Storebrand and UnI Forsikring agree to merge, and the merger receives official permission in January 1991.
Storebrand qualified for the Dow Jones Sustainability index for the 14th year in a row.
One of Storebrand's customer promises is that "All of our relationships, solutions and measures are sustainable". How is sustainability relevant to Storebrand and its customers? – We are a long-term enterprise. the period from when we receive the first payment from a customer until we make the last payment to that same customer may be as long as 70-80 years. We are thus obviously interested in what the world will look like in several generations. Last year, for example, we took one step further by integrating sustainability parameters in all of the Group's investment decisions. We introduced a new global sustainability fund, which has received a great deal of attention. We make use of our expertise here to select the most sustainable companies, and not just weed out those who do not satisfy our sustainability standard. More and more customers are concerned about where their money is invested. Work with sustainability also provides internal motivation. I am proud that we have helped prepare the Principles for Sustainable Insurance, PSI, which were introduced at the Un Conference on Sustainable development in the summer of 2012. a few years ago, we were involved in the preparatory work for the Un Principles for responsible Investment, PrI, which have been well received. We have also acceded to the Un Global Compact.
We want to make pensions simple. It is important to keep track of three figures in order to ensure that you have a good pension: odd arild Grefstad Ceo, Storebrand
the Storebrand trippel Smart equity fund was established on 1 october 2012. the rate of return at the end of the year was 1.91 per cent, 1.89 per cent better than the benchmark index. Storebrand trippel Smart invests in 100 of the most sustainable companies in the world, in our opinion. We believe that companies who work strategically and actively with sustainability will be among the most profitable in the long term.
the Storebrand Group's response to both national and international trends can be summed up with four Cs: customer-oriented, commercialisation, capital effectiveness and cost reductions.
the work on paid-up policies with investment choice was a top priority during the year. Some important clarifications are still required at the end of 2012 before we can recommend the product to our customers. these mainly concern how challenges associated with building up reserves for longevity are dealt with and what the payment solution for the new product will look like.
NEW OCCUPATIONAL PENSION PRODUCTS the banking Law Commission's report noU 2012:13 was submitted to the Ministry of Finance in June 2012. In its report, the Commission has looked at how insurance-based occupational pension schemes could best be adapted to the reformed national Insurance scheme, and trends in the employment and financial markets.
the banking Law Commission is now starting work on adapting the rules for risk cover (survivors and disability pensions) to the new pension products and new disability benefits that will be introduced in the national Insurance Scheme in 2015. In this phase the Commission will also consider changes to the transfer rules to adapt these to the new products. this report is expected to be completed during 2013. the proposal facilitates transferring from today's defined benefit-based products to the new hybrid products.
the proposed new occupational pension regulations (noU 2012:13 Pension acts and the national Insurance reform II) from the banking Law Commission describe the new hybrid schemes (basic model and standard model). the new schemes entail good solutions for new pension accrual in relation to Solvency II. there will no longer be any interest rate risk and the life expectancy risk will be significantly less than today.
the challenge is linked to the existing reserves and how the transitional rules will be formulated. the banking Law Commission's proposed transitional rules were made public on 7 January 2013. the proposed transitional rules are based on the rights to pension benefits that have been earned at the time of the transition being protected by the constitution. Given that the rights to benefits will be maintained, it implies that there will still be a large capital requirement when Solvency II is introduced.
Premium income excluding transfers to premium reserve Premium income from group defined benefit pensions will gradually decline due to the transition to defined contribution pensions. the growth in premium income for defined contribution schemes for companies has been good. new policies for traditional guaranteed capital and pensions are no longer issued. there is substantial conversion of portions of the guaranteed portfolio to Unit Linked or bank products, which entails a decline in the premium income compared with the previous year. the increase in premium income for Unit Linked in 2012 is attributed to good sales of the Garantikonto product and an increase in endowment insurance. a reduction in guaranteed savings is in line with the company's strategy.
Public sector Just before Christmas, Storebrand Life Insurance decided to withdraw from the market for defined benefit-based occupational pensions in the public sector. the decision applies to all insured pension solutions in both municipalities and public bodies. the winding up of this business is planned to take 3 years. at the end of 2012 the company's insurance reserves for this product amounted to noK 23.8 billion. Pension scheme members will not affected by this decision and Storebrand will ensure they receive good customer service while they remain our customers.
Risk result the risk result was noK 149 million for 2012. the risk result mainly consists of the disability result, reinsurance, the mortality result and the accident result. the risk result was affected by a good disability result due to fewer and shorter disability cases. as expected, the result is lower than the previous year, due to the positive impact of a terminated reinsurance contract with a non-recurring effect of noK 85 million. the new reinsurance agreement that came into effect on 1 January 2012 limits SPP's exposure to medical and mortality risk from private individuals.
In 2012, the volume of net new sales amounted to noK 4.9 billion compared with noK 5.5 billion in 2011.
2012 was a very good year for active management and resulted in significant outperformance (returns higher than benchmark indices) for customers of no less than noK 2.6 billion for the year as a whole (underperformance of minus noK 1.2 billion). of all the actively managed equity funds, 52 per cent (26 per cent) outperformed their benchmark indices in 2012 (calculated before management fees). all the fixed income funds (45 per cent) outperformed than their benchmark indices at the end of 2012.
Share trading in the online bank and via the broker board was wound up completely in december 2012 due to poor profitability.
both Storebrand Life Insurance and SPP utilise dynamic risk management in their ongoing management. this is intended to ensure that the companies maintain good risk bearing capacity and continuously adjust their asset allocation and financial risk to their solvency and risk capital. the effect of market downturns are dampened at the same time as customers and owners can participate in market upswings.
the most important risk factors for the banking activities are credit risk and liquidity risk. the bank group is also exposed to operational, compliance and, to a lesser extent, market risk.
the credit quality of the corporate market portfolio is considered good. the portfolio entirely consists of mortgages for commercial properties. Mortgage-backed commitments in which running cash flows cover the commitment's interest charges account for around 75 per cent of total exposure (loans and lines of credit). the remainder of the portfolio consists of mortgage-backed commitments involving property development.
a very limited number of loans exceed 80 per cent of their market value, and these are largely only given if the customers can put up additional collateral.
the Group's sick leave rate has been stable for many years. the sick leave rate for the Group as a whole in 2012 was 3.4 per cent: it was 4.2 per cent in norway, 1.9 per cent in SPP and 2.2 per cent in Storebrand baltic. Storebrand has been an "inclusive workplace" (Ia) company for 10 years and the Group's managers have over the years built up good routines for following up sick employees. our working relationship with naV's work centre is also good. Storebrand's health clinic in norway provided around 6,100 treatments in 2012 by chiropractors, physiotherapists and masseurs, with an average of 6 treatments per employee. the health clinic's low threshold provision has made a positive contribution to the low sick leave rate.
employees at head office can work out in the spinning room, weights room and sports hall. More than 60 per cent of employees in norway are members of Storebrand Sport. all employees in Sweden are members of SPP Leisure.
FINANCIAL PERFORMANCE Financial performance will be impacted by the changes that are taking place in the regulations for norwegian occupational pensions and what products the customers will choose in the coming years. Storebrand is continuously adapting to maintain its competitiveness and earnings from its business operations. the board therefore adopted a programme in the 2nd quarter to reduce the Group's costs by at least noK 400 million by 2014. In the long term, the Group's earnings and cash flow will gradually stabilise through the transition to products for which earnings performance is affected to a lesser degree by market fluctuations.
Storebrand aSa is the parent company in a financial group, and its statutory object is to manage its equity interests in the Group in compliance with the current legislation. the Group’s main business areas comprise pension and life insurance, asset management, banking and P&C insurance. the full text of the articles of association may be found at storebrand.no.
• election of shareholder representatives to the board of representatives and members of the nomination Committee and the Control Committee.
10. RISK MANAGEMENT AND INTERNAL CONTROL (no deviations from the Code of practice)
the Group has a common internal audit function, which carries out an independent review of the robustness of the management model. the internal audit function’s instructions and annual plan are determined by the board pursuant to the current legislation, regulations and international standards. the internal audit function produces quarterly reports for the boards of the respective group companies.
the aGM fixes the board’s annual remuneration on the basis of the recommendations of the nomination Committee. the fees paid to the members of the board are not linked to earnings, option schemes or similar arrangements. the members of the board and board Committees do not receive incentive-based remuneration; instead they receive a fixed annual compensation. the shareholder-elected members of the board do not participate in the company’s pension schemes. none of the shareholder-elected members of the board carry out any duties for the company beyond their appointment to the board. More detailed information on the remuneration, loans and shareholdings of board members may be found in notes 24 (Group) and 6 (aSa) of the notes to the accounts. board members are encouraged to hold shares in the company.
For norwegian executive personnel half of the awarded bonus is paid in cash, while the remaining half is converted to a number of synthetic shares based on a weighted average price before payment. the number of shares is registered in a share bank and the Storebrand Group publishes four interim financial statements, in addition to the ordinary annual financial statements.
2. the norwegian Corporate Governance board's Code of Practice is available at nues.no. 3. any deviations from the Code of Practice are commented on under each section in the statement above; see the deviations discussed in section 3. 4. a description of the main elements of the Group's systems for internal control and risk management related to the financial reporting process is discussed in section 10 above. 5. Provisions in the articles of association that refer to the provisions in chapter 5 of the norwegian Public Limited Companies act with regard to the general meeting are discussed in section 6 above. 6. the composition of the governing bodies and a description of the main elements in the current rules of procedure and guidelines may be found in sections 6, 7, 8 and 9 above. 7. the provisions in the articles of association that regulate the appointment and replacement of board members are discussed in section 8 above. 8. Provisions in the articles of association and authorisations granting the board the authority to buy back or issue the Group's own shares are discussed in section 3 above.
Jon arnt Jacobsen (55) board Member of Storebrand aSa since 2009.
Net income from financial assets and real estate for the customers: - equities and other units at fair value 15 6,487 -5,998 - bonds and other fixed-income securities at fair value 15 9,351 7,890 - financial derivatives at fair value 15 772 2,852 - net income from bonds at amortised cost 15 3,712 2,850 - net interest income lending 111 126 - net income from real estate 16 679 1,581 - result from investments in associated companies 32 48 72
Financial liabilities: - Liabilities to financial institutions 8,11,34,35 2,499 6,016 - Deposits from banking customers 8,11,34,35,48 19,860 18,477
Cash and cash equivalents at start of the period 4,218 3,146
11-4. P&C INSURANCE Costs related to insurance claims are recognised when the claims occur. the following allocations have been made: reserve for unearned premium for own account concerns on-going policies that are in force at the time the financial statements were closed and is intended to cover the contracts’ remaining risk period.
the Solvency II framework builds, inter alia, on the assumption that companies can manage the interest rate risk by investing in assets with an interest rate sensitivity that is similar to that of the insurance liabilities. norwegian pension schemes are prevented from doing this due to the lack of assets available in the norwegian market with long-term fixed interest rates, as well as the risk linked to the guaranteed annual return (the requirement that the excess return must at the least be equivalent to the basis interest that is irrevocably credited to the customer annually).
the new solvency regulations stipulate requirements for the adequacy of the companies' capital. the capital adequacy regulations are based on probability calculations that specify how much capital the company must have in order to be able to fulfil its obligations to the customers in cases of unforeseen events of given magnitudes and types. the new solvency regulations have not entered into force.
the level of the new tariff will be of great importance to the need to build up reserves and the course of funding in the coming years. the company has started such a build-up of reserves in the accounts starting in 2011. In 2012 and 2013 Storebrand will set aside as much as possible from its financial and risk results. When the minimum level for the tariff has been set, there will be a dialogue between the industry, Financial Supervisory authority of norway and the Ministry of Finance concerning the terms and conditions surrounding a plan to build up reserves.
1) EvALUATION OF INSURANCE RISK (UNDERWRITING) When writing individual risk cover, the customer is subject to a health check. the result of the health check is reflected in the level of premium quoted. When arranging group policies with risk cover, all employees of small companies are subject to a health check, while for companies with many employees a declaration of fitness for work is required. Underwriting also takes into account the company’s industrial category, sector and sickness record.
SPP the note that shows the effect on the result/equity shows the effect on the financial result excluding profit sharing. not all changes in market value affect the financial result. the part of the market value change that affects the result is the part that cannot be offset against the profit already earned by the customers (conditional bonuses).
Republic of Ireland 1,518 2,392 the reduction in exposure is attributed primarily to realisations.
Change in fair value of liabilities due to changes in credit risk 2 -2
the equity includes a risk equalisation reserve that can only be used to cover a negative risk result. tax deductions related to the build-up of this reserve are treated as a permanent difference between the financial and tax accounts. See "reconciliation of the Group's equity" for more details concerning this.
NOK million 2012 2011 Duration of lease (years) m2 leased amount in %1
Total insurance liabilities - life insurance 1) including personal risk and employee insurance of the insurance segment.
Kirsti V. Fløystøl ann-Mari Gjøstein odd arild Grefstad Chief executive officer
Tax base for the year -123 -105 - Use of losses carried forward
Externally managed properties: Energy consumption - Work on assessment has been initiated.
Primary capital is capital eligible to satisfy the capital requirements under the authorities' regulations.
Core (tier 1) capital is part of the primary capital and consists of the equity less the minimum requirement for reinsurance provisions in P&C insurance, goodwill, other intangible assets, net prepaid pensions, 50 per cent of any capital adequacy reserve, and crossownership deductions in other financial institutions.
The booked return on capital shows net realised income from financial assets and changes in the value of real estate and exchange rate changes for financial assets, expressed as a percentage of the year’s average capital in customer funds with guarantees and in the company portfolio, respectively. The market return shows the total income realised from financial assets, changes in the value of real estate and the year’s change in unrealised gains or losses, expressed as a percentage of the year’s average total capital in customer funds with guarantees and in the company portfolio, respectively, at market value.
This instrument is used to manage or change the interest rate risk.