APRIL Fee free fund trading storebrand becomes the first to launch an online trading solution that allows anyone to buy fund units with zero purchase fees.
Storebrand’s ambition is to be a leader within corporate responsibility and responsible investments. Both the group’s financial and non-financial goals and results are presented in the group’s annual report and show how corporate responsibility forms an integral part of our core activities.
The European Solvency II regulations will change the life insurance sector’s capital requirements with effect from 2013. Storebrand is well prepared for the regulatory changes which will affect core areas such as product design, investment allocation and risk management. Important work is taking place in Norway to adapt the Norwegian regulations to the general international regulations.
Storebrand is now closing in on the most cost efficient companies in European insurance 1.
Active competition combined with regulatory changes is increasing the need for efficiency in the life insurance sector. Storebrand wants to stay ahead of this development and has in the last few years strongly improved its productivity in all parts of its business.
At year-end 2010, one year after moving into our new head quarters in Lysaker Park, our MTI has increased from an already high level in
Facts We suppoRt And ARe ACtIve pARtICIpAnts In: sustainable. Microfinance must be subject to the same requirements to good workmanship as other financial services, and at the same time special care has to be exercised because you are investing in the poorest people in the world.
As per 4Q, 94 companies had been excluded from the group’s portfolios. Companies are excluded only as a last resort and only when the risks associated with ownership are regarded as unacceptable. even after exclusion we are in regular contact with companies to encourage improvement.
Overall, individuals will have greater responsibility for their own pensions. The changes will increase the need to provide information to employees.
This allows the Board and management to identify trends at an early stage, implement measures and focus on long-term value creation.
Average number of shares (million) 3 446 446 445 252 248 earnings per ordinary share (noK) 3.30 2.08 -5.01 7.95 6.03
General Management Programme, CEDEP/INSEAD • 1986 Bachelor of Commerce, International Relations, Copenhagen Business School • 1993 Bachelor of Commerce, Economics and Finance, Copenhagen Business School
Storebrand is a financial group consisting of four business areas: life insurance, asset management, banking and P&C insurance.
Profit before tax 877 759 1 Investment result and profit sharing.
The booked return was 4.9 per cent in 2010. The average annual interest guarantee in the various customer portfolios is between 3.3 per cent and 3.7 per cent. Therefore, the returns were sufficient to cover the interest guarantee and produce profit sharing between additional statutory reserves and the customers‘ premium fund.
The other result was minus NOK 30 million and primarily consists of the result from subsidiaries and changes in the administration and security reserves.
Total assets under management increased by around NOK 15 billion and amounted to NOK 219 billion at year-end 2010. The increase was due to good growth in customer assets, which was partly due to a net inflow of customer assets and positive returns.
Guaranteed products 778 402 unit link 500 486 risk products 199 173
Pre-tax profit/loss 116 147 1 Nordben was included in the result from and including June 2009.
Fondene AS, NOK 36 million from SPP Fonder AB and NOK 53 million from the management company Storebrand Eiendom AS.
The global economic recovery and stock market upturn continued in 2010, though there were strong fluctuations in the markets. In particular, the concern about national debt in Europe dominated the news picture. The markets in the most debt laden countries were the hardest hit, though the concern also spread to other markets. The global equity market was down by 10 per cent in the first half of the year, but ended with an upturn of 8 per cent towards the end of the year. Norwegian equities lagged somewhat behind the global market for a long time, but in the final quarter the Oslo Stock Exchange was greatly helped by a high oil price and ended with a positive return of 18 per cent.
The bank is also a leading provider of advice, transaction services, and financing for cooperate customers within commercial real estate.
Net individual and group write-downs recognised as costs in 2010 amounted to NOK 29 million in the Storebrand Bank Group, which includes a write-down in investment properties of NOK 14 million related to a taken over loss exposed commitment.
Storebrand Skadeforsikring AS achieved an operating result before amortisation of minus NOK 22 million in 2010 compared to minus
Storebrand ASA. The company offers treatment insurance in the retail and corporate markets in Norway and Sweden.
Group contribution and dividends 1,158 835 net financial items 1 -526 -104 operating costs -131 -162
investment portfolios. Overall the market movements in 2010 helped the company to strengthen its risk bearing capacity further.
The market value adjustment reserve amounted to NOK 2.0 billion as per 31 December 2010.
Storebrand used internal resources for this skills boost. Good training has produced very good results, especially on the theoretical side.
December of 2004 a recommendation for a national standard for good corporate governance was presented. This was last revised on 21 October 2010. The Storebrand Group‘s corporate governance principles comply with this recommendation and the new requirements concerning the statement of company management in the annual report that came into force on 1 July 2010 (section 3-3b of the Accounting Act). Further information about Storebrand‘s corporate governance policies and procedures and company management pursuant to section 3-3b of the Accounting Act can be found in a separate article on page 43 of the annual report.
Wage-growth will be the most important factor here in the short-term. The market has over time moved in the direction of funds-based products without interest guarantees. The Group has played an active part in this development and a steadily growing proportion of its business is linked to products in which financial performance is less affected by short-term market fluctuations.
Almost 594 million Storebrand shares were traded in 2010, an increase of 24 per cent from 2009. In terms of NOK, the trading amounted to NOK 23,114 million in 2010, up from NOK
Storebrand established its own principles for corporate governance as early as 1998 and views the Norwegian Code of Practice as a natural extension of these. The Board of Directors (the Board) has decided the company will adhere to the Norwegian Code of Practice. Its statement on adherence to the Code of Practice can be found on page 16.
Storebrand’s solvency capital and capital situation on page 34 in the
The Board meets at least 11 times a year. 11 board meetings and one board seminar about financial risk management in Storebrand and the pensions reform were held in 2010. The group’s future strategy is discussed at the Board’s annual strategy meeting. This results in guidelines for the management’s strategic plans and budgets in connection with the annual planning process. These must then be approved by the Board. The Board shall stay informed about Storebrand’s financial position and development, ensure that its activities are subjected to satisfactory controls, and ensure the group has adequate capital based on the scope of, and risks associated with, its activities. The attendance records of individual board members are provided in the overview of corporate bodies on page 49. The work of the Board is regulated by special instructions for the Board, which are reviewed annually. In order to ensure sound and well-considered decisions, meetings of the Board are well prepared so that all members can participate in the decisionmaking process. The Board prepares an annual schedule for its meetings and the topics it will consider. The agenda for the next board meeting is normally presented to the Board based on the approved schedule for the year and a list of matters carried forward from previous meetings.
The assessment and management of risk are integrated into the group’s value-based management system. The management system is intended to ensure a correlation between goals and actions at all levels of the group and the overall objective of value creation for
Organisational changes will take effect in the Storebrand Group on 1 March 2011, and changes have been made to the composition of the executive management. Storebrand’s executive management will have the following composition: • CEO Storebrand ASA, Idar Kreutzer • CFO and COO, Lars Aa. Løddesøl • CEO Storebrand Livsforsikring AS, Odd Arild Grefstad • CEO SPP Livförsäkring AB, Sarah McPhee • CEO Storebrand Kapitalforvaltning AS, Hans Aasnæs • Executive Vice President, Insurance, Gunnar Rogstad
Storebrand aSa profit and loss account 126 statement of financial position 127
NOK million notes 2010 2009 net premium income 11 28,661 26,475 net interest income - banking activities 12 457 423
NOK million 2010 2009 profit/loss for the year 1,480 934 other reSult elementS
Financial assets at fair value: - equities and other units 6,9,32,40 92,492 72,462 - bonds and other fixed-income securities 6,8,9,32,41 137,732 134,881 total assets customers 320,372 291,106 total assets 390,414 366,159
reConCiliation of Group’s equity storebrand Group majority’s share of equity paid in capital retained earnings
other equity 2 total retained earnings minority interests total equity profit for the year 928 928 5 934
net payments - sale/capitalisation of group companies -113 -234 net receipts/payments - sale/purchase of property and fixed assets -122 -127 net cash flow from investment activities -235 -361 caSh flow from financinG activitieS
investment activities includes cash flows for holdings in group companies and tangible fixed assets.
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 with respect to the hedging instrument that relates to the effective part of the hedging is recognised directly against equity, while gains and losses that relate to the ineffective part are recognised in the accounts in the profit and loss account immediately.
the pensioners’ surplus fund contains surplus premium reserve amounts allocated in respect of pensions in payment that are part of group pension policies.
The company maintains the following reserves: Reserve for unearned premium for own account concerns ongoing policies that are in force at the time the financial statements were closed and is intended to cover the contracts’ remaining risk period.
(additional statutory reserves and unrealised gains), and the investment risk of the portfolio in which the pensions assets are invested determines the price the customer pays for his or her return guarantee. return guarantees are priced on the basis of the risk the equity is exposed to. Group pension customers can choose an investment profile with a low proportion of equities, which normally results in a lower risk of losses and lower expected return. a larger proportion of equities will normally result in a higher expected return, but also a higher price for the return guarantee. higher returns will over time reduce the customer’s pension costs. the additional statutory reserves can only be used to cover deficient returns between zero and the guaranteed return for own contract. the insurance activities act stipulates the maximum size of additional statutory reserves. the insurance company bears all the downside risk, and must carry reserves against the policy if the buffer reserves are insufficient or unavailable.
financial instruments stated at amortised cost are assessed on the statement of financial position date to see whether or not there are objective indications that the financial asset or a group of financial assets have fallen in value. Changes in the debtors’ ability to pay, collateral/loan-to-asset value ratio and other business-related risk factors can affect the recognised write-downs.
05 insurance risk insurance is about protecting oneself against financial loss when events occur. these could be anything from damage to a car or theft in p&C insurance to disability, death or long life in life insurance.
Group contracts: • Group defined benefit pensions are guaranteed pension payments from a specified age for as long as the insured person lives. alternatively it can be agreed that the pension will end at a specified age. the product is offered in both the private and the public sectors. the cover includes retirement, disability and survivor pensions.
• Group one-year risk cover are guaranteed payments upon death or disability, and a waiver of premiums in the event of disability.
• Individual unit linked insurance are endowment insurance or allocated annuity in which the customer bears the financial risk.
for individual insurance, the premiums for life and long life cover are based on tariffs produced by insurance companies on the basis of their shared experience: namely t1984 for endowment insurance and r1963 for pensions insurance. disability premiums are based on the company’s own experience, and were last amended in 2002.
in the “international private equity and Venture Capital Valuation Guidelines” (september 2009 edition) or pursuant to fasb 157. most of the private equity funds report on a quarterly basis, while a few report less often. in those cases where storebrand has not received an updated valuation with respect to an investment from a fund by the time the annual financial statements are closed, the last valuation received is used and adjusted for cash flows and any significant market effects during the period from the last valuation up to the reporting date. these market effects are estimated on the basis of the type of valuations made of the companies in the underlying funds; the financial performance of relevant indexes, adjusted for estimated correlation between the relevant company and the relevant index.
Key assumptions for these factors will also be based on the mutual fund’s characteristics and quality. the specified composition of the abs/rmbs/Cmbs portfolio below is stated at fair value. the company’s valuation of asset backed securities is based on external sources. based on experience with procured tradeable prices from brokers, the company is of the opinion that reasonable alternative assumptions entail a valuation that could be 2-3 per cent higher or lower than that indicated by fair value.
non- observable assumptions 2009 assets lending to customers 758 758 bonds and other fixed-income securities 52,170 101,093 2,452 155,715 liabilities liabilities to financial institutions 6,841 6,841 deposits from and debt to customers 173 173 movements between quoted prices and observable assumptions
p&c insurance p&C insurance business encompasses the following companies: skadeforsikring as and storebrand helseforsikring as (50 percent stake). storebrand p&C
deposits from and due customers as % of gross lending 55% 51%
4 Statement concerning the effects of share-based remuneration agreements for the company and shareholders in accordance with the new guidelines for bonus entitlements in 2011 half of senior employees‘ net paid out bonus in 2012 must be spent on purchasing shares in storebrand asa at market prices with a 3 year lock-in period.
Currency differences from converting foreign units -3 -8 -222 -234 280 other changes -24 -24 1 Value of business-in-force, the difference between market value and carrying amount of the insurance liabilities in SPP. 2 NOK 13 million was classified as depreciation under operating costs.
Change in premium and claims reserves -966 -102 exchange rate changes -8 other changes -79 -21 37 real estate book value of investment properties 1
external valuations Valuations are obtained from external valuers for a representative selection of properties to verify the values calculated using the internal valuation model.
Office buildings (including parking and storage): notes to the finanCial statements of storebrand Group
the effective yield for each security is calculated using the observed market price. Calculated effective yields are weighted to give an average effective yield on the basis of each security’s share of the total interest rate sensitivity.
reclassification 2009 instruments included in the portfolio of loans and receivables are non-derivative financial assets that are not listed on an active market or subject to regular trading. the reclassification was carried out to attain a more appropriate return profile for the investments compared with the expected development in the pertinent insurance liabilities in storebrand life insurance.
hedging instrument/hedged item - cash flow contract/ nominal value carrying amount 1 booked contract/ nominal value carrying amount 1
NOK million assets liabilities assets liabilities booked underlying items 13,239 12,523 1 Carrying amount 31.12.
Carrying amount associated with financial liabilities 5,856 6,841 transferred financial assets consist of swap agreements with the state through the ministry of finance concerning the posting of financial collateral (see note 50). the swap agreements are entered into through auctions that are administrated by norges bank. in the swap arrangement, the state sells state treasury bills to the bank through a time/restricted swap for covered bonds. the bank can either keep the state treasury bill and receive payment from the state when the swap falls due for repayment, or it may sell the treasury bill in the market. When the bills become due within the term of the swap agreement, the bank must purchase new bills from the state at the price that is determined by the market price for treasury bills. this roll/over will be on/ going throughout the entire term of the agreement. upon expiry of the swap agreement, the bank is obligated to purchase the covered bonds back from the state at the same price that the state purchased them for. storebrand bank asa will receive the returns on the transferred covered bonds. all risk concerning the covered bonds continues to lie with storebrand bank asa and covered bonds are therefore not excluded.
NOK million 2010 2009 net premium income net income from financial assets -1 2 total income -1 2 insurance claims for own account 13 33 losses from sale of business -44 operating costs -6 -4 total costs before amortisation and write-downs -37 29
Group pre-tax profit -37 31 tax cost profit for the period -37 31
NOK million 2010 reinsurance share of gross insurance liabilities 23 bank deposits 50 total assets 73 paid in capital 27 retained earnings 9 total equity 36 insurance reserves - p&C insurance 26 other current liabilities 11 total equity and liabilities 73 cash flow analysis
this treatment can only be applied to income earned by subsidiaries during storebrand’s ownership. if the opposite occurs, it is recognised as an equity transaction. this means that the ownership interest in the subsidiary is reduced by the received dividend or group contribution.
notes to the finanCial statements of storebrand asa 04 pensions costs and pension liabilities employees are insured through a defined benefit pension equivalent to 70 per cent of pensionable salary at the time of retirement. the ordinary retirement age is 65. staff pensions are provided by a group pension scheme with storebrand livsforsikring as. pension payments from this scheme come into effect from the pension age, which is 67 for employees and 65 for underwriters. pension payments to employees between 65 and 67 and pensions linked to salaries of more than 12 times the national insurance basic amount (G) are paid directly by the company. a guarantee has been pledged for earned pensions for salaries of more than 12 G upon retirement before 65 years old. as per 31 december 2010, 12 G amounts to noK 907,692.
Share premium other equity equity 2010 2009NOK million profit for the year 502 502 568 pension experience adjustments 1 -414 -414 allocated dividend -491 -491 1 With effect from 1 January 2010 Storebrand ASA amended its policies such that actuarial gains and losses are recognised directly against equity. 2 449,909,891 shares with a nominal value of NOK 5. 3 In 2010, 108,628 of our own shares were bought back, while 329,539 shares were sold to our own employees.
2 Storebrand has committed NOK 198 million to microfinance, NOK 149 million of which was invested as of 31 December 2010. 3 Concerns the pensions and life insurance market in Norway, based on customer satisfaction survey (Norsk kundebarometer) performed by BI Norwegian School of Management. 4 2010 result includes ordinary complaints (30% within 3 weeks) and health assessments (75% within 3 weeks). 5 Changed from 20 to 30 seconds in 2010 due to new switchboard system. 6 Employee satisfaction survey (MTI), carried out by Confirmit.
storebrand Group Companies reg. org. number interest storebrand holding ab 100.0%
Life insurance offering an investment choice whereby the customer can influence the level of risk and return by selecting in which funds assets are to be invested. Applies to both individual policies and group defined contribution pensions.
Contracts with guaranteed payments for as long as the insured person lives. Alternatively it can be agreed that the pension will end at a specified age.
the company changes its name to storebrand asa and establishes storebrand bank as.
storebrand, skandia and pohjola consolidate their p&C insurance activities in the new nordic, swedish registered company, if skadeförsäkring ab. storebrand sells its stake five years later.