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ANNUAL REPORT 2010GjensidiGe Bank asa GjensidiGe Bank GROUP

gjensidige bank gROUP annUaL RePORT 20102

PAGE CONTENT3 Report of the board of directors8 income statement8 statement of Comprehensive income9 balance sheet 10 statement of Changes in equity 11 Cash flow statement PAGE NOTEs12 note 1 accounting Principles16 note 2 Critical accounting estimates and judgements17 note 3 segment information17 note 4 net interest income17 note 5 net Commision income18 note 6 net income / (Loss) on Financial instruments18 note 7 Operating expenses21 note 8 Tax21 note 9 Other assets22 note 10 intangible assets23 note 11 Fixed assets23 note 12 interest bearing securities24 note 13 Loans to and Receivables from Credit institutions24 note 14 Loans to and Receivables from Customers24 note 15 Loans by geographic area25 note 16 Losses on Loans26 note 17 Customers deposits27 note 18 debt incurred through the issue of security27 note 19 Other Liabilities27 note 20 Pension29 note 21 Fair Value of Financial intruments32 note 22 age analysis of overdue loans33 note 23 Related Parties34 note 24 Capital adequacy35 note 25 Classification of Financial instruments37 note 26 shares and Ownership interests37 note 27 Risk and Risk Management40 note 28 Liquidity Risk41 note 29 Market Risk41 note 30 Covered bonds41 note 31 assets Pledged as Collateral42 note 32 equity based Remuneration PAGE OTHER INFORMATION43 declaration from the board of directors and CeO44 auditor’s statement45 Control Committee’s statement

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annUaL RePORT fOR The GjensidiGe Bank asa GROUP

BUsINEssgjensidige bank asa was launched in 2007, with Online Retail banking in norway as its main area of business. The bank has offices in Førde and Oslo.

The bank offers traditional banking products such as current accounts, savings products and secured and unsecured loans. by combining internet banking with a local presence, the bank has achieved a unique position compared with other internet-based banks. in autumn 2009 the bank acquired Citibank’s norwegian consumer finance business. This acquisition made the bank one of the largest consumer finance providers in norway.

gjensidige bank asa cooperates with sparebanken sogn og Fjordane, which provides both technical banking and staff-related services.

distribution takes place via the group portal, www.gjensidige.no and the group’s 22 consultation offices at central locations throughout the country. The bank’s products are also offered through its own customer service centre.

The bank has agreements with Tekna, the Confederation of Vocational Unions (Ys), the norwegian society of engineers and Technologists (niTO) and the norwegian Farmers and smallholders Union (nbs) relating to the delivery of products and services to the organisations’ members. The bank’s products form part of gjensidige Forsikring’s loyalty programme, which offers good deals on insurance products.

gjensidige bank asa is a wholly-owned subsidiary of gjensidige bank Holding as, which in turn is a wholly-owned subsidiary of gjensidige Forsikring asa. gjensidige bank boligkreditt as is a wholly owned subsidiary of gjensidige bank asa.

The bank has access to financing with covered bonds via gjensidige bank boligkreditt as.

The bank does not carry out its own research and development (R&d).

The annual report is consolidated and comprises gjensidige bank asa and gjensidige bank boligkreditt as.

COMMENTs ON THE ANNUAL ACCOUNTs Profit & loss account The financial statements have been prepared in accordance with iFRs (international Financial Reporting standards). in accordance with the requirements in norwegian accounting legislation, the board of directors confirms that the prerequisites have been met for preparation of the accounts under the assumption that the company will continue as a going concern and that the annual accounts have been prepared under this assumption.

The figures stated relate to the gjensidige bank asa group. The figures in brackets refer to the parent company. if there is no number given in brackets, the figure stated applies to both the group and parent company.

The profit/loss after tax was a profit of nOk 24.6 million (17.3 million) in 2010, compared with a loss of nOk 54.9 million (55.6 million) in 2009. The main reason for the improvement in earnings is increased income and better operating margins. Following the acquisition of Citibank’s consumer finance business in autumn 2009, a significant proportion of the bank’s loan portfolio consists of unsecured loans, which has also helped to boost earnings. net interest and credit commission income amounted to nOk 407.0 million (392.6 million) in 2010, compared with nOk 57.5 million (53.3 million) in 2009. The main reasons for the growth in net interest income were higher volumes and higher margins. The group’s net interest income in relation to the average assets was 2.88 per cent for the year, compared with 0.63 per cent for 2009.

net other operating income came to nOk 37.5 million (38.1 million) in 2010, compared with nOk 16.5 million (16.7 million) in 2009, and com-prises commission, fees and fair value adjustments. The main reason for the improvement was a higher proportion of commission and membership fees as a result of growth in the customer base. Fair value adjustments as-sociated with the bank’s portfolio of liquid securities resulted in a nOk 5.6 million charge, as opposed to a nOk 7.0 million gain in 2009.

Operating expenses amounted to nOk 302.1 million (298.7 million) in 2010, compared with nOk 147.3 million (145.5 million) in 2009. The increase was a result of the bank having more staff and a larger organi-sation, as well as the integration and restructuring costs following the acquisition of the Citibank consumer finance business.

given that Online Retail banking is still in a start-up phase, the board considers the profit performance to be in keeping with expectations.

Loan write-downsgjensidige bank asa has a set of guidelines for writing down losses on lending. in 2010 the bank had a write-down for loan losses of nOk 109.4 million (109.0 million), compared with nOk 3.0 million (1.8 million) in 2009. Realised losses amounted to nOk 7.5 million. at the end of 2010, write-downs for loan losses on the balance sheet amounted to nOk 117.1 (115.6 million), compared with nOk 15.3 million (14.1 million) at the end of 2009. Write-downs rose in relation to 2009 as a result of the acquisition of the consumer finance portfolio. The bank’s total write-downs represented 0.83 per cent of gross lending as of the end of the year.

nOk 248.9 million of loans were more than 30 days overdue at the end of 2010. The increase in loans in default was mainly a result of the acquisition of the unsecured loan portfolio. Unsecured loans that default are collectively assessed. The outstanding loan balance, less expected discounted cash flows from customer repayments, is recognised under group write-downs. a loss is realised when it is overwhelmingly probable that a loan will not be repaid.

The board considers write-downs to be adequate.


events after the balance sheet date There have been no events after the balance sheet date that have a material impact on the financial statements.

BALANCE sHEETat the close of 2010, the bank had nOk 15.8 billion (14.7 billion) in total assets, compared with nOk 12.7 billion (12.8 billion) at the end of 2009. The return on equity in 2010 was 2.64 per cent, compared with minus 7.74 per cent in 2009.

Loansgjensidige bank asa’s loan portfolio increased by 22 per cent over the year, and at the end of 2010 gross loans amounted to nOk 14.1 billion (11.8 billion), compared with nOk 11.6 billion (9.9 billion) in 2009. The portfolio mainly consists of loans with adjustable interest rates. The bank lends only to consumers and agricultural customers. at the end of the year, 77.6 per cent of the bank’s exposure to customer lending was secured by mortgages. The average loan in the mortgage portfolio is just under nOk 1 million. There is no single exposure over nOk 10 million.

deposits gjensidige bank asa experienced a 39 per cent increase in customer deposits in 2010, and at the close of the year customer deposits amounted to nOk 9.1 billion, compared with nOk 6.6 billion in 2009. The deposit-to-loan ratio was 64.6 per cent, compared with 56.6 per cent in 2009.

Loans from financial markets net outstanding debt securities amounted to nOk 4.8 billion (3.7 bil-lion) at the close of 2010, compared with nOk 4.4 billion in 2009. nOk 1.2 billion of this debt matures over the next 12 months. gjensidige bank asa has a reserve of covered bonds totalling nOk 750 million issued by gjensidige bank boligkreditt as. Of this reserve, nOk 586.6 million is utilised in the swap arrangement with norges bank (the cen-tral bank of norway). The swap arrangement has provided the group with an infusion of nOk 512.9 million in liquid treasury bills.

Capital adequacy and equity at the end of 2010, the bank had a capital adequacy ratio of 16.1 per cent, compared with 17.8 per cent in 2009. The decline in capital adequacy was expected, and was chiefly attributable to the growth in lending. at the end of the year, net equity and subordinated loan capital amounted to nOk 1.2 billion.

The bank’s lower limit for capital adequacy is 12 per cent.

at the end of 2010, the bank’s equity amounted to nOk 1.3 billion, compared with nOk 1.2 billion in 2009, and was equivalent to 8.2 per cent of total assets. gjensidige bank asa has nOk 71.5 million in free equity as of 31.12.2010.

The board believes that the equity and capital adequacy ratio of the bank and the group are satisfactory and sufficient, in view of the group’s operations.

OWNERsHIP AND GOVERNANCEGood corporate governance Corporate governance is a priority for the board of directors. The bank seeks to comply with the norwegian code of practice for corporate governance, in so far as it is considered relevant. in its work in this area, the bank puts a particular emphasis on the composition of governing bodies, the responsibilities of the board, communication and informa-tion, and risk management and auditing. The board of gjensidige bank asa has approved ethical rules, and all employees have access to its policy, guidelines, ethical rules, instructions and other information through the group’s intranet.

The articles of association, instructions and corporate governance systems establish a clear division of roles and responsibilities at the bank.

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GOVERNING BODYsupervisory board gjensidige bank asa has exactly the same supervisory board as gjensi-dige bank Holding as.

The supervisory board has 15 members, 4 of whom are employee representatives. The supervisory board shall monitor the board of directors and CeO’s administration of the company and ensure that the bank’s objects are promoted in accordance with legislation, the articles of association and the decisions of the general Meeting and the supervisory board.

Control committee every two years, the general Meeting elects a control committee composed of three members and one deputy member. One of the members satisfies the requirements that apply to judges, cf. the second sub-section of section 54 of the Courts of justice act of 13 august 1915. This member also needs to be approved by the Financial supervi-sory authority of norway. The control committee shall monitor that the business is being appropriately and responsibly run, in accordance with the relevant legislation and regulations, the articles of association, the guidelines of the supervisory board and general Meeting, as well as the stipulations of the Financial supervisory authority of norway.

The Board of directors The board of directors is composed of five members, and one deputy member elected by the supervisory board.

Members are elected for two years at a time. Two of the board mem-bers are not employed at gjensidige. The board supervises the manage-ment of the bank’s affairs. it shall ensure that the bank’s operations are organised in a satisfactory manner, which includes ensuring that its bookkeeping and asset management are properly audited.

Changes to the composition of the Board of directorsbjørn Walle replaced geir bergskaug as Chairman of the board as of 17 september 2010. The reason for this was that geir bergskaug stopped working for gjensidige Forsikring asa.

external auditorThe external auditor performs the statutory audit and approves the annual financial statements and other financial information provided by the bank.

kPMg has been chosen as the bank’s external auditor.

internal auditorThe internal auditor shall help reassure the board of directors and the top management that the bank has appropriate and effective processes for risk management, internal control and corporate governance. The internal auditor reports to the board of directors.

gjensidige Forsikring asa’s corporate audit unit acts as the bank’s internal auditor.

FINANCIAL RIsKThe bank’s financial risk mainly comprises credit, liquidity and interest rate risk. Risk is reported monthly in accordance with the principles, strategies and limits on risk adopted by the board.

Credit riskCredit risk represents the risk of losses arising from customers or other counterparties failing to repay their debts when they are due. The bank’s credit strategy and policy have been drawn up based on gjensidige bank’s business plan. The credit strategy includes guidelines on credit risk profiles, and is the board’s most important tool in relation to managing the bank’s credit risk. The credit strategy is revised each year. The board follows up the credit strategy through monthly reports showing how well the bank is complying with the board’s most impor-tant guidelines. The bank uses risk classification models to calculate the risk associated with its credit exposure.

interest-rate risk Market risk is the risk of losses associated with unfavourable move-ments in market prices, which in this context relates to positions and activities in the interest, currency and stock markets. The group has no exposure to the stock market and has no currency risk.

interest rate risk refers to the risk of a negative impact on equity as a result of unexpected changes in general interest rate levels reducing the market value of fixed interest assets or increasing the market value of fixed interest debt/liabilities. The bank’s exposure to general interest rate levels shall be kept low in relation to its core capital.

To help manage interest rate risk, the bank calculate how much values would change in the event of changes to interest rate levels. The board has specified limits on the bank’s exposure to interest rate risk. at the end of the year, potential losses in the event of an unexpected change in interest rates of one per cent were around nOk 3.0 million.

Liquidity risk Liquidity risk is the risk that the bank will be unable to meet all of its financial obligations when they are due. The board of directors has set limits on liquidity risk. The bank shall have available a liquidity buffer made up of short-term deposits, liquid securities and/or committed credit facilities which provides a reasonable amount of time to make the necessary adjustments in the event of an acute liquidity freeze.


OPERATIONAL RIsKOperational risk is the risk of losses resulting from inadequate or failing internal processes or systems, human error or external events. The group follows gjensidige’s template for reporting in accordance with the “Regulations relating to risk management and internal controls”.

The aim of these reports is to shed light on the bank’s overall risk position, and to use that information to take the right business and strategic decisions.

Risk assessments are carried out within all of the bank’s areas of busi-ness. The most important risks, as well as a plan of action for reducing them to acceptable levels, are reported to the CeO.

in consultation with the bank’s senior management, the CeO considers the strategic risk, and reports the most important risks to the bank’s board, along with measures to minimise those risks. The board reports the status of previously reported areas of risk and plans of action.

The bank’s internal auditor assesses whether the bank’s internal control activities satisfy the stipulations of the “Regulations relating to risk management and internal controls” and reports the findings to the board.

The 2010 reports showed that risk levels and internal controls relating to operational risk within the various business areas were satisfactory.

WORKING ENVIRONMENTThe working environment at the bank is considered very good. Two work culture surveys were carried out in 2010, as well as a staff satisfaction survey. The 2010 staff satisfaction survey showed a slight decline in some areas in comparison with the previous year, whilst in other areas there was a marginal improvement. We do not consider this to be a big issue, bearing in mind that the organisation has been through a challenging year of integration, which has involved some major restructuring. Overall, staff satisfaction at the bank is high in relation to other companies in the gjensidige group.

The bank is signed up to the government’s ia programme for inclusive working life, and encourages and promotes physical and cultural activi-ties through its systematic Hse work. sickness absence was 6.90 per cent in 2010, 2.7 per cent of which consisted of short-term absence, i.e. absences of less than 16 days. Of the 32,149 scheduled workdays in the 2010 financial year, sickness absence made up 2,216 days.gjensidige bank asa has carefully monitored sickness absence in ac-cordance with the rules for inclusive working life companies, and it has not uncovered any negative conditions at the workplace that may be causing sickness absence.

There were no material personal injuries, property damage or accidents at the bank in 2010.

EQUAL OPPORTUNITYequal opportunity is important to gjensidige bank asa. Women and men shall have the same opportunities for career development, per-sonal development and pay. at the end of 2010 the bank had 54 male and 78 female employees. at the close of the year, the bank’s senior management team consisted of six men and one woman. 36% of all line managers are women.

The bank will seek to increase the proportion of women managers. Three of the board’s five permanent members are women. The bank has hiring policies, ethical guidelines and Hse routines designed to ensure compliance with the act relating to gender equality

DIsCRIMINATION AND ACCEssIBILITY The bank believes that all people are of equal value. as such, it aims to ensure that everyone is entitled and able to participate in society on an equal footing, regardless of any disability, and to prevent discrimina-tion on the grounds of disability. The bank has hiring policies, ethical guidelines and Hse routines designed to ensure compliance with the anti-discrimination and accessibility act. The bank has several employ-ees from ethnic minorities.

THE ENVIRONMENTThe bank’s operations result in minimal pollution of the environment. internal environmental measures focus on energy economising, reduc-ing travel through the use of videoconferencing, standardised printers and copiers that print on both sides of the paper, and responsible waste management.

sOCIAL REsPONsIBILITYThe bank’s corporate social responsibility affects the management and governance of its business, people and skills, administration, operations and commercial development. The bank is dependent on having the trust of society. The bank’s organisation shall at all times prioritise high ethical standards. This shall be achieved raising the awareness of our employees and elected officers to our ethical rules.

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OBJECTIVES AND STRATEGIESGjensidige Bank ASA shall help strengthen relationships with existing insurance customers in the private and agricultural segment and attract new customer groups to Gjensidige. The bank shall be profi table, and over the long term achieve Gjensidige’s required return on equity.

The bank focuses on the following main areas:• profi table growth;• further automation with an emphasis on improving the customer experience and improving internal processes;• realising the group’s vision that “We shall know the customer best and care the most!”

SUMMARY AND OUTLOOKThe bank has achieved its goal of reaching break-even in 2010, and for the fi rst time since its foundation in 2007 it achieved an operat-ing profi t for the year. The bank has successfully integrated Citibank’s Norwegian consumer fi nance business, and is now one of the biggest players in the Norwegian consumer fi nance market. The bank’s activi-ties and operations in Oslo have been brought together at Gjensidige’s headquarters at Sollerud.

In 2010 the bank renewed its collaboration agreements with The Norwegian Society of Engineers and Technologists (NITO) and The Norwegian Society of Chartered Technical and Scientifi c Profession-als (Tekna), while its agreement with The Confederation of Vocational

Unions (YS) was renewed in January 2011. Together with the ongoing partnership with the Norwegian Farmers and Smallholders Union (NBS), these agreements will make an important contribution to achieving the bank’s strategic goals in relation to the consumer and agricultural markets. Over the course of 2010, the bank improved its long-term fi nancing through growth in customer deposits and by increasing the average term-to-maturity of its other funding.

The Board is pleased with the results achieved by the bank in 2010. Citibank’s Norwegian consumer fi nance business has been successfully integrated, and further synergy effects are expected in the coming months. The bank is thus in a strong position to continue growing and developing.

DISPOSAL OF PROFIT BEFORE OTHER COMPREHENSIVE INCOMEThe parent company’s profi t before other comprehensive income of NOK 17.32 million is suggested transferred to uncovered losses.

In addition, the Board proposes to transfer NOK 73.51 million from equity to uncovered losses.

It will be proposed to the General Assembly to transfer NOK 74.07 million to Gjensidige Forsikring ASA as a group contribution. Equity, including the profi t for the period, will with the payment of the group contribution, be charged with NOK 70.00 million.

The Board would like to thank the staff for their efforts and their contributions to the company’s earnings in 2010 and has decided to give all full-time employees a bonus of NOK 10,000

Oslo, 31.12.2010/17.03.2011

Bjørn Walle Arvid Andenæs Ingun Ranneberg-Nilsen Marianne B. Einarsen Chairman of the Board Deputy Chairman of the Board

Britt Tjønneland Jan Kaare Hellevang CEO

8 gjensidige bank gROUP annUaL RePORT 2010

inCOme sTaTemenT PaRenT COmPanY COnsOLidaTed

1.1.-31.12.2009 1.1.-31.12.2010 nOk thousand note 1.1.-31.12.2010 1.1.-31.12.2009

319,423 761,563 interest income 4 782,585 323,287

266,075 368,997 interest expenses 4 375,568 265,835 53,348 392,566 net interest income 407,017 57,452

13,272 39,405 Commission, etc. 5 39,466 13,272 3,806 4,665 Commission costs, etc. 5 4,665 3,806 7,028 (5,594) net income / (loss) on financial instruments 6 (5,594) 7,028

199 8,992 Other operating income 8,340 37 16,693 38,139 net other operating income 37,547 16,531

70,041 430,705 Total income 444,564 73,983

34,780 89,314 Wages, salaries, etc. 7 89,463 34,780 97,393 191,794 Other expenses 7 194,441 98,964 13,301 17,601 depreciation and writedowns on fixed assets and intangible assets 7, 10, 11 18,243 13,515

145,474 298,710 Total operating expenses 302,146 147,259

1,773 109,037 Writedowns on loans and guarantees 16 109,359 3,003 (77,206) 22,958 Profit/ (loss) before tax expense 33,059 (76,279)

(21,610) 5,639 Tax expense 8 8,468 (21,348) (55,596) 17,319 Profit/ (loss) for the period 24,591 (54,931)

(55,596) 17,319 gjensidige bank asa ’s shareholders 24,591 (54,931)

(76,1) 19,8 earnings per share, nOk (basic and diluted) 28,1 (75,1)

sTaTemenT Of COmPRehensiVe inCOme

PaRenT COmPanY COnsOLidaTed1.1.-31.12.2009 1.1.-31.12.2010 nOk thousand 1.1.-31.12.2010 1.1.-31.12.2009

(55,596) 17,319 Profit/ (loss) for the period 24,591 (54,931)

statement of comprehensive income 525 (1,437) actuarial gains and losses on pension assets and liabilities (1,437) 525

(147) 402 Tax on other profit/ loss components 402 (147) 378 (1,035) Total other profit/ loss components (1,035) 378

(55,218) 16,284 TOTaL PROfiT / (LOss ) fOR The PeRiOd 23,556 (54,553)

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BALANCE SHEETPARENT COMPANY CONSOLIDATED

31.12.2009 31.12.2010 NOK thousand Note 31.12.2010 31.12.2009

ASSETS 264,519 797,777 Cash and receivables from central banks 797,777 264,519 301,848 515,836 Loans to and receivables from credit institutions 13 59,237 149,409

9,879,902 11,648,882 Loans to and receivables from customers 14, 15 14,002,337 11,560,303

2,077,521 1,303,958 Interest-bearing securities 12 555,058 577,521 88,026 241,636 Shares/ ownership interests 26 241,636 88,026 80,030 130,030 Shares in subsidiaries 26 41,543 61,043 Intangible assets 10 62,113 43,254

5,244 4,414 Fixed assets 11 4,414 5,244 22,980 749 Deferred tax assets 8 713 22,878 20,587 45,391 Other assets 9 40,347 21,680

12,782,200 14,749,716 Total assets 15,763,631 12,732,834

LIABILITIES 568,147 558,947 Debt to credit institutions 13 513,108 513,108

6,550,441 9,120,004 Deposits from/ debt to customers 17 9,120,004 6,550,441 4,366,725 3,716,080 Debt securities 18 4,763,068 4,366,725

72,722 68,285 Other liabilities 19 73,115 77,730 12,537 4,417 Provisions 20 4,417 12,537

11,570,572 13,467,733 Total liabilities 14,473,712 11,520,541

RETAINED EARNINGS 876,000 876,000 Share capital 876,000 876,000 332,192 332,192 Share premium account 332,192 332,192

93,228 73,790 Other paid-up equity 73,780 93,218 (89,792) Other equity 7,946 (89,117)

1,211,628 1,281,982 Total equity 1,289,918 1,212,293

12,782,200 14,749,716 Total liabilities and equity 15,763,631 12,732,834

Oslo, 31.12.2010/17.03.2011




sTaTemenT Of ChanGes in eQUiTY

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Total paid-up

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Total equity

equity as at 1.1.2009 586,000 172,692 89,784 848,476 (90,170) 758,306 new equity 2009 290,000 159,500 449,500 449,500 net group contribution (after tax) 59,040 59,040 59,040 Profit/ (loss) for the period 1.1.2009-31.12.2009 (55,606) (55,606) 675 (54,932)

statement of comprehensive income actuarial gains and losses on pension assets and liabilities 525 525 Tax on other profit/ loss components (147) (147)Total other profit/ loss components 378 378

Profit/ (loss) for the period (55,606) (55,606) 1,053 (54,553)

equity as at 31.12.2009 876,000 332,192 93,218 1,301,410 (89,117) 1,212,293

equity as at 1.1.2010 876,000 332,192 93,218 1,301,410 (89,117) 1,212,293 new equity 2010 net group contribution (after tax) 53,280 53,280 53,280 share-based payment transactions settled in equity 790 790 790 Profit/ (loss) for the period 1.1.2010-31.12.2010 24,591 24,591

statement of comprehensive incomeactuarial gains and losses on pension assets and liabilities (1,437) (1,437)Tax on other profit/ loss components 402 402 Total other profit/ loss components (1,035) (1,035)

Profit/ (loss) for the period 23,556 23,556

To cover uncovered losses (73,508) (73,508) 73,508 equity as at 31.12.2010 876,000 332,192 73,780 1,281,972 7,946 1,289,918

number of shares at end of period 876,000

PaRenT COmPanYequity as at 1.1.2009 586,000 172,692 89,784 848,476 (90,170) 758,306 new equity 2009 290,000 159,500 449,500 449,500 net group contribution (after tax) 59,040 59,040 59,040 Profit/ (loss) for the period 1.1.2009-31.12.2009 (55,596) (55,596) (55,596)

statement of comprehensive income actuarial gains and losses on pension assets and liabilities 525 525 Tax on other profit/ loss components (147) (147)Total other profit/ loss components 378 378

Profit/ (loss) for the period (55,596) (55,596) 378 (55,218)

equity as at 31.12.2009 876,000 332,192 93,228 1,301,420 (89,792) 1,211,628

equity as at 1.1.2010 876,000 332,192 93,228 1,301,420 (89,792) 1,211,628 new equity 2010 net group contribution (after tax) 53,280 53,280 53,280 share-based payment transactions settled in equity 790 790 790 Profit/ (loss) for the period 1.1.2010-31.12.2010 17,319 17,319

statement of comprehensive incomeactuarial gains and losses on pension assets and liabilities (1,437) (1,437)Tax on other profit/ loss components 402 402 Total other profit/ loss components (1,035) (1,035)

Profit/ (loss) for the period 16,284 16,284 To cover uncovered losses (73,508) (73,508) 73,508 equity as at 31.12.2010 876,000 332,192 73,790 1,281,982 1,281,982

number of shares at end of period 876,000

11gjensidige bank gROUP annUaL RePOTR 2010ResU

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PaRenT COmPanY COnsOLidaTed

1.1.-31.12.2009 1.1.-31.12.2010 nOk thousand 1.1.-31.12.2010 1.1.-31.12.2009

Cash flows from operating activities (3,182,578) (1,870,505) net loans to customers 1) (2,543,880) (4,864,210)

419,070 2,569,562 net deposits from customers 2,569,562 419,070 290,120 661,795 interest payments by customers 731,803 304,248

(210,000) (208,077) interest paid to customers (208,077) (210,000) 8,863 4,571 net interest received from credit institutions, etc. 6,631 9,417

Paid taxes (161) 13,281 53,988 net other commission income 35,677 7,412

(132,174) (281,109) Operating expenses (283,904) (133,896)Other income

(1,304,295) 588,672 net outflow/ inflow from purch./ sale of interest-bearing fin. instr. (136,741) (318,265) (4,097,713) 1,518,897 net cash flow from operating activities 170,911 (4,786,224)

Cash flow from investing activities (15,440) (36,271) net purchase of fixed assets (36,271) (17,364) (80,030) (50,000) investments in subsidiary (95,470) (86,271) net cash flow from investing activities (36,271) (17,364)

Cash flow from financing activities 3,871,911 (659,844) net inflow/ outflow from loans from credit institutions 396,343 4,329,980

(33,687) (107,198) net interest payment on financing activities (146,098) (36,748) 34,178 7,662 net inflow/outflow from other short-term liabilities (15,799) 37,137

449,500 Paid-up equity 449,500 82,000 74,000 net group contribution received/ dividends 74,000 82,000

4,403,902 (685,380) net cash flow from financing activities 308,446 4,861,869

210,719 747,246 Total cash flow 443,086 58,280

Cash flow for the year 355,648 566,367 Cash and cash equivalents as at 1 jan. 413,928 355,648 566,367 1,313,613 Cash and cash equivalents as at 31 dec. 857,014 413,928 210,719 747,246 net cash inflow/outflow 443,086 58,280

specification of cash and cash equivalents264,519 797,777 Cash and receivables from central banks 797,777 264,519301,848 515,836 deposits at financial institutions 59,237 149,409566,367 1,313,613 Cash and cash equivalents on cash flow statement 857,014 413,928

1) gjensidige bank asa aquired on the 15 th of december the portfolio of consumer loans from Citibank international Plc. in the cash flow statement this appears in the line ”net loans to customers”, which also consist of net payments of loans norway branch.

The cash flow statement shows inflows and outflows of cash and cash equivalents over the course of the year. The statement is adjusted for items that do not result in cash flows, such as provisions, depreciation and writedowns on loans and guarantees. The cash flows are classified as operating activities, investing activities or financing activities. Cash is defined as cash and receivables from central banks and credit institutions.

Cash fLOW sTaTemenT


GENERALgjensidige bank asa is a company owned by gjensidige Forsikring asa through gjensidige bank Holding as, and it is domiciled in norway. The company’s head office is located at Flovegen 2, Førde, norway The main activity of the company is ordinary banking services to retail customers. The accounting policies applied in the company accounts are described below.

The consolidated and parent company financial statements have been prepared in accordance with the norwegian accounting act and interna-tionalFinancial Reporting standards (iFRs ).

CHANGEs IN THE ACCOUNTING POLICIEsas a main rule, all income and expenses shall be shown in the income statement. The exception to this rule is the effect of changes to ac-counting principles. in the event of fundamental accounting reforms/changes in accounting policies, figures for previous years must be recalculated to allow comparisons. if items in the financial statement are reclassified, comparative figures must be calculated for the previous periods and be reported in the financial statements.

new and changed standards being used by the Groupbased on the assessments that have been made so far, the iFRss and interpretation statements that have been issued up until 17 March 2011, the use of which is not mandatory as at 31 december 2010; i.e. iFRs 9, iFRiC 19, amendments to ias 32, iFRiC 14 and the revised ias 24, as well as improvements to iFRss, are assumed to not have a significant effect on reported figures.

CONsOLIDATION POLICIEssubsidiariessubsidiaries are companies where gjensidige bank asa has controlling influence, which means companies where gjensidige bank asa either directly or indirectly via subsidiaries owns more than 50 per cent of the voting shares. subsidiaries are included in the consolidated financial statements from the date that control commences until the date it ceases. The subsidiaries accounting policies are altered as required in order to correspond with the policies chosen by the group.

The following companies meet the criteria for subsidiaries and are included in the consolidated financial statement:

gjensidige bank boligkreditt as, 100 percent shareholder and share of votes

investments in subsidiaries are included in the company financial state-mentsusing the historical cost method.

Transactions eliminated through consolidationintra-group balances and transactions together with unrealised income and expenses from intra-group transactions are eliminated in the consolidated accounts.

Business combinationsbusiness combinations are accounted for using the acquisition method. The historical cost of the business combination is measured at fair value (on the date of acquisition) of acquired assets, incurred liabilities and equity instruments issued by the group in exchange for control of acquired companies and includes any costs directly attributable to the business combination.

if, after a reassessment of the group’s share in the net fair value of identifiable assets, liabilities and contingent liabilities, the value exceeds the acquisition cost of the business combination, the excess is immedi-ately recognised in the income statement.

PRINCIPLEs FOR RECOGNIsING INCOME AND EXPENsEsnet interest incomeinterest rate revenue and expenses are calculated and recognised based on the effective interest rate method. The calculation takes into ac-count establishment fees and direct marginal transaction costs that are an integral part of the effective interest rateinterest is recognised in profit or loss using the internal rate of return method both for balance sheet items that are measured at amortised cost and ones that are measured at fair value through the income statement.interest rate income on writedowns on commitments are calculated as internal interest rates of the written down value.see also: ”Value calculation of fair value” and ”Value calculation of amortised cost”.

Commission income and expenses The way in which commission income from various customer services is recognised depends on the nature of the commission. Charges are recog-nised as income when the services are delivered or a significant part of the service has been completed. Charges received for completed services are recognised as income in the period the services were performed. Commis-sions received as payment for various tasks are recognised as income once then service has been completed. Commission costs are transaction-based and are recognised in the period the services were received.

net gain/loss on items measured at fair valueRealised and unrealised gains and losses on financial instruments meas-ured at fair value are recognised under the financial statement item ” net gain/(loss) on financial instruments”. Realised and unrealised gains and losses are a result of:

• shares/ownership interests and other stock market related instruments• interest-bearing securities and other interest rate instruments• currency gains/losses

Other operating incomeOther operating income that are not related to any of the other lines of income are generally recognised when the transaction has been completed.

Operating expensesOperating expenses consists of wages, administration and sales costs. These costs are accrued and expensed in the relevant accounting period.

CURRENCYThe company and group’s presentation currency and functional cur-rency are norwegian kroner. Transactions involving the purchase and sale of foreign currency denominated securities and financial instru-ments are translated into nOk using the exchange rate on the date of the purchase/ sale. The holdings of foreign securities and financial documents are valued in norwegian kroner according to the exchange rate on the balance sheet day. Cash and cash equivalents are also

nOTes

1 – aCCOUnTinG POLiCies


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valued at the exchange rate on the balance sheet date.

sEGMENTsFrom the start, gjensidige bank asa has only operated in one seg-ment. This segment is deposits from and loans to retail customers. This segmentation best reflects the way the business is run by the management. Financial information relating to segments is presented in a separate note.

INCLUsION OF NON-FINANCIAL AssETs ON THE BALANCE sHEETassets and liabilities are included on the bank’s balance sheet when the bank obtains real control over rights to the assets or assumes real obligations. assets are derecognised at the time the actual risk related to the assets has been transferred and the control of the rights to the assets has ended or expired.

FIXED AssETs Fixed assets consist of fixtures, machinery and iT-systems that are used within the company. Fixed assets are valued at the cost of acquisition with accumulated depreciations and any writedowns. They are depreci-ated on a straight line basis over their anticipated useful life. Where operating assets or significant parts of an operating asset have differ-ent lifespans, these are capitalised and depreciated separately. Unless it is insignificant the expected usable lifespan and the residual value is reviewed annually. The carrying value of an asset is written down if its recoverable amount is less than its carrying value.

INTANGIBLE AssETsOther intangible assetsintangible assets, whether acquired separately or as a group, are car-ried on the balance sheet at the cost of acquisition. intangible assets include customised software developed by the bank. This is carried on the balance sheet at its historical cost plus the costs of readying the software for use, less accumulated depreciations and any writedowns. When capitalising the carrying amount of new intangible assets, the probability of the financial benefits accruing to the company from the asset must be demonstrated. additionally, it must be possible to reliably estimate the cost of the asset.

Capitalised software expenses are depreciated across its expected useful lifespan, which normally is three to five years. The depreciation period and method is assessed annually. an evaluation is made of the need for writedowns when there are indications of impairment. The writedown of intangible assets and the reversal of writedowns are otherwise done in the same manner as that described for fixed assets. direct costs include expenses for employees who are directly in-volved in software development, materials and a number of relevant administrative expenses (overhead expenses). expenses connected to the maintenance of software and iT systems are recognised directly in profit or loss.

GoodwillCapitalised goodwill is not amortised. For the group, goodwill arises through the acquisition of other companies, and represents the excess value paid over and above individually valued assets. This excess value is tested for impairment for each interim report.

IMPAIRMENT OF NON-FINANCIAL AssETsThe company reviews the carrying value for assets and identifiable intangible assets annually or more frequently if there are occurrences or changes in the assumptions that indicate that the carrying value is irrecoverable. indicators that are assessed as significant by the company and that can trigger testing for impairment include: • a significant drop in profitability in relation to past or expected future profitability• significant changes in the company’s use of assets or overall strategy for its activities• significant downturn for the industry or the economy

Previous impairment losses, except for goodwill, will be reversed if the assumptions for the impairments no longer exist. impairment losses are only reversed to the extent that the new carrying value does not exceed what would have been the carrying value after depreciation at the time of the reversal if there had been no impairment.

FINANCIAL INsTRUMENTs Recognition and derecognitionFinancial assets and liabilities are recognised in the balance sheet when the company becomes a party to the instrument’s contractual terms. Ordinary purchases and sales of financial instruments are recognised on the transaction date. When a financial asset or a financial liability is initially recognised (asset/liability that does not have fair value through profit or loss), it is measured at fair value plus transaction costs that are directly related to the purchase or issue of the financial asset or liability.

Financial assets are derecognised when the contractual rights to the cash flows from the financial assets expire or when the business trans-fers the financial asset in a transaction where all or practically all the risk and rewards related to ownership of the asset are transferred.

Classification of financial instrumentsWhen initially recognised, financial assets are classified in one of the

following categories, depending on the purpose of the investment:• Loans and receivables, carried on the balance sheet at amortised

cost• Financial assets that are to be recognised at fair value with fair

value changes through profit or loss (Fair value option)• available-for-sale financial assets, measured at fair value with

changes in value recognised in equity• Held-for-trading financial assets measured at fair value through

profit or loss • investments held to maturity, carried at amortised cost• derivatives classified as hedging instruments

When initially recognised, financial liabilities are classified in one of the following categories

• Financial liabilities defined as liabilities measured at fair value with fair value changes through profit or loss

• Other financial liabilities carried at amortised cost

Loans and receivablesLoans and receivables are non-derivative financial assets with fixed payments or determinable payments. Loans and receivables are initially recognised at fair value, and thereafter at amortised cost using the effective interest rate method. When calculating the effective interest rate, cash flows are estimated and all the contractual terms of the financial instruments are taken into account.

On each balance sheet day loans and receivables are reviewed to deter-mine if there are objective evidence that a receivable/loan or a group of receivables/loans have been impaired. individual writedowns are made first, before determining any group writedowns.


if there is objective evidence that a financial asset is impaired, a writedown is made for the estimated loss. Objective evidence means occurrences indicating that the loan is impaired. such evidence may include information about damaged credit histories, bankruptcy or other defaults.

at fair value through the income statement On implementing iFRs, and in subsequent periods for initial recognition in the accounts, all financial assets and liabilities can be measured at fair value through profit or loss if they have been purchased with the intention of being sold or: • the classification reduces a mismatch in the measurement or recognition that would have arisen otherwise as a result of different rules for the measurement of assets and liabilities• the financial assets are included in a portfolio that is managed and evaluated regularly at fair value

The company holds a liquidity portfolio that is managed and evaluated regularly at fair value. The bank’s goal is to keep interest rate risk low, and it plans and manages its interest rate risk by offsetting fixed-rate borrowings, loans and investments against each other in a model, and then using interest rate swaps to hedge any residual risk. interest rate swaps are measured at fair value, and to avoid inconsistent measure-ment bonds and certificates of deposit with fixed interest rates subject to hedging are recognised at fair value.

Financial assets measured at fair value through profit or loss are meas-ured at fair value on the balance sheet date. Changes in fair value are recognised in profit or loss. Changes in fair value are included in ”net income/(loss) on financial instruments”.

available-for-salesecurities available for sale are non-derivative financial assets that are designated as such or that are not classified in any other category. securities in this category are measured at fair value, while changes in fair value are recognised through the statement of comprehensive income. each quarter these assets are tested for impairment. if the impairment is significant the total loss - measured as the difference between the cost of acquisition and fair value less any impairment of the financial asset that has previously been recognised in the income statement - is deducted from equity and recognised in the income statement. impairments of shares and similar instruments recognised in the income statement are reversed through the statement of compre-hensive income. investments held to maturityinvestments held to maturity are non-derivative financial assets with fixed or determinable payments and with a fixed maturity date, and that the company has the intention and capability of holding until maturity, with the exception of: • those that the company initially designates at fair value through profit or loss• those that meet the definition of loans and receivables

Held to maturity assets are measured at amortised cost using the effec-tive interest rate method. financial derivativesThe trading of financial derivatives is subject to strict limitations. all derivatives are measured at market value on the contract date. subse-quent measurement is done at fair value with changes in value being recognised as they occur. Fair value for derivatives are measured based on listed prices whenever possible. When listed prices are not available,

the company estimates fair value based on valuation models that use observable market data.

The company does not use hedge accounting.

fair valueFair value is the amount for which an asset can be sold or a liability can be settled by a transaction at arm’s length between well-informed and free parties. For financial assets listed on the stock exchange or on another regulated market place, fair value is set at the bid price on the last trading day up to and including the balance sheet day. For an asset that is to be acquired or for a liability that is held, fair value is set at the offer price.

Where the market for a financial instrument is inactive, fair value is established through valuation methods. Valuation methods include the use of recently completed market transaction at arm’s length between well informed and free parties, if these are available; refer-ences to the current fair value of another instrument that is virtually similar; discounted cash flow calculations; and option pricing models. if there is a valuation method that is widely used by market partici-pants to price the instrument, and the technique has a track record of producing reliable estimates of prices actually achieved in real market transactions, that method is used. amortised cost methodFinancial instruments that are not measured at fair value, are valued at amortised cost and the income is calculated using the internal rate of return method. in the internal rate of return method the investment’s internal rate of return is used. The internal rate of return is determined by discounting the contractual cash flows within the anticipated term to ma-turity. Cash flows include establishment fees and the costs of transaction that are not covered by the customer. amortised cost is the current value of such cash flows discounted by the internal rate of return.

debt to credit institutions and deposits from customersLiabilities to credit institutions and customers are recognised, depend-ing on the counterpart, either as a debt to credit institutions or as deposits from customers, regardless of the calculation method used. interest expense on these instruments is included in ”net interest income” using the internal rate of return method. Other fair value changes are included in ”net income/(loss) on financial instruments”.

debt securities in issuedebt securities include certificates of deposit or bonds issued by the bank, as well as repurchased bonds issued by the bank. debt securities are initially recognised at fair value. in subsequent periods, issued debt securities that are not hedged in, for example, an interest rate swap, are recognised at amortised cost using the effective interest rate method. When calculating the effective interest rate, cash flows are estimated and all the contractual terms of the financial instruments are taken into account. interest rate costs and the amortisation of premium/discount on instru-ments are recognised in ”net interest rate income” using the iRR method.Fixed-rate securities that are hedged with floating-rate or interest rateswaps are designated at fair value through profit or loss in order to avoid inconsistency.

Premium/discount on issued bondsWhen bonds issued by the bank are repurchased, the discount or pre-mium is recognised in profit or loss.

Preferential bondsin the second half of 2009 gjensidige bank asa established gjensidige bank boligkreditt as with the goal of participating in the state exchange scheme for preferential bonds (OMF). gjensidige bank asa has purchased issued bonds from gjensidige bank boligkreditt as and used these as


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collateral for exchange agreements with norges bank. The bank has com-mitted to buying back the bonds from norges bank at their original price at the expiry of the term. The bank receives the profits from the bonds that are part of the exchange scheme as if these were not sold. The bank has determined that the requirements for derecognition according to ias 39 are not met. The background for this is that the bank through the exchange scheme retains the risk of fair value developments on the bonds and the other cash flows in the form of interest rates.

DIVIDENDsdividends from investments are recognised when the company has an unconditional right to receive the dividends. dividends payable are recognised as liabilities at the point in time when the general Meeting approves the payment of dividends.

ACCOUNTING PROVIsIONsa provision is made when the company has a legal or implicit liability as a result of a past event, and it is probable that this will lead to a pay-ment or transfer of other assets to cover the liability.

PENsIONsgjensidige has both defined-benefit and defined-contribution pension schemes for its employees.

Liabilities to contribute to defined-contribution pension schemes are expensed in the income statement at the time they arise.

The defined-benefit pension scheme entitled employees to future pen-sion benefits. Pension liabilities are estimated assuming that pension rights accrue in a straight line, and on the basis of assumptions relating to years of service, discount rates, future returns on pension scheme assets, future increases in wages, pensions and national insurance scheme benefits and actuarial assumptions relating to mortality rates, staff turnover, etc.

Pension assets are measured at fair value (surrender value) and have been deducted from liabilities in the net pension liabilities presented on the balance sheet. any overfunding is recognised if it is likely that it can be used to reduce future pension contributions.

actuarial gains and losses are recognised in equity through the state-ment of comprehensive income.

The net pension liability is the difference between the current value of the pension liability and the fair value of the pension assets. as stipu-lated by the relevant norwegian standard, employer’s niC contributions are taken into account in periods where there is a pension shortfall. net pension liabilities for defined benefits and defined contributions schemes are shown on the balance sheet as other assets, in the event of a surplus, and other liabilities, in the event of a shortfall.

TAXATIONThe tax expense comprises tax payable and deferred tax. The income tax is recognised as an expense or income and is included in the income statement as a tax expense with the exception of income tax on trans-actions that are recognised directly in equity.

Payable tax is based on the company’s taxable income and is calculated in accordance with norwegian tax regulations and tax rates.

The deferred tax assets and liabilities are recognised using the balance method on all temporary differences that arise between taxable and accounting values of assets and liabilities deferred tax assets are calculated on unused loss carry-forwards and unused tax credits. The tax asset is only recognised to the extent that is is probable that future taxable profits may be used to offset temporary differences, unused tax loss carry-forwards and unused tax credits. The carrying values of deferred tax assets and deferred tax are subject to regular reviews. deferred tax is calculated on temporary differences and untaxed provi-sions. deferred tax assets and deferred tax liabilities are not discounted.

assets and liabilities are measured at the current tax rate in the period when the asset is realised or the liability is settled, based on the tax rate on the balance sheet day. Payable tax assets and tax liabilities, as well as deferred tax assets and tax liabilities, are offset if legally possible.


2 – CRiTiCaL aCCOUnTinG esTimaTes and jUdGemenTs

GeneRaLThe preparation of the financial statements under iFRs and the applica-tion of the adopted accounting policies require that management make assessments, prepare estimates and apply assumptions that affect the reported amounts of assets, liabilities, income and expenses. The estimates and the associated assumptions are based on historic experi-ence and other factors that are assessed as being justifiable based on the underlying conditions. The actual figures may deviate from these estimates. The estimates and the associated prerequisites are reviewed regularly. Changes in accounting estimates are recognised in the period the estimates are revised if the change only affects this period, or both in the period the estimates change and in future periods if the changes affect both the existing and future periods.

The gjensidige bank asa accounting principles in which assessments, estimates and prerequisites may significantly diverge from the actual results are discussed below.

WRiTedOWns On LOansLoans and claims are evaluated each balance day to assess whether there are objective evidence that a claim/loan or a group of claims/loans are impaired. individual writedowns are assessed before the writedown on groups is determined.

if there is objective evidence that a financial asset is impaired, a writedown is made for the estimated loss. ”Objective evidence” means evidence of occurrences indicating that the loan is impaired. This may be information about damaged credit histories, bankruptcy or defaults.

eQUiPmenT and inTanGiBLe asseTsequipment and intangible assets are reviewed annually to ensure that the depreciation method and period used match economic realities. The same applies to the residual value. assets are written down if there is evidence of impairment. faiR VaLUe Of finanCiaL insTRUmenTsThe fair value of financial instruments that are not traded in an active market (such as unlisted shares) is determined by means of valuation methods. These valuation methods are based primarily on the market conditions on the balance sheet date.

imPaiRmenT Of finanCiaL asseTsFinancial assets that are not carried at fair value are tested for impairment if there is objective evidence on the balance sheet date that a financial asset or a group of financial assets has fallen in value.

PensiOn LiaBiLiTiesThe present value of the pension liability depends on various financial and actuary assumptions. any change in these assumptions affects the carrying amount for the pension liability and pension expense.Pension liabilities are estimated assuming that pension rights accrue in a straight line, and on the basis of assumptions relating to years of service, discount rates, future returns on pension scheme assets, future increases in wages, pensions and national insurance scheme benefits and actuarial assumptions relating to mortality rates, staff turnover, etc.


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The bank has primarily only retail customers . This segment is composed of organizational, benefit, agricultural customers, and employees of gjensidige group.

From the second quarter of 2010 the bank also offers deposit products to the business market. Volume related to this product is currently of a size that it is not reported as a separate segment. The bank

operates only in norway and reporting of secondary geographical segments provides little additional information. Loan assets is however geographically split in a separate note.

3 – seGmenT infORmaTiOn


interest income 9,508 7,658 Loans to and receivables from credit institutions 8,280 9,822

285,048 689,005 Loans to and receivables from customers 759,591 300,275 18,990 46,487 interest-bearing securities 14,214 13,182

5,877 18,413 Other income 500 8 319,423 761,563 Total interest income 782,585 323,287

interest expenses 401 2,666 deposits from credit institutions 1,229 161

210,000 208,680 deposits from/ debt to customers 208,680 210,000

issued securities 4,057 142,785 - valued at amortized cost 150,788 4,057

49,356 9,181 - valued at fair value 9,181 49,356 2,261 5,685 Other interest expenses 5,689 2,261

266,075 368,997 Total interest expenses 375,568 265,835

53,348 392,566 net interest income 407,017 57,452

4 – neT inTeResT inCOme


Commission income 719 871 interbank fees 871 719

3.375 9.311 Card fees 9.311 3.375 3.108 4.455 Payment transactions 4.456 3.108

22 7.306 Commission income insurance 7.306 22 351 3.587 Loan fees 3.646 351

5.697 13.876 Other commission income 13.876 5.697 13.272 39.405 Total commission income 39.466 13.272

5 – neT COmmisiOn inCOme

Commission expenses 1.908 2.247 interbank fees 2.247 1.908 1.848 2.297 Payment transactions 2.297 1.848

50 120 Other commission expenses 120 50 3.806 4.665 Total commission expenses 4.665 3.806

9.466 34.741 Total net commission 34.801 9.466



(315) 6,659 net income on foreign currency trading and financial derivatives 6,659 (315) (315) 6,659 net income on financial instruments. trading portfolio 6,659 (315)

4,500 (11,549) net income on commercial paper and bonds (11,549) 4,500 2,844 3,610 net income on shares/ ownership interests 3,610 2,844

(4,314) net income on financial liabilities 1) (4,314)

7,343 (12,253) net income on financial instruments measured at fair value (12,253) 7,343

7,028 (5,594) net income / (loss) on financial instruments (5,594) 7,028

1) Of this gain in value attributable to credit risk is nOk 2.6 million.

6 – neT inCOme / (LOss) On finanCiaL insTRUmenTs


26,659 71,860 Wages, salaries, etc. 71,990 26,659 Pension costs

1,082 3,708 - defined contributions schemes 3,708 1,082 2,177 (1,452) - defined benefits schemes (1,452) 2,177 3,459 11,149 employer’s niCs 11,167 3,459 1,402 4,050 Other staff-related expenses 4,050 1,402

34,780 89,314 Total wages, salaries, etc. 89,463 34,780

37,733 67,085 iT expenses 67,708 37,733 7,636 44,456 Marketing, etc. 44,456 7,636 8,021 29,563 Other administrative expenses 29,641 8,021

32,674 32,424 Fees 33,990 34,327 11,115 18,267 Other operating expenses 18,647 11,247 97,393 191,794 Total other expenses 194,441 98,964

13,301 17,601 Ordinary depreciation 18,243 13,515 145,474 298,710 Total operating expenses 302,146 147,259

auditor’s fee 784 688 statutory auditing – kPMg 981 784

audit-related services 200 193 351 Other services – kPMg 378 715

Tax-related services internal auditing

977 1,038 Total payments to auditor 1,559 1,499

48 128 average full-time equivalent employees 128 48 134 133 Full-time equivalent employees as at 31 dec, 133 134

7 – OPeRaTinG eXPenses


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7 – OPeRaTing eXPenses (COnT.)salary and other benefits to management and governing body in 2010

nOk thousand fixed pay and Variable Other Pension Total interest The current

repaymentname and position fees pay benefits cost rewards Loans rate schedule

senior executivesjan kaare Hellevang, CeO 1,409 171 223 255 2,058Hans Haren, director of Consumer Finance and deputy CeO 3,007 310 167 1,137 4,621Tor egil nedrebø, director Retail bank (01.08-31.12) 396 57 28 481jan kåre Raae, director economics and Finance 739 80 14 50 883ivar Rekve, director Credit Management 859 80 12 69 1,020Lene steinum, director iT and innovation 946 40 137 74 1,197akshay sankpal, director strategy and analysis (01.01-30.11) 1,399 750 343 60 2,552Teemu alaviitala, director strategy and analysis (01.12-31.12) 106 60 26 4 196ida anker, director Human Resource (01.01-31.05) 423 30 10 32 495synnøve M. Øyra iversen, director sales and Marketing (01.01-30.09) 549 30 15 36 630 1,719 3,00 % 25/07/2027Frode schanke, director business development (01.01-30.09) 549 60 15 35 659 1,656 3,00 % 07/03/2018

Board of directorsbjørn Walle, Chairman (17.09-31.12)geir bergskaug, Chairman (01.01-16.09) 3,222 3,50 % 25/08/2017arvid andenæs, deputy Chairman 110 110 1,347 3,65 % 15/08/2024ingun Ranneberg-nilsen 931 3,00 % 20/05/2020Marianne broholm einarsen 110 110britt Randi Tjønneland (employee repr.) 36 36 368 3,00 % 18/03/2018Roger nedrebø (deputy employee repr. 01.01-24.03) 12 12Hans jacob starheim (deputy employee repr. 25.03-31.12) 28 28

Total for senior executives and Board of directors 10,678 1,611 1,019 1,780 15,088 9,243

Control Committee sven iver steen (Chairman) 180 180Oddhild Marie Løbø 60 60asle Hindenes 60 60inger Tone Ødegård 60 60Total 360 360

Representativesinge k. Hansen (Chairman) 4 4Randi bakkerud sætershagen (deputy Chairman) 2 2Total 6 6

The company has no other remuneration to the Managing director and has not committed itself to the CeO or chairman to give special consideration upon termination of appointment.


salary and other benefits to management and governing body in 2009

gjensidige bank asa has a joint management team that is responsible for the day-to-day running of the company. The people in this management team are considered key employees.

1. key employees at gjensidige bank asa receive a fixed salary in line with market rates. The pay of other managers within the gjensidige group is also taken into account.

2. The management team has a bonus scheme which pays out bonuses based on personal scorecards. 100% achievement of the goals on the personal scorecard may entitle an individual to a bonus of up to three months’ pay. The deputy CeO also has a stay-on bonus related to his position. The bonus is linked to the achievement of budget goals for 2010 and 2011, as well as the successful integration of the business acquired from Citibank international plc. 100% achievement of the goals may entitle him to a bonus of up to six months’ salary, as a one-off payment in 2012, after the 2011 accounts have been finalised.

3. The company has no plans to award shares, subscription rights or options.

4. Pension plans are on a defined-contribution basis for salary up to 12g. The CeO has a separate defined-benefit pension plan, which is a continuation of a plan that he had when employed at gjensidige Forsikring. The deputy CeO has a separate pension plan based on his contract with his former employer Citibank international plc.

5. The deputy CeO is entitled to 18 months of severance pay in the event of his leaving his position. apart from that there are no contractual severance packages.

6. Other variable compensation on top of basic salaries is payable on the same principles as at gjensidige Forsikring asa.

it is gjensidige bank’s goal to reward their managers in terms of expertise and contribution to profit, and ensure a proper market adjusted wage levels in the company. emphasis is placed on motivating the managers to achieve common goals, as well as stimulating each individual to further development and learning. salary will continue to be competitive so that the group can attract and retain talented executives.

The deputy CeO’s ”stay on” bonus is included in this year’s statement, otherwise the remuneration of senior executives in 2010 is in accordance with the declaration that was submitted to the general assembly in 2009.

The new regulation on compensation in financial institutions requires that companies review their compensation arrangements. The regulations apply from 2011, and the Financial supervisory authority has announced that they will come with an interpretative statement in February. although the regulations do not apply before from 2011, changes must be discussed in general for the coming fiscal year’s financial statements.

deCLaRaTiOn ReGaRdinG The deTeRminaTiOn Of The PaY and OTheR BenefiTs Of seniOR eXeCUTiVes fOR The finanCiaL YeaR 2010

nOk thousand fixed pay and Variable Other Pension Total interest The current

repaymentname and position fees pay benefits cost rewards Loans rate schedule

senior executivesjan kaare Hellevang, CeO 1,098 171 221 175 1,666 11Hans Haren, deputy CeO (16.12-31.12) 75 75 ida anker, director Human Resource (16.12-31.12) 30 30 jan kåre Raae, director economics and Finance 670 106 14 36 826 Frode schanke, director business development 667 106 22 36 831 1,756 synnøve M. Øyra iversen, director sales and Marketing 666 106 21 36 829 1,799 ivar sandelien Rekve, director Credit Management 567 16 32 615 1,523 atle kristian Hornnes, director Risk Management (01.04-31.12) 399 41 18 22 481 2,009 Frank Hana, director business support (01.10-31.12) 161 20 7 188 1,403

Board of directorsgeir bergskaug, Chairman 2,938 arvid andenæs 80 80 1,424 ingun Ranneberg-nilsen 1,015 Marianne broholm einarsen 80 80 Roger nedrebø 49 49 britt R. Tjønneland 46 46 506

Total for senior executives and Board of directors 4,588 529 333 344 5,795 14,373

Control Committee sven iver steen 150 150 inger Tone Ødegård (01.08-31.12) 25 25 Håvard Hynne (01.01-27.05.) 13 13 Oddhild Løbø 50 50 asle Hindenes 50 50 Total 288 288

Representatives

inge k. Hansen (Chairman) 4 4

Randi b. sætershagen (deputy Chairman) 2 2

Total 6 6

7 – OPeRaTing eXPenses (COnT.)

The company has no other remuneration to the Managing director and has not committed itself to the CeO or chairman to give special consideration upon termination of appointment.


LTs


4,069 Tax payable 6,964 161

(21,610) 1,569 Change in deferred tax/tax assets 1,503 (21,508) (21,610) 5,638 Total 8,467 (21,348)

Reconciliation of tax expense (77,206) 22,958 Profit/ (loss) before tax expense 33,059 (76,279) (21,618) 6,428 expected tax at nominal tax rate of 28% 9,256 (21,358)

(452) (1,134) Tax effect of permanent differences (1,133) (452) 460 344 Other adjustments to previous years 344 460

(21,610) 5,639 Tax expense 8,468 (21,348)

deferred tax assets 22,136 deferred tax assets arising from taxable loss 22,136

deferred tax assets arising from temporary differences 709 1,237 - Pension liabilities 1,237 709

1,100 99 - Tangible assets 63 999

(966) (587) - Financial instruments (587) (966) 22,980 749 net deferred tax assets 713 22,878

net changes in deferred tax assets/ deferred tax through profit or loss are as follows: (22,960) (20,720) group contribution (20,720) (22,960)

(54) (1,002) Current assets (1,068) (155) (1,062) 379 Financial instrument 379 (1,062)

443 125 Pension liabilities 125 443 22,136 (1,072) Loss carryforwards (1,072) 22,136

(460) (344) Other provisions (344) (460) (1,957) (22,634) Close of year (22,700) (2,058)

Current and deferred taxes recognized directly in equity

402 deferred tax relating to items recognized directly in equity 402 402 Total 402

deferred tax assets resulting from loss carryforwards are only recognised to the extent that it is probable that they will be realised, deferred tax assets and deferred tax are offset and the net amount is entered when this is permitted by legislation and the amounts relate to the same tax authority,

8 – TaX eXPense

9 – OTheR assseTsPaRenT COmPanY COnsOLidaTed

31.12.2009 31.12.2010 nOk thousand 31.12.2010 31.12.2009

16,017 37,269 earned income not yet received 32,225 17,110 3,383 1,716 advance payments 1,716 3,383 1,065 6,275 derivatives 6,275 1,065 121 131 Other 131 122

20,587 45,391 Total 40,347 21,680


nOk thousandCapitalised

project costsCapitalised

software Goodwill Total

COnsOLidaTed

Cost or adjusted value at 1.1.2009 54,996 6,974 61,970 acquired 2,734 9,445 1,500 13,679 disposed ofCost or adjusted value at pr 31.12.2009 57,730 16,419 1,500 75,649

accumulated depreciation and writedowns at 1.1.2009 18,837 1,662 20,499 depreciation for the year 8,273 3,624 11,897 Writedowns for the yearaccumulated depreciation and writedowns at 31.12.2009 27,110 5,286 32,396

Carrying value at 31.12.2009 30,620 11,134 1,500 43,254

Cost or adjusted value at 1.1.2010 57,730 16,419 1,500 75,649 acquired 22,642 12,252 34,893 disposed of Cost or adjusted value at pr 31.12.2010 80,372 28,671 1,500 110,543

accumulated depreciation and writedowns at 1.1.2010 27,110 5,286 32,396 depreciation for the year 9,003 7,032 16,035 Writedowns for the year accumulated depreciation and writedowns at 31.12.2010 36,112 12,318 48,430


Useful life 6-10 years 3 yearsgoodwill is related to aquisition of business as of 15.12.2009. goodwill is not amortized, but is assessed with regards to write-down.

PaRenT COmPanY

Cost or adjusted value at 1.1.2009 54,996 6,974 61,970 acquired 2,734 7,521 1,500 11,755 disposed of accumulated depreciation and writedowns at 31.12.2009 57,730 14,495 1,500 73,725



Cost or adjusted value at 1.1.2010 57,730 14,495 1,500 73,725 acquired 22,642 12,252 34,893 disposed of Cost or adjusted value at pr 31.12.2010 80,372 26,747 1,500 108,618



Useful life 6-10 years 3 years

goodwill is related to aquisition of business as of 15.12.2009. goodwill is not amortized, but is assessed with regards to write-down.

10 – inTanGiBLe asseTs


LTs

12 – inTeResT BeaRinG seCURiTies

Figures relate to gjensidige bank asa as there are no differences between the parent company and group nOk thousand

improvements to leased premises

machinery, fixtures, fittings

and vehicles Total

Cost or adjusted value at pr 1.1.2009 4,083 1,146 5,228 acquired 2,266 1,419 3,686 disposed of Cost or adjusted value at 31.12.2009 6,349 2,565 8,914

accumulated depreciation and writedowns at 1.1.2009 1,680 372 2,052 depreciation for the year 1,069 549 1,618 Writedowns for the yearaccumulated depreciation and writedowns 31.12.2009 2,749 921 3,670

Carrying value at 31.12.2009 3,600 1,644 5,244

Cost or adjusted value at pr 1.1.2010 6,349 2,565 8,914 acquired 204 1,174 1,378 disposed ofCost or adjusted value at 31.12.2010 6,552 3,739 10,292

accumulated depreciation and writedowns at 1.1.2010 2,749 921 3,670 depreciation for the year 1,592 616 2,208 Writedowns for the yearaccumulated depreciation and writedowns 31.12.2010 4,340 1,538 5,878

Carrying value at 31.12.2010 2,212 2,202 4,414

Useful life 4 years 5 years

11 – fiXed asseTs


31.12.2009 31.12.2010 nOk thousand 31.12.2010 31.12.2009

364,374 512,946 short-term government debt 512,946 364,37464,681 state-owned enterprises 64,681

143,296 40,000 norwegian financial institutions 40,000 143,296913,591 162,459 Covered bonds586,559 586,559 Covered bonds used in swap scheme

5,020 1,994 exchange rate adjustment 2,112 5,170 2,077,521 1,303,958 Total 555,058 577,521

572,351 552,946 stock exchange listed securities 555,058 577,521

1,505,170 751,012 Unlisted securities 2,077,521 1,303,958 Total 555,058 577,521

The maximum credit exposure of financial assets for gjensidige bank asa and gjensidige bank group valued at fair value through profit or loss account constitute nOk 555.0 million as at 31.12.2010.



31.12.2009 31.12.2010 nOk thousand 31.12.2010 31.12.2009

Loans to and receivables from credit institutions

219,556 515,836 Loans and receivables without an agreed term to maturity 59,237 67,118

82,292 Loans and receivables with an agreed term to maturity 82,291

301,848 515,836 Gross loans to and receivables from credit institutions 59,237 149,409

Writedowns on loans that have been individually tested for impairment

Writedowns on loans that have been collectively tested for impairment

301,848 515,836 net loans to and receivables from credit institutions 59,237 149,409

debt to credit institutions

55,039 45,839 Loans and deposits from credit institutions without agreed terms or notice periods

513,108 513,108 Loans and deposits from credit institutions with agreed terms or notice periods* 513,108 513,108

568,147 558,947 debt to credit institutions 513,108 513,108

*) Covered bonds used in government swap scheme


31.12.2009 31.12.2010 nOk thousand 31.12.2010 31.12.2009

Loans to and receivables from customers

Loans and receivables without an agreed term to maturity

9,893,972 11,764,477 Loans and receivables with an agreed term to maturity 14,119,485 11,575,604

9,893,972 11,764,477 Gross loans to and receivables from customers 14,119,485 11,575,604

(816) (685) Writedowns on loans that have been individually tested for impairment (685) (816)

(13,254) (114,911) Writedowns on loans that have been collectively tested for impairment (116,463) (14,485)

9,879,902 11,648,882 net loans to and receivables from customers 14,002,337 11,560,303

13 – LOans TO and ReCeiVaBLes fROm CRediT insTiTUTiOns

14 – LOans TO and ReCeiVaBLes fROm CUsTOmeRs

15 – LOans BY GeOGRaPhiC aReaPaRenT COmPanY COnsOLidaTed

31.12.2009 31.12.2010 31.12.2010 31.12.2009 Loans Percent Loans Percent nOk thousand Loans Percent Loans Percent

Loans by region

1,830,033 18,5 % 2,166,126 18.4 % Oslo 2,717,703 19.2 % 2,270,394 19,6 %1,818,448 18.4 % 2,037,864 17.3 % akershus 2,697,186 19.1 % 2,321,698 20,1 %2,457,444 24.8 % 2,926,443 24.9 % eastern norway 3,306,553 23.4 % 2,691,550 23,3 %

273,529 2.8 % 361,139 3.1 % southern norway 417,088 3.0 % 306,169 2,6 %1,964,856 19.9 % 2,493,036 21.2 % Western norway 2,887,877 20.5 % 2,224,928 19,2 %

889,800 9.0 % 1,072,723 9.1 % Central norway 1,272,318 9.0 % 1,035,472 8,9 %659,861 6.7 % 690,085 5.9 % northern norway, svalbard 796,695 5.6 % 725,393 6,3 %

1 0.0 % 17,061 0.1 % abroad 24,065 0.2 % 9,893,972 100.0 % 11,764,477 100.0 % Total gross loans by geographic area 14,119,485 100.0 % 11,575,604 100.0 %


LTs

16 – LOsses On LOansCOnsOLidaTed

Reconciliation of individual and group writedowns on loans and receivables

individual writedowns

Group writedowns Total


Group write-downs Total

nOk thousand 2010 2010 2010 2009 2009 2009

as at 1.1 816 14,485 15,301 672 12,880 13,552 - Losses realised on loans, guarantees, etc, for which writedowns had previously been made

(61) (61) (1,235) (1,235)

- Recoveries against writedowns from previous years (368) (368) + increase in writedowns on loans 246 101,978 102,224 1,214 1,605 2,819 + interest on impaired loans and receivables 52 52 164 164 as at pr 31.12 685 116,463 117,147 816 14,485 15,301

nOk thousand 2010 2009 2010 2009 2010 2009 2010 2009

Loans by sector and industry Cross loan individual

writedowns Group writedowns net loans

COnsOLidaTedPublic sectorindustry and mining Power, water, building and construction Commerce, hotels and restaurants bus. services, prop. man. and fin. services Other service industries Private individuals 14,119,485 11,575,604 (685) (816) (116,463) (14,485) 14,002,337 11,560,303 Total 14,119,485 11,575,604 (685) (816) (116,463) (14,485) 14,002,337 11,560,303

Parent companyPublic sectorindustry and miningPower, water, building and constructionCommerce, hotels and restaurantsbus. services, prop. man. and fin. servicesOther service industriesPrivate individuals 11,764,477 9,893,972 (685) (816) (114,911) (13,254) 11,648,882 9,879,902 Total 11,764,477 9,893,972 (685) (816) (114,911) (13,254) 11,648,882 9,879,902

15 – LOans bY geOgRaPHiC aRea (COnT.)

Losses by sector and industry 2010 2009nOk thousand Loan losses share % Loan losses share %

Public sectorindustry and miningPower, water, building and constructionCommerce, hotels and restaurantsbus, services, prop, man, and fin, servicesOther service industriesPrivate individuals 109,359 100 3,004 100Total 109,359 100 3,004 100


PaRenT COmPanY

Reconciliation of individual and group writedowns on loans and receivables





nOk thousand 2010 2010 2010 2009 2009 2009

as at 1.1 816 13,254 14,070 672 12,880 13,552 - Losses realised on loans, guarantees, etc. for which writedowns had previously been made

61 61 (1,235) (1,235)

- Recoveries against writedowns from previous years 368 368 + increase in writedowns on loans 246 101,656 101,903 1,214 374 1,588 + interest on impaired loans and receivables 52 52 164 164 as at pr 31.12 685 114,910 115,595 816 13,254 14,070

Losses by sector and industry 2010 2009nOk thousand Loan losses share % Loan losses share %

Public sectorindustry and miningPower, water, building and constructionCommerce, hotels and restaurantsbus. services, prop. man. and fin. servicesOther service industriesPrivate individuals 109,037 100 1,773 100Total 109,037 100 1,773 100

16 – LOsses On LOans (COnT.)

17 – CUsTOmeR dePOsiTsThe figures all refer to gjensidige bank asa. Other companies do not hold deposits.

31.12.2010 31.12.2009nOk thousand deposits share % deposits share %

deposits from/ debt to customers w/o agreed term to maturity 8,902,751 97.6 % 6,417,299 98.0 %

deposits from/ debt to customers with agreed term to maturity 217,25 2.4 % 133,142 2.0 %Total 9,120,004 100 % 6,550,441 100.0 %

average interest rate 2.8 % 3.3 %

deposits by sector and industryRetail market 8,812,385 96.6 % 6,519,399 99.5 %Other *) 307,619 3.4 % 31,042 0.5 %Total deposits by sector and industry 9,120,004 100.0 % 6,550,441 100.0 %

*) Hereby gjensidigestiftelsen 224,998 31,042

deposits by regionOslo 1,745,885 19.1 % 1,371,752 20.9 %akershus 1,769,664 19.4 % 1,205,735 18.4 %eastern norway 2,065,975 22.7 % 1,513,351 23.1 %southern norway 235,890 2.6 % 183,075 2.8 %Western norway 1,954,244 21.4 % 1,351,594 20.6 %Central norway 797,036 8.7 % 546,088 8.3 %northern norway, svalbard 515,801 5.7 % 378,846 5.8 %abroad 35,509 0.4 %Total deposits by region 9,120,004 100.0 % 6,550,441 100.0 %


LTs

18 – deBT inCURRed ThROUGh The issUe Of seCURiTies PaRenT COmPanY COnsOLidaTed31.12.2009 31.12.2010 nOk thousand 31.12.2010 31.12.2009

2,369,266 1,049,771 Commercial paper and other short-term borrowings 1,049,771 2,369,266

1,997,459 2,666,309 bond debt 3,713,297 1,997,459 4,366,725 3,716,080 Total debt incurred through the issue of securities 4,763,068 4,366,725

19 – OTheR LiaBiLiTies PaRenT COmPanY COnsOLidaTed

31.12.2009 31.12.2010 nOk thousand 31.12.2010 31.12.2009

3,903 1,391 accounts payable 1,391 3,903 1,688 459 derivatives 459 1,688

35,593 43,794 Other liabilities 44,501 35,756 31,538 22,640 accrued interest expenses 26,763 36,383 72,722 68,285 Total other debt and liabilities 73,115 77,730

20 – PensiOngjensidige bank asa is required to have an occupational pension plan pursuant to the act relating to mandatory occupational pensions. The pension plan meets the requirements of the law.

employees of gjensidige bank asa have a defined contribution pension plan. The Managing director and the deputy Managing director have a defined performance plan.

There are no employees in the gjensidige bank boligkreditt as subsidiary.

defined COnTRiBUTiOn PensiOn PLanThe defined contribution pension plan is a private pension plan that supplement the national insurance scheme. The benefits from the pension plan are additional to the retirement pension from the national insurance scheme. The retirement age is 67 years.

The disability pension, spousal/cohabitant pension and children’s pension are included pursuant to specific regulations.

in gjensidige bank asa, employees are awarded pension contributions in accordance with the limits to tax-free contribution. Currently this limit is five percent for salaries between 1 and 6 g and eight percent for salaries between 6 and 12 g. Contributions to the defined contribution pension plan are recognised as an expense in the year the contribution is paid.

The figure recognised as an expense for contributions to the defined contribution pension plan is nOk 3.708 million.

COnTRaCTUaL PensiOn (afP)There are no employees included in the old contractual pension plan and therefore no associated liabilities have been recognised. in the financial statement the transition to the new contractual pension plan has been treated as a deduction.

all employees who turn 62 after 1 january 2011 may claim a pension according to the new contractual pension plan from 1 january 2011. The new contractual pension plan consists of a life-long addition to the retirement pen-sion from the national insurance scheme, and is calculated based on pensionable income up to and including the year one turns 61. The contractual pension may only be claimed after having turned 62. The annual contractual pension will increase as the age from which the pension is claimed increases.

The contractual pension is a defined contribution pension plan that as a starting point shall be recognised as a pension liability in the financial statement balance. There is insufficient information available to recognise a liability for the 2010 financial year and the pension plan is therefore recognised as a contribution plan.

Part of the funding (nOk 300 million ) are measured at fair value option .Through 2010, the value of the bond debt where written up by nOk 4,3 million.The bank considers that changes in value of the debt securities does not come from changes in gjensidige bank asa’s specific credit risk, but as a result of general changes in credit spreads and risk-free rate in the financial market.

The method used to assess the specific credit risk is comparing the pricing / credit spreads on the bank’s commercial paper and bond debt with the pricing / credit spreads on other norwegian certificate / bond equivalent issuers.

economic assumptions 2010 2009

discount rate 3.70 % 4.20 %expected rate of return on assets 4.70 % 5.80 %

Wage increase 3.50 % 3.80 %

adjustment of the national insurance scheme’s basic amount “g” 3.25 % 3.70 %

adjustment of existing pensions 2.00 % 2.10 %employer’s niC rate 14.10 % 14.10 %Take-up percentage for aFP 0.0 % 31.0 %demographic assumptions on life expectancy k2005 k2005

Pension benefits earned during the year 2010 2009nOk thousand funded Unfunded Total funded Unfunded TotalPresent value of pension benefits earned during the year 155,517 849,045 1,004,562 157,521 321,456 478,977 interest expense 26,952 (19,111) 7,841 19,504 83,206 102,710 expected return on pension scheme assets (30,869) (30,869) (23,258) (23,258)expense previous pension schemes (2,957,768) (2,957,768) 1,394,322 1,394,322 employer’s niCs 21,375 (300,024) (278,649) 21,682 253,657 275,339 Total pension expense 172,975 (2,427,858) (2,254,883) 175,449 2,052,641 2,228,090

28 GJENSIDIGE BANK GROUP ANNUAL REPORT 2010

20 – PENSION (CONT.)

Pension liabilities on the balance sheet 2010 2009NOK thousand Funded Unfunded Total Funded Unfunded Total

Present value of pension liabilities 519,918 2,583,681 3,103,599 40,242,515 1,295,336 41,537,851

Estimated impact of future wage increases 356,411 978,634 1,335,045 295,791 1,207,403 1,503,194 Total pension liabilities 876,329 3,562,314 4,438,643 40,538,306 2,502,739 43,041,045 Fair value of pension scheme assets (567,468) (567,468) (32,053,384) (32,053,384)Total real net liability 308,861 3,562,314 3,871,175 8,484,922 2,502,739 10,987,661

Employer’s NICs 43,549 502,286 545,835 1,196,374 352,886 1,549,260 Net pension liabilities 352,410 4,064,600 4,417,010 9,681,296 2,855,625 12,536,921

Pension liabilities on the balance sheet 2010 2009

Opening balance at 1.1 43,041,046 1,239,287 Reversals and past pension schemes (2,957,768) 1,394,322 Pension benefi ts earned during the year 1,004,562 478,977 Pension benefi ts paidInterest expenses for employees 7,841 102,710

Interest expenses for pensioners

Actuarial gains and losses not recognised in income statement 1,437,424 (70,835)Business combination 1) (38,094,461) 39,896,585 Gross pension liabilities at 31.12. 4,438,643 43,041,046

Pension scheme assetsOpening balance 32,053,384 229,810 Pension contributions 50,000 113,028 Pension benefi ts paid

Expected rate of return on assets 30,869 23,258

Changes to pension schemeActuarial gains and losses not recognised in income statement 23,215 97,288 Business combination 1) (31,590,000) 31,590,000 Total pension scheme assets at 31.12 567,468 32,053,384

MembersNo. of members of the scheme 2 132 - of whom current employees 2 132 - of whom retired and disability pensioners

1) In the acquisition of Citibank in December 2009 the agreement was that Gjensidige Bank ASA should take over the pension liability to employees of Citibank as part of the settlement, both funded and unfunded schemes. In the fi nal agreement is only parts of the unsecured obligations that are acquired.


LTS

21 – FAIR VALUE OF FINANCIAL INSTRUMENTSMETHOD USED TO CALCULATE FAIR VALUE OFFINANCIAL INSTRUMENTSFinancial instruments measured at fair value (incl. fi nancial-instruments available for sale). See Note 1 Accounting principles

Financial instruments measured at amortised cost Market prices are used to price loans and receivables from credit institu-tions and loans to customers. The value of loans that have been written down is determined by discounting future cash fl ows using the internal rate of return based on market conditions for equivalent loans that have not been written down. Fair value is considered to be the carrying amount for loans and receivables measured at amortised cost. No allowance has

been made for any changes in credit risk over and above the changes in estimated future cash fl ows for loans that have been written down.

The fair value of short-term liabilities to credit institutions is estimated as being their amortised cost. Long-term liabilities to credit institutions are measured at fair value based on the equivalent interest rate as the bank pays on its own bonds. Debt securities measured at amortised cost are va-lued in the same way as debt securities measured at fair value, cf. note 1.

Off balance sheet obligations and guaranteesMortgaged assets are measured at fair value, cf. note 1. Other off balance sheet obligations and guarantees are measured at their nominal value. The fair value is shown on the balance sheet under provisions.

31.12.2010 31.12.2009CONSOLIDATED NOK thousand Book value

Adjustment to fair value Book value

Adjustment to fair value

ASSETS

Cash and receiv. from central banks 797,777 797,777 264,519 264,519

Loans to and receivables from credit institutions, measured at amortised cost 59,237 59,237 149,409 149,409Loans to and receivables from credit institutions 59,237 59,237 149,409 149,409

Loans to and receivables from customers, measured at amortised cost 14,002,337 14,004,171 11,560,303 11,562,986Loans to and receivables from customers, designated at fair value Loans to and receivables from customers 14,002,337 14,004,371 11,560,303 11,562,986

Interest-bearing securities, receivables and loans, amortised cost

Interest-bearing securities, designated at fair value 555,058 555,058 577,521 577,521Interest-bearing securities 555,058 555,058 577,521 577,521

Shares, designated at fair value 241,636 241,636 88,026 88,026

Shares, available for sale Shares 241,636 241,636 88,026 88,026

Derivatives, trading portfolio 6,275 6,275 1,065 1,065Derivatives 6,275 6,275 1,065 1,065

Other fi nancial instruments, amortised cost 32,224 32,224 17,110 17,110Total other fi nancial instruments 32,224 32,224 17,110 17,110

Total 15,694,544 15,696,578 12,657,952 12,660,635

LIABILITIES

Debt to credit institutions, measured at amortised cost 513,108 513,108 513,108 513,108Debt to credit institutions 513,108 513,108 513,108 513,108

Deposits from/ debt to customers, measured at amortised cost 9,120,004 9,120,122 6,550,441 6,550,441

Deposits from/ debt to customers, measured at fair value Deposits from/ debt to customers 9,120,004 9,120,122 6,550,441 6,550,441

Debt incurred through the issue of securities, measured at amortised cost 4,459,270 4,454,157 3,016,590 3,020,210

Debt incurred through the issue of securities, measured at fair value 303,798 303,798 1,350,135 1,350,135Debt incurred through the issue of securities 4,763,068 4,757,955 4,366,725 4,370,345

Derivatives, trading portfolio 459 459 1,569 1,569Derivatives 459 459 1,569 1,569

Other fi nancial liabilities, amortised cost 26,763 26,763 31,537 31,537

Other fi nancial liabilities 26,763 26,763 31,537 31,537

Total 14,423,403 14,418,408 11,463,380 11,467,000

Off balance sheet obligations and guaranteesObligations Guarantees 8,426 8,426 Mortgaged assets 1 756,537 756,537 256,090 256,090

1 Mortgaged assets include bonds and commercial paper mortgaged with Norges Bank as security for loans/ credit facility with Norges Bank.


21 – FAIR VALUE OF FINANCIAL INSTRUMENTS (CONT.)

PARENT COMPANY 31.12.2010 31.12.2009

NOK thousand Book valueAdjustment to fair value Book value

Adjustment to fair value

ASSETS

Cash and receiv, from central banks 797,777 797,777 264,519 264,519

Loans to and receivables from credit institutions, measured at amortised cost 515,836 515,836 301,848 301,848Loans to and receivables from credit institutions 515,836 515,836 301,848 301,848

Loans to and receivables from customers, measured at amortised cost 11,648,882 11,650,916 9,879,902 9,882,585Loans to and receivables from customers, designated at fair value Loans to and receivables from customers 11,648,882 11,650,916 9,879,902 9,882,585

Interest-bearing securities, receivables and loans, amortized cost 748,900 733,317 1,500,000 1,477,030

Interest-bearing securities, designated at fair value 555,058 555,058 577,521 577,521Interest-bearing securities 1,303,958 1,288,375 2,077,521 2,054,551

Shares, designated at fair value 241,636 241,636 88,026 88,026

Shares, available for sale Shares 241,636 241,636 88,026 88,026

Derivatives, trading portfolio 6,275 6,275 1,065 1,065Derivatives 6,275 6,275 1,065 1,065

Other fi nancial instruments, amortised cost 37,269 37,269 16,017 16,017Total other fi nancial instruments 37,269 37,269 16,017 16,017

Total 14,551,632 14,538,084 12,628,898 12,608,611

LIABILITIES

Debt to credit institutions, measured at amortised cost 558,947 558,947 568,147 568,147Debt to credit institutions 558,947 558,947 568,147 568,147

Deposits from/ debt to customers, measured at amortised cost 9,120,004 9,120,122 6,550,441 6,550,441

Deposits from/ debt to customers, measured at fair value Deposits from/ debt to customers 9,120,004 9,120,122 6,550,441 6,550,441

Debt incurred through the issue of securities, measured at amortised cost 3,412,282 3,416,165 3,016,590 3,020,210

Debt incurred through the issue of securities, measured at fair value 303,798 303,798 1,350,135 1,350,135Debt incurred through the issue of securities 3,716,080 3,719,963 4,366,725 4,370,345

Derivatives, trading portfolio 459 459 1,569 1,569Derivatives 459 459 1,569 1,569

Other fi nancial liabilities, amortised cost 22,640 22,640 31,537 31,537Other fi nancial liabilities 22,640 22,640 31,537 31,537

Total 13,418,131 13,422,132 11,518,419 11,522,039

Off balance sheet obligations and guaranteesObligations 5,000 5,000 Guarantees 3,426 3,426 Mortgaged assets *) 756,537 756,537 256,090 256,090

1 Mortgaged assets include bonds and commercial paper mortgaged with Norges Bank as security for loans/ credit facility with Norges Bank.

Assets and liabilities that are measured at fair value, whether this is because they are part of the trading portfolio, were designated at fair value on initial recognition or are held as available for sale, shall be classifi ed according to how reliable the fair value estimate is.

There are three classifi cation levels, with level 1 assets having prices quoted in active markets. Level 2 valuations are directly or indirectly based on observable prices for similar assets. Level 3 valuations are not based on observable prices, and instead rely on e.g. our own valuation models.


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CONSOLIDATED 31.12.2010

NOK thousand Level 1 Level 2 Level 3 Total

Loans to and receivables from customers, designated at fair valueInterest-bearing securities, designated at fair value 514.901 40.157 555.058Shares, designated at fair value 241.636 241.636Shares, available for saleDerivatives, trading portfolio 6.275 6.275

Total assets measured at fair value 756.537 46.432 802.969

Deposits from/ debt to customers, measured at fair valueDebt incurred through the issue of securities, measured at fair value 303.798 303.798Derivatives, trading portfolio 459 459Total liabilities measured at fair value 304.257 304.257

CONSOLIDATED 31.12.2009NOK thousand Level 1 Level 2 Level 3 Total

Loans to and receivables from customers, designated at fair valueInterest-bearing securities, designated at fair value 364.374 213.147 577.521Shares, designated at fair value 88.026 88.026Shares, available for saleDerivatives, trading portfolio 1.065 1.065Total assets measured at fair value 452.400 214.212 666.612

Deposits from/ debt to customers, measured at fair value Debt incurred through the issue of securities, measured at fair value 1.350.135 1.350.135Derivatives, trading portfolio 1.569 1.569Total liabilities measured at fair value 1.351.704 1.351.704

PARENT COMPANY 31.12.2010

NOK thousand Level 1 Level 2 Level 3 Total

Loans to and receivables from customers, designated at fair valueInterest-bearing securities, designated at fair value 514.901 40.157 555.058Shares, designated at fair value 241.636 241.636Shares, available for sale Derivatives, trading portfolio 6.275 6.275Total assets measured at fair value 756.537 46.432 802.969

Deposits from/ debt to customers, measured at fair valueDebt incurred through the issue of securities, measured at fair value 303.798 303.798Derivatives, trading portfolio 459 459Total liabilities measured at fair value 304.257 304.257

PARENT COMPANY 31.12.2009NOK thousand Level 1 Level 2 Level 3 Total

Loans to and receivables from customers, designated at fair value Interest-bearing securities, designated at fair value 364.374 213.147 577.521Shares, designated at fair value 88.026 88.026Shares, available for saleDerivatives, trading portfolio 1.065 1.065Total assets measured at fair value 452.400 214.212 666.612

Deposits from/ debt to customers, measured at fair value Debt incurred through the issue of securities, measured at fair value 1.350.135 1.350.135Derivatives, trading portfolio 1.569 1.569Total liabilities measured at fair value 1.351.704 1.351.704

21 – FAIR VALUE OF FINANCIAL INSTRUMENTS (CONT.)

There were no major moves between levels 1 and 2 in 2010.


Age analysis of overdue but not impaired loansNo signifi cant differences between the fi gures for the Group and Parent company. The fi gures shows consolidated fi gures and in the extent there are deviations from the parent, this is commented on separately. 31.12.2010NOK thousand

< 1 month 1- 3 months

More than 3 months Total

Loans to and receivables from credit institutions Loans to and receivables from customers 233,9461) 86,310 157,537 477,793 OverdraftsLoans to and receivables from customers and credit institutions

classifi ed as fi nancial assets measured at fair value through profi tor loss upon initial recognition

Total 233,946 86,310 157,537 477,793

1) Of this Gjensidige Bank Boligkreditt AS NOK 3.2 million

31.12. 2009NOK thousand

< 1 month 1- 3 months

More than 3 months Total

Loans to and receivables from credit institutionsLoans to and receivables from customers 710 4,921 24,013 29,644 OverdraftsLoans to and receivables from customers and credit institutions

classifi ed as fi nancial assets measured at fair value through profi tor loss upon initial recognition

Total 710 4,921 24,013 29,644

The list shows loans that are more than NOK 1000 overdue and accounts that are more than NOK 1000 overdrawn.If any loan or account is overdue, all credits provided to the customer in question are included.

Age analysis of overdue loans by individual impairment

31.12.2010NOK thousand

Loans to and receivables from

customers GuaranteesUnused credit

facilities Total

Default 1 - 30 daysDefault 31 - 60 daysDefault 61 -90 daysDefault more than 90 days 5,066 5,066 Total 5,066 5,066

These loans are secured by mortgages valued at a total of NOK 8,3 million

31.12.2009NOK thousand

Loans to and receivables from

customers GuaranteesUnused credit

facilities Total

Default 1 - 30 daysDefault 31 - 60 daysDefault 61 -90 daysDefault more than 90 days 4,370 4,370 Total 4,370 4,370

Factors that caused impairment is objective evidence of impairment which includes signifi cant fi nancial problem for the debtor.Expected future cash fl ows are lower than the loan balance and the difference is recorded as an individual impairment.

22 – AGE ANALYSIS OF OVERDUE LOANS


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23 – RELATED PARTIES

OVERVIEW RELATED PARTIES Gjensidige Bank Holding AS is the parent company (100%), while Gjensidige Forsikring ASA is the Group’s parent company. Gjensidige Bank Boligkreditt AS is a subsidiary (100%). All companies in the group are to be regarded as related parties and will be specifi ed to the extent that the company has transactions or balan-ces with them.

TRANSACTIONS WITH RELATED PARTIES The list below shows the transactions with related parties are recognized in the income statement

BALANCE WITH RELATED PARTIES The list below shows assets / liabilities on / to related parties

1.1.-31.12.2010 1.1.-31.12. 2009

NOK thousand Income Expense Income Expense

Net interest incomeGjensidige Bank Boligkreditt AS 49,663 1,437 11,677 240 Gjensidige Forsikring ASA

Other incomeGjensidige Bank ASA 653 162

Other expensesGjensidige Forsikring ASA 22,601 11,845

Total 50,316 24,038 11,839 12,085

31.12.2010 31.12. 2009

NOK thousand Assets Liabilities Assets Liabilities

Gjensidige Bank Boligkreditt ASA 1,236,515 45,839 1,667,650 55,248 - of which covered bonds 748,900 1,500,000

Gjensidige Forsikring ASA 822 824 6,165

Total 1,236,515 46,661 1,668,474 61,413

For transactions with senior management and board, see note 7

When Gjensidige Bank Boligkreditt AS was established an agreement was signed with Gjensidige Bank ASA for the delivery of services related to loan administra-tion and operations of the company. In addition, Gjensidige Bank Boligkreditt AS is granted a long-term framework credit of up to NOK 250 million, as well as a short-term sales credit of up to NOK 1.3 billion. The short-term seller credit will be settled as new bonds are issued.


24 – CAPITAL ADEQUACYPARENT COMPANY CONSOLIDATED

31.12.2009 31.12.2010 NOK thousand 31.12.2010 31.12.2009

1,208,192 1,208,192 Share capital and share premium account 1,208,192 1,208,192 3,436 73,790 Other equity 81,726 4,101

1,211,628 1,281,982 Equity 1,289,918 1,212,293

Deductions (41,543) (61,043) Goodwill and other intangible assets (62,113) (43,254) (22,980) (749) Deferred tax assets (714) (22,878)

1,147,105 1,220,190 Core capital 1,227,091 1,146,161

Additional capital 1,147,105 1,220,190 Net equity and subordinated debt 1,227,091 1,146,161

Minimum requirement for equity and subordinated debt

Credit riskOf which:

11,232 18,786 Institutions 1,078 2,390 8,343 1,557 Businesses 1,557 8,343

239,893 224,980 Mass market 225,417 241,428 197,798 258,517 Residential mortgage loans 331,391 247,917

2,067 25,169 Overdue advances 25,169 2,067 12,000 5,992 Covered bonds

7,028 3,866 Units in unit trusts 3,866 7,028 1,307 971 Other advances 446 1,188

479,668 539,838 Total minimum requirement for credit risk 588,924 510,361

7,197 27,864 Operationell risk 28,754 7,197 Deductions:

(1,060) (9,193) Group writedowns (9,317) (1,159) 485,805 558,509 Minimum requirement for equity and subordinated debt 608,361 516,399

661,300 661,681 Surplus equity 618,730 629,762

5,279.581 5,917,704 Balance sheet items not included in trading portfolio 6,442,452 5,616,358 715,671 828,649 Off balance sheet items not included in trading portfolio 917,484 762,575

18.9 % 17.5 % Capital adequacy ratio 16,1 % 17,8 %18.9 % 17.5 % Core capital ratio 16,1 % 17,8 %


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25 – CLASSIFICATION OF FINANCIAL INSTRUMENTSCONSOLIDATEDBALANCE 31.12.2010

Financial instruments measured at fair value through profi t or loss

NOK thousand Trading

portfolioDesignated at

fair value

Financial assets and liabilities at amortise

costNon-fi nancial assets

and liabilities Total

ASSETSCash and receivables from Norges Bank 797,777 797,777

Loans to and receivables from credit institutions 59,237 59,237 Loans to customers 14,002,337 14,002,337 Interest-bearing securities 555,058 555,058 Shares and ownership interests 241,636 241,636 Intangible assets 62,113 62,113 Property, plant and equipment 4,414 4,414 Deferred tax assets 713 713 Derivatives 6,275 6,275 Other assets 34,071 34,071 Total assets 6,275 796,694 14,859.351 101,311 15,763,631

LIABILITIESDebt to credit institutions 513,108 513,108 Deposits from/ debt to customers 9,120,004 9,120,004 Debt securities 303,798 4,459,270 4,763,068 Derivatives 459 459 Other liabilities 26,763 45,892 72,656 Provisions 4,417 4,417 Total liabilities 459 303,798 14,119,146 50,309 14,473,712

Total equity 1,289,918 1,289,918 Total liabilities and equity 459 303,798 14,119,146 1,340,228 15,763,631

PARENT COMPANYBALANCE 31.12.2010




fair value




ASSETSCash and receivables from Norges Bank 797,777 797,777 Loans to and receivables from credit institutions 515,836 515,836 Loans to customers 11,648,882 11,648,882 Interest-bearing securities 555,058 748,900 1,303,958 Shares and ownership interests 241,636 241,636 Ownership interest in group 130,030 130,030 Intangible assets 61,043 61,043 Property, plant and equipment 4,414 4.414 Deferred tax assets 749 749 Derivatives 6,275 6,275 Other assets 39,116 39,116 Total assets 6,275 796,694 13,841,425 105,322 14,749,716

LIABILITIESDebt to credit institutions 558,947 558,947 Deposits from/ debt to customers 9,120,004 9,120,004 Debt securities 303,798 3,412,282 3,716,080 Derivatives 459 459 Other liabilities 22,640 45,185 67,825 Provisions 4,417 4,417 Total liabilities 459 303,798 13,113,874 49,602 13,467,733

Total equity 1,281,982 1,281,982

Total liabilities and equity 459 303,798 13,113,874 1,331,585 14,749,716


CONSOLIDATEDBALANCE 31.12.2009




fair value




ASSETSCash and receivables from Norges Bank 264,519 264,519

Loans to and receivables from credit institutions 149,409 149,409 Loans to customers 11,560,303 11,560,303 Interest-bearing securities 577,521 577.521 Shares and ownership interests 88,026 88,026 Intangible assets 43,254 43,254 Property, plant and equipment 5,244 5,244 Deferred tax assets 22,878 22,878 Derivatives 1,065 1,065 Other assets 20,615 20,615 Total assets 1,065 665,547 11,974,231 91,992 12,732,834

LIABILITIESDebt to credit institutions 513,108 513,108 Deposits from/ debt to customers 6,550,441 6,550,441 Debt securities 1,348,872 3,017,853 4,366,725 Derivatives 1,688 1,688 Other liabilities 15,356 60,686 76,042 Provisions 12,537 12,537 Total liabilities 1,688 1,348,872 10,096,758 73,223 11,520,541

Total equity 1,212,293 1,212,293 Total liabilities and equity 1,688 1,348,872 10,096,758 1,285,516 12,732,834

PARENT COMPANYBALANCE 31.12.2009




fair value




ASSETSCash and receivables from Norges Bank 264,519 264,519 Loans to and receivables from credit institutions 301,848 301,848 Loans to customers 9,879,902 9,879,902 Interest-bearing securities 577,521 1,500,000 2,077,521 Shares and ownership interests 88,026 88,026 Ownership interest in group 80,030 80,030 Intangible assets 41,543 41,543 Property, plant and equipment 5,244 5,244 Deferred tax assets 22,980 22,980 Derivatives 1,065 1,065 Other assets 19,522 19,522 Total assets 1,065 665,547 12,026,299 89,289 12,782,200

LIABILITIESDebt to credit institutions 568,147 568,147 Deposits from/ debt to customers 6,550,441 6,550,441 Debt securities 1,350,135 3,016,590 4,366,725 Derivatives 1,688 1,688 Other liabilities 12,609 58,425 71,034 Provisions 12,537 12,537 Total liabilities 1,688 1,350,135 10,147,787 70,962 11,570,572

Total equity 1,211,628 1,211,628 Total liabilities and equity 1,688 1,350,135 10,147,787 1,282,590 12,782,200

25 – CLASSIFICATION OF FINANCIAL INSTRUMENTS (CONT.)


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26 –SHARES AND OWNERSHIP INTERESTSPARENT COMPANY CONSOLIDATED

31.12.2009 31.12.2010 NOK thousand 31.12.2010 31.12.2009

88,026 241,636 Ownership interest/shares 241,636 88,026 80,030 130,030 Ownership interest in group

168,056 371,666 Total 241,636 88,026

88,026 241,636 Stock exchange listed securities 241,636 88,026 80,030 130,030 Unlisted securities

168,056 371,666 Total 241,636 88,026

Book value Market value Specifi cation of ownership interest/shares Book value Market value Voting shares %

Current assets 88,026 241,636 Storebrand likviditet 241,636 241,636 100 %

Fixed assets 80,030 130,030 Unlisted securities na na

27 – RISK AND RISK MANAGEMENTThe Board of Gjensidige Bank ASA is responsible for setting up the framework for and following up on the company’s risk exposure. The risks in Gjensidige Bank ASA are measured and reported in accordance with the policies and guidelines approved by the Board. The Board determines the instructions and policies for managing the bank’s risks.

The Board decides the company’s credit policy. The Board also sets limits for the company’s market and liquidity risk. The Board of Gjensi-dige Bank ASA has the fi nal responsibility for limiting and following up on the risk in the company.

The company management is responsible for developing and following up on policy, instructions, guidelines, management and reporting con-nected to the company’s risk management.

CAPITAL ADEQACY REGULATIONS The bank adapted to the Basel II regulations as of 1 January 2008. The regulations are built on three pillars: • Pillar 1 Minimum capital requirements• Pillar 2 CAAP process for evaluation of the bank’s total capital requirements • Pillar 3 Requirements for the public disclosure of fi nancial information

Pillar 1: When introducing new capital adequacy regulations the bank adapts to the simplest method. This means reporting credit risks using the standard method, and reporting operational risk using the basic method.

Pillar 2: The bank draws up the ICAAP document in accordance with its own ICAAP process. The document is drawn up with a broad involvement of management and specialists at the bank, as well as of the Board.

Pillar 3: The bank has defi ned guidelines for the public disclosure of information, and these have been adopted by the Board. The Pillar 3 document is presented together with the annual report. Updates to the information provided in the Pillar 3 document are provided in the bank’s quarterly reports.

The Basel II regulations allow institutions to adapt the reporting of capi-tal adequacy according to how advanced the bank’s own measurement methods for the quantifi cation of risk are. Gjensidige Bank ASA aims to apply for approval for reporting credit risks using the IRB method, but has not yet set an application date.

THE BANK’S RISK AREASThe bank’s risk areas are evaluated continuously, and the strategy for the risk areas is adopted annually by the Board. The bank employs statistical modelling to calculate capital requirements given the chosen level of confi dence for most of the risk categories. The capital require-ments are calculated for the risk areas for the entire strategy period in the current strategy plan, as shown in the bank’s ICAAP document, and are reported to the Board quarterly.

CREDIT RISK Credit risk is the danger of losses as a result of the customers/counter-parts not being able, or not being willing, to meet their commitments to the bank. The bank’s credit risk originates in loans and credits.

The Board sets the framework for the bank’s credit risk through its credit policy and the annual credit strategy that provides guidelines for its credit business.

On the mortgage front, Gjensidige Bank ASA is strict in its credit policy, and mainly provides mortgages of up to 80 percent of the reliably assessed collateral value. Mortgages that exceed 80 per cent of a reliably assessed collateral value are only provided to specifi ed customer groups. Analyses of the bank’s credit portfolio done by Lindorff Decision show very good customer quality. The customer’s ability to pay is evaluated in all mortgage applications. In addition to being able to service a loan at current interest rates, the customer must also be able to service their total loans if the interest rate increases by up to 4.5 percent.

The bank is one of the largest actors in consumer fi nancing. This port-folio has a higher credit risk than the mortgage portfolio, but the risk is priced through a risk pricing model. The portfolio development is closely supervised through thorough and continuous analyses, and is measured to risk adjusted returns. The portfolio shows good profi tability.

The fi gures in the note are calculated for Gjensidige Bank ASA without the inclusion of loans that are sold to Gjensidige Bank Boligkreditt AS. Even though parts of the bank’s mortgage portfolio have been trans-ferred to Gjensidige Bank Boligkreditt AS, the quality of the portfolio remaining in Gjensidige Bank ASA remains good.


MODELS FOR CALCULATING CREDIT RISKGjensidige Bank ASA has developed statistical methods for calculating application and behavioural scores. The models predict the probability that the customer defaults in the course of a 12 month period.

The application score model uses both internal and external data about the customer, and is used when the customer applies for a loan from the bank. The behavioural score model uses internal bank data exclu-sively, and calculates the probability for default given the customer’s previous use of the bank’s services.

With the help of these models all lending in the bank receives a monthly risk classifi cation in the risk classes A - K, where A is the best and K are loans that are in default. From these classifi cations, loans are divided into three main groups: Low risk, intermediate risk and high risk. The classifi cation is used in the bank’s monthly reporting and follow-up of the customer base.

The table below shows the portfolio as of 31.12.10 allocated by risk, and the part of the group writedowns connected to each risk category. The overview below shows the fi gures for the Gjensidige Bank ASA portfolio secured by collateral.

Loan Per cent Individual writedowns Group writedowns

Low 6,302 627,424 69.8 % 5,811,141Intermediate 2,381 312,090 26.4 % 4,169,535High 349,233,945 3.9 % 685,010 3,380,923Total 9,033,173,459 100.0% 685,010 13,361,599

Low risk is here defi ned as an exposure that has a PD (probability of default) that is less than 1.25 percent in the next 12 months. The ex-posure with an intermediate risk has a default probability between 1.25 percent and 3 percent. Exposures that are classifi ed as high risk have a default probability that is greater than 3 percent. The table below show the collaterally secured portfolio of the Bank Group divided by risk. The overview below shows the consumer loan portfolio in Gjensidige

Bank ASA. For the consumer loan portfolio PD is defi ned differently from other portfolios. Here the PD value shows the probability that a customer defaults in the next 18 months. The PD values in the consu-mer loan portfolio and in other portfolios are thus not directly compa-rable. In the overview below, customers defi ned as low risk have a PD of < 3 %. Customers with a PD value between 3 and 6 % are defi ned as intermediate risk, and high risk customers have a PD of > 6 %. This gives the following distribution:*Due to the migration of the consumer loan portfolio to Edb’s banking systems in

November 2010, the fi gures are not directly comparable to the fi gures for 2009.

Within the market for private customers, Gjensidige Bank ASA has also developed a framework model that shows the loss level for each customer receivable, assuming it is defaulted on. The loss level is calcu-lated based on the product that has been granted to the customer, the collateral that secures the bank’s receivable, and the assessed value of the receivable.

LOSS ON LENDINGWhen fi rst measured loans are evaluated at fair value with the addition of direct transaction costs. In subsequent measurements, loans are evaluated at amortised cost using the effective interest rate method. Changes in the interest rate of the loan due to changes in the market interest rate, do not impact the value of the loan.

The bank charges losses on loans and credits in accordance with the guidelines issued by The Financial superviser. The writedown is the dif-ference between the discounted value of the expected future cash fl ow discounted by the effective interest rate and the carrying amount of the loan. The writedown can be divided into two, individual writedown and group writedown. The bank makes decisions on individual write-downs fi rst, before group writedowns are calculated.

The bank’s commitments are reviewed and individually evaluated when there is objective evidence that a loss has occurred. When there is ob-jective evidence such as of bankruptcy, composition with creditors, debt negotiations and other defaults indicating that the bank will incur a loss on a loan, individual writedowns are recognised. Writedowns mean that commitments receive a K risk classifi cation, which is the classifi cation for defaults. The value of the collateral is determined based on the realizable value at the expected date of realization. The writedown is reversed when the loss is reduced.

A commitment is considered to be in default if an account is overdrawn or if a borrower is not meeting their payments and the customer does not settle up within 90 days. A commitment is reported as defaulted on when the overdraft/arrears are greater than NOK 1000 (for consumer loans, defaults are defi ned as arrears that are greater than 10 percent of the instalment, which in most cases is less than NOK 1000). If a commitment is written off without having been defaulted on, it is reported as a writedown but non-defaulted commitment.

When the bank recognises losses on commitments that have previously had individual writedowns, the entire write-off is recognised in the period, while the individual writedown is reversed. Incoming payments on previously depreciated receivables (write-offs) are recognised as a reduction in the write-off on loans.

The bank has it’s own models for calculating the writedowns on groups of loans. The models are based on the bank’s models for calculating credit risk down to each individual exposure in the secured segment. The calculation of the group writedown is done by looking at each individual exposure and calculating the likely loss in the current portfolio over the portfolio’s statistical remaining term. Write downs on groups of loans take into account potential losses on customers who are in the bank’s portfolio, but who have not been identifi ed at the balance sheet date as being likely to default. In the unsecured portfolio writedowns on groups of loans are based on the development of the portfolio, especially as it relates to defaults. Based on experience-based fi gures, an expected cash fl ow is calculated for the various exposures. The dif-ference between the expected cash fl ow and the customer exposure is then recognised as writedowns as groups on loans.

The bank also has guidelines for the calculation of expected customer exposure in the event the customer defaults. The Bank Group’s maxi-mum exposure to credit risk on the balance sheet date is best refl ected in the total of recognised loans of NOK 14.117 billion.

MARKET RISKMarket risk is the risk of losses associated with unfavourable move-ments in market prices, which in this context relates to positions and activities in the interest, currency and stock markets.


Low 1,882,267,168 68.9 %Intermediate 660,900,507 24.2 %High 188,136,345 6.9 % 101,549,091Total 2,731,304,020 100.0%


Low 8,350,832,714 73.3 % 5,811,141 Intermediate 2,650,009,855 23.3 % 4,169,535 High 387,338,261 3.4 % 685,010 4,933,005 Total 11,388,180,830 100.0 % 685,010 14,913,681

27 – RISK AND RISK MANAGEMENT (CONTINUE)


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The Board has specifi ed limits on the bank’s exposure to interest rate risk. The framework for the interest rate risk under 1 year is limited to a negative exposure of up to 500 MY. A framework is also provided for interest rate risks for all time periods plus/minus 300 MY. The bank’s maximum exposure to interest rate risk is 500 MY. Interest rate risk under three months is reported but does not enter into the risk fram-ework. This means that when the limit is fully utilised, the maximum loss for the bank at one percentage point change in the yield curve will be NOK 5 million. Utilisation of this limit is reported monthly to the Board of Directors.

Periods of fi xed interest rates on the bank’s assets and debts through fi xed interest rate products on bank loans are also a market risk and are included in the frameworks as defi ned above.

As of 31.12.2010 the bank has a negative interest rate exposure in the 3 months to a year interval of 313 MY. The net accumulated interest rate exposure over three months is a negative 299 MY as of 31.12.2010.

The bank measures the market risk using a Value at Risk analysis in the bank’s total risk model. As of 31.12.2010 the capital provisions for interest rate risk was MNOK 5.2

Gjensidge Bank ASA does not have currency or share risk. Gjensidige Bank ASA does not have market risk under Pillar 1 because the bank does not have a trading portfolio.

OPERATIONAL RISKOperational risk refers to the risk loss resulting from human errors, exter-nal events or defi ciencies or inadequacies in the bank’s internal systems, routines or processes. The bank has its own losses and events database for the evaluation, follow-up and storage of operational mistakes.

The capital needed to cover the bank’s operational risk based on the determined level of confi dence, which is currently 99.95 %, is calculated using the total risk model. LIQUIDITY RISKLiquidity risk is the risk of the bank not being able to meet its debt obligations when due and/or not being able to fi nance a growth in its assets without incurring a substantial increase in costs in the form of a price loss on assets that must be realised or in the form of especially expensive fi nancing.

We distinguish between two types of liquidity risk1. The bank has its credit rating downgraded as a result of large losses but still has access to liquidity in the fi nancial market2. The bank does not have access to liquidity as a result of large losses

Provisions for the fi rst type of liquidity loss is estimated in the total risk model. Liquidity risk arising from losses that result in a downgrading of credit rating category is defi ned as the charge against equity due to increased fi nancing costs. Liquidity risk due to reduced access to liquidity is a matter of having suffi cient liquid assets to meet the obligations which fall due.

Through recession scenarios and stress tests using the probability and consequences of weakened fi nancing, requirements are defi ned for depo-sit coverage, maturities structure and liquidity reserves. These calculations are based on a relatively short time frame.The Board has established limits that restrict the bank’s liquidity needs within different time periods, and targets for long-term liquidity indicators. The bank shall have a liquidity reserve (buffer capital) available in short-

term deposits, highly liquid securities and / or committed credit facilities which during an acute liquidity shortage in the market would provide a reasonable time period in which to implement necessary measures.

The liquidity reserve shall cover the total of:

a) 100 percent of the funding due in the fi rst month in the futureb) 100 percent of the funding due in the second month in the futurec) 75 percent of the funding due in the third month in the futured) 50 percent of the funding due in the fourth month in the futuree) 50 percent of the funding due in the fi fth month in the futuref) 25 percent of the funding due in the sixth month in the futuree) An unexpected decline in deposits of 9 percent, based on the deposits published in the most recent quarterly fi nancial statements.

Based on this, the requirement for a liquidity reserve as of 31.12.2010 was NOK 1,200.8 million and the actual liquidity reserve was NOK 1,816.1 million composed of NOK 857 million in deposits and NOK 959.1 million in bonds, securities and money market funds. NOK 162.4 million of this were investments in preferential bonds from Gjensidige Bank Boligkreditt AS (eliminated in the consolidated accounts) that were not utilised in the swap arrangement with Norges Bank. The liquidity reserves are in the main realisable within a few days and the liquidity holdings are suffi cient to meet payments due on debts for 19 months.

Stress tests have also been completed demonstrating the bank’s requi-rements for a liquidity reserve based on future scenarios of recession and fi nancial crisis. CONCENTRATION RISKConcentration risk is the risk of losses due to the bank having large parts of its lending tied to single actors or to limited geographic or business areas. The concentration risk is managed using the bank’s risk frameworks, and is measured and evaluated through annual stress tests/scenario analyses in the credit area.

As of 31.12.10 the portfolio is geographically diverse, with the greatest lending in the most populous areas of the country. The largest loan is about MNOK 9.6. The total of the 10 largest loans is MNOK 80.9.

BUSINESS RISKBusiness risks are those risks related to unexpected fl uctuations in revenue due to situations other than credit risk, market risk or operatio-nal risk. The risk may arise in various business or product segments, and be tied to market fl uctuations and/or changed customer behaviour, for example due to changes in reputation or mistaken strategic assessments.

A statistical model has been developed based on the bank’s budgets and prognoses that calculate the capital required for business risk.

COMPLIANCE RISK The bank has defi ned compliance risk as the risk that the bank will incur public sanctions, fi nes, fi nancial loss or a weakened reputation as a result of failing to comply with laws, regulations, standards or internal guidelines.

The bank has created a compliance function that identifi es, evaluates, advises, supervises and reports on the compliance risk and any breach of current laws and regulations.

Management annually confi rms that the operations in their unit are in compliance with current laws and regulations and that the compliance risk has been assessed. This is done in connection with the reporting of the results of the year’s risk assessment pursuant to regulations on risk management and internal control.

27 – RISK AND RISK MANAGEMENT (CONTINUE)


CONSOLIDATED 31.12.2010NOK thousand 1 month 1-3 months 3-12 months 1-5 years More than 5 years Perpetual loans Total

Debt to credit institutions 3,805 13,587 542,508 559,900 Deposits from/ debt to customers 9,079,657 206 41.366 155 9,121,384 Debt incurred through the issue of securities 119,188 229,690 955,043 3,776,274 5,080,196 Loan offers and unused credit facilities 2,367,044 2,367.044 Derivatives – gross outfl ows * 399 12,706 37,527 50,632 Total liabilities 11,566,288 233,701 1,022,703 4,356.465 17,179,156

*) Derivatives – gross infl ows 498 16,465 48,976 65,939

Financial derivatives – net outfl ows (negative fi gure implies net infl ow)

(99) (3,759) (11,449) (15,307)

CONSOLIDATED 31.12.2009NOK thousand 1 month 1-3 months 3-12 months 1-5 years More than 5 years Perpetual loans Total

Debt to credit institutions 2,829 14,798 556,163 573,789 Deposits from/ debt to customers 6,550,442 6,550,442 Debt incurred through the issue of securities 117,217 403,752 1,963,217 2,130,514 4,614,700 Loan offers and unused credit facilities 2,578,001 2,578,001 Derivatives – gross outfl ows * 2,314 3,925 33,042 47,175 86,456 Total liabilities 9,247,974 410,507 2,011,057 2,733,852 14,403,389


Financial derivatives – net outfl ows (negative fi gure implies net infl ow) 1,934 3,925 (14,306) (17,433) (25,880)

28 – LIQUIDITY RISKLiquidity risk is the risk that the bank cannot meet its payment obliga-tions when they arise, or replace deposits that are withdrawn, resulting in the Group defaulting on its obligations. Liquidity risk is managed and measured using several methods.

The Board has established a framework that limits the proportion of the bank’s liabilities that mature within certain time periods, and goals for the long-term fi nancing of illiquid assets (liquidity indicator).

At the end of the year Gjensidige Bank ASA group had a liquidity reserve of NOK 1,816.1 million divided into NOK 857.0 million in deposits and

NOK 959.1 million invested in bonds, certifi cates and money market funds. Of this, NOK 162.4 million where investments in bonds from Gjensidige Bank Boligkreditt AS (eliminated in the consolidated fi nancial statements) that are not used in the swap arrangement with Norges Bank. The cash reserves is largely realizable in some days and the reserve is suffi cient to cover the maturity of the debt in 19 months

The below fi gures are nominal amounts, and include interest payments based on the interest rates on the reporting date.

PARENT COMPANY 31.12.2010NOK thousand 1 month 1-3 months 3-12 months 1-5 years More than 5 years Perpetual loans Total

Debt to credit institutions 45,839 3,805 13,587 542,508 605,740 Deposits from/ debt to customers 9,079,657 206 41,366 155 9,121,384 Debt incurred through the issue of securities 119,188 222,355 932,876 2,656,942 3,931,361 Loan offers and unused credit facilities 1,860,186 1,860,186 Derivatives – gross outfl ows * 399 12,706 37,527 50,632 Total liabilities 11,105,269 226,366 1,000,535 3,237,132 15,569,303


Financial derivatives – net outfl ows(negative fi gure implies net infl ow)

(99) (3,759) (11,449) (15,307)

PARENT COMPANY 31.12.2009NOK thousand 1 month 1-3 months 3-12 months 1-5 years More than 5 years Perpetual loans Total

Debt to credit institutions 55,039 2,829 14,798 556,163 628,828 Deposits from/ debt to customers 6,550,441 6,550,441 Debt incurred through the issue of securities 117,217 403,752 1,963,217 2,130,514 4.614,700 Loan offers and unused credit facilities 2,312,358 2,312,358 Derivatives – gross outfl ows * 2,314 3,925 33,042 47,175 86,456 Total liabilities 9,037,369 410,507 2,011,057 2,733,852 14,192,784

*) Derivatives – gross infl ows 380 47,348 64,608 112,336 Financial derivatives – net outfl ows(negative fi gure implies net infl ow) 1,934 3,925 (14,306) (17,433) (25,880)


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29 – MARKET RISK

Market risk is the risk of losses associated with unfavourable movements in market prices, which in this context relates to positions and activities in the interest, currency and stock markets.

Equity risk is the risk taken on by the bank through short-term and long-term investments in shares. Gjensidige Bank ASA Group has no such investments.

Interest rate risk is the risk that interest rates will move at a different rate or in a different direction than assumed by the bank when planning its fi nancing structure. Gjensidige Bank ASA is exposed to interest rate risk through borrowings in the fi nancial markets and fi xed-rate loans to customers.

Currency risk is the risk of losses as a result of exchange rates moving at a different rate or in a different direction than assumed by the bank in its

planning. Gjensidige Bank ASA is not exposed to currency risk.The capital needs for market risk is calculated in the total risk model using statistical models. The model uses a simulation based method that generates a probability distribution to market losses over a one-year period. The bank has chosen a 99.95% confi dence level. The confi dence level is an expression of the security level the bank wishes to maintain. For example, a confi dence level of 99.95% means that there is only a 0.05% likelihood that the bank has not reserved suffi cient capital to cover unexpected losses.

30 – COVERED BONDS

NOK thousand (fi gures are the same for parent company and consolidated) 31.12.2010 31.12.2009

Carrying value 586,559 586,559Carrying value of associated fi nancial obligations 513,108 513,108

Transferred fi nancial assets consist of trade agreements with the government on fi nancial collateral. Swap agreements are entered into auctions adminis-trated by Norges Bank on behalf of the Ministry of Finance.

In exchange, the government sells short-term government debt to the bank

through a time-limited exchange for covered bonds. At the end of the swap agreement the bank is obligated to purchase the covered bonds back from the state to the same price as the government bought them. Gjensidige Bank ASA receives the profi t of the transferred bonds. All risk of covered bonds is still lying with Gjensidige Bank ASA and the bonds are thus not ceased

31 – ASSETS PLEDGED AS COLLATERAL

NOK thousand (fi gures are the same for parent company and consolidated) 31.12.2010 31.12.2009

Securities provided as collateral for loans from/credit facility with Norges Bank 756,537 256,090Securities provided as collateral for covered bonds swapped with short-term government debt 586,559 586,559Guarantee statement from The Norwegian Banks' Guarantee Fund 3,426Total 1,346,522 842,649

Gjensidige Bank ASA has provided securities as collateral for F-loans from Norges Bank, as well as in conjunction with swapping covered bonds with short-term government debt.

In order to receive a loan from/ credit facility with Norges Bank, collateral must be provided in the form of interest-bearing securities or deposits at Norges Bank.

Gjensidige Bank ASA has participated in two auctions in conjunction with the state’s package of measures relating to exchange arrangement of bonds, both of which are due in 2013.

Financial capital 99.95%

NOK million 2010 2009 2008

Interest-rate risk 5,2 4,3 5,2Equity price risk 0 0 0Foreign-exchange risk 0 0 0Total 5,2 4,3 5,2


Personnel expenses NOK thousand NOTE 31.12.2010

Equity purchase plan for employees purchased in 2010 7 790

In connection with the listing of Gjensidige Forsikring ASA on 10 December 2010, employees of the Gjensidige Group (including employees of Gjensidige Bank ASA) were given the opportunity to purchase shares in Gjensidige Forsikring ASA.

Employees in permanent positions on 13 December 2010 were qualifi ed to purchase the shares. There were no requirements regarding the hours for each position, whether the employees were working, on sick leave or on other forms of leave. The offer was also made to employees who were receiving a work assessment allowance. There are no further requirements to the equity purchase offer.

For every ten shares that employees own consecutively up to and including 12 December 2011, the employees will receive 1.5 bonus shares. If the shares are owned consecutively up to and including 10 December 2012, another 1.5 bonus shares will be given for every ten shares. As of 31 December 2010, participating employees have invested NOK 44.8 million in the share purchase plan.

The fair value at the date of purchase was measured based on the price in the customer trancheversus the price in the employee tranche. The value of the bonus shares was discounted by a factor in accordance with one and two years respectively. The fi gure is recognised as a salary expense in the in-come statement and as other invested equity in the list of changes in equity.

32 – EQUITY BASED REMUNERATION


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The Board and the CEO have today discussed and approved the annual report and fi nancial statement for Gjensidige Bank ASA for calendar year 2010 and as per 31 December 2010 (Annual Report 2010).

We declare to the best of our knowledge that the fi nancial statements for 2010 has been prepared in accordance with IFRS as adopted by the EU , together with additional requirements by the Accounting Act, and taking into account the limitations of accounting regulations for banks.

The accounting data provides a true and fair view of the company’s assets, liabilities, fi nancial position and results as a whole, and the annual report gives a true picture of important events in the accounting period and their impact on the fi nancial statements, related material transactions and the most imoprtant risks and uncertainties faced by the bank in the next accounting period.

DECLARATION FROM THE BOARD OF DIRECTORS AND CEO

Oslo, 31.12.2010/17.03.2011




KPMG AS Telephone +47 04063 P.O. Box 7000 Majorstuen Fax +47 22 60 96 01 Sørkedalsveien 6 Internet www.kpmg.no N-0306 Oslo Enterprise 935 174 627 MVA

KPMG AS, a Norwegian member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. Statsautoriserte revisorer - medlemmer av Den norske Revisorforening

Offices in: Oslo Alta Arendal Bergen Bodø Elverum Finnsnes Grimstad

Hamar Haugesund Kristiansand Larvik Mo i Rana Molde Narvik Røros

Sandefjord Sandnessjøen Stavanger Stord Tromsø Trondheim Tønsberg Ålesund

To the Annual Shareholders’ Meeting of Gjensidige Bank ASA

INDEPENDENT AUDITOR’S REPORT

Report on the Financial Statements We have audited the accompanying financial statements of Gjensidige Bank ASA, which comprise the financial statements of the parent company Gjensidige Bank ASA and the consolidated financial statements of Gjensidige Bank ASA and its subsidiaries. The parent company’s and the consolidated financial statements comprise the balance sheet as at 31 December, 2010, and the income statement and the statement of other comprehensive income, statement of changes in equity and cash flow statement for the year then ended, and a summary of significant accounting policies and other explanatory information.

The Board of Directors and the Managing Director’s Responsibility for the Financial Statements The Board of Directors and the Managing Director are responsible for the preparation and fair presentation of the financial statements in accordance with International Financial Reporting Standards as adopted by the EU, and for such internal control as the Board of Directors and the Managing Director determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

Auditor’s Responsibility Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with laws, regulations, and auditing standards and practices generally accepted in Norway, including International Standards on Auditing. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Opinion In our opinion, the consolidated financial statements give a true and fair view of the financial position of Gjensidige Bank ASA and of Gjensidige Bank ASA and its subsidiaries as at 31

ANNUAL REPORT


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Independent auditor's report Gjensidige Bank ASA

2

December, 2010, and of their financial performance and cash flows for the year then ended in accordance with International Financial Reporting Standards as adopted by the EU.

Report on Other Legal and Regulatory Requirements Opinion on the Board of Directors’ report Based on our audit of the financial statements as described above, it is our opinion that the information presented in the Board of Directors’ report concerning the financial statements, the going concern assumption, and the proposal for the allocation of the profit is consistent with the financial statements and complies with the law and regulations.

Opinion on Accounting Registration and Documentation Based on our audit of the financial statements as described above, and control procedures we have considered necessary in accordance with the International Standard on Assurance Engagements (ISAE) 3000, «Assurance Engagements Other than Audits or Reviews of Historical Financial Information», it is our opinion that the company’s management has fulfilled its duty to produce a proper and clearly set out registration and documentation of the company’s accounting information in accordance with the law and bookkeeping standards and practices generally accepted in Norway.

Oslo, 17 March 2011 KPMG AS

Geir Moen State Authorised Public Accountant

[Translation has been made for information purposes only]


Statement by The control committee To the General Assembly and the Supervisory Board of Gjensidige Bank ASA.

The Committee has, in accordance with its standing instructions, reviewed the protocols from

board meetings in 2010 and relevant documents. The Committee has regularly reviewed the

company's interim reports and key indicators. The committee has been submitted

documentation of the company’s control scheme and the implementation of this on key

areas, including the risk situation. The process is carried out according to internal

regulations.

The Control Committee has conducted four meetings during 2010. The meetings have been

held on the bank offices in Førde and Oslo. The company management has provided

supplemental information, financial position and other conditions in the meetings. The

Committee has received satisfactory answers to their questions and had discussed the

issues it has requested.

Company's external auditor has been involved in the control committee meeting and

informed on their work.

External auditors have not made any written inquiries to the company or made any revision notes or messages through the Control Committee to the Supervisory Board (Commercial Banks Act § 14) in addition to the audit report the auditor shall submit each fiscal year according to The private limited companies act (Aksjeloven) 7-4. The company's internal audit has served as the committee secretary and in the meetings also reported on the internal audit’s work. The Secretary has prepared the meeting of the Control Committee in a good way. The Committee has reviewed the Board of Directors' Report and the financial statement for the year 2010. The Committee considers the Board of Director's assessment of the financial position as adequate and recommends the adoption of the accounts presented as the financial statements of Gjensidige Bank ASA for 2010.

Førde, 21 March 2011

Sven Iver Steen Chairman

Oddhild Løbø Asle Hindenes Inger Tone Ødegård Deputy Chairman (Alternate member)

ANNUAL REPORT

§

Gjensidige Bank ASA

P.O. 313

NO-6802 Førde

E-mail: [email protected]

Telephone: 03100

gjensidige.no/banken

Documents

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