Financial calendar 2001 25 April: Annual General Meeting 9 May: 1st Quarter results 15 August: 2nd Quarter results 31 October: 3rd Quarter results February 2002: Annual Results for 2001 *) This includes 7,928 corporate customers with 236,561 employees in group life insurance schemes and 6,561 corporate customers with 215,358 employees in group pension schemes provided by Storebrand.
Key figures per share Average number of ordinary shares (000's) 277,464 277,209 277,079 276,766 276,586
2000 was the first full year for Finansbanken as a member of the Storebrand group. Over the course of the year the bank re-focused its activities on three main areas of activity: private banking, asset management and project financing. New areas of business focus for the bank such as private banking and asset management are seeing strong growth, whilst traditional activities such as real estate project financing and securities financing provide Finansbanken with a strong business platform.
Finansbanken achieved a 2 percent increase in net interest income and lending fees, bringing the total for 2000 to NOK 401 million. The bank’s profit before loan losses and provisions increased from NOK 240 million in 1999 to NOK 313 million 2000. Loan losses and provisions amounted to NOK 295 million as compared to NOK 73 million in 1999, and caused a drop in pre-tax profit of NOK 149 million to NOK 18 million. The increase in loan losses and provisions reflects a deterioration in certain of the bank’s lending relationships with shipping customers as described above. The bank’s total assets increased from NOK 13.9 billion to NOK 20.3 billion in 2000, largely as a result of increased lending.
Oslo Reinsurance Company ASA, which is a specialised company involved in the run-off of insurance portfolios, was consolidated into Storebrand’s accounts for the first time in 2000 following the acquisition of the company in 1999. The company again reported a strong performance, with an operating profit of NOK 96 million for 2000. The company continues to rundown its reserves, and by the close of 2000 the net claims reserves in its balance sheet amounted to NOK 696 million.
The group’s risk capital fell in 2000 as result of the impact on unrealised gains of the conditions seen in the financial markets as well as sales of securities. Risk capital stood at NOK 16.2 billion at the end of 2000, representing a reduction of NOK 5.5 billion over the course of the year. By way of comparison risk capital increased by NOK 8.4 billion in 1999. The current level of risk capital is satisfactory for the group’s continuing activities.
As one of the leading expertise-based companies in Norway, the group offers one of the most prestigious graduate trainee programs in Norway as well as a Young Professionals Program.
Capital situation The group’s equity capital increased by NOK 421 million to NOK 10,533 million in 2000, whilst its total primary capital increased by NOK 319 million to NOK 10,882 million. The group’s capital ratio, which measures primary capital in relation to risk weighted total assets, was 12.7 percent at the end of 2000. This represents a reduction of 1.3 percentage points in 2000, and was primarily due to a 14 percent increase in risk weighted total assets over the course of the year. The increase in risk weighted assets resulted from the life company having a proportionately higher investment in equities and also increasing its holdings of fixed-income securities with higher credit ratings
A greenhouse for growth New technology and changes in behaviour are having an effect on society as a whole. The advent of the ”new economy” is creating both opportunities and challenges. We are seeing rapid changes in the way people relate to their employers, where they work and their hours of work. The established structure of commercial life and the value chains we are used to are undergoing rapid change, and new structures are taking their place. Whilst this represents new and promising opportunities for those individuals that feel part of this process of change, others feel alienated and insecure. A central feature is that the individual now has much greater freedom of choice than before. Storebrand's contribution to this process is to offer financial security.
Skilled employees The key factor for success in the finance industry, as in other industries characterised by the need for a high level of expertise, is the ability to attract, develop and retain skilled staff. The most important feature of this is to strive to ensure that all employees are happy in their work and enjoy a challenging role in a successful company. Storebrand makes use of a wide range of tools to meet these challenges. One example of this is that all the Storebrand companies are part of the same employment pool. In addition Storebrand’s trainee programme is highly regarded by newly qualified graduates seeking a first position. 2000 saw the completion of a project to develop a profit-related bonus scheme for all employees, and this scheme will be established during the course of 2001.
For the whole of the 1900s the only form of pension that companies could arrange for their employees was the defined-benefit pension, with pension payments set at a defined percentage of final salary.
Storebrand Bank's advisory concept is not built solely on giving financial advice. The bank's financial advisers are also there to help customers to establish their own financial targets. Many customers are not aware that a relatively small change in their financial arrangements or a change in financial priorities made now can make a worthwhile difference to their financial situation later in life. We therefore intend to offer our customers the best products, whether they are the bank's own products or are provided by external suppliers.
• Profit allocation to the owner of the Storebrand Livsforsikring Group of NOK 838 million
Storebrand Kapitalforvaltning ASA carries out discretionary asset management for 68 customers. This includes eight companies in the Storebrand group.
All client funds are held in separate securities portfolios that are revalued on a daily basis. This provides the basis for return to be monitored on a daily basis, together with monitoring of risk positions and investment limits.
Expenses Total operating expenses increased by NOK 330.7 million to NOK 564.0 million. The higher level of operating expenses should be seen in the light of the transfer of the Storebrand group's entire retail market distribution to Storebrand Bank. The increase in expenses principally reflects increased staff costs and commissions paid to advisers, higher IT costs in respect of operational responsibilities for major systems and systems development, higher marketing costs and the cost of refurbishing the bank's financial centres. Salaries and general administration expenses increased by NOK 247 million to NOK 390 million. Ordinary depreciation was unchanged from 1999 at NOK 8.7 million. Other operating expenses increased by NOK 83.8 million to NOK 165.3 million.
Capital base and capital adequacy The group's capital base at the close of 2000 amounted to NOK 1,629 million, and the parent bank had a capital base of NOK 1,783 million. This represents a capital ratio of 9.7% (10.8% for the parent bank) and a core capital ratio of 6.5% (7.5% for the parent bank). Core capital increased by a net NOK 56 million in 2000.
Central banks and financial institutions 1,255 522 579 Net lending 16,470 12,222 11,052
Financial institutions 4,051 2,597 2,096 Customer deposits from and due 8,381 5,603 5,852 Securities issued 5,210 3,932 3,115 Other liabilities 679 418 418 Subordinated loan capital 543 344 423 Equity 1,233 1,035 922
Oslo Re is involved in the run-off of reinsurance business. The company was acquired in 1999, and also serves to ensure that Storebrand Skadeforsikring has access to technical insurance expertise following the establishment of If.
1999. The company's main activity is now the management of a limited portfolio of financial assets.
Storebrand ASA has a 50 percent shareholding in Fair Financial Ireland Ltd (Ireland) which has a 100 percent shareholding in the Danish company Fair Forsikring AS. This company operates a non-life insurance business in Denmark, and the 50 percent interest was first recognised in Storebrand ’s accounts with effect from 1 April 2000.
Norway 61.4% Great Britain 12.2% Sweden 11.5% USA 7.7% Germany 2.8% 33 other countries 4.4%
Investor relations Storebrand wishes to maintain and further develop the company’s good contacts with all participants in the national and international capital markets. The company has a separate Investor Relations function within its finance department. This function is responsible for establishing and co-ordinating contact between the company and external connections, such as analysts, stock exchanges, shareholders, investors, etc.
The dividend to shareholders will normally be in the order of 15-30% of profit after tax. The Board intends to operate the company’s dividend policy with a view to the longer term, and will aim at a stable growth in dividend per share over time.
Properties and real estate 9 61.3 59.0 Shares and participations in group companies 6 7,217.0 6,660.0 Shares and other equity investments - long term holdings 7 1.5 7.0
Payments of tax, duties etc. -14.0 -48.5 Net receipts from securities 62.0 5,051.2 5,882.8
Expenses arising from financial assets -20,588.3 -7,943.7 -12,438.4 - of which operating expenses -144.9 -140.3 -98.6
Consolidation principles The Storebrand group accounts incorporate companies in life insurance, asset management, banking and nonlife insurance. The accounts have been prepared in accordance with the Accounting Act and regulations for the annual accounts of insurance companies, asset management companies and banks issued by the Banking, Insurance and Securities Commission.
Method of valuation The company regularly assesses the value of the properties that it owns. The properties are valued individually by discounting estimated future net income streams by a rate corresponding to the yield requirement for the relevant property. The net income stream takes into
Realised losses on facilities are losses which are considered to be final. These include losses arising on the borrower’s bankruptcy, insolvency or composition with creditors, or where the companies consider it is overwhelmingly likely that the loss is final.
Shares held as fixed assets Investments in shares in subsidiaries and in associated companies are considered as fixed assets where the investment is of a long term and strategic nature. A corresponding classification is made for strategic investments in shares. The book value of such shares is the cost price, and write-downs are made on an individual
Market value adjustment reserve The value of the market value adjustment fund is equivalent to unrealised gains on financial current assets. Unrealised gains or losses on foreign exchange contracts are not transferred to the market value adjustment reserve with the exception of gains or losses on forward exchange contracts in respect of open currency positions. The market value adjustment reserve can never have a negative value. Unrealised losses are recognised to profit and loss on the basis of write-downs carried out on a portfolio basis.
Group contribution payments from subsidiaries are recognised as gross income for Storebrand ASA.
Deviation from estimated values at 1.1: -140.0 38.7 6.7 -94.6 14.2 -2.0
Storebrand Felix kurs og konferanse AS Oslo 1.0 1 1,000 100.0% 8.0
*) Storebrand ASA has sufficient tax losses to carry forward to fully offset its tax liability, see note 10.
Share Par value No. of Interest Acquisition Market NOK million capital NOK shares cost value
International fund units Esg Partners L.P. (Bermuda) 100 2.7 2.6 Head Insurance Investors L.P. (USA) 91 36.4 35.5
Of which listed Norwegian shares 818.9 Of which listed foreign shares 25.5
Employee numbers totalled 257 at the start of 2000. The reduction is a result of the transfer of IT operations to IBM Norway and the transfer of internal audit to the auditor company Arthur Andersen.
Income from group and associated companies 4.5 11.0 10.2 23.1 11.0 10.2 Income from properties and real estate 858.9 772.9 625.1 864.0 772.9 625.1
Interest and related income on loans to/deposits with credit institutions 2.4 4.3 2.4 59.1 -4.9 61.5 -0.6 2.4 Interest and related income on loans to/claims on customers 563.1 438.2 242.3 1,238.1 407.6 1,801.2 845.8 242.3 Interest and related income from certificates, bonds and other interest bearing securities 56.8 52.9 46.0 95.8 19.2 152.6 72.1 46.0 Other interest and related income 254.2 6.0 0.8 0.7 0.1 254.9 6.1 0.8
In addition employers' social security contributions in respect of the uninsured scheme totalling NOK 6.8 million were recorded in 2000. Finansbanken is included in the figures from 1999. Figures for 1998 include Storebrand Skadeforsikring.
Auditors' fees for group companies Audit fees 7.2 Other control functions 0.6 Fees for advisory services 2.7
Deviation from estimated values at 1.1.*) -92.9 -24.8 8.1 -109.6 45.5 -23.6
Not greater than 60% of valuation 1,681.3 5,551.8 7.5 7,240.6 6,902.2
Tier 1 capital: Tier 1 capital is part of primary capital and consists of equity capital less the revaluation reserve and net prepaid pensions.
Internet: Associated companies: If Skadeforsikring Norge Filipstad Brygge 1 P O Box 1374, Vika N-0114 Oslo Non-life insurance customer service: +47 024 00 Internet: Europeiske Reiseforsikring Haakon VIIs gt. 6 P O Box 1374 Vika N-0114 Oslo