From Norwegian to Nordic 2007 was a strong year for Storebrand. The results were satisfying, with a profit for the year of NOK 2,020 million and a return on equity of 24 per cent. Storebrand’s competitiveness also improved during the year. 2007 saw a net notified inflow of pension reserves of NOK 4.1 billion to Storebrand Life Insurance. The number of corporate customers increased by 1,650 to 22,725.
329 billion. We are acquiring a company that is highly competent, has long traditions and is a well-embedded brand in its core market.
• 1847 On 4 May 1847, the P&C insurance company Christiania Almindelige BrandforsikringsSelskab for Varer og Effecter is incorporated by private subscription. The company soon came to be known as just Storebrand.
• 1925 Storebrand changes its legal name from Christiania Almindelige Forsikrings-Aksjeselskap (renamed in 1915) to Christiania Almindelige Forsikrings-Aksjeselskap Storebrand. This name is kept until 1971.
Average number of ordinary shares (1,000)1 251 517 247 965 258 576 272 933 277 927
Storebrand’s acquisition of SPP has created the leading Nordic life insurance and pension provider and a strong platform for future growth. Storebrand and SPP combined is a leading participant in the Nordic occupational pensions market, building on the skill sets, experience, market position and product offerings of both businesses. The enlarged group will have a strong dual-home market structure evidenced by a 10 per cent market share in Sweden1 and a 31 per cent market share in Norway for occupational pension funds under management as of 31 December 2007. The combined entity is well positioned to participate in the further consolidation of the fast-growing Nordic life insurance and pensions sector.
A separate department monitors all Storebrand ’s investments focusing on areas such as environmental degradation, corruption, labour and human rights, and weapons.
SPP’s long experience from the provision of unit linked and mutual fund products in Sweden will provide Storebrand with a better insight into and ability to deliver in this market. Moreover, SPP’s mutual fund products portfolio worth more than NOK 30 billion provides the group as a whole with a good platform for extracting economies of scale in the long-term.
LEIV L. NERGAARD (63), partner, Norscan Partners AS. MBA, Norwegian School of Economics and Business Administration (NHH). 1969­2006 Norsk Hydro ASA, including 2002­2003 CEO Norsk Hydro Deutschland, 1991­2002 CFO Norsk Hydro, 1984­1991, various management positions in finance, accounting and strategy, Norsk Hydro. 1980­1984 CEO Notod­ den Fabrikker. 1997­ board member and later Deputy Chairman and Chairman of the Board, Storebrand ASA (Chairman of the Board from 2000). 2007­ Chairman of the Board, Clean Marine AS. 2004­, board member, Yara International ASA (Chairman of Audit Committee from 2007). 2004­ Chairman of the Board, GRIP. 2003­ Chairman of the Board, Joma International AS. 2003­2007 board member, Tinfos AS. 2004­ 2008 Chairman of the Board, Storebrand Life Insurance. 1997­2006 board member, Rieber & Søn ASA (Chairman of the Board from 2000). 1996­2002 board member, Prosessindustriens Lands­ forening (PIL). 1995­2002 board member, NHO. 1993­1996 board member, Freia Marabou Kraft AS. 1990­1996 board member, Den Norske Turistforening. 1987­1996 board member, Alcatel ASA.
The company achieved an interest result, which is the return in excess of the interest guaranteed to customers, of NOK 7,887 million compared with NOK 5,523 million in 2006. The administration result was lower because the growth in costs was higher than the growth in the administration premium in 2007. The risk result was somewhat lower than in 2006.
Other activities primarily consist of the P&C business and the holding company Storebrand ASA. The deficit experienced in 2007 in the P&C
more than 3,900 policies have been sold, and its introduction is regarded as successful.
Ethical guidelines: Storebrand updated its ethical guidelines in 2007, and developed new handbooks, which are also available online. In addition, ethical issues were a standard agenda item at all gatherings for new employees. Employees can seek advice anonymously from an ethics page on the Storebrand Intranet, and the company publishes its replies for all
Storebrand’s ethical guidelines are distributed to and reviewed by all advisers in the group.
The Board reviews these principles every year. In order to strengthen
The Code of Practice takes into account international developments and other national codes, but is built on national considerations such as Norwegian legislation and practice. The Code of Practice is updated annually, most recently on 4 December 2007. The rules of the Oslo
The notice calling the meeting and supporting papers are published on the group’s website 21 days before the general meeting.
shall reflect the company’s interest groups, customer structure and its function in society. A broad cross-section of shareholders is represented through elections to the Board of Representatives.
Deviations from section 9 of the Code of Practice: There is no requirement in legislation or the company’s Articles of Association for the appointment of a Deputy Chairman to the Board of Storebrand ASA.
The committee is entitled to look into any matter, and has access to all relevant documentation and information. The committee has the power to demand information from any employee and any member of the company’s corporate bodies. The Control Committee met 10 times in 2007 and submitted a report on its work to the
Internal audit produces quarterly reports for the boards. Reports from special investigations initiated by internal audit or management in respect of possible breaches of ethical rules are immediately reported to the chairman of the Audit Committee and the group’s CEO, with copies to the heads of Legal Services and Human Resources. Internal audit is subject to a formal mandate in accordance with current legislation, regulations and international standards. The Control Committee is entitled to use the resources of internal audit as required.
Information and communications (CoP section 13) The Board has issued guidelines for the company’s reporting of financial and other information and for contact with shareholders other than through the AGM. The group’s financial calendar is published both on the Internet and in the company’s annual report. All reporting is based on the principle of openness and takes into account the need for the equal treatment of all participants in the securities markets, and the rules concerning good stock exchange practice. Further information can be found on pages 28–30.
Solvency II is that both the company’s assets and liabilities should be valued at their fair value on an ongoing basis. Storebrand has played an active role in understanding and producing information about, and possible solutions to, the particular challenges Norway faces due to the Solvency II regulations. A good network of contacts has been established with the relevant agencies in Norway and the EU, and the work on producing good adaptations to the regulations will continue during the period up to their implementation. In order to ensure they are well prepared and understand the implications of Solvency
SPP, the life insurance activities, including occupational pensions, now constitute a relatively large proportion of Storebrand’s exposure and capital, and asset management is even more important. Basel 2 and
and the ownership interest in Storebrand Helseforsikring AS. Banking activities comprise Storebrand Bank ASA and its subsidiaries. Asset management activities comprise Storebrand Kapitalforvaltning AS and
Analysis of results – explanatory notes: The interest result is the difference between the net booked return, including interest costs on subordinated loan capital, and the guaranteed return on policies. The average guaranteed return on insurance policies in 2007 was 3.5 per cent. The risk result arises because of the incidence of mortality and disability during the period differing from that assumed for the premium tariffs. The administration result shows the difference between the administration premium charged and actual operating costs.
Good net pension transfer inflows. Storebrand Life Insurance saw net inflows of pension reserves of NOK 1,056 million in 2007.
The value of new business written in 2007 (based on year-end 2007 assumptions) increases the EV by NOK 503 million. The value of new business is based on a marginal approach, meaning that the change in cost of volatility of the in-force business at year-end due to writing new business is attributed to the new business.
The acquisition of SPP facilitates the further utilisation of the operational efficiency in Storebrand Investments, including the potential for extracting significant synergies.
(NOK 423.7 million). This represents a reduction of NOK 126.5 million compared with 31 December 2006. From 31 December 2005 to 31
247.1 million, a reduction of NOK 112.9 million from 31 December 2006. As per 31 December 2007, grouped write-downs totalled NOK
At the close of 2007, the bank had available unused committed credit facilities equivalent to EUR 400 million.
Market share (new business)2 - Occupational pensions (benefit/contribution) excluding transfers 37% 32% 43% Very good - Corporate group life 18% 23% 40% Room for improvement - Long-term pensions savings and mutual funds3 8% 7% 6% Satisfactory - Individual endowment policies 30% 25% 59% Satisfactory - Personal risk products 9% 10% 12% Room for improvement
Premium and claims reserves – P&C insurance 38 1 998.8 2 297.3 2 998.5
Net receipts/payments – securities in the trading portfolio: - Shares and other equity participations 3 350.1 -1 853.9 -7 447.6 - Bonds and other fixed-income securities 926.5 8 671.7 -3 787.5 - Financial derivatives and other financial instruments -3 998.0 505.8 2 806.7 - Dividend receipts from the trading portfolio 8.4 3.2 36.4
Payments to third parties for goods and services -504.3 2 932.0 1 713.3
Payments to employees, pensioners, employment taxes, etc -1 283.8 -1 124.4 -1 078.9
Cash flow statement for Storebrand Group 1 January – 31 December
Changes to accounting principles No changes to the accounting principles were made in 2007.
Consolidation The consolidated financial statements combine Storebrand ASA and companies where Storebrand ASA has the power to exercise a controlling influence. A controlling influence is normally achieved where the group owns, directly or indirectly, more than 50 per cent of the shares in a company and the group has the power to exercise control over the company. Minority interests are included in the group’s equity capital.
Investment properties Properties leased to tenants outside the group are classified as investment properties. In the case of properties occupied partly by the group for its own use and partly let out to tenants, the identifiable tenanted portion is treated as an investment property.
Premium fund The premium fund contains premiums prepaid by policyholders as a result of taxation regulations for individual and group pension insurance and allocated profit share. Credits and withdrawals are not booked through the profit and loss account but are taken directly to the balance sheet.
Property and casualty insurance Insurance premiums are recognised as income in pace with the period of insurance. Costs are recognised when they are incurred.
Deferred tax A number of companies in the group, including Storebrand Livsforsikring AS, have sizeable tax losses carried forward. In order to capitalise the tax asset associated with tax losses carried forward, it is necessary to establish that the company in question will have taxable profits in the future. In a normal year, companies in the group such as Storebrand Livsforsikring AS will have significant tax-free income arising from holdings of shares within the EEA area, and this income does not increase taxable profit. A number of companies in the group have therefore decided to write-down their deferred tax assets. See also note 7.
The proforma profit and loss account was prepared to show what the result could have been if the acquisition had actually taken place as per 1 January 2007. Proforma information is not necessarily indicative of future results. Proforma information describes a hypothetical situation and does not describe the Storebrand group’s actual financial position or the actual merger of activities that has taken place. The proforma information is also based on several uncertain estimates and assumptions. The proforma information is based on a simplified statement of the results in Storebrand and SPP for the period 1 January 2007 up to 31 December 2007.
Accumulated depreciation and write-downs opening balance -59.2 -1.6 -275.4 -43.8 -379.9 5.8 -407.7
Booked in the balance sheet: Accumulated experience adjustments included in equity 176.8 465.8 226.1
Goodwill and other intangible assets -9 610.5 -81.2 -288.3 -10 406.8 -731.9 -827.8
Interest income from financial instruments not at fair value totalled NOK 1,861.3 million in 2007 (compared with NOK 1,141.5 million in 2006).1 Interest expense on financial instruments not at fair value totalled NOK 1,506.4 million in 2007 (compared with NOK 780.3 NOK million in 2006).2
Interest income from other bonds at amortised cost 640.2 657.3 530.1
Shares and other equity instruments 2 033.3 71 627.8 73 661.1
Bonds and other fixed-income securities 112 025.6 112 025.6 50 782.7 50 782.7 57 539.3 57 539.3
Other bonds at amortised cost 12 919.7 12 447.8 13 176.5 13 086.4 9 259.5 9 898.9
Deposits from banking customers, amortised cost 17 332.2 17 332.2 13 533.7 13 532.8 11 187.0 11 187.0
Uncalled residual liabilities concerning Limited Partnership 4 661.0 4 237.0 2 982.0
Loans and deposits from credit institutions without notice or fixed term 2.9 8.9 76.5
Fair value loans in default and loans past maturity not written down 2007
Fair value loans in default and loans past maturity not written down 2006
Deposits and lending with no contractual fixed interest rate period are classified in this column according to the guidelines for reporting public bank statistics.1 Bonds and other fixed-income securities without no contractual fixed interest rate period consist of bond funds, security lending collateral reinvested in interest-bearing securi-2 ties and bonds in Nordben Life and Pension Insurance Co. Ltd. In this note, derivatives are presented net3
The risk result consists of the fees the company charges to cover the insurance risk and the actual costs of this. The insurance risks are the death, long life and disability risks. The risk result is for the account of the company
Income from investments in subsidiaries 1 672.2 1 036.2 1 026.5
Pension assets at fair value 1 957.7 1 972.8 1 962.0
However, the bonus cannot exceed more than 15 per cent of the total insurance capital. When the bonus is higher, the excess part is converted into guaranteed bonus. This applies to insurance with individually calculated bonus. Similar principles apply to other policies.
Operating profit: Operating profit from the year’s operations including the share due to insurance customers.
P&C insurance Claims ratio: Claims incurred as a percentage of premiums earned.
Foreign exchange options: A foreign exchange option confers a right (but not an obligation)