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ANNUAL REPORTAND ACCOUNTS

2015

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CONTENT

A LETTER FROM THE CEO

3KEY FIGURES

6ANNUAL REPORT

8STATEMENT OF COMPREHENSIVE INCOME

14BALANCE SHEET

16NOTES TO THE ACCOUNTS

20CORPORATE GOVERNANCE

44

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A letter from the CEO

Taking on the mantle of chief executive of the Norwegian Hull Club fills me with

great pride and a sense of responsibility. The business is in a strong position with

very high levels of loyalty among its members and clients. This creates the ideal

platform for our future development and, in particular, to take advantage of the

many opportunities arising in today’s maritime market. Seizing these opportunities

is a challenge I relish on. My team and I are committed to taking Club into the next

phase of its development.

We aim of maximising revenues from existing products and services while identify-

ing those areas in which we see potential for further growth and diversification. In a

shifting world, no business—even one as revered as the Norwegian Hull Club – can

afford the luxury of standing still. But equally, there is no greater mistake than

losing sign of the reasons behind our success. At the Club’s core are a range of

market-leading products and services that continue to offer best-in-class support

for ship owners around the world. For example, our ability to respond to multiple

emergencies, no matter how large or complex, is a testament to the enhanced

emergency response skills we have been able to develop, making us the envy of our

competitors. We had the opportunity to demonstrate this in the first half of 2015

when the club was involved in four significant losses for our members. While this

was an unusually high number, it is in line with our competitors.

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It is my aim to grow our core offering in a measured and sustainable way. The field

in which we are able to play has broadened – new risks have evolved, regulation

has increased in complexity, geo-political affairs have become more tangled. The

challenge to the Club is to determine how best to take advantage of these new and

broader horizons.

Changes do not take place in a vacuum. The backdrop to these structural and

behavioural shifts in our marketplace is a global economy which has been unable

to generate levels of growth to match those achieved pre-2007 yet still creates

substantial excess production capacity with no simple formula for reviving future

growth. Despite interest rates virtually flat-lining at historically low levels, most

countries are not increasing public spending to increase economic activity, with the

exception of China.

Within our own immediate sphere of operations, the marine insurance market is

currently impacted by an excess supply of capital which continues to put downward

pressure on rates. These forces are increased by ship owners seeking to cut costs.

In 2015, market conditions deteriorated, particularly in oilfield services. At the end

of the year, a significant number of offshore support vessels and drilling units have

been laid up.

In the face of these pressures, the Norwegian Hull Club’s mission is to make

our members’ lives easier. It is my goal that our members should perceive their

relationship with the Norwegian Hull Club to be a positive one, i.e. an asset to their

business. In order to achieve this, we must continue to provide high quality services

and products, but equally we must be innovative, bold and deeply attuned to the

inner workings of the maritime industry.

In February, the Club’s board approved the opening of a branch office in London

during 2016 – this will mark the first time the core insurance business has operated

outside of Norway. As the heart of the international specialty insurance market,

a London office presents considerable benefits to us. The bulk of our business is

transacted via broker markets with London having the greatest concentration of

broking firms. Trading in the City of London allows us to strengthen broker relation-

ships while offering the potential for growth, for developing new products and for

new business. I am pleased to say that London brokers have been highly supportive

of this move.

London marks the beginning of the Club’s new offerings that will encompass our

online and digital presence, our product development, our routes to market, and the

manner in which we promote ourselves to external audiences around the world. We

have a hugely positive message to communicate and a brand that resonates deeply

with our market. Our proud Norwegian heritage and the deeply ethical stance it

engenders is a large part of that brand message. It is something we treasure and

maintain at the heart of our business.

Ultimately, the test of our strategy is one of member satisfaction and enhanced

engagement with the Club. The Norwegian Hull Club has a powerful and compelling

story. We are ready to write a new chapter.

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All figures in USD 000's

2011 2012 2013 Restated 2014 2015

Gross earned premiums 192 956 210 961 219 365 203 825 191 496

Gross claims 129 512 178 745 127 264 104 988 176 903

Gross result 63 444 32 216 92 100 98 837 14 593

Premiums for own account 156 665 181 336 185 234 171 179 161 839

Claims for own account 112 961 156 973 123 227 105 811 125 704

Insurance result f.o.a. 43 704 24 363 62 007 65 368 36 135

Premium discount 5 439

Other income 9 368 9 197 10 609 9 907 7 991

Operating expenses 24 264 27 078 29 189 29 779 17 975

Technical result f.o.a. 28 808 6 483 43 427 40 057 26 152

Net financial income -3 850 33 407 9 257 -7 804 -17 614

Total change i solvency capital 24 958 39 890 52 685 32 253 8 539

Total assets 476 797 572 879 630 213 652 979 639 815

Provision for risk equalisation + Equity 214 204 253 499 298 073 319 451 330 113

Loss ratio for own account 72 % 87 % 67 % 64 %* 78 %

Expense ratio 10 % 10 % 10 % 12 % 6 %

Combined ratio 82 % 96 % 77 % 76 % 84 %

Gross loss ratio 67 % 85 % 58 % 52 % 92 %

Return on investment portfolio (denom-inated currency)

0.4% 9.0 % 4.1 % 3.2 % 1.4 %

Return on benchmark (denominated currency)

1.7% 9.2 % 4.3 % 3.6 % 1.3 %

Total change in solvency capital Provision for risk equalisation + Equity

0

10000

20000

30000

40000

50000

60000

2011 2012 2013 2014 2015

0

50000

100000

150000

200000

250000

300000

350000

2011 2012 2013 2014 2015

KEY FIGURES

* Ratios before premium discount: 62%, loss ratio: 62%, combined ratio: 74%

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KEY FIGURES

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ANNUAL REPORTBUSINESS STRATEGYNorwegian Hull Club is a mutual marine insurer covering

vessels and mobile offshore units for Hull & Machinery, Loss

of Hire, Total loss, War risk, Building risks, upstream energy

insurance, mega-yachts, medical insurance for seafarers,

crew contractual liability insurance as well as P&I coverage

and FD&D coverage for charterers. The majority of the Club’s

premium income comes from international clients. The

registered office is in Bergen, Norway.

Our business strategy is to provide an integrated claims

leader service to our members and to offer a diversified

product mix to meet their business needs. The Club places

a strong emphasis on added value services mainly related to

sophisticated claims handling, emergency response and loss

prevention activities.

OPERATIONAL REVIEWUNDERWRITINGThe global Marine and Energy underwriting market remains

very competitive and this trend is expected to continue well

into 2016. Premium rates in Marine continue to be affected

by low hull values and rock bottom charter rates in many

sectors together with an oversupply of underwriting capacity.

On the Energy side, the reduction in oil prices to around USD

30 per barrel has resulted in much exploration being put on

hold and in the early capping of a number of older wells. With

many units laid up, levels of cover are often reduced.

Both the Marine and Energy markets are also expected

to be further impacted by the introduction of a number of

broker facilities giving Lloyd’s syndicates direct access to

their retail network and participation on a larger part of the

brokers’ global book. Following capacity is consequently more

centralised, rates are lower and broker commission higher,

leading to a deterioration of potential profits for underwriters.

In the current market conditions, rate and claims leaders

such as NHC have come under pressure to give up part of the

commercial benefits associated with taking on the burden of

being a rates or claims leader.

The gross loss ratio for 2015 was 92%, corresponding to a

gross insurance result of USD 14.6 million. The loss ratio for

own account was 78%. This corresponds to an insurance

result for own account of USD 36.1 million. The technical

result from insurance before change in equalisation provision

was USD 30.1 million.

The number of units insured increased in 2015. The effect

on premium was, however, more than offset by reductions in

insured values, downward pressure on rates and appreciation

of the USD. Thus, premium income was reduced compared to

2014.

The overall underwriting performance in 2015 was

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satisfactory with the exception of the Hull & Machinery and

Energy areas where rates came under pressure. In both of

these classes the results were affected by a combination of

insufficient premium rates and an unusual number of large

losses.

New product offerings for members were introduced in

the Crew P&I and Energy Operators space in the form of

increased limits and we also launched new products for Cyber

risk and Kidnap & Ransom which we expect to perform well

in 2016.

On the Reinsurance side, the 2015 year was impacted by a

few high cost claims that hit the reinsurance program early

in the year. The panel of reinsurers responded in a timely

manner and we have successfully renewed the same program

with the same participants for 2016 with additional cover for

new product offerings launched in 2015.

CLAIMSThe Gross claims incurred in 2015 were above the expected

level and 2014 figures at USD 176.9 million and claims for our

own account amounted to USD 125.7 million. A small number

of large claims in the energy segment explain much of the

excess. While the overall frequency of claims is generally

flat there is a significant difference in frequency, across all

segments. There was also an unusually high number of total

losses, but this is in line with the market in general.

Quick settlements are one of the most important services

the Club offers its members and clients and NHC continues

to keep a strong focus on shutting down claims promptly.

Our benchmark is settlements where NHC is co-insurer and

this shows that we settle claims 17% quicker on Hull and

Machinery and 39% quicker on Loss of Hire compared to

other lead underwriters. We are working steadily to improve

systems and methods to further reduce the handling time for

the benefit of our members.

The Loss Prevention Committee (LPC) consisting of 30 ship

owners has now been running for two years and meets twice a

year. The committee gives valuable input on how we prioritise

and target our Loss Prevention work in order to reduce

casualties for owners and claims for the Club.

In 2015 we established two sub committees to look at specific

issues that we feel demand more attention - one covering

dangerous cargo on bulk ships and the other covering fire on

RORO vessels. In both cases we intend to ensure that lessons

learnt are widely used in order to raise awareness and prevent

repeat losses.

INVESTMENTSAfter a prolonged period of low volatility in the financial

markets, sentiment in global markets turned negative during

the summer months. The sell-off in financial markets was

sparked by uncertainty surrounding the US Federal Reserve’s

interest rate policy, deteriorating macro fundamentals in

China, and in emerging markets more broadly, as well as

continued issues in the energy sector in particular and

commodity markets in general.

Once again, central banks came to the rescue. The Fed

decided not to raise rates in September and both the

European Central Bank and the Bank of Japan hinted at

increased stimulus measures. Consequently, markets rallied

in October and the first part of November, before giving back

some of the gains until year end. In summary, there was more

volatility than seen for a number of years. Although the US

Federal Reserve finally raised its Fed funds rate from zero in

December, market expectation is that rates will stay low for a

long time.

Norwegian Hull Club’s investment portfolio returned 1.35% in

local currencies. Equities, high yield bonds and allocation to

emerging markets impacted figures negatively, whereas the

portfolio benefitted from manager selection and investments

in real estate and private markets. In fact, all of the return

came from the less liquid real estate and private investments

allocations. The Club’s investment portfolio is invested in

several currencies, predominantly USD, EUR and NOK, to

reflect the currency composition of premium income. As a

consequence of appreciation of USD versus other currencies

in the investment portfolio, the investment result in USD was

minus 2.6%.

SOLVENCY IIThe Solvency II directive for insurance companies in Europe

took effect from 1 January 2016. Preparations to meet the

various requirements continued in 2015 and processes

and structures have been implemented to comply with the

directive.

Norwegian Hull Club has capital well in excess of Solvency II

requirements. Capital will remain compliant even if there is a

levy of the proposed tax on equalization reserves, which has

been challenged.

OTHER ACTIVITIESMARINE BENEFITS ASMarine Benefits AS is a subsidiary of NHC and provides

benefit solutions, health insurance and crew contractual

liability insurance for the global shipping community. Marine

Benefits also performs third party services for ship owners

and managers on crew claims handling.

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MARINE INSURANCE PRODUCTION / IT SYSTEMInsurance Technology Solutions AS is a subsidiary of

Norwegian Hull Club which develops and operates software

systems for the marine insurance industry. At the end of 2015,

the company had fifteen clients.

ENTERPRISE RISK MANAGEMENTNorwegian Hull Club has a risk management and internal

control structure that systematically identifies, assesses,

communicates and manages risks throughout the organi-

sation. In order to understand and manage risks, both the

probability and the consequence of events are assessed.

The Board of Directors adopts Norwegian Hull Club’s strategy

and risk profile, including capital targets and maximum risk

levels. The primary responsibility for managing risk within

these limits rests with the respective operating units and with

the CEO.

The Club is exposed to the following main risks:

STRATEGIC RISKStrategic risk relates to external and internal factors such

as developments in the market and in the area of products,

required personnel skills and reputation risk.

Developments in the marine insurance market in general and

with individual competitors are monitored in daily operations

and through participation in industry forums. Requirements

for new or higher skills among employees are met through

recruitment of new employees as well as training and

education of existing employees.

INSURANCE RISKInsurance risks are the risks that the premium charged is not

sufficient to cover claims incurred and that provisions for

claims already incurred are not sufficient to cover the ultimate

cost.

Clear limits for what insurance risk can be undertaken have

been established. The actuarial function is continuously

monitoring the adequacy of pricing and adequacy of provi-

sions made.

The Board of Directors adopts the reinsurance structure and

program each year. The primary objective is to protect the

capital and to limit fluctuations in results. The benefits of

buying reinsurance protection are weighted against the costs.

FINANCIAL RISKFinancial risks refer to investment, credit, liquidity and

currency risks. Financial instruments are used to modify

exposure to interest rate and currency risks.

The Board of Directors has adopted a strategic asset

allocation and maximum exposure to each asset class for

investments. Risk level is monitored and managed both for

investments itself and as part of the Club’s overall risk. Stress

tests are carried out to ensure that the Club can withstand the

impact of severe negative scenarios.

Liquidity risk is considered to be insignificant. The objective

is, however, to have sufficient liquid assets to maintain a

balanced investment portfolio after a severe, negative event

where asset prices fall and/or may have to be sold.

Currency risk is managed with the objective to maintain

capital adequacy after significant fluctuations in currency

exchange rates.

OPERATIONAL RISKOperational risk is the risk of loss resulting from inadequate

or failed internal processes and systems, mistakes made by

employees or from external events.

In order to reduce operational risks, structural procedures

have been built whereby policies and procedures have been

adopted and are kept in a documentation system that can

be accessed by all employees. A compliance function shall

ensure that the Club does not incur public sanctions, financial

losses or loss of reputation from breach of laws, regulations or

standards.

For further details on risks, please see notes to the accounts.

INTERNAL CONTROLInternal control is a continuous process throughout the organ-

isation. The Compliance Officer coordinates the processes

and reports to management and the Board of Directors.

The internal audit function is a part of internal control and

is carried out by an independent auditor. The internal audit

function shall monitor whether risk management, internal

control processes and internal operations are satisfactory and

reports to the Board of Directors.

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CORPORATE GOVERNANCENorwegian Hull Club is subject to supervision by the Financial

Supervisory Authority of Norway. In addition, the Club’s

governing bodies have adopted separate internal regulations

regarding corporate governance issues. During 2015, the

Board of Directors has adopted all policy documents neces-

sary to comply with Solvency II requirements.

The composition and the main tasks of the governing bodies

are set out as an appendix to this Annual Report.

ACCOUNTSIn accordance with section 3-3 of the Norwegian Accounting

Act, the annual accounts are prepared under the assumption

that the enterprise is a viable going concern.

The Board of Directors and management focus on the oper-

ating result, defined as the result generated before provisions

for equalisation reserves and taxation but after financial

items. The operating result will normally be equal to the

change in free reserves (equity plus equalisation reserves).

RESULTS The operating result for Norwegian Hull Club was USD 8.5

million. At the end of 2015 the Club’s contingency reserves

were USD 330 million.

Gross loss ratio was 92%, corresponding to a gross insurance

result of USD 14.6 million. The loss ratio for own account was

78%. This corresponds to an insurance result for own account

of USD 36.1 million. The technical result from insurance before

change in equalisation provision was USD 30.1 million.

The result from ordinary operations was USD 0. Tax expense

was minus USD 2.1 million.

PREMIUM INCOME AND CLAIMS Gross premium written was USD 182.6 million. Premium

earned for own account was USD 161.8 million. Gross claims

incurred were USD 176.9 million, and claims for own account

amounted to USD 125.7 million.

FINANCIAL ITEMSFinancial income was minus USD 15.8 million. Of this, minus

USD 9.8 million related to the investment portfolio while the

balance comprised foreign exchange items and other financial

income. Administration expenses related to financial assets

were USD 1.6 million.

OPERATING EXPENSESPersonnel, marketing and other operating expenses amounted

to USD 16.2 million. The operating expenses are affected by

reversal of pension provisions made in previous years.

RETURN PREMIUM AND APPROPRIATION OF RESULTThe Board of Directors does not propose any return of mutual

premium to members this year.

After tax, the total comprehensive income for the year was

USD 2,123,302, which the Board of Directors proposes be

transferred to Other equity.

BALANCE SHEETAs per 31 December 2015, equity was USD 40.5 million. In

addition to equity, the USD 289.7 million in provision for risk

equalisation is a general reserve that supports the various

business risks.

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CASH FLOWThe cash flow generated by operating activities was minus

USD 26.7 million after a USD 1.8 million decrease in financial

assets. Cash flow generated by investments in fixed assets,

subsidiaries and employee loans was USD 3.4 million. The

change in the cash balance during the year was minus USD

23.3 million.

RATINGOn 24 June 2015, Standard & Poor’s raised its long-term

counterparty credit and insurer financial strength rating for

Norwegian Hull Club to “A” from “A minus”. The outlook is

“stable”.

ORGANISATION AND ENVIRONMENTAt the end of 2015, Norwegian Hull Club employed 118 staff.

Sick leave including long-term absence equaled 2.3% of total

working hours. Unplanned personnel turnover was 5.4%.

Including the subsidiaries Marine Benefits and ITS, the total

number of employees was 158.

The gender ratio between employees at the end of 2015 was

37% female to 63% male. The Club pursues diversity in the

organisation. At the end of 2015, there were 16 non-Norwe-

gians from 11 countries among the 118 employees.

The Club aims to be a workplace in which no discrimina-

tion occurs, in compliance with the Discrimination and

Accessibility Act.

There were no accidents involving either the Club’s employees

or property during the year. The working environment is

considered to be good.

Day-to-day operations do not contaminate the external

environment. However, the Club does insure vessels that may

contribute to environmental pollution.

MEMBERSNo member represents more than 5.5% of the votes at the

General Meeting. The ten largest members represent 29% of

the votes.

EVENTS AFTER 2015 YEAR ENDThere are no events that have occurred in 2016 that signifi-

cantly affect the capital of Norwegian Hull Club.

The Club has announced that it will open its first office

outside Norway. The opening of an office in London is planned

for the second half of 2016. There are a number of factors

behind this decision: it will allow Norwegian Hull Club to

build stronger relationships with the London-based brokers,

thereby creating considerable opportunities for new business

and assistance in cross selling; it will assist in developing new

products or adapting and refining existing products, many of

which are ideally suited to the specialist nature of the London

market.

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Bergen, 15 . March 2016

FUTURE PROSPECTSWhile the number of units insured has steadily increased

over recent years, Norwegian Hull Club is affected by the

weak markets for oilfield services and in some segments of

traditional shipping such as bulk and container vessels. A

strong USD, which reduces the value of premium income in

other currencies, adds to this.

Norwegian Hull Club will nevertheless secure its capital

base and grow the business volume over time in a profitable

and sustainable manner, to diversify into profitable areas,

to improve our distribution network through geographical

positioning, and to offer their members and clients a first class

service & financial security.

Norwegian Hull Club is well capitalised and has a strong

portfolio of products and services. In the short term, the

challenge is to strike a balance between maintaining and

developing the existing book of business in a depressed

market while protecting the capital, in order to be able to offer

clients sound protection and services in the longer term.

With the human, structural and financial capital already in

place, combined with a renewed focus on growth in interna-

tional markets, the Board of Directors believe Norwegian Hull

Club is well placed for long term sustainable growth.

Hans Olav LindalChairman

Jan A. Hammer Tom E. Jebsen

Siri P. Strandenes

Nils Petter Dyvik Anna Erlandsen

Roar Sanden

Njål Sævik Morten Ulstein

Faz PeermohamedCEO

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Notes 2015 2014

Gross premiums 16 182 622 916 209 856 538

Reinsurance premiums 15 -29 548 427 -31 928 535

Change in provisions for unearned gross premiums 8 873 556 -6 031 887

Reinsurers' share of change in provisions 15 -108 825 -717 335

A Premiums for own account 161 839 219 171 178 782

B Allocated investment return from non technical accounts 1 3 969 000 8 357 000

C Other insurance related income 6 207 747 7 646 420

Gross paid claims 164 280 088 117 987 614

Reinsurers share of gross claims 15 -28 320 893 -4 352 424

Change in gross claims reserve 12 623 379 -12 999 571

Reinsurers' share of change in gross claims reserve 15 -22 878 817 5 175 327

D Claims for own account 12 125 703 756 105 810 947

Premium discount - 5 439 100

Marketing expenses 1 9 613 450 21 389 970

Commissions earned -1 783 717 -2 260 994

E Total insurance related expenses for own account 7 829 733 19 128 976

F Other insurance related expenses 8 361 223 8 389 354

G Operating result technical accounts before change in solvency capital (A+B+C-D-E-F)

30 121 255 48 413 824

Change in provisions for risk equalisation 8 538 671 27 200 047

H Total changes in risk provisions 13 8 538 671 27 200 047

I Operating result technical accounts (G-H) 21 582 584 21 213 777

STATEMENT OF COMPREHENSIVE INCOME

ALL FIGURES IN USDRESTATED

STATEMENT OF COMPREHENSIVE INCOME

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RESTATED

STATEMENT OF COMPREHENSIVE INCOME

Notes 2015 2014

Financial income 13 214 283 18 039 233

Realised gains and losses 3 535 847 2 915 867

Adjustment investment portfolio -32 514 776 -26 132 406

J Total financial income -15 764 646 -5 177 306

K Administration expenses financial assets 1 848 938 2 626 369

L Allocated investment return transferred to technical accounts 3 969 000 8 357 000

M Profit before income tax (I+J-K-L) 0 5 053 103

N Income tax expenses (income) 9 -2 123 302 451 972

O Profit for the year (M-N) 2 123 302 4 601 131

P Other comprehensive income- actuarial loss pension plan - -3 688 766

Q TOTAL COMPREHENSIVE INCOME FOR THE YEAR 2 123 302 912 365

Dividend - -

Other equity 2 123 302 912 366

TOTAL 2 123 302 912 366

ALL FIGURES IN USD

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ASSETS Notes 31.12.15 31.12.14

Deferred tax benefit 9 3 624 463 1 501 161

Total intangible assets 3 624 463 1 501 161

Shares in subsidiaries 4 2 356 629 2 356 629

Other shares 4 1 281 925 1 281 925

Mortgage loans 2 13 370 728 18 100 165

Stocks and shares 7 93 548 163 100 424 614

Bonds 8 301 068 324 292 320 665

Financial derivatives 8 2 210 587 5 905 348

Bank deposits investment portfolio 1 8 658 944 18 576 328

Total financial assets 422 495 300 438 965 674

Reinsured proportion of gross premium provisions 13 15 777 252 15 886 077

Reinsured proportion of gross claims provision 13 42 918 070 20 039 253

Total reinsured proportion of insurance provisions 58 695 323 35 925 331

Insurance related receivables 5 97 950 899 103 535 729

Reinsurance receivables 3 449 729 355 400

Disbursements 17 942 327 12 657 091

Other receivables 2 122 956 13 297 470

Total receivables 121 465 911 129 845 690

Properties 3 4 382 372 3 693 909

Equipment and fixtures 3 5 327 374 5 604 194

Cash and bank deposits 22 280 005 35 504 891

Total other assets 31 989 751 44 802 994

Accrued interest 1 544 749 1 938 536

TOTAL ASSETS 639 815 496 652 979 386

BALANCE SHEET

ALL FIGURES IN USD

BALANCE SHEET

RESTATED

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Equity and Liabilities Notes 31.12.2015 31.12.2014

Equity 8 042 072 8 042 072

Other equity 32 419 615 30 296 314

Currency adjustment equity

Total equity 10 40 461 687 38 338 386

Unearned gross premium provision 13 99 807 321 108 680 877

Gross claims provision 13 185 984 066 173 360 687

Unearned commission provision 13 1 034 768 1 245 599

Total gross insurance provisions 286 826 156 283 287 163

Provision for risk equalisation 289 651 293 281 112 622

Total risk provisions etc. 13 289 651 293 281 112 622

Pension liability 2 8 951 045 20 249 955

Withheld payroll tax, social security etc. 1 1 952 437 2 333 529

Taxes payable 9 - -

Total tax etc. payable 10 903 482 22 583 483

Payables direct insurance accounts 401 086 6 580 465

Payables reinsurance 5 431 236 12 864 812

Payables other accounts 6 140 555 8 212 456

Total payables 11 972 877 27 657 733

TOTAL EQUITY AND LIABILITIES 639 815 496 652 979 386

BALANCE SHEET

Hans Olav LindalChairman

Jan A. Hammer

Tom E. Jebsen

Siri P. Strandenes

Nils Petter Dyvik

Roar Sanden

Njål Sævik Morten Ulstein

Faz PeermohamedCEO

Bergen, 15 . March 2016

ALL FIGURES IN USD RESTATED

Anna Erlandsen

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STATEMENT OF CASH FLOWS

2015 2014

Profit of the year before tax

Change in net technical reserves -10 692 328 31 368 394

Net profit on sale of fixed shares -

Change in disbursements -5 285 236 20 954 046

Net profit on sale of fixed assets -31 062

Change in net pension liabilities -11 298 910 -865 868

Change in net receivables -2 007 146 -1 239 291

Depreciations and impairment of assets 812 164 1 583 327

Taxes paid -81 876 -82 000

Net cash flow from operations before financial assets -28 553 332 51 687 545

Change in net bonds -8 747 659 -26 706 166

Change in net stocks and shares 6 876 452 -5 511 183

Change in net financial derivatives 3 694 761 -4 270 332

Net cash flow from financial assets 1 823 554 -36 487 681

A Net cash flow from operational activities -26 729 777 15 199 864

Cash generated / used by investing activities

Net receipts/payments related to purchase/capitalization of subsidiaries and associated companies

-

Net receipts/payments related to sale/purchase of fixed assets -1 223 807 -3 484 238

Change in mortgage loans 4 619 482 2 263 725

B Net cash inflow / outflow from investment activities 3 395 675 -1 220 513

C Net financing activities - dividend paid to members -7 310 302

D Effect of changes in exchange rates on cash and cash equivalent 81 878 81 999

A+B+C+d Net change in cash and cash equivalents -23 252 224 6 751 048

Cash and cash equivalents 01.01 54 081 219 47 330 170

Cash and cash equivalents 31.12 30 828 995 54 081 219

ALL FIGURES IN USD

RESTATED

A N N U A L R E P O R T 2 0 1 5

19

STATEMENT OF CASH FLOWS

A N N U A L R E P O R T 2 0 1 5

20

NOTES TO THE ACCOUNTS

NOTE 1 ACCOUNTING PRINCIPLES

Basic principlesThe financial statements of the Norwegian Hull Club

have been prepared in accordance with the Norwegian

Accounting Act, Norwegian Finance Ministry’s prescribed the

‘’Regulations from December 16, 1998 for annual accounts

for Insurance companies’’ and ‘’Regulations from January 21,

2008 on simplified IFRS’’.

Principally this means that accounting recognition, measure-

ments and disclosures to the financial statements complies

with Norwegian generally accepted accounting standards,

and a limited use of certain International Financial Reporting

Standards (IFRS) in accordance with the Finance Ministry’s

regulations on simplified application of the International

Financial Reporting Standards.

The financial statements of the Norwegian Hull Club as of 31

December 2015 consist of the statement of comprehensive

income, balance sheet, statement of cash flows and notes to

the accounts.

The financial statements have been prepared based on the

fundamental principles governing historical cost accounting,

comparability, continued operations and congruence.

Transactions are recorded at their value at the time of the

transaction. Income is recognized at the time when it is

earned. Costs are expensed in the same period as the income

to which they relate is recognized. Costs that can not be

directly related to income are expensed as incurred. Hedging

and portfolio management are taken into account.

Assets related to current business activities and accounts

receivable due within one year of the closing are classified

as current assets. The same applies to short-term debt and

accounts payable. Current assets/short-term debts are

recorded at the lowest/highest of acquisition cost and fair

value. Monetary items in foreign currencies are recorded at

fair value. Other assets are classified as fixed assets. Fixed

assets are recorded at original cost, with deductions for

depreciation. In the event of a decline in value, which is not

temporary, a fixed asset will be subject to a write-down.

According to Norwegian generally accepted accounting

principles there are some exemptions to common assessment

and valuation principles. Comments to these exemptions

follow below.

Basis of consolidationNorwegian Hull Club Group consists of Norwegian Hull Club,

Insurance Technology Solutions AS and Marine Benefits AS.

Norwegian Hull Club owns 100% of the latter two companies.

The activity in these companies is regarded as an insignificant

addition to the group’s business, and has therefore not been

consolidated in the accounts.

Accounting principles for material itemsPremium and commission recognition / premium reservePremium and commission are recognised when earned.

Insurance premiums are due for payment in advance and

provisions are made for the unearned portion of the premiums

related to a period after the end of the fiscal year (premium

reserve). Premium is recorded net of commission. The insur-

ance contracts that the Club issues are defined in line with

Norwegian accounting regulation (“Forskrift om årsregnskap

m.m. for forsikringsselskaper”).

Line of businessNorwegian Hull Club operates in the ocean marine line of

business, including underwriting of medical insurance for

seafarers.

Premium from multi-year policiesNorwegian Hull Club has written multi-year policies. The

premium for the insurance years 2016 and later is not

recorded in the accounts.

Claims incurred but not reportedThe reserve for claims incurred but not reported is calculated

according to the ”Benktander Method” based on reported

claims and the method of the Financial Supervisory Authority

of Norway (FSA) based on paid claims. The maximum is

applied.

Cost recognition and matching / claims reserveClaims are expensed as incurred. Other costs are expensed

in the same period as the income to which they relate is

recognised. Claims reserves are intended to cover anticipated

future claims payments for losses incurred, but not yet settled

at the end of the fiscal year. These reserves comprise provi-

sions for losses reported to the Club, but not yet settled and

provisions for losses incurred but not yet reported at the end

of the fiscal year. Provisions for known losses are assessed

individually by the claims departments, while provisions for

unknown losses are based on the Club’s empirical data and

future expectations as well as actuarial methods. Reinsurance

contracts do not free the ceding Norwegian Club Hull from its

obligations to the insured.

NOTES TO THE ACCOUNTS

A N N U A L R E P O R T 2 0 1 5

21

NOTES TO THE ACCOUNTS NOTES TO THE ACCOUNTS

Provision for risk equalizationThe premium reserve and claims reserve are intended to

cover anticipated future claims payments. The provision for

risk equalisation is intended to provide a cushion to protect

the Club’s finances against unforeseen increases in claims,

and represents part of the Club’s capital together with it’s

equity and the other provisions described below.

Reserve for unallocated loss adjustment expenses (ULAE)In line with regulation (“Forskrift om årsregnskap m.m. for

forsikringsselskaper”) the Club has implemented a provision

to cover indirect claims cost. The Club has calculated

unallocated loss adjustment expenses to 7% and 4.5% for

claims provision. For indirect claims expenses related to paid

claims, the Club has allocated a share of operating expenses.

Accounts ReceivablesReceivables are accounted for at face value with deductions

for expected loss.

Employee loansEmployee loans are accounted for at face value with deduc-

tions for expected loss. At year end there were no deductions

made.

Fixed assets and depreciationFixed assets are recorded in the accounts at historical cost

less depreciation. Historical cost includes expenditure that

is directly attributable to the acquisitions of the items.

Depreciation is calculated using the straight line method.

Upgrading of rented office premises is depreciated over the

rent period. If the fair value of a fixed asset is lower than book

value, and the decline is not temporary, the fixed asset will be

written down to fair value. Depreciation is classified as other

insurance related expenses.

Marketing expensesMarketing expenses do not include any sales commissions.

Foreign exchangeUSD is the Club’s functional and presentation currency. The

major part of the Club’s premium income and claim cost are in

USD. The currency is also significant in respect of provisions

in the marine ocean line of business Profit and loss transac-

tions in foreign currencies are translated into USD using the

average yearly rate of exchange. Foreign exchange gains and

losses resulting from the settlement of such transactions and

from the translation at year-end exchange rates of monetary

assets and liabilities denominated in foreign currencies are

recognised in the income statement.

Foreign exchange gains and losses resulting from the

settlement of such transactions and from the translation at

year-end exchange rates of monetary assets and liabilities

denominated in foreign currencies are recognised in the

statetement of comprehensive income as financial income or

costs.

Receivables and liabilities (including technical insurance

obligations) in foreign currency are translated into USD at

the year-end exchange rate. Foreign exchange gains and

losses that relate to payables, receivables and cash and cash

equivalents are presented in the statement of comprehensive

income under financial income or costs as currency gain/loss.

All other foreign exchange gains and losses are posted in the

statement of comprehensive income under items they relate

to. Foreign securities and financial instruments are valued in

USD at the year-end exchange rate.

Norwegian kroner are used in the official Norwegian

regulatory reporting. The year end exchange rate used for

the balance sheet for the Norwegian financial reporting was

8.81(NOK/USD). The average exchange rate used in the

statement of comprehensive income was 8.07(NOK/USD).

Cash and cash equivalentsCash and bank deposits are included in cash and cash equiv-

alents in the statement of cash flows. The working capital

credit facility amounts to USD 1.1 million, and is not used at

year end. In addition, Norwegian Hull Club has another credit

facility of USD 30 million covering both bank guarantees

and ordinary credits. Restricted deposit amounts to USD 6.3

million at the end of the year.

EXEMPTIONS TO THE BASIC ASSESSMENT AND VALUATION PRINCIPLESFinancial current assetsNorwegian Hull Club uses the opportunity that is given

insurance companies in§ 3-7 and §3-10 in “Forskrift om

årsregnskap for skadeforsikringsselskaper” to present

all financial assets at fair value through profit and loss in

accordance with the fair value option, if not otherwise

decided before investment in a financial asset is made. This

means that the fair value adjustments on financial assets are

recognized in income before other comprehensive income.

Financial instruments are valued at fair market value. Such

financial instruments are equities (both listed and unlisted),

bonds, real estate funds and money market funds. Foreign

exchange contracts are valued at fair market value as well.

A N N U A L R E P O R T 2 0 1 5

22

Regular purchases and sales of financial assets are recognised

on the trade date. Investments are initially recognised at fair

value plus transaction costs for all financial assets not carried

at fair value through profit or loss. Financial assets carried at

fair value through profit or loss are initially recognised at fair

value and transaction costs are expensed in the income state-

ment. Financial assets are derecognised when the rights to

receive cash flows from the investments have expired or have

been transferred and the Club has transferred substantially

all risks and rewards of ownership. Realized gains / losses on

financial instruments are presented on a separate line in the

statement of comprehensive income. Interest and dividends

income are included in financial income for financial assets at

fair value through profit and loss.

Shares in subsidiaries and associated companiesShares in subsidiaries and associated companies are valued

using the cost method in the Norwegian Hull Club accounts.

Cost increases when the parent gives the subsidiary increased

equity capital by subscription for share issue or group contri-

bution. Dividends / group contribution received is normally

recognized as income, but only to the extent that dividends /

group contribution received from subsidiary does not exceed

the share of retained earnings in the subsidiaries after the

purchase. Received dividends / group contributions in excess

of this amount are recorded as a reduction of the acquisition

cost. Norwegian Hull Club records received dividend / group

contributions the same year as the subsidiary makes the

provisions.

Pension cost, funding and obligationsThe Club had a defined benefit scheme with a life insurance

company to provide pension benefits for its employees. The

scheme provides entitlement to benefits based on future

service from the commencement date of the scheme. These

benefits are principally dependent on the employees pension

qualifying period, salary at retirement age and the size of

benefits from the National Insurance Scheme. The Club fulfils

its obligations in line with the regulation of “Lov om obliga-

torisk tjenestepensjon av 21.12.2005”.

The liability recognised in the balance sheet in respect of

defined benefit pension plans is the present value of the

defined benefit obligation at the end of the reporting period

less the fair value of plan assets, together with adjustments

for unrecognised past-service costs. The defined benefit obli-

gation is calculated annually by independent actuaries using

an actuarial method of calculation. The pension obligation

is in principle determined as the discounted value (present

value) of the part of future estimated pension benefits which

have been earned according to the balance sheet date, taken

into account the basic parameters/factors.

For defined contribution plans, the group pays contributions

to publicly or privately administered pension insurance plans

on a mandatory, contractual or voluntary basis. The Club has

no further payment obligations once the contributions have

been paid. The contributions are recognised as employee

benefit expense when they are due.

As a consequence pension provision of USD 9.8 million has

been reversed and booked as negative operating expenses.

Deferred tax and tax expenseDeferred tax is calculated based on temporary differences

between book values and tax basis for assets and liabilities at

year-end. For the purpose of calculating deferred tax nominal

tax rates are used. Taxable and deductible temporary differ-

ences are offset to the extent they reverse within the same

time frame. However, deferred tax liabilities on net pension

assets are treated separately. Temporary differences that

will constitute a future tax deduction give rise to a deferred

tax asset. Change in deferred tax liability and deferred tax

asset, together with taxes payable for the fiscal year adjusted

for errors in previous year’s tax calculations constitutes tax

expenses for the year.

Allocated return on investmentsThe allocated return on investments is calculated on the basis

of the average of total technical reserves during the year using

the average yield on Norwegian government bonds with three

years duration. Allocated return on investments is transferred

from the non-technical to the technical account. In 2015 the

allocated return on investments was 0.76%.

Change in accounting principles and restated accounting figures The Club has previous years used the corridor method of

accounting for actuarial gains/losses. In 2015 the Club has

changed accounting principles whereas actuarial gains/losses

are recognised through Other Comprehensive Income and in

the balance sheet immediately in accordance with IAS 19R

Employee Benefits.

The accounting figures for 2014 have been restated in accor-

dance with the change in accounting principles. Actuarial

losses adjusted for deferred taxes that occurred before 1

January 2014 have been recognised with a corresponding

change in the provision for risk equalization and the figures

have been changed accordingly. Actuarial losses adjusted for

deferred taxes occurred in 2014 have been recognised in the

restated Statement of Comprehensive Income through Other

Comprehensive Income, with a corresponding change in

provisions for risk equalization. The restated figures have been

prepared as if the new accounting principles were applied at

the balance sheet date of the financial statements.

NOTES TO THE ACCOUNTS STATEMENT OF CASH FLOWS

A N N U A L R E P O R T 2 0 1 5

23

NOTES TO THE ACCOUNTS STATEMENT OF CASH FLOWS

2014 2013

Profit of the year before tax -0 15 678 788

Change in net technical reserves 31 368 394 40 514 911

Net profit on sale of fixed shares -

Change in disbursements 20 954 046 -12 656 051

Net profit on sale of fixed assets -31 062 -

Change in net pension liabilities -865 868 -489 663

Change in net receivables -1 239 291 -9 700 179

Depreciations and impairment of assets 1 583 327 766 263

Taxes paid -82 000 -2 407 778

Net cash flow from operations before financial assets 51 687 545 31 706 291

Change in net bonds -26 706 166 -2 799 667

Change in net stocks and shares -5 511 183 -1 850 868

Change in net financial derivatives -4 270 332 -1 462 231

- -

Net cash flow from financial assets -36 487 681 -6 112 766

- -

A Net cash flow from operational activities 15 199 864 25 593 525

Cash generated / used by investing activities

Net receipts/payments related to purchase/capitalization of subsidiar-ies and associated companies

-575 194

Net receipts/payments related to sale/purchase of fixed assets -3 484 238 -1 005 440

Change in mortgage loans 2 263 725 -792 481

B Net cash inflow / outflow from investment activities -1 220 513 -2 373 114

C Net financing activities - dividend paid to members -7 310 302

d Effect of changes in exchange rates on cash and cash equivalents 81 999 330 716

A+B+C+D Net change in cash and cash equivalents 6 751 048 23 551 126

Cash and cash equivalents 01.01 47 330 170 23 779 044

Cash and cash equivalents 54 081 219 47 330 170

ALL FIGURES IN USD

A N N U A L R E P O R T 2 0 1 5

24

NOTES TO THE ACCOUNTS

Benefits Salary Other ben-efits

Loan Profit sharing Pension

John Wiik, CEO 486 662 23 359 102 168 1 136 798 800 710

Arne Birkeland, CAO 240 479 15 482 108 979 74 437 8 775

Ole Jørgen Eikanger, CCO 192 749 16 514 160 944 23 102 8 263

Per Gustav Blom, CFO 216 751 13 624 194 120 65 491 36 691

Christian Irgens, BID 182 723 27 248 - - 22 924

Hans Christian Seim, COO 244 274 16 514 247 350 61 129 25 721

Atle Fjellstad, CUO 187 572 14 450 251 115 35 200 25 338

Hans Olav Lindal(Chair)** 49 542

Nils P. Dyvik* / ** 34 680

Jan A. Hammer 14 863

Tom E. Jebsen 14 863

Siri Pettersen Strandenes* 29 725

Njål Sævik 14 863

Morten Ulstein 14 863

Bernt Thoresen (employee repr.) 7 431

Anna Erlandsen (employee repr.) 7 431

Roar Sanden (employee repr.)* 24 771

Total remuneration 213 032

Harald Kobbe(Chair) 22 294

Egil Fjogstad 14 863

Annicken Kildahl 14 863

Agnethe Brekke 14 863

Total remuneration to Supervisory Committee 66 882

Atle Bergshaven(Chair) 3 716

Helge Kraft 2 477

Jens Ismar 2 477

Stig Remøy 2 477

Total remuneration to Election Committee 11 147

All employees 2015 2014

Salary 13 909 814 16 450 811

Payroll tax 2 295 458 3 200 366

Profit sharing 2 626 524 3 290 433

Other benefits 296 007 430 394

Pension cost -6 749 103 3 689 924

TOTAL 12 378 700 27 061 928

Atle Bergshaven(Chair) 1 858

Other members 1 239

Total remuneration to Committee 44 588

Number of employees NHC

31.12.2014 124

31.12.2015 118

NOTE 2Number of employees / Benefits / Employee loans / Audit / Pensions

(The pension figure in the table above represents the actual payments in 2015)

There are no loans to members of the Board of Directors, Committee, Supervisory Committee, Election Committee, Audit committee or the

Compensation Committee.

Sub Committees:

*= Member of audit committee

**= Member of remuneration committee

Board of directors with sub Committees

Supervisory Committee

Election Committee

Employee salary and loans

Committeeper meeting

per meeting

A N N U A L R E P O R T 2 0 1 5

25

NOTES TO THE ACCOUNTS NOTES TO THE ACCOUNTS

Remuneration/profit sharingThe Club recognises a liability for profit-sharing, based on the

requirements on compensation schemes in financial institu-

tions, given in relevant Norwegian regulation (Forskrift om

godtgjørelsesordninger i finansinstitusjoner, verdipapirforetak

og forvaltningsselskap for verdipapirfond av 1. desember

2010). The Club has established the principles for remuner-

ation of senior executives, employees with duties essential

to the firm’s risk exposure, as well as employees with

supervisory responsibilities. The scheme aims to promote

good management and control of the Club’s risk and shall not

encourage excessive risk taking. A remuneration committee is

appointed and it will annually asses the need for adjustment

in the compensation scheme based on the changes of the

Club’s risk exposure.

In addition to salary, employees covered by the scheme could

be assigned a variable remuneration. The total share of profit

available for distribution is calculated based on a percentage

of the Club’s profit. The individual’s share of profit available

for distribution is determined, among other things on the

basis of salary and individual performance criteria, which

include any extraordinary effort, large client / personnel

responsibility, contributions to skills upgrading in the Club and

any breach of internal guidelines or other relevant legislation

are given weight. In addition, certain financial criteria could

also be emphasized, including the achievement of objectives

within the employee’s department.

2015 2 014

Audit Fee 72 044 109 753

Tax advice fee 14 591 10 880

Other services provided by auditor 27 649 121 078

In total 114 284 241 711

Due to termination of the defined pension scheme per

31.12.2015, a net gain from unwinding the pension obligations

amounted to USD 9.8 million have reduced the marketing

expenses and administration costs in the statement of

comprehensive income for 2015.

The Club has extended ordinary loans to employees totalling

USD 11 505 507. Interest rates equal the lowest rate allowable

if the loans are not to be taxed as employee benefit. All

real-estate loans are secured by real-estate collateral. The

real-estate loans have repayment period of 20 years.

The Club don’t expect any loss from employee loans.

Therefore, no provisions have been made. The loans are

secured within 80% of the market value of the real estate.

Audit

(The figures presented in the table above include VAT).

Pension costs, funding and obligationsThe Club has a defined benefit plan that covers a total of 43

employees and 32 pensioners.

Full retirement pension will amount to approximately 66% of

the scheme pension-qualifying income (limited to 12G). The

scheme also includes entitlement to disability, spouses and

children’s pensions. The retirement age under the scheme is

aged 67 years. The scheme is terminated as at 31.12.2015. The

benefits accruing under the scheme are funded obligations.

The Club also has an early retirement pension scheme, which

will pay out 66% of the salary 65-67 years of age. These

are non-funded obligations. This scheme is also terminated

at 31.12.2015. The Club also has pension obligations for

employees with salaries exceeding 12G. These are non-funded

obligations. The Club has been established a hybrid pension

scheme for all employees from 01.01.2016 instead of above

mentioned terminated schemes as at 31.12.15. The club pays a

defined contribution to the scheme based on each employer’s

salary and has no further obligations. In connection with the

termination of the pension schemes, a compensation will be

paid to some of the employees based on estimated loss of

benefits.

Additionally the Club has pension obligations for some

pensioners. These are non-funded obligations.

All pension schemes are valued in accordance with the IFRS

(IAS 19). Changes in the pension obligations as a result of

changes in the actuarial assumptions and variations between

actual and anticipated return on pension funds, are recognised

in the balance sheet immediately, through a statement called

Other Comprehensive Income (OCI).

The defined benefit plan was closed for new employees

from 1 January 2006. From this date new employees are

covered by a defined contribution plan. The cost for the Club

in respect of defined contribution scheme was for 2015 USD

360 278(USD 505 640 for 2014). The cost for AFP (early

retirement pensions) for 2015 was USD 166 629 (USD 178

842 for 2014).

A N N U A L R E P O R T 2 0 1 5

26

NOTES TO THE ACCOUNTS

NOTES FOR IAS19 DISCLOSURES PER 31.12.2015

(FUNDED OBLIGATIONS) (NON FUNDED OBLIGATIONS) (TOTAL)

1. NET PENSION COST 2014 2015 2014 2015 2014 2015

Current service cost 607 991 612 802 951 490 1 042 250 1 559 481 1 655 051

+ Recognised past service cost - -5 969 858 - -2 193 324 - -8 163 182

= Service cost 607 991 -5 357 057 951 490 -1 151 074 1 559 481 -6 508 131

+ Net interest expense / (income) 108 141 159 010 425 676 301 575 533 816 460 585

+ Administrative expenses related to management of plan assets

8 628 6 997 - - 8 628 6 997

+ Payroll tax (PT) 100 975 -732 925 194 180 -119 779 295 155 -852 704

= Cost in financial statement 825 735 (5 923 975) 1 571 346 (969 278) 2 397 081 (6 893 253)

(FUNDED OBLIGATIONS) (NON FUNDED OBLIGATIONS) (TOTAL)

2. CHANGE IN DEFINED BENEFIT

OBLIGATION (DBO)

2014 2015 2014 2015 2014 2015

DBO at the beginning of year 17 049 753 19 119 579 9 003 321 9 450 584 26 053 074 28 570 163

+ Service cost 515 453 561 665 806 671 955 278 1 322 124 1 516 943

+ Interest cost on DBO 687 401 564 745 360 887 276 410 1 048 288 841 155

+ Past service cost - -19 937 146 - -2 010 299 - -21 947 445

+ Remeasurements 4 423 669 280 630 1 281 001 -373 794 5 704 670 -93 164

+ Acquisition / (disposals) 549 848 - 150 310 - 700 159 -

- Benefits paid 567 731 589 473 402 412 453 266 970 143 1 042 740

= DBO at end of year 22 658 394 - 11 199 778 7 844 912 33 858 172 7 844 912

TBO at end of year 31 204 614 - 23 611 794 2 819 585 54 816 409 2 819 585

3. CHANGE IN PLAN ASSETSPlan assets at beginning of year 14 531 139 13 594 446 - - 14 531 139 13 594 446

+ Interest income on plan assets 595 720 419 005 - - 595 720 419 005

+ Remeasurements -269 225 55 014 - - -269 225 55 014

+ Acquisition / (disposals) 455 770 - - - 455 770 -

+ Past service cost - -14 465 453 - - - -14 465 453

+ Contribution 1 483 819 1 101 209 - - 1 483 819 1 101 209

- Administrative expenses 118 870 114 748 - - 118 870 114 748

- Benefits paid 567 731 589 473 - - 567 731 589 473

= Plan assets at end of year 16 110 622 0 - - 16 110 622 0

4. OBLIGATION IN FINANCIAL STATEMENTNet defined benefit obligation (asset) 6 547 772 - 11 199 778 7 844 912

- 17 747 550 7 844 912

+ Payroll tax 923 236 - 1 579 169 1 106 133 2 502 405 1 106 133

+ Unrecognised past service cost - - - - - -

+ Remeasurements at end of year - - - - - -

= Obligation in financial statement 7 471 007 - 12 778 947 8 951 045 20 249 955 8 951 045

5. RECONCILIATIONBalance sheet provision(prepayment) at begin-ning of year

2 873 738 6 304 177 10 272 789 10 783 116 13 146 528 17 087 293

+ Cost in financial statement 700 056 -5 429 639 1 332 183 -888 395 2 032 239 -6 318 035

- Contributions/benefits paid during year (includ-ing PT)

1 693 038 1 256 480 459 152 517 177 2 152 190 1 773 657

+ Remeasurements recognised in OCI 5 482 908 381 942 1 461 623 -426 499 6 944 530 -44 556

- Impact of (acquisition)/disposals -107 344 - -171 504 - -278 848 -

+ Other movements in the balance sheet 0 -0 0 -0 0 -0

= Balance sheet provision (prepayment) at end of year

7 471 007 (0) 12 778 947 8 951 045 20 249 955 8 951 045

Note 2 continues on next page

A N N U A L R E P O R T 2 0 1 5

27

NOTES TO THE ACCOUNTS

6. ASSUMPTIONS 01/01/15 31/12/15

Number of employees 144 21

Number of pensioners 10 7

Total salary

Average salary

Average age 43,6 51,6

Average remaining service period 15

Contractual Pension Scheme (AFP) probability 0 % 0 %

Resignation rate (over/under 40 years) 0-8 % 0-8 %

Tariff K2013/KU K2013/KU

Estimated return on plan assets 3,00 % 2,70 %

Discount rate 3,00 % 2,70 %

Salary increase 3,25 % 2,50 %

Increase of pension from the Norwegian National Insurance 3,00 % 2,25 %

Pension increase varierende varierendePayroll tax 14,10 % 14,10 %

7. REMEASUREMENTS 2014 2015

Remeasurements at beginning of year 0 0

+ Actuarial loss / (gain) on DBO from demographic assump-tions

0 0

+ Actuarial loss / (gain) on DBO from financial assumptions 1 259 324 -144 736

+ Actuarial loss / (gain) on DBO from experience adjust-ments

464 699 -320 593

- Gain / (loss) on plan assets during year 0 0

- Return on plan assets excluding interest income 0 0

+ Administrative expenses related to plan assets 0 0

- Remeasurements recognised in OCI 1 724 024 -465 329

= Remeasurements at end of year (0) (0)

EQUIPMENT AND FIXTURES PROPERTIES TOTAL

Acquisition cost 1.1 10 114 257 3 693 909 13 808 166

Additions 535 345 688 462 1 223 807

Disposals - -

Acquisition cost 31.12 10 649 602 4 382 372 15 031 973

Accumulated depreciation 1.1 4 510 063 4 510 063

Ordinary depreciation 812 164 812 164

Disposals depreciation - -

Accumulated depreciation 31.12 5 322 227 - 5 322 227

Book value 31.12 5 327 375 4 382 372 9 709 746

The year-end exchange rate is used for the service costs in the balance, and the average exchange rate is used for the service costs

in the financial costs (hence the difference between the two figures).

NOTE 3Fixed Assets

Depreciation is calculated using straight line method. Equipment and fixtures are depreciated over a period of 3-7 years. Upgrading

of rented office premises, which are part of the equipment and fixtures group are depreciated over the rent period (10 and 13

years). The Club has an option to extend the rent period beyond the fixed term. Properties are not depreciated. Depreciation is

classified as other insurance related expenses.

NOTES TO THE ACCOUNTS

A N N U A L R E P O R T 2 0 1 5

28

COMPANYINSURANCE TECHNOLOGY

SOLUTIONS AS MARINE BENEFITS AS OLAV KYRRESGT. 11 ASBusiness office Bergen Bergen Bergen

Ownership share / Voting share 100 % 100 % 33 %

Result in subsidiaries and associated companies -128 662 197 937 -420 646

Book value 295 969 2 060 659 1 281 925

Equity 179 729 2 258 041 2 792 717

NOTE 4Subsidiaries and associated companies

NOTE 5Risk

UNDERWRITING RISK

The risk that the Club’s premium income will be insufficient

to cover the estimated size and frequency of claims. The risk

is managed through the use of actuary models for pricing, risk

assessment and adoption of a sound underwriting strategy.

RESERVE RISK

Reserve risk is the risk that the Club’s technical provisions

are insufficient to cover the underlying liabilities. Actuarial

models are used to calculate sufficient provisions.

REINSURANCE RISK

The risk associated with the choice of reinsurance structure

and its adequacy as well as the reinsurers’ ability to carry

the losses. Experienced employees establish a reinsurance

structure ahead of the insurance year, which is regarded as

optimal for the Club on the basis of sensitivity analyses of

various claims scenarios, the desired exposure of the Club’s

solvency capital in the event of a major claim and opportu-

In NHC the cost method is used for the following companies:

The activity in these companies is regarded as an insignificant addition to the group’s business, and has therefore not been

consolidated in the accounts. Subsidiaries and associated companies’ financial information has been included based on unaudited

financial statements as of 31 December 2015. The figures presented in the table above are all result before tax.

It-services purchased from ITS AS amounts to USD 0.9 million. Transaction between Marine Benefits AS and Norwegian Hull Club

amounts to USD 0.9 million.

Net receivables/liabilities to group and associated companies:Balances due to Marine Benefits AS USD 1.5 million as of 31.12.2015 (as of 31.12.2014 USD 1,5 mill). The term and conditions for

the loan comprise a floating rate of interest, 3 month LIBOR + 1,5 % p.a. The loan should be repaid within 2018. Balance due from

Marine Benefits is USD 0.75 million. This is a short term claims fund. Balances due from Olav Kyrresgt. 11 AS totalling USD 1.4

million as of 31.12.2015 (as of 31.12.2014 USD 1.6 million).

nities for transferring risk on the basis of the historical claim

picture. The capital adequacy of reinsurers and their ability to

meet their obligations are also carefully assessed.

OPERATIONAL RISK

The risk that the Club’s operational guidelines are inappro-

priate or that Club’s employees deviate from the guidelines.

A set of guidelines have been established to manage the

operational risk. The Club defines critical risks, and estab-

lishes procedures to eliminate or reduce the risk. Estimated

loss from operational failures has been calculated. The Club’s

capital is sufficient to cover such a provision. The operational

procedures are subject to continuous monitoring and are

reviewed annually by the internal auditor in connection with

the assessment of the Club’s internal control.

FINANCIAL RISK

The investment portfolio is exposed to three main categories

of risks namely credit risk, market risk and liquidity risk. The

NOTES TO THE ACCOUNTS

A N N U A L R E P O R T 2 0 1 5

29

NOTES TO THE ACCOUNTS

Club seeks to develop an investment strategy that minimizes

the potential consequences of the above listed risks for any

defined risk level. Routines have been established in order to

make sure that the Club at any given time is in compliance

with all relevant regulations in terms of capital management,

capital adequacy and so forth. The Club reviews the invest-

ment risk continuously and formally at least once a month.

Furthermore, the Club has developed stress tests in order

to calculate the sensitivity and potential write down of the

investment portfolio, and will make sure that the results of

these tests are within the risk tolerance limits and parameters

adopted by the Board.

CREDIT RISK

Credit risk is the risk that the Club’s customers or counter-

parties to financial instruments will cause the Club financial

loss by failing to honor their obligation. Theoretically, the

Club’s maximum credit exposure in terms of financial assets

is the aggregated balance sheet carrying amounts of financial

investments. In order to reduce the credit risk, banks shall

have a minimum rating of “A” (Standard & Poor’s), and the

bond portfolios shall be sufficiently diversified and have an

adequate rating level from a holistic point of view. Bonds

that are valued at fair value have on average an A+ rating

(Standard & Poor). Banks had on average an A+ rating as of

31st of December 2015.

The ocean marine line of business is characterized as a

mature market. A large share of the premium income is

handled through brokers, and the business is characterized by

a delay in terms of payment. The Club has premium income

from clients with a good history in terms of payment and

the bad debts figures are very low. However, USD 0.5 million

is set as provision for bad debt at 31.12.15(2014: USD 0.3

million). The medical insurance for seafarers business has

limited credit risk, and is considered as not significant.

OVERVIEW OF INSURANCE RELATED RECEIVABLES:

DIRECT INSURANCE 2015 DIRECT INSURANCE 2014IN % OF TOTAL IN % OF TOTAL

Not Due 86 159 579 88,0 % 88 812 007 85,8 %

Due in 2015 11 064 302 11,3 % 13 845 098 13,4 %

Due in 2014 258 673 0,3 % 486 811 0,5 %

Due before 2014 468 346 0,5 % 391 812 0,4 %

In total 97 950 899 100,0 % 103 535 729 100,0 %

The reinsurance structure is established ahead of the insur-

ance year. The Club is liable towards the insured if a reinsurer

does not honour its obligations. The creditworthiness of

the reinsurers is therefore a part of the decision basis in the

process of placing reinsurance. In order to reduce the credit

NOTES TO THE ACCOUNTS

risk, reinsurers participating on the core reinsurance program

shall have a minimum rating of “A” (Standard & Poor’s/ AM

Best).

MARKET RISK

Being a marine insurance company operating in a global

business like shipping, USD is the base currency. As a result,

the Club’s investment portfolio is to a large extent USD based,

and the return of the portfolio is calculated in USD. However,

since a portion of the Club’s income is also received in Euro

and NOK, a share of the investment portfolio will be invested

in these currencies. Consequently, the investment portfolio is

subject to currency risk for the part of the portfolio that is not

invested in USD denominated instruments. Furthermore, the

Club is also exposed to currency risk due to the fact that more

or less all of the operating costs are in NOK. Currency forward

contracts are used in order to manage the currency exposure.

In order to limit the interest rate exposure, the part of the

investment portfolio that is invested in fixed income instru-

ments shall have a maximum average duration of six years.

As at the end of 2015, the actual duration of the fixed income

portfolio was 2.71 years. Thus, the value of the fixed income

portfolio will increase / decrease by 2.71% if the interest rate

curve moves down or up by 1.00% -point. The effect on the

statement of comprehensive income, will with the before

mentioned change in interest rate, be +/- USD 8.2 million.

Currency is a very complex matter, consisting of many issues,

that has called for simplification in monitoring and manage-

ment. On a quarterly basis the currency balance is monitored

and matched. The provision for risk equalisation is invested in

a basket of currencies that reflects the premium currencies.

This way, capital will fluctuate in line with capital requirement.

LIQUIDITY RISK

Liquidity risk is the risk that the Club will not be able to meet

obligations when due. The liquidity risk in the investment port-

folio is considered to be low. Roughly 85% of the portfolio is

invested in assets that under normal circumstances are highly

liquid. These are money market funds, government bonds,

corporate bonds and equities. Other types of investments of

absolute return nature is considered to be illiquid, even though

secondary markets are available for most of them.

A N N U A L R E P O R T 2 0 1 5

30

The liquidity strategy is adopted on the basis of the

Norwegian liquidity regulation (“Forskrift om forsvarlig

likviditetsstyring av 29. Juni 2007”). The Club shall over

time have a working capital (as deposit in bank accounts) in

the region of USD 10 million. In addition, the Club shall have

established credit facilities of minimum USD 25 million. The

Club has developed a scenario analysis with a list of events

that have the most severe impact on the Club’s liquidity

position. In order to secure a sufficient degree of liquidity in

the investment portfolio, at least 15% of the portfolio shall

be saleable within five days without having to impact the risk

profile of the portfolio by the required sales.

RISK MEASURES AND STRESS TESTING

The Club monitors its risk taking on a quarterly basis based

on risk models developed by Standard and Poor’s and

the Financial Supervisory Authority of Norway. The latter

includes a model developed to mirror the anticipated capital

NOTES TO THE ACCOUNTS

0

50

100

150

200

250

300

350Capital in excess of target

Target excess capital

Capital Requirement

S&PFSAS&PFSA

2014 2015

requirements under the upcoming Solvency II regulations. The

models covers Market risk (i.e. investment risk and risk arising

from asset/liability mismatch in terms of currency and/or

interest rates), Counterparty credit risk, Underwriting risk and

Operational risk. The Club has established internal targets

in terms of capital in excess of the model requirements. As

of 31.12.2015 the Club’s capital exceeds the S&P A-rating

requirement by USD 152 million(2014:141 million) and the

FSA model by USD 207 million(2014:189 million).

The Club’s minimum capital requirement is determined as

described above and the excess amounts are shown in the

table below (2015):

Capital and Capital Requirements

NOTES TO THE ACCOUNTS

A N N U A L R E P O R T 2 0 1 5

32

NOTES TO THE ACCOUNTS

Note 6 Financial assets

31.12.15 31.12.14Book Value Market Value Book Value Market Value

Stocks, shares, bonds and other financial instruments in total 396 827 074 396 827 074 398 650 629 398 650 629

Loans and receivables 13 370 728 13 370 728 18 100 165 18 100 165

Bank deposits investment portfolio 8 658 944 8 658 944 18 576 328 18 576 328

418 856 747 418 856 747 435 327 122 435 327 122

Financial assets at fair value through profit or loss 31/12/15 31/12/14

Listed securities 334 908 979 318 979 320

Unlisted securities 61 918 094 79 671 309

31.12.15 BOOK VALUE MARKET VALUE

LOANS AND RECIEVABLES

ASSET AT FAIR VALUE THROUGH PROFIT

AND LOSS LOANS AND

RECIEVABLES

ASSET AT FAIR VALUE THROUGH PROFIT

AND LOSS

Stocks, shares, bonds and other financial in struments in total 396 827 074 396 827 074

Loans and receivables 13 370 728 13 370 728

Bank deposits investment portfolio 8 658 944 8 658 944

Total 22 029 673 396 827 074 22 029 673 396 827 074

31.12.14 BOOK VALUE MARKET VALUE

LOANS AND RECEIVABLES

ASSET AT FAIR VALUE THROUGH PROFIT

AND LOSS LOANS AND

RECEIVABLES

ASSET AT FAIR VALUE THROUGH PROFIT

AND LOSS

Stocks, shares, bonds and other financial instrument i total 398 650 629 398 650 629

Loans and receivables 18 100 165 18 100 165

Bank deposits investment portfolio 18 576 328 18 576 328

Total 36 676 493 398 650 629 36 676 493 398 650 629

For more detailed information about carrying and fair values for financial instruments, please see notes 7, 8 and 9.

FAIR VALUE HIERARCHY

Government bonds, corporate bonds and other financial

instruments that are traded in active markets where the fair

value are determined on the basis of quoted market prices at

the balance sheet date, are classified on level 1 in the pricing

hierarchy. A market is regarded as active if quoted prices

are readily and regularly available from an exchange, dealer,

broker, industry group, pricing service, or regulatory agency,

and those prices represent actual and regularly occurring

market transactions on an arm’s length basis.

The fair value of financial instruments that are not traded in

an active market is determined by using valuation techniques.

These valuation techniques maximize the use of observable

market data where it is available and rely as little as possible

on entity specific estimates. If all significant inputs required

to value an instrument are observable, the instrument is

included in level 2. Investments listed in the following have

been classified on level two in the pricing hierarchy:

• Equity funds, government bond funds, corporate bond funds

and high yield bond funds. Values are determined on the

basis of the quoted market prices of the assets the funds have

invested in.

NOTES TO THE ACCOUNTS

The table below set out an overview of the carrying and fair values of the Club’s financial instruments and the accounting treat-

ment of these instruments as defined in IAS 39

A N N U A L R E P O R T 2 0 1 5

33

Level 1 Level 2 Level 3

QUOTED ACTIVE MARKED PRICES

VALUATION TECHNIQUES BASED ON OBSERVABLE MARKED DATA.

VALUATION TECHNIQUES BASED ON NOT-OBSERVABLE MARKED DATA.

Financial assets at fair value through profit or loss:

Equity funds 40 176 596

Private equity funds 24 090 527

Real estate funds 29 281 041

Bonds 172 098 154 128 970 167

Financial derivatives 2 210 587

In total 172 098 154 171 357 350 53 371 568

NOTES TO THE ACCOUNTS

• Currency futures, interest rate futures, stock and equity

options, credit default swaps and currency swaps. Values

are determined on the basis of the price development on

an underlying asset or instrument. The before mentioned

categories of derivatives are being priced by using standard

and well recognized methods of pricing like option pricing

models etc.

If one or more of the significant inputs is not based on

observable market data, the instrument is included in level

3. Investments listed in the following have been classified on

level three in the pricing hierarchy:

• Unlisted Private Equity investments. All of these are either

investment in funds or in fund of funds. Values are determined

on the basis of quarterly NAV (Net Asset Value) reports from

the fund managers. These reports are prepared based on the

IPEV guidelines (International Private Equity and venture

capital Valuation) set forth by the Equity Venture Capital

Association or corresponding guidelines in the respective

jurisdiction of the underlying funds. NAVs are calculated

by the fund managers by making use of those methods of

pricing in the IPEV and similar guidelines that are most suited

to estimate actual value for each type of asset subject all

relevant factors. Due to late reporting, NAVs as per the last

quarterly reports are used in the accounts. The NAV from the

most recent quarterly report are adjusted for capital distribu-

tions and/or capital calls in the period until 31.12, and might

be adjusted if incidents of material character have occurred

during the period since last reporting date. An example in this

respect could be a substantial change in the market value of a

listed company a Private Equity fund has invested in.

• Real Estate funds. As for Private Equity, values are deter-

mined on the basis of quarterly NAV reports from the fund

managers. Minimum yearly, the values of all properties in the

funds are assessed by a publicly authorized real estate agent

or valuator. The assessed values of the properties adjusted

for other assets and liabilities, and if relevant expected cash

flow (for example differentials due to future requirements

and /or regulation that will impact the future cash flow of the

properties) make up the basis for the NAVs.

The market value of the Private Market Investment portfolio has changed from USD 23.7 million per. 31.12.14 to USD 24.1 mil-

lion per. 31.12.15. Drawdowns and new investments in the period were USD 5.4 million, while dividends and repaid investments

amounted to USD 5.5 million.

The market value of the real estate funds have changed from USD 38 million per 31.12.2014 to USD 29.3 million per 31.12.2015. New

investment and drawdowns in the period were USD 0 million, while dividends and repaid investments amounted to USD 6.5 million.

The Club uses the following hierarchy for determining and disclosing the fair value of financial instruments by valuation technique:

NOTES TO THE ACCOUNTS

A N N U A L R E P O R T 2 0 1 5

34

NOTES TO THE ACCOUNTSNOTES TO THE ACCOUNTS

Note 7 Stocks and shares

Currency ISIN Acquisition cost Book value Market value

EQUITY FUND

Skagen Kon-Tiki NOK NO0010140502 3 211 232 2 298 082 2 298 082

Cantillong Global Equity Fund USD IE00B3KF5S87 10 000 000 9 781 838 9 781 838

Nordea Stabile Aksjer Etisk NOK FI0008800990 9 192 333 13 082 239 13 082 239

Orbis SICAV Global Equity Fund USD LU0334985271 3 000 000 3 036 544 3 036 544

Sands Capital EMG Fund USD IE00BDFMDW42 3 000 000 2 906 250 2 906 250

Longview Global Equity Fund USD LU0507273943 8 052 361 9 071 642 9 071 642

EQUITY FUND IN TOTAL 36 455 926 40 176 596 40 176 596

Private investments

Storebrand International Private Equity VI NOR 366 804 596 913 596 913

Nordea Private Equity II EUR 2 533 419 2 181 616 2 181 616

Nordea Private Equity III EUR 2 262 012 2 106 297 2 106 297

Borea Opportunity II NOK 1 181 373 232 944 232 944

Partner Group Secondary 2008 EUR 11 909 275 7 286 952 7 286 952

Bluebay Direct Lending Fund II SLP EUR 1 384 451 1 302 306 1 302 306

Partner Group Infrastructur EUR 2 512 982 2 593 054 2 593 054

Union Real Estate Fund NOK 4 782 217 3 887 134 3 887 134

Partner Group Direct Mezzanine USD 3 682 054 3 884 984 3 884 984

Sector Exspec USD 23 970 18 325 18 325

PRIVATE EQUITY IN TOTAL 30 638 557 24 090 527 24 090 527

Real estate fund

Aberdeen Eiendomsfond Norge I IS NOK 19 456 000 14 302 137 14 302 137

Aberdeen Eiendomsfond Norge I AS NOK 198 551 144 472 144 472

Aberdeen Eiendomsfond Asia NOK 4 355 930 1 081 442 1 081 442

Pareto Eiendomsfelleskap AS NOK 166 256 119 742 119 742

Pareto Eiendomsfelleskap IS NOK 16 531 381 11 854 455 11 854 455

Prime Office Germany NOK 6 118 174 1 778 789 1 778 789

Real estate in total 46 826 291 29 281 041 29 281 041

STOCKS AND SHARES IN TOTAL 113 920 775 93 548 163 93 548 163

Remaining commitments(in local currency):

Nordea Private Equity II EUR 345 510

Nordea Private Equity III EUR 265 247

Partners Group Secondary 2008 EUR 1 157 463

Bluebay Direct Lending Fund II SLP EUR 3 732 801

Partner Group Infrastructur EUR 431 653

Partner Group Mezzanine USD 959 709

Borea Opportunity II NOK 8 250 000

Union Real Estate Fund NOK 15 204 001

A N N U A L R E P O R T 2 0 1 5

35

NOTES TO THE ACCOUNTS

Note 8 Bonds and foreign exchange contracts

Risk weight Currency Nominal Aquisition costMarket value/Book value incl. acc. int.

CORPORATE BONDS

Government 0 % USD 39 617 000 40 073 498 39 907 701

Finance institutions and corporate 20 % USD 57 839 654 58 713 745 58 655 135

Other 100 % USD 68 084 401 69 427 848 68 608 986

Corporate bonds in total 165 541 055 168 215 091 167 171 821

INVESTMENT GRADE BOND FUNDS

Ashmore SICAV IG TRF 100 % USD 1 546 218 1 324 835

Gramercy Corp EM Debt Fund 100 % USD 2 754 991 2 413 177

Babson Active Short Duration Fund 100 % USD 22 000 000 21 871 118

Nordea SICAV 1 US Corporate Bond Fund 100 % USD 17 919 248 17 919 220

Investment grade bond fund in total 44 220 457 43 528 349

HIGH YIELD BOND FUNDS

Gramercy High Yield Corp EM Debt Fund 100 % USD 1 908 102 1 618 518

Babson Cap GlobalHY BondFund Tranche A 100 % USD 8 000 247 7 901 209

Oaktree Global HY Bond Fund IB Class 100 % USD 3 000 000 2 877 302

Finsbury High Income 100 % USD 9 521 476 9 421 059

Nordea US High Yield 100 % USD 4 667 676 4 281 733

High yield bond funds in total 27 097 502 26 099 821

MONEY MARKET FUNDS

Arctic Return 20 % NOK 1 741 388 1 208 401

Holberg Lividitet 20 20 % NOK 21 210 457 19 400 239

Holberg Likviditet OMF 20 % NOK 28 489 849 19 442 350

Money market funds in total 51 441 695 40 050 990

GOVERNMENT BOND FUNDS

BlueBay EM Bond Fund 0 % USD 6 000 000 5 938 355

Ashmore SICAV EM Sovereign Debt Fund 0 % USD 13 724 609 13 352 654

Governement bonds funds in total 19 724 609 19 291 008

BONDS HELD FOR TRADING

US Treasury N/B 1.375% 31.10.2020 0 % USD 4 909 594 4 926 334

Bonds held for trading in total 4 909 594 4 926 334

Bonds in total 315 608 947 301 068 324

OTHER FINANCIAL INSTRUMENTS

Foreign currency exchange contracts 0 2 210 587

There are no open interest rates futures as of 31.12.2015.

The due date for FX swap contracts are 19th of February 2016. The amounts bought are USD 10 million and EUR 35 million, the

amounts sold are GBP 7.1 million and NOK 312 million.

NOTES TO THE ACCOUNTS

A N N U A L R E P O R T 2 0 1 5

36

Note 9 Taxes

NOTES TO THE ACCOUNTS

TAX EXPENSE FOR THE YEAR 31.12.2 015 31.12.2 014

Taxes payable - -

Tax charge previous year - -

Change in deferred tax -2 123 302 -912 366

Total tax expense for the year -2 123 302 -912 366

Tax expenses included in other comprehensive income 1 364 338

Income tax expenses -2 123 302 451 972

SPECIFICATION OF TAX EXPENSE FOR THE YEAR

Earnings before tax - -

Conversion effect 5 657 084 6 979 422

Earnings before tax 5 657 084 6 979 422

Permanent differences(due to none tax-deductible expenses) 591 876 1 865 343

Permanent differences(tax-except investment - "fritaksmodellen") -18 494 220 -15 961 675

Change in temporary differences -100 859 -49 983 918

Basis taxes payable in statement of comprehensive income -12 346 120 -57 100 828

Group Contribution - -

Taxable income -12 346 120 -57 100 828

SPECIFICATION OF THE BASIS FOR DEFERRED TAX / TAX ASSET

Assets 2 945 257 1 840 598

Receivables -520 000 -300 000

Pension liabilities -8 951 045 -8 462 882

Bonds and financial derivatives 42 921 736 49 930 629

Stocks and shares 342 845 401 838

Net temporary differences 36 738 794 43 410 183

Loss carried forward -51 236 646 -48 970 040

Basis for deferred tax asset in the balance -14 497 852 -5 559 857

Deferred tax / tax asset 25 %(27%) -3 624 463 -1 501 161

SPECIFICATION OF TAX EXPENSE FOR THE YEAR

27% tax on net income 1 527 413 3 248 782

Correction previous years provision - -

Currency effect deferred tax 483 954 399 324

Effect of correction in deferred tax 382 609 609 876

Effect of change of tax percentage deferred tax 316 357

Tax effect from permanent differences -4 833 633 -3 806 010

Estimated tax expense -2 123 302 451 972

NOTES TO THE ACCOUNTS

A N N U A L R E P O R T 2 0 1 5

38

NOTES TO THE ACCOUNTS

Note 10 Equity

NOTES TO THE ACCOUNTS

OWNERS` FUND OTHER EQUITY TOTAL EQUITY

Equity at 1.1.2014 8 042 072 29 383 948 37 426 020

Profit of the year* 4 601 131 4 601 131

Other Comprehensive Income - actuarial losses* -3 688 766 -3 688 766

Equity at 31.12.2014 8 042 072 30 296 313 38 338 385

Equity at 01.01.2015 8 042 072 30 296 314 38 338 386

Profit of the Year 2 123 302 2 123 302

Equity as at 31.12.15 8 042 072 32 419 616 40 461 687

Note 11Guarantees not presented in balance sheet

Note 12Claims expenses

As claims leader, Norwegian Hull Club may issue guarantees to third parties on behalf of clients to cover liabilities incurred in

connection with collisions, salvage scenarios or other types of third party claims. Such guarantees will be issued on 100 % basis,

thereby including the liabilities of co-insurers that will counter-guarantee Norwegian Hull Club’s liability for their respective shares.

The Club’s exposure under the guarantees is dependant on and limited by

• • The final liability under the case in question, which is often lower than the guarantee amount;

• • Counter guarantees from co-insurers; and

• • (Guarantee) debtor liability of the client.

GUARANTEE LIABILITY REGARDING CLAIMS: 31.12.15 31.12.14

Gross guarantees issued 103 754 771 84 154 028

Counter-guarantees from co-insurers 76 397 417 62 550 392

Guarantees for own account 27 357 354 21 603 636

31.12.15 31.12.14

Gross paid claims 164 280 088 117 987 614

Change in outstanding gross claims reserve 12 623 379 -12 999 571

Gross claims 176 903 467 104 988 043

Paid claims for own account 135 959 195 113 635 190

Change in outstanding claims reserve for own account -10 255 438 -7 824 244

Claims for own account 125 703 756 105 810 947

Run off gain (+) / loss (-) gross -565 982 22 600 991

Run off gain (+) / loss(-) for own account 2 427 989 19 335 846

* Note that changes in equity in 2014 have been restated(refer to note 1 “Change in accounting prinsiples”)

A N N U A L R E P O R T 2 0 1 5

39

NOTES TO THE ACCOUNTS

Note 13Technical reserves for own account

Note 14Equity capital adequacy ratio

31.12.15MINIMUM

REQUIREMENT 31.12.14

Unearned gross premium provision 99 807 321 99 807 318 108 680 877

Reinsured proportion of gross premium provision -15 777 252 -15 777 252 -15 886 077

Unearned premium provision for own account 84 030 069 84 030 067 92 794 800

Unerned commission provision 1 034 768 1 034 768 1 245 599

Gross claims provision 185 984 066 185 984 060 173 360 687

Reinsured proportion of gross claims provision -42 918 070 -42 912 069 -20 039 253

Provision for risk equalisation 289 651 293 67 925 114 281 112 622

Total risk provision etc. 517 782 127 296 061 941 528 474 455

31.12.15 31.12.14

Risk adjusted basis of calculation 341 417 749 357 685 059

Split of gross basis of calculation

-risik category 0% 123 673 278 85 038 189

-risik category 20% 129 131 175 164 401 978

-risik category 35% 13 480 683 18 100 165

-risik category 50% 114 441 387 119 125 880

-risik category 100% 253 652 582 258 906 666

-off balance sheet items 8 663 807 11 306 257

Applicable equity 34 364 386 35 329 858

Equity capital adequacy ratio 9,82 % 9,57 %

31.12.15 31.12.14

Minimum requirement solvency margin 26 838 977 31 579 205

Solvency margin capital 286 656 867 295 015 066

Composition of solvency margin capital

-applicable equity 34 364 386 35 655 709

-from provision for risk equalisation 252 292 481 259 359 357

Solvency margin capital in percent of requirement 1068,1 % 934,2 %

NOTES TO THE ACCOUNTS

A N N U A L R E P O R T 2 0 1 5

40

31.12.15 31.12.14

Reinsurers' share of gross premiums 29 548 427 31 928 535

Reinsurers' share of change in provisions for unearned gross premiums 108 825 717 335

Earned premium 29 657 253 32 645 869

Reinsurers' share of gross claims 28 320 893 4 352 424

Reinsurers' share of change in gross claims reserve 22 878 817 -5 175 327

Incurred claims 51 199 710 -822 904

Commissions incurred 1 783 717 2 260 994

Reinsurers' result -23 326 174 31 207 780

31.12.15 31.12.14

Norway 43 078 558 49 157 918

Countries covered by the EEA agreement 89 706 973 106 124 658

Other countries 49 837 386 54 573 962

Total 182 622 916 209 856 538

Note 15 Reinsurers’ result

Note 16Geographical distribution of gross premium written from direct insurance

NOTES TO THE ACCOUNTS

A N N U A L R E P O R T 2 0 1 5

41

NOTES TO THE ACCOUNTSNOTES TO THE ACCOUNTS

A N N U A L R E P O R T 2 0 1 5

42

A N N U A L R E P O R T 2 0 1 5

44

CORPORATE GOVERNANCE

Norwegian Hull Club is subject to supervision by the Financial Supervisory Authority of Norway. In addition, the Club’s governing bodies have adopted separate internal regulations regarding corporate governance issues.

GENERAL MEETING

Members of the Club, clients that write Hull & Machinery

business on a mutual basis, vote at the general meeting.

COMMITTEE

The Committee elects the Board of Directors, recommends

annual accounts to the General Meeting and supervises the

Board of Directors and management. The members of the

Committee are elected from the members, i.e. the owners, of

the Club.

SUPERVISORY COMMITTEE

The supervisory Committee is tasked with more detailed

supervision of the Board of Directors and management, and

reports to the Committee. The Chairman of the Supervisory

Committee shall be independent of the Club.

From 2016, there is no formal requirement to maintain the

Supervisory Committee.

BOARD OF DIRECTORS

The Board of Directors is responsible for setting out the

strategy, including risk tolerance, and generally overseeing

the daily management of the Club. Up to two members of the

Board of Directors can be independent; the others represent

members of the Club. The Board of Directors has audit, risk

and compensation sub-committees. The Chair of the Audit

Committee is independent of the Club.

AUDIT COMMITTEE

The Audit Committee is a sub committee of the Board of

Directors. Its responsibility is to discuss significant accounting

issues with management and the external auditor and to

assess procedures adopted for preparing the accounts. The

Audit Committee shall further assess the independence

of the external auditor, discuss audit issues with external

and internal auditor, assess the auditors’ work and make

recommendation to the Board of Directors regarding election

of external and internal auditors.

RISK COMMITTEE

The Risk Committee is a sub committee of the Board of

Directors. Its responsibility is to supervise the Club’s total

risk and regularly consider if the Club’s management and

control systems are adapted to the risk level and scope of

the operations. The Risk Committee shall further regularly

consider the continuous compliance with capital requirements

and requirements for technical insurance provisions, shall

regularly the appropriateness of the risk management system

and shall follow up the key functions actuary, compliance and

risk management.

COMPENSATION COMMITTEE

The Compensation Committee is also a sub committee of

the Board of Directors. The Compensation Committee makes

recommendations to the Board of Directors on the compen-

sation of the CEO and the management team, as well as the

structure of general compensation.

ELECTION COMMITTEE

The Election Committee makes recommendations on

candidates for the various governing bodies. The Election

Committee consists of the Chairman of the Committee, the

last retired Chairman of the Board of Directors and three

members elected by the General Meeting.

According to the instructions for the Election Committee, the

Chairman of the Committee, members of the Supervisory

Committee and members of the Board of Directors shall in

general not be re-elected after ten years of service.

A N N U A L R E P O R T 2 0 1 5

45

CORPORATE GOVERNANCE

BERGEN

Visit address:Olav Kyrresgate 11NO-5014 Bergen

Postal address:P.O. Box 75 SentrumNO-5803 BergenNorway

OSLO

Visit and postal address:Dronning Eufemias gate 160191 OsloNorway

KRISTIANSAND

Visit address:Rådhusgata 3NO-4611 Kristiansand

Postal address:P.O. Box 489NO-4664 KristiansandNorway

web: www. norclub.noEnterprise no: NO 910 508 334