Interim Report 4Th Quarter and Preliminary Result 2016 Gjensidige Insurance Group

Interim Report 4th quarter and preliminary result 2016 Gjensidige Insurance Group

Group highlights Fourth quarter and preliminary result 2016 In the following, figures in brackets indicate the amount or percentage for the corresponding period the year before.

Year as a whole Fourth quarter Group Group • Profit/loss before tax expense: NOK 6,139.9 million (5,049.7) • Profit/loss before tax expense: NOK 1,305.8 million (1,470.6) • Profit per share: NOK 9.34 (7.57) • Profit per share: NOK 2.18 (2.49)

General Insurance General Insurance • Earned premiums: NOK 22,441.9 million (21,272.0) • Earned premiums: NOK 5,685.6 million (5,493.5) • Underwriting result: NOK 3,734.6 million (3,456.9) • Underwriting result: NOK 700.4 million (879.2) • Combined ratio: 83.4 (83.7) • Combined ratio: 87.7 (84.0) • Cost ratio: 14.2 (15.1) • Cost ratio: 17.1 (16.0) • Financial result: NOK 2,155.1 million (1,492.4) • Financial result: NOK 561.4 million (610.8)

Proposed dividend • Proposed regular dividend: NOK 3,400 million (3,200) • Proposed regular dividend per share: NOK 6.80 (6.40)

Profit performance Group NOK millions Q4 2016 Q4 2015 1.1.-31.12.2016 1.1.-31.12.2015

General Insurance Private 549.9 639.5 2,196.7 2,208.1 General Insurance Commercial 382.2 402.9 1,631.3 1,440.8 General Insurance Nordic 20.4 65.6 247.3 509.1 General Insurance Baltics (36.6) (64.4) (99.5) (98.9) Corporate Centre/costs related to owner (128.3) (102.5) (10.6) (331.8) Corporate Centre/reinsurance 1 (87.1) (61.9) (230.6) (270.5) Underwriting result general insurance 2 700.4 879.2 3,734.6 3,456.9 Pension and Savings 28.7 23.3 125.4 84.2 Retail Bank 94.4 82.8 428.5 303.6 Financial result from the investment portfolio 3 561.4 610.8 2,155.1 1,492.4 Amortisation and impairment losses of excess value – intangible assets (60.1) (82.7) (254.2) (209.6) Other items (19.1) (42.8) (49.5) (77.7) Profit/(loss) for the period before tax expense 1,305.8 1,470.6 6,139.9 5,049.7

Key figures general insurance Large losses 4 181.9 261.4 871.8 880.3 Run-off gains/(losses) 5 314.4 230.5 1,023.4 724.8

Loss ratio 6 70.6% 68.0% 69.1% 68.6% Cost ratio 7 17.1% 16.0% 14.2% 15.1% Combined ratio 8 87.7% 84.0% 83.4% 83.7%

1 Large losses in excess of NOK 30.0 million are charged to the Corporate Centre, while claims of less than NOK 30.0 million are charged to the segment in which the large losses occur. As a main rule, the Baltics segment has a retention level of EUR 0.5 million. Large losses allocated to the Corporate Centre amounted to NOK 205.5 million (382.5) for the year as a whole and NOK 47.6 million (118.0) in the quarter. Accounting items related to written reinsurance and reinstatement premium are also included. 2 Underwriting result general insurance = earned premiums - claims incurred etc. - operating expenses 3 Excluding the return on financial assets in Pension and Savings and Retail Bank. 4 Large losses = loss events in excess of NOK 10.0 million. Expected large losses for the quarter were NOK 318.0 million. 5 Run-off gains/(losses) = changes in estimates from earlier periods. Provisions are based on best estimates, and the expected run-off result over time is zero. 6 Loss ratio = claims incurred etc./earned premiums 7 Cost ratio = insurance related operating expenses/earned premiums 8 Combined ratio = loss ratio + cost ratio

Gjensidige Insurance Group – 4th quarter and preliminary 2016 1

A solid fourth quarter and record-strong full-year result

Group profit performance Development during the year Earned premiums in the Baltic segment increased by 61.4 per cent The Gjensidige Group delivered a record-strong profit before tax (56.4 per cent in local currency), mainly driven by the acquisition of expense of NOK 6,139.9 million (5,049.7) in 2016. The profit from PZU Lietuva. The underwriting result was negative and in line with general insurance operations measured by the underwriting result 2015. It was impacted by several medium-sized frequency claims was NOK 3,734.6 million (3,456.9), corresponding to a combined and pan-Baltic integration costs. ratio of 83.4 (83.7). A restructuring provision of around NOK 164 million was made in the second half-year to cover a downscaling of The Retail Bank’s profit performance improved, largely driven by 230 positions in staff and support functions. This was part of the portfolio growth and improved returns on financial instruments. The communicated strategy to reduce underlying costs in order to profit performance in Pension and Savings developed positively, create room to invest in the brand, technology and new mainly due to higher business volume. competencies, and thereby secure long-term competitiveness. The provision is recognised in the Corporate Centre. Furthermore, a The return on financial assets was satisfactory, and higher than provision in the amount of NOK 23.0 million related to increased 2015. This was largely due to increased returns on current equities payroll tax, applicable from 2017, was made in the fourth quarter, and bonds, partly offset by negative returns on private equity mainly affecting costs in the Corporate Centre. investments.

The removal of an annual minimum regulation clause for pension Development during the quarter payments under the defined benefit plan contributed non-recurring The Group recorded a profit before tax expense for the quarter of income of NOK 476.6 million in the first quarter. The amount was NOK 1,305.8 million (1,470.6). The profit from general insurance classified as a reduction in operating expenses and recognised in operations measured by the underwriting result was NOK 700.4 full in the Corporate Centre. Adjusted for this, the restructuring million (879.2), corresponding to a combined ratio of 87.7 (84.0). provision and payroll tax, the underwriting result was NOK 3,445.0 The return on financial assets was 1.0 per cent (1.1) or NOK 561.4 million, corresponding to a combined ratio of 84.6, on par with the million (610.8). The profit after tax expense was NOK 1,090.4 record-strong result in 2015. million (1.246.7), corresponding to NOK 2.18 (2.49) per share.

The return on financial assets was 3.9 per cent (2.6) or NOK The underwriting result in the fourth quarter 2015 was record- 2,155.1 million (1,492.4). strong, driven by a very benign frequency claims situation due to favourable weather. The lower underwriting result in the fourth The tax expense amounted to NOK 1,474.1 million (1,265.0), quarter 2016 was partly driven by a more normal winter and corresponding to an effective tax rate of 24.0 per cent (25.1). The consequently more normal overall frequency claims levels. In effective tax rate was influenced by realised and unrealised gains addition, the underlying claims inflation trend is somewhat less and losses on equity investments in the EEA. favourable. The previously mentioned restructuring provision and payroll tax provision had a negative effect of NOK 43.9 million and The profit after tax expense was NOK 4,665.9 million (3,784.7), NOK 23.0 million, respectively. Adjusted for these, the combined corresponding to NOK 9.34 (7.57) per share. ratio was 86.5. A lower level of large losses and higher run-off gains contributed positively to the result development. The storm The underwriting result was positively influenced by solid premium Urd resulted in NOK 75 million in large losses. growth of 5.5 per cent compared with the year before, leading to earned premiums totalling NOK 22.4 billion (21.3). The result also The Retail Bank showed a positive profit development compared to reflects continued good customer and risk selection and risk pricing. the same period in 2015, mainly driven by portfolio growth and Adjusted for one-off effects and run-off and large losses better returns on financial investments. Pension and Savings expectations, profitability in 2016 was in the lower part of the recorded a higher profit due to higher volumes. targeted 86-89 combined ratio corridor. Total large losses were below expectations, and somewhat lower than last year. Run-off The financial result in the quarter was positively impacted by good gains exceeded the expected run-rate. returns on the investment in SpareBank1 SR-Bank, properties and tactical allocation. Earned premiums in the Private segment increased by 1.7 per cent. The underwriting result was on a par with 2015. Higher run-off gains Equity and capital position were offset by a slightly less favourable frequency claims The Group’s equity amounted to NOK 22,326.0 million (23,330.6) at development. year end. The return on equity was 21.4 per cent (17.4).

Earned premiums in the Commercial segment increased by 2.6 per Based on Gjensidige’s understanding of the Solvency II regulation cent, mainly driven by new business initiatives. Growth, a and how it is implemented in Norway, the solvency margins at the somewhat more favourable frequency claims level and higher run- end of the year were: off gains contributed positively to the improved underwriting result. • Standard Formula (SF): 147 per cent In the Nordic segment, earned premiums increased by 13.1 per • Partial Internal Model (PIM): 180 per cent cent (9.6 per cent in local currency), mainly due to the acquisition of Mondux and Vardia. The underwriting result was lower than in 2015, largely due to a higher level of large losses and a less favourable frequency claims development in Denmark.

2 Gjensidige Insurance Group – 4th quarter and preliminary 2016

If the guarantee scheme provision was included as solvency targets and is part of the company’s strategy to optimise the capital capital, the ratios would be: structure over time. The bond is listed on the Oslo Stock Exchange.

• Standard Formula (SF): 150 per cent Update on Solvency II-related regulatory uncertainties • Partial Internal Model (PIM): 183 per cent There is still some uncertainty about how capital requirements and qualifying funds will be calculated under the new rules. Available capital in excess of the risk-based requirement calculated using the Group’s partial internal model (PIM) constitutes the For Gjensidige, the main remaining uncertainty is whether the Group’s economic excess capital. In addition, a deduction is made guarantee scheme provision will be included in qualifying funds. for the higher of the calculated supplementary capital required to The FSA takes the view that the guarantee provision should be maintain the current A-rating and the capital required to meet the treated as a liability. In Gjensidige’s opinion, special Norwegian statutory solvency requirements. Excess capital above and beyond provisions that are actually an equity element must be treated as solvency capital. Gjensidige will continue to make endeavours to this constitutes the strategic buffer. The buffer amounted to NOK ensure that the regulations are in line with this view. 1.3 billion. If adjusted for the expected capital effect of around NOK

400 million from the acquisition of Mølholm Forsikring A/S It is still unclear whether new tax deduction rules related to technical announced on 16 January 2017, the buffer would be NOK 0.9 provisions will be introduced and, if so, how they will be worded. In billion. Gjensidige’s opinion, the new solvency regulations should not entail major changes in tax positions, and it expects a new proposal to The solvency margins and strategic buffer are calculated net of a reflect this. NOK 3.4 billion dividend proposed by the Board. Gjensidige is still awaiting approval of the partial internal model. Other matters Such approval is expected during 2017. Internal review of loss reserves –revised plan for reserve releases Change in the defined benefit plan In depth reserve reviews have been performed by actuaries in The defined benefit plan included a regulation clause for pension Gjensidige. The reviews confirm and strengthen previous analysis payments, whereby the minimum annual regulation was linked to and point to the conclusion that claims related to personal injury the development of the consumer price index. The minimum tend to be even smaller than assumed up until now. This trend regulation clause was removed in the first quarter, which changed seems particularly evident in workers compensation in Norway and the benefit plan. Non-recurring income of NOK 476.6 million was motor TPL in Norway. A revised plan is made to release reserves of recognised as a reduction in operating expenses in the Corporate approximately NOK 2.7-4.5 billion over the next 3-5 years, Centre. The change also had a negative impact of NOK 128.9 corresponding to an expected annual amount of approximately million (pre-tax) on other comprehensive income in the first quarter. NOK 900 million on average, up from previously communicated NOK 800 million. The expected release-level corresponds to a New tax on financial services in Norway positive effect on the combined ratio of around 4 percentage points In December 2016, a new Financial Tax was introduced by the for the next 3-5 years, based on the current annual premium level. Norwegian Government. The new Financial Tax means that This gradual approach of releasing reserves secures that releases Gjensidige’s taxable income will continue to be taxed at a rate of 25 are based on actual trends that are permanent and not per cent. Furthermore, it will entail Gjensidige having to pay randomness. The development will be monitored closely over time. increased payroll tax. The increase is 5 per cent and will be deductible for tax purposes leading to an effective increase of 3.75 Restricted Tier 1 bond issue per cent in payroll expenses, corresponding to approximately NOK On 29 August 2016, Gjensidige Forsikring ASA successfully issued 65 million in isolated net profit effect based on the 2016 full-year a perpetual restricted Tier 1 bond amounting to NOK 1 billion and accounts. Gjensidige has taken measures to minimise the negative with a coupon of 3M NIBOR + 360 bps. The bond has a call option effects of the implementation of this Financial Tax. for the issuer after five years. The bond fulfils the regulatory requirements as Tier 1 eligible capital under Solvency II and achieves intermediate equity content under the S&P rating model. The issue is in line with the existing capital strategy and financial

Gjensidige Insurance Group – 4th quarter and preliminary 2016 3

General Insurance Private

Development during the year Earned premiums amounted to NOK 2,111.6 million (2,036.4). With The underwriting result was 2,196.7 million (2,208.1). effect from October 2016, the Mondux product insurance portfolio Increased premiums and run-off gains were offset by a slightly less was moved from the Nordic segment to the Private segment. favourable underlying frequency claims development. The Earned premiums in this portfolio amounted to NOK 40.9 million. combined ratio was 73.5 (72.9). Motor insurance showed a small decline in premiums, despite an increase in the number of cars in the portfolio. Property insurance, Earned premiums amounted to NOK 8,291.3 million (8,152.3). leisure insurance and accident and health insurance showed an Premiums showed an increase in all main product lines. increase in premiums. Gjensidige’s competitive position remained strong, and the number of customers increased slightly in the period despite fierce competition Claims incurred amounted to NOK 1,283.4 million (1,130.3). The loss ratio was 60.8 (55.5). Both motor insurance and property Claims incurred amounted to NOK 5,030.8 million (4,908.5). The insurance showed increases in the underlying loss ratios compared loss ratio was 60.7 (60.2) Motor insurance and property insurance to the fourth quarter 2015, when the loss ratios were at levels below showed increases in the underlying loss ratio from very benign what can normally be expected. The underlying frequency claims levels in 2015. For leisure insurance and accident and health development in motor insurance has been worse than expected insurance, loss ratios were relatively stable. Overall, the weather however, and measures have been taken to offset higher expected situation was benign also in 2016, resulting in a lower frequency claims inflation going forward. The development will be closely claims impact than can normally be expected. monitored, and further measures will be taken if necessary. Effects will materialise gradually over a two-year period after Operating expenses amounted to NOK 1,063.8 million (1,035.7) implementation. Accident and health insurance showed a positive and the cost ratio was 12.8 (12.7). development in the loss ratio, while the above-mentioned Mondux product insurance portfolio affected the loss ratio negatively by 1.3 Development during the quarter percentage points. The underwriting result was NOK 549.9 million (639.5). The decline in the underwriting result was driven by a less favourable frequency Operating expenses amounted to NOK 278.3 million (266.7) and claims level. The combined ratio was 74.0 (68.6). the cost ratio was 13.2 (13.1).

General Insurance Private NOK millions Q4 2016 Q4 2015 1.1.-31.12.2016 1.1.-31.12.2015

Earned premiums 2,111.6 2,036.4 8,291.3 8,152.3 Claims incurred etc. (1,283.4) (1,130.3) (5,030.8) (4,908.5) Operating expenses (278.3) (266.7) (1,063.8) (1,035.7) Underwriting result 549.9 639.5 2,196.7 2,208.1

Amortisation and impairment losses of excess value – intangible assets (6.4) (5.6) (25.8) (12.0)

Large losses 1 20.8 11.0 56.2 45.1 Run-off gains/(losses) 2 143.9 125.5 377.5 261.0

Loss ratio 3 60.8% 55.5% 60.7% 60.2% Cost ratio 4 13.2% 13.1% 12.8% 12.7% Combined ratio 5 74.0% 68.6% 73.5% 72.9%

1 Large losses = loss events in excess of NOK 10.0 million. Claims incurred in excess of NOK 30.0 million per event are charged to the Corporate Centre. 2 Run-off gains/(losses) = changes in estimates from previous years 3 Loss ratio = claims incurred etc./earned premiums 4 Cost ratio = operating expenses/earned premiums 5 Combined ratio = loss ratio + cost ratio

4 Gjensidige Insurance Group – 4th quarter and preliminary 2016

General Insurance Commercial

Development during the year Development during the quarter The underwriting result increased to NOK 1,631.3 million (1,440.8). The underwriting result was NOK 382.2 million (402.9). The The increase in the underwriting result was driven by premium decrease in the underwriting result was driven by a more growth combined with a somewhat more favourable underlying normalised frequency claims level. The combined ratio was 78.9 frequency claims level and higher run-off gains. The combined ratio (77.2). was 77.5 (79.6). Earned premiums increased to NOK 1,808.1 million (1,768.1), Earned premiums increased to NOK 7,257.4 million (7,076.8) mainly due to new business initiatives. Growth was challenged by mainly due to new business initiatives. Growth was partly offset by softening market conditions, in particular for accident and health softening market conditions, affecting accident and health insurance insurance. in particular.

Claims incurred amounted to NOK 1,220.7 million (1,169.5) and the Claims incurred amounted to NOK 4,825.1 million (4,826.7) and the loss ratio was 67.5 (66.1). The increase was driven by a more loss ratio was 66.5 (68.2). Adjusted for increased run-off gains and normalised underlying frequency claims level than in the same the impact from large losses, the underlying level of frequency claims was somewhat better than in 2015. This is very satisfactory period last year, in particular for motor insurance. As for the Private given the fierce competition. segment, measures have been taken to offset a higher claims inflation expectation going forward. A higher proportion of large Operating expenses amounted to NOK 801.1 million (809.3), losses was more than offset by higher run-off gains. corresponding to a cost ratio of 11.0 (11.4). Operating expenses amounted to NOK 205.2 million (195.8) and the cost ratio was 11.3 (11.1).

General Insurance Commercial NOK millions Q4 2016 Q4 2015 1.1.-31.12.2016 1.1.-31.12.2015

Earned premiums 1,808.1 1,768.1 7,257.4 7,076.8 Claims incurred etc. (1,220.7) (1,169.5) (4,825.1) (4,826.7) Operating expenses (205.2) (195.8) (801.1) (809.3) Underwriting result 382.2 402.9 1,631.3 1,440.8

Large losses 1 103.2 83.8 448.6 384.7 Run-off gains/(losses) 2 137.1 99.1 486.5 341.8

Loss ratio 3 67.5% 66.1% 66.5% 68.2% Cost ratio 4 11.3% 11.1% 11.0% 11.4% Combined ratio 5 78.9% 77.2% 77.5% 79.6%

Gjensidige Insurance Group – 4th quarter and preliminary 2016 5

General Insurance Nordic

Development during the year The underwriting result was NOK 247.3 million (509.1). The decline in the underwriting result was driven by a higher proportion of large losses and a less favourable underlying frequency claims development in Denmark. The Vardia portfolio also contributed to the weaker result. The combined ratio was 95.8 (90.3).

Earned premiums increased to NOK 5,917.8 million (5,233.3), of which NOK 164.5 million was related to currency effects. The Mondux acquisition increased earned premiums by NOK 116.2 million, while the Vardia acquisition contributed NOK 304.1 million. Earned premiums increased to NOK 1,542.9 million (1,392.2). The premiums in the Danish portfolio accounted for around 78 per Currency effects reduced earned premiums by NOK 45.8 million. cent of total premiums in the segment. They increased organically Vardia contributed NOK 143.7 million. With effect from the by 5.1 per cent in local currency. The growth was especially driven beginning of the fourth quarter, a product insurance portfolio from by property and motor insurance in the commercial portfolio. The Mondux was transferred to the Private segment. This led to a underlying premium development in the Swedish portfolio was decrease of NOK 28.8 million in earned premiums in the quarter. negative, mainly due to repricing measures implemented to improve The underlying premium development was positive in both the profitability of the commercial portfolio. The private portfolio Denmark and Sweden, driven in particular by growth in property developed positively. insurance in the commercial portfolio in Denmark and private insurance in the Swedish portfolio. Claims incurred amounted to NOK 4,739.6 million (3,905.2). Currency effects had a negative impact of NOK 119.9 million on Claims incurred amounted to NOK 1,258.4 million (1,097.0). claims. The loss ratio was 80.1 (74.6). The higher loss ratio was Currency effects reduced incurred claims by NOK 33.9 million. The due to a higher proportion of large losses in combination with a less loss ratio was 81.6 (78.8). The higher loss ratio was mainly due to favourable underlying frequency claims development in Denmark in weaker underlying profitability in Denmark for agriculture insurance commercial motor insurance, property insurance and product and property insurance. The frequency of medium-sized property insurance. Profitability improved in the Swedish portfolio compared claims was unusually high during the quarter. Measures have been with the year before, mainly driven by private motor insurance and taken to compensate for higher expected overall claims inflation in commercial property insurance. The Swedish portfolio is on track to achieve profitability during 2017. Denmark going forward. The development will be closely monitored, and further measures will be taken if necessary. Effects Operating expenses were NOK 930.9 million (819.0). Currency will materialise gradually over a two-year period after effects had a negative impact of NOK 25.7 million. The cost ratio implementation. The Swedish portfolio continued the positive trend was 15.7 (15.6). of a lower underlying loss ratio. This was partly due to re- underwriting in the commercial portfolio and partly to a more Development during the quarter diversified private portfolio. The underwriting result decreased to NOK 20.4 million (65.6). The Operating expenses amounted to NOK 264.1 million (229.5). decline in the underwriting result was due to weaker underlying Currency effects reduced operating expenses by NOK 6.9 million. profitability. In addition, the Vardia portfolio contributed negatively. The cost ratio was 17.1 (16.5), negatively affected by the Vardia The combined ratio was 98.7 (95.3). portfolio.

General Insurance Nordic NOK millions Q4 2016 Q4 2015 1.1.-31.12.2016 1.1.-31.12.2015

Earned premiums 1,542.9 1,392.2 5,917.8 5,233.3 Claims incurred etc. (1,258.4) (1,097.0) (4,739.6) (3,905.2) Operating expenses (264.1) (229.5) (930.9) (819.0) Underwriting result 20.4 65.6 247.3 509.1

Amortisation and impairment losses of excess value – intangible assets (53.4) (58.9) (216.8) (175.2)

Large losses 1 10.3 48.7 161.6 68.0 Run-off gains/(losses) 2 61.0 28.8 150.7 145.8

Loss ratio 3 81.6% 78.8% 80.1% 74.6% Cost ratio 4 17.1% 16.5% 15.7% 15.6% Combined ratio 5 98.7% 95.3% 95.8% 90.3%

1 Large losses = loss event in excess of NOK 10.0 million. Claims incurred in excess of NOK 30.0 million per event are charged to the Corporate Centre. 2 Run-off gains/(losses) = changes in estimates from previous years 3 Loss ratio = claims incurred etc./earned premiums 4 Cost ratio = operating expenses/earned premiums 5 Combined ratio = loss ratio + cost ratio

6 Gjensidige Insurance Group – 4th quarter and preliminary 2016

General Insurance Baltics

Development during the year acquired company, combined with increased investments in IT The underwriting result was minus NOK 99.5 million (minus 98.9). systems, distribution improvements and pan-Baltic rebranding initiatives. Numerous initiatives have been implemented in 2016 The underwriting result was negatively affected by several medium- that are expected to improve profitability going forward. sized frequency claims, and investments related to integration activities. The combined ratio was 109.6 (115.4). After the The Baltic segment is on track to deliver profitability from and acquisition of PZU Lietuva, the new joint organisation is on track including 2018. with the integration of IT systems and initiatives related to claims handling and distribution channels. The number of FTEs has been reduced by 49. Development during the quarter The underwriting result was minus NOK 36.6 million (minus 64.4). Earned premiums increased to NOK 1,036.3 million (642.0), driven The improved underwriting result was mainly driven by lower run-off by the PZU Lietuva acquisition. NOK 20.8 million of the increase losses, but the underlying frequency claims level also improved. was related to currency effects. The underlying premium The combined ratio was 114.5 (125.4). development was positive, influenced by portfolio re-underwriting and repricing activities. The relative proportion of property Earned premiums amounted to NOK 252.4 million (253.7). NOK 0.1 insurance in the portfolio has increased after the acquisition. million of the change in earned premiums was related to currency effects. Claims incurred amounted to NOK 748.4 million (524.8). NOK 17.0 million of the increase was related to currency effects. The loss ratio Claims incurred amounted to NOK 195.0 million (229.3). NOK 1.1 was 72.2 (81.8), positively affected by run-off gains. The loss ratio million of the decrease in claims was related to currency effects. was negatively affected by a number of medium-sized property and The loss ratio was 77.3 (90.4). The improvement was driven by motor insurance claims. Tariffs based on group best practice were lower run-off losses, the implementation of new tariffs and a lower introduced in Latvia at the end of 2015 and in Lithuania during April 2016, with the aim of improving profitability in a highly price- level of frequency claims. sensitive market. Improvements have taken place in frequency claims levels and further improvements are expected as more Operating expenses increased to NOK 94.0 million (88.8). NOK 0.2 portfolio is underwritten using improved tariffs. million of the change in operating expenses was related to currency effects. The cost ratio was 37.3 (35.0). Since cost savings are being Operating expenses amounted to NOK 387.4 million (216.0). NOK realised as a result of acquisition synergies, the cost base of the 7.0 million of the increase in operating expenses was related to consolidated company is expected to decrease in 2017. currency effects. The cost ratio was 37.4 (33.6). The increase in the cost ratio was mainly due to a higher cost ratio run-rate in the

General Insurance Baltics NOK millions Q4 2016 Q4 2015 1.1.-31.12.2016 1.1.-31.12.2015

Earned premiums 252.4 253.7 1,036.3 642.0 Claims incurred etc. (195.0) (229.3) (748.4) (524.8) Operating expenses (94.0) (88.8) (387.4) (216.0) Underwriting result (36.6) (64.4) (99.5) (98.9)

Amortisation and impairment losses of excess value – intangible assets (3.5) (18.3) (14.9) (22.4)

Large losses 1 Run-off gains/(losses) 2 (1.8) (22.9) 12.8 (30.1)

Loss ratio 3 77.3% 90.4% 72.2% 81.8% Cost ratio 4 37.3% 35.0% 37.4% 33.6% Combined ratio 5 114.5% 125.4% 109.6% 115.4%

1 Large losses = loss events in excess of EUR 0.5 million. Claims incurred in excess of this per event are as a rule charged to the Corporate Centre. 2 Run-off gains/(losses) = changes in estimates from previous years 3 Loss ratio = claims incurred etc./earned premiums 4 Cost ratio = operating expenses/earned premiums 5 Combined ratio = loss ratio + cost ratio

Gjensidige Insurance Group – 4th quarter and preliminary 2016 7

Pension and Savings Development during the year The profit before tax expense increased to NOK 125.4 million Savings assets under management amounted to NOK 15,141.6 (84.2). million (15,555.1) at the end of the period.

Net insurance revenue was NOK 195.9 million (155.9) and In total, assets under management increased by NOK 2,790.7 management income was NOK 126.2 million (119.5). The positive million. Total assets under management amounted to NOK development was driven by higher volumes and reclassification of 38,378.8 million (35,588.1) at the end of the year. income previously reported as financial income following clarification from the Norwegian FSA. In order to strengthen the solvency capital ratio and to optimise the capital structure, Gjensidige Pensjonsforsikring AS (GPF) issued a Operating expenses were essentially flat at NOK 223.9 million subordinated bond (Tier 2) of NOK 300 million in June. (222.0). Development during the quarter Net financial income, including the return both on the group policy The profit before tax expense was NOK 28.7 million (23.3). Net portfolio and the corporate portfolio, amounted to NOK 27.3 million insurance revenue was NOK 63.2 million (35.2), and management (30.8). The decrease was due to the above mentioned income amounted to NOK 32.9 million (30.3). The increased reclassification of income. Underlying financial income grew due to revenue was due to a growing customer portfolio and increased higher insurance reserves, a narrowing bond portfolio spread and assets under management. In addition, the reclassification of increased return on real estate investments. The company’s share financial income contributed to growth in net insurance revenues. of the profit relating to the paid-up policy portfolio was allocated in its entirety as a provision for longevity. Operating expenses amounted to NOK 53.0 million (58.2). Lower pension and IT costs explained the reduction. At the end of the period, pension assets under management amounted to NOK 23,237.3 million (20,033.1) including the group Net financial income amounted to a loss of NOK 14.4 million policy portfolio of NOK 5,409.6 million (4,877.5). (positive 16.0), as a consequence of the reclassification of income.

The recognised return on the paid-up policy portfolio was 4.08 per cent (5.43). The average annual interest guarantee was 3.5 per cent (3.5).

Pension and Savings NOK millions Q4 2016 Q4 2015 1.1.-31.12.2016 1.1.-31.12.2015

Earned premiums 450.3 468.0 1,479.4 1,431.5 Claims incurred etc. (387.1) (432.8) (1,283.5) (1,275.7) Net insurance revenue 63.2 35.2 195.9 155.9 Management income etc. 32.9 30.3 126.2 119.5 Operating expenses (53.0) (58.2) (223.9) (222.0) Net operating income 43.1 7.3 98.1 53.4 Net financial income (14.4) 16.0 27.3 30.8 Profit/(loss) before tax expense 28.7 23.3 125.4 84.2

Operating margin 2 44.87% 11.16% 30.47% 19.37% Recognised return on the paid-up policy portfolio 3 4.08% 5.43% Value-adjusted return on the paid-up policy portfolio 4 4.87% 5.42%

1 Run-off gains/(losses) = changes in estimates from previous years 2 Operating margin = net operating income/(net insurance revenue + management income etc.) 3 Recognised return on the paid-up policy portfolio = realised return on the portfolio 4 Value-adjusted return on the paid-up policy portfolio = total return on the portfolio

8 Gjensidige Insurance Group – 4th quarter and preliminary 2016

Retail Bank Development during the year The profit before tax expense increased to NOK 428.5 million (303.6). The increase was a result of higher income driven by portfolio growth and improved returns on financial instruments.

Net interest income amounted to NOK 797.3 million (721.2). The improvement was driven by business growth.

Net commission income and other income increased to NOK 74.3 million (4.1). The increase was the result of gains on financial instruments, partly offset by higher acquisition costs. The improvement also included a gain on the Visa Europe sale to Visa Inter-national, of which Gjensidige Bank’s share was order to pursue a merger with Gjensidige Investeringsrådgivning NOK 12.3 million. AS. The merger plan was officially registered with the Brønnøysund Register Centre, and the merger is expected to be approved during The net interest margin was 1.85 per cent (2.12). The decrease the first quarter 2017. The merger is expected to improve was driven by overall margin pressure. competitiveness in the savings market and ensure more efficient operations within the Group. Operating expenses were NOK 373.6 million (359.3). The increase was mainly driven by business growth, changed employees’ In order to gain access to international capital markets, Gjensidige pension scheme and somewhat increased depreciation. The Bank established, through its subsidiary Gjensidige Bank cost/income ratio decreased to 42.9 per cent (49.5). Boligkreditt, a Euro Medium Term Covered Bond Programme amounting to EUR 2 billion during the second quarter. Total write-downs and losses amounted to NOK 69.5 million (62.3), an increase driven by portfolio growth. Write-downs and losses were Development during the quarter primarily related to the unsecured lending portfolio. The bank agreed The profit before tax expense amounted to NOK 94.4 million (82.8). to sell NOK 14.6 million of impaired customer loans in the first quarter. The increase was driven by portfolio growth and better returns on The sale led to the release of the provisions made for this group of financial instruments. Write-downs and losses were higher than in loans. The portfolio continues to be of high quality. Write-downs and the corresponding quarter in 2015. losses were 0.18 per cent (0.20) of average gross lending. Adjusted for the above-mentioned sale of impaired customer loans, the ratio Net interest income increased to NOK 210.5 million (191.4). This 1 was 0.21 per cent. The weighted average loan-to-value ratio was was driven by business growth. The result for the fourth quarter estimated to be 61.7 per cent (63.7) for the mortgage portfolio. 2015 included NOK 12.6 million related to the reversal of the accrual for the Deposits Guarantee Fund fee. Net commission Gross lending increased by 12.3 per cent and amounted to NOK income and other income increased to NOK 1.1 million (minus 9.2), 41,249.5 million (36,735.5) at the end of 2016. Deposits increased driven by gains on financial instruments. by 9.9 per cent, reaching NOK 21,270.4 million (19,357.2) at the end of 2016. The deposits to loans ratio was 51.6 per cent (52.7). Operating expenses amounted to NOK 90.8 million (90.5). The cost/income ratio was 42.9 per cent (49.6). Business growth led to an increased need for capital during the period. The total capital was increased by NOK 300 million, split between the Total write-downs and losses amounted to NOK 26.5 million (9.0), issuing of a Tier 2 subordinated bond amounting to NOK 100 million predominantly related to the unsecured lending portfolio. The and an equity increase of NOK 200 million from the parent company. increase was mainly due to portfolio growth in 2016 combined with the release of group write-downs in the corresponding quarter 2015. At the end of the second quarter, S&P Global Ratings raised its long- term and short-term counterparty credit ratings for Gjensidige Bank Gross lending growth was NOK 1,334.4 million (2,430.2), while ASA and its subsidiary Gjensidige Bank Boligkreditt AS to 'A/A-1' from deposits increased by NOK 892.1 million (1,849.2). 'A-/A-2'. The outlook remained stable. This was driven by the reassess- ment of Gjensidige Bank's strategic position within the parent company. 1 The loan–to-value ratio estimate is calculated on the basis of the exposure on the reporting date and the property valuation, including any higher priority pledge(s), at the time Gjensidige Bank ASA received a licence from the Norwegian Financial Supervisory Authority to provide investment services in the loan was approved.

Retail Bank NOK millions Q4 2016 Q4 2015 1.1.-31.12.2016 1.1.-31.12.2015

Interest income and related income 362.2 329.4 1,408.0 1,311.0 Interest expenses and related expenses (151.7) (137.9) (610.7) (589.8) Net interest income 210.5 191.4 797.3 721.2 Net commission income and other income 1.1 (9.2) 74.3 4.1 Total income 211.6 182.3 871.6 725.2 Operating expenses (90.8) (90.5) (373.6) (359.3) Write-downs and losses (26.5) (9.0) (69.5) (62.3) Profit/(loss) before tax expense 94.4 82.8 428.5 303.6

Net interest margin, annualised 1 1.85% 2.12% Write-downs and losses, annualised 2 0.18% 0.20% Cost/income ratio 3 42.9% 49.6% 42.9% 49.5%

1 Net interest margin, annualised = net interest income/average total assets 2 Write-downs and losses, annualised = write-downs and losses/average gross lending 3 Cost/income ratio = operating expenses/total income

Gjensidige Insurance Group – 4th quarter and preliminary 2016 9

Management of financial assets and properties

The Group’s investment portfolio includes all investment funds in the Group, except for investment funds in the Pension and Savings, and Retail Bank segments. The investment portfolio is split into two parts: a match portfolio and a free portfolio. The match portfolio is intended to correspond to the Group’s technical provisions. It is invested in fixed-income instruments with a duration that matches the duration of the technical provisions. The free portfolio consists of various assets. The allocation of assets in this portfolio must be seen in connection with the Group’s capitalisation and risk capacity, investments in the portfolio of bonds held at amortised cost was as well as the Group’s risk appetite at all times. Results from the approximately 2.8 per cent on average during the year, and the use of derivatives for tactical and risk management purposes are running yield was 4.5 per cent at the end of the year. assigned to the respective asset classes, depending on whether the derivatives used are equity or fixed-income derivatives. Foreign- The average duration of the match portfolio was 3.5 years. The exchange risk in the investment portfolio is generally hedged close average term to maturity for the corresponding insurance liabilities to 100 per cent, within a permitted limit of +/- ten per cent per was 3.7 years. The distribution of counterparty risk and credit rating currency. is shown in the charts on page 12. Securities without an official credit rating amounted to NOK 11.5 billion (11.5). Of these Development during the year securities, 10.2 per cent (13.5) were issued by Norwegian savings banks, while the remainder were mostly issued by Norwegian At the end of 2016, the investment portfolio totalled NOK 54.0 billion power producers and distributors, property companies or (57.2). The financial result for the full year was NOK 2,155.1 million municipalities. A third-party internal rating existed for 64.7 per cent (1,492.4), which corresponds to a return on total assets of 3.9 per (67.4) of the portfolio without an official rating. Bonds with a coupon cent (2.6). linked to the development in the Norwegian consumer price index accounted for 10.1 per cent (11.2) of the match portfolio. Match portfolio The match portfolio amounted to NOK 35.1 billion (36.0). The 1 portfolio yielded a return of 3.5 per cent (2.8), excluding changes in The geographical distribution of the match portfolio is shown in the chart on page 11. the value of the bonds recognised at amortised cost.

1 Bonds recognised at amortised cost amounted to NOK 17.5 billion The geographical distribution is related to issuers and does not reflect actual currency (18.7). Unrealised excess value amounted to NOK 1,338.3 million exposure. (1,416.3) at the end of the period. The reinvestment rate for new

Financial assets and properties Result Q4 Result 1.1.-31.12. Carrying amount 31.12. NOK millions 2016 2015 2016 2015 2016 2015

Match portfolio Money market 18.1 28.0 130.8 48.4 5,159.5 6,836.6 Bonds at amortised cost 192.3 220.7 858.4 929.5 17,491.3 18,747.7 Current bonds 1 46.0 27.8 275.3 4.1 12,417.0 10,454.4 Match portfolio total 256.4 276.5 1,264.5 982.0 35,067.8 36,038.7 Free portfolio Money market 9.1 7.4 43.8 26.5 4,321.1 4,066.4 Other bonds 2 (8.3) 25.3 296.5 106.2 3,689.5 4,075.5 High yield bonds 3 16.1 (28.8) 208.7 (37.4) 1,072.2 2,475.9 Convertible bonds 4 (4.1) 12.0 10.2 20.8 1,045.3 1,066.4 Current equities 5 217.2 (82.5) 410.1 (376.5) 2,870.3 3,250.3 PE funds (21.8) (16.6) (150.6) (102.0) 1,145.7 1,383.7 Property 6 114.7 480.6 250.8 974.8 3,072.2 3,188.1 Other 7 (17.8) (63.3) (179.0) (102.0) 1,673.5 1,628.9 Free portfolio total 305.1 334.2 890.6 510.4 18,889.9 21,135.2 Financial result from the investment portfolio 561.4 610.8 2,155.1 1,492.4 53,957.7 57,173.9 Financial income in Pension and Savings and Retail Bank (17.6) 2.2 72.6 15.9 Interest expense on subordinated loan Gjensidige (8.1) (8.1) (31.6) (35.0) Forsikring ASA Net income from investments 535.7 604.8 2,196.1 1,473.3

1 The item includes discounting effects of the insurance liabilities in Denmark, and a mismatch between interest rate adjustments on the liability side in Denmark and the corresponding interest rate hedge. Investments include mortgage, sovereign and corporate bonds, investment grade bond funds and loan funds containing secured debt. 2 The item includes total investment grade and current bonds. Investment grade bonds are investments in internationally diversified funds that are externally managed. 3 Investments in internationally diversified funds that are externally managed. 4 Investments in internationally diversified funds that are externally managed. 5 The item includes the investment in SpareBank 1 SR-Bank. Other investments are mainly investments in internationally diversified funds that are externally managed. In addition, there is derivative exposure of NOK (15.7) million. 6 Gjensidige halved its property exposure through the sale of 50 per cent of Oslo Areal AS in late 2015. In addition, there was a forward contract on the IPD index that further increased Gjensidige's property exposure by approximately NOK 1.6 billion throughout 2016. 7 The item includes currency hedging related to Gjensidige Sweden and Gjensidige Denmark, lending, paid-in capital in Gjensidige Pensjonskasse, profit/loss effects from total return swaps with Gjensidige Pensjonsforsikring AS and Gjensidige Pensjonskasse, hedge funds, commodities and finance-related expenses.

10 Gjensidige Insurance Group – 4th quarter and preliminary 2016

Free portfolio The free portfolio amounted to NOK 18.9 billion (21.1) at the end of Equity portfolio the year. The return was 4.6 per cent (2.3). The total equity exposure at the end of the period was NOK 4.0 billion (4.6), of which NOK 2.9 billion (3.3) was current equities and Fixed-income instruments NOK 1.1 billion (1.4) PE funds. The return on current equities was The fixed-income instruments in the free portfolio amounted to NOK 15.1 per cent (minus 10.3). The good return on equities was due to 10.1 billion (11.7), of which money market investments, including a combination of a strong return on the remaining equity holding in cash, accounted for NOK 4.3 billion (4.1). The rest of the portfolio SpareBank 1 SR-Bank and a moderate return on the diversified was invested in international bonds (investment grade, high yield equity portfolio which was mostly exposed to international equities, and convertible bonds). The total fixed-income portfolio yielded a including emerging markets. In October 2016, approximately half of return of 5.2 per cent (1.2). It was positively affected by good the investment in SpareBank 1 SR-Bank was sold at NOK 46 per returns on investment grade and high yield bonds and a moderate share with a limited realised gain in the fourth quarter, resulting in return on money market investments and convertible bonds. an ownership at year-end of 4.8 per cent. In January 2017, the stake was further reduced to 0.9 per cent through a sale at NOK 61 At the end of 2016, the average duration in the portfolio was per share with a limited realised gain in the first quarter 2017. The approximately 2.5 years. The distribution of counterparty risk and proceeds have been reinvested such that concentration risk in the credit rating is shown in the charts on the next page. Securities portfolio is reduced. The return on PE funds was minus 12.5 per without an official credit rating amounted to NOK 2.6 billion (2.1). Of cent (minus 6.8). The negative return was particularly driven by a these securities, 12.4 per cent (11.1) were issued by Norwegian fall in the net asset value of funds exposed to the oil sector during savings banks, while the remainder were mostly issued by the first quarter. Exposure to oil-related PE funds was around NOK Norwegian power producers and distributors, property companies 600 million at the end of the year. or municipalities. A third-party internal rating existed for 74.4 per cent (65.7) of the portfolio without an official rating. 1 The geographical distribution is related to issuers and does not reflect actual currency exposure. The geographical distribution1 of the fixed-income instruments in the free portfolio is shown in the chart above.

Return per asset class Per cent Q4 2016 Q4 2015 1.1.-31.12.2016 1.1.-31.12.2015

Match portfolio Money market 0.3 0.4 2.2 0.8 Bonds at amortised cost 1.1 1.2 4.7 4.9 Current bonds 1 0.4 0.3 2.3 0,0 Match portfolio total 0.7 0.8 3.5 2.8 Free portfolio Money market 0.2 0.2 1.0 0.7 Other bonds 2 (0.2) 0.7 8.1 3.2 High yield bonds 3 1.2 (1.6) 11.5 (2.3) Convertible bonds 4 (0.4) 1.3 1.1 2.5 Current equities 5 8.1 (2.5) 15.1 (10.3) PE funds (1.9) (1.2) (12.5) (6.8) Property 6 3.7 10.7 7.9 16.6 Other 7 (1.2) (3.2) (11.0) (6.1) Free portfolio total 1.6 1.6 4.6 2.3 Return on financial assets 1.0 1.1 3.9 2.6

Gjensidige Insurance Group – 4th quarter and preliminary 2016 11

Property portfolio Gjensidige's goal is to distribute high and stable regular dividends At the end of the year, the exposure to commercial real estate in the to its shareholders, and at least 70 per cent of the profit after tax portfolio was NOK 3.1 billion (3.2) plus a forward contract of NOK expense over time. In addition, any future excess capital over and 1.6 billion. The forward contract matured on 31 December 2016. above the capitalisation target will be distributed to the owners The property portfolio yielded a return of 7.9 per cent (16.6). The over time as special dividends. By capitalisation target is meant sale of 50 per cent of the shares in Oslo Areal explains the high capitalisation that is adapted to Gjensidige's strategic targets and return in 2015. appetite for risk at all times. The Group shall maintain its financial flexibility, although not at the expense of capital discipline. Total return swaps have been entered into between Gjensidige Forsikring ASA (GF), Gjensidige Pensjon og Sparing AS (GPS) and Gjensidige Pensjonskasse (GPK), whereby GPS and GPK will receive a return on property, while GF will receive a return on Outlook money market instruments plus a margin. The underlying amount in The Group targets a 15 per cent return on equity after tax. There is the agreements is NOK 0.2 billion. always considerable uncertainty associated with the assessment of future developments. However, the Board remains confident in Development during the quarter Gjensidige’s ability to deliver solid earnings and dividend growth The financial result for the total investment portfolio was NOK 561.4 over time. Strong underwriting profitability is expected to offset a million (610.8) in the quarter. This corresponds to a return on challenging environment as regards achieving investment returns. financial assets of 1.0 per cent (1.1). 1. Organic growth is expected to be in line with nominal GDP The match portfolio returned 0.7 per cent (0.8), excluding changes growth in Gjensidige’s market areas in the Nordic countries in the value of the portfolio valued at amortised cost. The return on and the Baltic states over time. In addition, profitable growth the free portfolio was 1.6 per cent (1.6). The positive return was will be achieved by pursuing a disciplined acquisition strategy, primarily driven by returns on the investments in SpareBank1 SR- as has been done successfully over the past ten years. Bank, properties and tactical allocation. This was partly offset by 2. The annual combined ratio is expected to be at the lower end negative returns in particular from global investment grade bonds, of the target corridor of 90–93 (undiscounted and given zero but also to some extent from PE funds and convertible bonds. run-off effects). The target cost ratio is around 15 per cent. A reduction is expected in the underlying cost ratio and loss ratio, but Gjensidige will aim to strike a balance between good profitability and increased investments in order to ensure strong competitiveness going forward. Extraordinary Organisation circumstances relating to the weather and the proportion of large losses and run-off can contribute to a combined ratio The Group had a total of 4,005 employees at the end of the year, above or below the target range. compared with 3,990 at the end of the third quarter. 3. Over the next 3-5 years, average annual run-off gains are expected to be around NOK 900 million, moving the expected The number of employees broke down as follows: 2,031 (2,048) in reported combined ratio to the lower end of the 86-89 corridor general insurance operations in Norway, 144 (144) in Gjensidige (undiscounted). Bank, 75 (73) in Gjensidige Pensjon og Sparing, 705 (703) in 4. Regulatory uncertainty relating to Solvency II has decreased. Denmark, 385 (366) in Sweden and 665 (656) in the Baltic states All else being equal, this supports the already strong capital (excluding agents). The figures in brackets refer to the number of position. employees at the end of the third quarter.

Over time, dividend pay-outs will reflect Gjensidige’s policy not to Events after the balance sheet date build capital in excess of the targeted capitalisation. No significant events have occurred after the end of the period. It is Gjensidige’s ambition to become the most customer-oriented general insurance company in the Nordic region, based on Dividend profitable operations and a leading position.

The Board has proposed a dividend based on the profits for the The strategic priorities in the period up until 2020 are: 2016 financial year (regular dividend) of NOK 3,400 million (3,200). This corresponds to NOK 6.80 (6.40) per share and • Digital customer experiences represents around 73 (85) per cent of the Group’s profit after tax • Business intelligence and analytics expense. • Building organisational capabilities

In addition, during 2016, a total amount of NOK 3,000 million, In order to support the three strategic priorities and ensure strong corresponding to NOK 6.00 per share, was distributed based on competiveness in future, efficiency measures are being taken to the Group’s excess capital position (special dividends). (NOK create room for increased investments primarily in the fields of 1,000 million in April and NOK 2,000 million in November). technology, competence development and brand strength.

12 Gjensidige Insurance Group – 4th quarter and preliminary 2016

Efforts to deliver the best digital customer experiences in the Nordic challenging, the outlook for the Norwegian and Nordic general general insurance industry will be strengthened. At the same time, insurance operations is still regarded as good. Gjensidige intends to increase its presence in the growing market for health and personal insurance. There are still some outstanding uncertainties relating to changes to the regulatory framework conditions for the financial sector in Competition is still increasing in the Norwegian general insurance Norway and internationally. The Solvency II regulations were market. Gjensidige has managed to capitalise on its position as implemented in Norway on 1 January 2016. Gjensidige has market leader in Norway, and its competitiveness remains good. It submitted an application to use its own partial internal model (PIM), has strengthened its leading position relative to its main competitors and approval is expected in 2017. Endeavours will continue to be in parallel with delivering good profitability and high customer made to win acceptance for inclusion of the guarantee provision as satisfaction. The growth rate is expected to remain subdued in the solvency capital. short to medium term, although an uptick in inflation and growth will lead to increased insurance premiums. Continued efforts to The Group has satisfactory capital buffers in relation to internal risk maintain and further strengthen Gjensidige’s position in the models, statutory solvency requirements and its target rating. The Norwegian market will be prioritised, with particular focus on Board considers the Group’s capital situation and financial strength ensuring cost-efficiency and improving digital customer to be good. experiences. At the same time, new, profitable opportunities for growth will be considered in the Nordic region and the Baltic states in order to ensure good utilisation of a scalable business model and Other matters best practice. Strong emphasis will also be placed on further developing cooperation with partners and distributors. The Board has decided to pay employees of Gjensidige Forsikring ASA a collective bonus corresponding to NOK 20,700, Low interest rates and financial challenges in several key including holiday pay, per full-time employee. The bonus is based economies as well as in the Nordic countries reflect an uncertain on the combined ratio achieved, and on the development in the economic situation and remain a source of uncertainty. Gjensidige portfolio and customer satisfaction in 2016. has a robust investment strategy, although returns are affected by The Board wishes to thank all employees for their efforts and their challenging market conditions. The Group is financially sound and contribution to Gjensidige’s good results in 2016. has a high proportion of its business in the Norwegian general insurance market. Although the macroeconomic situation is

Oslo, 8 February 2017 The Board of Gjensidige Forsikring ASA

Inge K. Hansen Per Arne Bjørge Knud Peder Daugaard John Giverholt Gisele Marchand Chair

Gunnar Mjåtvedt Anne Mari Nyhammer Mette Rostad Lotte K. Sjøberg Tine G. Wollebekk

Helge Leiro Baastad CEO

Gjensidige Insurance Group – 4th quarter and preliminary 2016 13

Consolidated income statement

NOK millions Notes Q4 2016 Q4 2015 1.1.-31.12.2016 1.1.-31.12.2015

Operating income Earned premiums from general insurance 4 5,685.6 5,493.5 22,441.9 21,272.0 Earned premiums from pension 450.3 468.0 1,479.4 1,431.5 Interest income etc. from banking operations 362.2 329.4 1,408.0 1,311.0 Other income including eliminations 41.4 35.3 162.0 140.8 Total operating income 3 6,539.5 6,326.2 25,491.4 24,155.4

Net income from investments Results from investments in associates and joint ventures 81.2 41.7 184.1 49.7 Operating income from property 0,0 33.0 0,0 366.7 Interest income and dividend etc. from financial assets 253.5 287.5 1,262.0 1,199.3 Net changes in fair value on investments (incl. property) 23.2 1,058.7 (1,040.3) 189.0 Net realised gain and loss on investments 205.4 (765.9) 1,920.8 (102.7) Expenses related to investments (27.5) (50.2) (130.5) (228.8) Total net income from investments 535.7 604.8 2,196.1 1,473.3

Total operating income and net income from investments 7,075.2 6,931.0 27,687.5 25,628.7

Claims, interest expenses, loss etc. Claims incurred etc. from general insurance 5, 6 (4,013.8) (3,734.7) (15,515.9) (14,597.5) Claims incurred etc. from pension (387.1) (432.8) (1,283.5) (1,275.7) Interest expenses etc. and write-downs and losses from banking (178.2) (147.0) (680.1) (652.2) operations Total claims, interest expenses, loss etc. (4,579.0) (4,314.5) (17,479.6) (16,525.4)

Operating expenses Operating expenses from general insurance (971.3) (879.5) (3,191.4) (3,217.6) Operating expenses from pension (53.0) (58.2) (223.9) (222.0) Operating expenses from banking operations (90.8) (90.5) (373.6) (359.3) Other operating expenses (15.2) (35.0) (24.8) (45.1) Amortisation and impairment losses of excess value - intangible assets (60.1) (82.7) (254.2) (209.6) Total operating expenses (1,190.3) (1,146.0) (4,068.0) (4,053.6)

Total expenses (5,769.3) (5,460.5) (21,547.5) (20,578.9)

Profit/(loss) for the period before tax expense 3 1,305.8 1,470.6 6,139.9 5,049.7

Tax expense (215.4) (223.8) (1,474.1) (1,265.0)

Profit/(loss) for the period 1,090.4 1,246.7 4,665.9 3,784.7

Profit/(loss) for the period attributable to: Owners of the company 1,091.1 1,250.8 4,670.4 3,788.8 Non-controlling interests (0.7) (4.1) (4.5) (4.1) Total 1,090.4 1,246.7 4,665.9 3,784.7

Earnings per share, NOK (basic and diluted) 2.18 2.49 9.34 7.57

14 Gjensidige Insurance Group – 4th quarter and preliminary 2016

Consolidated statement of comprehensive income

NOK millions Q4 2016 Q4 2015 1.1.-31.12.2016 1.1.-31.12.2015

Profit/(loss) for the period 1,090.4 1,246.7 4,665.9 3,784.7 Components of other comprehensive income Items that are not reclassified subsequently to profit or loss Remeasurement of the net defined benefit liability/asset 74.0 (19.5) (158.7) 69.0 Share of other comprehensive income from associates and joint ventures 0.3 0,0 0.3 0,0 Tax on items that are not reclassified to profit or loss (18.5) 6.4 39.7 (17.5) Total items that are not reclassified subsequently to profit or loss 55.8 (13.1) (118.7) 51.5

Items that may be reclassified subsequently to profit or loss Exchange differences from foreign operations 89.4 69.2 (391.3) 438.4 Exchange differences from hedging of foreign operations 0,0 0,0 0,0 127.5 Investments available for sale 4.5 17.0 (12.5) 17.0 Tax on items that may be reclassified to profit or loss (13.6) (54.5) 66.7 (114.3) Total items that may be reclassified subsequently to profit or loss 80.3 31.7 (337.1) 468.5

Total components of other comprehensive income 136.1 18.6 (455.8) 520.0

Total comprehensive income for the period 1,226.5 1,265.3 4,210.1 4,304.7

Total comprehensive income for the period attributable to: Owners of the company 1,227.2 1,269.4 4,214.6 4,308.8 Non-controlling interests (0.7) (4.1) (4.5) (4.1) Total 1,226.5 1,265.3 4,210.1 4,304.7

Gjensidige Insurance Group – 4th quarter and preliminary 2016 15

Consolidated statement of financial position

NOK millions Notes 31.12.2016 31.12.2015

Assets

Goodwill 3,140.2 3,224.5 Other intangible assets 1,360.5 1,343.6 Deferred tax assets 19.1 12.9 Investments in associates and joint ventures 1,601.6 1,547.8 Interest-bearing receivables from joint ventures 1,420.2 1,538.0 Owner-occupied property 29.5 34.8 Plant and equipment 292.5 289.4 Investment properties 8 Pension assets 488.7 93.1

Financial assets Financial derivatives 7 1,335.4 486.5 Shares and similar interests 7 6,892.1 7,202.3 Bonds and other securities with fixed income 7 30,385.8 30,626.4 Bonds held to maturity 7 1,625.9 2,635.6 Loans and receivables 7 60,030.6 55,837.3 Assets in life insurance with investment options 17,780.0 15,109.6 Reinsurance deposits 0.3 0.9 Reinsurers' share of insurance-related liabilities in general insurance, gross 706.8 533.0 Receivables related to direct operations and reinsurance 5,621.5 4,997.4 Other receivables 945.9 502.7 Prepaid expenses and earned, not received income 91.3 96.7 Cash and cash equivalents 2,158.7 3,151.9

Total assets 135,926.6 129,264.4

Equity and liabilities

Equity Share capital 999.9 999.9 Share premium 1,430.0 1,430.0 Other equity 19,876.3 20,876.5 Total equity attributable to owners of the company 22,306.3 23,306.3 Non-controlling interests 19.8 24.3 Total equity 22,326.0 23,330.6

Provision for liabilities Subordinated loan 1,946.8 1,547.2 Premium reserve in life insurance 4,127.0 3,867.2 Provision for unearned premiums, gross, in general insurance 9,527.9 9,230.0 Claims provision, gross 9 32,447.5 33,178.5 Other technical provisions 297.3 230.5 Pension liabilities 511.8 558.8 Other provisions 342.1 345.6

Financial liabilities Financial derivatives 7 1,191.8 403.5 Deposits from and liabilities to customers 7 21,270.4 19,357.2 Interest-bearing liabilities 7 19,596.5 17,804.7 Other liabilities 7 1,368.5 1,065.4 Current tax 1,272.7 1,295.1 Deferred tax liabilities 871.7 835.8 Liabilities related to direct insurance and reinsurance 7 555.2 619.4 Liabilities in life insurance with investment options 17,780.0 15,109.6 Accrued expenses and deferred income 7 493.3 485.3

Total liabilities 113,600.5 105,933.8

Total equity and liabilities 135,926.6 129,264.4

16 Gjensidige Insurance Group – 4th quarter and preliminary 2016

Consolidated statement of changes in equity

Re- measurement of the net Other Perpetual Exchange defined Other Share Own Share paid-in Tier 1 differ- benefit earned Total NOK millions capital shares premium capital capital ences liab./asset equity equity

Equity as at 31.12.2014 1,000.0 (0.1) 1,430.0 25.6 (13.2) (1,627.8) 20,842.3 21,656.8

1.1.-31.12.2015 Profit/(loss) for the period (the controlling interests' share) 4.5 3,784.3 3,788.8

Components of other comprehensive income Items that are not reclassified subsequently to profit or loss Remeasurement of the net defined liability/asset 69.0 69.0 Tax on items that are not reclassified to profit or loss (17.5) (17.5) Total items that are not reclassified 51.5 51.5 subsequently to profit or loss

Items that may be reclassified subsequently to profit or loss Exchange differences from foreign operations 438.4 438.4 Exchange differences from hedging of foreign operations 127.5 127.5 Investments available for sale 17.0 17.0 Tax on items that may be reclassified to profit or loss (114.3) (114.3) Total items that may be reclassified 451.5 17.0 468.5 subsequently to profit or loss

Total components of other comprehensive income 451.5 51.5 17.0 520.0

Total comprehensive income for the period 4.5 451.5 51.5 3,801.2 4,308.8

Own shares 0,0 (9.9) (9.9) Paid dividend (2,949.6) (2,949.6) Remeasurement of the net defined liability/asset of sold (6.7) 6.7 companies Equity-settled share-based payment transactions 6.0 6.0 Perpetual Tier 1 capital 298.2 298.2 Perpetual Tier 1 capital - interest paid (3.9) (3.9)

Equity as at 31.12.2015 attributable 1,000.0 (0.1) 1,430.0 31.6 298.8 438.3 (1,583.0) 21,690.7 23,306.3 to owners of the company

Non-controlling interests as at 31.12.2015 24.3

Equity as at 31.12.2015 23,330.6

1.1.-31.12.2016 Profit/(loss) for the period (the controlling interests' share) 21.4 4,649.0 4,670.4

Components of other comprehensive income Items that are not reclassified subsequently to profit or loss Remeasurement of the net defined liability/asset (158.7) (158.7) Share of other comprehensive income of associates and joint 0.3 0.3 ventures Tax on items that are not reclassified to profit or loss 39.7 39.7 Total items that are not reclassified (119.0) 0.3 (118.7) subsequently to profit or loss

Items that may be reclassified subsequently to profit or loss Exchange differences from foreign operations (391.3) (391.3) Investments available for sale (12.5) (12.5) Tax on items that may be reclassified to profit or loss 66.6 0.1 66.7 Total items that may be reclassified (324.7) (12.4) (337.1) subsequently to profit or loss

Total components of other comprehensive income (324.7) (119.0) (12.1) (455.8)

Total comprehensive income for the period 21.4 (324.7) (119.0) 4,637.0 4,214.6

Own shares 0.1 (3.8) (3.7) Paid dividend (6,196.6) (6,196.6) Equity-settled share-based payment transactions 7.6 7.6 Perpetual Tier 1 capital 997.7 997.7 Perpetual Tier 1 capital - interest paid (19.6) (19.6)

Equity as at 31.12.2016 attributable 1,000.0 (0.1) 1,430.0 39.2 1,298.3 113.5 (1,702.0) 20,127.3 22,306.3 to owners of the company

Non-controlling interests as at 31.12.2016 19.8

Equity as at 31.12.2016 22,326.0

Gjensidige Insurance Group – 4th quarter and preliminary 2016 17

Consolidated statement of cash flows

NOK millions 1.1.-31.12.2016 1.1.-31.12.2015

Cash flow from operating activities Premiums paid, net of reinsurance 27,023.8 25,539.7 Claims paid, net of reinsurance (17,547.5) (16,314.5) Net payment of loans to customers (4,545.8) (9,167.6) Net payment of deposits from customers 1,848.1 2,653.9 Payment of interest from customers 1,326.3 1,283.8 Payment of interest to customers (264.7) (311.0) Net receipts/payments of premium reserve transfers (645.2) (759.2) Net receipts/payments from financial assets 953.5 (4,947.7) Net receipts/payments from properties 0,0 285.0 Net receipt/payments on sale/acquisition of investment property 130.2 Operating expenses paid, including commissions (4,400.0) (3,785.8) Taxes paid (1,376.5) (1,056.9) Net other receipts/payments 140.8 53.6 Net cash flow from operating activities 2,512.8 (6,396.4)

Cash flow from investing activities Net receipts/payments from sale/acquisition of subsidiaries and associates/joint venture (92.2) 2,521.7 Net receipts/payments on sale/acquisition of owner-occupied property, plant and equipment and intangible assets (110.7) (21.9) Net receipts/payments on sale/aquisition of customer portfolio - intangible assets (45.5) (36.1) Net cash flow from investing activities (248.4) 2,463.8

Cash flow from financing activities Payment of dividend (6,152.7) (2,949.6) Net receipts/payments of subordinated loans incl. Interest 261.7 (36.9) Net receipts/payments regarding perpetual Tier 1 capital instrument and non-controlling interests 997.0 297.1 Net receipts/payments of loans to credit institutions 2,003.6 7,554.7 Net receipts/payments of other short-term liabilities (19.9) 40.7 Net receipts/payments of interest on funding activities (310.4) (248.5) Net receipts/payments of sale/acquisition of own shares (3.7) (9.9) Net cash flow from financing activities (3,224.5) 4,647.7

Effect of exchange rate changes on cash and cash equivalents (33.1) 33.1 Net cash flow for the period (993.2) 748.1

Cash and cash equivalents at the start of the period 3,151.9 2,403.8 Cash and cash equivalents at the end of the period 2,158.7 3,151.9 Net cash flow for the period (993.2) 748.1

Specification of cash and cash equivalents Deposits with central banks 57.0 548.7 Cash and deposits with credit institutions 2,101.7 2,603.2 Total cash and cash equivalents 2,158.7 3,151.9

18 Gjensidige Insurance Group – 4th quarter and preliminary 2016

Notes

the standard. The measurement of the provision for expected credit 1. Accounting policies losses on financial assets depends on whether the credit risk has increased significantly since initial recognition. At initial recognition The consolidated financial statements as of the fourth quarter of and if the credit risk has not increased significantly, the provision 2016, concluded on 31 December 2016, comprise Gjensidige should equal 12-month expected credit losses. If the credit risk has Forsikring and its subsidiaries (collectively referred to as the Group) increased significantly, the provision should equal lifetime expected and the Group’s holdings in associated companies. With the credit losses. This dual approach replaces today’s collective exception of the changes described below, the accounting policies impairment model. For individual impairment there are no significant applied in the interim report is the same as those used in the annual changes in the rules compared with the current rules. During 2016, report for 2015. Gjensidige Bank continued the process to analyse the need for changes to the bank’s models and IT systems following the The consolidated financial statements as of the fourth quarter of implementation of the new rules for impairment provisions. The 2016 have been prepared in accordance with IFRS and IAS 34 work has started and is expected to continue during 2017. It is Interim Financial Reporting. The interim report does not include all currently too early to estimate the expected impact to the group’s the information required in a complete annual report and should be financial statements. Preliminary expectations are that the read in conjunction with the annual report for 2015. implementation of IFRS 9 could lead to increased provisions for credit loss due to the change from an incurred loss model to an New standards and interpretations not yet expected loss model. IFRS 9 is effective from 1 January 2018. adopted A number of new standards, changes to standards and Amendments to IFRS 4 Applying IFRS 9 Financial Instruments interpretations have been issued for financial years beginning after with IFRS 4 Insurance Contracts (2016) 1 January 2016. They have not been applied when preparing these IFRS 9 addresses the accounting for financial instruments and is consolidated financial statements. Those that may be relevant to effective for annual periods beginning on or after 1 January 2018. Gjensidige are mentioned below. Gjensidige does not plan early An insurer may apply the temporary exemption from IFRS 9 if the implementation of these standards. activities are predominantly connected with insurance. Gjensidige’s banking operations amounts to a significant part of the group’s turnover and Gjensidige will therefore most likely not be able to Amendments to IFRS 2: Classification and measurement of share-based payment transactions (2016) apply the temporary exemption. IFRS 2 has been amended regarding the classification and measurement of share-based payment transactions with a net IFRS 15 Revenue from contracts with customers (2014) settlement feature for withholding tax obligations. If the entity is IFRS 15 covers all contracts with customers, but insurance obliged to withhold an amount for an employee’s tax obligation contracts, among others, are exempted. Insofar as such contracts associated with a share-based payment, and transfer that amount cover the provision of several services or other services closely in cash to the tax authority on the employee’s behalf, then the entity related to the insurance operations are carried out, this may have a shall account for that obligation as an equity-settled share-based bearing on how Gjensidige recognises revenues in its accounts. payment transaction. The amendments are effective from 1 January IFRS 15 is effective 1 January 2018. Our preliminary assessment is 2018. The tax obligation in the Group’s remuneration scheme will that services beyond what is covered by IFRS 4 about insurance be reclassified from liability to equity as at 1 January 2018. From contracts comprise an insignificant part of the income. Our this date the tax obligation will be accounted for as an equity-settled preliminary assessment is that the standard is not expected to have share-based payment transaction instead of a cash-settled share- a significant effect on Gjensidige’s financial statements. based payment transaction. Our preliminary assessment is that the amendment is not expected to have a significant effect on IFRS 16 Leases (2016) Gjensidige’s financial statements. IFRS 16 requires all contracts that qualify under its definition as a lease to be reported on a lessee`s balance sheet as right of use IFRS 9 Financial instruments (2014) assets and lease liabilities. Earlier classification of leases as either IFRS 9 introduces new requirements for the classification and operating leases or finance leases are removed. Short-term leases measurement of financial assets, including a new expected loss (less than 12 months) and leases of low-value assets are exempt model for the recognition of impairment losses, and changed from the requirements. A lessee shall recognise a right-of-use asset requirements for hedge accounting. and a lease liability. The interest effect of discounting the lease liability shall be presented separately from the depreciation charge IFRS 9 contains three primary measurement categories for financial for the right-of-use asset. The depreciation expense will be assets: amortised cost, fair value through other comprehensive presented with the group’s other depreciations, whereas the interest effect of discounting will be presented as a financial item. IFRS 16 income, and fair value through profit or loss. Financial assets will be is effective 1 January 2019. The standard is expected to have an classified either at amortised cost, at fair value through other comprehensive income, or at fair value through profit or loss, effect on the group’s financial statements, significantly increasing depending on how they are managed and which contractual cash the group’s recognised assets and liabilities and potentially affecting flow properties they have. IFRS 9 introduces a new requirement in the presentation and timing of recognition of charges in the income connection with financial liabilities earmarked at fair value: where statement. changes in fair value that can be attributed to the liabilities' credit risk are presented in other comprehensive income rather than over Based on our preliminary assessments and on the basis of profit or loss. According to prevailing rules, impairment for credit Gjensidige’s current operations, other amendments to standards losses shall only be recognised when objective evidence of and interpretation statements will not have a significant effect. impairment losses exists. Impairment provisions according to IFRS 9 shall be measured using an expected loss model, instead of an The preparation of interim accounts involves the application of incurred loss model as in IAS 39. The impairment rules in IFRS 9 assessments, estimates and assumptions that affect the use of will be applicable to all financial assets measured at amortised cost accounting policies and the amounts recognised for assets and or at fair value with the changes in fair value recognised in other liabilities, revenues and expenses. The actual results may deviate comprehensive income. In addition, loan commitments, financial from these estimates. The most material assessments involved in guarantee contracts and lease receivables are within the scope of applying the Group’s accounting policies and the most important sources of uncertainty in the estimates are the same in connection with preparing the interim report as in the annual report for 2015.

Gjensidige Insurance Group – 4th quarter and preliminary 2016 19

Comparable figures are based on IFRS. All amounts are shown in Notes are presented on a Group level. Separate notes for NOK millions unless otherwise indicated. Due to rounding-off Gjensidige Forsikring ASA (GF ASA) is not presented as GF ASA is differences, figures and percentages may not exactly add up to the the material part of the Group and therefore the notes for the Group exact total figures. give a sufficient presentation of both the Group and GF ASA.

A complete or limited audit of the interim report has not been carried out. 2. Seasonal variations

For some insurance products, seasonal premiums are used. This is Another consequence of a seasonal premium is that if the customer because the incidence of claims is not evenly distributed throughout cancels the insurance contract before the renewal date, only the the year, but follows a stable seasonal pattern. Normally, premium portion of the seasonal premium is refunded for which the Company income (earned premiums) is accrued evenly over the period of did not bear any risk. For motorcycle insurance taken out on 1 April, insurance, but for products with a seasonal pattern, premium but cancelled on 1 October, the policyholder will only be refunded income must also be allocated according to the incidence of claims. 15 per cent of the annual premium, even though the insurance was Gjensidige Forsikring has a seasonal premium for the following in effect only for six months. products: pleasure craft, snowmobiles and motorcycles. For example for motorcycles, earned premiums for the period from April to September amount to a full 85 per cent of the annual premiums. 3. Segment information

The Group´s core operations comprise the segments general Segment income is defined as earned premiums for general insurance Private, Commercial, Nordic and Baltics. The Group also insurance, earned premiums and management income etc. for has operations in the Pension and Savings and Retail Bank Pension and Savings and interest income and related income and segments. other income for Retail Bank.

The segments are evaluated regularly by Gjensidige´s senior group The segment result is defined as the underwriting result for general management based on financial and operational information insurance, and the profit before tax expense for Pension and specially prepared for each segment for the purpose of following up Savings and Retail Bank. performance and allocating necessary resources. As from 1 January 2015 the commercial portfolios in Sweden are transferred from the Commercial segment to the Nordic segment. The comparative figures have been changed correspondingly.

General insurance Private Commercial Nordic Baltics Pension and Retail Bank Eliminations etc. 1 Total Fourth quarter Savings NOK millions 2016 2015 2016 2015 2016 2015 2016 2015 2016 2015 2016 2015 2016 2015 2016 2015 Segment income Segment income – external 2,111.6 2,036.4 1,808.1 1,768.1 1,542.9 1,392.2 252.4 253.7 483.1 498.3 366.6 334.1 (25.3) 43.3 6,539.5 6,326.2 Segment income – group 2

Total segment income 2,111.6 2,036.4 1,808.1 1,768.1 1,542.9 1,392.2 252.4 253.7 483.1 498.3 366.6 334.1 (25.3) 43.3 6,539.5 6,326.2

- Claims, interest expenses, loss (1,283.4) (1,130.3) (1,220.7) (1,169.5) (1,258.4) (1,097.0) (195.0) (229.3) (387.1) (432.8) (178.2) (147.0) (56.3) (108.6) (4,579.0) (4,314.5) etc.

- Operating expenses (278.3) (266.7) (205.2) (195.8) (264.1) (229.5) (94.0) (88.8) (53.0) (58.2) (90.8) (90.5) (204.9) (216.5) (1,190.3) (1,146.0) + Net income from investments (14.4) 16.0 (3.3) (13.8) 553.4 602.6 535.7 604.8

Segment result/profit/(loss) 549.9 639.5 382.2 402.9 20.4 65.6 (36.6) (64.4) 28.7 23.3 94.4 82.8 266.9 320.8 1,305.8 1,470.6 before tax expense

General insurance Private Commercial Nordic Baltics Pension and Retail Bank Eliminations etc. 1 Total 1.1.-31.12. Savings NOK millions 2016 2015 2016 2015 2016 2015 2016 2015 2016 2015 2016 2015 2016 2015 2016 2015 Segment income Segment income – external 8,291.3 8,152.3 7,257.4 7,076.8 5,917.8 5,233.3 1,036.3 642.0 1,605.6 1,551.0 1,437.0 1,330.0 (54.1) 170.0 25,491.4 24,155.4 Segment income – group 2

Total segment income 8,291.3 8,152.3 7,257.4 7,076.8 5,917.8 5,233.3 1,036.3 642.0 1,605.6 1,551.0 1,437.0 1,330.0 (54.1) 170.0 25,491.4 24,155.4

- Claims, interest expenses, loss (5,030.8) (4,908.5) (4,825.1) (4,826.7) (4,739.6) (3,905.2) (748.4) (524.8) (1,283.5) (1,275.7) (680.1) (652.2) (172.0) (432.4) (17,479.6) (16,525.4) etc. - Operating expenses (1,063.8) (1,035.7) (801.1) (809.3) (930.9) (819.0) (387.4) (216.0) (223.9) (222.0) (373.6) (359.3) (287.2) (592.3) (4,068.0) (4,053.6)

+ Net income from investments 27.3 30.8 45.3 (15.0) 2,123.5 1,457.4 2,196.1 1,473.3

Segment result/profit/(loss) 2,196.7 2,208.1 1,631.3 1,440.8 247.3 509.1 (99.5) (98.9) 125.4 84.2 428.5 303.6 1,610.3 602.8 6,139.9 5,049.7 before tax expense

1 Eliminations etc. consist of internal eliminations and other income and expenses not directly attributable to one single segment. Interest on subordinated loan is included in Net income from investments.

2 There is no significant income between the segments at this level in 2016 and 2015.

20 Gjensidige Insurance Group – 4th quarter and preliminary 2016

4. Earned premiums from general insurance

NOK millions Q4 2016 Q4 2015 1.1.-31.12.2016 1.1.-31.12.2015

Earned premiums, gross 5,828.2 5,635.9 23,031.6 21,724.8 Ceded reinsurance premiums (142.7) (142.4) (589.7) (452.8) Total earned premiums, net of reinsurance 5,685.6 5,493.5 22,441.9 21,272.0

5. Claims incurred etc. from general insurance

NOK millions Q4 2016 Q4 2015 1.1.-31.12.2016 1.1.-31.12.2015

Gross claims (4,181.7) (3,757.0) (15,983.4) (14,640.8) Claims, reinsurers' share 167.9 22.2 467.5 43.2 Total claims incurred etc. from general insurance (4,013.8) (3,734.7) (15,515.9) (14,597.5)

6. Run-off gain/(loss) from general insurance

NOK millions Q4 2016 Q4 2015 1.1.-31.12.2016 1.1.-31.12.2015

Earned premiums from general insurance 5,685.6 5,493.5 22,441.9 21,272.0 Run-off gain/(loss) for the period, net of reinsurance 1 314.4 230.5 1,023.4 724.8 In per cent of earned premiums from general insurance 5.5 4.2 4.6 3.4

1 Run-off gains/(losses) from general insurance includes run-off from the general insurance segments in addition to run-off on Corporate Centre/reinsurance.

Gjensidige Insurance Group – 4th quarter and preliminary 2016 21

7. Financial assets and liabilities Valuation based on non-observable market data When neither quoted prices in active markets nor observable market data is available, the fair value of financial assets/liabilities is Fair value estimated based on valuation techniques which are based on non- Financial assets and liabilities measured at fair value are carried at observable market data. the amount each asset/liability can be settled to in an orderly transaction between market participants at the measurements date A financial asset/liability is considered valued based on non- at the prevailing market conditions. observable market data if fair value is estimated without being based on quoted prices in active markets or observable market Different valuation techniques and methods are used to estimate data. Financial assets/liabilities valued based on non-observable fair value depending on the type of financial instruments and to market data are classified as level three in the valuation hierarchy. which extent they are traded in active markets. Instruments are classified in their entirety in one of three valuation levels in a The following financial assets are classified as level three in the hierarchy on the basis of the lowest level input that is significant to valuation hierarchy the fair value measurement in its entirety. • Unlisted private equity investments. The private equity investments that are not organized as funds are valued The different valuation levels and which financial assets/liabilities using cash flow analysis, price multiples and recent market that is included in the respective levels are accounted for below. transactions. The private equity investments that are organized as funds are valued based on NAV (Net Asset Quoted prices in active markets Value) as reported by the fund administrators in accordance Quoted prices in active markets are considered the best estimate of with IPEV guidelines (International Private Equity and an asset/liability’s fair value. A financial asset/liability is considered Venture capital Valuation. The NAV are estimated by the valued based on quoted prices in active markets if fair value is fund administrators by using the valuation techniques best estimated based on easily and regularly available prices and these suited to estimate fair value, given the actual circumstances prices represent actual and regularly occurring transactions at of each underlying investment. Because of late reporting arm’s length principle. Financial assets/liabilities valued based on from the funds, the NAV from the previous quarterly quoted prices in active markets are classified as level one in the reporting are used in estimating fair value. The NAV is then valuation hierarchy. assessed for discretionary adjustments based on objective events since the last reporting date. Objective events may The following financial assets are classified as level one in the be the development in underlying values of listed companies valuation hierarchy since the last reporting, changes in regulations or substantial market movements. By substantial market movements in • Listed shares general or in individual sectors, as measured by the • Norwegian government/government backed bonds and other development in various stock market indices, it is predictable fixed income securities that the value of PE investments will be affected as well. On • Exchange traded funds the basis of what this produces of information a final valuation is made. Valuation based on observable market data • Real estate funds. The real estate funds are valued based When quoted prices in active markets are not available, the fair on reported NAV values as reported by the fund value of financial assets/ liabilities is preferably estimated on the administrators. Because of late reporting from the funds, the basis of valuation techniques based on observable market data. NAV values from the previous quarterly reporting are used in estimating fair value. • A financial asset/liability is considered valued based on observable Gjensidige’s paid-in capital in Gjensidige Pensjonskasse. The paid-in capital is valued at nominal value. market data if fair value is estimated with reference to prices that are not quoted, but are observable either directly (as prices) or The valuation process for financial assets classified as level indirectly (derived from prices). three In consultation with the Investment Performance and Risk The following financial assets/liabilities are classified as level two in Measurement department, the Chief Investment Officer decides the valuation hierarchy which valuation models will be used when valuing financial assets classified as level three in the valuation hierarchy. The models are • Currency derivatives, equity options and forward rate evaluated as required. The fair value and results of the investments agreements, in which fair value is derived from the value of and compliance with the stipulated limits are reported weekly to the underlying instruments. These derivatives are valued using Chief Financial Officer and Chief Executive Officer, and monthly to common valuation techniques for derivatives (option pricing the Board. models etc.). • Equity funds, bond funds, hedge funds and combination funds, in which fair value is estimated based on the fair value Sensitivity financial assets level three of the underlying investments of the funds. The sensitivity analysis for financial assets that are valued on the • Bonds, certificates or index bonds that are unlisted, or that basis of non-observable market data shows the effect on profits of are listed but where transactions are not occurring regularly. realistic and plausible market outcomes. General market downturns The unlisted instruments in this category are valued based or a worsening of the outlook can affect expectations of future cash on observable yield curves and estimated credit spreads flows or the applied multiples, which in turn will lead to a reduction where applicable. in value. A fall in value of ten per cent is deemed to be a realistic • Interest-bearing liabilities (banking activities) measured at and plausible market outcome for shares and similar interests, as fair value. These liabilities are valued based on observable well as bonds and other securities with a fixed return that are credit spreads. included in level three of the valuation hierarchy. • Listed subordinated notes where transactions are not occurring regularly.

22 Gjensidige Insurance Group – 4th quarter and preliminary 2016

Carrying Carrying amount as at Fair value as amount as at Fair value as NOK millions 31.12.2016 at 31.12.2016 31.12.2015 at 31.12.2015

Financial assets Financial derivatives Financial derivatives at fair value through profit or loss 1,335.4 1,335.4 434.3 434.3 Financial derivatives subject to hedge accounting 52.2 52.2

Financial assets at fair value through profit or loss, designated upon initial recognition Shares and similar interests 6,892.1 6,892.1 7,202.3 7,202.3 Bonds and other fixed income securities 30,385.8 30,385.8 30,626.4 30,626.4 Shares and similar interests in life insurance with investment options 16,002.8 16,002.8 13,720.6 13,720.6 Bonds and other fixed income securities in life insurance with investment options 1,777.2 1,777.2 1,389.0 1,389.0

Financial assets held to maturity Bonds held to maturity 1,625.9 1,702.3 2,635.6 2,800.5

Loans and receivables Bonds and other fixed income securities classified as loans and receivables 15,895.8 17,160.4 16,173.2 17,439.1 Loans 45,554.9 45,795.3 41,202.1 41,511.7 Receivables related to direct operations and reinsurance 5,621.5 5,621.5 4,997.4 4,997.4 Other receivables 945.9 945.9 502.7 502.7 Prepaid expenses and earned, not received income 91.3 91.3 96.7 96.7 Cash and cash equivalents 2,158.7 2,158.7 3,151.9 3,151.9

Total financial assets 128,287.5 129,868.8 122,184.4 123,924.8

Financial liabilities Financial derivatives Financial derivatives at fair value through profit or loss 1,191.8 1,191.8 403.5 403.5

Financial liabilities at fair value through profit or loss, designated upon initial recognition Debt in life insurance with investment options 17,780.0 17,780.0 15,109.6 15,109.6 Financial liabilities at amortised cost Subordinated debt 1,946.8 1,904.9 1,547.2 1,485.5 Deposits from and liabilities to customers, bank 21,270.4 21,270.4 19,357.2 19,357.2 Interest-bearing liabilities 19,596.5 19,649.2 17,804.7 17,616.7 Other liabilities 1,368.5 1,368.5 1,065.4 1,065.4 Liabilities related to direct insurance 555.2 555.2 619.4 619.4 Accrued expenses and deferred income 493.3 493.3 485.3 485.3

Total financial liabilities 64,202.5 64,213.3 56,392.3 56,142.7

Gain/(loss) not recognised in profit or loss 1,570.5 1,990.0

Gjensidige Insurance Group – 4th quarter and preliminary 2016 23

Valuation hierarchy 2016

The table shows a valuation hierarchy where financial assets/liabilities are divided into three levels based on the method of valuation.

Level 1 Level 2 Level 3 Valuation Valuation techniques techniques Quoted prices based on based on non- in active observable observable NOK millions markets market data market data Total

Financial assets Financial derivatives Financial derivatives at fair value through profit or loss 1,335.4 1,335.4

Financial assets at fair value through profit or loss, designated upon initial recognition Shares and similar interests 820.4 3,764.6 2,307.0 6,892.1 Bonds and other fixed income securities 10,840.6 18,211.7 1,333.5 30,385.8 Shares and similar interests in life insurance with investment options 15,993.6 9.2 16,002.8 Bonds and other fixed income securities in life insurance with investment options 1,764.3 12.9 1,777.2

Financial assets at amortised cost Bonds held to maturity 382.8 1,319.5 1,702.3 Bonds and other fixed income securities classified as loans and receivables 17,158.9 1.5 17,160.4 Loans 3,370.1 42,425.2 45,795.3

Financial liabilities Financial derivatives Financial derivatives at fair value through profit or loss 1,191.8 1,191.8

Financial liabilities at fair value through profit or loss, designated upon initial recognition Debt in life insurance with investment options 17,757.9 22.1 17,780.0

Financial liabilities at amortised cost Subordinated debt 1,904.9 1,904.9 Interest-bearing liabilities 19,649.2 19,649.2

Valuation hierarchy 2015

The table shows a valuation hierarchy where financial assets/liabilities are divided into three levels based on the method of valuation.

Level 1 Level 2 Level 3 Valuation Valuation techniques techniques Quoted prices based on based on non- in active observable observable NOK millions markets market data market data Total

Financial assets Financial derivatives Financial derivatives at fair value through profit or loss 434.3 434.3 Financial derivatives subject to hedge accounting 52.2 52.2

Financial assets at fair value through profit or loss, designated upon initial recognition Shares and similar interests 1,139.8 4,118.8 1,943.7 7,202.3 Bonds and other fixed income securities 11,440.1 17,011.7 2,174.6 30,626.4 Shares and similar interests in life insurance with investment options 13,709.6 11.0 13,720.6 Bonds and other fixed income securities in life insurance with investment options 1,377.7 11.3 1,389.0

Financial assets at amortised cost Bonds held to maturity 810.2 1,990.3 2,800.5 Bonds and other fixed income securities classified as loans and receivables 17,437.5 1.6 17,439.1 Loans 3,364.6 36,609.1 39,973.7

Financial liabilities Financial derivatives Financial derivatives at fair value through profit or loss 403.5 403.5

Financial liabilities at fair value through profit or loss, designated upon initial recognition Debt in life insurance with investment options 15,087.3 22.3 15,109.6

Financial liabilities at amortised cost Subordinated debt 1,485.5 1,485.5 Interest-bearing liabilities 17,616.7 17,616.7

24 Gjensidige Insurance Group – 4th quarter and preliminary 2016

Reconciliation of financial assets valued based on non-observable market data (level 3) 2016

Amount of net realised/ unrealised gains Net recognised in realised/ profit or loss unrealised Trans- that are gains fers attributable to recognised into/out Cur- instruments As at in profit or Purch- Settle- of rency As at held as at NOK millions 1.1.2016 loss ases Sales ments level 3 effect 31.12.2016 31.12.2016

Shares and similar interests 1,943.7 (342.8) 905.7 (199.3) (0.3) 2,307.0 (303.9) Bonds and other fixed income securities 2,174.6 (114.4) 324.2 (119.2) (832.9) (98.7) 1,333.5 24.0 Total 4,118.3 (457.2) 1,229.9 (318.5) (832.9) (99.0) 3,640.5 (279.9)

Sensitivity of financial assets valued based on non-observable market data (level 3) 2016

NOK millions Sensitivity

Shares and similar interests Decrease in value 10% 230.7 Bonds and other fixed income securities Decrease in value 10% 133.4 Total 364.1

Reconciliation of financial assets valued based on non-observable market data (level 3) 2015

Amount of net realised/ unrealised gains Net recognised in realised/ profit or loss unrealised Trans- that are gains fers attributable to recognised into/out Cur- instruments As at in profit or Purch- Settle- of rency As at held as at NOK millions 1.1.2015 loss ases Sales ments level 3 effect 31.12.2015 31.12.2015

Shares and similar interests 2,131.6 (132.5) 278.3 (333.6) 1,943.7 (226.9) Bonds and other fixed income securities 406.1 56.0 1,749.7 (37.3) 2,174.6 32.8 Total 2,537.7 (76.5) 2,028.0 (370.9) 4,118.3 (194.1)

Sensitivity of financial assets valued based on non-observable market data (level 3) 2015

NOK millions Sensitivity

Shares and similar interests Decrease in value 10% 194.4 Bonds and other fixed income securities Decrease in value 10% 217.5 Total 411.8

Gjensidige Insurance Group – 4th quarter and preliminary 2016 25

8. Investment properties

AMF Pensionsforsäkring acquired 50 per cent of the shares in Oslo In the table below the fair value as at the date of the sale of the 50 Areal on 3 November 2015. The remaining investment in Oslo Areal per cent ownership in Oslo Areal is presented as disposals. is classified as a joint venture accounted for according to the equity method. Hence, there is no longer investment properties recognised directly in Gjensidige Insurance Group’s financial statements.

Investment properties (level 3)

NOK millions 31.12.2016 31.12.2015

As at 1 January 6,104.0 Additions 79.6 Additions through subsequent expenditures Disposals (3,275.8) Net gains/(losses) from fair value adjustments 198.2 Transfer from/(to) owner-occupied property (6.4) Transfer to joint ventures (3,099.7) At end of the period 0.0

9. Claims provision, gross

NOK millions 31.12.2016 31.12.2015

General insurance Claims provision, gross, as at 1 January 32,300.5 32,238.1 Additions from acquisitions 348.3 283.3 Claims for the year 17,858.4 15,237.8 Claims incurred in prior years, gross (1,045.8) (653.3) Claims paid (17,779.6) (15,385.0) Discounting of claims provisions 44.9 57.1 Change in discounting rate 194.5 (57.6) Exchange differences (563.7) 580.2 Claims provision, gross, at the end of the period 31,357.4 32,300.5

Pension Claims provision, gross, as at 1 January 878.0 688.8 Claims for the year 1,294.4 1,275.7 Claims incurred in prior years, gross 12.6 51.2 Claims paid (414.7) (346.4) Transfer of pension savings (680.1) (791.3) Claims provision, gross, at the end of the period 1,090.1 878.0

Group Claims provision, gross, as at 1 January 33,178.5 32,926.9 Additions from acquisitions 348.3 283.3 Claims for the year 19,152.7 16,564.7 Claims incurred in prior years, gross (1,033.2) (653.3) Claims paid (18,194.3) (15,731.4) Discounting of claims provisions 44.9 57.1 Change in discounting rate 194.5 (57.6) Transfer of pension savings (680.1) (791.3) Exchange differences (563.7) 580.2 Claims provision, gross, at the end of the period 32,447.5 33,178.5

Discounted claims provision, gross - workers' compensation insurance in Denmark 4,905.2 5,067.4 Nominal claims provision, gross - workers' compensation insurance in Denmark 5,449.1 5,794.7

The claims provisions shall cover future claims payments. The long cash flows and substantial future interest income. The claims claims provisions for workers compensation insurance in Denmark for occupational injuries in Denmark are paid either as annuities or are converted to present value (discounted), whereas other as lump-sum indemnities (which are calculated mainly as provisions are undiscounted. discounted annuities). Therefore, it is most expedient to regard the whole portfolio as annuities. The discount rate used is a swap The reason why the claims provisions for workers compensation interest rate. insurance in Denmark are discounted is that this portfolio consists exclusively of Danish workers’ compensation business with very

26 Gjensidige Insurance Group – 4th quarter and preliminary 2016

10. Contingent liabilities

NOK millions 31.12.2016 31.12.2015

Guarantees and committed capital Gross guarantees 0.1 0.1 Committed capital, not paid 1,174.3 1,643.6

As part of its ongoing financial management Gjensidige has Gjensidige Forsikring is liable externally for any insurance claim committed, but not paid up to NOK 1,174.3 million (1,643.6) in loan arising in the cooperating mutual fire insurers’ fire insurance funds containing secured debt and various private equity and real operations. estate funds, over and above the amounts recognised in the balance sheet. According to the agreement with Gjensidige Pensjonskasse the return, if not sufficient to cover the pension plans guaranteed interest rate, should be covered from the premium fund or through contribution from Gjensidige Forsikring. 11. Related parties

In November 2016 the shares in Gjensidige Investeringsrådgiving Other than the distribution of dividend there have not been any AS (GIR) was distributed as dividend from Gjensidige Pensjon og significant transactions with related parties other than ordinary Sparing Holding AS to Gjensidige Forsikring ASA. This was done current agreements conducted at arm’s length distance. according to accounting continuity.

12. Acquisition of Vardia

On 27 April 2016, Gjensidige Forsikring ASA agreed to acquire the The acquisition is a result of the Group’s intention to expanding its Swedish insurance portfolio of Vardia Insurance Group ASA. presence and distribution power in the Swedish market. As a result Gjensidige has also entered into an agreement to acquire 100 per of the acquisition, Gjensidige’s market share in Sweden will cent of the shares in Vardia Försäkring AB from Vardia Holding AB. increase from approximately 1.6 per cent to approximately 2.5 per cent based on 2015 numbers. Gross premiums written for the The acquisition price for the insurance portfolio and the shares were Swedish portfolio were approximately SEK 600.0 million in 2015, of SEK 200.0 million adjusted for net debt and SEK 54.2 million which 75 per cent were retail premiums and 25 per cent were respectively, with a conditional additional purchase price for the commercial SME premiums. shares of maximum SEK 30.0 million. The accounting of the acquisition was based on the acquisition The distribution company Vardia Försäkring AB is responsible for method. The analysis of acquired assets and liabilities is presented new sales, customer support, product development and claims in the table below and is considered to be temporary. The handling. In addition to being a general agent for Vardia Insurance difference between the acquisition price and the identifiable Group ASA in Sweden, Vardia Försäkring also distributes for acquired assets and assumed liabilities is recognised as goodwill in another risk carrier a premium volume corresponding to the consolidated financial statement. approximately SEK 40 million. Vardia Försäkring AB has some 125 employees. The voting share is equal to the ownership share. Excess value is identified for customer relationships and databases Through its voting rights and in the absence of any contractual for claims history. Provisions were made for deferred tax liability for arrangements, Gjensidige has control over Vardia Försäkring AB. excess value with the exception of goodwill. Goodwill consists of expected synergies from the merging of the Private and All terms and conditions related to the acquisition were clarified and Commercial business areas and optimization of the reinsurance the payment was transferred the first of July, so the acquisition date cover for the Group as a whole. was set at 1 July 2016. The Vardia portfolio and Vardia Försäkring AB are recognised in the consolidated accounts of Gjensidige Profit before tax expense for Vardia Försäkring AB for the period 1 Forsikring as from that date. January 2016 to 31 May 2016 amounted to SEK 4.5 million.

Fair value of each major class of transaction price Vardia Försäkring AB including Vardia portfolio

Carrying amount before Fair value at the NOK millions the transaction Fair value adjustment acquisition date

Goodwill 35.2 35.2 Intangible assets 3.8 277.9 281.7 Insurance realeted assets 454.9 454.9 Receivables etc 237.2 - 237.2 Cash 14.4 14.4 Total assets 710.3 313.1 1,023.4 Liabilities related to insurance 806.0 806.0 Deferred tax liabilities - 5.2 5.2 Other liabilities 118.2 118.2 Total liabilities 924.2 5.2 929.4

Net defined assets and liabilities (213.9) 307.9 94.0 Transaction price 94.0

Acquired goodwill is not considered to be tax deductible.

Gjensidige Insurance Group – 4th quarter and preliminary 2016 27

Quarterly earnings performance

Q4 Q3 Q2 Q1 Q4 Q3 Q2 Q1 Q4 NOK millions 2016 2016 2016 2016 2015 2015 2015 2015 2014

Earned premiums from general insurance 5,685.6 5,705.5 5,536.8 5,514.0 5,493.5 5,471.2 5,188.1 5,119.2 5,214.4 Other income 853.9 818.7 679.2 697.7 832.7 686.4 666.4 697.8 830.1 Total operating income 6,539.5 6,524.2 6,216.0 6,211.7 6,326.2 6,157.7 5,854.6 5,817.0 6,044.5

Total net income from investments 535.7 737.0 591.0 332.4 604.8 (174.0) 518.1 524.4 352.5

Total operating income and net income from 7,075.2 7,261.2 6,807.1 6,544.1 6,931.0 5,983.6 6,372.7 6,341.3 6,397.0 investments

Claims incurred etc. from general insurance (4,013.8) (4,004.3) (3,599.6) (3,898.1) (3,734.7) (3,588.0) (3,341.8) (3,933.0) (3,607.9) Other claims, interest expenses, loss etc. (565.2) (535.7) (412.4) (450.4) (579.7) (447.3) (434.2) (466.6) (604.0) Total claims, interest expenses, loss etc. (4,579.0) (4,540.0) (4,012.0) (4,348.5) (4,314.5) (4,035.3) (3,776.1) (4,399.6) (4,211.9)

Operating expenses from general insurance (971.3) (989.4) (865.6) (365.2) (879.5) (792.3) (776.1) (769.6) (799.3) Other operating expenses (219.0) (216.0) (220.1) (221.5) (266.5) (204.3) (180.4) (184.8) (226.7) Total operating expenses (1,190.3) (1,205.3) (1,085.7) (586.6) (1,146.0) (996.6) (956.5) (954.4) (1,026.0)

Total expenses (5,769.3) (5,745.3) (5,097.7) (4,935.2) (5,460.5) (5,031.9) (4,732.6) (5,354.0) (5,238.0)

Profit/(loss) for the period before tax expense 1,305.8 1,515.9 1,709.3 1,608.9 1,470.6 951.7 1,640.1 987.3 1,159.0

Underwriting result general insurance 700.4 711.8 1,071.6 1,250.7 879.2 1,091.0 1,070.2 416.5 807.2

Q3 Q2 Q1 Q4 Q3 Q2 Q1 Q4 Q3 NOK millions 2014 2014 2014 2013 2013 2013 2013 2012 2012

Earned premiums from general insurance 5,203.6 5,061.5 4,907.2 4,766.3 4,866.9 4,646.6 4,457.2 4,418.2 4,571.7 Other income 600.5 645.2 636.1 630.2 513.8 516.7 486.9 479.5 419.3 Total operating income 5,804.1 5,706.8 5,543.4 5,396.5 5,380.6 5,163.3 4,944.1 4,897.7 4,991.0

Total net income from investments 574.3 765.3 783.5 892.2 846.0 615.6 184.2 780.5 851.6

Total operating income and net income from 6,378.4 6,472.1 6,326.8 6,288.8 6,226.6 5,778.8 5,128.3 5,678.2 5,842.6 investments

Claims incurred etc. from general insurance (3,695.3) (3,357.9) (3,809.3) (3,664.2) (3,293.7) (3,487.3) (3,414.4) (3,108.5) (3,116.6) Other claims, interest expenses, loss etc. (399.3) (448.3) (440.7) (440.8) (332.8) (343.2) (318.9) (321.6) (294.3) Total claims, interest expenses, loss etc. (4,094.7) (3,806.2) (4,249.9) (4,105.0) (3,626.5) (3,830.5) (3,733.3) (3,430.1) (3,410.9)

Operating expenses from general insurance (753.2) (752.5) (748.9) (726.4) (720.6) (710.8) (699.9) (707.0) (674.7) Other operating expenses (193.8) (165.4) (172.0) (174.2) (206.1) (160.6) (154.5) (159.9) (150.1) Total operating expenses (947.1) (917.9) (921.0) (900.7) (926.7) (871.4) (854.4) (866.9) (824.8)

Total expenses (5,041.7) (4,724.2) (5,170.9) (5,005.7) (4,553.3) (4,701.9) (4,587.6) (4,297.0) (4,235.7)

Profit/(loss) for the period before tax expense 1,336.7 1,747.9 1,155.9 1,283.1 1,673.3 1,076.9 540.7 1,381.3 1,606.9

Underwriting result general insurance 755.0 951.0 349.1 375.7 852.5 448.5 342.9 602.7 780.3

28 Gjensidige Insurance Group – 4th quarter and preliminary 2016

Key figures

In addition to the financial statements according to IFRS, Gjensidige uses different alternative performance measures (APM) to present the business in a more relevant way for its different stakeholders. The alternative performance measures have been used consistent over time, and relevant definitions have been disclosed. Comparable figures are provided for all alternative performance measures.

1.1.- 1.1.- Q4 2016 Q4 2015 31.12.2016 31.12.2015

Gjensidige Insurance Group Return on financial assets 1 % 1.0 1.1 3.9 2.6 Equity NOK millions 22,326.0 23,330.6 Return on equity, annualised 2 % 21.4 17.4 Equity per share NOK 44.7 46.7 Total eligible own funds to meet the group SCR (SF) 3 NOK millions 20,377.9 19,491.4 Group SCR margin (SF) 4 % 146.8 138.9 Total eligible own funds to meet the minimum 5 NOK millions 14,065.2 14,088.3 consolidated group SCR (SF) Minimum consolidated group SCR margin (SF) 6 % 266.4 280.9

Gjensidige Forsikring ASA Total eligible own funds to meet the SCR (SF) 7 NOK millions 18,625.0 18,659.7 SCR margin (SF) 8 % 181.5 176.9 Total eligible own funds to meet the MCR (SF) 9 NOK millions 16,124.4 16,236.6 MCR margin (SF), Group 10 % 349.2 343.5

Share capital Issued shares, at the end of the period Number 500,000,000.0 500,000,000.0 Earnings per share in the period, basic and diluted 11 NOK 2.18 2.49 9.34 7.57

General Insurance Gross premiums written Private NOK millions 1,860.1 1,788.1 8,375.9 8,269.1 Commercial NOK millions 1,644.3 1,658.7 7,446.1 7,434.9 Nordic NOK millions 1,409.8 1,182.2 6,262.4 5,430.0 Baltics NOK millions 261.6 267.7 1,080.6 702.9 Corporate Centre/reinsurance NOK millions (20.1) 0,0 53.0 138.7 Total NOK millions 5,155.7 4,896.6 23,218.0 21,975.6 Premiums, net of reinsurance 12 % 97.5 97.9 Earned premiums Private NOK millions 2,111.6 2,036.4 8,291.3 8,152.3 Commercial NOK millions 1,808.1 1,768.1 7,257.4 7,076.8 Nordic NOK millions 1,542.9 1,392.2 5,917.8 5,233.3 Baltics NOK millions 252.4 253.7 1,036.3 642.0 Corporate Centre/reinsurance NOK millions (29.4) 43.0 (60.9) 167.7 Total NOK millions 5,685.6 5,493.5 22,441.9 21,272.0 Loss ratio 13 Private % 60.8 55.5 60.7 60.2 Commercial % 67.5 66.1 66.5 68.2 Nordic % 81.6 78.8 80.1 74.6 Baltics % 77.3 90.4 72.2 81.8 Total % 70.6 68.0 69.1 68.6 Cost ratio 14 Private % 13.2 13.1 12.8 12.7 Commercial % 11.3 11.1 11.0 11.4 Nordic % 17.1 16.5 15.7 15.6 Baltics % 37.3 35.0 37.4 33.6 Total % 17.1 16.0 14.2 15.1 Combined ratio 15 Private % 74.0 68.6 73.5 72.9 Commercial % 78.9 77.2 77.5 79.6 Nordic % 98.7 95.3 95.8 90.3 Baltics % 114.5 125.4 109.6 115.4 Total % 87.7 84.0 83.4 83.7 Combined ratio discounted 16 % 86.7 83.2 82.4 82.3

Gjensidige Insurance Group – 4th quarter and preliminary 2016 29

1.1.- 1.1.- Q4 2016 Q4 2015 31.12.2016 31.12.2015

Pension and Savings Assets under management pension, at the end of the period NOK millions 23,237.3 20,033.0 of which the group policy portfolio NOK millions 5,409.6 4,877.5 Assets under management savings, at the end of the period NOK millions 15,141.6 15,555.1 Operating margin 17 % 44.87 11.16 30.47 19.37 Recognised return on the paid-up policy portfolio 18 % 4.08 5.43 Value-adjusted return on the paid-up policy portfolio 19 % 4.87 5.42 Share of shared commercial customers 20 % 70.0 70.9 Return on equity, annualised 2 % 14.5 10.0

Retail Bank Gross lending, addition in the period NOK millions 1,334.4 2,430.2 4,514.0 9,189.0 Deposits, addition in the period NOK millions 892.1 1,849.2 1,913.1 2,653.9 Gross lending, at the end of the period NOK millions 41,249.5 36,735.5 Deposits, at the end of the period NOK millions 21,270.4 19,357.2 Deposits-to-loan ratio at the end of the period 21 % 51.6 52.7 Net interest margin, annualised 22 % 1.85 2.12 Write-downs and losses, annualised 23 % 0.18 0.20 Cost/income ratio 24 % 42.9 49.6 42.9 49.5 Shared customers' share of gross lending 25 % 76.2 77.0 Capital adequacy ratio 26 % 17.1 16.1 Tier 1 capital ratio 27 % 15.0 14.2 Common equity Tier 1 capital ratio 28 % 13.5 12.6 Return on equity, annualised 2 % 11.7 10.3

1 Return on financial assets = net financial income in per cent of average financial assets including property, excluding Pension and Savings and Retail Bank 2 Return on equity, annualised = Shareholders’ share of net profit for the period/average shareholders’ equity for the period, annualised 3 Total eligible own funds to meet the group SCR (SF) = Total eligible own funds to meet the group SCR under the Solvency II standard formula. Total comprehensive income is included, less a formulaic dividend pay-out ratio in first, second and third quarter of 70 per cent of net profit. 4 Group SCR margin (SF) = Ratio of total eligible own funds to group SCR under the Solvency II standard formula 5 Total eligible own funds to meet the minimum consolidated group SCR (SF) = Total eligible own funds to meet the minimum consolidated group SCR under the Solvency II standard formula. Total comprehensive income is included, less a formulaic dividend pay-out ratio in first, second and third quarter of 70 per cent of net profit. 6 Minimum consolidated group SCR margin (SF) = Ratio of eligible own funds to minimum consolidated group SCR under the Solvency II formula 7 Total eligible own funds to meet the SCR (SF) = Total eligible own funds to meet the SCR for Gjensidige Forsikring ASA under the Solvency II standard formula. Total comprehensive income is included, less a formulaic dividend pay-out ratio in first, second and third quarter of 70 per cent of net profit of the Group. 8 SCR margin (SF) = Ratio of total eligible own funds to SCR for Gjensidige Forsikring ASA under the Solvency II standard formula 9 Total eligible own funds to meet the MCR (SF) = Total eligible own funds to meet the MCR for Gjensidige Forsikring ASA under the Solvency II standard formula. Total comprehensive income is included, less a formulaic dividend pay-out ratio in first, second and third quarter of 70 per cent of net profit of the Group. 10 MCR margin (SF) = Ratio of eligible own funds to MCR for Gjensidige Forsikring ASA under the Solvency II formula 11 Earnings per share, basic and diluted = the shareholders’ share of the profit or loss for the period/average number of outstanding shares in the period 12 Premiums, net of reinsurance = gross premiums written, net of reinsurance/gross premiums written (general insurance) 13 Loss ratio = claims incurred etc./earned premiums 14 Cost ratio = operating expenses/earned premiums 15 Combined ratio = loss ratio + cost ratio 16 Combined ratio discounted = combined ratio if claims provisions had been discounted 17 Operating margin = operating result/(net insurance-related income + management income etc.) 18 Recognised return on the paid-up policy portfolio = realised return on the portfolio 19 Value-adjusted return on the paid-up policy portfolio = total return on the portfolio 20 Shared customers = customers having both pension and savings and general insurance products with Gjensidige 21 Deposit-to-loan ratio = deposits as a percentage of gross lending 22 Net interest margin, annualised = net interest income/average total assets 23 Write-downs and losses, annualised = write-downs and losses/average gross lending 24 Cost/income ratio = operating expenses/total income 25 Shared customers = customers having both bank and general insurance products with Gjensidige 26 Capital adequacy ratio = net primary capital/risk-weighted assets. The result of the period is not included in the calculation for the quarters, with the exception of fourth quarter. 27 Tier 1 capital ratio = Tier 1 capital/risk-weighted assets. The result of the period is not included in the calculation for the quarter, with the exception of fourth quarter. 28 Common equity Tier 1 capital ratio = common equity Tier 1 capital/risk-weighted assets. The result of the period is not included in the calculation for the quarter, with the exception of fourth quarter.

30 Gjensidige Insurance Group – 4th quarter and preliminary 2016

Income statement Gjensidige Forsikring ASA

Restated Restated NOK millions Q4 2016 Q4 2015 1.1.-31.12.2016 1.1.-31.12.2015

Premiums Earned premiums, gross 5,552.8 5,359.9 21,930.6 21,024.4 Ceded reinsurance premiums (142.0) (137.8) (578.0) (447.2) Total earned premiums, net of reinsurance 5,410.7 5,222.1 21,352.6 20,577.2

General insurance claims Gross claims (3,974.2) (3,484.5) (15,205.3) (14,055.3) Claims, reinsurers' share 175.3 (4.0) 497.1 53.9 Total claims incurred, net of reinsurance (3,799.0) (3,488.6) (14,708.2) (14,001.4)

Insurance-related operating expenses Insurance-related administration expenses incl. commissions for received (914.6) (812.1) (2,973.4) (3,117.5) reinsurance and sales expenses Received commission for ceded reinsurance and profit share 12.2 3.5 23.7 4.6 Total insurance-related operating expenses (902.4) (808.6) (2,949.7) (3,112.9) Profit/(loss) of technical account general insurance 709.3 925.0 3,694.8 3,462.8

Net income from investments Income from investments in subsidiaries, associates and joint ventures 4.6 714.2 113.3 777.3 Impairment losses investments in subsidiaries, associates and joint ventures (94.2) (94.2) Interest income and dividend etc. from financial assets 302.2 287.9 1,266.1 1,275.8 Net operating income from property 1.0 0,0 11.9 Changes in fair value on investments 26.4 999.1 (1,053.4) 8.6 Realised gain and loss on investments 206.4 (1,053.6) 1,889.6 (365.4) Administration expenses related to investments, including interest expenses (66.9) (70.5) (218.9) (272.0) Total net income from investments 378.5 878.1 1,902.5 1,436.2

Other income 3.9 2.0 11.9 11.2 Other expenses (2.6) (2.4) (9.2) (9.7)

Profit/(loss) of non-technical account 379.8 877.8 1,905.2 1,437.7

Profit/(loss) before tax expense 1,089.1 1,802.7 5,600.0 4,900.5

Tax expense (180.1) (214.3) (1,322.0) (1,098.5)

Profit/(loss) before components of other comprehensive income 909.0 1,588.4 4,278.0 3,801.9

Components of other comprehensive income Items that are not reclassified subsequently to profit or loss Remeasurement of the net defined benefit liability/asset 73.5 (19.5) (159.2) 69.0 Tax on items that are not reclassified to profit or loss (18.4) 6.8 39.8 (17.1) Total items that are not reclassified subsequently to profit or loss 55.1 (12.7) (119.4) 51.9

Items that may be reclassified subsequently to profit or loss Exchange differences from foreign operation 57.5 52.1 (273.0) 293.9 Exchange differences from hedging of foreign operation 62.7 Tax on items that may be reclassified to profit or loss (13.5) (54.3) 66.6 (96.7) Total items that may be reclassified subsequently to profit or loss 43.9 (2.2) (206.5) 259.9

Total comprehensive income 1,008.1 1,573.5 3,952.1 4,113.7

Gjensidige Insurance Group – 4th quarter and preliminary 2016 31

Statement of financial position Gjensidige Forsikring ASA

Restated NOK millions 1.1.-31.12.2016 1.1.-31.12.2015

Assets Goodwill 1,587.0 1,676.7 Other intangible assets 955.5 846.9 Total intangible assets 2,542.5 2,523.6

Investments Buildings and other real estate Owner-occupied property 19.0 19.0 Subsidiaries and associates Shares in subsidiaries 5,741.7 5,421.2 Shares in associates and joint ventures 1,086.9 1,098.4 Interest bearing receivables within the group incl. joint ventures 1,420.2 1,538.0 Financial assets measured at amortised cost Bonds held to maturity 1,226.8 1,797.1 Loans and receivables 16,018.9 16,338.3 Financial assets measured at fair value Shares and similar interests (incl. shares and similar interests measured at cost) 6,134.4 7,130.6 Bonds and other fixed-income securities 23,108.2 24,205.7 Financial derivatives 1,207.8 327.8 Reinsurance deposits 457.8 524.6 Total investments 56,421.6 58,400.7

Reinsurers' share of insurance-related liabilities in general insurance, gross Reinsurers' share of provision for unearned premiums, gross 115.5 32.0 Reinsurers' share of claims provision, gross 512.2 361.7 Total reinsurers' share of insurance-related liabilities in general insurance, gross 627.7 393.7

Receivables Receivables related to direct operations 4,983.0 4,671.0 Receivables related to reinsurance 340.1 25.7 Receivables within the group 89.5 61.0 Other receivables 833.5 367.2 Total receivables 6,246.0 5,124.8

Other assets Plant and equipment 273.8 274.7 Cash and cash equivalents 1,143.0 1,704.5 Pension assets 486.2 93.1 Total other assets 1,903.0 2,072.4

Prepaid expenses and earned, not received income Earned, not received interest income 0,0 22.2 Other prepaid expenses and earned, not received income 4.2 3.5 Total prepaid expenses and earned, not received income 4.2 25.7 Total assets 67,745.0 68,540.9

32 Gjensidige Insurance Group – 4th quarter and preliminary 2016

Restated NOK millions 1.1.-31.12.2016 1.1.-31.12.2015

Equity and liabilities Paid in equity Share capital 1,000.0 1,000.0 Own shares (0.1) (0.1) Share premium 1,430.0 1,430.0 Perpetual Tier 1 Capital 999.2 Other paid in equity 36.7 29.3 Total paid in equity 3,465.9 2,459.2

Retained equity Funds etc. Fund for valuation variance Fund for unrealised gains Natural perils capital 2,266.2 2,171.0 Guarantee scheme provision 628.9 616.2 Other retained earnings 11,318.2 12,885.7 Total retained earnings 14,213.3 15,672.9

Total equity 17,679.1 18,132.1

Subordinated loan 1,197.7 1,197.4

Insurance-related liabilities in general insurance, gross Provision for unearned premiums, gross 8,585.9 8,238.4 Claims provision, gross 30,802.6 31,652.5 Provision for premium discounts and other profit agreements 56.3 44.5 Total insurance-related liabilities in general insurance, gross 39,444.8 39,935.4

Provision for liabilities Pension liabilities 493.2 528.7 Current tax 1,149.4 1,145.6 Deferred tax liabilities 905.4 934.9 Other provisions 327.2 335.8 Total provision for liabilities 2,875.1 2,945.1

Liabilities Liabilities related to direct insurance 289.6 392.1 Liabilities related to reinsurance 88.2 82.7 Financial derivatives 1,173.1 366.3 Accrued dividend 3,400.0 4,200.0 Other liabilities 1,252.9 970.4 Liabilities to subsidiaries and associates 43.1 22.2 Total liabilities 6,246.9 6,033.7

Accrued expenses and deferred income Other accrued expenses and deferred income 301.4 297.2 Total accrued expenses and deferred income 301.4 297.2

Total equity and liabilities 67,745.0 68,540.9

The security provision was reclassified from liabilities to equity and provision for deferred tax on the security provision was recognised. These changes were implemented from 1 January 2016 and the corresponding figures have been changed accordingly. This was caused by changed legislation which also applies for some other minor changes. Discounting of reserves and introduction of risk margin are expected to be implemented at a later stage in Group and company accounts, in connection with the implementation of IFRS 17 Insurance Contracts.

Gjensidige Insurance Group – 4th quarter and preliminary 2016 33

Statement of changes in equity Gjensidige Forsikring ASA

Equity as at 31.12.2014 1,000.0 (0.1) 1,430.0 22.8 59.2 (1,611.2) 15,263.4 16,164.2

Reclassified security provision 2,818.0 2,818.0 Deferred tax (760.9) (760.9) Equity as at 1.1.2015 1,000.0 (0.1) 1,430.0 22.8 59.2 (1,611.2) 17,320.5 18,221.4

1.1.-31.12.2015

Profit/(loss) before components of other comprehensive 3,801.9 3,801.9 i Components of other comprehensive income Items that are not reclassified subsequently to profit or loss Remeasurement of the net defined benefit liability/asset 69.0 69.0 Tax on items that are not reclassified to profit or loss (17.1) (17.1) Total items that are not reclassified subsequently to profit 51.9 51.9 or loss

Items that may be reclassified subsequently to profit or loss Exchange differences from foreign operations 293.9 293.9 Exchange differences from hedging of foreign operations 62.7 62.7 Tax on items that may be reclassified to profit or loss (96.7) (96.7) Total items that may be reclassified subsequently to profit 259.9 259.9 or loss

Total components of other comprehensive income 259.9 51.9 311.8

Total comprehensive income for the period 259.9 51.9 3,801.9 4,113.7

Own shares 0,0 (9.9) (9.9) Accrued and paid dividend (4,199.6) (4,199.6) Equity-settled share-based payment transactions 6.5 6.5

Equity as at 31.12.2015 1,000.0 (0.1) 1,430.0 29.3 319.1 (1,559.3) 16,912.9 18,132.1

1.1.-31.12.2016

Profit/(loss) before components of other comprehensive 11.1 4,266.9 4,278.0 i Components of other comprehensive income Items that are not reclassified subsequently to profit or loss Remeasurement of the net defined benefit liability/asset (159.2) (159.2) Tax on items that are not reclassified to profit or loss 39.8 39.8 Total items that are not reclassified subsequently to profit (119.4) (119.4) or loss

Items that may be reclassified subsequently to profit or loss Exchange differences from foreign operations (273.0) (273.0) Tax on items that may be reclassified to profit or loss 66.6 66.6 Total items that may be reclassified subsequently to profit (206.5) (206.5) or loss

Total components of other comprehensive income (206.5) (119.4) (325.9)

Total comprehensive income for the period 11.1 (206.5) (119.4) 4,266.9 3,952.1

Own shares 0.1 (3.8) (3.8) Accrued and paid dividend (5,396.6) (5,396.6) Equity-settled share-based payment transactions 7.3 7.3 Perpetual Tier 1 capital 997.1 997.1 Perpetual Tier 1 capital - interest paid (8.9) (8.9)

Equity as at 31.12.2016 1,000.0 (0.1) 1,430.0 36.7 999.2 112.6 (1,678.7) 15,779.4 17,679.1

34 Gjensidige Insurance Group – 4th quarter and preliminary 2016 Gjensidige is a leading Nordic insurance group listed on the Oslo Stock Exchange. We have about 3,900 employees and offer insurance products in Norway, Denmark, Sweden and the Baltic states. In Norway, we also offer banking, pension and savings. Operating income was NOK 24 billion in 2015, while total assets were NOK 129 billion.

Gjensidige Forsikring ASA Schweigaardsgate 21, 0191 Oslo P.O.box 700, Sentrum, 0106 Oslo Phone +47 915 03100