Declaration of the Board and the CEO Independent auditor's report Statement of the Board of Representatives
In October Storebrand Bank launches fixed-rate loans with 20 years maturity. Meanwhile, Storebrand market's lowest interest rates on loans with 3, 5 and 10-year maturity, with nominal interest rates from 2.10 percent.
Group result before amortisation and reserve strengthening 1,762 3,423 2,938 1,960 1,279
In the second quarter, customers have switched to paid up policies with investment choice at total value of 1.2 billion. Exceeding 10,000 paid-up customers in total.
With the transitional rules, Storebrand has a Solvency II ratio as high as 168 per cent at the end of the 4th quarter, compared with a target of at least 130 per cent. Is this not excessively good and indicative of the fact that one could have “relaxed” a little with regard to the adaptations? “No. We have not overdone it here. The adaptations have been necessary. Over time the effect of the transitional rules will diminish, and then the solvency ratio without transitional rules must increase to 130 per cent. At present, we are at 124 per cent, without transitional rules, and during the transitional
Storebrand has entered into a long-term strategic partnership agreement with the US IT company Cognizant. This agreement encompasses Storebrand Baltic, in which the partners have shared ownership and cooperate on operations and development. Why such cooperation? “We cannot be best at everything. We must focus on what is close to our customers and make use of partners when others are better than us. Cognizant is a world-leader in its field, and, together, we can give our work on innovation and digitisation of the Group's services a boost. This will result in better and more innovative solutions for our customers, and cost reductions for the Group.”
The year 2015 was a fateful year for climate change globally. Climate change and climate adaptation are issues that are discussed in the boardrooms of most major companies. The finance and insurance industry is not an exception. On the contrary, there are increasingly higher requirements for how the financial sector selects investments to reduce climate impact, to increase sustainable investments and to report climate impact in a transparent manner.
Another example of a climate effect that affects company results, and is thus relevant to investors, is the effect of increased precipitation. Around a third of the GDP of EU members is weather-dependent. This applies, for example, to the food industry, where two-thirds of the products are sold to a lesser extent if the weather is poor, and the construction industry, where it is more complex and expensive to handle cement when the temperature falls below five degrees.
This is in addition to the measures that Storebrand has already implemented and systematically carries out for the entire assets under management within the framework of sustainability analysis, which are described in greater detail below.
Storebrand is an important driving force for more sustainable products and services in the Norwegian market, and our goal is to be a pioneer and lead Norwegian consumers in a more sustainable direction.
Real estate: Aggregated sustainability rating 58 of 100 points 59 of 100 points 59 of 100 points
Number of external managers contacted about violations of the Storebrand standard 10 8
Goldman Sachs & Co E Goldman Sachs & Co 7,000,000 1.46 FIN
Secondly, Storebrand aims to manage the portion of the business that consists of pension savings with guaranteed interest rates in the Guaranteed Pension segment. This area is in a long-term decline. Companies are requesting products with guaranteed interest rates to a lesser extent, and these products are capital-intensive for the life insurance companies during periods of low interest rates. The Group's first priority in this area is to ensure the accrual of pensions for our customers by means of robust systems for risk-taking, while the Group actively adapts to the new European solvency regulations, Solvency II, and to strengthen the reserves due to the increased longevity of the population.
In 2014, the Norwegian authorities gave around one million Norwegians the opportunity to exchange their paid-up policies with a guarantee for paid-up policies with investment choice. Storebrand is the only company that offers this to all of its working employed paid-up policy customers. This gives many customers an opportunity to manage their pension assets, which may give them a higher return and thus a better pension. Approximately NOK 4.7 billion was transferred to paid-up policies with investment choice since the start. Good advice is important, and, both on our websites and over the phone, we focus on giving good advice and recommendations adapted to each individual customer. Storebrand's CEO, Odd Arild Grefstad, was the first customer to switch to a paid-up policy with investment choice, and by the end of 2015 around 18,200 agreements had been converted to paid-up policies with investment choice.
Results The result for Savings was NOK 1,020 million for 2015. Adjusted for non-recurring effects in the 4th quarter of 2014 and 2015, there was earnings growth of 16 per cent for the full year1. The earnings improvement is driven by volume and income growth within unit linked insurance and asset management.
The Solvency II regulation will be introduced in 2016. Measures implemented during 2015, which included risk reduction, longevity reserve strengthening and changed technical insurance assumptions, contributed to the company being able to enter 2016 without raising new equity. The Group’s target solvency margin in accordance with the new regulations is 130 per cent, including use of the transitional rules. At the end of the 4th quarter, the solvency position for the Storebrand Group was calculated to be 168 per cent (without transitional rules, the solvency margin is estimated to be 124 per cent). Storebrand uses the standard model for the calculation of Solvency II. In 2015, the models that are used to calculate Solvency II were updated to reflect the current business and regulations. In particular, a change in the model relat-
At the end of the year, 42 per cent of the managers in the Group were women, and 51 per cent of the employees were women. In SPP, 52 per cent of the managers were women. This positive trend is a result of our systematic efforts to identify future managerial candidates and promote even gender distribution. There has been a focused effort on management development in the areas of strategic and operative management, communication and change. The aim is to ensure that future competence requirements are met, to develop Storebrand to meet the changing needs of society and the market. No significant salary differences have been identified that can be attributed to gender discrimination. Moreover, this is something that the company will follow up and measure regularly.
Storebrand's health clinics at the head office in Norway provided treatment on 2,526 occasions in 2015 and have also provided training guidance and workplace assessments for employees. The two health clinics at Lysaker Park, as well as good health insurance for all employees, are positive contributors to Storebrand's low rate of absence due to illness.
Public service pensions In December 2015, the Ministry of Labour and Social Affairs proposed amendments to occupational pensions in the public sector. A net scheme with all-years accrual, gender-neutral premiums and lifelong disbursements, which can be combined with earned income, is proposed. The Government will discuss the proposal with the parties, and it is expected that the subsequent process will be clarified within a short period of time.
Storebrand’s principal focus within sustainability is sustainable investments. Storebrand has worked with sustainability systematically and in a goal-oriented manner for over 20 years. This work is clearly based on Storebrand ’s vision and core values Storebrand’s sustainability guidelines are based, for example, on the principles set forth in the UN Global Compact and the UN Principles for Responsible Investment. See the separate article in the annual report on page 39.
General Meeting to vote on each individual purpose to be covered by the authorisations.
At the 2010 Annual General Meeting, the Articles of Association were amended so that the requirement in the Norwegian Public Limited Companies Act or the Articles of Association that documents concerning matters to be considered at the General Meeting must be sent to the shareholders does not apply if the documents are made available to the shareholders on the company's website. This also applies to documents that are to be included in or attached to the notice of the general meeting pursuant to the Norwegian Public Limited Companies Act or the Articles of Association. A shareholder may nevertheless request that the documents concerning the items to be discussed are sent free of charge.
8. CORPORATE ASSEMBLY AND BOARD OF DIRECTORS: COMPOSITION AND INDEPENDENCE (NO DEVIATIONS FROM THE CODE OF PRACTICE) The Board of Representatives elects the Board’s members and supervises the management of the company by the Board and CEO. Storebrand is legally required to have a corporate assembly – the Board of Repre-
The duties of the Board of Representatives include making recommendations to the General Meeting regarding the Board’s proposed annual report and financial statements, electing between five and seven shareholder-elected board members, including the Chairman of the Board, fixing the remuneration paid to board members, prescribing the rules of procedure for the Control Committee's work, and considering reports from the Control Committee. The Board of Representatives is entitled to make recommendations to the Board on any matter.
The Articles of Association stipulate that between five and seven board members shall be elected by the Board of Representatives based on nominations from the Nomination Committee. Two members, or three members if the Board of Representatives elects six or seven directors, shall be elected by and from among the employees. The board members are elected for one year at a time. The day-to-day management is not represented on the Board of Directors. At the end of 2015, the Board of Directors consisted of ten members (six men and four women).
Financial information and Storebrand’s accounting process Storebrand publishes four interim financial statements, in addition to the ordinary annual financial statements. The financial statements shall satisfy legal and regulatory requirements and be prepared in accordance with the adopted accounting policies and published according to the schedule adopted by the Board of Storebrand ASA.
are binding and which are advisory. The General Meeting shall vote separately on the binding and advisory guidelines. The remuneration consists of fixed salaries, variable remuneration, pension schemes and other fringe benefits deemed to be natural in a financial group. The aim of the remuneration is to motivate greater efforts to ensure longterm value creation and resource utilisation in the company. In the opinion of the Board the overall remuneration shall be competitive, but not leading. An annual assessment is carried out based on external market data to ensure remuneration is adequate in relation to equivalent positions in the market.
We help our customers to make choices that can give them better pension. Liven Joramo Sandell Storebrand
Board member at Boligselskapet INI AS Grønland, Norwegian Finans Holding AS, HAV Eiendom AS, Norske Skog AS, Grieg Seafood ASA and Røisheim Eiendom. Orlgand is Board Chairman GIEK Røisheim Hotell and Berghammeren AS.
Note 1 Accounting policies Note 2 Income from investments in subsidiaries Note 3 Net income for various classes of financial instruments Note 4 Personnel costs Note 5 Pensions costs and pension liabilities Note 6 Remuneration to the CEO and elected officers of the company Note 7 Tax Note 8 Parent company’s shares in subsidiaries and associated companies Note 9 Bonds and other fixed-income securities Note 10 Financial derivatives Note 11 Financial risks Note 12 Tangible fixed assets Note 13 Bond and bank loans Note 14 Hedge accounting Note 15 Shareholders Note 16 Information about close associates Note 17 Number of employees/person-years Note 18 Capital requirements
Financial liabilities: 0 0 - Liabilities to financial institutions 9,13,32 416 19 - Deposits from banking customers 9,13,32 17,825 19,358
New accounting standards that have a significant impact on the consolidated financial statements have not been implemented in 2015. For changes in estimates, see Note 2 for further information.
If the discounted present value of the pertinent future cash flows is less than the carrying value, goodwill will be written down to its fair value. Reversal of an impairment loss for goodwill is prohibited even if information later comes to light showing that there is no longer a need for the write-down or the impairment loss has been reduced. Goodwill is allocated to the relevant cash flow generating units that are expected to benefit from the acquisition so that it can subsequently be tested for impairment. Cash flow generating units are identified in accordance with the legal entity.
Financial assets held for trading are measured at fair value at the reporting date, with all changes in their fair value recognised in profit or loss.
The discount rate curve used earlier (prior to the change) was determined based on the unadjusted quoted swap interest rates for terms to maturity up to 10 years, and a long-term spot rate that represented the sum of the long-term assumptions for inflation, real interest rate and forward premium for terms to maturity in excess of 20 years, and a linear interpolation of the spot rates for terms to maturity ranging from 10 to 20 years.
Storebrand Group has country-specific pension schemes for its employees. The schemes are recognised in the accounts in accordance with IAS 19. In Norway, the pension scheme from 1 January 2015 changed from a defined benefit to a defined contribution scheme. The effect of this change was recognised in the accounts as at 31 December 2014. Storebrand is a member of the Norwegian contractual early retirement (AFP) pension scheme. The Norwegian AFP scheme is regarded as a defined-benefit scheme, but there is insufficient quantitative information to be able to estimate reliable liabilities and costs for accounting purposes.
In 2015, the Financial Supervisory Authority of Norway approved Storebrand's application for an escalation plan for reserves in accordance with K2013, including use of the risk equalisation reserve and equity.
The Other segment includes the insurance risk at BenCo. BenCo offers pension products to multinational companies through Nordben and Euroben. The insurance risk at BenCo primarily relates to group life insurance, early retirement pensions and pensions for expatriate employees. These are defined-benefit pensions that can be time-limited or lifelong. Many of the agreements have short durations, typically 5 year early retirement pensions, and the insurance risk is therefore limited.
STOREBRAND LIFE INSURANCE: The company hedges most of the foreign exchange risk in the customer portfolios on an ongoing basis. Foreign exchange risk exists primarily as a result of investments in international securities, as well as subordinated loans in a foreign currency to a certain extent.
If the assets in an insurance contract in the company are smaller than the market value of the liability, an equity contribution is allocated that reflects this shortfall. This is termed a deferred capital contribution (DCC) and changes in its size are recognised in the profit and loss account as they occur. When the contracts' assets exceed the present value of the liabilities, a buffer, which is termed the conditional bonus, is established. Changes in this customer buffer are not recognised in the profit and loss account.
Facilities for Storebrand Boligkreditt AS The bank has two credit facilities with Storebrand Boligkreditt AS. One of these is an ordinary overdraft facility of up to NOK 6 billion. This has no fixed expiry date, but may be terminated by the bank with 15 months’ notice. The other facility must at all times be sufficient to cover interest and principal on covered bonds and related derivatives for the next 12 months. The credit facility is not revocable by the bank until three months after the maturity of the longest covered bonds and related derivatives.
Investments subject to netting agreements 4,451 3,351 1,100 2,275 -206 -941
The Group categorises financial instruments valued at fair value on three different levels, which are described in more detail below. The levels express the differing degrees of liquidity and different measurement methods used. The company has established valuation models to gather information from a wide range of well-informed sources with a view to minimising the uncertainty of valuations.
Liabilities 20141 1) Includes lending to customers/liabilities to financial institutions classified at fair value through profit and loss
Transferred to/from non-observable assumptions to/from observable assumptions 58 12 1) Includes derecognition of NOK 4927 million in Storebrand Eiendomsfond Norge KS. As of 31.12.15, Storebrand Life Insurance had NOK 1 427 million invested in Storebrand Eiendomsfond Norge KS. This investment is classified as “Investment in Associated Companies” in the Consolidated Financial Statements.
Average number of person-years 2,236 2,174 1) Including Storebrand Helseforsikring with 100 per cent.
The premiums and components for the defined-contribution scheme are the following : - Saving starts from the first krone of salary - Savings rate of 7 per cent of salary from 0 to 12 G (the National Insurance basic amount "G" is NOK 90,068 at 31 December 2015) - In addition 13 per cent of salary between 7.1 and 12 G is saved - Savings rate for salary over 12 G is 20 per cent
The Norwegian companies participate in the Joint Scheme for Collective Agreement Pensions (AFP). The private AFP scheme provides a lifelong supplement to an ordinary pension and is a multi-employer pension scheme, but there is no reliable information available for inclusion of this liability on the statement of financial position. The scheme is financed by means of an annual premium that is defined as a percentage of salaries from 1 G to 7.1 G, and the premium rate was 2.4% in 2015. Storebrand employees in Norway who were born before 1 January 1956 can choose between drawing an AFP scheme pension or retiring at the age of 65 and receiving a direct pension from the company until they reach the age of 67. Employees can choose to receive benefits from the AFP scheme from the age of 62 and still continue to work.
Net pension cost recognised in profit and loss account in the period 315 -382 1) See also note 23 Operating costs
Bonus scheme The Group's executive management team and executive personnel who have a significant influence on the company's risk receive only fixed salaries. Other employees may in addition to fixed salary be awarded a discretionary bonus of 5-15% of fixed salary.
2) NOK 48,8 million was classified as depreciation under operating costs.
Allocation by company and customers: Properties for own use - company 68
Allocation by company and customers: Bonds and other fixed-income securities - company 29,123 26,699
Investments in trading portfolio: - bonds and other fixed-income securities 9,11 2,231 1,635 - financial derivatives/other financial instruments 10,11,14 28 31
CHANGES IN THE NET DEFINED BENEFITS PENSION LIABILITIES IN THE PERIOD: NOK million 2015 2014
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