Facts and figures 2018 1) After tax, adjusted for amortisation of intangible assets
Storebrand´s driving force is to create a future we and our customers can look forward to. A great part of our work is therefore about working to achieve the UN Sustainable Development Goals. Sustainable and socially responsible investments lie at the core of our savings strategy. Among other things, we are supporting the UN Global Compact, the world’s largest corporate social responsibility initiative. As Norway’s largest private asset manager, our most important influence on the UN Sustainable Development Goals is tied to how we invest the more than NOK 700 billion that we manage.
Number of shares as of 31 December 2018: Lars Aa. Løddesøl (1964) Group CFO
Previous positions 2013 -2015: CEO, Storebrand Asset Management 2011–2013: CIO, Storebrand Livsforsikring AS
Number of shares as of 31 December 2018: Jan Erik Saugestad (1965) Executive Vice President, Asset Management
Overall strategic goals Storebrand revised its business strategy in 2018 on the basis of several development trends. In recent years, the regulatory framework for savings and pensions has been undergoing major changes. The introduction of the Share Savings Accounts (ASK) and Individual Pension Accounts (IPS) improved the savings terms and conditions for people. The introduction of Individual Pension Accounts in the coming years will change the occupational pension market and provide customers with greater insight into their pensions.
The principles are: • We base our business activities on the UN Sustainable Development Goals.
A driving force for sustainable investments 6) Read more about our sustainability standard in the section “an active owner”.
“If we are to be successful in a movement towards zero emissions, we must be responsible owners and give the companies an opportunity to change. Selling out of companies is in a way the last thing we want. We want the companies to assess the risk of being in coal, and seek new investment opportunities in renewable energy,” says the Executive Vice President for Asset Management, Jan Erik Saugestad.
• Development of a climate accounting tool for property. When extrapolated, this should strengthen our aims, initiative planning and documentation at the portfolio level.
17) The Net Promotor System (NPS) is a measurement tool for customer satisfaction, in which the customer gives a score from 0 to 10, with 10 as the best result.
In 2018, 41 incidents20) related to the processing of personal data were reported. We reported 11 of these as non-conformities to the Norwegian Data Protection Authority in accordance with the General Data Protection Regulation. All the incidents from 2018 have been processed and closed. For non-conformities in which the risk to privacy protection was assessed as medium to high, the affected customers were contacted directly by phone or e-mail in accordance with our policies. We provided information about what had happened, actions taken, and information about whether it was necessary for the individual in question to take any separate action to ensure his or her privacy.
STOREBRAND ANNUAL REPORT 2018 22) Read more about our approach to digital business development in Section 3, customer and community relations.
Approach Our business relies on the trust of customers, partners, governments, shareholders and society at large. To gain trust, our organisation must be professional, capable and marked by high ethical standards. All employees shall act with due care, integrity and objectivity.
25) The governing documents include the “Guidelines for Outsourced Activities”, “Guidelines for Granting Authorisations”, “Code of Ethics”, “Guidelines for Combating Corruption”, “Guidelines for Combating
Investor relations Storebrand attaches importance to comprehensive and efficient communication with financial markets. Maintaining a continuous dialogue with shareholders, investors and analysts both in Norway and internationally is a high priority. The Group has a special Investor Relations unit. This unit is responsible for establishing and coordinating contact between the Company and external parties such as the stock exchange, analysts, shareholders and other investors. All interim reports, press releases and presentations of interim reports are published on Storebrand’s website: www.storebrand.no/ir.
Storebrand believes that diversity enhances the business’s relative ability to create value. Increased diversity is an important part of Storebrand’s recruitment policy. Storebrand seeks to maintain and develop an organisation with real equality.
from the Board and management, who have the ultimate responsibility, to each employee who promotes sustainability in their own area.
The Board adopts Storebrand’s sustainability goals, which are followed up three times a year by the executive management. Storebrand also complies with the international reporting standard GRI (Global Reporting Initiative, version G4) and uses integrated reporting. The financial results are revised by Storebrand’s external auditor, see the Auditor’s Report. 27)
Storebrand’s business activities are divided into the following segments: Savings, Insurance, Guaranteed Pension and Other.
Storebrand achieved a group profit before amortisation of NOK 3,158 million (2, 940 million) for 2018. Group profit after tax was NOK 3,697 million (2,405 million). The figures in brackets show the comparative figures for the same period last year.
Fee and administration income increased by 3 per cent in 2018. 33) The underlying income performance is marked by higher income from products without guaranteed interest rates and a decline in income from products with guaranteed interest rates.
Total fee and administration income increased by 6 per cent from 2017 to 2018, adjusted for income in SKAGEN, as well as for a negative foreign exchange effect. Income growth is driven by the customers’ conversion from defined-benefit to defined-contribution pension schemes in combination with the return, new sales and higher savings rates. In addition, volume growth and transaction-based fees in asset management contributed to growth. Higher margins for lending to the retail market in the 4th quarter entailed that net interest income as a percentage of the average total assets for 2018 was 1.20 per cent, compared with 1.22 per cent in the previous year. For the Norwegian Unit Linked products, strong competition contributed to pressure on the margins. There is also pressure on the margins for unit linked insurance in Sweden. In Asset Management, an increasing relative proportion of the customers’ AuM in low margin products contributed to pressure on the average margins.
In the Norwegian market, Storebrand retained its position as a market leader in defined contribution schemes, with a 31 per cent market share. Premium growth in the defined contribution -based occupational pensions in Norway was 7 per cent in 2018. Growth was driven by sales to new customers, conversion from defined benefit pensions, higher savings rates and growth from wage adjustments. There strong competition in the market for defined contribution pensions is expected to continue.
The profit-sharing result was NOK 333 million in 2018, compared with NOK 104 million for the previous year. The result has essentially been generated by the Swedish business. In 2018, profit sharing increased due to the dissolution of reserves in deferred capital contributions (DCC) of NOK 200 million, which was a result of improved risk management after transitioning to a new core IT system. Reserve strengthening of approximately NOK 200 million by SPP was charged to the result in 2017 as a consequence of changes in the discount rate for the market valuation of liabilities. The changes were due to a transition to a new long-term interest rate (Ultimate Forward rate) in the solvency calculations, which was also used as a basis for the reserve calculations in SPP’s accounts.
Storebrand ASA has only one class of share. All shares have equal rights and the shares are freely negotiable. The Company is not aware of the existence of agreements between shareholders that limit rights to sell shares or to exercise related voting rights.
Interest rate risk is in a special position because changes in interest rates also affect the value of the insurance liability in the solvency balance sheet. Since pension disbursements may be many years in the future, the insurance liabilities are particularly sensitive to changes in interest rates, and they should ideally be balanced with the interest rate sensitivity of the assets. It is not possible to eliminate the interest rate risk in Norway, but accounting at amortised cost reduces the solvency risk without increasing the risk from the annual guarantee. In Sweden, there is good correlation between the interest rate sensitivity of assets and liabilities.
The booked return for guaranteed customer portfolios in Norway has on average been slightly higher than the guarantee in 2018. The return has been helped by a large share of bonds held at amortised cost that benefit greatly from securities purchased at interest rates higher than the current level. Property also provided a good return. Shares gave a negative return, and this has reduced the unrealised gains. In Sweden, the return for guaranteed portfolios has also been positive in 2018.
Regulations will be introduced in three main areas: 1) A uniform classification system (“taxonomy”) for what can be regarded as sustainable economic activity. 2) Requirements for reporting (“disclosure”) on sustainable investments and sustainability risk. 3) Reference values for carbon emissions (“carbon bench marks”).
Norwegian regulations Individual Pension Accounts The Ministry of Finance’s legislative proposal for Individual Pension Accounts was put forward in December 2018, and it is expected that it will be considered by the Norwegian parliament in the spring of 2019. It is not yet clear when the Individual Pension Accounts will be introduced. The Ministry will request comments on the scheme’s entry into force when the regulations are distributed for consultation later this year.
When the Individual Pension Account scheme is introduced, previous pension contributions will be transferred from a retail market for pension capital certificates to a corporate market for active defined contribution schemes. Storebrand is well-positioned in this market.
The financial services industry has noted that a transition to defined contribution-based AFP could solve many of the challenges associated with the scheme: There will be greater predictability for employees, while the company will also have predictable costs and not run the risk of not recognising the liabilities. Time-limited benefits can provide a better distribution profile. A transition from “pay as you go” with partial funding to a fully funded scheme will be demanding. At the same time, liabilities are currently being “kicked down the road” and, according to NHO, the scheme will not be sustainable in the long-term.
In 2018, we replaced an annual survey of employee satisfaction with more frequent employee engagement surveys. On average, 87 per cent of Storebrand employees responded to an employee survey or pulse measurement at least once during the last three months of 2018. The pulse measurements from the last half of 2018 showed progress for issues such as the extent to which employees experience freedom of opinion, a high degree of self-determination or autonomy in their daily work, support from management, and learning and development.38)
The company seeks to ensure equal treatment and opportunities for all internal and external recruitment and development processes.
Total comprehensive income for the period 385 2,290 2,675 11 22 2,708
A large majority of the financial instruments are measured at fair value (the fair value option is used), whilst other financial instruments that are included in the categories Loans and receivables and Held to maturity are measured at amortised cost. Financial instruments measured at amortised cost are largely related to Norwegian pension liabilities with annual interest rate guarantee.
Insurance liabilities must be adequate and cover liabilities relating to issued insurance contracts. Various methods and principles are used in the Group when assessing the reserves for different insurance contracts. A considerable part of the insurance liabilities relate to insurance contracts with interest guarantees. The recognised liabilities related to Norwegian insurance contracts with guaranteed interest rates are discounted by the basic interest rate (which corresponds to the guaranteed return/ interest rate) for the respective insurance contracts.
Use of estimates when preparing the consolidated financial statements. The preparation of the consolidated financial statements in accordance with IFRS requires the management to make judgements, estimates and assumptions that affect assets, liabilities, revenue, expenses, the notes to the financial statements and information on potential liabilities. Actual amounts may differ from these estimates. See Note 2 for further information.
Hedging of net investments Hedging of net investments in foreign businesses is recognised in the accounts in the same way as cash flow hedging. Gains and losses on the hedging instrument that relate to the effective part of the hedging are recognised through total comprehensive income, while gains and losses that relate to the ineffective part are immediately recognised in the income statement. The total loss or gain in equity is recognised in the income statement when the foreign business is sold or wound up.
Premium fund, deposit reserve and pensioners’ surplus fund The premium fund contains premiums prepaid by policyholders as a result of taxation regulations for individual and group pension insurance and allocated profit shares. Credits and withdrawals are not recognised through the income statement but are taken directly to the balance sheet.
After the transaction Storebrand Asset Management AS owns 100% of the shares in Skagen AS.
Financial items and risk result life & pension -46 8 71 173 525 171
Newer individual endowment policies are priced without taking gender into account. The tariffs for all individual endowment policies are based on the company’s own experiences.
Other operations The other companies in the Storebrand Group are not included in the sensitivity analysis, as there is little market risk in these areas. The equity of these companies is invested with little or no allocation to high-risk assets, and the products do not entail a direct risk for the company as a result of price fluctuations in the financial market.
Derivatives: - of which derivatives with a positive market value 4,926 4,926 4,064 - of which derivatives with a negative market value -4,607 -4,607 -2,015
Net primary capital for companies included in the CRD IV report 3,311 2,929
Profit on equities and fund units 719 2 820 -8 797 -5 258 -10 -5 249 16 974
At end of the policy year 464 513 685 793 797 760 - four years later 475 478 - five years later 468
The ordinary retirement age is 65 in accordance with the pension agreement between the Employer’s Association of the Swedish Banking Institutions (BAO) and the trade unions that are part of BTP.
Properties - customers without guarantee 3,303 2,954 1) The properties are valued on the basis of the following effective required rate of return (included 2.5 per cent inflation)
Vacancy Norway The vacancy rate for lettable areas was 6.1 per cent (4.1 per cent) at the end of 2018. Of the total vacancy, 6.6 per cent (9,3 per cant) is related to to space that is unavaiilable for leasing due to ongoing development procjects At the end of 2018, a total of 12.7 per cent (13.3 per cent) of the floor space in the investment properties was vacant.
Booked value of securities pledged as collateral in other financial institutions 151 302
2) In 2018, 542,532 shares were sold to our own employees. Holding of own shares 31. December 2018 was 431,140.
Cash and cash equivalents at the end of the period 34 53
A prerequisite for recognition is that this is earned equity by a subsidiary. Otherwise, this is recognised as an equity transaction, which means that the ownership interest in the subsidiary is reduced by dividends or group contributions.
Gross booked value fin. assetsr Net amount 1) Used for hedge accounting, also see note 14
The consolidated financial statements have been prepared in accordance with the EU-approved International Financial Reporting Standards (IFRS) and the associated interpretations, as well as the other disclosure obligations stipulated in the Norwegian Accounting Act that must be applied as at 31 December 2018. The annual financial statements for the parent company have been prepared in accordance with the Norwegian Accounting Act, Norwegian Regulations relating to annual accounts, etc. for insurance companies and the additional requirements in the Norwegian Securities Trading Act. The annual report for the Group and parent company complies with the requirements of the Norwegian Accounting Act and Norwegian Accounting Standard no. 16 as at 31 December 2018.
PricewaterhouseCoopers AS, Postboks 748 Sentrum, NO-0106 Oslo T: 02316, org. no.: 987 009 713 VAT, www.pwc.no State authorised public accountants, members of The Norwegian Institute of Public Accountants, and authorised accounting firm
management had established controls to ensure assessment of market rent and discount rate. We found that routines to ensure that these elements regularly were checked against both external valuations and marked data was established. Those controls that we elected to base our audit on, was in our view working efficiently.
valuation of financial assets measured at fair value. Particularly we focused on those controls that ensured complete and accurate use of quoted market prices and other observable masterdata, holdings- and transaction reconciliations and return on investments controls. In our opinion, the controls that we have chosen to base our audit on are working effectively.
Storebrand use external service providers to operate some of the key IT systems. The auditor at the relevant service organization evaluated the design and efficiency of the established control systems, and tested the controls designed to ensure the integrity of the IT system that were relevant to financial reporting. We examined the reports and evaluated possible misstatement and improvements.
Key performance indicators for sustainability is, in all material aspects, developed, measured and reported in accordance with the definitions and explanations provided in relation to each table containing key performance indicators.