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Corporate Governance

This statement follows the structure set out in the Norwegian Accounting Act Section 3-3b:

Introduction

The Board bases its overall corporate governance on:

  • Optimising the Company’s assets in a long-term perspective
  • Equal treatment of shareholders
  • Equal and assured access to reliable, relevant and up-to-date information about the Company’s business

The statement follows the the structure set out in the Norwegian Accounting Act Section 3­-3b:

  1. The statement is submitted in compliance with the Norwegian Code of Practice for Corporate Governance of 30 October 2014.
  2. The Code of Practice is available at  http://www.nues.no/ 
  3. Grounds are stated for any deviations from the Code of Practice and regulations, and they are commented on under each item.
  4. The main elements in the systems for internal control and risk management are described in section 10 of the statement, see section 10a below. The systems for internal control and risk management relating to the financial reporting process are described separately in section 10b.
  5. The Company’s Articles of Association do not contain provisions that, in whole or in part, expand on or deviate from the provisions of Chapter 5 of the Public Limited Liability Companies Act.
  6. The annual report describes the composition of the Board and the Board’s select committees. The main elements of the currently applicable instructions and guidelines for these bodies are described in sections 8 and 9 below.
  7. The provisions in the Articles of Association that regulate the appointment and replacement of board members are described in section 8 below.
  8. The provisions in the Articles of Association and authorisations that empower the Board to decide that the Company shall buy back or issue own shares are explained in section 3 below.

1. Statement on corporate governance

1. Statement on corporate governance
Corporate governance is subject to an annual evaluation and discussion by the Board. The Board discussed and prepared this statement at a meeting on 25 January 2018 and adopted it at a meeting on 15 February 2018. Gjensidige’s compliance with the individual items is also described.
The Board’s statement on corporate governance in Gjensidige Forsikring ASA is available at
www.gjensidige.no.
Core values and social responsibility
Gjensidige’s core values and social mission lie in its core business operations – to safeguard life, health and assets through relieving customers of financial risk and providing active, helpful assistance when there is a risk of loss or when a claim has arisen.

Gjensidige has signed the UN Global Compact and we are committed to promoting the ten Global Compact principles for sustainable development. This is particularly important in relation to our asset management, where ethical screening is used to ensure that we do not invest in companies that are in breach of our ethical standards.

The Board has adopted guidelines for ethics and corporate social responsibility. Gjensidige’s commitment will be further developed on the basis of the expertise that it accumulates through conducting its core business.

Through our operations, we have acquired extensive expertise in loss prevention. This know-how shall as far as possible be used for the benefit of society as a whole. Traffic and fires are especially important areas in which the Company’s expertise in loss prevention can help to save lives and assets. Other important areas are awareness-raising campaigns aimed at combating fraud and other crime, and efforts to promote physical and mental health in the population. The Company’s efforts in the area of corporate social responsibility will be concentrated on loss prevention in the broadest sense.

Gjensidige’s internal control systems include the Company’s core values and guidelines for ethics and corporate social responsibility. A dedicated ethics suggestion box has been established for reporting relevant matters. Effective notification procedures have also been established that make it easy to notify the management and/or the Board of inappropriate conduct that it has not been possible to change through established management systems, and that also ensure that whistleblowers are protected and that matters that are raised receive relevant follow-up.

The Group shall be characterised by high ethical standards. Its corporate governance shall be in accordance with best practice. A good corporate governance policy will improve the Group’s potential for value creation and increase the trust and respect it enjoys in society over time.

Our work on social responsibility is described in more detail on pages 22–39 of the annual report and athttps://www.gjensidige.no/group. Selected quantitative results are presented in the table on page 39. 

The working environment, equal opportunities and integration are described in more detail on page 29 of the annual report.

The Company’s financial investments shall comply with generally accepted guidelines for socially responsible investments (SRI). Gjensidige’s guidelines for SRI cover human rights, labour rights, the environment, corruption and weapons production. Companies that fail to meet the requirements set out in the guidelines will be excluded from Gjensidige’s investment universe.

Deviations from the Code of Practice: None

2. The business

Operations
Pursuant to its Articles of Association, Gjensidige can engage in direct and indirect general and life insurance operations, including taking on pure risk insurance with a duration of no more than one year in the area of life insurance, owning companies that engage in general insurance, life insurance, banking, financing and securities activities, and other related businesses.

Vision and goals
Gjensidige’s vision is to know the customer best and care the most. Its mission is to safeguard life, health and assets, which has been the Company’s value basis for two hundred years.
Gjensidige’s goal is to become the most customer­oriented general insurance company in the Nordic region, based on profitable operations and a leading position.

Strategy
A strong focus on customers is the core of Gjensidige’s strategy. Backed by a down-to-earth business culture and analysis-based core operations, this will give Gjensidige a competitive advantage.

Gjensidige’s position shall be further strengthened through the development of Gjensidige as a pan-Nordic general insurance player that also takes its share of the growing accident and health insurance market. Acquisitions shall complement organic growth and contribute to the Company delivering on its strategic goals, and the following group targets after 2–3 years:

  • a return on equity of more than 15 per cent
  • a combined ratio in the range of 90–93

Three strategic areas are in focus: digital customer experiences, analytically-driven business processes, and dynamic organisational capabilities.

A fast pace and flexibility in the development of products, services and service models are necessary in order to be the preferred insurance provider. The automation of internal processes is intended to ensure cost-efficiency and facilitate increased use of self-service solutions by customers.

Analytical use of data in order to offer attractive products and services and ensure profitable oper­ations is crucial if we are to realise our ambition of being the most customer-oriented general insurance company in the Nordic region.

Changes in technology and customer behaviour mean that increasingly close cooperation is required between our distribution channels. A good understanding of what customers are concerned with in their everyday lives is a prerequisite if we are to develop new, relevant services.

Customers’ needs and behaviour are changing faster than ever. It is therefore paramount to reduce the time it takes to develop and launch new customer-oriented services.
Information is a strategic resource for Gjensidige. The work on ensuring good data quality, efficient data collection processes, availability, reporting and analysis will therefore be further strengthened.

Our strategic ambitions cannot be realised without motivated, committed managers and employees who have the right expertise and attitudes. A higher pace of change – not least as regards technology and customer behaviour – means that a transition is needed from traditional training-­based competence-raising measures to a dynamic learning culture driven by individual managers and employees. Competence shall increasingly be shared through data-driven work processes and cooperation-based solutions. A stronger overall understanding shall be created through internal rotation of managers and staff.

Gjensidige Bank and Gjensidige Pensjon play an important strategic role in relation to Gjensidige’s position in the Norwegian market. Exclusive customer solutions and concepts will continue to be important in both the private and commercial markets.

As part of our strategic work, we constantly challenge our strategic platform. The main conclusion is that it remains firm, also after the changes we see in the market, including further development of Gjensidige’s partner strategy using new technologies.

Deviations from the Code of Practice: None

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3. Equity and dividends

Equity
The Gjensidige Group’s equity amounted to NOK 23.7 billion at the end of 2017.
The solvency margin at the end of the year was 137 per cent based on the standard formula and 169 per cent based on the Company’s partial internal model. See note 23 for further description of event after the balance sheet date.



Dividend
Gjensidige’s target is to distribute high and stable nominal dividends, and at least 70 per cent of the profit after tax expense over time. When determin­ing the size of the dividend, consideration will be given to expected future capital needs. Over time, Gjensidige will also distribute excess capital.

Gjensidige’s capitalisation is adapted at all times to the Group's adopted strategic targets and risk appetite. The Group shall maintain its financial freedom of action in parallel with strong capital discipline that supports the Group’s targeted return on equity.

Adopted dividend for 2016
A dividend of NOK 3.4 billion was adopted and disbursed in April 2017 for the 2016 financial year. That corresponds to NOK 6.80 per share. On 25 October 2016, based on the current authorisation granted to the Board, the Board also adopted a dividend of NOK 4.00 per share, corresponding to a total of NOK 2.0 billion. The dividend is related to the distribution of excess capital and was disbursed on 10 November 2016.

Proposed dividend for 2017
The proposed dividend for the 2017 financial year is NOK 3,55 billion. That corresponds to NOK 7,10 per share. The proposed dividend based on the profit for the year corresponds to 78.6 per cent of the Group's profit after tax expense. The Board’s proposal for the distribution of dividend for the 2017 financial year is explained in more detail in the annual report.

Authorisations granted to the Board
Gjensidige’s annual general meeting granted the following authorisations to the Board in 2017:

  • Authorisation to purchase Gjensidige shares in the market with a total nominal value of up to NOK 50,000,000, corresponding to 25,000,000 shares with a nominal value of NOK 2. The authorisation is valid until the next annual general meeting, but no longer than until 30 June 2018, and the shares can, among other things, be used as consideration shares in connection with the acquisition of businesses or for subsequent sale and deletion The authorisation can also be used to fulfil the Group’s obligations under the share savings programme and incentive schemes for employees. The Board is free to acquire and sell shares in the manner that the Board finds expedient, such, however, that general principles concerning equal treatment of shareholders are adhered to. The minimum and maximum amounts that can be paid per share are NOK 20 and NOK 225, respectively. In 2017, the authorisation was used to purchase shares in connection with the share savings programme for employees and incentive schemes for executive personnel. The authorisation was considered as a separate item at the Company’s annual general Meeting.
  • Authorisation of the Board to decide the distribution of dividend on the basis of the Company’s annual accounts for 2016. The authorisation is valid until the next annual general meeting, but no longer than until 30 June 2018. The authorisation is in accordance with the Company’s adopted capital strategy and dividend policy. It gives the Company flexibility and means that the Company can distribute additional dividends without having to call an extraordinary general meeting. The authorisation was not used in 2017. The authorisation was considered as a separate item at the Company’s annual general Meeting.
  •  Authorisation to raise subordinated debt and other external financing limited to NOK 1.5 billion, and to trade in the bonds issued at all times under the Company’s subordinated bond issue and on the conditions stipulated by the Board. The authorisation was not used in 2017. The authorisation was considered as a separate item at the Company’s annual general Meeting.
  • Authorisation to increase the share capital through new subscription for shares. The authorisation enables the Board to exploit the mechanisms provided for in the Public Limited Liability Companies Act. The purpose can, among other things, be to increase the Company’s financial flexibility in connection with the acquisition of businesses, and to ensure an optimal capital structure. The authorisation enables the Board to increase the Company’s share capital by a total nominal amount of up to NOK 50,000,000, corresponding to 25,000,000 shares with a nominal value of NOK 2. The subscription price and other terms and conditions for subscription are stipulated by the Board. A capital increase within these limits can take place through one or more capital increases, as decided by the Board. The Board may decide that the shareholders’ pre-emption right to the new shares can be waived. The Board may also decide that the share capital contribution can be made in the form of assets other than cash. The Board is hereby authorised to implement the amendments of the Articles of Association that the share capital increase necessitates. The authorisation does not include decisions on mergers pursuant to the Public Limited Liability Companies Act Section 13-5. New shares qualify for dividend from the date on which they are registered in the Register of Business Enterprises. The authorisation is valid until the general meeting in 2018, but no longer than until 30 June 2018. The authorisation was not used in 2017. The authorisation was considered as a separate item at the Company’s annual general meeting.

When the Board proposes new authorisations to the general meeting, they shall, in the same way as the existing authorisations, be considered as separate items at the Company’s annual general meeting, be limited to defined purposes and be valid until the next annual general meeting.

Deviations from the Code of Practice: The authorisation of the Board to carry out share capital increases and to purchase own shares is not entirely limited to defined purposes. Steps were not taken to ensure that the general meeting could vote on each individual purpose the authorisations were intended to cover. This was done in order to ensure the flexibility the authorisations was meant to represent.

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4. Equal treatment of all shareholders

The Company has only one class of shares and all shares carry equal rights in the Company.

Each share carries one vote at the general meeting, unless otherwise stipulated by law or other official decision.

Existing shareholders have pre-emption rights when new shares are issued. With the approval of at least two-thirds of the total number of votes represented at the general meeting, the general meeting can decide to set aside the pre-emption rights. Grounds must be stated for any proposal to waive pre-emption rights, and this must be documented in the case document submitted to the general meeting.

In cases where the Board decides to issue new shares and the pre-emption right is waived on the basis of an authorisation, the reason will be stated in a stock exchange announcement in connection with the share issue.

The Board shall ensure that the Company complies with the Public Limited Liability Companies Act Sections 3-8 and 3-9 in agreements between the Company and parties mentioned therein. On entering into not immaterial agreements between the Company and shareholders, related parties, board members or members of the management or related parties of such members, the Board shall obtain an assessment from an independent third party. The same applies to agreements with group companies that have minority shareholders. This follows from the rules of procedure for the Board, which are available at https://www.gjensidige.no/konsern/.

All board members and members of the management shall immediately notify the Board if they, directly or indirectly, have an interest in a transaction or agreement that the Company is considering. This applies even if the board member is deemed not to be disqualified from considering the matter. These provisions are laid down in the rules of procedure for the Board.

The objective is to avoid harming the Company’s reputation in connection with investments where there may be circumstances that can be perceived as an unfortunate close involvement, or a close relationship between the Company and a board member or executive personnel.

The Company’s trading in own shares must take place through a stock exchange or in other ways at the listed price.

Deviations from the Code of Practice: None

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5. Freely negotable shares

Pursuant to the Articles of Association, the shares in the Company are freely negotiable. Gjensidige is a Norwegian financial institution. Norwegian framework legislation contains general licensing provisions that apply to all Norwegian financial institutions in connection with large acquisitions of shares (ten per cent or more).

Deviations from the Code of Practice: None

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6. The general meeting

The general meeting is Gjensidige’s supreme body.

The general meeting is open and accessible for all shareholders. The annual general meeting shall be held before the end of April every year. The Company’s Articles of Association do not contain provisions that expand on or deviate from the provisions of the Public Limited Liability Companies Act Chapter 5.

The general meeting is conducted in accordance with the Code of Practice:

  •  The Articles of Association stipulate that three weeks’ notice shall be given. The notice of the meeting and case documents are made available on the Company's website: https://www.gjensidige.no/konsern/. Shareholders may nonetheless demand that the case documents be sent to them free of charge. The minutes will be published at https://www.gjensidige.no/konsern/ as soon as they are available.
  • The case documents shall be sufficiently detailed to provide a basis for considering the matters raised.
  • Shareholders who wish to attend the general meeting must notify the Company in writing at least five days before the meeting. The registration deadline is based on practical considerations in connection with the organisation of the general Meeting.
  • In connection with elections at the general meeting, it will be possible to vote for one candidate at a time.
  • The CEO, the Chair of the Board and the Chair of the Nomination Committee are required to be present unless this is clearly unnecessary or they have valid grounds for not attending.
  • The Company's auditor will be present at the Meeting.
  • If necessary, and if the nature of the matter so requires, the whole Board and the whole Nomination Committee will be present at the Meeting.
  • Pursuant to the Articles of Association, the general meeting shall be chaired by the Chair of the Board or another person designated by the Board.
  • Shareholders may attend by proxy. The notice of the meeting will contain more detailed information about the procedure for attendance by proxy, including an authorisation form. In addition, a person will be appointed who can vote by proxy on behalf of shareholders.
  • Shareholders can vote electronically in advance before the general meeting. Voting in advance can be done via the Company’s website www.gjensidige.no, and via VPS Investor Services.

More information about the use of proxy and shareholders’ right to have matters considered by the general meeting is provided in the notice of the meeting and at https://www.gjensidige.no/konsern.

Pursuant to the Articles of Association, the Board may decide that shareholders can attend the general meeting by means of electronic aids, including exercising their rights as shareholders electronically.

Members of the Board are present at the general meeting. In accordance with the Articles of Association, the Chair of the Board and the CEO will normally be present to answer questions.

Deviations from the Code of Practice: Pursuant to the Code of Practice, the whole Board, the whole Nomination Committee and the auditor should be present at the general meeting. It has so far not been necessary for all the above parties to be present, but this may change depending on the circumstances relating to the matters to be considered. In accordance with the Articles of Association, the Chair of the Board, the Chair of the Nomination Committee, the Company’s auditor and the CEO will be present to answer any questions.

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7. Nomination Committee

Gjensidige has decided in its Articles of Association that the Company shall have a Nomination Committee consisting of four to six members elected by the general meeting. The Chair and members of the Nomination Committee are elected for a term of one year.

At present, Gjensidige’s Nomination Committee consists of five members. All members are independent of the Board and other executive personnel. According to the rules of procedure for the Nomination Committee, the members should reflect the interests of the shareholders as a whole. As majority owner, the Gjensidige Foundation is represented by two members.

This recommendation was followed in 2017.

As of 31 December 2017, the Nomination Committee consisted of the following members:

  • Einar Enger (Chair)
  • Marianne Ødegaard Ribe
  • John Ove Ottestad
  • Torun Bakken Skjervø
  • Joakim Gjersøe

One of the board members elected from among the employees attends as a regular member in connection with discussions and recommendations concerning the office of Chair of the Board. The Chair of the committee can invite other board members selected from among the employees to take part in certain important discussions relating to the election of the Chair of the Board.

The Nomination Committee started its preparations for the 2017 election already in autumn 2016. A total of eight meetings were held. In order to arrive at the best possible basis for its assessments, the Nomination Committee had conversations with the Chair of the Board, the board members and the CEO.

The Nomination Committee shall contribute to the election of competent and engaged officers with a focus on value creation. The objective is that, together, the elected officers shall be capable of challenging and inspiring the management in the Company’s business areas.

The Nomination Committee shall propose candidates for:

  • the Board, including the Chair of the Board
  • the Nomination Committee, including the Chair of the Committee
  •  the external auditor

A reasoned recommendation containing relevant personal details shall be enclosed with the notice of the meeting.
The Nomination Committee wishes to ensure that the shareholders’ views are taken into account when members are nominated for the Board. In addition to the Nomination Committee consulting particularly active shareholders to elicit proposals for candidates and ensure support for its recommendations, all shareholders are encouraged on the Company’s website to propose candidates for governing bodies. The deadline for submitting proposals is normally the turn of the year in order to ensure that proposed candidates are considered at the start of the process, and to have time to carry out statutory suitability assessments and obtain the necessary clearances from the financial authorities before the election. The Nomination Committee shall recommend all rates of remuneration to be decided by the general meeting, including the remuneration of members of the Nomination Committee, which is decided by the general meeting, and submit a recommendation concerning whether the proposal for the auditor’s fee should be approved.

Deviations from the Code of Practice: None

8. Board, composition and independence

The Board of Gjensidige shall consist of ten members, three of whom are elected by the employees. The shareholder-elected board members are elected for two years at a time. Board members elected by and from among the employees are also elected for two years at time, but such that at least one member is up for election every year.

The Chair of the Board is elected for one year at a time by the general meeting.

Tine G Wollebekk left the Board with effect from 1 June 2017 as a result of her being appointed as CEO of Bank Norwegian and Norwegian Finans Holding from the same date. The Nomination Committee immediately started work on finding her successor.

The Board of Gjensidige shall be broadly composed, and consideration shall be given to the Board’s ability to work well as a collective. In the rules of procedure for the Nomination Committee, the general meeting sets out the following guidelines for the Nomination Committee’s work:

  • The Nomination Committee shall emphasise that all proposed candidates for the Board have the necessary experience, qualifications and capacity to carry out the duties of the office in a satisfactory manner.
  • When nominating members to the Board, the principles for good corporate governance mean that emphasis should be placed on the overall interests of the shareholders and on reflecting the composition of the shareholders.
  • The members of the Board should be independent of the Company’s management.

Each gender currently has at least 40 per cent representation among the shareholder-elected members of the Board. For a more detailed presentation of the board members, see pages 49 to 63 of the annual report and the Company's website https://www.gjensidige.no/konsern/.

The Board’s independence
No member of the Company’s management is a member of the Board. All shareholder-elected board members are independent of executive personnel. Board members Eivind Elnan, Per-Arne Bjørge and Hilde Nafstad were elected on the proposal of the Company’s biggest owner, the Gjensidige Foundation. All board members are independent of important business associates.

Board members’ shareholdings
Seven of the board members own shares in the Company; see the overview in Note 18. The board members follow the general rules for primary insiders, but they have all voluntarily accepted and informed their related parties that trading in the Gjensidige share, or derivative instruments, may only take place within a reasonable time frame after submission of the quarterly report, so that trading can take place on the basis of the same information about the Company and the Company’s financial position as is available to the rest of the market.

Deviations from the Code of Practice: None

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9. The work of the board

The work of the Board follows a fixed annual plan and is conducted in accordance with established rules of procedure. The rules of procedure are available at https://www.gjensidige.no/konsern/. They contain more detailed rules for the work of the Board and how it handles matters, including what matters shall be considered by the Board, rules for notices of meetings and the conducting of meetings. The Board has also issued instructions for the CEO, which regulate the internal division of responsibility and tasks.

The Board holds regular physical board meetings and holds nine fixed meetings every year. Additional meetings may be held depending on the matters at hand and the situation. They can be held by phone or electronically using the Company’s board portal. In 2017, a total of 11 board meetings were held, of which one was an extraordinary board meeting and one was held via the board portal. One of the ordinary meetings was an annual strategy meeting. The Board also held a study session to obtain external input on the Board’s strategy revision.

In matters in which the Chair of the Board is or has been actively involved, another board member shall chair the Board’s discussion of the matter.

The Board carries out an annual self-evaluation that is also submitted to the Nomination Committee for use as documentation in connection with the committee’s work.

The Board of Gjensidige Forsikring ASA has established select committees – an Audit Committee, a Risk Committee and a Remuneration Committee. The committees consist of between three and five members, including at least one elected from among the employees. This contributes to thorough and independent assessments of matters concerning, among other things, internal control, financial reporting and remuneration of executive personnel. The purpose of the committees is to facilitate good and well-prepared discussions at board meetings.
The Audit Committee
The Audit Committee is a preparatory and advisory select committee that is tasked with preparing the Board’s follow-up of the financial reporting process and improving the Board’s follow-up of the Group, among other things by contributing to thorough and independent consideration by the Board of matters relating to financial reporting. The committee shall also monitor the systems for internal control and risk management, as well as the Company’s internal audit function. The committee is also in continuous contact with the Company’s elected auditor about the auditing of the annual accounts, and it assesses and monitors the auditor’s independence, cf. Chapter 4 of the Auditors Act.

The committee shall state an opinion on the election of the auditor and the auditor’s fee. The committee held seven meetings in 2017.
As of 31 December 2017, the Audit Committee consisted of the following members:

  • Gisele Marchand (Chair)
  • Per Arne Bjørge
  • Gunnar Mjåtvedt
  • Hilde Merete Nafstad
  • Tine G Wollebekk (until 1 June 2017)

The Risk Committee
The Risk Committee is a preparatory and advisory select committee. Among other things, the Risk Committee shall prepare the Board’s consideration of matters relating to the group companies’ overall risk, and regularly assess whether the Group’s management and control systems are adapted to the appetite for risk and scope of the business. The committee also reviews the Company’s risk limits and investment strategy and limits. It also prepares the Board’s consideration of ORSA and ICAAP, and of whether the risk management system ensures that the internal model reflects at all times the Group’s risk profile in an appropriate manner.

The committee held nine meetings in 2017.

As of 31 December 2017, the Risk Committee consisted of the following members:

  • Inge K Hansen (Chair)
  • Per Arne Bjørge
  • John Giverholt
  • Lotte Kronholm Sjøberg

The Remuneration Committee
The Remuneration Committee shall, within the limits of the Board’s responsibility, strengthen the Board’s follow-up of the Group’s remuneration policy in relation to the CEO, the senior management team and key personnel.
The committee shall prepare matters for the Board. It is primarily responsible for:

  • Drafting proposals for and following up compliance with the Group’s guidelines and framework for remuneration
  • Annually preparing and proposing the remuneration of the CEO
  • Annually drafting proposals for the CEO's scorecard
  •  Acting as adviser to the CEO in connection with the annual assessment of the remuneration of the senior group management
  •  Assessing the management's proposed ‘Statement on the stipulation of pay and other remuneration for executive personnel’, cf.  the Public Limited Liability Companies Act Section 6-16 a.
  • Considering other important personnel matters relating to executive personnel

Reference is otherwise made to the Board’s state­ment on remuneration in Note 18 in the annual report .
The committee is an advisory body to the Board. It held one meeting in 2017.

As of 31 December 2017, the Remuneration Committee consisted of the following members:

  • Inge K Hansen
  • Eivind Elnan
  • Gunnar Mjåtvedt
  • The Gjensidige Group has been granted permission by the authorities to establish a joint remuneration committee for the whole Group, with effect from 1 January 2017.

The Board’s impartiality
The Group’s rules of procedure for the Board regulate matters concerning board members’ impartiality. A board member is disqualified from participating in considering or deciding matters that are of such great importance to the board member or his/her related parties that he or she must be deemed to have a direct or indirect same applies to the CEO. Board members are also disqualified when other special circumstances are present that could undermine trust in their motives for participating in deciding a matter.

Individual board members are obliged to ensure they are not disqualified from considering a matter on grounds of partiality. In cases of doubt, the matter shall be presented to the Chair of the Board. The Chair of the Board shall submit cases of doubt relating to his or her own impartiality to the whole Board.

In 2017, the Chair of the Board recused himself in connection with the consideration of one matter following an impartiality assessment.

The Board shall approve agreements between the Company and a board member or the CEO. The Board shall also approve agreements between the Company and a third party in which a board member or the CEO must be deemed to have a particular interest.

Introduction programme for new board members
Relevant information about the Company and the work of the Board is made available to new board members on the Company’s web-based portal for board members. In addition, new board members will, by meeting key members of the management, be given an introduction to the organisation and running of the Company.

Deviations from the Code of Practice: None

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10. Risk management and internal control

a) General
The Board focuses on risk management and internal control, which are an integral part of the Board’s systematic work. The Board has adopted a group policy for risk management and internal control. Among other things, the document describes the main principles for risk management and internal control, in addition to describing the division of responsibility. The document is available at https://www.gjensidige.no/konsern/,

The main purpose of risk management and internal control is to provide reasonable assurance of goal attainment based on the following methods:

  • Targeted, efficient operations.
  • Reliable, available management information and correct external Reporting.
  • Compliance with internal and external regulations.
  • Loss limitation and safeguarding of assets

Gjensidige’s internal control system includes the Company’s core values, guidelines for ethics and corporate social responsibility and other governing documents.

The Board carries out an annual review of the Group’s most important risk areas and its internal control. The Board also receives quarterly reports on the risk situation in the Group. The division of responsibility between the Board and the CEO is as follows:

The Board’s responsibilities:

  • The Board has overall responsibility for ensuring that Gjensidige has established expedient, effective processes for risk management and internal control in accordance with recognised frameworks.
  • The Board shall ensure that such processes are satisfactorily established, implemented and followed up, among other things by considering reports prepared by the Risk Management and Compliance functions that are submitted to the Board by the CEO and the internal audit function, which reports directly to the Board.
  • The Board shall ensure that risk management and internal control are integrated in the Group’s strategy and business processes.

The CEO’s responsibilities:

  • The CEO shall ensure that Gjensidige’s risk management and internal control are implemented, documented, monitored and followed up in a satisfactory manner. The CEO shall issue instructions and guidelines for how the Group’s risk management and internal control shall be carried out in practice, and establish expedient control processes and functions.

Centralised control functions have been established that are independent of business operations: the Risk Management, Compliance and Actuary functions. In addition, the internal audit function serves as an additional, independent control level that reports directly to the Board.

The Risk Management function is an independent function that is responsible for maintaining and further developing the Group's risk management system to ensure that the system is satisfactory at all times in relation to laws, regulations and the requirements of the Board. The Risk Management function shall prepare guidelines for internal control that cover all types of risks in the risk management system, and ensure that they are implemented and followed up at least annually.

The Compliance function is independent in relation to operations. It identifies, assesses, advises on, monitors and reports on the Group’s compliance risk. Assessing compliance risk is part of the Group’s annual risk assessment process.

The Actuary function is an independent control function that is responsible for actuarial matters. The control tasks that have been assigned to the Actuary function follow from Section 28 of the Financial Undertakings Act concerning the implementation of the Solvency II Directive.

The internal audit function is an independent, objective confirmatory and advisory function that shall contribute to the organisation achieving its goals. Group Audit is the Company’s third-line defence. It is tasked with carrying out an independent risk assessment that covers all the Group’s operations. Group Audit’s primary responsibility is to monitor and check the

Group’s processes for risk management, internal control and corporate governance. The head of the internal audit function is appointed and dismissed by the Board and submits reports on the Group’s risk management and internal control to the Board and the CEO at least once a year. 

The Group’s control functions are organised on the basis of the principle of three lines of defence.

b) Financial reporting and financial management
Among other things, the CFO is responsible for asset management, risk and capital management, the Actuary function, the planning process and financial performance. Among other things, the Executive Vice President of Group Staff and General Services is responsible for financial reporting and follow-up of the results of and limits on investment activities. This organisation is intended to ensure independence between the leading premise setter for profit performance and those who report the results.

The Gjensidige Group publishes four interim reports in addition to the ordinary annual accounts. The accounts shall meet the requirements of laws and regulations and be prepared in accordance with adopted accounting principles.

Publishing deadlines are stipulated by the Board. The tasks that are carried out in the concluding phase are set out in a schedule that specifies the person responsible and the deadline for ensuring timely reporting. The schedule is reviewed prior to each quarter to ensure that any new circumstances are identified and that the schedule continues to be expedient.

As part of Gjensidige’s governing documents, an overall description has been prepared of the process relating to the closing of the accounts. Reporting instructions have also been prepared, including accounting principles that subsidiaries and branch offices must use in their reporting. Internal control is based on the principle of division of labour and dualism, and it is documented through descriptions of processes and procedures in important areas. Authorisation structures, reconciliations and management reviews have been established.

As part of the Board’s above-mentioned annual review of the Group’s risk areas and internal control, an evaluation is also carried out of risks and controls in the financial reporting process, and of whether measures are necessary.

Consolidated accounts are prepared every month and reported to the Board on a monthly basis, with comments on and explanations for each business segment. In this connection,

Group Accounts cooperates with the Actuary function, Group Performance Management, Reinsurance and the controllers in the business areas in order to quality assure the figures and comments. The insurance provisions are assessed monthly by the Actuary function and reviewed annually by an external actuary. Accounting items that entail a varying degree of discretionary assessment are reviewed and documented in advance of the quarterly closing of accounts. Discretionary accounting items are reviewed by the Board’s Audit Committee at quarterly meetings. The Audit Committee also considers interim reports, company accounts and consolidated accounts. The processes are identical for the Group and the parent company. The annual accounts are adopted by the respective general meetings.

The Group has established a planning process for financial management whereby the CEO, the CFO and the Chief Performance Officer meet with business and support areas at least every quarter to review financial performance and goal attainment, as well as events that affect future developments. Among other things, they assess risks relating to financial reporting, in both the short and long term. The senior group management reviews the monthly financial reporting, including developments in profit/loss and balance sheet items, goal attainment, the forecast for the year, risk assessment and analyses of and comments on results in business and support areas.

The Group is concerned with ensuring that processes relating to financial reporting and financial management are carried out by personnel with the correct expertise for the different tasks involved. Professional updating through self-study, courses and continuing education takes place on the basis of the needs and complexity of the position in question. The goal is that the Group shall have sufficient expertise and resources at all times to be able to carry out timely closing of the accounts without there being material errors in the consolidated and company accounts. This involves fields such as IFRS, NGAAP and the Annual Accounts Regulations for Insurance Companies etc. Gjensidige participates actively in various industry organisations for banks and life and general insurance companies where topical issues are discussed.

Requirements and principles for outsourced functions or activities are specified in the ‘Group Policy on Outsourcing’, which has been approved by the Board. The policy ensures compliance with the requirements of the outsourcing provisions in Norwegian law and the Solvency II regulations.
All functions and activities that are not defined as core functions and activities may be outsourced provided that Gjensidige retains full responsibility for the discharging of the entity’s obligations.

When outsourcing, the following shall be assessed and documented:

  • How a vendor of sufficient quality is to be selected
  • Details that the written agreement must include
  • How outsourcing will be managed and monitored
  • Contingency plans (for both the enterprise and vendor).

Outsourcing shall not:

  • Significantly impair the quality of Gjensidige’s management
  • Unduly increase operational risk
  • Impede supervision of outsourced activities
  • Undermine continuous and satisfactory service to policyholders.
  • Intragroup outsourcing shall always be in line with relevant market prices and conditions; in other words, the same conditions shall apply as for outsourcing to an external party. Particular care should be taken when considering intragroup outsourcing, so that potential conflicts of interest are identified and mitigated.
  • Gjensidige’s centralised purchasing function, the Group Procurement function, shall be notified of all outsourcing and shall have an updated overview of all outsourcing agreements. The function ensures that the agreements are in accordance with internal requirements. The Group Procurement function is also responsible for sending a message to the FSA when notification to the FSA is required.

The Group Procurement function shall report annually to the Board with an overview of all outsourcing agreements reported to the Financial Supervisory Authority. Furthermore, the

Group Procurement function shall, on behalf of Executive Vice President Group Staff and General Services of Gjensidige Forsikring ASA, at least annually, report the results to the Group CEO.

In connection with the outsourcing of important work processes, such as payroll and ICT services, the Group obtains statements in accordance with ISA3402 in order to assess the contracting party’s internal control. The purpose of this is to ensure that the contracting party has satisfactory internal control. Gjensidige’s own security department also performs independent security checks of the contracting party in relation to ICT systems, including access control and the protection of sensitive data.

Deviations from the Code of Practice: None

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11. Renumeraton of the Board

The Nomination Committee proposes the remuner­ation of the Board, which is decided by the general meeting. This remuneration is not dependent on the Group’s performance, and none of the board members have share options issued by the Company.

The remuneration of individual board members is described in Note 18 in the annual report. The amount of the remuneration reflects the Board’s responsibility, expertise, time consumption and the complexity of the business. In addition, board members are paid a separate fee for participating in the Board’s Audit Committee, Risk Committee and Remuneration Committee.

As a rule, board members or companies with which they are associated shall not take on specific assignments for the Company in addition to their office as a board member. If such assignments nonetheless arise, the whole Board shall be informed about this. No such assignments were carried out in 2017, and no fees have therefore been paid to board members over and above the remuneration they receive as members of the Board.

Deviations from the Code of Practice: None

12. Renumeration of executive personell

The Group has established a remuneration system that applies to all employees. The system is intended to ensure that Gjensidige attracts and retains employees who perform, develop, learn and share. The remuneration shall be competitive, but the Group shall not be a wage leader. Employees are expected to take an overall view of the pay and benefits offered by the Group. The Group’s remuneration systems shall be open and performance-based, so that they, as far as possible, are perceived as being fair and predictable. The remuneration that is paid shall correspond to the agreed performance.

Guidelines for remuneration and career development shall be linked to achievement of the Group’s strategic and financial goals and core values, and both quantitative and qualitative targets shall be taken into consideration. The measurement criteria shall promote the desired corporate culture and long-term value creation, and, as far as possible, take actual capital costs into account. The remuneration system shall contribute to promoting and providing incentives for good risk management, prevent excessive risk-taking and contribute to avoiding conflicts of interest. A fixed basic salary shall be the main element of the overall remuneration, which also consists of variable pay, pension and insurance schemes, and payments in kind. Variable pay shall be used to reward achievements that exceed expectations, where both results and behaviour in the form of compliance with core values, brand and management principles will be assessed.

Variable pay shall be performance-based without being a risk driver, and it shall reflect the results and contributions of both the Company, the division, the department and the individual employee. Other compensation elements offered shall be perceived as attractive by both new and current employees.

There is a ceiling on all variable remuneration.

The Board’s guidelines for stipulating the remuneration of the Senior Group Management and executive personnel meet the regulatory requirements.

The remuneration of the CEO is decided by the Board on the basis of an overall assessment that takes into account Gjensidige’s remuneration system and the market salary for corresponding positions. The fixed salary is assessed and stipulated annually based on wage growth in society in general and in the financial industry in particular. Variable remuneration (bonus) is decided by the Board on the basis of agreed goals and deliveries. It can amount to up to 50 per cent of the fixed salary including holiday pay. Variable remuneration is earned annually and is based on an overall assessment of financial and non-financial performance over the past two years. Half of the variable remuneration is in the form of a promise of shares in Gjensidige Forsikring ASA, one third of which are allocated in each of the following three years. Restricted variable remuneration that has not yet been disbursed may be reduced if subsequent results and developments indicate that it was based on incorrect assumptions.

Remuneration of the senior group management is stipulated by the CEO within limits discussed with the Remuneration Committee and on the basis of guidelines issued by the Board.

Correspondingly, the Group’s guidelines are used as the basis for other executive personnel and employees who can materially influence risk.

The overall remuneration is decided on the basis of the need to offer competitive terms in the various business areas. It shall contribute to attracting and retaining executive personnel with the desired expertise and experience who promote the Group's core values and development.

The fixed salary is assessed and stipulated annually based on wage growth in society in general and in the financial industry in particular. Variable pay (bonus) for executive personnel is earned annually and is based on an overall assessment of financial and non-financial performance over the past two years. Individual variable remuneration, including holiday pay, can amount to up to 30 per cent of the annual salary. Variable pay is not included in the pension basis. Half of the variable remuneration is in the form of a promise of shares in Gjensidige Forsikring ASA, one third of which are allocated in each of the following three years. Restricted variable remuneration that has not yet been disbursed may be reduced if subsequent results and developments indicate that it was based on incorrect assumptions.

The guidelines are submitted to the general meeting as a separate item in accordance with the Public Limited Liability Companies Act Section 6-16 a. The general meeting’s decision on the guidelines in the statement on the remuneration of executive personnel is advisory in relation to the Board, except the part of the document that concerns share-based remuneration, which is binding. As a result, the general meeting holds an advisory vote on the Board’s statement on the stipulation of pay and other remuneration and the Board’s guidelines for the stipulation of pay for executive personnel, as well as a binding vote on the new guidelines for the allocation of shares, subscription rights etc. that the Board proposes pursuant to the Public Limited Liability Companies Act Section 6-16 a (1) no 3.

The Board’s complete statement on the remuneration of executive personnel is included in Note 18 in the annual report.

Deviations from the Code of Practice: None

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13. Information and communication

Gjensidige shall have an open dialogue with all stakeholders. All financial market participants shall have simultaneous access to correct, clear, relevant and detailed information about the Group’s historical results, operations, strategy and outlook. The information shall be consistent over time. The Board has adopted guidelines for the reporting of financial information and other information in the form of an IR policy. The guidelines are available at https://www.gjensidige.no/group/investor-relations.

Gjensidige has published all relevant ownership information about the Group at https://www.gjensidige.no/group

This is the most important means of providing identical, simultaneous and relevant information to all stakeholders. A financial calendar is also published on the website, containing dates for the announcement of financial information and information about the Company’s general meetings.

The Company has a dedicated IR (investor relations) function that has a central place in the Company’s management, and that ensures that there is regular contact with the Company’s owners, potential investors, analysts and the financial market. The goal is that the Company’s information work shall be in accordance with best practice at all times.

The interim results are presented directly by webcast and teleconference that are open for all stakeholders. The webcast can be followed directly at https://www.gjensidige.no/konsern/investorinformasjon.
A recording is also made available at the same web address.

A capital market day shall be held when it is considered expedient in order to keep the market up-to-date about the Group’s development, goals and strategies.

Deviations from the Code of Practice: None

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14. Corporate takeover

The Company has one big owner, the Gjensidige Foundation. The Foundation has laid down in its statutes that its ownership interest shall amount to at least 60 per cent of the shares issued in Gjensidige.

Guidelines have been adopted for corporate takeovers. These guidelines ensure that all shareholders' interests are safeguarded and they contribute to equal treatment of shareholders.
The guidelines are in compliance with the Norwegian Code of Practice for Corporate Governance. The Board will obtain independent valuations and draft a recommendation on whether or not the shareholders should accept the bid.

In conversations with the bidder and in its other actions, the Board shall endeavour to safeguard the interests of the Company and the shareholders as a whole. The Board shall ensure that all the Company’s shareholders are treated equally and kept up-to-date about relevant matters relating to the bid. The shareholders must be informed as soon as possible to give them time to consider the bid. Endeavours will otherwise be made to avoid undue disruption of other activities during a takeover process.

The Board shall not attempt to prevent bids being made, and, as a rule, it shall seek to facilitate the implementation of bids that may be in the interests of the shareholders. The Board shall not take such actions as described in the Securities Trading Act Section 6-17 without first obtaining instructions from the general meeting. The Company shall not use authorisations to issue shares to prevent a bid.

In order to look after the shareholders’ interests, the Board shall consider whether to initiate processes that trigger competing bids in a way that safeguards the shareholders’ interests.
As a rule, the Company shall engage the services of an independent legal adviser and an independent financial adviser in its work of assessing a submitted or notified serious bid.

These advisers cannot represent the Company’s shareholders in connection with the transaction. Grounds shall be stated for the experts’ valuation.

Deviations from the Code of Practice: None

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15. The external auditor

The external auditor is elected by the general meeting on the Nomination Committee’s recommendation. The Audit Committee, which in practice is the external auditor’s most important point of contact, submits an opinion on the election to the Nomination Committee.

The external auditor normally carries out an interim audit every autumn in addition to auditing the annual accounts. The interim audit focuses on the Company’s internal control in relation to the presentation of the accounts. The accounting department and executive personnel have regular contact with the auditor throughout the year.

A number of regular meetings are held between the external auditor and the Company’s governing bodies during the course of the year:

The auditor presents the main elements of the audit plan to the Audit Committee annually. In addition, the Audit Committee considers the auditor’s assessment of internal control in relation to financial reporting. The auditor attends board meetings when the annual accounts are considered.

At least one meeting is held every year between the Board and the auditor, and between the Audit Committee and the auditor, at which the CEO and other executive personnel are not present.

A policy and guidelines have been adopted for relations with the elected auditor. At least every five years, several accounting companies will normally be invited to tender for the contract for the statutory auditing.

Guidelines have been drawn up for the management’s right to use an external auditor for services other than auditing.

The auditor shall under no circumstances carry out advisory assignments or other services if this could affect or give rise to doubts about the auditor’s independence and objectivity. Nor shall the auditor act in a manner that entails a risk that he/she will have to audit the result of his/her own advisory services or other services, or that entails a risk that he/she will perform functions that are part of the Group’s internal decision-making process.

The Audit Committee shall also monitor the auditor’s independence, including what services other than auditing the auditor has provided. The breakdown between the auditor’s fee and consultancy fees for 2017 is described in Note 17.

A new external auditor was elected at the general meeting in 2017.

Deviations from the Code of Practice: None

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