it is Gjensidige has implemented IFRS in their consolidated financial statements. expected to give rise to a significant change in the standard. One of the Insurance companies, however, are currently not allowed to prepare company most important aspects is how the insurance companies’ liabilities can be accounts under IFRS. Since the company accounts will still be prepared in reported at fair value. The new standard will not be published earlier than accordance with the Norwegian Financial Reporting Regulations for Insur- 2010. ance Companies, there will be significant differences between the company accounts and consolidated accounts. With effect from 2007 the Norwegian B. Security provisions in the broad sense Financial Reporting Regulations have been adapted to IFRS in certain areas, Security provisions in the broad sense consist of Gjensidige’s security provi- however, there are many other areas that must be harmonised before they sions, reinsurance provisions, administrative provisions, natural perils fund and

are equivalent. The Financial Supervisory Authority of Norway has indicated guarantee scheme provisions. Under the current financial reporting legislation, operations that they will continue working on additional adaptations in 2008. security provisions are classified as technical provisions between liabilities and equity. Some of these schemes are unique to Norway, and IFRS provides no An implementation of IFRS at the consolidated level, starting in the 2007 concrete guidelines for how these are to be classified in financial statements financial year requires restatement of the opening balance as of 1 January under IFRS, with the exception of reinsurance provisions (discussed above) 2006. The material effects of the IFRS implementation based on the applica- and administrative provisions. ble regulations and interpretations are described below. Under IFRS, claims provisions shall include an element to cover the adminis- The accounting principles under IFRS form the basis for the preparation of trative expenses incurred in settling claims. The administrative provisions are Gjensidige’s consolidated IFRS accounts. These are described in disclosure therefore reclassified as claims provisions in the opening balance sheet. The note 1 earlier in this yearly report. effect of the administrative provisions on profit or loss will be the reclassification to claims provisions in the profit and loss account under IFRS. Transitional effects, IFRS 1 The rules for the first-time adoption of IFRS are described in IFRS 1. The main Natural perils fund and guarantee scheme provisions are provisions to cover rule states that a company must define new accounting principles under IFRS future events and these provisions do thus not satisfy the liability definition and then apply these retrospectively to adopt the opening balance sheet under IFRS. The provisions must therefore be reclassified as equity. Due to mana under IFRS. The standard permits a number of exceptions to this main rule to the fact that a tax deduction has been allowed for allocation to the schemes, make the transition easier for the companies. The application of exceptions to deferred tax is deducted prior to reclassification. the main rule are described in greater detail below.

In connection with the introduction of Solvency II (expected from 2010 results at the g ement A. Insurance contracts, IFRS 4 earliest) it is expected that the company will be required to recognise a risk IFRS 4 Insurance Contracts, which covers the accounting of insurance supplement with respect to its claims provisions. Gjensidige has participated contracts, is an important standard for Gjensidige. Gjensidige’s insurance in the Financial Supervisory Authority’s consequence calculations for Solvency products are covered by this standard, and international work on this II (QIS I and II). It is nevertheless still very uncertain what such a risk supple- standard has been divided into two phases. In the first phase, the current ment will amount to. The consequence calculations performed, however, accounting policies for insurance contracts can essentially be retained. It is indicate that the risk supplement will be much lower than the current security permitted, however, to change the accounting policies for insurance contracts provisions. The company believes therefore that the accounts provide the if the changes entail that the accounts become more relevant or reliable. most correct picture when the security provision are classified as equity. However, the standard does require that the reinsurers’ share (reinsurance) of insurance liabilities no longer be offset but instead be classified as an asset. C. Pension liabilities, IAS 19 The reinsurers’ share amounted to NOK 373.9 million as of 1 January 2006. The accounting of pensions under NGAAP differs mainly from IFRS in con- The offsetting of reinsurance has no impact on equity, and the reclassifica- nection with the treatment of actuarial gains/losses in the opening balance tion has been implemented in the opening balance sheet. The reinsurers’ sheet. In accordance with IFRS 1 on the first-time adoption of IFRS there is a share has been reduced by the reinsurance provisions as of 1 January 2006 in transitional rule that allows the recognition of actuarial gains/losses in equity the amount of NOK 42.8 million. in the opening balance sheet rather than retrospective calculation of what the assets and liabilities would have been had IFRS been applied since the start of Under current rules, these reinsurance provisions are to be used to cover the the pension scheme. Gjensidige has opted to apply this transitional rule. IFRS costs incurred if one or more of the company’s reinsurers fails to meet their also requires that the discount be based on the yield on the balance sheet share of the total claims liabilities. The reinsurance provisions serve to reduce date on a very high-quality corporate bond with approximately the same the amount receivable from reinsurers in the opening balance sheet. The rein- maturity as the group’s liabilities. As there are no such bonds in Norway, the surance provisions are provisions based on objective evidence, and provisions discount rate corresponds to the ten-year government bond yield with a sup- have been allocated if there have been events that indicated an impairment plement to reflect the average time remaining until the payment of benefits. loss. One exception here is the portion of the reinsurance provisions that have The discount rate as of 1 January 2006 under IFRS has been calculated at 4.0 been allocated in accordance with the minimum requirements of the Financial per cent. The impact on equity amounts to NOK 1.3 billion. NOK 956.3 million Supervisory Authority of Norway. This increases the equity under IFRS by of this amount is attributable to historical actuarial gains/losses, while the NOK 3.2 million after the deduction of deferred tax. impact of the change in the discount rate is NOK 350.3 million. Pension funds 136 | GJensidige annual report 2007

are reclassified to pension liabilities since all the schemes are underfunded assets. The excess values are regarded as having a time-limited life and are under IFRS. depreciated by the straight-line method. The recoverable amount is calculated at the end of the period. If the recoverable amount is lower than the carrying Differences between the estimated pension liabilities/estimated value of pen- value, the asset will be written down. Such a calculation of the recoverable sion funds at the end of the previous financial year and actuarially calculated amount has been performed for all the portfolios for the opening balance pension liabilities/fair value of pension funds at the beginning of the following sheet. The performance of the portfolio referred to as “Foreningsgruppeliv” year have been amortised over the average remaining contribution period has been more negative than expected, and the excess value linked to this under NGAAP. In Gjensidige’s IFRS accounts, this principle is changed and portfolio has therefore been written down in its entirety. This represents a actuarial gains/losses will be recognised directly against equity. negative effect of NOK 55 million.

In accordance with Norwegian Accounting Standard 6a relating to pen- G. Financial instruments, IAS 39 sions, the transitional effect can also be taken into account in the company For the transition to IFRS, Gjensidige has performed an initial integration at accounts, if the company reports its consolidated accounts under IFRS. fair value and classification in accordance with the categories available in IAS The transitional effect will therefore be recognised in Gjensidige’s company 39. Most of the instruments are classified under the category at fair value accounts from 1 January 2007 and entails that there will no longer be any on acquisition (“fair value option”). This entails assessment at fair value and differences between the company accounts and consolidated accounts in the adjustments over the profit and loss account. The reason for this is the fact periods to come. that a group of financial assets and liabilities is managed and valued based on their fair value in accordance with a documented investment strategy. Under D. Real estate, IAS 40 and IAS 16 NGAAP all financial instruments in the insurance business’ asset management Gjensidige carries its real estate at historical cost in line with NGAAP. IAS 40 are assessed at fair value with the exception of strategic investments that are allows investment properties to be carried at fair value, and Gjensidige are assessed at cost. valuing its investment properties on the basis of this standard. Fair value is determined internally or externally, and changes will be recognised in the The company’s strategic shareholdings in DnB NOR are classified in the profit and loss account. This valuation is based on a long-term assessment category Available for Sale. They are carried at cost under NGAAP, while of the properties’ standard, location, cash flows, development potential and valuation in this category under IFRS is made at fair value and adjustments potential realisable value. Gjensidige considers this to be in accordance with are recognised directly to equity. This entails a positive increase in the equity the definition of fair value in IFRS. of NOK 1,186 million. A significant or longstanding impairment loss must be recognised over the profit and loss account. Impairment loss on an equity At the time of the transition, the value of all investment properties under IFRS security is regarded as significant when the fall in value is over 20 per cent or 1 will be adjusted to fair value, and this will have a positive effect of NOK long-term when it has existed for over nine months. 165.4 million on the equity in the consolidated accounts. The adjustment of the value will be recognised in the profit and loss account in subsequent The bond portfolio, which is valued as held to maturity under NGAAP, is periods. Deferred tax is calculated and allocated as provisions for the excess continued in the category held-to-maturity bonds under IAS 39. value associated with real estate. Under IFRS loans are valued at their amortised cost and accrued by means In March 2007 the regulations pursuant to the Norwegian Financial Report- of the effective interest method. Write-downs are performed when there is ing Regulations for Insurance Companies were amended to permit carrying objective evidence of a fall in value. The loans must be assessed at fair value investment property at fair value in the company accounts as well. This will in accordance with the initial integration on the opening balance sheet. Loans entail that the treatment of the investment properties will be the same in the granted for fire alarm systems in agriculture are zero interest loans, where company and consolidated accounts effective from 1 January 2007. the discounted value of the loans is lower than the cost value when the loan was granted. This means that the loans must be written down by NOK 135.9 Property for own use must be valued in accordance with IAS 16. Property million in the opening balance sheet. This effect will be recognised as income for own use is defined as property that is used by Gjensidige itself, and in subsequent years in accordance with the remaining period for the loans. valuation at cost will be maintained for these properties. The opportunity to use fair value as the assumed historical cost at the time of the transition in The Norwegian Financial Reporting Regulations states that financial current accordance with IFRS 1 will not be applied. Depreciation will be based on the assets shall be assessed at fair value by means of the average prices that decomposition of the individual buildings. If the buildings are used both for these assets have been traded for on the last trading day. The purchase and the company’s own use and as investment property, the distribution will be sales rates shall be used under IFRS. Differences are calculated between the based on the actual use of the areas. average purchase and sales rates, and this entails an increase in the value of financial instruments of NOK 1.9 million on the opening balance sheet. E. Goodwill, IFRS 3 The standard on business combinations, IFRS 3, prohibits the amortisation H. Accounting provisions of goodwill. Instead there will be an annual impairment test to ensure that Accounting provisions made under NGAAP need to be reviewed against the any diminution in value is recognised. After the performance of impairment definition of liabilities under IFRS. Items that do not meet this definition must tests, the assessment is that there is no need to write down goodwill on the be reversed and increase the equity. Provisions of NOK 55 million have been opening balance sheet. reversed on the opening balance sheet as a result of them not being deemed to meet the definition of a liability under IFRS. F. Intangible assets, IAS 38 Gjensidige has acquired insurance portfolios in previous years, and this has K. Deferred tax resulted in excess values in the accounts that are classified as intangible as- All circumstances that have entailed an entry against equity also entail an sets. The assessment is that these assets follow IAS 38 concerning intangible entry against deferred tax assets/liabilities corresponding to 28 per cent of GJensidige annual report 2007 | 137

the original entry. The implementation of IFRS has impacted the deferred Equity NGAAP 1 January 2006 12,487.1 this is GJ ENSI D I G E tax assets/liabilities in the following areas: security provisions, natural perils Unrealised gains on investment property 425.2 fund, guarantee scheme provisions, minimum required reinsurance provisions, Unrealised gains on shares 1,186.4 write-down of loans, pensions, accounting provisions and excess value of Fair value loans (135.9) investment properties. In addition, deferred tax has been recognised as a Security provision 2,041.6 result of the gross entry of goodwill in connection with the acquisition of the Natural perils fund 1,950.9 new companies, Fair and Parekss. Guarantee scheme 483.6 Pension (1,330.2) IFRS BALANCE SHEET AS OF 31 DECEMBER 2006 Deferred tax (1,150.1) The IFRS balance sheet at the end of 2006 contains the same adjustments Various minor changes 6.2 made on the opening balance sheet. In addition, there are certain new condi- Total changes 3,477.7 tions, and these conditions will be commented on below. Equity IFRS 1 January 2006 15,964.8 J. Gjensidige Fund Equity NGAAP 31 December 2006 15,440.9 The Gjensidige Fund is an endowment fund, and the purpose of the fund is Unrealised gains on investment property 998.1 to promote “Security and Health”. Funds that have been allocated are part operations Unrealised gains on shares 324.8 of the company’s equity until a decision has been made to grant funds to a specific party. Fair value loans (106.0) Security provision 2,278.3 G. Financial instruments Natural perils fund 2,003.6 Gjensidige purchased shares in Storebrand in 2006, which are carried at cost Guarantee scheme 508.1 in the NGAAP accounts. These shares are classified in the category available Pension (1,382.1) for sale and the unrealised gain as of 31 December increases the equity. Deferred tax (1,393.4) Gjensidige fund 300.0 IFRS PROFIT AND LOSS ACCOUNT FOR 2006 Various minor changes 45.0 The IFRS profit and loss account for 2006 has been adjusted by the effects Total changes 3,576.4 of the above adjustments on profit or loss. Any differences that may only be Equity IFRS 31 December 2006 19,017.3 found in the profit and loss account are described below. profit and loss NGAAP 31 December 2006 3,264.0 I. Direct and indirect claims processing costs Adminitrative expenses including sales expenses 154.1 Under IFRS it is possible to classify direct and indirect claims processing costs Change in security provision 315.4 mana as claims expenses, as opposed to NGAAP where only certain direct claims Unrealised gains on investment property 572.9 processing costs can be classified like this. It appears to be the practice in Income reporting interest loans made 29.9 other IFRS reporting countries to classify both direct and indirect claims Depreciation goodwill 41.7 processing costs as claims expenses. This is also carried out at Gjensidige so Change in tax benefit results (243.3) g ement that we can report comparable figures. Various minor changes (42.8) Total changes 827.9 Effects of transition to IFRS TOTAL profit IFRS 31 December 2006 4,091.9 The enclosed tables show the effects of the transition to IFRS, reconciliation of the differences in the equity and profit and loss between NGAAP and IFRS, and the final IFRS accounts. In the summary that illustrates the effects of the transition, the existing format for NGAAP is used to illustrate the changes necessary. The format under IFRS is somewhat different, and is shown in its final form at the end of the document. To illustrate the changes better, a diagram has been included that shows what lines go where in the new format. 138 | GJensidige annual report 2007

International Financial Reporting Standards

BALANCE SHEET balance sheet IFRS 1.1.2006 balance sheet IFRS 31.12.2006 Balance Balance Implemen. Balance Balance Implemen. sheet sheet effect sheet sheet effect NOK million Notes NGAAP IFRS IFRS Notes NGAAP IFRS IFRS

ASSETS Intangible assets Goodwill E, K 301.2 259.8 (41,4)) E.K 222.0 557.2 335.2 Deferred tax asset K 143.2 0.0 (143.2) K 331.0 (331.0) Other intangible assets F 136.2 382.2 246 E 584.9 586.9 2.0 Total intangible assets 580.6 642.0 61.4 1,137.9 1,144.1 6.2

Financial assets Investment property D 6,634.6 6,800.0 165.4 D 6,419.6 7,157.9 738.3 Shares in associates 7.5 7.5 6.8 6.8 Owner-occupied property 953.0 953.0 930.9 930.9

Financial non-current assets except group companies Shares and similar interests G 1,151.6 (1,151.6) G 2,345.1 (2,345.1) Bonds held to maturity 6,087.5 6,087.5 7,537.4 7,537.4 Loans G 792.9 657.0 (135.9) G 645.6 539.6 (106.0) Other financial non-current assets 18.5 18.5 1.1 1.1

Financial current assets Shares and other similar interests G 6,796.6 7,014.5 217.9 G 9,035.0 9,329.4 294.4 Bonds and other fixed interest securities 11,951.0 11,951.0 11,478.5 11,478.5 Deposits with financial institutions 1,575.4 (1,575.4) 1,310.0 (1,310.0) Financial assets available for sale G 2,122.0 2,122.0 G 2,434.1 2,434.1 Reinsurance deposits 1.6 1.6 0.6 0.6 Total financial assets A 35,970.2 35,612,6.0 (357.6) 39,710.6 39,416.4 (294.2)

Receivables Reinsurance assets A 373.9 373.9 A 414.6 414.6 Receivables arising out of direct insurance operations 2,221.5 2,221.5 2,794.0 2,794.0 Other receivables 323.8 323.8 542.0 542.0 Total receivables 2,545.2 2,919.1 373.9 3,336.0 3,750.6 414.6

Other assets Tangible fixed assets other than buildings and real state 323.1 323.1 252.1 252.1 Cash and cash equivalents 1,087.9 2,663.4 1,575.4 1,013.9 2,271.3 1,257.4 Pension funds C 517.6 0.0 (517.6) C 605.0 0.0 (605.0) Total other assets 1,928.7 2,986.5 1,057.8 1,871.0 2,576.0 705 Prepaid expenses and accrued interest 264.2 264.2 279.3 279.3 TOTAL ASSETS 41,289.0 42,424.4 1,135.5 46,334.8 47,112.7 778.0 GJensidige annual report 2007 | 139

International Financial Reporting Standards (cont.) this is GJ ENSI D I G E

EQUITY AND LIABILITIES Equity fund 12,4 87.1 15,964.9 3,477.7 15,440.9 19,017.3 3,576.4 Total equity 12,487.1 15,964.9 3,477.7 15,440.9 19,017.3 3,576.4

Technical provisions Provision for unearned premiums, gross 5,253.8 5,253.8 5,737.9 5,737.9 Reinsurers’ share A (9.0) 9.0 A (23.7) 23.7 Provisions for unearned premiums, net of reinsurance 5,244.8 5,253.8 9.0 5,714.2 5,737.9 23.7 operations Claims provisions, gross B 14,502.6 15,374.0 871.4 B 16,638.7 17,556.6 917.9 Reinsurers’ share A (407.7) 407.7 A (423.0) 423.0 Claims provisions, net of reinsurance 14,095.0 15,374.1 1,279.1 16,215.7 17,556.6 1,340.9 Provision for premium discounts 6.2 6.2 25.2 25.2

Security provisions etc Provisions for insufficient premium level 0.1 0.1 Security provision B 2,041.6 (2,041.6) B 2,278.3 (2,278.3) Reinsurance provision A 47.3 (47.3) A 40.5 (40.5) Administration provision B 871.4 (871.4) B 917.9 (917.9) Natural perils fund provision B 1,950.9 (1,950.9) B 2,003.6 (2,003.6) Guarantee scheme B 483.6 (483.6) B 508.1 (508.1) Total security provision etc 5,394.9 0.1 (5,394.8) 5,748.4 (5,748.4) Total technical provisions, net of reinsurance 24,740.9 20,634.2 (4,106.6) 27,703.5 23,319.8 (4,383.8) mana Provisions for other risks and liabilities Pension liabilities C 148.6 961.2 812.6 C 169.6 946.7 777.1 Deferred tax K 1,006.9 1,006.9 K 26.2 1,134.4 1,108.2

Other provisions H 121.8 66.8 (55.0) H 306.6 306.6 results g ement Total provisions for other risks and liabilites 270.4 2,034.9 1,764.6 502.4 2,387.7 1,885.3

Liabilities Liabilities arising out of direct insurance operations 222.8 222.8 253.7 253.7 Gjensidige fund J 300.0 (300.0) Amount owed to credit institutions 2,672.5 2,672.5 792.2 792.2 Other liabilities 755.9 755.9 1,185.5 1,185.5 Total liabilities 3,651.2 3,651.2 2,531.4 2,231.4 (300.0) Accrued expenses and prepaid income 139.4 139.4 156.5 156.5 TOTAL EQUITY AND LIABILITIES 41,288.9 42,424.4 1,135.7 46,334.7 47,112.7 778.0 140 | GJensidige annual report 2007

International Financial Reporting Standards (cont.)

01.01-31.12.2006 Income statement IFRS Income Income Implemen. statement statement effect NOK million Notes NGAAP IFRS IFRS

TECHNICAL ACCOUNT GENERAL INSURANCE Premiums Gross premiums written 13,787.2 13,787.2 Ceded reinsurance premiums (331.5) (331.5) Premiums written, net of reinsurance 13,455.7 13,455.7 Change in the gross provision for unearned premiums (268.2) (268.2) Change in the provision for unearned premiums, reinsurers’ share 5.8 5.8 Earned premiums, net of reinsurance 13,193.3 13,193.2

Allocated return on investments transferred from the non-technical account 1,008.1 1,008.1

Claims Gross paid claims I, B (7,971.8) (8,287.9) (316.1) Paid claims, reinsurers’ share 149.4 149.4 Change in the provision for claims, gross (1,858.8) (1,858.8) Change in the provision for claims, reinsurers’ share (17.6) (17.6) Claims incurred, net of reinsurance (9,698.8) (10,014.9) (316.1)

Premium discounts and other profit agreements (21.7) (21.7)

Administrative expenses including sales expenses I, C (3,000.7) (2,566.6) 434.1 Reinsurance commissions 4.9 4.9 Net operating expenses (2,995.8) (2,561.7) 434.1

Underwriting result before changes in security provision etc 1,485.1 1,603.2 118.0

Change in security provision etc. Change in provision for insufficient premium level 0.1 0.1 Change in security provision B (239.7) 239.7 Change in reinsurance provision A 6.8 (6.8) Change in administration provision B (36.1) 36.1 Change in natural perils fund B (52.6) 52.6 Change in guarantee scheme B 6.2 (6.2) Total changes in security provision etc. (315.3) 0.1 315.4

Total technical account general insurance 1,169.8 1,603.2 433.4 GJensidige annual report 2007 | 141

International Financial Reporting Standards (cont.) this is GJ ENSI D I G E

01.01-31.12.2006 income statement IFRS Income Income Implemen. statement statement effect NOK million Notes NGAAP IFRS IFRS

NON-TECHNICAL ACCOUNT GENERAL INSURANCE Financial income Income from shares in associates (0.8) (0.8) Income from buildings and real estate D 545.5 1,118.4 572.9 Income from other financial assets G 1,498.7 1,528.6 29.9 Unrealised gains and reversal of unrealised losses on financial assets 143.4 143.4 Reversal of assessment on financial assets 2,681.6 2,681.6 Total financial income 4,868.4 5,471.2 602.8 operations

Financial costs Administration costs on buildings and real estate (288.9) (288.9) Other administration costs (55.0) (55.0) Interest costs (500.1) (500.1) Other costs related to financial assets E (170.9) (129.3) 41.7 Unrealised losses and reversal of unrealised gains on financial assets G (0.2) (6.8) (6.7) Write-downs of financial asset 0.4 0.4 Loss on sale of securities (801.2) (801.2) Total financial costs (1,815.9) (1,780.9) 35.0

Allocated return on investments transferred to the technical account (1,008.1) (1,008.1)

Other income 313.9 313.9 Other expenses (368.7) (368.7) Balance on the non-technical account 1,989.5 2,627.3 637.8 Profit before tax 3,159.3 4,230.5 1,071.2 mana Tax 104.7 (138.7) (243.4) Total 3,264.0 4,091.9 827.9 mn results g ement 142 | GJensidige annual report 2007

Income statement Gjensidige Forsikring BA

1.1-31.12 1.1-31.12 NOK million Notes 2007 2006

Premiums Gross premiums written 13,375.3 13,324.8 Ceded reinsurance premiums (598.3) (317.3) Premiums written, net of reinsurance 4 12,777.0 13,007.5 Change in the gross provision for unearned premiums (23.1) (144.4) Change in the provision for unearned premiums, reinsurers’ share 48.7 1.7 Earned premiums, net of reinsurance 12,802.6 12,864.7

Allocated return on investments transferred from the non-technical account 1,389.3 995.9

Claims Gross paid claims (8,607.9) (7,817.2) Paid claims, reinsurers’ share 187.3 144.2 Change in the provision for claims, gross (1,357.2) (1,789.2) Change in the provision for claims, reinsurers’ share 48.1 (42.8) Claims incurred, net of reinsurance 4 (9,729.8) (9,505.1)

Premium discounts and other profit agreements (18.0) (21.7)

Administrative expenses including sales expenses 5, 21 (2,395.5) (2,738.3) Reinsurance commissions 4 34.4 6.1 Net operating expenses (2,361.1) (2,732.3)

Technical result 2,082.9 1,601.6

Change in security provision etc Change in provision for insufficient premium level 0.1 Change in security provision (141.2) (239.7) Change in reinsurance provision 6.8 Change in administration provision (95.6) (37.7) Change in natural perils fund (126.3) (52.6) Change in guarantee scheme (13.0) 6.2 Total changes in security provision etc. (376.1) (317.0)

Balance on the technical account, general insurance 1,706.8 1,284.6 gjensidige annual report 2007 | 143 this is GJ ENSI D I G E

1.1-31.12 1.1-31.12 NOK million Notes 2007 2006

Financial income Income from shares in subsidiaries 2 121.4 (58.3) Income from shares in associates 2 (0.5) (0.8) Income from buildings and real estate 363.4 208.1 Income from other financial assets 1,431.4 1,444.6

Unrealised gains and reversal of unrealised losses on financial assets 85.8 operations Reversal of assessment on financial assets 1.0 Gain on sale of securities 3,049.0 2,674.5 Total financial income 4,965.7 4,354.0

Financial costs Administration costs on buildings and real estate (84.1) (90.5) Other administration costs / Adm, costs related to financial assets (47.3) (23.4) Interest costs (394.5) (383.0) Other costs related to financial assets (72.7) (145.5) Unrealised losses and reversal of unrealised gains on financial assets (673.3) Loss on sale of securities (1,589.4) (794.7) Total financial costs (2,861.3) (1,437.1)

Allocated return on investments transferred to the technical account (1,389.3) (995.9)

Balance on the non-technical account 715.2 1,921.0 mana Profit before tax 2,422.0 3,205.6

Tax 17 (502.8) 58.3

PROFIT FOR THE YEAR 1,919.2 results 3,264.0 g ement

Transfers from equity and distribution of profit To valuation difference reserves 120.7 Provisions for dividends 1,021.4 300.0 To the equity fund 18 777.1 2,964.0 Total transfers and allocations 1,919.2 3,264.0 144 | GJensidige annual report 2007

Balance sheet Gjensidige Forsikring BA

31.12. 31.12. NOK million Notes 2007 2006

ASSETS Intangible assets Deferred tax benefit 17 252.9 210.7 Other intangible assets 14 285.0 314.6 Total intangible assets 537.9 525.3

Financial assets Investment property 13 2,011.1 1,418.6 Buildings and real estate for own use 14,15 904.8 930.9 Shares in subsidiaries 2 8,614.5 3,662.7 Group receivables 3 2.4 Shares in associates 2 6.0 6.8 Financial fixed assets except group companies Shares and similar interests 6A, 10 2,832.7 2,175.9 Bonds held to maturity 6B, 10 8,830.7 7,4 87.3 Loans 11,12 552.1 889.8 Financial current assets Shares and similar interests 7, 10 6,559.9 8,605.3 Bonds and other fixed-interest securities 8, 10 10,363.2 11,064.9 Other financial current assets 9 238.9 (90.5) Reinsurance deposits 0.6 0.6 Total financial assets 40,914.4 36,154.8

Receivables Receivables arising out of direct insurance operations 24 2,769.4 2,682.7 Receivables arising out of reinsurance 4 458.1 370.4 Short term group receivables 3 126.2 2,131.4 Other receivables 24 223.2 335.0 Total receivables 3,576.9 5,519.5

Other assets Tangible fixed assets other than buildings and real estate 14 301.5 210.3 Cash and cash equivalents 22, 10 3,050.3 1,889.4 Pension funds 16 605.0 Total other assets 3,351.8 2,704.7

Prepaid expenses and accrued interest 24 319.6 248.0 TOTAL ASSETS 48,700.6 45,152.4 gjensidige annual report 2007 | 145 this is GJ ENSI D I G E

31.12. 31.12. NOK million Notes 2007 2006

EQUITY AND LIABILITIES Equity Equity certificates 3,860.0 Other equity 11,116.8 15,440.9 Fund for unrealised gains, property 464.2

Total equity 18 15,441.0 15,440.9 operations

Technical provisions Provision for unearned premiums, gross 4 5,416.8 5,393.2 Claims provisions gross 4 17,618.0 16,280.5 Provision for premium discounts 38.4 25.2

Security provision etc. Security provision 4 2,419.6 2,278.3 Reinsurance provision 40.5 Administration provision 4 1,004.4 908.9 Natural perils fund 2,129.8 2,003.6 Guarantee scheme 521.1 508.1 Total security provision etc. 6,074.9 5,739.4

Total technical provisions 29,148.1 27,438.2

Provisions for other risks and liabilities mana Pension liabilities 16 1,123.4 160.6 Other provisions 24 169.1 305.2 Total provisions for other risks and liabilities 1,292.5 465.8 mn results g ement Liabilities Liabilities arising out of insurance operations 24 223.4 223.7 Group liabilities 3 520.9 145.9 Dividend and Gjensidige fund 1,021.4 300.0 Other liabilities 24 942.8 989.4 Total liabilities 2,708.6 1,658.9

Incurred expenses and prepaid income 24 110.4 148.6 TOTAL EQUITY AND LIABILITIES 48,700.6 45,152.4 146 | GJensidige annual report 2007

cash flow statement Gjensidige forsikring BA

1.1 - 31.12 1.1 - 31.12 NOK million 2007 2006

Net cash flow from operational activities Premiums received, net of reinsurance 12,969.0 12,520.3 Claims paid, net of reinsurance (8,429.0) (7,670.3) Operating expenses paid, including commission (2,208.9) (2,304.7)

Net receipts / payments on lendings and deposits 68.6 (120.2)

Net cash flow from investments Shares and other equity participations 820.0 (2,333.4) Bonds and other fixed-income securities (525.6) (423.2) Financial derivatives and other financial instruments 620.2 (596.8) Investment property 93.1 95.3

Group contribution and liquidation dividend (75.5) 45.4 Interest and other financial income 731.7 3,030.8 Net receipts/payments – real estate activities 40.3 94.3 Tax paid (4.0) (3.9) Net cash flow from operational activities 4,099.8 2,333.8

Cash flow from investment activities Payments on purchase of subsidiaries (2,324.4) (441.7) Net receipts/payments on real estate for own use 1.5 63.4 Net receipts/payments on sale/purchase of equipment (264.1) (89.7) Net cash flow from investment activities (2,587.0) (467.9)

Cash flow from financing activities Payment of the general insurance company’s guarantee scheme 0.0 31.0 Net cash flow from equity (352.0) (477.0) Net payments on loans in subsidiaries and other inter company balances 0.0 (1,782.8) Net cash flow from financing activities (352.0) (2,228.8)

Net movement in cash and cash equivalents 1,160.9 (362.9)

Cash and cash equivalents at the start of the period 1,889.4 2,252.3 Cash and cash equivalents at the end of the period 3,050.3 1,889.4 Net movement in cash and cash equivalents 1,160.9 (362.9) gjensidige annual report 2007 | 147

Note 1 – accounting principles this is GJ ENSI D I G E

GENERAL In accordance with the Norwegian Financial Reporting Act and the Norwegian The financial statements have been prepared in accordance with Norwegian Financial Reporting Regulations for Insurance Companies, some items are financial reporting legislation, regulations issued by the Norwegian Financial subject to special valuation rules. Reference should be made to the following Supervisory Authority and the generally accepted accounting principles in sections. Norway. BUILDINGS and real estate for own use SHARES in subsidiaries and associated companies Property for own use is defined as property that is used by Gjensidige for Shares in subsidiaries and associated companies are dealt with in accordance conducting its business. Buildings and real estate for own use is measured with the equity method. This means that the company’s share of the profit/ at historical cost less accumulated depreciation and accumulated impairment loss for the year, amortisation and impairment of excess values, as well as losses. All buildings for own use are subject to straight-line depreciation to capital gains and losses, are reported on a separate line of the profit and loss reflect normal wear and tear and ageing. account.

INVESTMENT PROPERTy operations RECOGNITION OF REVENUE AND EXPENSES Properties that are leased to tenants outside the group are classified as Insurance premiums are recognised over the term of the policy. Expenses investment property. Investment properties are carried at fair value. Fair value are recognised as they are incurred. is measured and recorded at the end of each period. Changes in fair value are recognised in the oncome statement in the period they occur. Fair value is Prepaid income and unpaid expenses at the end of the year are accrued and based on market prices, after taking into account any differences in the type, reported as a liability on the balance sheet. Unpaid income at the end of the location or condition of the individual property. year is accrued and reported as a receivable on the balance sheet. Dividends are recognised in the year they are received. If market prices are not available, the property will be valued on an individual basis by discounting the assumed future cash flows by the appropriate disco- Foreign currency unt rate for the individual property. The cash flow takes into account existing Profit and loss transactions in foreign currencies that relate to the insurance and future losses attributed to vacancies, investments and assumptions on operations are translated into NOK at the average rate of exchange during the the development of the rental market. The valuation is performed by both month in which the transaction took place. Receivables and liabilities denomi- external and internal expertise. nated in foreign currencies are translated into NOK at the rate of exchange on the balance sheet date. The investment properties are entered initially at historical cost, i.e. the mana purchase price including any directly attributable expenses related to the Profit and loss transactions that relate to the purchase and sale of securities purchase. Investment properties are not depreciated. and financial instruments denominated in foreign currencies are translated

into NOK at the rate of exchange at the time of the transaction. Holdings of If the building is used for both business purposes and as an investment results g ement foreign securities and financial instruments are translated into NOK at the property, the distribution between buildings for own use and investment rate of exchange on the balance sheet date. Liquid assets are also translated property is based on the actual use of the property. into NOK at the rate of exchange on the balance sheet date. The exchange rate risk associated with foreign securities is largely eliminated through financial fixed assets hedging transactions. Shares and units Long-term financial investments intended for permanent ownership are Allocated return on investments recorded at cost. Impairments are made on an individual basis if the fair value The allocated return on investments is calculated based on the average falls below the book value and this situation is not deemed to be temporary. technical insurance provisions throughout the year. The average yield on government bonds with three years remaining until maturity is used for the Units in general partnerships and limited partnerships are recognised in ac- calculation. The Financial Supervisory Authority of Norway has calculated cordance with the equity method. Income from these investments is reported the average technical yield for 2006 and 2007 to be 3.70 and 4.78 per cent, under income from other financial assets. respectively. The allocated return on investments is transferred from the non- technical to the technical accounts. Bonds held to maturity Bonds intended to be held to maturity are managed in accordance with the VALUATION AND CLASSIFICATION OF ASSETS AND LIABILITIES Norwegian Financial Reporting Regulations for Insurance Companies. These Assets intended for long-term ownership or use are classified as fixed assets. bonds are recorded at cost at the time of purchase. The difference between Other assets are classified as current assets. Bonds held as fixed assets are the historical cost and nominal value is amortised over the bond’s remaining classified as fixed assets until maturity, while other receivables maturing wit- time to maturity and recognised as interest in accordance with the effective hin a year are classified as current assets. Corresponding criteria are applied interest rate method. when classifying liabilities. Loans Fixed assets are carried at cost and written down to fair value if the dimi- Loans are carried at their amortised cost. Write-downs are performed in the nution in value is not expected to be temporary. Tangible fixed assets are event of objective evidence for individual loans, and therefore valuations are reported net of ordinary depreciation. Current liabilities are reported at their not made for groups of loans. historical nominal value. 148 | GJensidige annual report 2007

Objective evidence means the existence of incidents indicating diminution of on the company’s empirical data and actuarial methods. Claims provisions are the value of the loan. This may be information on payment alerts, bankruptcy not discounted. or when payments are not made within 60 days after the due date. Loans are written down in full in this case. If the loan is paid, it will be reversed in the Unexpired risk provisions following month. These provisions are intended to cover insufficient premium level, and are amortised in line with reductions in the underlying risks. Loans are established on market terms. Interest-free loans are issued to finance fire alarm systems in agriculture for loss prevention purposes. These Security provisions loans are repaid using the discount granted on the main policy when the The premium and claims provisions are intended to cover the company’s alarm system is installed. anticipated future claims payments under current insurance contracts. The security provisions are intended to protect the company’s finances against FINANCIAL CURRENT ASSETS unforeseen increases in claims payments. The premium, claims and security Certificates and bonds not held to maturity, and shares and similar interests provisions together must, with at least 99 per cent probability, cover the not intended for long-term ownership, are carried at fair value. company’s commitments as per the balance sheet date.

Financial derivatives The security provisions for one-year risk life insurances must exceed a Financial derivatives are used in the management of exposure to equities, statutory minimum, and this is included as part of the security provisions for bonds and foreign exchange in order to achieve the desired level of risk and commercial market insurances. return. These instruments are used both for trading purposes and for hedging balance sheet items. Reinsurance provisions In accordance with the new Norwegian Financial Reporting Regulations for All trading of financial derivatives is subject to strict limitations. The instru- Insurance Companies, reinsurance provisions have been discontinued, and the ments are classified as current assets and carried at fair value. minimum requirement less a deduction for the estimated deferred tax as of 1 January 2007 have been transferred to equity. TANGIBLE FIXED ASSETS OTHER THAN GROUP’S BUILDINGS AND real estate for own use Administrative provisions Tangible fixed assets for the group’s own use are classified as other assets on Provisions shall cover administrative expenses incurred in connection with the the balance sheet and recorded at historical cost less accumulated depre- settlement of claims, if the company is liquidated. ciation and impairments. Depreciation is calculated on the basis of cost and distributed on a straight-line basis over the asset’s estimated life. Gains and Natural perils fund losses on the disposal of tangible fixed assets for the group’s own use are The operating surplus from mandatory natural perils insurance must be al- recognised in the income statement as ordinary income or expenses. located to a separate natural perils fund. This may be used only in respect of claims related to natural perils. Loss or damage due to natural perils is defined INSURANCE TECHNICAL PROVISIONS as loss or damage that is caused directly by a natural peril such as an avalan- Insurance technical provisions are valued in accordance with Section 12-2 che, storm, flood, storm surge, earthquake or volcanic eruption. of the Norwegian Insurance Act and the transitional rule in Section 17-2 concerning the regulations pursuant to the Norwegian Insurance Activity Act. Guarantee scheme provisions The Financial Supervisory Authority of Norway has set separate minimum The purpose of these provisions is to guarantee that claims submitted under requirements for the various types of provisions. These include provisions for direct general insurance contracts entered into in Norway are settled in full. unearned premiums (premium provisions), claims provisions, security provisions and administrative provisions. In the premium and claims provisions categories, PENSIONS the minimum requirements shall also be met for each line of business (LOB), Gjensidige accounts for pensions in accordance with the Norwegian Ac- and in the security provisions category they shall be met for each LOB group. counting Standard for pension costs (NRS 6a). The defined benefit scheme entitles the employees to agreed future pension benefits. Pension liabilities Premium provisions are calculated on the basis of linear accrual and assumptions for length of The premium provisions reflect the accrual of premiums written. The service, discount rate, future return on pension funds, and future growth in provisions correspond to the unearned portions of the premiums written wages, pensions and social security benefits, as well as actuarial assumptions during the year. No deduction is made for any expenses before the premiums for mortality, staff turnover, etc. Pension funds are carried at fair value, and written are accrued. are deducted from liabilities in the net pension liabilities figure on the balance sheet. Any overfunding is recognised if it is likely that it can be put to use. In the case of group life for the comercial market, the premium provisions also Actuarial gains or losses are recorded directly against equity. include provisions for fully paid whole-life cover (after the payment of disability capital) and an option fund (provisions for the right to renew without The defined benefit scheme is a closed scheme that was transferred to the supplying a new health certificate). Gjensidige Pension Fund in 2006. New employees are offered a defined contribution scheme. The cost of the defined contribution scheme is recognised Claims provisions in the income statement in the financial year when the contribution is paid. Claims provisions comprise provisions for anticipated future claims payments in respect of incurred claims, but not fully settled at the end of the year. DEFERRED TAX, INCOME TAX EXPENSE These include both claims that have been reported to the company and those The calculation of deferred tax in the income statement and balance sheet that have not yet been reported. Provisions for claims are assessed individu- has been performed using the provisional Norwegian Accounting Standard for ally by the claims department, while provisions for unknown claims are based the treatment of tax. gjensidige annual report 2007 | 149

The tax expense recognised in the income statement consists of tax payable Internal purchases and sales this is GJ ENSI D I G E and changes in the deferred tax assets/liabilities. Tax payable is calculated on Internal purchases and sales between companies are carried out on ordinary the basis of the taxable profit for the year. Deferred tax assets/liabilities are commercial terms. Intercompany balances are settled based on their nominal calculated on the basis of temporary differences between accounting and tax value. values, and the tax effects of losses carried forward. The nominal tax rate is used for these calculations. Tax-increasing and tax-reducing temporary dif- TRANSACTIONS BETWEEN COMPANIES IN THE GJENSIDIGE GROUP ferences are offset against each other within the same time interval. The mutual fire insurers carry out sales and customer care on behalf of Gjensidige Forsikring. For these services commissions are paid. Refunds are Deferred tax assets arise when temporary differences can be offset against received for the services that Gjensidige Forsikring provides for the mutual tax in the future, and are recognised in the balance sheet. Deferred tax assets fire insurers in connection with the management of their own fire insurance are valued in line with the general valuation policies. business. Due to the fire policy reinsurance scheme, Gjensidige Forsikring also manages assets on behalf of the mutual fire insurers. operations Note 2 – shares in subsidiaries and associates

Registrered Interest Cost Profit/ Equity ac- book value NOK million office held loss* quired**** 31.12.07 31.12.06

Subsidiaries Drammen Torget Vest AS** Drammen 47.6 82.9 Fair Financial Ireland Limited Copenhagen 100 % 231.6 (9.8) 12.2 193.6 196.3 Fair Forsikring A/S Copenhagen 100 % 2,668.7 20.3 2,266.4 2,556.3 Gjensidige Bank Holding AS Oslo 100 % 810.1 (84.9) 627.1 625.5 497.0 Gjensidige NOR Forsikring Eiendom AB*** Stockholm (16.3) 332.2 Gjensidige NOR Forsikring Eiendom AS Oslo 100 % 0.1 0.1 0.3 0.3 Gjensidige Norge AS Oslo 100 % 195.7 0.2 195.7 7.1 7.0 Gjensidige Pensjon og Sparing Holding AS Oslo 100 % 410.5 (90.7) 320.0 297.3 236.5

Glitne Invest AS Oslo 100 % 340.1 33.6 340.1 361.1 315.6 mana HPS Handel AS** Stavanger (2.2) 291.3 Oslo Areal ASA Oslo 100 % 3,577.4 269.4 3,260.8 3,854.9 1,496.3 Parekss Insurance Company Riga 100 % 210.3 (4.0) 82.0 193.9 204.2 Samtrygd Eigedom AS Førde 100 % 3.0 (0.1) 3.0 2.4 results 2.5 g ement Storgata 90 AS Tromsø 100 % 15.7 1.3 0.1 0.1 Strandtorget Drift AS Lillehammer 100 % 0.1 0.1 0.2 0.2 Strandtorget Eiendom AS Lillehammer 100 % 0.1 0.1 0.1 0.1 Tennant Insurance Group AB Stockholm 100 % 568.3 (41.7) 146.7 521.5 Total shares in subsidiaries 9,031.8 121.4 7,255.6 8,614.5 3,662.7

* Includes profit and amortisation of excess value from subsidiaries, exclusive of internal gains. ** The companies have been sold to Oslo Areal ASA, a company in the group. *** The company has been sold externally. The profit includes the reversal of translation differences. **** Equity at the time of the acquisition adjusted for any share capital increases and contributions in kind. The equity has been set equal to the original cost price if the company has been acquired indirectly through the acquisition of other companies.

The voting share equals the ownership share for all investments Registrered Interest Cost Profit/ Equity ac- book value NOK million office held loss* quired**** 31.12.07 31.12.06

Associates Bilskadeinstituttet AS Oslo 29.5 % 0.2 0.4 1.3 1.3 Forsikring og Finans Sandnes AS Sandnes 34 % 0.1 0.1 Forsikringskontoret Johansen og Torkelsen AS Sandnes 34 % 0.2 0.2 Fossmark Assuranse AS Stavanger 34 % 0.1 0.1 Vervet AS Tromsø 25 % 6.0 (0.5) 0.1 4.3 5.1 Total shares in associates 6.3 (0.5) 0.5 6.0 6.8

Total shares in subsidiaries and associates 9,038.2 65.4 7,746.0 8,620.4 3,669.5 150 | GJensidige annual report 2007

Note 2 – shares in subsidiaries and associates (cont.)

Equity movements in subsidiaries NOK million Equity movements in associates NOK million

Equity as at 1 January 2007 3,662.7 Equity as at 1 January 2007 6.8 Change in accounting principies 236.7 Change in accounting principies Group contributions / Dividend paid (Specified in note 3) (66.4) Dividend paid Group contributions paid net of tax / Dividend (Specified in note 3) Dividend received Profit for the year 66.0 Profit for the year (0.6) Net equity paid 5,182.8 Net equity paid Sale of companies (410.8) Sale of companies Translation differences / rounding errors (140.7) Translation differences / rounding errors (0.2) Equity in subsidiaries as at 31 December 2007 8,530.3 Equity in associates as at 31 December 2007 6.0

note 3 – Related party TRANSACTIONS

Group contributions and dividends 2007 2006 NOK million Received Given Received Given

Contributions Gjensidige Pensjonsforsikring AS 70.3 78.1 Gjensidige Investeringsrådgivning ASA 55.3 48.9 Gjensidige Pensjon og Sparing Holding AS 4.5 9.8 Gjensidige Bank ASA 120.0 Glitne Invest AS Gjensidige Norge AS (tidl. Norge Forsikring AS) 0.2 2.9 Drammen Torvet Vest AS 6.1 Oslo Areal ASA 124.0

Dividends Gjensidige NOR Forsikring Eiendom AS 2.6 HPS Handel AS 7.8 Oslo Areal ASA 66.4 32.4 Gjensidige NOR Forsikring Eiendom AB 12.8 Total group contributions and dividends 195.1 245.6 55.6 145.9

Purchase and sale of assets 2007 2006 NOK million Purchases Sales Purchases Sales

Subsidiaries Asset Type Glitne Invest AS Energy Venture l Shares (8 %) 1.6 Gjensidige Bank Holding AS (tidl. Gj. NOR Kr. AS) Inventories, receivables and liabilities 25.3 Drammen Torget Vest AS Oslo Areal ASA Shares (100 %) 577.3 og HPS Handel AS gjensidige annual report 2007 | 151

note 3 – Related party TRANSACTIONS (cont.) this is GJ ENSI D I G E

RELATED PARTY BALANCES 2007 2006 NOK million Receivables Payables Receivables Payables

Within the Group Fair Forsikring A/S 275.3 Gjensidige Norge AS 0.2 Gjensidige Bank ASA 3.1 120.0 11.2 Gjensidige Bank Holding AS (Tidl. Gjensidige NOR Kredittforsikring AS) 11.6 Gjensidige Pensjon og Sparing Holding AS 7.6 0.3 Gjensidige Pensjonsforsikring AS 70.3 0.6 Gjensidige Investeringsrådgivning ASA 55.3 0.2 Glitne Invest AS 0.8 Hjelp 24 Glitne AS 1.3 HPS Handel AS 7.8 operations Oslo Areal ASA 111.2 1,956.7 Drammen Torvet Vest AS 140.0 Gjensidige NOR Forsikring Eiendom AS 2.6 Total due for payment of less than one year 123.4 520.9 2,131.6 0.2 Samtrygd Eigedom AS 2.8 2.4 Total due for payment of more than one year 2.8 2.4

Total related party balances within the Group 126.2 520.9 2,134.1 0.2

Cooperating companies* and other associates Gjensidige fire mutuals 145.3 153.3 Gjensidige Pensjonskasse I og II 81.0 Lindorff AB (associate) 0.3 Total associates 138.3 145.3 153.3

* Cooperating companies are defined as companies with which Gjensidige Forsikring has entered into a long-term strategic alliance. mana

Guarentees

Cooperating companies results g ement Gjensidige Forsikring is responsible externally for any insurance claim arising from the cooperating mutual fire insurers’ fire insurance business. 152 | GJensidige annual report 2007

note 4 – underwriting RESULT

Private insurances Of which Yachts & Com- legal Motor Of which Of which pleasure- Accident Travel Other Total NOK million bined expenses liability other craft private private

Premiums written Gross premiums written 1,528.1 85.6 3,902.5 1,684.0 2,218.5 198.2 456.9 357.7 108.1 6,551.5 Ceded reinsurance premiums (33.9) (3.4) (3.4) (1.2) (58.0) (0.2) (1.7) (98.4) Premiums written, net of reinsurance 1,494.2 85.6 3,899.1 1,684.0 2,215.1 197.0 398.9 357.5 106.4 6,453.1

Gross business Premiums earned 1,523.7 83.7 3,828.4 1,688.2 2,140.2 195.7 442.8 335.9 106.5 6,433.0 Claims incurred (998.7) (82.3) (2,861.5) (1,363.2) (1,498.3) (143.1) (342.0) (224.9) (79.9) (4,650.1) Operating expenses (320.9) (18.1) (674.7) (334.9) (339.8) (29.7) (123.4) (125.2) (24.6) (1,298.6) Underwriting result 204.1 (16.7) 292.2 (9.9) 302.1 22.9 (22.6) (14.2) 2.0 484.3

Reinsurers’ share Premiums earned (33.9) (3.4) (3.4) (1.2) (49.1) (0.2) (1.7) (89.5) Claims incurred (0.2) 3.1 3.1 (0.1) 29.2 0.2 (0.1) 32.1 Operating expenses (0.7) (0.7) Commission received 2.4 0.2 0.2 0.1 4.1 0.1 6.9 Underwriting result (32.4) (0.1) (0.1) (1.2) (15.8) (1.7) (51.2)

Underwriting result, net of reinsurance 171.7 (16.7) 292.1 (9.9) 302.0 21.7 (38.4) (14.2) 0.3 433.1

Gross claims incurred Incurred during the year (983.1) (55.6) (2,878.5) (1,357.8) (1,520.7) (134.5) (361.2) (245.6) (80.3) (4,683.2) Incurred in previous years (15.6) (26.7) 17.0 (5.4) 22.4 (8.6) 19.2 20.7 0.4 33.1 Total for the accounting year (998.7) (82.3) (2,861.5) (1,363.2) (1,498.3) (143.1) (342.0) (224.9) (79.9) (4,650.1)

Claims incurred, net of reinsurance Incurred during the year (983.1) (55.6) (2,878.5) (1,357.8) (1,520.7) (134.5) (328.7) (245.3) (80.3) (4,650.4) Incurred in previous years (15.8) (26.7) 20.1 (5.4) 25.5 (8.7) 15.9 20.6 0.3 32.4 Total for the accounting year (998.9) (82.3) (2,858.4) (1,363.2) (1,495.2) (143.2) (312.8) (224.7) (80.0) (4,618.0) gjensidige annual report 2007 | 153

note 4 – underwriting RESULT (cont.) this is GJ ENSI D I G E

Industry and commercial insurances Of Liabi- Col- Annual Workers which Of Of lity and lective pure com- Other Total Indu- Com legal which which guaran- disease Live- Fish Trans- insu- pensat. industry industry NOK million strial bined expence Motor liability other tees accident stock farms port rance

Premiums written Gross premiums written 916.1 1,114.2 18.1 631.7 234.2 397.5 280.5 975.2 4 87.2 69.7 58.7 80.4 27.7 1,511.4 6,152.8 Outward reinsurance premiums (32.7) (134.4) (28.4) 0.0 (28.4) (13.2) (143.3) (7.6) (3.4) (10.2) (373.2) Premiums written, net of reinsurance 883.4 979.8 18.1 603.3 234.2 369.1 267.3 831.9 487.2 69.7 51.1 77.0 27.7 1,501.2 5,779.6

Gross business Premiums earned 901.7 1,118.6 19.4 612.4 231.6 380.8 275.3 998.5 509.8 69.5 70.8 81.0 58.2 1,555.8 6,251.6 Claims incurred (515.7) (793.2) (24.4) (649.6) (248.6) (401.0) (227.1) (903.9) (431.7) (58.9) (35.1) (59.8) (5.9) (944.4) (4,625.3) Operating expenses (184.1) (231.8) (4.7) (101.1) (43.8) (57.3) (101.3) (74.1) (57.5) (24.7) (12.5) (22.4) (6.2) (228.2) (1,043.8) operations Underwriting result 201.9 93.6 (9.7) (138.3) (60.8) (77.5) (53.1) 20.5 20.6 (14.1) 23.2 (1.2) 46.1 383.2 582.5

Reinsurers’ share Premiums earned (35.4) (117.0) (23.6) (23.6) (14.7) (121.6) (7.6) (3.6) (10.2) (333.7) Claims incurred (5.6) 93.6 15.7 15.7 1.9 68.7 (16.7) (0.1) (21.4) 136.1 Operating expenses (0.6) (1.7) (0.1) (0.1) (0.1) (2.3) (4.8) Commission received 2.3 9.4 2.0 2.0 0.9 10.0 0.5 0.2 0.7 26.1 Underwriting result (39.3) (15.7) (6.0) (6.0) (12.0) (45.2) (16.7) (0.1) (7.1) (3.4) (30.9) (176.3)

Underwriting result, net of reinsur. 162.5 77.9 (9.7) (144.3) (60.8) (83.5) (65.0) (24.7) 3.9 (14.2) 16.1 (4.6) 46.1 352.3 406.1

Gross claims incurred Incurred during the year (586.0) (786.8) (13.0) (635.5) (230.8) (404.7) (188.7) (901.3) (452.9) (59.1) (37.3) (50.3) (37.2) (1,064.9) (4,800.0) Incurred in previous years 70.3 (6.4) (11.4) (14.1) (17.8) 3.7 (38.4) (2.6) 21.2 0.2 2.2 (9.5) 31.3 120.5 174.7 Total for the accounting year (515.7) (793.2) (24.4) (649.6) (248.6) (401.0) (227.1) (903.9) (431.7) (58.9) (35.1) (59.8) (5.9) (944.4) (4,625.3)

Claims incurred, net of reinsurance mana Incurred during the year (576.6) (690.3) (13.0) (619.9) (230.8) (389.1) (186.9) (789.4) (452.9) (59.1) (37.2) (50.3) (37.2) (1,060.9) (4,560.7) Incurred in previous years 55.3 (9.3) (11.4) (14.0) (17.8) 3.8 (38.3) (45.8) 4.5 0.1 2.1 (9.5) 31.3 95.1 71.5 Total for the accounting year (521.3) (699.6) (24.4) (633.9) (248.6) (385.3) (225.2) (835.2) (448.4) (59.0) (35.1) (59.8) (5.9) (965.8) (4,489.2) mn results g ement 154 | GJensidige annual report 2007

note 4 – underwriting RESULT (cont.)

Marine insurance Energy Inward reinsurance Other Total Costal/ Total Non inward Total Hull fishing Marine Propor- propor- reinsu- Pool Gjensidige insurance NOK million vessel insur. Energy tional tional rance schemes Forsikring

Premiums written Gross premiums written 317.2 317.2 0.1 5.9 52.2 58.1 295.6 13,375.3 Outward reinsurance premiums (18.8) (18.9) 1.2 (3.1) (3.1) (105.9) (598.3) Premiums written, net of reinsurance 298.4 298.3 1.3 5.9 49.1 55.0 189.7 12,777.0

Gross business Premiums earned 308.0 308.0 0.1 5.9 53.9 59.8 299.7 13,352.2 Claims incurred 6.6 (554.6) (548.0) 8.4 (1.0) (81.3) (82.3) (67.8) (9,965.1) Operating expenses (46.6) (46.6) (0.1) (0.4) (0.2) (0.6) (2,389.7) Underwriting result 6.6 (293.2) (286.6) 8.4 4.5 (27.6) (23.1) 231.9 997.4

Reinsurers’ share Premiums earned (18.7) (18.7) (107.7) (549.6) Claims incurred (3.0) 74.6 71.6 (2.2) (2.5) (2.5) 0.2 235.3 Operating expenses (0.3) (0.3) (5.8) Commission received 1.3 1.3 (0.1) 0.2 0.2 34.4 Underwriting result (3.0) 56.9 53.9 (2.3) (2.3) (2.3) (107.5) (285.7)

Underwriting result, net of reinsur. 3.6 (236.3) (232.7) 6.1 4.5 (29.9) (25.4) 124.4 711.7

Gross claims incurred Incurred during the year (536.0) (536.0) (0.3) (79.8) (80.1) (85.0) (10,184.3) Incurred in previous years 6.6 (18.6) (12.0) 8.4 (0.7) (1.5) (2.2) 17.2 219.2 Total for the accounting year 6.6 (554.6) (548.0) 8.4 (1.0) (81.3) (82.3) (67.8) (9,965.1)

Claims incurred, net of reinsurance Incurred during the year (457.7) (457.7) (0.3) (79.8) (80.1) (85.0) (9,833.9) Incurred in previous years 3.6 (22.3) (18.7) 6.2 (0.7) (4.0) (4.7) 17.4 104.1 Total for the accounting year 3.6 (480.0) (476.4) 6.2 (1.0) (83.8) (84.8) (67.6) (9,729.8)

technical provisions Industry Inward reinsurance and Non Total Other Total Private commercial Marine Propor- propor- inward pool Gjensidige NOK million insurance industry insurance Energy tional tional reinsur. schemes Forsikring

Premium provision, net of reinsurance 2,982.1 2,198.1 49.8 1.5 125.9 5,357.4 Provision for insufficient premium level Reinsurers’ share 59.4 Premium provision, net of reinsurance 5,416.8 NFSA minimum requirement 2,982.1 2,198.1 49.8 1.5 125.9 5,357.4

Claims provision, net of reinsurance 5,555.2 11,150.1 265.7 44.2 104.9 99.1 17,219.2 Reinsurers’ share 398.8 Claims provisions, gross 17,618.0 NFSA minimum requirement 4,353.5 9,664.7 150.5 29.9 104.9 99.1 14,402.6

Security provision 1,085.0 1,284.0 30.1 4.5 15.9 2,419.5 NFSA minimum requirement 1,085.0 1,284.0 30.1 4.5 15.9 2,419.5

Administration provision 440.1 545.0 11.5 1.7 6.1 1,004.4 NFSA minimum requirement 440.1 545.0 11.5 1.7 6.1 1,004.4

Inward Reinsurance Premiums written during the year 5.7 49.2 54.9 54.9 Premiums written in previous years 0.1 0.1 0.1 Premiums written, net of reinsurance 5.8 49.2 55.0 55.0 gjensidige annual report 2007 | 155

note 5 – insurance related sales and operating expenses this is GJ ENSI D I G E

NOK million 2007 2006

Salaries 612.8 681.7 Commissions 235.2 247.5 Other sales expenses 634.2 590.7 Total insurance related sales expenses 1,482.2 1,519.9 Other insurance related operating expenses 913.3 1,218.5 Total insurance related operating expenses 2,395.5 2,738.3 note 6 – FINANcial fixed assets operations

A shares and similar interests Number Cost Book NOK million of shares value

Public Listed Storebrand 48,782,290 3,043.1 2,766.0

Unlisted Sikon Øst ASA 112,760 22.6 17.9 Fjord Invest AS 16,970 17.9 17.9 BTV Investeringsfond AS 5,500 6.0 6.0 Helgeland Vekst AS 40,000 4.0 4.0 Tun Media (Landbrukets Medieselskap AS) 1,553,872 3.7 3.7 Norinnova 578 3.0 3.0 Other shares and similar interests 27.8 14.2 mana Total shares and similar interests 3,128.0 2,832.7

The company has a portfolio of both short-term and long-term equity inves- to correspond to the fair value of the long-term equity investments. The

tments. The long-term equity investments include large holdings in individual Storebrand holdings have been impaired to fair value in the long-term results equity g ement companies. In addition, the portfolio of long-term equity investments includes investment portfolio. The market value is therefore the book value. stakes in some smaller regional companies. The book value is considered

NOK million 2007

Book value as at 1 January 2,175.9 Additions 1,124.5 Disposals (191.5) Impairments (276.2) Book value as at 31 December 2,832.7 156 | GJensidige annual report 2007

note 6 – FINANcial fixed assets (cont.)

B bonds held to maturity Par Book Market Surplus/deficit NOK million Cost value value value value

Norwegian bonds Public Listed Bonds issued by financial institutions 3,784.7 3,755.5 3,755.5 3,676.4 (33.1) Bonds issued by industrial institutions 1,368.6 1,333.4 1,333.4 1,305.3 78.2 Government and state guaranteed bonds 567.5 554.3 554.3 537.7 12.8

Unlisted Bonds issued by financial institutions 615.1 612.3 612.3 597.7 (0.2) Bonds issued by industrial institutions 42.5 40.3 40.3 37.4 2.3 Government and state guaranteed bonds 176.5 174.8 174.8 170.8 0.8 Total norwegian bonds 6,554.9 6,470.5 6,470.5 6,325.3 60.7

foreign bonds Public Listed Bonds issued by financial institutions 1,129.1 1,122.2 1,078.3 1,063.9 46.8 Government and state guaranteed bonds 334.3 334.7 334.7 334.2 (4.3) Bonds issued by industrial institutions 102.2 101.5 95.8 94.6 6.3 Unlisted Bonds issued by financial institutions 200.0 200.0 200.0 205.3 Government and state guaranteed bonds 153.3 151.5 151.5 149.7 1.5 Total foreign bonds 1,918.8 1,910.0 1,860.3 1,847.7 50.3 Total bonds held to maturity 500.0 500.0 500.0 500.0 Total foreign bonds, incl. bonds held to maturity 2,418.8 2,410.0 2,360.3 2,347.7 50.3

Total bonds held to maturity 8,973.7 8,880.4 8,830.7 8,673.1 111.0

Foreign bonds by currency NOK 2,026.5 2,025.2 2,025.2 2,017.6 (2.8) EUR 206.6 204.0 192.6 189.6 13.4 USD 185.7 180.8 142.4 140.6 39.6 Total foreign bonds 2,418.8 2,410.0 2,360.3 2,347.7 50.3

The average effective yield on bonds has been calculated as 4.69 per cent weighting for the average effect for the overall holdings has been determined based on their market value and 3.96 per cent based on their book value. The with the individual paper’s share of the interest rate sensitivity as a factor.

NOK million 2007 Book value as at 1 January 7,4 87.3 Additions 2,779.5 Withdrawals (1,352.0) Earned premium/discount for the year (56.8) Translation differences (27.2) Book value as at 31 December 8,830.7 gjensidige annual report 2007 | 157

note 7 – shares and similar interests this is GJ ENSI D I G E

Norwegian shares Number of shares or Cost Market NOK million percentage ownership value

Norwegian financial shares Indre Sogn Sparebank 0.7% 0.49 0.50 Total Norwegian financial shares 0.49 0.50

Other norwegian shares Convexa Capital IV AS 7.1% 7.50 11.39 Convexa Capital VI AS - klasse A 0.1% 0.03 5.12 Convexa Capital VI AS - klasse B 12.6% 11.56 11.90 Convexa Capital VIII AS - klasse B 11.0% 19.96 19.23 EDB Business Partner 0.3% 13.54 10.61 operations Ementor 0.1% 3.45 3.79 Fred. Olsen Energy 0.0% 7.60 8.02 Hafslund B 0.0% 6.45 7.02 Kongsberg Automotive Holding 0.4% 8.52 7.94 MPU Offshore Lift 1.3% 6.23 4.80 Norchip AS 0.0% 3.13 2.52 Norsk Hydro 0.0% 12.16 13.16 Norske Skogindustrier A 0.0% 3.27 4.02 Orkla 0.0% 30.30 34.09 SeaDrill Ltd 0.0% 6.87 7.49 StatoilHydro ASA 0.0% 33.35 32.31 Telenor 0.0% 12.84 14.79 TGS Wavefield ASA 0.1% 11.25 11.19 Tomra Systems 0.1% 8.25 7.31 Verdane Capital II 1.3% 0.50 0.07 mana Verdane Capital III 0.8% 0.00 0.00 Viking Venture AS 6.6% 13.50 24.35 Viking Venture II AS 13.9% 40.00 62.04

Viking Venture Management AS 4.5% 0.00 results 0.00 g ement Vmetro 1.1% 4.01 2.84 Yara International 0.0% 5.06 7.96 Not specified 17.76 6.10 Total other Norwegian shares 287.08 320.08

Energy Ventures IS 17.5% 16.23 23.96 Energy Ventures II KS 8.5% 32.14 38.07 HitecVision Private Equity III AS 12.6% 81.33 100.76 Teknoinvest VIII KS (inkl. Teknoinv. VIII (GP) KS) 13.9% 50.03 74.70 Teknoinvest VIII B DIS 15.7% 4.08 4.26 Total Norwegian equity funds 183.81 241.75

Total Norwegian equity funds and similar interests 471.38 562.32 Of which Listed 171.38 176.17

The shares classified as short-term investments include both listed and unli- term than listed shares. The portfolio of listed short-term equity investments sted shares. Unlisted shares, or private equity, is an asset class that is under is a well diversified global portfolio. The largest share is under passive index development administratively at Gjensidige. Private equity is less liquid than management with Storebrand Kapitalforvaltning. The rest of the portfolio is other shares, and it is expected to have a higher risk and return in the long- spread across a number of reputable managers. 158 | GJensidige annual report 2007

note 7 – shares and similar interests (CONT.)

foreign shares Number of shares or Cost Market NOK million percentage ownership value

Australia BHP Billiton 37,559 5.5 7.2 Woolworth Australia 20,940 2.9 3.4 Commonwealth Bank of Australia 11,057 2.8 3.1 Westpac Banking Corp 20,978 2.5 2.8 National Australian Bank 15,434 2.9 2.8 Total 16.6 19.3 Belgium Fortis B 18,817 2.2 2.7 Total 2.2 2.7 Bermuda BW Offshore 503,300 13.2 11.5 Total 13.2 11.5 Canada Potash Corp Saskatchewan 4,664 1.5 3.7 Manulife Financial 14,985 3.2 3.3 Royal Bank of Canada 11,773 3.5 3.3 Encana 8,083 2.9 3.0 Suncor Energy 4,829 2.5 2.9 Sun Life Financial Inc 9,044 2.4 2.8 Bank of Nova Scotia 9,256 2.6 2.6 Total 18.5 21.5 Denmark Danisco 11,626 5.7 4.5 Total 5.7 4.5 Finland Nokia A 46,129 7.0 9.7 Sampo Leonia Plc 59,500 10.8 8.5 Total 17.8 18.3 France BNP Paribas 9,119 6.6 5.4 Vivendi 20,189 5.3 5.0 Arcelor (fransk line) NVP 11,685 3.8 4.9 Sanofi-Aventis 9,660 5.6 4.8 France Telecom 19,602 3.5 3.8 Axa 17,116 4.0 3.7 Suez (FR-line) 9,975 2.9 3.7 L Oreal 3,818 2.5 3.0 Carrefour 6,898 2.9 2.9 Danone 5,740 2.7 2.8 Societe Generale 3,282 3.5 2.6 Total 43.3 42.7 Greece National Bank of Greece 7,582 2.5 2.8 Total 2.5 2.8 Hong Kong Cheung Kong Holdings 26,000 1.9 2.6 Total 1.9 2.6 Italy ENI 46,032 9.4 9.2 Enel 66,589 4.6 4.3 UniCredito Italiano 89,488 4.3 4.0 Intesa SanPaolo 79,701 3.6 3.4 Total 21.9 20.9 gjensidige annual report 2007 | 159

note 7 – shares and similar interests (CONT.) this is GJ ENSI D I G E foreign shares (cont.) Number of shares or Cost Market NOK million percentage ownership value

Netherland Ing-Group 17,855 5.1 3.8 Philips Electronics (Koninklijke) 14,660 3.4 3.4 Unilever NL 16,000 2.8 3.2 Total 11.2 10.4 Spain Telefonica 43,457 5.7 7.7 Banco Santander 61,180 7.0 7.2 BBVA (Bilbao Vizcaya Argentaria) 38,177 5.9 5.1 Total 18.6 19.9

Great Brittain operations BP Plc 186,877 13.3 12.4 Royal Dutch Shell A ord 49,070 11.0 11.2 Vodafone Group 539,746 9.7 11.0 Axis-Shield 400,000 13.7 10.6 HSBC Holdings GB 109,042 13.0 9.9 GlaxoSmithkline 52,460 8.9 7.3 Imperial Chemical Industries 77,150 3.2 5.6 Rio Tinto 9,527 3.2 5.5 Royal Bank of Scotland 104,509 12.3 5.0 Anglo American Plc 14,122 4.8 4.7 BG Group 35,531 3.0 4.4 Brit Amer Tobacco 19,309 4.0 4.1 BHP Billiton 23,935 3.0 4.0 Tesco 76,076 3.4 3.9

Barclays Bank 69,035 6.1 3.8 mana Astrazeneca 15,925 5.5 3.7 Diageo 30,755 3.9 3.6 Unilever GB 17,396 3.3 3.6 mn results g ement HBOS 40,848 5.5 3.2 Royal Dutch Shell B shares 14,178 3.2 3.2 Rolls Royce 51,137 2.4 3.0 Xstrata 7,574 2.1 2.9 Lloyds Bank 52,145 3.5 2.7 BT Group 89,309 2.9 2.6 Reuters Group 36,790 2.1 2.5 Switzerland Nestle 3,663 8.5 9.1 Novartis 21,815 8.1 6.5 Roche Holding Genuss 6,909 7.9 6.5 UBS 20,516 8.3 5.2 Credit Suisse Group RG 13,447 5.9 4.4 Holcim 4,952 2.7 2.9 Compagnie Financie 7,535 2.7 2.8 Total 43.9 37.4 Sweden Svenska Handelsbanken A 54,827 9.5 9.5 Total 9.5 9.5 Germany EON 7,090 6.8 8.2 Bayer 11,424 5.0 5.7 Allianz SE (Societas Europeae) 4,504 6.0 5.3 Basf 4,991 3.2 4.0 Rwe 5,055 3.2 3.9 160 | GJensidige annual report 2007

note 7 – shares and similar interests (CONT.)

foreign shares (cont.) Number of shares or Cost Market NOK million percentage ownership value

Germany (cont.) Volkswagen 2,963 2.1 3.7 Deutsche Telecom 29,275 3.0 3.5 Deutsche Bank 4,859 3.9 3.4 Deutsche Boerse 2,878 1.8 3.1 Sap AG 10,472 3.4 3.0 Total 38.4 43.7 USA Exxon Mobil 53,706 25.3 27.3 General Electric 93,268 21.6 18.8 Microsoft 79,367 14.9 15.3 AT&T Inc 55,480 12.7 12.5 Procter & Gamble 29,325 11.8 11.7 Chevron Corp 21,059 9.8 10.7 Johnsen & Johnsen 25,948 10.6 9.4 Apple Inc 8,655 5.4 9.3 Google Class A 2,321 7.0 8.7 Altria Group Inc 20,109 8.3 8.3 Intel 56,899 8.0 8.2 Bank of America Corp 36,092 12.0 8.1 Cisco Systems 53,943 9.0 7.9 International Business Machine (IBM)) 13,176 8.2 7.7 Pfizer 58,942 10.2 7.3 J.P Morgan Chase and Co 29,749 9.1 7.1 Citigroup 43,945 14.5 7.0 Merck & Co 21,475 6.3 6.8 Hewlett-Packard Co 24,651 5.4 6.8 Coca-Cola 19,811 6.0 6.6 Verizon Communications 26,430 6.1 6.3 Pepsico Inc 15,177 6.3 6.3 American International Group 19,513 8.6 6.2 Schlumberger 10,456 4.6 5.6 Oracle Corporation 44,463 5.3 5.5 Wells Fargo 29,376 6.7 4.8 Abbott Laboratories 15,584 5.2 4.8 Goldman Sachs 3,884 4.4 4.5 Monsanto 7,231 2.2 4.4 Exelon 9,679 4.6 4.3 McDonalds 12,714 2.7 4.1 United Health Group 12,081 4.0 3.8 Qualcomm 17,625 4.6 3.8 Wachovia Corp 17,625 6.2 3.6 CVS/Caremark 16,390 3.8 3.5 Rockwell Collins 8,796 3.0 3.4 Emerson Electric 10,978 3.2 3.4 Occidental Petroleum 7,783 2.4 3.2 Lilly Eli 11,173 4.1 3.2 3M CO 7,068 3.6 3.2 Deere & Co 6,295 2.3 3.2 Caterpillar 8,029 3.8 3.2 Bristol-Myers Squibb 21,918 3.9 3.2 American Express 11,110 4.4 3.1 Amgen 12,350 4.9 3.1 Research in Motion 4,978 1.2 3.1 gjensidige annual report 2007 | 161

note 7 – shares and similar interests (CONT.) this is GJ ENSI D I G E foreign shares (cont.) Number of shares or Cost Market NOK million percentage ownership value

USA (cont.) Wyeth 12,827 4.3 3.1 Bank of New York Mellon 11,554 2.8 3.1 Kraft Foods 16,490 3.3 2.9 Texas Instruments 16,079 3.1 2.9 Prudential Financial Inc 5,770 3.6 2.9 Wellpoint Inc 6,108 3.1 2.9 Time Warner 32,005 4.1 2.9 News Corporation B 24,766 3.4 2.9 Gilead Sciences Inc 11,276 2.1 2.8

Medtronic 10,296 3.4 2.8 operations Textron 7,195 2.2 2.8 Anadarko Petroleum 7,659 2.3 2.7 EMC 26,872 2.3 2.7 Metlife 7,848 2.9 2.6 Dell Inc. 19,657 3.2 2.6 US Bancorp 14,939 3.3 2.6 Morgan Stanley 8,882 3.7 2.6 Nike B 7,263 2.1 2.5 Johnson Controls 12,747 2.8 2.5 Total 386.2 365.0 Other countries Other Asia/Oceania 32.6 35.8 Other Europe 178.8 171.6 North-America 397.7 340.5

Other countries 8.9 10.6 mana

Total foreign shares 1,416.2 1,325.5 Of which listed 1,414.9 1,325.5 mn results g ement Other equity funds and similar interests Altor Fund II LP 0.9 % 28.0 29.5 BaltCap PEF LP 8.6 % 0.0 0.0 Cerep I 3.5 % 72.8 90.4 Cerep II 3.7 % 100.7 106.6 Energy Ventures III LP 5.6 % 0.7 0.7 FSN Capital II LP 6.9 % 52.4 64.7 Fortis Equity World Emerging 79,549 380.8 375.4 Fortis L Fund Equity Environmental Sustain. World 121,733 118.3 118.2 Genesis Emerging Markets Invest 733,672 123.1 178.4 Goldman Sachs SICAV - Global Emerging Mrk.Inst. Ac 1,893,501 128.7 157.9 Gottex Market Neutral Pl-2XL Fund 491,642 287.1 260.9 HitecVision Private Equity IV LP 6.7 % 67.1 103.3 HitecVision Private Equity V LP 5.6 % 0.0 0.0 LGT Crown European Private Equity PLC 0.8 % 10.2 10.1 NeoMed Innovation IV LP 2.9 % 10.4 10.3 Northzone IV K/S 10.8 % 61.8 59.2 Northzone V K/S 5.7 % 19.4 15.6 Norvestor IV LP 14.6 % 53.0 76.6 Norvestor V LP 14.1 % 18.4 18.4 Partners Group Direct Investments 2006 LP 1.0 % 26.2 26.1 Partners Group European Buyout 2005 (A) LP 2.7 % 31.1 28.2 Partners Group Fond av Hedgefond 1,983,219 1,396.5 1,333.5 Russell Alternative Strategies Fund II Plc. 133,510 912.8 831.6 Russel Japan Fund 164,478 197.4 169.3 162 | GJensidige annual report 2007

note 7 – shares and similar interests (CONT.)

foreign shares (cont.) Number of shares or Cost Market NOK million percentage ownership value

Other equity funds and similar interests (cont.) Sector Polaris 330,377 223.1 211.5 Sector EuroPower Fund Class A EUR 73,437 61.5 64.6 Sector Healthcare - A USD 76,265 59.2 56.6 Sector Speculare III Fund Class A USD 50,000 29.9 32.0 Sector Speculare II Fund Class A USD 12,050 8.1 22.6 The Winton Evolution Fund 7,457 63.6 73.8 UBS (LUX) EQUITY FUND - GLOBAL INNOVATORS B 172413 118.7 121.2 Verdane Capital V B K/S 3.7 % 11.6 14.4 Verdane Capital VI K/S 10.0 % 12.3 10.5 Not specified/Other privat equity investments 0.1 0.2 Total foreign equity funds and similar interests 4,685.0 4,672.1

Total foreign shares and similar interests 6,101.2 5,997.6

Total shares and similar interest 6,572.6 6,559.9 gjensidige annual report 2007 | 163

note 8 – bonds and other fixed interest securities this is GJ ENSI D I G E

Cost Market NOK million value

Norwegian bonds Listed Bonds issued by others 770.5 768.7 Bonds issued by banks and financial institutions 2,4 67.0 2,462.9 Bonds issued by public sector 390.4 388.6 Unlisted Bonds issued by banks and financial institutions 969.5 968.4 Total Norwegian bonds 4,597.5 4,588.5

Norwegian certificates Listed operations Certificates issued by others 679.5 678.2 Certificates issued by banks and financial institutions 57.0 57.0 Certificates issued by public sector 285.7 285.4 Unlisted Certificates issued by others 70.0 70.0 Certificates issued by banks and financial institutions 844.5 844.1 Certificates issued by public sector 30.0 30.0 Total Norwegian certificates 1,966.6 1,964.7 foreign bonds Unlisted Bonds issued by by banks and financial institutions 686.2 683.8 Total foreign bonds 686.2 683.8

Foreign certificates mana Unlisted Certificates issued by banks and financial institutions 549.8 549.4 Total foreign certificates 549.8 549.4 mn results g ement Funds and financial derivatives Flexifund Money Market RMB I (USD) 211.5 206.7 Fidelity Inst. Global Bond Fund 1,383.2 1,361.3 Putnam Global High Yield Bond Fund 1,005.4 962.8 Pimco Global Bond Fund Investor (Hedged) 30.0 31.7 Other bond funds 14.2 14.2 Norwegian financial derivatives Total funds and financial derivatives 2,644.3 2,576.7

Total bonds, certificates, funds and financial derivatives 10,444.4 10,363.2

Bonds, certificates, funds and financial derivatives by currency NOK 7,813.9 7,804.3 DKK 16.2 13.9 EUR 2,614.3 2,545.0 USD Total 10,444.4 10,363.2

Effective yield The effective yield for individual fixed interest securities is calculated based effective yield for fixed interest securities is 6.04 per cent. The modified on the market value. The weighting for the average effect for the overall duration is 0.61. The average effective yield for bonds is 5.13 per cent. The holdings has been determined with the individual paper’s share of the overall modified duration is 0.21. The overall average effective yield is 5.67 per cent. interest rate sensitivity as a factor. The average The modified duration is 0.34. 164 | GJensidige annual report 2007

note 9 – financial derivatives

Principal Principal Market NOK million average value

Interest-related contracts Forward contracts 47,000.0 45,754.5 (0.5) IRF Interest rate options Interest rate SWAP 4,750.0 5,741.7 (9.1)

Currency-related contracts Forward contracts 18,348.1 14,077.3 247.6 Currency options 156.2 92.1 0.9

Equity-related contracts Equity options 1,030.6 2,079.9 Equity contracts 399.6 671.0

Total derivatives 71,684.5 68,416.5 238.9

Derivatives are used in accordance with the Norwegian Derivatives in Insu- Currency-related contracts consist mainly of: rance Regulations to make asset and risk management more efficient. • Currency futures, which are agreements to purchase or sell a particular amount of currency at a particular exchange rate at a future date. In each asset class the individual asset managers use derivatives suited to • Currency swaps, which are agreements with banks to swap particular that class, and most of the types of financial derivatives mentioned below are amounts of different currencies at a particular exchange rate and to pay used regularly. The use of derivatives is restricted by the agreement with the interest on these amounts for an agreed period. individual manager, and requirements are made for approved product lists and • Currency options, which are agreements giving the right/obligation to sufficient expertise and systems on the part of the manager. Short positions purchase or sell currency at a particular exchange rate at a future date. (in other words undertakings to sell securities that the company does not already own, or to purchase securities without having sufficient liquid funds Equity-related contracts consist mainly of: to complete the transaction) are not normally permitted. • Equity options, which are agreements giving the right/obligation to buy or sell equities at a particular price on or before a future date. The manager in each asset class may never expose the company to a greater • Equity swaps, which are agreements to swap equities at a particular price amount than specified in the management mandate. at a future date. • Equity futures, which are agreements to buy or sell equities at a particular The company’s overall foreign exchange risk is hedged almost entirely using price on a future date. currency futures. The overall level of risk in the equity portfolio was reduced during the year by buying options on broad indices rather than buying shares. Commodity-related contracts consist mainly of: Financial derivatives included in hedge funds are not included in the overview. • Commodity options, which are agreements giving the right/obligation to buy or sell commodity futures at a particular price on or before a future Interest-related contracts consist mainly of: date. • Interest rate swaps, which are agreements to exchange interest terms on nominal amounts. These transactions are carried out mainly with banks as counterparties. The • Forward rate agreements, which are agreements that set an interest rate credit risk from these activities is considered to be marginal. Both interest- on a nominal amount for a future period. related and currency-related transactions are conducted within established • Interest rate futures (IRF), which are agreements that secure the buyer a position limits. particular interest rate on an amount for a future period. • Bond options, which are agreements giving the right/obligation to purchase or sell bonds at a particular price on or before a future date. • Bond futures, which are agreements to purchase or sell bonds at a particular price on a future date. gjensidige annual report 2007 | 165

note 10 – financial risk this is GJ ENSI D I G E

A LIquidity risk Duration of balance sheet components. Amounts include interest earned:

Not incl. agreed Up to 1– 3 3 months 1 – 5 Over NOK million remaining term 1 month months to 1 year years 5 years Total

Not classified 8,558.8 208.9 44.4 8,812.2 Shares in subsidiaries 8,623.8 8,623.8 Long-term bonds and certificates 14.2 709.5 4,521.8 2,618.2 7,863.7 Time deposit 552.2 552.2 Loans 25.5 1.1 12.2 99.9 413.4 552.1 Shares and similar interests 2,850.9 2,850.9 Short-term bonds and certificates 12.4 1,351.8 6,326.9 1,367.3 9,058.4 Total 20,073.1 1,262.8 4,743.2 4,026.7 6,426.8 1,780.6 38,313.2 operations Bonds and other securities with fixed returns include short positions in this note.

B Interest rate risk Fixed-rate financial assets: Not incl. agreed Up to 1– 3 3 months 1 – 5 Over NOK million remaining term 1 month months to 1 year years 5 years Total

Short-term bonds and certificates 14.2 747.1 3,194.3 3,894.2 13.9 7,863.7 Time deposit 552.2 552.2 Loans 25.5 1.1 12.2 99.9 413.4 552.1 Long-term bonds and certificates 5.0 12.4 1,355.5 6,318.2 1,367.3 9,058.4 Total 39.7 558.3 759.5 4,562.0 10,312.4 1,794.6 18,026.4

* Loans are presented excluding provisions for losses

Interest rate sensitivity by current asset and currency type: mana Not incl. agreed Up to 1– 3 3 months 1 – 5 Over NOK million remaining term 1 month months to 1 year years 5 years Total

AUD 0.1 0.1 CAD 0.1 results 0.1 g ement CHF 0.1 0.1 DKK 4.1 4.1 EUR 2.1 2.1 GBP 0.3 0.3 HKD JPY 0.3 0.3 NOK 0.3 (27.3) (44.9) 8.0 (63.9) NZD SEK 1.1 1.1 SGD USD 12.8 12.8 Total 0.3 (6.4) (44.9) 8.0 (43.0)

Fixed assets DKK 1.0 1.0 EUR 0.3 0.4 NOK (1.3) (7.6) (153.2) (82.6) (244.7) SEK USD Sum (7.6) (153.1) (82.6) (243.4) Interest rate sensitivity is an indicator for the interest rate risk that is based interest rates by one percentage point. With an interest rate increase of one on how interest rate fluctuations affect the market value of bonds, interest percentage point, the portfolio value of current assets will be reduced by NOK rate derivatives and other interest rate sensitive financial items. The interest 43 million. The portfolio values for the fixed assets in Gjensidige Forsikring rate risk is maintained within the given limits. This overview illustrates how will be reduced by NOK 243.4 million. An interest rate decrease of one per the value of financial current assets and fixed assets (bonds held until matu- cent would increase correspondingly the values by the same amount. rity) as of 31 December 2007 would have been affected by an increase in all 166 | GJensidige annual report 2007

note 10 – financial risk (cont.)

C exchange rate risk Foreign exchange transactions are conducted within strictly defined limits and means of currency futures at the portfolio level, and the currency positions used both for trading purposes and to hedge financial assets. The table speci- are monitored continuously against a total limit. Negative currency positions fies gross and net positions in the major currencies. Hedging is performed by are closed out no later than the day after they arose.

Short-term current assets

Gross position Total gross position Total currency Total net posision Total net posision Currency in currency in currency NOK contract in currency in NOK

AUD 8.0 37.9 (7.7) 0.2 1.1 CAD 10.6 58.3 (10.2) 0.4 2.4 CHF 9.7 46.3 (9.5) 0.2 0.8 DKK 15.6 16.7 (28.3) (12.7) (13.5) EUR 142.9 1,134.4 (138.2) 4.7 37.5 GBP 15.1 163.0 (14.6) 0.5 4.9 HKD 19.2 13.3 (18.4) 0.8 0.6 JPY 3,356.5 163.1 (2,954.5) 402.0 19.5 NZD 0.1 0.1 SEK 57.1 48.0 (174.0) (116.8) (98.2) SGD 2.6 9.8 (2.5) 0.1 0.4 USD 1,236.5 6,714.3 (1,220.1) 16.5 89.6 Total 45.3

Long-term fixed assets:

DKK 2,253.6 2,399.4 (2,438.0) (184.4) (196.3) EUR 47.8 379.5 (43.8) 4.0 31.5 SEK 661.0 555.3 (525.9) 135.1 113.5 USD 27.4 148.9 (25.6) 1.9 10.1 Total (41.3)

note 11 – LOSSES AND PROVISIONS FOR LOSSES ON LOANS AND GUARANTEES

NOK million 2007 2006

Specific provisions with objective evidence as at 1 January 6.9 11.3 Realised losses for which provisions were previously made 0.6 Change in prov. for losses for the period based on objective evidence (2.5) (5.1) Specific provisions with objective evidence as at 31 December 4.4 6.9

Non-performing loans incl. interest before prov. for losses 4.4 7.8 Non-performing loans incl. interest after prov. for losses 0.2 0.9

Gjensidige Forsikring implemented the new loan regulations dated 21 De- accordance with the new regulations. Impairments are performed in the event cember 2004 relating to the accounting of loans and guarantees in financial of objective evidence for individual loans, and therefore valuations are not Institutions on 1 January 2006. Loans are carried at their amortised cost in made for groups of loans. gjensidige annual report 2007 | 167

note 12 – Loans and guarantees this is GJ ENSI D I G E

A loans NOK million 2007 2006

Mortgage loans 5.7 11.8 Other loans 525.4 615.4 Subordinated loans 25.3 269.4 Specific provisions for losses with objective evidence as at 31.12 (4.4) (6.9) Total loans 552.1 889.8

Other loans consist almost entirely of interest-free loans to agricultural custo- than 20 years. Applications for these loans undergo normal credit assessment mers granted exclusively for the installation of fire alarm systems by these before being granted. The default rate is around 0.88 per cent against 0,85 customers. The loans are not secured, and the term varies from three to more per cent in 2006.

B subordinated loans operations Par value Cost Market NOK million value

Four Seasons Venture III AS 2.7 2.7 1.4 Vervet AS subordinated loan 28/09/06 24.0 24.0 24.0 Total 26.7 26.7 25.3

The subordinated loans are interest-free note 13 – Investment properties

NOK million 2007

Profit and loss account Rental income from investment properties 119.5

Other income from investment properties 1.9 mana Direct costs from investment properties generating rental income during the period (28.3) Total 93.1 Net gain (loss) on changes in fair value 146.0 mn results g ement Total income from investment properties 239.1

Balance sheet Transferred to investment properties as at 1 January 1,418.6 Change in value as at 1 January 2007 entered directly against equity 415.5 Additions and capital improvements 66.6 Disposals (35.5) Fair value gain (loss) 146.0 As at 31 December 2,011.1

In connection with the transition to IFRS in the consolidated accounts and As at 31 December 2007 all properties were valued by external advisors. the amended Norwegian Financial Reporting Regulations for Insurance Quarterly valuations will, however, be performed by internal advisors. Companies, Gjensidige Forsikring has changed its valuation principles for the portion of the property portfolio that is regarded as investment properties. The average yield applied to determine fair value of property, where current These are classified as investment properties in the balance sheet and carried prices in an active market are unavailable, were as follows: at fair value. The cost price less accumulated depreciation has been transferred from the category buildings to the category investment property as at Offices 6.55% 1 January 2007. The implementation effect, i.e. the change in value as at 1 January 2007 has been entered directly against equity. There are no restrictions with regard to the sale of the investment properties or how income and cash flows generated by the investment properties can be Investment properties consist of commercial properties that are rented to used. There are no contractual obligations to buy, build or develop investment parties outside the Gjensidige Group, or are acquired in accordance with the properties. Gjensidige Forsikring has no investment properties for leasing or company’s capital investment strategy. The average rental period is 5 years, classified as available for sale. and the portfolio consists primarily of office buildings. The properties are located throughout Norway from Alta in the north to Mysen in the south. 168 | GJensidige annual report 2007

note 14 – buildings for own use, tangible fixed assets and intangible assets

Intangible Fixed Buildings NOK million assets assets for own use

Cost as at 1 January 1,044.1 657.6 2,793.4 Transferred to investment property1 (1,655.0) Additions during the year 53.8 147.5 24.6 Disposals during the year (5.3) (15.6) (11.0) As at 31 December 1,092.6 789.5 1,152.0

Accumulated depreciation and impairment as at 1 January (762.8) (468.8) (443.8) Transferred to investment property1 0.0 0.0 236.3 Impairments during the year (94.2) (99.5) (43.7) Disposals during the year 1.8 10.2 4.0 Accumulated depreciation and impairment as at 31 December (855.2) (558.1) (247.2) Projects in progress 47.5 70.1 As at 31 December 285.0 301.5 904.8

Depreciation method Str.-line Str.-line Str.-line

Depreciation rate (per cent) 12.5 - 20 10 - 33 2

1 Gjensidige Forsikring’s properties that are not used for the group’s own use have been transferred to investment properties as of 1 January 2007, cf. Note 13. In connection with the transition to IFRS in the consolidated accounts, Gjensidige Forsikring has changed the accounting principle for properties that are not used for the group’s own use. They are now valued at fair value and not the accumulated historical cost. Section 3-13b of the Norwegian Financial Reporting Regulations for Insurance Companies permits such valuation.

External and internal assistance for development work in connection with the introduction, or a significant upgrade, of computer software, including adaptation of standard systems is capitalised as intangible assets.

specification of intangible assets Depreciation NOK million period 2007 2006

Insurance portfolio – Occupational group life insurance 10 years 15.4 Insurance portfolio – Credit life insurance 10 years 17.7 26.6 Insurance portfolio – Occupational/personal group life insurance 5 years 36.0 64.0 Internally developed IT projects (e.g. projects in progress) 183.7 175.3 Total intangible assets 237.4 281.3

The amortisation period for the insurance portfolios taken over and the acquisition is based on the anticipated time needed to realise the synergy effects and the time frame on the insurance portfolios future earnings. gjensidige annual report 2007 | 169

note 15 – Properties for own use and investeringseiendommer this is GJ ENSI D I G E

Total Average life Average Average area in Book Market of contracts rent per index Own NOK million sq. meters value value in years sq. metre adjustment % use

Type of property Offices 123,835.5 1,669.9 2,401.2 3.5 1,173 93 % 50 % Shopping centres 30,814.0 628.0 628.0 5.0 1,187 100 % 0 % Other 27,395.0 618.0 607.3 4.6 1,228 95 % 57 % Total Gjensidige Forsikring 182,044.5 2,915.9 3,636.6 4.4 1,196 96 % 54 %

Geographical allocation Oslo region 86,553.3 1,400.4 1,971.7 8.2 1,311 97 % 40 % Stavanger 2,695.6 49.0 81.7 4.3 1,657 100 % 98 % Bergen 16,104.9 180.0 228.4 2.9 871 96 % 22 % Trondheim 8,539.0 210.7 210.7 3.2 1,556 100 % 0 % operations Other cities 62,044.1 999.2 1,065.2 4.0 1,073 91 % 51 % Rest of the country 6,107.6 76.6 78.9 0.7 596 96 % 59 % Total Gjensidige Forsikring 182,044.5 2,915.9 3,636.6 4.4 1,196 96 % 54 %

Areas used for parking and storage are included when calculating the average rent per square metre.

Properties for own use Properties for own use have rental contracts based on market rental data. Own use is rental within Gjensidige Group.

15B INVESTMENTS IN AND DISPOSAL OF BUILDINGS FOR THE GROUP’S OWN USE AND INVESTMENT PROPERTIES

NOK million 2007 2006 2005 2004 2003

Additions 91.2 298.4 188.6 15.4 303.7

Disposals 461.1 742.8 451.2 162.4 533.5 mana

In 2007, additions and disposals of investment properties amounted to NOK buildings for own use amounted to NOK 24.6 million and NOK 9.9 million,

66.6 million and NOK 16.2 million, respectively. Additions and disposals of respectively. It has not been possible to make allocations for earlier results periods. g ement 170 | GJensidige annual report 2007

note 16 – pension

Defined benefit pension SCHEME fund assets at the end of the previous financial year and actuarially calculated Gjensidige Forsikring has an occupational pension insurance scheme pursuant pension liabilities/actual value of pension fund assets at the beginning of the to the Taxation Act (TPES) with a standard retirement age of 67. Gjensidige year are entered directly against equity. Forsikring is also required to have an occupational pension scheme pursuant to the Mandatory Occupational Pension Act. The company’s scheme meets the Net pension liabilities are the difference between the present value of gross requirements of the Act. A retirement age of 65 applies to insurers. pension liabilities and the value of the pension fund assets. In accordance with the Norwegian standard, employer’s contributions are taken into account in pe- The retirement pension constitutes 70 per cent of the pension base, based riods of underfunding. Net pension liabilities for funded and unfunded schemes on the number of years of service and final salary. The scheme also includes a are shown on the balance sheet under other assets in the case of overfunding pension for the surviving spouse and children and a disability pension subject to and under provisions for other risks and liabilities in the case of underfunding. specific rules. In addition, Gjensidige Forsikring has pension obligations to individual employees beyond the ordinary group scheme. This applies to employees The pension schemes were closed to new employees in 2006 and the scheme with a lower retirement age, employees with salaries over 12G and supplemental was transferred to the Gjensidige Pension Fund. The low pension expenses in pensions. Employees are entitled to apply for an AFP contractual pension from 2006 are due to the scheme amendment, which is discussed in greater detail the age of 62. AFP is classified as an unfunded scheme. under accounting principles. The gain associated with the scheme amendment was recognised in its entirety in 2006. Pension liabilities are valued at the present value of future pension benefits accrued by the balance sheet date for accounting purposes. Future pension be- The transition to Norwegian Accounting Standard 6a resulted in an implementa- nefits are calculated on the basis of the expected final salary. When measuring tion effect of NOK 1,357.3 million as of 1 January 2007. accrued pension liabilities, estimated values on the balance sheet date are used. Pension fund assets are valued at market value (transfer value). For the valuation A new updated mortality table was used for the calculations for 2007. This has of pension fund assets, estimated values on the balance sheet date are used. entailed a non-recurring effect on the actuarial gains/losses of over NOK 200 Differences between estimated pension liabilities/estimated value of pension million.

NOK million 2007 2006

Pension expenses recognised in the income statement are as follows: Pension benefits accrued during the year 80.7 119.4 Interest cost on benefit obligations 88.6 114.3 Estimated return on plan assets (75.6) (89.5) Pension costs before extraordinary items 93.7 144.2 Administration costs 3.4 Recognised cost of pension benefits earned in earlier periods (259.4) Net pension expenses 93.7 (111.8) Employer’s National Insurance contributions 13.2 (15.8) Total pension expenses 106.9 (127.5)

Pension liabilities recognised on the balance sheet: Present value of pension liabilities 2,553.1 2,096.0 Present value of pension fund assets (1,568.5) (1,295.9) Scheme amendment (34.4) Actuarial gains/losses (1,219.2) Total actual net liabilities 984.6 (453.5) Employer’s National Insurance contributions 138.8 9.2 Net pension liabilities 1,123.4 (444.4)

Financial status of the pension liabilities as of 31 December is as follows: Minimum liability 2,149.6 1,530.2 Effect of future salary inflation 403.5 565.7 Total actual pension liabilities 2,553.1 2,096.0 Fund-based scheme 2,092.1 1,817.7 Not fund-based scheme 460.9 278.3 Net pension liabilities 2,553.1 2,096.0

Movement in net pension liabilities is as follows: Net pension liabilities as of 1 January (444.4) (376.1) Implementation effect of NRS 6a 1,357.3 Actuarial gains/losses entered against equity 366.7 Employer’s National Insurance contributions on actuarial gains/losses, entered against equity 51.7 Total pension expenses 106.8 27.7 Total contributions, incl. fees and employer’s National Insurance contributions (264.4) (56.5) Payments financed by operations (50.3) (39.5) Net pension liabilities as of 31 December 1,123.4 (444.4) gjensidige annual report 2007 | 171

note 16 – pension (cont.) this is GJ ENSI D I G E

NOK million 2007 2006

Movement in the pension fund assets is as follows Balance sheet as of 1 January (1,295.9) (1,797.2) Expected return on pension fund assets (75.6) (89.5) Company’s contributions, excluding employer’s National Insurance contributions (231.8) (49.5) Payments from pension fund 72.7 59.5 Estimate of gain / loss (37.8) 580.9 Balance as at 31 December (1,568.5) (1,295.9)

Gjensidige Forsikring expects to pay NOK 264.4 million to the defined benefit scheme for 2007.

Distribution of the pension fund assets on the date of the balance sheet is as follows: Certificates 18.4 % 20.6 %

Shares 2.7 % 29.7 % operations Bonds 21.1 % 30.0 % Money market fund 40.0 % 4.5 % Real estate 12.3 % 12.6 % Other 5.5 % 2.6 % Total plan assets 100.0 % 100.0 %

Expected return on the pension fund assets is as follows: Certificates 5.3 % 3.0 % Shares 9.0 % 8.0 % Bonds 6.0 % 4.5 % Money market fund 5.0 % 4.0 % Real estate 8.0 % 6.0 % Other 7.0 % 4.3% - 9% mana The total expected return is based on the expected return for each asset has been set based on the ten-year government bond yield with a mark-up to category and the actual distribution of the assets. The expected return has reflect the duration of the pension liabilities. The duration is estimated to be been set up in consultation with external advisors, and it takes into account 25 years, and the adjustment for the discount rate has been calculated based

both current and future market expectations when they are available, as on the difference between the 10 and 30-year US government bonds. results The g ement well as the historical return. The following assumptions have been used for salary levels, pension adjustments and basic amount adjustment are based on calculation of the pension costs and net pension liabilities. The discount rate historical observations and the expected future inflation of 2.5 per cent.

2007 2006

Discount rate 4.5 % 4.0 % Expected return 5.5 % 5.0 % Salary adjustments 4.3 % 4.0 % Change in social security base amount 4.3 % 3.8 % Pension adjustment 2.0 % 1.6 % Employer’s contribution rate 14.1 % 14.1 % Staff turnover before/after 40 years Ladder Ladder Probability of AFP early retirement 40.0 % 40.0 %

The discount rate is the assumption that has the greatest impact on the value of the pension liabilities. See Note 2 in the consolidated accounts with regard to the sensitivity analysis.

The amounts for the current and earlier periods are as follow: 2007 2006 2005 2004

Pension liabilities net 2.553,1 2.096,0 2.316,9 2.067,6 Pension funds 1.568,5 1.295,9 1.813,7 1.626,2 Deficit 984,6 800,1 503,3 441,4

Defined contribution pension scheme The costs associated with the defined contribution pension schemes are recognised on an ongoing basis throughout the year. The company’s employees are given contributions in accordance with the limit for tax-free contributions. 172 | GJensidige annual report 2007

note 17 – tax

NOK million 2007 2006

Taxable temporary differences Real estate 437.4 Pension funds 605.0 Profit and loss account 9.7 41.7 Total taxable temporary differences 447.1 646.7

Tax deductible temporary differences Real estate (124.0) Shares, bonds and other securities (16.2) (41.7) Tangible fixed assets (64.9) (66.1) Receivables/provisions required by GAAP etc (169.1) (308.0) Pension funds (1,123.4) (160.6) Total tax deductible temporary differences (1,373.6) (700.5)

Total taxable temporary differences 4 47.1 646.7 Total tax deductible temporary differences (1,373.6) (700.5)

Tax exempted temporary differences 23.2 (3.6) Total (903.3) (57.5)

Tax losses brought forward and adjustment-related income Tax credits brought forward * (695.1) Net temporary differences*** (903.3) (752.5)

Timing differences that cannot be assessed Net temporary differences (tax rate 28 %) (903.3) (752.5) Deferred tax / (tax benefit) (252.9) (210.7) Change in deferred tax charged to the balance sheet 355.0 Change in deferred tax charged to the profit and loss account (312.8) 66.4

Calculation of taxable income Profit before tax 2,422.0 3,205.6 Adjustments in respect of equity method (120.8) 59.1 Permanent differences ** (723.7) (3,217.4) Change in temporary differences ** (1,117.1) (47.4) Taxable income *** 460.4 0.0

Tax payable of taxable income Tax from profit before tax (tax rate 28%) 678.2 897.6 Tax from adjustments in respect of equity method (33.8) 16.5 Tax from permanent differences ** (202.6) (925.4) Tax from change in temporary differences ** (312.8) 11.2 Total tax payable (128.9) 0.0

Specification of tax payable in the balance sheet Tax payable (128.9) Tax from group contributions 36.0 Group contributions paid (68.8) 40.9 Change in deferred tax (53.1) Used tax credit (40.9) Total tax payable in the balance sheet (214.8) 0.0

*) Amount restated as tax loss brought forward **) Taxable part ***) Use of tax credits gives no tax payable gjensidige annual report 2007 | 173

note 17 – tax (cont.) this is GJ ENSI D I G E

NOK million 2007 2006

Income tax expense Taxes payable (128.9) Wealth tax (8.0) (7.0) Adjustments previous years (53.1) (1.1) Changes in deferred tax (312.8) 66.4 Income tax expense (-) (502.8) 58.3

1987 about Gjensidige Forsikring and the tax act have been the basis for this have presented their new opinion. The allocated accounting provision is NOK operations practise. In 2006 the central taxation Office for Large Sized Enterprises (SFS) 180 NOK million and cover the years 2006 and 2007. has contested whether this practise can be maintained, and has given notice mana mn results g ement 174 | GJensidige annual report 2007

note 18 – change in equity

Class I capital Class II capital

Pre- Equali- Total Pre- Total Equity mium sation Other Class I Earned mium Other Class II Total NOK million certificates reserve fund capital capital capital fund capital capital NGAAP

Retained earnings as of 01.01.07 15,440.9 15,440.9 15,440.9 Issuance of equity certificates 1 3,860.0 3,860.0 (3,860.0) (3,860.0) Total 3,860.0 3,860.0 11,580.9 11,580.9 15,440.9

Opening balance change in pension liabilities 3,4 (257.2) (257.2) (771.6) (771.6) (1,028.8) Opening balance change in real estate 3,4 85.9 85.9 257.7 257.7 343.5 Opening balance change in real estate subsidiaries 3,4 59.1 59.1 177.3 177.3 236.4 Total restated opening balance 3,860.0 (112.2) 3,747.8 11,580.9 (336.7) 11,244.2 14,992.0

Translation differences 3 (35.2) (35.2) (105.6) (105.6) (140.8) Actuarial gains and losses, pensions 3 (77.0) (77.0) (231.0) (231.0) (308.0) Profit for the year 449.6 30.2 479.8 1,348.9 90.5 1,439.4 1,919.2 Dividend (255.4) (255.4) (766.1) (766.1) (1,021.4) Equity as of 31.12.07 3,860.0 194.2 (194.2) 3,860.0 12,163.7 (582.8) 11,580.9 15,441.0 Ownership fraction 2 25.0 % 75.0 %

A total of 77,200,000 equity certificates have been issued, and this gives a dividend of NOK 3.31 per equity certificate.

Of which fund for unrealised profit Opening balance change in real estate 85.9 257.7 343.5 Profit of the year 30.2 90.5 120.7 Fund for unrealised profit 116.1 348.2 464.2 Definitions 1. The General Meeting of Gjensidige Forsikring BA passed a resolution to issue equity certificates in October 2007. The issue was carried out through a reclassification of 25 per cent of the equity capital, which corresponds to NOK 3,860 million, as equity certificates (primary capital) as of 1 January 2007. The equity certificates were transferred free of charge to the Gjensidige Foundation. After the issuance of the equity certificates Gjensidige’s general insurance and insurances of the person customers at any given time have a 75 per cent financial interest in the company, while the Gjensidige Foundation has 25 per cent. 2. The company’s ownership fraction represents the ratio between Class I capital and the sum total of Class I capital and Class II capital based on the most recent audited company accounts approved by the general meeting. 3. In accordance with Gjensidige’s articles of association, transactions that are to be entered directly against equity shall be entered in such a way so as to avoid a change in the ownership fraction, unless otherwise stipulated by a mandatory rule of law, or the transactions are a result of an injection or withdrawal of capital by primary capital certificate holders or customers, or a merger with another mutual insurance company. This rule applies correspondingly in the event of a change in the accounting policies, a correction to earlier annual accounts and other similar account entries that are not made in accordance with the all-inclusive income concept. 4. After tax

Reconciliation IFRS VS NGAAP NOK million Class I Class I I Totalt

NGAAP 479.8 1,439.4 1,919.2 Reversal of goodwill amortisation in subsidiaries and associates 30.2 90.5 120.6 Reversal of net change in security provision 71.3 213.8 285.1 Interest on fire alarm systems loans 6.2 18.7 24.9 Impairment on financial assets available for sale 26.5 79.4 105.9 Other 5.8 17.5 23.3 IFRS, consolidated result 619.7 1,859.3 2,479.0

NGAAP equity 31.12.2007, unconsolidated 3,860.0 11,580.9 15,441.0 Goodwill etc in subsidiaries and associates 35.8 107.3 143.1 Security provision recognised as equity under IFRS 1,276.7 3,830.3 5,107.0 Discounting of fire alarm systems loans (20.3) (60.8) (81.1) Other provisions (10.1) (30.4) (40.5) Deferred tax (322.1) (966.3) (1,288.4) Share Dividend 255.4 766.1 1,021.4 IFRS equity 31.12.2007, consolidated 5,075.3 15,227.2 20,302.5 gjensidige annual report 2007 | 175

note 19 – capital ratio this is GJ ENSI D I G E

NOK million 2007 2006

Equity 15,441.0 15,440.9 Overfunded pension liabilities after tax (435.6) Goodwill (53.7) (106.0) Deferred tax benefit (252.9) (210.7) Other intangible assets (231.2) (208.6) Investment property, unrealised gains, proportion (305.8) Rensurance provision, minimum requirement (21.0) Actuarial losses on defined benefit plans, proportion 390.9 Core capital 14,967.1 14,480.0 Primary capital in other financial institutions (2,914.6) (1,778.7) Net primary capital (A) 12,052.5 12,701.3 operations Assets with a 0 % risk weight 2,104.8 3,094.3 Assets with a 10 % risk weight 54.7 266.1 Assets with a 20 % risk weight 14,499.3 15,330.5 Assets with a 50 % risk weight 348.8 403.2 Assets with a 100 % risk weight 30,920.6 25,259.9

Other non-weighted assets Goodwill 53.7 106.0 Deferred tax benefit 252.9 210.7 Other intangible assets 231.2 208.6 Loss provisions (4.4) (6.8) Derivatives (238.9) (90.5) Total assets 48,222.8 44,782.0

Assets with a 0 % risk weight 0.0 0.0

Assets with a 10 % risk weight 5.5 26.6 mana Assets with a 20 % risk weight 2,899.9 3,066.1 Assets with a 50 % risk weight 174.4 201.6 Assets with a 100 % risk weight 30,920.6 25,259.9 mn results g ement Weighted total assets 34,000.3 28,554.2

Weighted reinvestment cost derivatives 108.2 37.1 Primary capital in other financial institutions (2,914.6) (1,778.7) Loss provisions (4.4) (6.8) Risk weighted calculation base (B) 31,189.4 26,805.8 Capital ratio (A/B) 38.6 % 47.4 % NFSA minimum requirement 8.0 % 8.0 % note 20 – solvency margin

NOK million 2007 2006

Net primary capital 11,802.2 12,701.2 Proportion of security provision 1,088.8 1,025.2 Proportion of reinsurance provision 32.1 Natural perils fund (for 2007 25 % of the natural peril fund is included) 532.5 1,001.8 Solvency margin capital 13,423.5 14,760.3 Solvency margin minimum requirement 2,391.7 2,287.9 In excess of requirement 11,031.8 12,472.4 Solvency margin capital in percent of requirement 561.3 % 645.2 % 176 | GJensidige annual report 2007

note 21 – salaries and GENERal ADMINISTRAtion expenses

NOK million 2007 2006

A average number of employees 2,126 2,218 B auditor’s fees (incl. vat) Audit 1.2 1.4 Consultancy – technical account support and legal consultancy 0.1 Consultancy – tax 0.1 Consultancy – other 3.8 0.2

C Combined remuneration of the executive management The board of directors’ statement concerning the adoption of salaries and other remuneration to the CEO and executive management.

Gjensidige’s compensation policy The regulation of the CEO’s salary, including the award of other financial bene- • Gjensidige expects its employees to have a comprehensive view of what fits within the scope of these guidelines, is determined by the board of directors the company offers in the form of a salary and benefits. upon advice from the central board of directors’ compensation committee. • The company’s compensation systems shall be open, performance-based, fair and predictable. Remuneration of other members of the executive management • Compensation shall be linked to achievement of the company’s defined The CEO determines the financial terms for members of the executive man- strategic and financial goals. In addition, it is expected that employees agement based on a statement submitted to the compensation committee. espouse the company’s values and act loyally. Gjensidige’s compensation policy, which forms part of these guidelines, is Recommended guidelines for the coming financial year used as a basis. General Gjensidige has undergone a major development from a Norwegian-based Additional financial benefits may be offered to members of the executive general insurance company to a player on the Nordic financial market. In addi- management depending on the market conditions and taking into account the tion, the complexity has increased through the establishment of banking, life fact that the benefit is related to the employee’s job function at Gjensidige. insurance and savings operations. A bonus can be given on a discretionary basis according to criteria determined Remuneration of the CEO by the CEO, as derived from the company’s strategies and goals. The CEO’s salary and other financial benefits are determined by the board of directors based on an overall assessment, in which Gjensidige’s compensation In addition to the annual salary, a bonus shall also ensure that Gjensidige is policy and these guidelines are used as a basis. able to attract and hold on to the necessary expertise to implement its strategies and accomplish its own goals. Bonuses are determined on a discretionary basis based on the CEO’s achievement of goals, and they cannot exceed 50 per cent of the fixed annual salary. An upper limit for bonus payments has been set at 30 per cent of the annual In addition, the CEO may be given benefits in kind, such as a company car, salary. The CEO may make exceptions to this policy in consultation with the free broadband, etc. All financial benefits are reported as wages in accordance compensation committee. with the current tax laws. Members of the group management have a retirement age of 62. All current Such benefits must be related to the CEO’s job function. members of the group management are members of the closed defined The retirement age for the CEO is 62. benefit pension scheme.

The CEO has pension rights in accordance with Gjensidige’s closed defined Everyone with a full contribution period is entitled to a pension of 70 per cent benefit pension scheme. of their salary. The board of directors will honour previous individual pension agreements for two members of the group management. In accordance with his individual employment contract, he is entitled to a pension of 100% of his annual salary upon retirement at the age of 62, which There is a bonus scheme agreement for one of the members of the group reduces subsequently to 70% upon reaching the age of 67. He has an option management. to retire at age 60 years if the board of directors or he himself so desires. There is a corresponding reduction from 100 per cent upon retirement to 70 There are no severance pay schemes for managers that resign from their per cent upon reaching the age of 67. positions at Gjensidige.

Car schemes and other benefits are maintained until reaching the age of 67. Binding guidelines concerning the allotment of shares etc. for the coming year - cf. Section 6-16a of the Norwegian Public Limited Companies Act. The CEO has no severance pay agreement if he resigns before reaching retire- The CEO and members of the executive management will be allowed to partici- ment age. pate in subscription programmes for the purchase of equity capital certificates etc. by employees in the same manner as other employees of Gjensidige. gjensidige annual report 2007 | 177

note 21 – salaries and GENERal ADMINISTRAtion expenses (cont.) this is GJ ENSI D I G E

Executive remuneration policy for the previous financial year In the previous year the financial benefits for members of the group manage- policy, corresponding positions in other companies, and the assumed salary ment, with the exception of the CEO, were determined in accordance with development for employees in general. Gjensidige’s current compensation policy, in consultation with the chairman of the board. The CEO’s terms, including salary adjustments, have been Two persons in the group management have had a bonus scheme that has determined by the board of directors based on Gjensidige’s compensation been decided on by the CEO in consultation with the chairman of the board.

remuneration of: Calculated Rights earned Loans, total in finan. year advance value accor. to payments Retire- Fixed and of non- defined- guaran. ment- variable cash benefit pens. (outstanding Interest Applicable conditions condi- operations NOK 1000 salary benefits scheme amount) rate 7) and installment plan tions Management Helge L. Baastad, CEO 3,622.1 250.5 1,599.2 2) Tor Lønnum, Deputy CEO 2,908.4 208.5 818.9 3) Bjørn Asp, Executive Vice President 2,019.6 159.6 493.0 2,599.2 Final installment 22.11.2032 3) Geir Bergskaug, Executive Vice President 1,656.8 148.8 644.2 3) Erica Blakstad, Executive Vice President 1,619.0 189.5 1,248.1 3) Petter Bøhler, Executive Vice President 1,844.7 201.2 830.5 1,150.2 Final installment 20.05.2012 3) Trond Delbekk, Executive Vice President 1,873.5 180.3 609.6 3) Hege Toft Karlsen, Executive Vice President 1,518.2 168.9 342.0 2,500.0 Final installment 20.04.2017 3) Jørgen Ringdal, Executive Vice President 1,875.0 217.3 684.2 2) Odd Røste, Executive Vice President 1,666.4 143.3 295.1 3) Bjørn Walle, Executive Vice President 1,742.0 149.5 1,574.0 4) Ove Ådland, Executive Vice President 1,675.1 180.0 606.0 3)

Nils Arne Fagerli, Executive Vice President (15.08. - 31.12.) 1) 600.0 55.3 416.4 3,933.9 Final installment 20.09.2033 3) mana

Board of directors 6 Jørgen Tømmerås, chairman 383.0 9.5

Jorund Stellberg, deputy chairman 328.7 14.0 results g ement Sverre Groven (01.01. - 21.03.) 193.8 1.9 15.4 0 % Final installment 01.11.2010 Magne Revheim 144.0 7.6 Marthe Sondov (01.01. - 21.03.) 185.3 Randi B. Sætershagen 254.5 2.4 Hans Ellef Wettre 147.0 2.3 Tor Øwre 339.5 18.7 Cato Litangen (21.03. - 31.12.) 196.8 8.1 Marianne Lie (21.03. - 31.12.) 156.3 Odd Kristian Hamborg, employee 135.0 Petter Aasen, employee (30.10. - 31.12.) 79.1 Marianne Bø Engebretsen, employee (21.03. - 31.12.) 101.3 Magnhild Egge, employee (01.01. - 21.03.) 33.8 Gunnar Mjåtvedt, employee (21.03. - 31.12.) 147.1 Marit Lund, employee (01.01. - 21.03.) 88.8 Einar Rist, employee (01.01. - 01.08.) 110.8

Board of directors, deputies 6 Tove Jebens 65.0 Harald Milli 10.0 Odd Samuelsen 19.0 Valborg Lippestad (09.10. - 31.12.) 5.5 Jonfinn Fløtre (01.01. - 09.10.) 43.5 6.2 Magnar Kvalvåg, employee (01.01. - 21.03.) 8.5 3.7 Rita Karina Møller, employee (01.01. - 21.03.) 2.5 Kjetil Kristensen, employee (21.03. - 31.12.) 62.5 Ingvild Solli Andersen, employee (30.10. - 31.12.) 1.7 Petter Aasen, employee (21.03. - 30.10.) 178 | GJensidige annual report 2007

note 21 – salaries and GENERal ADMINISTRAtion expenses (cont.)

Committee of representatives Randi Braathe, Chairman (region Øst) 93.0 2.0 Trond Bakke, Deputy Chairman (region Innlandet) 106.0 0.7

In addition: 55 representatives from regions/mutual fire insurers/organisations/employees5) 1) The stated remuneration applies to the period the individual in question has held the position or office 2) Age 62, 100 per cent salary reducing gradually to 70 per cent at age 67 3) Age 62, 70 per cent salary until age 67, then Gjensidige Forsikring’s ordinary pension terms will take effect 4) Age 60, 70 per cent salary until age 67, then Gjensidige Forsikring’s ordinary pension terms will take effect 5) Annual fee of NOK 3000; in addition to a per meeting fee of NOK 3,000. There has been three meetings each year. 6) The fee includes a fee for subsidiaries 7) Interest rate is 5.15 per cent, nominal, unless otherwise agreed on separately. 8) For employee representatives only the remuneration for the office in question is stated.

note 22 – Blocked funds

NOK million 2007 2006

Blocked bank deposits Source-deductible tax accounts 56.0 61.0

Securities placed as security for: Insurance operations 14.2 15.9

Deposits placed as security for: Insurance operations 8.2 37.5

note 23 – CONTINGENT OFF-BALANCE SHEET ASSETS AND LIABILITIES

GUARANTEE LIABILITIES NOK million 2007 2006

Gross guarantee liability Reinsurance share Guarantee liability for own account 0.0 0.0

Guarantee liability for own account, broken down Loan guarantees 0.6 Contract guarantees Guarantees to the government Total guarantee liability for own account 0.6 0.0

See note 3 for guarantees within the group and cooperating companies.

As part of the company’s ongoing financial management, it has undertaken to CONTINGENT assets invest up to NOK 1,222.0 million in various private equity investments beyond Of the total receivables of NOK 57.0 million, NOK 54.6 million is linked to the amounts that are recorded. expenses associated with the sale of equity capital certificates. The payment of the receivables is contingent on the equity capital certificates being listed on the stock exchange and sold on the market. gjensidige annual report 2007 | 179

note 24 – balance sheet components this is GJ ENSI D I G E

NOK million 2007 2006

Receivables in connection with insurance Receivables in connection with direct insurance 2,629.7 2,505.5 Receivables in connection with reinsurance 139.8 177.2 Total 2,769.4 2,682.7

Other receivables Receivables in connection with real estate 64.5 Receivables in connection with asset management 39.7 Other receivables 223.2 230.8 Total 223.2 335.0

Prepaid expenses and accrued interest operations Accrued, not received rental income and interest 324.3 247.1 Other prepaid expenses and accrued interest (4.7) 0.9 Total 319.6 248.0

Other provisions Non-recurring payment to employees 60.0 Restructuring costs 169.1 245.2 Total 169.1 305.2

Liabilities in connection with insurance Liabilities in connection with direct insurance 189.3 180.2 Liabilities in connection with reinsurance 34.1 43.5 Total 223.4 223.7

Other liabilities

Oustanding accounts fire mutuals 146.1 153.3 mana Accounts payable 160.2 114.6 Liabilities real estate 45.2 Liabilities asset management 23.8 261.9 Liabilities public authorities 295.3 results 310.6 g ement Other liabilities 317.2 103.9 Total 942.8 989.4

Accrued expenses and prepaid income Unpaid government fees 110.4 148.6 Other accrued expenses and prepaid income Total 110.4 148.6 180 | GJensidige annual report 2007

Auditor’s report GJensidige annual report 2007 | 181

statement by the control commitee this is GJ ENSI D I G E

to the general meeting and SUPERVISORY BOARD of gjensidige forsikring BA

The control committee has, in accordance with its standing instructions and The committee has received all documents and information requested. together with the auditor, actuary and Chief Financial Officer, reviewed the Board of Directors’ report and the annual accounts for the year 2007 and the The committee recommends the adoption of the accounts presented as the auditor’s report for Gjensidige Forsikring BA’s parent company accounts and annual parent company accounts and consolidated accounts of Gjensidige consolidated accounts. Forsikring BA. operations Oslo, 11 March 2008

Kåre Lund Chairman

Tove Melgård Marit Tønsberg mana mn results g ement 182 | GJensidige annual report 2007

Statement by the SUPERVISORY BOARD

The supervisory board’s statement on the board of directors’ report and the annual parent company accounts and consolidated accounts for gjensidige forsikring ba for 2007

At the meeting of 26 March 2008 the Supervisory Board reviewed the Board • Of the remaining amount, NOK 30.2 million shall be transferred to the of Directors’ report and the annual parent company accounts and consolida- fund for unrealised gains (other equity Class I-capital), NOK 194.2 million ted accounts for 2007 for Gjensidige Forsikring BA, including the proposal for shall be transferred to the equalisation fund (Class I-capital), NOK 90.5 the distribution of the annual profit. million shall be transferred to the fund for unrealised gains (other equity, Class II-capital) and NOK 582.8 million shall be transferred to retained The Supervisory Board recommends that the general meeting approves the earnings (Class II-capital). submitted company accounts as Gjensidige Forsikring BA’s annual accounts for 2007. The Supervisory Board recommends that the general meeting approves the submitted consolidated accounts as Gjensidige Forsikring’s consolidated The Supervisory Board recommends that the general meeting approves the accounts for 2007. Board of Directors’ proposal for the distribution of the annual profit: The Supervisory Board recommends that the general meeting approves the • NOK 1,021.5 million of the annual profit of NOK 1,919.2 million reported Board of Directors’ report for 2007. by Gjensidige Forsikring BA to be allocated as dividends, NOK 255.4 million of which shall be distributed to the equity certificate holders and NOK 766.1 million of which shall be distributed to the general insurance customers eligible to vote.

Oslo, 26 March 2008

Randi Braathe Chairman