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Press Release 09.10.2019

Financial Reports
Annual Report 2018
HY 2018 Original Report
HY 2018 Restated Information
Annual Report 2017

Solvency and Financial Condition Reports (SFCR)
Group SFCR 2018 – Gefion Holding and Gefion Insurance
Group SFCR 2017- Gefion Holding and Gefion Insurance
Group SFCR 2016 – Gefion Holding and Gefion Insurance

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Order on limitation of business

The Danish Financial Supervisory Authority (“DFSA”) has ordered Gefion Insurance A/S (“Gefion Insurance” or “the Company”) not to expand the scope of our current operations.

The order will remain in force until Gefion Insurance has sufficient own funds to meet its Solvency Capital Requirement and until the Company has complied in full with the DFSA’s liquidity order of 11 December 2019.

Please find the DFSA’s full order here (only in Danish). A statement from the DFSA on the order can be found in English here.

Our comments to the DFSA’s order

From the outset, it is important to underline that Gefion Insurance is allowed to continue to write motor insurance business as well as other lines of business already being written in all countries where the Company is currently operating. In practice, the order will not have any effect on Gefion Insurance’s current operations.

The order is a result of Gefion Insurance’s solvency ratio being below 100 and a follow up on the liquidity order of 11 December 2019.

Gefion Insurance has been working on several solutions that in the short-term will improve the liquidity position of the Company. These efforts have resulted in the Company complying with the DFSA’s liquidity order of 11 December 2019 as per 31 December 2019. The Company expects to be able to ensure compliance with the liquidity order during the applicable period, which runs until the end of February.

Gefion Insurance is also in on-going and progressed discussions with potential capital providers in order to secure sufficient own funds to meet the Company’s Solvency Capital Requirement and reestablish the solvency ratio to above 100.

Order on the annual report for 2018

The Danish Financial Supervisory Authority (“DFSA”) has ordered Gefion Insurance A/S (“Gefion Insurance” or “the Company”) to publish supplementary/corrective information for the Company’s annual report for 2018. According to the DFSA, Gefion Insurance cannot recognize the value of a reinsurance contract.

Please find the DFSA’s statement on the decision here (only in Danish).

Our comments to the DFSA’s order

The DFSA has made its decision more than seven months after Gefion Insurance presented its final annual report for 2018. The Company does not agree with the decision, which in the Company’s opinion is based on an incorrect assessment of the facts surrounding the conclusion of the reinsurance contract in question.

Gefion Insurance has followed current practices for the recognition of the reinsurance contract in the audited annual report for 2018.

As the decision does not have any direct consequences for Gefion Insurance’s policyholders or cooperation partners, the Company will now prepare and publish the supplementary/corrective information in accordance with the decision.

Order on ensuring liquid assets

The Danish Financial Supervisory Authority (“DFSA”) has ordered Gefion Insurance A/S (“Gefion Insurance”) to ensure liquid assets of at least EUR 5m by the end of December 2019 towards the end of February 2020.

Please find the DFSA’s full order here (only in Danish). A statement from the DFSA on the order can be found in English here.

Our comments to the DFSA’s order

Following the closure of the ordinary inspection, Gefion Insurance has seen a significant decline in premium volumes. The decline in premium volumes are due to the cancellation of poor performing agents, but also the substantial fall in volumes on continued business. The decline has been more significant than expected and in addition, non-aligned credit terms offered to reinsurers and agents have further negatively impacted the liquidity position.

Gefion Insurance has been in on-going and open discussions with the DFSA on our current liquidity position. Gefion Insurance is working on several solutions that in the short-term will improve the liquidity position of the Company. These solutions are expected to be implemented over the course of the next two to three weeks. At the same time, discussions with potential capital providers are on-going and are expected to be finalised in the beginning of 2020.

Gefion Insurance expects the situation to normalize, and the Company projects significant improvements resulting from the termination of loss-making portfolios as well as from improved underwriting and claims handling initiatives. Not least, we expect to see improvements from reduced credit terms. The impact of these solutions is expected to offset the decline in premium volumes.

The DFSA has ordered Gefion Insurance to ensure that the Company has a liquidity buffer of EUR 5 million by year end, which is in line with our own projections. With the above initiatives and solutions, the Company is of the view that this can be achieved.

Statement of the DFSA’s conclusions of the inspection of Gefion Insurance

Following the completion of the ordinary inspection, the Danish Financial Supervisory Authority (DFSA) has decided to issue a number of orders and reprimands regarding Gefion Insurance A/S’ (“Gefion Insurance”) governance structure – primarily in relation to our oversight and control with agents and TPA’s, but also in respect of more technical issues.

On the basis of the number and the content of the governance orders and reprimands issued by the DFSA, the DFSA has decided to impose a temporary capital add-on on Gefion Insurance. The capital charge amounts to approximately DKK 39.2 million (EUR 5.2 million equivalent) and will remain in place until the governance issues have been fully solved. As a result of the capital add-on, Gefion Insurance’s Solvency Capital Requirement (SCR) will drop below 100, whereas the capital add-on will not affect our Minimum Capital Requirement (MCR).

Please find the DFSA’s statement on the inspection here. An English translation of the statement can be found here.

The DFSA’s full order on capital add-on can be found here (only in Danish). Furthermore, the DFSA’s full order on limitation of business volumes can be found here(only in Danish).

Our comments to the DFSA’s order

Gefion strongly disagrees with the decision to impose a capital add-on and will take steps to appeal the decision. The majority of the orders and reprimands regarding our governance structure have either already been addressed at this point in time or are in the process of being addressed.

In the short term, we are taking immediate steps to recapitalise Gefion Insurance and to re-establish an SCR above 100. This includes discussions with existing shareholders and other capital providers. Gefion Insurance notes that the existing shareholders have just recently demonstrated their commitment towards Gefion Insurance by injecting more than EUR 5 million into Gefion Insurance. In the more medium term, we are in discussions with a number of third-party investors to significantly increase our capital base before year-end.

Due to the fact that we will have an SCR below 100, the DFSA has also ordered that Gefion Insurance should not expand its business volumes (compared to 2018-levels) until a re-capitalisation has increased the SCR level to above 100. It is important to underline that the order does not prevent Gefion Insurance from continuing to trade with existing partners and underwrite insurance risks.

In conclusion, the very thorough ordinary inspection of Gefion Insurance, which was initiated by the DFSA back in November 2018, is now coming to an end. This also means that necessary actions can now be taken, so that Gefion Insurance will be able to continue to operate in close collaboration with our key stakeholders and partners.

Whilst we are disappointed with the decision taken by the DFSA, Gefion Insurance are determined to continue to operate as a successful company and valued insurer to our many customers and partners across the European insurance market. We look forward to being able to fully focus on developing the business for the remainder of 2019, where focus will be on consolidation and profitability in our existing programs.

Order of 21 June from the Danish FSA

The Danish Financial Supervisory Authority (“DFSA”) has ordered Gefion Insurance A/S (“Gefion Insurance”) to refrain from using the loss-absorbing capacity of the deferred tax in the calculation of the Solvency Capital Requirement.

Please find the DFSA’s statement on the order here. An English translation of the statement can be found here.

Our comments to the DFSA’s order
The order comes after a lengthy case handling process, which was initiated back in 2017.

The DFSA has taken the view that Gefion Insurance cannot use the loss-absorbing capacity of deferred tax when calculating the Solvency Capital Requirement. This is based on the assessment that Gefion Insurance will not be able to reestablish the company’s own funds quickly enough after an immediate occurrence of a hypothetical 200-year event where Gefion Insurance would lose its entire capital.

Gefion Insurance does not agree with the decision.

Gefion Insurance has argued that it will be possible for the company to raise sufficient capital, and the company will therefore be able to continue to do business even in a hypothetical 200-year event. In the period April 2018 to May 2019 alone, capital increases of EUR 12.3 million have been completed. Furthermore, Gefion Insurance is still in on-going discussions about further capital increases.

However, in the current situation, it has not been possible to convince the DFSA of this and Gefion Insurance has therefore chosen to take note of the order, even though Gefion Insurance is still of the opinion that it – in line with other insurance companies – has had no reason to change its practice due to a lack of common European guidelines in the area.

The DFSA has confirmed to Gefion Insurance that it is complying with the order.

Gefion Insurance is now looking forward to the DFSA’s up-coming conclusion of the very long and thorough ordinary inspection of Gefion Insurance, which the DFSA has carried out. An inspection that has taken place in a close and open collaboration between the parties.

Gefion Insurance looks forward to concluding on the process so that the necessary decisions can be made, and the company can focus on its continuing operations and consolidation together with our business partners and investors for the benefit of our more than 600,000 insurance customers.