To achieve the goals we have set, we must understand the needs of our customers and ensure good interaction between the digital touchpoints and human interactions. As an organisation, we need to be even more agile, keep adapting and developing new solutions, and have a relentless focus on our customers. To support an agile way of working, we created several cross-functional teams with substantial freedom of action. These teams define, prioritise and develop digital solutions and services. In 2018, we also entered into several fintech collaborations, including as part owner and partner of the savings app Dreams. Through an understanding of behavioural psychology, Dreams makes digital savings easy and fun, and they were awarded as one of the 100 top fin-tech companies in the world in 2018.
2018 was a good year. Storebrand delivered great results and took a step along the road to becoming a world-class savings group. We completed a successful integration of SKAGEN and Silver into the Group, explored and refined our sustainable investments, and entered into close cooperation with the fintech company Dreams. Our financial solidity was strengthened and there was an increase in the dividends distributed to shareholders. At the same time, the financial markets experienced turbulence at the end of the year, in a somewhat uncertain macroeconomic situation.
The entire Storebrand portfolio is regularly screened according to our sustainability criteria. By the end of 2018, 171 companies were excluded from the Storebrand investment universe. During the past year, we have had an owner dialogue with 314 companies. We have the industry’s strictest policy for the exclusion of coal, and we are now tightening our policy further with the goal of excluding any company that has more than 5 per cent of their earnings from coal 1) by 2026.
In 2018, we also launched three custom investment portfolios, that we called “Wave”. Wave will only invest in companies that contribute to solving the greatest challenges of our time in the areas of renewable energy, equality and cities of the future. Going forward, we will continue to seek new investment opportunities that contribute to sustainable solutions. At the same time, we will exercise active ownership through voting and dialogue with the companies in which we invest. Our aim is to influence them to reduce their CO2 emissions from their own activities, among other things. Sustainability is not just about corporate social responsibility, it’s also good business. Money placed with us, either in savings and pension products, insurance or the bank, should be working for our customers, and it should also be working for the planet and society. It should be Good Money.
“Our driving force is to give our customers a future to look forward to by helping them secure their current and future finances.”
• Storebrand acquired the remaining 9 per cent of the shares in SKAGEN AS and now owns the company wholly.
• Storebrand won the tender competition after Silver was placed under public administration in 2017. 16,000 customers with 24,500 contracts and NOK10 billion in assets under management were transferred to Storebrand.
• SPP launched the pension robot Gajda, a digital tool that guides the employees through the various pension elements and helps them make the right decision based on their life situation.
• Google Pay: Storebrand launched Google Pay for easy, fast and secure mobile payments.
Important notice: This document may contain forward-looking statements. By their nature, forward-looking statements involve risk and uncertainty because they relate to future events and circumstances that may be beyond the Storebrand Group’s control. As a result, the Storebrand Group’s actual future financial condition, performance and results may differ materially from the plans, goals and expectations set forth in these forward-looking statements. Important factors that may cause such a difference for the Storebrand Group include, but are not limited to: (i) the macroeconomic development, (ii) change in the competitive climate, (iii) change in the regulatory environment and other government actions and (iv) market related risks such as changes in equity markets, interest rates and exchange rates, and the performance of financial markets generally. The Storebrand Group assumes no responsibility to update any of the forward-looking statements contained in this document or any other forward-looking statements it may make.
Introduction 2 Facts and figures 2018 4 Letter from the Group Chief Executive Officer 8 Important events in 2018 1. This is Storebrand 14 Storebrand at a glance 15 Organisation 17 Executive mangament 20 A sustainable strategy 22 Supporting the UN Sustainable Development Goals 2. Financial Capital and our Investment Universe 26 Provide a return to the owners 27 A driving force for sustainable investments 30 Storebrand’s climate risk work 32 An active owner 34 Key performance indicators 3. Customers and Community Relations 38 Lifelong savings 40 Engaging, relevant and responsible advisory services 42 Digital trust 43 Simple and digital customer experiences 44 Key performance indicators 4. People and Systems 48 A culture for learning 49 Committed and courageous employees 50 Diversity and equal opportunities 52 Good environmental and working conditions throughout the entire value chain 53 Order in our own house 54 Key performance indicators People and Systems 5. Shareholder matters 58 Shareholder matters 6. Governance 62 Board of Directors Storebrand ASA 65 Committees 66 Companies in the Storebrand Group 68 Corporate governance 7. Directors’ Report 78 Strategic Highlights 82 Group financial results for 2018 88 Capital situation, rating and risk 91 Regulatory changes 95 Organisation, working environment and expertise 96 Corporate governance 97 Official financial statment of Storebrand ASA
8. Annual Accounts and Notes 100 Financial statements and Notes, Storebrand Group 185 Financial Statements and Notes, Storebrand ASA 203 Auditor’s Report 9. Sustainability Data 212 Definitions key performance indicators 214 Materiality analysis and GRI index 222 Auditor’s Report on Sustainability
This is Storebrand We create a future to look forward to, by delivering simple and sustainable pensions and savings.
Our aim is to work for a future that we can look forward to, through delivering better pensions – simple and sustainable. We have been a part of people’s lives for over 250 years. Today, we are Norway’s largest private asset manager, with over NOK 700 billion invested in companies throughout the world. When more than 1.8 million Norwegians and Swedes place their savings with us , it comes with some clear obligations. We aim to manage our customers´ money profitably, so that their dream of a good retirement can be fulfilled. However, money should be managed sustainably, so that future generations have a future to look forward to. In the area of sustainable investments, we will be a courageous pathfinder and a role model for other investors.
Our vision, Recommended by our customers, is simple and gives a clear indication that the satisfaction of our customers is the most important goal for us.
We offer pension, savings, insurance and banking products to private individuals, businesses and public enterprises.
“Our vision is simple and gives a clear indication that the satisfaction of our customers is the most important goal for us”.
2) Adjusted for extraordinary tax income as per stock exchange release 15 January 2019.
Asset Management • NOK 707bn in AuM of which 33% external assets • 100% of investments subject to sustainability screening
Savings consist of products that encompass pension savings without interest rate guarantees. This includes defined contribution pensions in Norway and Sweden, asset management and banking products for private individuals.
Guaranteed Pension consists of products that include long-term savings to a pension, where customers have a guaranteed return or performance. The area includes defined benefit pensions in Norway and Sweden, paid-up policies and individual capital and pension insurance.
Energy/Shipping, Handelsbanken Markets 1995–1997: Partner, Marsoft Capital 1992–1995: Head of Research, Nordea Markets 1990–1991: Junior Consultant,
Number of shares as of 31 December 2018: SECTION 1. THIS IS STOREBRAND
A sustainable strategy tude of committed and courageous employees, who will find the best solutions for our customers and make bold choices that support a sustainable business model.
The three focus areas are described in the following sections, with the approach, goals, initiatives and results for the related issues. The key performance indicators that are stated for each focus area in the annual report are reported to the executive management on a continuing basis and to the Board semi-annually.
In 2018, Storebrand developed three overall strategic goals: A leading position in occupational pensions, a unique positioning in the private savings market and an asset manager with strong competitive advantages and good growth opportunities. Broad insurance offerings to both the retail and corporate markets are aimed at supporting our strategic goals.
Our employees are our most important resource for delivering on our strategy. Continuous learning to understand the needs of our customers is required. We want to have a multi-
Our three main focus areas and the associated issues are: • Financial capital and our investment universe –
• Our people and systems – people first, digital always - A culture for learning - Committed and courageous employees - Diversity and equal opportunities - Good environmental and working condi- tions throughout the entire value chain
• Lifelong savings • Engaging, relevant and responsible advisory services • Digital trust • Simple and digital customer experiences
• A culture for learning • Committed and courageous employees • Diversity and equal opportunities • Good environmental and working conditions throughout the entire value chain
An asset manager with strong competitive advantages and good growth opportunities
The materiality analysis and focus areas are dealt with by the executive management and the Board, and they form the basis for our integrated reporting. The annual report has been prepared in accordance with the Global Reporting Initiative (GRI) standards. Read more about the materiality analysis in the Other Content section.
Storebrand has sustainability principles that sum up how sustainability is an integral part of our overall goals. The principles were updated in 2018 and encompass all parts of Storebrand’s activities, including investments, product development, procurement, employee follow-up and internal operations.
• Our processes and decisions are based on sustainability – from the Board and management, who have the ultimate responsibility, to each employee who promotes sustainability in their own area.
• We are transparent about our work and our sustainability results.
Storebrand has identified eight sustainability goals (3, 5, 6, 7, 8, 11, 12, 13) that we have the greatest impact on through our investment activities. Several of these are relevant to the three focus areas we have defined as essential to our business. We use these sustainability goals actively in our asset management, through a special sustainability rating, for example.4)
4) Read more about how sustainability goals are implemented in our investment universe in Section 2.
5) Read more about our specific initiatives to ensure diversity and equality in Section 4.
Financial Capital and Investment Universe Storebrand will deliver profitable growth by building a world-class savings group, supported by insurance, through simple and sustainable solutions.
26 Provide a return to the owners 27 A driving force for sustainable investments 29 Zero coal by 2026 30 Storebrand’s climate risk work 32 An active owner 34 Key performance indicators
Approach Storebrand shall deliver profitable growth. The guaranteed portfolios shall be managed in a capital-efficient manner and free up capital for the shareholders over time. Occupational pension is a core product in both Norway and Sweden. In Norway, employees and former employees of companies that have a pension agreement with Storebrand are offered attractive solutions in the retail market. Our vision is simple: We are successful when our customers recommend us.
• Grow by more than ten per cent in the Swedish occupational pensions market
Results The results are discussed more fully in the Directors’ Report. Storebrand delivered a return on equity of 13.7 per cent, and the Board proposes to the General Meeting an ordinary dividend of NOK 1,402 million, corresponding to NOK 3 per share for 2018. Operating income grew by 13 per cent, driven by 8 per cent premium growth from collective pension agreements in Norway and Sweden.
Why A long-term perspective is key, both to ensuring sustainable development and good management of the customers’ pension assets. That is why we established a dedicated sustainability team for asset management already in 1995. Sustainability has been integral to investment decisions since then.
Approach Our portfolio managers have good tools for identifying risk and opportunities and making good, sustainable investment decisions. All companies in Storebrand’s investment portfolio must satisfy the minimum requirements for human rights and international law, corruption and financial crime, climate and environmental damage, controversial weapons and tobacco. We call this the Storebrand Standard. It applies to all the funds and pension assets and shall ensure that customers’ money is invested in companies that do not violate international norms. In case of serious violations of the Storebrand Standard, we use our role as the owner to make improvements in the dialogue with the company. If our dialogue is not successful, a company can be excluded from our investments.6)
Storebrand has developed a rating that defines how sustainable companies are. It helps us assess the company’s environmental, social and management factors. The tool makes it possible to invest in companies that perform better with respect to sustainability. We also have a number of additional sustainability criteria. In this way, we transfer money flows from activities with a negative influence to companies that participate in the transformation to a sustainable society.
Storebrand supports and participates in a number of sustainability initiatives globally.7)
Goals and ambitions Our ambition is to put capital to work to finance socially beneficial, sustainable solutions and to reduce exposure to activities that impact society negatively. Therefore, all our investments must satisfy the requirements of the Storebrand Standard. In addition, we clearly focus on companies with core business activities that produce goods or services that contribute directly to achieving sustainable social development. We also aim to strengthen our commitment to fossil-free fund solutions.
7) Read more about what initiatives we support and participate in “About Storebrand”.
Storebrand has been a pioneer in developing fossil-free funds, which we started with in 2016 and expanded in 2017. In 2018, our Swedish branch, SPP, launched SPP Global Multifactor Plus, a fossil-free factor fund. SPP also launched two other fossil-free fund solutions in 2018, in addition to relaunching SPP Global Solutions.
We also implemented several initiatives to strengthen our sustainability analyses, and, among other things, focused on water risk in our investments (UN Sustainable Development
Goal Number 6), which resulted in a report in collaboration with Norwegian Church Aid. In addition, we have formulated a special investment policy for deforestation, which encompasses soy, palm oil and cattle farming and will be launched in 2019.
Results Our results with respect to the goals and ambitions mentioned above are summarised under key figures. This shows that we had excluded 171 companies from our investment universe as of the fourth quarter of 2018, because they violated our sustainability standard. The investments through Storebrand’s and SPP’s funds have a total carbon footprint of 21.8 tonnes of CO2 per NOK million of revenue.8) This is lower than the funds’ comparable indexes, which showed 31.8 tonnes in equivalent units of measurement. In total, 23 per cent of our fund portfolio in SPP and Storebrand is fossil free.
Nearly 5 per cent of assets under management in Storebrand and SPPs fund portfolios is invested in companies that contribute specifically to sustainable development. 9)
9) Defined as companies in which the core business activities are to produce goods or services that contribute to achieving sustainable social development.
The financial industry must stop financing coal power if the world is to achieve the global climate targets. Together with other investors and companies in Europe, Storebrand will make a focused effort to achieve a broad phase-out of coal, gradually excluding coal companies from the portfolios, with a total phase-out by 2026.
Climate risk has two dimensions. Storebrand takes climate risk into consideration on behalf of our shareholders because it could impact our earnings and their return on investment. We also take it into consideration on behalf of our customers because it can affect their returns and payouts.
Asset management Asset management’s largest financial climate risk is believed to lie in the transition to a low-emission society, where climate regulations, more rigorous emission requirements, a changed cost picture and market preferences may affect the value of investments. Our three most important initiatives to reduce climate risk are: • Pilot project under the auspices of UNEP FI “Implementing the TFCD10) Recommendations for Investors”, in which Storebrand, as one of 20 investors, participates to further develop standardised reporting in accordance with the TCFD Framework.
• Stress testing the portfolios: Storebrand Asset Management stress tested its investments through the 2 Degrees Investing Initiative scenario analysis tool PACTA.11) The transitional risk was mapped through exposure to high and low carbon technologies in the most important sectors, including fossil fuels and electrification in the transport sector. The results indicate how our investments are influenced by different scenarios, compared with reference portfolios.
• Company dialogue: Storebrand has participated in a number of meetings with companies we have invested in to gain knowledge of how climate-related data can be used for investment analysis. An important goal has been to understand the challenges and opportunities presented by the TCFD framework, including which data can be easily shared.
Property portfolio Storebrand has a substantial property portfolio that may be impacted by extreme weather and long-term weather pattern changes, as well as by new requirements for energy and climate efficiency. A survey of physical risk, transitional risk and scenario analyses for existing property investments is scheduled for completion in 2019, using the modelling tool that has been developed by UNEP FI’s pilot project. Property investments are considered to be well-protected against transitional risk due to stricter energy requirements and other climate-related regulations. The following risk mitigation measures have been implemented: • Energy/climate efficiency. 30 per cent of the managed property portfolio is certified to meet environmental requirements.The target is 74 per cent in 2025. Continuous efficiency improvements are ensured through operational optimisation initiatives. Financial performance is quantified and documented. Our property investments are rated by GRESB (The Global property Sustainability Benchmark) in four different portfolios that are ranked first, second, third and fourth, respectively, in the Nordic region.
11) The tool is designed for financial institutions that want to measure their investments against a two-degree scenario, in cooperation with the Principles for Responsible Investment (PRI).
• Reduction of investments in coal (down 5 per cent every second year)
• Number of active climate-related inquiries to companies we invest in
Why We believe that companies with a sustainable business model are the ones best equipped to both provide longterm returns to their owners and to manage the greatest challenges of our time. Therefore, we want to influence the companies we invest in to develop in a more sustainable direction. We do this through active ownership, among other things.
Storebrand also manages direct property investments in Norway and Sweden totalling NOK 43 billion, which account for 6 per cent of our investment portfolio. We place stringent requirements on how the properties we manage perform, and actively seek to make improvements.
Active ownership is also about visiting and following up the companies we have invested in. Last year, we visited palm oil plantations in Indonesia to discuss palm oil production, deforestation, working conditions and the living conditions of the local population. In South Korea, we discussed working conditions and anti-corruption initiatives with two different companies.
In 2018, a revised corporate policy for sustainable investments was established for the entire group – including SKAGEN, SPP and Delphi, effective as of 1 January, 2019. The most important change is a reinforcement of how we exercise active ownership. In addition to keeping a list of the companies we exclude, a list of companies we have under observation was also created. For the companies on the observation list, we retain our existing holdings, while we make an active effort to achieve real changes in how they operate.
Based on our new coal investment policy, we took a public stance in 2018 against a German energy company, requiring that they transform their energy portfolio away from coal. Companies that have more than five per cent of their business activities in coal will be excluded from our portfolio by 2026.15)
Since 2013, 64 companies have been excluded from our investment universe due to their association with the coal industry. Another five companies will be excluded in 2020 if they do not change their practices.
The share of environmentally classified property investments has increased from 23 per cent in 2016, to 26 per cent in 2017 and 30 per cent of the AUM in 2018. We work continuously with environmental management and investment in initiatives to optimise the environmental performance of the properties we manage, and we have reduced both energy and water consumption by nearly 30 per cent through active ownership since 2011. 16)
Percentage of AuM screened for sustainability criteria 100% 100% 100% 100% 100%
Number/share of General Meetings at which the promotion of Storebrand ’s sustainability criteria has been voted on NEW NEW 530/41,6% N/A N/A
Tonnes CO2 emissions per m2, property management 8.3 8.2 7.4 7.3 5.8
See more detailed definitions in section 9 Sustainability data, page 212
II) Pay-out ratio is adjusted for extraordinary tax income as per stock exchange release 15 January 2019
Customer and Community Relations We encourage customers to take charge of their own pensions and savings. We provide relevant and responsible advisory services and products for savings, as well as insurance and banking.
Why Pension savings represent Storebrand’s core service offerings. (Helping customers make the right financial choices is an important task.) In order to ensure a viable retirement, customers must be aware of their future financial status and plan accordingly.
Customer seminars, easy access to qualified advisers and understandable communications are important elements in our efforts to become a preferred savings group.
Initiatives In 2018, our digital calculation tool My Pension Figure played a key role in our efforts to encourage customers to take charge of their own pension. More than 80 per cent of all customers who establish a savings contract with Storebrand have checked their expected pension figure in advance. An oversized piggy bank was used as a symbol for pension money in a 2018 marketing campaign that scored 121 per cent against a Penetrace benchmark composed of other campaigns in our industry.
To make the tool more relevant and enhance the customer experience of My Pension Figure we made some technical adjustments and improvements in 2018. Among them was an improvement to the digital welcoming process for
customers who checked their pension figure, and 2,500 customers were followed up by our pension advisers during the campaign period.
Through the various phases of working life, to the point of retirement, we work to provide our customers with an overview, necessary insight and understanding of their own pension and insurance agreements.
Approach The starting point for all customer contact is the principle of “the customer first”. This is reflected in our newly established service standards (in order of priority): • Trustworthy – I keep what I promise and I am professional
“Our ambition is to become the industry leader in customer satisfaction.”
Our authorisation and qualification requirements shall be reflected in our digital interfaces with our customers. Storebrand supports Financial Services Industry in its work to develop a quality standard for electronic advisory services.
Regardless of whether the contact is digital or physical, Storebrand ’s advice should be based on the customer’s needs and life situation. In the area of savings, our ambition is for 75 per cent of all our advisers to be authorised at any given time. 17)
Initiatives The interaction between digital and physical customer service is becoming increasingly important. Teams dedicated to digital and physical customer service work together to define, prioritise and develop initiatives and focus areas. The development and further refinement of My Pension Figure, as well as the development of a new purchase solution for IPS, are examples of such joint initiatives.
In 2018, all customer advisers in the corporate and retail markets were given an introduction to the Group’s newly established service standards. All new advisers are authorised, and 14 savings and investment advisers received AFR authorisation in 2018. In addition, ten new advisers received
Results In 2018, we improved customer satisfaction related to advisory services measured by the NPS scores, from 41.5 per cent in 2017 to 46.1 per cent in 2018, 3.4 percentage points higher than the target for the year. At the same time, we received a top ranking in the Norwegian Customer Barometer’s annual survey of customer satisfaction in the corporate market.
With a market share of 19 per cent in 2018, Storebrand maintained its position as one of the market leaders in Individual Pension Savings (IPS) in strong competition with the industry at large.
18) The turnover among the positions explains why our ambition is not 100 per cent.
Why As managers of our customers’ insurance, finances and future financial stability, we rely on trust to succeed.
Intelligent use of information in general, and personal data in particular, is critical in a digital world where office branches and physical customer meetings no longer exist. This strengthens our need to invest in digital trust. Our customers must be able to trust that we will handle their personal data properly and in accordance with their wishes. At the same time, they should experience that sharing personal information with us creates value for them.
To document and control the effectiveness of our security efforts, we have implemented an internal control system throughout the entire value chain. Through this system, we stipulate requirements, verify and continuously improve security throughout the Group, internally, with our partners and in our customer solutions.
Goals and ambitions Our ambition is to engage our customers and build longterm relationships through a good and transparent digital dialogue. At the same time, we take responsibility for safeguarding our customers’ rights under the Personal Data Act, and we take their information security very seriously. Security and privacy training are mandatory for all employees, and this is followed up by both managers and the Group’s compliance function.
We actively seek to improve employee security skills and awareness through our mandatory security culture programme. The program is mandatory for all managers and employees, including the Group Chief Executive Officer. To ensure that our systems are robust, we have installed several layers in our security architecture. If a hole is detected in one of the layers, the next layer will provide protection until we have corrected the first. We conduct security tests and cyber risk assessments, with subsequent risk management measures as part of our daily operations.
Digital trust 20) A customer and process-related incident is defined as an undesired situation that has occurred as a result of a failure of internal processes, operational disruptions, human error, violation of internal/external regulations or external matters. The consequences may be financial loss or gain, extra work, loss of reputation and/or sanctions related to the violation of internal/external regulations.
Approach When digital business development was established as a separate commercial group unit in 2017, Storebrand chose to integrate technology expertise as part of our business development and operations, erasing the historical division between “business” and “IT”.
Digital Business Development is an interdisciplinary organisation, where business developers, pricing and product experts, IT architects, developers and interaction designers work together to improve customer experiences and solve customer problems by means of technology and digital services.
Initiatives In 2018, major boosts were seen in many areas, all of which were provided by team-based work methods.
Both corporate customers and institutional customers of Storebrand Asset Management received brand new portal solutions.
For the retail market, we developed automated loan applications, optimised digital sales and purchase processes in all product areas, and we introduced major improvements in self-service and advisory service solutions for individual pension and savings customers.
Digital Business Development delivered several initiatives based on the exploration of new technologies, partnerships and business opportunities. In 2018, we contributed, among other things, to thematic investments based on sustainability goals (the savings solution Wave), automation of chat (chatbots), changing the savings habits of young people through the Dreams savings app, and digital services for pension advice for customers approaching retirement age (Soon a Pensioner).
Results from the Net Promotor System (NPS), in which the customer gives a score from 0 to 10, with 10 as the best, at the beginning of 2018 showed that 25 per cent more scored our solutions 0–6, rather than 9-10. By the end of 2018, just as many gave a score of 9–10 as those who gave a score of 6 or lower, in line with our target for the year.
Key performance indicators See more detailed definitions in section 9 Sustainability data, page 212
Our operations in Sweden, SPP, launched Gajda to help companies shed light on occupational pensions as a benefit for their employees, and to help them take charge of important choices for their occupational pensions. Gajda has been developed based on a customer-driven process that combines technology and finance to make it as simple and enjoyable as possible to understand pensions.
During its first year on the market, Gajda was awarded the National Government Employee Pensions Board’s (SPV’s) prestigious prize, Guldkanten, for the best pension information in 2018. The service also contributed to attracting the customers and positive feedback. At the request of the customers, Gajda now provides a broader offering to help even more companies engage their employees in their occupational pensions. The goal is to reach 80,000 customers by 2020.
GDPR courses employees have started (number/per cent) NEW NEW 1488/89% N/A N/A
Net Promoter System Sweden Corporate Market (priority enterprises) #8 Top 3 #7 Top 3 Top 3
Expected pension as a percentage of salary (My Pension Figure) 58% Increase 59% Increase Increase
Cases registered/handled by the Financial Complaints Board NEW NEW 135 N/A N/A
Sustainable Brand Index Sweden (B2B in the industry) NEW Position 1/6 1 1
People and Systems “People first, digital always” is Storebrand’s HR strategy for the period 2017–2020. The strategy is designed to ensure that our organisation is capable of continuous change.
Goals and ambitions Our ambition is to build a learning culture marked by innovation, responsibility for one’s own learning and feedback to ensure continuous improvement. At Storebrand, all employees shall be able to develop in line with the Company ’s needs. In 2019 we will facilitate additional digital learning resources that strengthen the employees’ opportunity to take responsibility for their own learning.
Initiatives In 2018, we launched a new digital learning platform, Campus Storebrand to make mission-critical knowledge available. Training for the new General Data Protection Regulation (GDPR) was our first major initiative. We also used the platform for training courses in sales and customer service for employees, and on employee days under the theme “Learning is the Creation of Value”.
To simplify and digitalise our HR processes, we introduced a new HR system, Workday, in March 2018. The system encompasses security solutions and access control and helps Storebrand comply with the new privacy protection rules.
We also completed our first digital programme for middle management, Storebrand Leadership Weekly, with more than 20 middle managers from Sweden and Norway participating. The topic of the programme was trust management. We continued the rollout of work method “Build, Measure, Learn” in large parts of the organisation. This work method entails that we test, try and fail and get customer feedback before we re-test and continue to build.
Results In 2018, we offered 115 courses via the Campus Storebrand digital learning platform. A total of 1,852 people attended one or more courses and completed a total of 5,636 hours of learning, with an average of 3.1 hours per person. By the end of 2018, more than 80 per cent of our employees had completed training for the new Personal Data Act. 23)
Our new HR system offers a digital candidate experience to everyone who seeks employment at Storebrand. The application and recruitment process are fully digitalised, from entering an application into the system until new employees sign their employment contract via a cell phone or a computer.
All participants at Storebrand Leadership Weekly participated in the research project “Technology-based Management Development”. A 360-degree evaluation of managers before and after the programme documented a positive development in the categories of “management” and “management performance”, which encompasses the productivity, efficiency and satisfaction of employees.
Employee surveys are conducted regularly through the Peakon tool to measure well-being, commitment to work tasks, perception of sustainability and the experience of self-determination. The surveys were introduced throughout the Group in 2018, and results are followed up by the Group management on a regular basis.
Openness is a prerequisite for motivation, trust and confidence. All employees shall experience that they can discuss issues with management and others in the Group. Storebrand has its own ethical guidelines.
Results On average, 87 per cent of the employees responded to pulse measurements through Peakon at least once during the last three months of 2018. Peakon was introduced throughout the Group in August 2018.
In 2018, for the second consecutive year, ten employees were given an opportunity to be a conver- sation partner and adviser to a student with a minority language background. Through monthly meetings at Storebrand and strength-based learning (Appreciative Enquiry), the students gained insight into Norwegian working life, help in developing themselves and advice on schools and working life.
The mentor programme is a collaboration between Storebrand and the non-profit organisation Catalysts, which is headed by Lisa Cooper. Storebrand partici- pated as the first business partner in 2017. The objective is to prevent students from dropping out of high school through inclusion in the local community.
Since 2017, we have worked actively to ensure gender equality, through, among things, the programme FiftyFifty, targeted recruitment measures as well as by nominating an equal number of women and men to executive positions and management development programmes. We also work actively to maintain a good gender balance among key persons who act on behalf of the Company. We intend to have a recruitment process that is as transparent and inclusive as possible. We have a zero-tolerance policy against harassment and discrimination, and we strive for equal treatment and equal opportunities in all our recruitment and development processes.
Goals and ambitions We aim to offer the best candidate journey, so that Storebrand is considered an attractive workplace for courageous pathfinders. We will continue the development of our own employees and promote individual development of management skills among women.
Initiatives Throughout 2018, we improved our communication with potential new employees to make it as gender neutral as possible. There shall be (at least) one female and one male final candidate for recruitment to management positions. We expanded the use of social media to promote vacant positions.
Every year, we nominate men and women on a 50/50 basis for our management programmes, and in cooperation with our elected representatives, we survey and analyse salary levels for various positions in order to eliminate differences based on gender.
Results In Norway, 37 per cent of our managers are women, while the percentage at SPP in Sweden is 48 per cent. Among all employees, 46 per cent are women in Norway and 53 per cent are women in Sweden.
Absence due to illness has been low and stable for several years. The level was 3 per cent in 2018. Absence due to illness in the Norwegian organisation was 2.7 per cent, while it was 3.3 per cent in the Swedish organisation.
In 2018, Storebrand took a solid second place on the She Index, an index that shows how well Norwegian companies are working on gender balance.
The goal of the index is to show the development of gender balance in business over time. The index makes it possible for companies to compare their own progress with others.
**) Based on Hay Grade 13-20. For Hay Grade definition, see page 212.
24) 1,667 in Storebrand Norway and SPP in Sweden, as well as 131 in SKAGEN.
Why At Storebrand, sustainability is integrated into core business activities. This means that the financial, social and environmental aspects are assessed before we make decisions about purchases. Procurement is one of several areas that can directly or indirectly affect Storebrand’s sustainability performance.
Approach Storebrand stipulates requirements for sustainability, corporate social responsibility, environmental work and ethics, both internally and for all of our partners and suppliers. In addition to following internal procurement rules, all procurement should help reduce the environmental and climate impact of the goods and services procured.
Storebrand is a member of the United Nations Global Compact. Suppliers and subcontractors must demonstrate that they follow the same minimum standard for human rights, labour rights and corruption prevention. They also must document the life cycle cost and environmental properties of their products. The supplier shall have good internal ethical guidelines and should observe the Guidelines of the Initiative for Ethical Trade or the social accountability/corporate social responsibility standard (SA 8000).
Good environmental and working conditions throughout the entire value chain outsourcing (offshoring), claims settlement (cars and property ), as well as property management in general.
Goals and ambitions The Group shall not use suppliers or products that violate international agreements, national legislation or internal policies. Storebrand shall contribute through its own business and procurement activities to sustainable development and to ensuring that human rights and labour laws are not violated. Our ambition for 2018 was to increase the share of environmentally certified 26) procurement to 40 per cent, and up to 50 per cent in 2025.
All major new suppliers (procurement of over NOK 1 million) are assessed on the basis of social and environmental criteria.
Money Laundering, Terrorist Financing and Economic Crime”, “Guidelines for Dealing with Conflicts of Interest”, “Event Guidelines”, “Governing Document for Information Security” and the “Governing Document for the Processing of Personal Data”.
Storebrand aims to be a courageous pathfinder in the area of sustainability. This means that we want to reduce and shed light on the carbon footprint of our own business activities.
Storebrand also aims to be transparent. We are a member of Finance Norway, the trade organisation for banks and insurance companies. Storebrand has a direct dialogue with the authorities and political parties concerning regulatory issues. There is no culture in Norway of financial contributions from listed companies to political parties, and Storebrand does not make any such contributions.
Key performance indicators Result 2017 Goal 2018 Result 2018 Goal 2020 Goal 2025
Tonnes of CO2 emissions per full-time equivalent 0.71 0.68 0.72 0.66 0.61
Paper consumption, head offices, kg per full-time employee II) 50 52 37 40 32
Scope 1 per employee (tonnes of CO2 per employee) NEW NEW 0 TBD TBD
I) The increase in 2018 is probably lower, as the figures in 2017 was underreported
II) Copy paper 2018 was reduced due to surplus stock. Some increase is to be expected in 2019.
Number (share) of women at executive levels 1–3 50 % 25 (44%) 50% 50%
Trading volume for shares in storebrand In 2018, 445 million shares were traded, compared with 427 million in 2017. The trading volume in monetary terms was NOK 30,447 million in 2018, up from NOK 25,359 million in 2017. As measured in NOK, Storebrand was the 11th-most traded stock on the Oslo Stock Exchange in 2018. In relation to the average total number of shares, the turnover rate for shares in Storebrand was 95 per cent.
Share price performance Shares in Storebrand yielded a total return (including dividends) of -4.22 per cent through 2018. In the corresponding period, the Oslo Stock Exchange’s OSEBX Index ended at -1.84 per cent, whereas the European Insurance Index Beinsur yielded a total return of -5.32 per cent (NOK) for the corresponding period.
Dividend policy Storebrand’s goal is to pay a dividend of more than 50 per cent of the group profit after tax. The ambition of the Board is to pay an ordinary dividend per share of at least the same nominal level as in the previous year. Normally, dividends are paid when there is a sustainable solvency margin of more than 150 per cent. If the solvency margin is over 180 per cent, the Board’s intention is to propose an extra- ordinary dividend or buyback of shares.
Share purchase scheme for employees Every year since 1996, Storebrand ASA has given its employees an opportunity to purchase shares in the Company through a share purchase scheme. The purpose of the scheme is to involve the employees more closely in the Company ’s value creation. In 2018, each employee was given the opportunity to buy shares in Storebrand. 787 employees, around 45 per cent of the employees, participated and subscribed for a total of 542,532 shares.
Earnings per ordinary share (NOK) 7.89 5.28 4.73 2.63 4.61 4.41
Dividend per ordinary share (NOK) 3.0 2.1 1.55 0 0 0
Governance 62 Board of Directors Storebrand ASA 65 Committees 66 Companies in the Storebrand Group 68 Corporate Governance
The management of the Storebrand Group belongs under the Board. This means, among other things, that the Board will provide for a proper organisation of the business and establish plans, budgets and guidelines. The Board oversees the management and keeps abreast of the Storebrand Group’s financial position. In addition, the Board ensures that business activities, accounting and asset management are subject to proper scrutiny. All directors are independent of significant business associates. All shareholder-elected directors are independent of executive personnel.
The Board has appointed three subcommittees: The Compensation Committee, the Audit Committee and the Risk Committee.
Top Manager Programme IMD, BI Norwegian Business School and Management in Lund
Executive Vice President of DNB, as well as various managerial positions in the same group (1985–2013)
Director and Chairman of the Audit Committee at Norske Skog ASA
Deputy Director General and Director General at the Ministry of Finance
Audit Committee Chairman Karin Bing Orgland Members Martin Skancke Heidi Storruste (Employee-elected)
Nomination Committee Chairman Per Otto Dyb Members Leiv Askvig Nils Halvard Bastiansen Margareth Øvrum
2) Storebrand ASA owns 25.1 per cent and Storebrand’s total ownership interest is 100 per cent for AS Værdalsbruket.
Good corporate governance is important to ensure that an enterprise can achieve its defined goals, including best possible utilisation of resources and good value creation. The Storebrand Group (hereinafter referred to as Storebrand ) works continuously on improving both the overall decision-making processes and the day-to-day management of the company.
Storebrand’s corporate governance principles have been laid down in accordance with the Norwegian Code of Practice for Corporate Governance. The management and Board of Directors of Storebrand ASA (hereafter referred to as the Board) conduct an annual review of Storebrand’s adopted corporate governance policies and compliance therewith. Storebrand reports in accordance with section 3-3b of the Norwegian Accounting Act and the Norwegian Code of Practice for Corporate Governance.
Storebrand publishes an integrated report that deals with the financial, environmental and social conditions and corporate governance that are the most important to Storebrand. The materiality analysis is discussed in the annual report.
The market is kept updated on Storebrand’s goals, strategies and creation of value through quarterly performance presentations and other thematic presentations. Read more about the Company’s goals and main strategies in the Directors’ Report under the heading Strategic highlights.
For more than 20 years, Storebrand has been one of the best companies in sustainable investments, taking an active position on how both the customers and their own funds are invested. Storebrand believes that companies that integrate environmental, social and governance considerations in their business activities reduce risk and create new opportunities for the business activities and capital owners. Storebrand has the ambition of maintaining a position among the best companies by integrating this perspective in other business areas. Storebrand believes that this will create increased value for customers, owners, society and other stakeholders.
The Board of Directors has adopted and made known a dividend policy whereby Storebrand aims to pay a dividend of over 50 per cent of the group profit after tax. The ambition of the Board is to pay an ordinary dividend per share of at least the same nominal level as in the previous year. Normally, dividends are paid when there is a sustainable solvency margin of more than 150 per cent. With a solvency margin above 180 per cent, the Board’s intention is to propose extraordinary dividends or the buyback of shares.
4. Equal treatment of shareholders and transactions with close associates (No deviations from the Code of Practice) Storebrand ASA has only one class of share. There are no specific restrictions on the ownership of shares or voting rights beyond the restrictions imposed by the Act on Financial Undertakings and Financial Groups. Through their work, the management and Board of Directors of Storebrand focus strongly on the equal treatment of shareholders.
In the event of capital increases in accordance with the authorisation set out in Item 3 above, the Board may decide that the shareholders’ preferential rights shall be waived. For a complete account of shareholder matters, see Section 5 of the annual report.
6. General Meeting (No deviations from the Code of Practice) General Meeting Pursuant to the Articles of Association, Storebrand ASA’s General Meeting shall be held by the end of June each year. The General Meeting was held on 11. April 2018. All shareholders with a known address will receive notice of the General Meeting, which will be sent out no later than 21 days prior to the General Meeting. Pursuant to the Articles of Association, the deadline for giving notice of attendance shall be set at no later than five calendar days prior to the General Meeting. In accordance with Storebrand’s Articles of Association, the opportunity to make other agenda papers available on the Storebrand website is exercised, cf. Section 5-11a of the Norwegian Public Limited Companies Act. A shareholder may nevertheless demand to receive agenda papers by post.
It is also possible to vote by proxy. Provisions have been made so that the proxy form is linked to each individual item to be considered. We will seek whenever possible to design the form so that it also allows voting for candidates who are to be elected. The voting rules for the General Meeting allow separate votes for each member of the various bodies. Further information about voting in advance, use of proxies and the shareholders’ rights to have matters discussed at the General Meeting is available both in the notice of the General Meeting and on Storebrand’s website.
None of the members elected by the General Meeting have any employment, professional or consultancy relationship with Storebrand beyond their appointment to the Board of Directors. The backgrounds of the individual board members are described in the annual report and on Storebrand’s website. The composition of the Board of Directors satisfies the independence requirements set forth in the Code of Practice. There are few instances of disqualification during the consideration of matters by the Board (none in 2018). An assessment of the individual board members’ independence is noted in the list of governing and controlling bodies under the heading “Members of Storebrand ASA’s Board of Directors and Committees”. An overview of the number of shares in Storebrand ASA owned by members of governing bodies as at 31 December 2018 is included in the notes to the financial statements for Storebrand ASA (Information on related parties). None of the board members have held office for more than ten years.
The Audit Committee assists the Board by reviewing, evaluating and, where necessary, proposing appropriate measures with respect to the Group’s overall controls, financial and operational reporting, risk management/control, and internal and external auditing. The Audit Committee held seven meetings in 2018, including a joint meeting with the Risk Committee. The external and internal auditors participate in the meetings. The majority of the Committee members are independent of the company.
The main task of the Risk Committee is to prepare matters to be considered by the Group’s Board of Directors in the area of risk, with a special focus on Storebrand’s risk appetite and risk strategy, including the investment strategy. The Committee should contribute forward-looking decision-making support related to the Board’s discussion of risk taking, financial forecasts and the treatment of risk reporting. The Risk Committee held seven meetings in 2018, including a joint meeting with the Audit Committee.
results are audited by Storebrand’s external auditor, see the Auditor’s Report in the Other section.
As an extension of the general policies and guidelines, a code of ethics has been drawn up that applies to all employees and representatives of Storebrand, in addition to corporate rules for areas such as risk management, internal control, financial reporting, handling inside information and share trading by primary insiders. Guidelines and information about information security, contingency plans, measures against money laundering and other financial criminality have also been drawn up. Storebrand is subject to statutory supervision in the countries where it has operations that require a licence, including the Financial Supervisory Authority of Norway, as well as its own supervisory bodies and external auditor.
Monthly and quarterly operating reports are prepared in which the results by business area and product area are analysed and assessed against set budgets. The operating reports are reconciled against other financial reporting.
11. Remuneration of the Board of Directors (No deviations from the Code of Practice) The General Meeting fixes the Board’s remuneration annually on the basis of the recommendations of the Nomination Committee. The fees paid to the members of the Board are not linked to earnings, option schemes or similar arrangements. Members of the Board and Board Committees do not receive incentive-based remuneration; instead they receive a fixed annual compensation, either per year or per meeting the member attends, or a combination of such remuneration. The shareholder-elected members of the Board do not participate in Storebrand’s pension schemes. None of the shareholder-elected members of the Board carry out any duties for Storebrand beyond their appointment to the Board. More detailed information on the remuneration, loans and shareholdings of board members can be found in Note 23 (Group) and Notes 6 and 17 (ASA). Board members are encouraged to hold shares in the company.
Storebrand shall have an incentive model that supports Company strategy, with emphasis on the customer’s interests and long-term perspective and an ambitious model of cooperation, as well as transparency that enhances the Storebrand’s reputation. The Group’s executive management only receive fixed salaries and use a percentage of their fixed salaries to purchase shares in Storebrand with a lock-in period of three years. This is to clarify that the Storebrand’s top management acts in accordance with the long-term interests of the owners. The employees’ performance and achievements are regularly followed up against the operational goals of the individual business areas, directly related to Storebrand’s strategy. This helps to further strengthen agreement between the owners and the management.
13. Information and communication (No deviations from the Code of Practice) The Board has issued guidelines for the company’s reporting of financial and other information and for contact with shareholders other than through the General Meeting. Storebrand ’s reporting with regard to sustainable investments goes beyond the statutory requirements. Storebrand’s financial calendar is published on the Internet and in the company ’s annual report. Financial information is published in the quarterly and annual reports, as described under Item 10 above – Financial information and Storebrand’s accounting process. Documentation that is published is available on Storebrand’s website. All reporting is based on the principle of transparency and takes into account the need for the equal treatment of all participants in the securities markets and the rules concerning good stock exchange practices. Storebrand has its own guidelines for handling insider information, see also Item 10 – Management and control, above.
Storebrand Asset Management AS has had a Corporate Governance Committee for several years. The Committee has a mandate to set the level of ambition and establish frameworks for corporate governance. The Committee shall coordinate Storebrand’s use of voting rights, including prioritising matters and ensuring consistency in the work. The Committee shall meet every quarter.
The principles for Storebrand’s corporate governance have been prepared in accordance with Norwegian law, and they are based on the Norwegian Code of Practice for Corporate Governance published by the Norwegian Corporate Governance Board (NUES).
The Norwegian Code of Practice for Corporate Governance is available at www.nues.no.
Any deviations from the Code of Practice are commented on under each section in the statement above, see the deviations discussed in Item 3.
A description of the main elements of Storebrand’s systems for internal control and risk management related to the financial reporting process is discussed in Section 10 above. Provisions in the Articles of Association that refer to the provisions in Section 5 of the Norwegian Public Limited Companies Act with regard to the General Meeting are discussed in Item 6 above.
The composition of the governing bodies and a description of the main elements in the current rules of procedure and guidelines can be found in Items 6, 7, 8 and 9 above.
Continued strong growth in unit linked savings, as well as competitive and sustainable returns to our customers, contribute to increased assets under management. Storebrand is the market leader in defined contribution pensions, and is Norway’s largest private asset manager, with NOK 707 billion under management.
The new principles are: • We base our business activities on the UN Sustainable
• We help our customers live more sustainably. We do this by managing our customers’ money in a sustainable manner, in addition to providing sustainable financing and insurance.
• We collaborate to achieve the UN Sustainable Development Goals with our customers, suppliers, the authorities and knowledge environments.
27) Read more about our sustainability work and sustainable investments in our annual report in the sections About Storebrand: a sustainable strategy and Financial Capital and Our
Secure pensions and capital release from guaranteed pensions The Guaranteed Pensions area is in long-term decline. Companies are requesting products with guaranteed interest rates to a lesser extent, and these products are capital-intensive for life insurance companies during periods of low interest rates. The customers’ accrued pension rights are secured through a solid solvency position and robust systems for risk-taking in the business. As the pensions are paid to our customers, capital is released that the Company must pledge as security. This capital can be distributed over time to the shareholders in the form of dividends, buyback of shares or the acquisition of new capital-generating business.
As a result of the transition to new tax rules, Storebrand has recognised a deferred tax related to property investments in 2018. In accordance with the old rules, the provisions would have been released by the sale of the properties. The transitional rules mean that the provisions are recognised as income earlier than expected. The tax income does not change the Board’s long-term assessment of the earning potential of Storebrand, and thus does not affect the Board’s basis for the assessment of dividends.
The Board proposes to the General Meeting an ordinary dividend of NOK 1,402 million, corresponding to an ordinary dividend of NOK 3.0 per share for 2018.
29) Results adjusted for the extraordinary tax effect discussed in Note 26.
Outlook Strategic direction Storebrand follows a twofold strategy. First, Storebrand aims to build a world class Savings Group supported by Insurance. Storebrand is the market leader in pension solutions to Norwegian businesses and a challenger in the Swedish market, and uniquely positioned in the growing retail savings market. Storebrand Asset Management has a strong competitive position and clear growth ambitions.
Second, through cost control and disciplined use of capital, Storebrand aims to increase return to shareholders. Storebrand expects to start capital release as dividends and/or share buy backs when the solvency margin is above 180 per cent. The solvency margin is expected to grow 5 percentage points annually after dividends from today’s level. The guaranteed business in long term run off is projected to release NOK 10bn of capital in the next ten years until 2027.
The loyalty programme for the employees of companies who have a pension scheme with Storebrand is an important future focus area. The sale of banking products and property and casualty insurance results in increased loyalty and profitability, contributing to the expected growth of the Savings and Insurance segments. Competition in the market has led to pressure on the margins in these segments, which in turn requires cost reductions and adaptations to the distribution and product solutions to achieve continued profitable growth. In order to realise our ambitions for the retail market, sales must increase going forward.
Our goal is nominally flat costs from 2018 to 2020. This yields a reduction in real costs. Storebrand will continue to make selected investments in growth initiatives. Digitalisation, automation and our partnership with Cognizant are expected to provide reduced costs for the Group over the next few years.
Market performance Norwegian interest rates increased marginally in 2018. Swedish interest rates remained relatively unchanged compared with the start of the year. Swedish interest rates are influenced by a very expansive monetary policy.
The short-term interest rate remains low in the euro area, influenced by the European Central Bank’s expansive monetary policy. The first step in downscaling the central bank’s programme to purchase fixed income securities has been taken, and a gradual reduction is expected going forward. This increases the likelihood of higher market interest rates.
Capital management and dividends Storebrand has established a framework for capital management that links dividends to the solvency ratio and has published a new dividend policy for 2018 onwards. The aim is to have a solvency ratio of more than 150 per cent, including the transitional rules. The solvency ratio at the end of the 31) ORSA: Own Solvency and Risk Assessment
fourth quarter was 173 per cent. Our solvency level shows that the Group is robust in relation to the risks facing the business. A gradual improvement is expected in the underlying solvency margin in the coming years. The expected creation of value by the Group and reduced capital requirements from the guaranteed business are expected to increase our solvency level in the coming years. Financial market volatility and changes to regulatory requirements may result in short-term movements in the solvency level. The Board’s ambition is to pay consistently increasing dividends, combined with extraordinary dividends, to reflect the financial market volatility and release of capital. The expected release of capital will result in a higher distribution ratio over time.
A dividend of more than 50 per cent of the Group’s profit after tax, as well as a higher nominal level than the ordinary dividend for 2018, is expected for 2019.
The Storebrand Group’s annual financial statements have been prepared in accordance with the International Financial Reporting Standards (IFRS). Pursuant to Norwegian accounting legislation, the Board of Storebrand ASA confirms that the Company meets the conditions for preparing its financial statements on the basis of a going concern assumption.
• Group profit 32) NOK 3,158 million for 2018 • Successful integration of SKAGEN and Silver • Solvency margin of 173 per cent • The Board proposes a dividend of NOK 3.0 per share
Adjusted for the consolidation of SKAGEN, the Group’s operating costs were reduced by 1 per cent compared with the previous year. Storebrand has reduced costs and delivered on the goal to keep the nominal costs flat between 2015 and 2018. The goal is to have nominally flat costs from 2018 to 2020, which will entail a reduction in the real costs.
The Group reported taxable accounting income of NOK 898 million in 2018 (2 million).35) The effective tax rate is influenced by the fact that the Group has operations in countries with tax rates that are different from Norway, and it varies from quarter to quarter depending on each legal entity’s contribution to the group profit. The tax rate is estimated to be between 20–23 per cent for 2019. For more information on tax and uncertain tax positions, see Note 26.
35) The change is described in more detail in the stock exchange notice of 15 January 2019 and in Note 26.
The Savings Segment reported growth in fee and administration income of 9 per cent from 2017 to 2018. The result was NOK 1,267 million in 2018 (NOK 1,511 million in 2016). The reduction in the result is mainly due to low performance -based income from SKAGEN. Growth in assets under management in pensions and asset management, as well as growth in bank lending contributed to the earnings growth. The costs increase as a result of the acquisition, development and marketing of new product lines.
Fee and administration income in the Guaranteed Pension segment were marked by the fact that a large portion of the portfolio is mature and in long-term decline. Administration income declined by 2.8 per cent. Operating costs have diminished over time, also as a result of the area being in long-term decline. The result amounted to NOK 1,138 million 2018 (NOK 766 mill in 2017). The higher result is attributed to an improvement in operational performance, increased risk result and a higher level of profit sharing.
Adjusted for costs in SKAGEN, the nominal cost level increased in accordance with the growth in volume related to investments in new products, higher distribution costs and other volume-related costs.
Return on standard defined contribution pension portfolios in the ITP scheme
Balance sheet and market performance The premium income for savings without an interest rate guarantee amounted to NOK 16 billion in 2018, which was NOK 2 billion higher than in 2017. Total reserves in non-guaranteed life insurance related savings grew by 7 per cent from 2017, to NOK 179 billion.
SPP had a market share of 13 per cent in the Swedish market for other occupational pensions Unit Linked insurance. Premium income was 9 per cent higher than in 2017. The transfer balance and new sales improved substantially with the previous year.
*Careful, Balanced and Agressive Pension was esablished in March 2004 . Extra Careful and Extra Agressive Pension was established in December 2011.
The cost percentage was 16 per cent (18 per cent in 2017). Non-recurring effects related to the amendment of distribution agreements previously entered into contributed to a significant cost reduction. Ongoing efficiency improvements are being made in the insurance area.
The investment portfolio of Insurance in Norway amounted to NOK 8.1 billion, which was primarily invested in fixed income securities with a short or medium duration. Financial returns were lower due to the widening of credit spreads.
Storebrand has an established position in personal insurance and a challenger position in property and casualty insurance in the retail market. Storebrand’s growth in the retail market has stagnated as a result of greater competition and a shift in the distribution strategy. Cooperation has been established with external distributors, and combined with separate channels, this should contribute to profitable growth. The Akademiker portfolio is an important driver of growth, and the rate of sales is stable. The growth in personal insurance is stable and in line with overall market growth.
New subscriptions for guaranteed pensions have been closed for most products, however, premium payments and the accumulation of returns for existing customers means that it will take some time before a nominal reduction in the reserves is seen. Fee and administration income performed throughout 2018 consistent with the fact that a large part of the portfolio is mature and in long-term decline. Income was NOK 1,441 million in 2018, compared with 1,483 million for the previous year. In 2018, income declined by 2.8 per cent compared with the previous year. Approximately half of the reduction in revenue was driven by foreign exchange fluctuations.
Operating costs were NOK 828 million in 2018, which was NOK 61 million lower than in 2017. Operating costs have diminished over time, as a result of the area being in longterm decline.
The risk result was NOK 191 million in 2018, compared with NOK 67 million for the previous year. There are strong risk results in the Norwegian paid-up policy portfolio, with good results for disability and reactivation in particular, but also satisfying results for death and pure endowment. The paid-up result was boosted by the dissolution of NOK 149 million in longevity reserves. In the Swedish business, the risk result was negative, as a result of reserve strengthening of NOK 216 million. SPP’s underlying risk result was stable.
Balance sheet and market performance Customer reserves for Guaranteed Pension amounted to NOK 261 billion at the end of 2018, which was 3.8 billion lower than at the start of the year.
The products are in long-term decline, but the Norwegian paid-up policy portfolio grew due to conversion from defined benefit to defined contribution pensions. The paid-up policies amounted to NOK 133 billion at the end of 2018, compared with NOK 128 billion for the previous year. From 2014, the customers were given an offer to convert from traditional paid-up policies to paid-up policies with investment options, a product that is included in the Savings Segment.
The Storebrand Life Insurance Group is funded by a combination of equity and subordinated loans. Assuming the current interest rate at the end of 2018, interest expenses are expected to be approximately NOK 80 million quarterly.
The financial result includes the return on the company portfolios in Storebrand Life Insurance and SPP, as well as the financial result of Storebrand ASA. The financial result is in line with expectations, given the low interest rate level throughout the year.
Capital situation Storebrand adapts the level of equity and debt in the Group continuously and systematically. The level is adjusted for financial risk and capital requirements. The growth and composition of business segments will be important driving forces behind the need for capital. Capital management is designed to ensure an efficient capital structure and maintain an appropriate balance between internal targets and regulatory requirements. Capital should be as high as possible in the structure to ensure flexibility.
The Group’s target is to have a solvency margin ratio in accordance with Solvency II of at least 150 per cent, including use of the transitional rules. The solvency margin for the Storebrand Group was estimated at 173 per cent at the end of 2018, including transitional rules. Without the transitional rules, the solvency margin was 172 per cent. Storebrand uses the standard model for the calculation of Solvency II.
Good risk management and a positive impact of the regulatory adjustment mechanisms in the solvency regulations more than compensate for demanding financial markets. Together with a strong group profit after tax, this contributed to the solvency margin without transitional rules being strengthened by 17 percentage points in 2018. The value of the transitional rules was considerably reduced throughout the year, mainly due to higher discount rates. Storebrand Livsforsikring AS aims for an A- rating. Storebrand ASA aims to have liquid assets on par with the Company’s interest-bearing debt and to fund portions of the liquidity reserve by equity over time.
The Storebrand Bank Group had pure core capital adequacy of 16.6 per cent and capital adequacy of 18.9 per cent at the end of 2018. The Bank Group has adapted to the new capital requirements. The company has satisfactory capital adequacy and liquidity based on its business activities. The lending portfolio consists primarily of low-risk home mortgages.
Storebrand ASA (holding) held liquid assets of NOK 1.9 billion at the end of the year. Liquid assets consist primarily of short-term fixed income securities with a good credit rating. Storebrand ASA’s (holding) total interest-bearing liabilities were NOK 1.8 billion at the end of the year. This corresponds to a net debt-equity ratio of minus 0.2 per cent. The next maturity date for bond debt for Storebrand ASA is in September 2019. In addition to the liquidity portfolio, the Company has an unused credit facility of EUR 200 million, which expires in December 2023, with the option of an extension for another two years. Storebrand ASA recognised dividends and group contributions from subsidiaries of NOK 4,131 million for 2018. Dividends allocated to shareholders amounted to NOK 1,402 million
The Board of Directors of Storebrand ASA and the Boards of subsidiaries discuss and adopt a risk appetite and risk strategy at least annually. The risk appetite is the overall risk level and what types of risk are acceptable to the Company to achieve its financial and operational goals. Our risk strategy concretises the guidelines from the risk appetite to the targets and frameworks for risk-taking, both overall and for the various types of risk. Our risk appetite and risk strategy provide guidelines and set limits for more detailed strategies related, inter alia, to financial market risk (investment strategy), insurance risk, credit risk and liquidity risk.
Risk-taking should contribute to Storebrand achieving its strategic and commercial goals, including customers receiving a competitive return on their pension assets and Storebrand receiving adequate payment for assuming risk in relation to defined rates of return.
Out of consideration for customer protection and system stability, the authorities have stipulated requirements through the Solvency II Regulations that the solvency margin shall be at least 100 per cent in a normal situation. This should cover losses that are expected to occur every 200 years. The Board of Directors of Storebrand ASA has limited risk-taking beyond this in its risk appetite. There should be a low risk that the solvency margin falls below the regulatory requirement of 100 per cent, especially due to fluctuations in the financial market. The solvency margin target has therefore been set at 150 per cent in a normal situation. Risk-taking shall also contribute to reaching the Group’s profitability target and growth target for Savings and Pensions. In the Guaranteed Pension area, risk-taking should contribute to the release of capital as the reserves are reduced over time. Overall, this should support the Group’s dividend policy.
Storebrand is dependent on large amounts of customer data for managing its business activities and creating value. The management of information shall entail that there is a low risk of customer data or other sensitive information being abused or misplaced.
The Group’s climate risk work is described in the Financial Capital and Our Investment Universe section of our annual report under “a driving force for sustainable investments”.
The asset management business offers active and passive management and the management of fund-in-fund structures for the customers’ account and risk. Operational risks, including regulatory compliance, are the greatest risks.
The greatest risks for the banking business are credit risk and liquidity risk. Virtually the entire loan portfolio is secured by mortgage on real property.
The greatest risk is the disability risk. Storebrand has risk connected to there being more disability cases than expected and/or that fewer disabled persons will be able to work again. Storebrand also offers cover that provides a payout for death, but Storebrand’s risk from this is limited. In property and casualty insurance, most of the risk is linked to developments in claims payments from car and home insurance.
In Norway, interest rates rose slightly in 2018, especially at the short end. Higher interest rates reduce Storebrand’s risk because it increases the likelihood of a return higher than the guarantee. A higher credit spread has also improved the possibility of covering the interest guarantee by investing in bonds. In Sweden, short-term interest rates also rose, but the three-month money market rate remains negative. The long-term interest rates fell somewhat in Sweden.
Changes in occupational pension schemes in Norway will reduce the risk of low interest rates over time, since defined benefit-based schemes are replaced by defined contribution pensions or hybrid schemes without a guaranteed return over zero per cent. The change has the greatest effect on new premiums, while existing reserves will continue as paid-up policies.
The regulations that are adopted by the authorities are of great importance to Storebrand. The Ministry of Finance has introduced a legislative proposal to the Norwegian parliament (Stortinget) for Separate Pension Accounts. The parties in the private sector are considering changes in the AFP early retirement scheme. The Ministry of Finance and Financial Supervisory Authority of Norway are working on amendments to the regulations for the management of guaranteed pension products.
Sustainable finance The European Commission is working on a regulations for sustainable finance. The regulations follows the action plan for the financing of sustainable growth and is designed to contribute to more investment in sustainable businesses, at the same time as the financial system is robust with respect to climate-related risk.
There are also ongoing processes to assess how sustainability can be taken into account in Solvency II and IDD (Insurance Distribution Directive).
EU regulations will establish standards for sustainable management and stipulate requirements for reporting and information to customers about this. Storebrand considers this to be positive and is following the EU process closely.
The Ministry proposes that employees should be able to transfer both past and current contributions to a self-
STOREBRAND ANNUAL REPORT 2018 selected provider. Employees may also elect to retain their pension capital certificates, so that they are managed separately from the pension capital earned from the current employer.
For employees, it is positive to be able to combine all pension contributions from different employers in one place. Most people will likely benefit from following the main track and not opt out of funds being transferred into a pension account in the employer’s scheme.
Public service pensions New public occupational pensions will be introduced from 2020. The Government and the parties reached agreement in March 2018 on a new markup model for retirement pensions. This is an all-years accrual, holding-based model that is well adapted to the pension reform and the new National Insurance Scheme. Pension accrual for public employees who are born in 1963 or later will change in the markup model as of 2020. For these employees, the AFP scheme will change from an early retirement scheme to a lifelong supplementary pension based on the private sector model. Members born in 1962 or earlier, will retain the accrual based on the current model even after 2020 and retain the current AFP early retirement scheme.
Storebrand currently provides administration and asset management services for municipal pension funds. Storebrand is considering whether the introduction of a new public occupational pension can also facilitate the company ’s re-entry into the insured municipal pension market. If so, Storebrand wants to provide a comprehensive solution, which encompasses both the new markup scheme and the existing gross scheme.
Storebrand offered insured municipal occupational pensions until 2012. One of the main reasons that the company pulled out of the market then was the fact that the market did not work. Pension procurements were only put out to tender in exceptional cases. The general rule was that existing agreements with KLP continued without any competition.
Contractual pensions (AFP) The Confederation of Trade Unions (LO) and Confederation of Norwegian Enterprise (NHO) are studying changes to the AFP early retirement scheme. The report was scheduled to be ready before Christmas 2018 and form the basis for negotiations on changes to the scheme during the annual wage settlement in spring 2019. It is now clear that the process will be delayed by a year. The report will thus be completed in 2019, as a basis for the negotiations during the annual wage settlement in the spring of 2020.
Today, companies only take AFP into account to a limited extent when determining the level of their occupational pension schemes. If AFP becomes more predictable for the employees, this may change.
The working group assessed various initiatives: • The opportunity for companies to build up additional statutory provisions separately for individual contracts.
• The opportunity for the company to fulfil annual interest rate guarantees with borrowed equity.
• The opportunity for the companies to compensate customers when transitioning to paid-up policies with investment options.
The Ministry has also requested that the Supervisory Authority prepare a proposal to eliminate the right to retain the market value adjustment reserve for up to 2 per cent of the premium reserve in connection with transfers. This change should become effective from 2020, and it would be positive with a view to the future transfer market for municipal service pensions.
Under the new rules, life insurance companies will be taxed on the returns from company funds and the profit from insurance business. Tax losses that provide a basis for tax loss carryforwards will not arise from the customer funds. Existing tax loss carryforwards will continue.
STOREBRAND ANNUAL REPORT 2018 for the occupational pension companies based on IORP II, but with reinforced capital requirements. A legislative proposal is to be put forward in the spring of 2019 and legislative amendments will not take effect until the end of the first half of 2019. SPP is encompassed by Solvency II in its entirety, but it follows the development of the regulations for occupational pension companies and the stipulation of capital requirements for these companies.
In 2017, Storebrand conducted a materiality analysis to identify the Group’s focus areas for long-term value creation. This analysis was refined in 2018. Efforts to implement initiatives in the focus areas to create financial results and positive ripple effects for society are measured, followed up and reported externally and internally. 37)
Learning and development A high level of skill is one of Storebrand’s most important factors for success, and it forms the foundation for renewed growth. At Storebrand, expertise is synonymous with the ability of each individual employee to perform and manage certain tasks and situations. This ability is based on knowledge and experience, skills, motivation and personality.
Digitalisation has enabled the development of products and services at a rate that the finance sector has never previously seen. For an organisation that is to both represent the long-term commitments Storebrand has to its customers and at the same time be in the driver’s seat for digital improvements and innovation, fast and continuous learning is essential.
To communicate, involve and create a common understanding of our purpose, strategy and culture, we make use of learning technologies to give our employees options for flexible and easy access to learning, anywhere and anytime. The Company’s performance in learning and development is discussed in Section 4 of the annual report, People and systems.
No injuries to people, property damage, or accidents were reported in the Storebrand Group in 2018.
Diversity Storebrand’s organisation must reflect our customers and the market in which the Group operates. Diversity contributes to increased innovation and learning in the organisation. In addition, our sustainability analyses show that companies that focus on diversity are more innovative and profitable.
We are actively working to maintain a gender balance among key employees. Storebrand has for several years worked systematically to identify future managerial candidates and promote an even gender distribution. There has been a focused effort on management development in the
STOREBRAND ANNUAL REPORT 2018 areas of strategic and operational management, communication and change.
Storebrand’s headquarters outside Oslo has been adapted to meet individual needs. It is a universally designed building, which was re-certified as an Eco-Lighthouse in 2018.
The Group’s performance in diversity is discussed in Section 4 of the annual report under the heading People and systems.
The Group has established systems for both internal and external whistleblowing. The external channel has been established through a law firm. The Group also has comprehensive routines for preventing harassment and improper conduct.
The Group’s approach to and results in this area are discussed in Section 4 of the annual report, People and systems, under the headings Committed and courageous employees and Good environmental and working conditions throughout the entire value chain
Storebrand ASA is the holding company in the Storebrand Group, and the accounts have been prepared in accordance with the Norwegian Accounting Act, the generally accepted accounting policies in Norway and the Norwegian Regulations relating to annual accounts for insurance companies.
Allocation of the profit for the year Storebrand ASA reported a profit of NOK 3,963 million for 2018, compared with NOK 1,824 million for 2017.
Heidi Storruste Ingvild Pedersen Odd Arild Grefstad Group Chief Executive Officer
Storebrand Group 100 Income statement 101 Statement of total comprehensive income 102 Statement of finacial position 104 Statement of changes in equity 105 Statement of cach flow 107 Notes
Net income from financial assets and properties for the company: - equities and other units at fair value 15 -10 31 - bonds and other fixed-income securities at fair value 15 286 507 - financial derivatives at fair value 15 50 99 - loans at fair value 15 4 57 - bonds at amortised cost 15 116 134 - loans at amortised cost 15 665 665 - profit from investments in associated companies/joint controlled operation 29 46 119
Net income from financial assets and properties for the customers: - equities and other units at fair value 15 -5,249 16,943 - bonds and other fixed-income securities at fair value 15 912 3,157 - financial derivatives at fair value 15 -2,288 848 - loans at fair value 15 140 113 - bonds at amortised cost 15 4,254 4,243 - loans at amortised cost 15 541 443 - profit from investments in associated companies 29 303 231
Tax on other comprehensive income elements not to be classified to profit/loss 1 2
Total other comprehensive income elements not to be classified to profit/loss -48 -92
Change in unrealised gains on financial instruments available for sale 8
Total other comprehensive income elements that may be classified to profit/loss -318 395
Share of total comprehensive income - hybrid capital investors 9 11
Intangible assets and excess value on purchased insurance contracts 27 6,106 6,295
Financial assets at fair value: - Bonds and other fixed-income securities 8,10,12, 30, 36 24,055 31,719
Financial liabilities: - Liabilities to financial institutions 9,12,30 2 155 - Deposits from banking customers 9,12,30 14,419 14,628
Equity transactions with owners: Hybrid capital classified as equity 3 3 3
Purchase of minority interests -82 -82 -38 -120 1) 467,813,982 shares with a nominal value of NOK 5.
Net cash flow from financial assets and banking customers 6,389 -4,653
Receipts - issuing of share capital / sale of shares to own employees -120
Cash and cash equivalents at start of the period for new/sold out companies 91 7
Cash and cash equivalents at start of the period 3,724 3,965
Cash/cash equivalents Cash/cash equivalents are defined as claims on central banks and claims on financial institutions without notice periods for the company portfolio. The amount does not include claims on financial institutions linked to the insurance customers portfolio, since these are liquid assets that not available for use by the Group.
2. Summary of significant accounting policies for material items on the balance sheet For the most part, the asset side of the Group’s balance sheet comprises financial instruments and investment properties.
3. Basis for preparation of the financial statements The accounting policies applied in the consolidated financial statements are described below. The policies are applied consistently to similar transactions and to other events involving similar circumstances. There is no required use of uniform accounting policies for insurance contracts.
Storebrand ASA’s consolidated financial statements are presented using EU-approved International Financial Reporting Standards (IFRS) and related interpretations, as well as other Norwegian disclosure requirements laid down in legislation and regulations.
4. Changes in accounting policies New accounting standards that have a significant impact on the consolidated financial statements have not been implemented in 2018. For changes in estimates, see Note 2 for further information.
Debt raised by issuance of securities AC AC -12 034 -12 049 -13 902 -13 906
IFRS 15 The new standard for recognising revenue from contracts with customers entered into force on 1 January 2018. Revenue recognition in the Storebrand Group will be primarily regulated by IAS39 and IFRS4. Revenues that will be recognised under Other Income are regulated by IFRS 15 and are recognised according to the rules in this standard. Of these, management fees associated with the asset management business at Storebrand Asset Management are the most significant. The implementation of IFRS 15 has not had any significant impact on Storebrand’s consolidated financial statements.
IFRS 16 IFRS 16 Leases, replaces the current IAS 17 and is applicable from 1 January 2019. IFRS 16 establishes principles for the recognition, measurement, presentation and disclosure of leases. The new standard for leases will not result in major changes for lessors, but will however significantly change accounting by lessees. IFRS 16 requires that, in principle, lessees recognise all leases in the balance sheet according to a simplified model that resembles the accounting treatment of financial leases in accordance with IAS17. The present value of the combined lease payments shall be recognised in the balance sheet as debt and an asset that reflects the right of use of the asset during the lease period, with the exception of short-term agreements and agreements in which the asset has a low value. The recognised asset is amortised over the lease period and the depreciation expense is recognised as an operating expense on an ongoing basis. The interest expense on the lease commitment is recognised as a financial expense.
IFRS 16 can be implemented according to either a full retrospective approach or a modified retrospective approach, and Storebrand has selected the modified retrospective approach. This means that comparative figures are not restated and the effect is entered in the balance sheet in the implementation year of 2019. Upon implementation, the right of use of the asset and liability will be the same amount and will not impact on equity. The transition to IFRS 16 is expected to increase assets and
IFRS 17 IIFRS 17 replaces IFRS 4 Insurance Contracts and introduces new requirements for the recognition, measurement, presentation and disclosure of issued insurance contracts. The standard has not been approved by the EU, but is expected to be applicable from 1 January 2022. The purpose of the new standard is to establish uniform practices for the accounting treatment of insurance contracts.
As a starting point, IFRS 17 must be retrospectively applied, but modified retrospective application is permitted or application based on the fair value on the transition date if retrospective application is impracticable.
Storebrand Livsforsikring AS, Storebrand Asset Management AS, Storebrand Bank ASA and Storebrand Forsikring AS are significant subsidiaries owned directly by Storebrand ASA. Storebrand Livsforsikring AS also owns the Swedish holding company Storebrand Holding AB, which in turn owns SPP Pension & Försäkring AB (publ). On acquiring the Swedish operations in 2007, the authorities instructed Storebrand to make an application to maintain a group structure by the end of 2009. Storebrand has filed an application to maintain the existing group structure. Benco (which owns Euroben and Nordben) is also a company owned by Storebrand Livsforsikring AS. A controlling interest in Skagen AS was acquired in 2017 and is owned by Storebrand Asset Management AS. The Norwegian authorities have granted Storebrand an exemption from the requirement to organise equivalent businesses in the same company. This exemption expires in 2022.
Elimination of internal transactions Internal receivables and payables, internal gains and losses, interest, dividends and similar between companies in the Group are eliminated in the consolidated financial statements. Transactions between the customer portfolios and the company portfolio in the life insurance business and between the customer portfolios in the life insurance business and other companies in the Group will not be eliminated in the consolidated accounts. Pursuant to the life insurance regulations, transactions with customer portfolios are carried out a fair value.
When making investments, including purchasing investment properties, a decision is made as to whether the purchase constitutes acquisition of a business pursuant to IFRS 3. When such acquisitions are not regarded as an acquisition of a business, the acquisition method pursuant to IFRS 3 is not applied. Among other things, this does not entail provisions for deferred tax such as for business combinations.
Goodwill is not amortised, instead it is tested for impairment. Goodwill is reviewed for impairment if there are indications that its value has become impaired. The review is conducted at least annually and determines the recoverable amount of goodwill. If the discounted present value of the relevant discounted cash flow 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.
Goodwill arising from the acquisition of interests in associated companies is included in investments in associated companies, and tested annually for impairment in connection with the assessment of book value.
12. Investment properties IInvestment properties are measured at fair value. Fair value is the amount for which an asset could be exchanged between well-informed, willing parties in an arm’s length transaction. Income from investment properties consists of both changes in fair value and rental income.
13. Financial instruments 13-1. General policies and definitions Recognition and derecognition Financial assets and liabilities are included in the balance sheet from such time Storebrand becomes party to the instrument’s contractual terms and conditions. General purchases and sales of financial instruments are recorded on the transaction date. When a financial asset or a financial liability is initially recognised in the financial statements, it is valued at fair value. Initial recognition includes transaction costs directly related to the date of acquisition or issue of the financial asset/liability if it is not a financial asset/liability at fair value through profit or loss.
Impairment of financial assets For financial assets carried at amortised cost, an assessment is made on each reporting date whether there is any objective evidence that a financial asset or group of financial assets is impaired.
If there is objective evidence that impairment has occurred, the amount of the loss is measured as the difference between the asset’s carrying amount and the present value of the estimated future cash flows (excluding future credit losses that have not
occurred) discounted at the financial asset’s original effective interest rate (i.e. the effective interest rate calculated at initial recognition). The amount of the loss is recognised in the income statement.
Financial assets held for trading are measured at fair value at the reporting date, with all changes in their fair value recognised through profit or loss.
At fair value through profit or loss in accordance with the fair value option (FVO). A significant proportion of Storebrand’s financial instruments are classified in the category of fair value through profit or loss because: • such classification reduces the mismatch in the measurement or recognition that would otherwise arise as a result of the different rules for measuring assets and liabilities, or • the financial assets form part of a portfolio that is managed and reported on a fair value basis The accounting is equivalent to that of the held for trading category (the instruments are measured at fair value and changes in value are recognised in the income statement).
13-3. Derivatives Accounting treatment of derivatives that are not hedging Derivatives that do not meet the criteria for hedge accounting are recognised as financial instruments held for trading. The fair value of such derivatives is classified as either an asset or a liability with changes in fair value through profit or loss.
13-4. Hedge accounting Fair value hedging Storebrand uses fair value hedging. The items hedged are financial assets and financial liabilities measured at amortised cost. Derivatives are recognised at fair value through profit or loss or are included in total comprehensive income. Changes in the value of the hedged item that are attributable to the hedged risk adjusts the carrying amount of the hedged item and is recognised through profit or loss.
Combined fair value and cash flow hedging Some borrowing in foreign currency is hedged by means of hedging instruments (derivatives). The cash flows in the hedged item coincide with the cash flows of the hedging instruments. Derivatives are recognised at fair value. Hedge accounting is carried out by dividing the hedge into fair value hedging of the interest and a cash flow hedging of the margin. Net changes in the value of the cash flow hedge are recognised in the Statement of Total Comprehensive Income.
Insurance liabilities The premium reserve represents the present value of the company’s total insurance liabilities, including future administration costs in accordance with the individual insurance contracts, after deducting the present value of agreed future premiums. In the case of individual account policies with flexible premium payments, the total policy value is included in the premium reserve. The premium reserve is equivalent to 100 per cent of the guaranteed surrender or transfer value of insurance contracts prior to any fees for early surrender or transfer and the policies’ share of the market value adjustment reserve.
Transfers of premium reserves, etc. (transfers) Transfers of premium reserves resulting from transfers of policies between insurance companies are recorded in the income statement as net premiums for own account in the case of reserves received and claims for own account in the case of reserves paid out. The recognition of costs and income takes place on the date the insured risk is ceded. The premium reserve in the insurance liabilities is reduced/increased on the same date. The premium reserve transferred includes the policy’s share of additional statutory reserves, the market value adjustment reserve, conditional bonus and the profit for the year. Transferred additional reserves are not shown as part of premium income, but are reported separately as changes in insurance liabilities. Transferred amounts are classified as current receivables or liabilities until the transfer takes place.
14-2. Life insurance – Norway Additional statutory reserves The company is permitted to make allocations to the additional statutory reserves to ensure the solvency of its life insurance business. These additional reserves are divided among the contracts and can be used to cover a negative interest result up to the interest rate guarantee. In the event that the company does not achieve a return that equals the interest rate guarantee in any given year, the allocation can be reversed from the contract to enable the company to meet the interest rate guarantee.
The additional statutory reserves cannot exceed 12 per cent of the premium reserve. If the limit is exceeded, the excess amount is assigned to the contract as surplus.
14-3. Life insurance Sweden Life insurance liabilities The life insurance liabilities are estimated as the present value of the expected future guaranteed payments, administrative expenses and taxes, discounted by the current risk-free interest rate. Insurance reserves with guaranteed interest rates in SPP use a modelled discount rate. A real discount curve is used for risk insurance within the defined-contribution portfolio. For endowment insurance within the defined-benefit and defined-contribution portfolios, as well as sickness insurance in the defined -benefit portfolio, the provisions are discounted using the nominal yield curve. As a starting point, the applicable discount rate is determined based on the methods used for the discount rate in Solvency II.
Conditional bonus and deferred capital contribution The conditional bonus arises when the value of customer assets is higher than the present value of the liabilities, and thus covers the portion of the insurance capital that is not guaranteed. In the case of contracts where customer assets are lower than liabilities, the owners’ result is charged via deferred capital contribution allocations. The conditional bonus and deferred capital contribution are recognised on the same line in the balance sheet.
14-4. P&C insurance Costs related to insurance claims are recognised when the claims occur. The following allocations have been made: Reserve for unearned premium for own account concerns on-going policies that are in force at the time the financial statements were closed and is intended to cover the contracts’ remaining risk period.
In Sweden, SPP has agreed, in accordance with the Finance Companies’ Service Pension Plan (BTP Plan), to collective, defined -benefit pension plans for its employees. A group defined-benefit pension implies that an employee is guaranteed a certain pension based on the pay scale at the time of retirement on termination of the employment.
Properties used for the Group’s own activities are measured at appreciated value less accumulated depreciation and writedowns. The fair value of these properties is tested annually in the same way as described for investment properties. The increase in value for buildings used by the Group for its own activities is recognised through total comprehensive income. Any write-down of the value of such a property is recognised first in the revaluation reserve for increases in the value of the property in question. If the write-down exceeds the revaluation reserve for the property in question, the excess is recognised in the income statement.
17. Tax The tax cost in the income statement consists of tax payable and changes in deferred tax. Tax is recognised in the income statement, except to the extent that it relates to items recognised in total comprehensive income. Deferred tax and deferred tax assets are calculated on the differences between accounting and tax values of assets and liabilities.
New tax rules for pension and life insurance companies In December 2018, the Norwegian Parliament (Storting) adopted amendments to the tax rules for pension and life insurance companies. For life insurance companies, the new rules entail that, effective from the 2018 financial year, the taxation of income and expenses associated with assets in the group portfolio and investment option portfolio (customer assets) must take place in accordance with accounting legislation. A consequence of this is that the income and expenses must not only be accrued and dated in accordance with the accounts, but must generally be taxed in accordance with the accounts.
When introducing the new rules, transitional rules were also adopted whereby net unrealised gains linked to customer assets shall be recognised as income for tax purposes in 2018. These previously provided a basis for tax deductions through insurance reserves.
Tax deductions are no longer permitted for provisions to the risk equalisation fund (RUF). In accordance with the transitional rules, provisions to the RUF at the end of 2017 are allocated to a separate account that is recognised as income for tax purposes upon discontinuation of the business. No tax expense will arise if the going concern assumption is in place and there will thus be no basis for capitalising deferred tax.
When introducing the new rules, transitional rules were also adopted which allow P&C insurance companies to transfer the difference between the provision for 2017 and the provisions for 2018 to a separate account with 10 per cent straight-line income recognition over 10 years from and including the 2018 financial year. The companies in the Group have made use of this transitional rule.
Under the transitional rules, net provisions to the National Fund for Natural Disaster Assistance and guarantee scheme at the end of 2017 can be allocated to a separate account recognised as income for tax purposes upon discontinuation of the business. No tax expense will arise if the going concern assumption is in place and there will thus be no basis for capitalising deferred tax.
The Storebrand Group includes companies that are both subject to and not subject to the financial tax. Therefore, when capitalising deferred tax/deferred tax assets in the consolidated financial statements, the company tax rate that applies for the individual companies is used (22 or 25 per cent).
Reference is made to Note 26 - Tax for further information.
19. Leasing A lease is classified as a finance lease if it mainly transfers the risk and rewards incident to ownership. Other leases are classified as operating leases. Storebrand has no financial lease agreements.
In preparing the consolidated financial statements the management are required to apply estimates, make discretionary assessments and apply assumptions for uncertain amounts. The estimates and underlying assumptions are reviewed on an ongoing basis and are based on historical experience and expectations of future events and represent the management’s best judgement at the time the financial statements were prepared.
In the Swedish business, there are no contracts with an annual interest rate guarantee. However, there are insurance contracts with a terminal value guarantee. These contracts are discounted by a market-based calculated interest rate where parts of the yield curve used are not liquid. Changes in the discount rate may have a significant impact on the size of the insurance liabilities and impact the result. If the associated customer assets have a higher value than the recognised value of these insurance liabilities, then the difference will represent a conditional customer allocated fund – conditional bonus (buffer capital). Changes in the assumptions for future administrative expenses (cost assumptions) may also have a significant impact on the recognised insurance liabilities. Changes in estimates and valuations may entail a change in the return on the customer portfolios. Depending on the size of any impairment in value, such impairment may be offset by a reduction in the conditional bonus, so that the effect on the owner’s result may be limited. If the value of the individual insurance contract is higher than the associated customer assets, the owner will have to cover the deficient capital.
Key elements included in valuations that require exercising judgement are: • Market rent and vacancy trends • Quality and duration of rental income • Owners’ costs • Technical standard and any need for upgrading • Discount rates for both certain and uncertain cash flows, as well as residual value
External valuations are also obtained for parts of the portfolio every quarter. All properties must have an external valuation during at least a 3 year period.
Deferred tax and uncertain tax positions Calculation of deferred tax assets, deferred tax liabilities and the income tax expense is based on the interpretation of rules and estimates.
Silver On 24 October 2017, Storebrand Livsforsikring AS entered into an agreement to acquire Silver Pensjonsforsikring (Silver). On 17 October 2017, Silver was set under administration.
The transaction was completed in January 2018 after Silver was released from administration. The transaction was completed in two parts, with the first part as an acquisition of the bifurcated insurance portfolio (amounted to NOK 9.7 billion), and the latter as an acquisition of Silver Pensjonsforsikring AS with its remaining insurance portfolio (amounted to NOK 0.3 billion) and operations. The remaining insurance portfolio for Silver Pensjonsforsikring consisting of pension capital certificates and individual pension contracts with no guarantee.
Storebrand Livsforsikring AS paid a purchase price of NOK 520 million funded by the company portfolio. The purchase price has been transferred to Silver’s customers as a part of the administrative board’s solution, and contributes to maintaining good pensions for the customers.
The amount of NOK 520 million has been transferred to Silver’s customers, and in the acquisition analysis the excess value of the acquisition will be allocated to the insurance contracts (VIF –value of business in force) amounted NOK 280 million, which are amortised over 10 years, reserve strength due to transition to Storebrand’s tariffs amounted NOK 97 million, deferred tax asset amounted NOK 374 million and negative goodwill amounted NOK 37 million. As a part of simplifying the corporate structure, Storebrand Livsforsikring AS has completed a merger with the fully owned subsidiary Silver Pensjonsforsikring AS. The merger has been carried out without consideration pursuant to the Norwegian Limited Liability Companies Act §13-23 and §13-1 with accounting effect from 1 January 2018.
Payment for financing insurance liabilities Excess value upon acquistion Book values
Storebrand’s operation includes the segments Savings, Insurance, Guaranteed Pension and Other.
Savings The savings segment includes products for retirement savings with no interest rate guarantees. The segment consists of defined contribution pensions in Norway and Sweden, asset management and retail banking products. In addition, certain other subsidiaries in Storebrand Livsforsikring and SPP are included in Savings.
Reconciliation between the income statement and alternative statement of the result (segment) The results in the segments are reconciled against the Group result before amortisation and write-downs of intangible assets. The Group’s income statement includes gross income and costs linked to both the insurance customers and owners (shareholders ). The alternative statement of the result only includes result elements relating to owners (shareholders) which are the result elements that the Group has performance measures and follow-up for. The result lines that are used in segment reporting will therefore not be identical with the result lines in the Group’s income statement. Below is an overall description of the most important differences.
Fee and administration income consists of fees and fixed administrative income. In the Group’s income statement, the item is classified as premium income, net interest income from bank or other income depending on the type of activity. The Group’s income statement also includes savings elements for insurance contracts and possibly transferred reserve.
Price of return guarantee and profit risk (fee incomes) – Storebrand Life Insurance AS The return guarantees in group pension insurance with a return guarantee must be priced upfront. The level of the return guarantee, the size of the buffer capital (additional statutory reserves and unrealised gains), and the investment risk of the portfolio in which the pensions assets are invested determine the price that the customer pays for his or her return guarantee. Return guarantees are priced on the basis of the risk to which the equity is exposed. The insurance company bears all the downside risk and must carry reserves against the policy if the buffer reserves are insufficient or unavailable.
Administration costs consist of the Group’s operating costs in the Group’s income statement minus operating costs allocated to traditional individual products with profit sharing.
Risk result life and pensions consists of the difference between risk premium and claims for products relating to defined-contribution pension, unit linked insurance contracts (savings segment) and defined-benefit pension (guaranteed pension segment). Risk premium is classified as premium income in the Group’s income statement.
SPP Pension & Försäkring AB For premiums paid from and including 2016, previous profit sharing is replaced by a guarantee fee. The guarantee fee is annual and is calculated as a percentage of the capital. It goes to the company.
Financial items and risk result life & pension 93 161 642 513
STOREBRAND GROUP ARE REPRESENTED IN THE FOLLOWING COUNTRIES: Segment/Country Norway Sweden UK Guernsey Netherlands Denmark
Buffer capital in % of customer reserves Storebrand Life Group 1) 6.4% 7.2%
Organisation of risk management The Group’s organisation of the responsibility for risk management follows a model based on three lines of defence. The objective of the model is to safeguard the responsibility for risk management at both company and Group level.
The Board of Storebrand ASA has established a Risk Committee consisting of 3 Board members. The main task of the Risk Committee is to prepare matters to be considered by the Board in the area of risk, with a special focus on the Group’s appetite for risk, risk strategy and investment strategy. The Committee should contribute forward-looking decision-making support related to the Board’s discussion of risk taking, financial forecasts and the treatment of risk reporting.
Independent control functions Independent control functions have been established for risk management for the business (Risk Management Function/Chief Risk Officer), for compliance with the regulations (Compliance Function), for ensuring the insurance liabilities are calculated correctly (Actuary Function), for data protection (Data Protection Officer), for money laundering (Anti-Money Laundering) and for the bank’s lending. Relevant functions have been established for both the Storebrand Group (the Group) and all of the companies requiring a licence. The independent control functions are organised directly under the companies’ managing directors and report to the boards of the respective companies.
In terms of function the independent control functions are affiliated with the Group CRO, who is responsible to the group CEO and reports to the board of Storebrand ASA. The Group CRO shall ensure that all significant risks are identified, measured and appropriately reported. The Group CRO function shall be actively involved in the development of the Group’s risk strategy and maintain a holistic view of the company’s risk exposure. This includes responsibility for ensuring compliance with the relevant regulations for risk management and the consolidated companies’ operations.
Storebrand’s IT systems are vital for operations and reliable financial reporting. Errors and disruptions may have consequences for operations and can impact on the trust the Group has from both customers and shareholders. In the worst case, abnormal situations can result in penalties from the supervisory authorities. Storebrand’s IT platform is characterised by complexity and integration between different specialist systems and joint systems. The operation of the IT systems has largely been outsourced to different service providers. A management model has been established with close follow-up of providers and internal control activities in order to reduce the risk associated with the development, administration and operation of the IT systems, as well as information security. The bank platform and insurance platform are based on purchased standard systems that are operated and monitored through outsourcing agreements. There is a greater degree of own development for the life insurance activities, but parts of the operation of this have also been outsourced. The individual portfolio is handled in a purchased standard system.
Storebrand offers traditional life and pension insurance as both group and individual contracts. Contracts are also offered in which the customer has the choice of investment.
SPP’s mortality assumptions are based on the general mortality tariff DUS14, adjusted for the company’s own observations.
The table below specifies the risk result for the largest entities in the Group and also states the effect of reinsurance and pooling on the result. The risk result in the table shows the total risk result for distribution to customers and owner (the insurance company).
1) Change in estimate linked to closed risk product in SPP.
For the life insurance companies, the financial assets are invested in a variety of sub-portfolios. Market risk affects Storebrand ’s income and profit differently in the different portfolios. There are three main types of sub-portfolio: company portfolios, customer portfolios without a guarantee (unit linked insurance) and customer portfolios with a guarantee.
The market risk in unit linked insurance is at the customers’ risk and expense, meaning Storebrand is not directly affected by changes in value. Nevertheless, changes in value do affect Storebrand’s profit indirectly. Income is based largely on the size of the reserves, while the costs tend to be fixed. Lower returns on the financial market than expected will therefore have a negative effect on Storebrand’s future income and profit.
Storebrand aims to take low financial risk for the company portfolios, and most of the funds were invested in short and medium -term fixed income securities with low credit risk.
The most significant market risks facing guaranteed customer portfolios are linked to equity risk, interest rate risk, credit risk and property price risk. There were no major changes in the investment allocation during 2018. In Norway most of the credit risk is linked to securities, which are carried at amortised cost. This reduces the risk to the company’s profit significantly.
The table above shows the currency positions as at 31 December 2018. Currency exposure is associated primarily with investments in the Norwegian and Swedish life insurance businesses.
Banking business Storebrand Bank ASA hedges net balance sheet items by means of forward contracts. The permitted limit for the bank’s foreign exchange position is 0.50 per cent of primary capital, which is presently approximately NOK 12 million.
Storebrand Livsforsikring The annual guaranteed return to the customers follows the basic interest rate. From 2018, new premiums were taken in with a basic interest rate of 2.0 per cent, and pensions were adjusted upwards with a basic interest rate of 0.5 per cent.
The percentage distribution of the insurance reserves by the various basic annual interest rates as at 31 December is as follows:
In the Swedish operations management of interest rate risk is based on the principle that the interest rate risk from assets shall approximately correspond to the interest rate risk from the insurance liabilities.
Sensitivity analyses The tables show the fall in value for Storebrand Life Insurance and SPP’s investment portfolios as a result of immediate value changes related to financial market risk. The calculation is model-based and the result is dependent on the choice of stress level for each category of asset and assumptions for diversification. The stresses have been applied to the company portfolio and guaranteed customer portfolios as at 31 December 2018. The effect of each stress changes the return in each profile.
The amount of stress is the same that is used for the company’s risk management. The stresses include a 12 per cent fall in shares, 7 per cent fall in property, and an increase in credit spreads of 60 basis points. For interest rates, the stresses include both an increase and fall of 50 basis points, where the most negative is used. The increase in interest rates is negative for the result, while the solvency position is negatively affected by a fall in interest rates.
The stresses are applied individually, but the overall market risk is less than the sum of the individual stresses, because diversification is assumed. The correlation between the stresses is the same that is used for Solvency II.
As a result of customer buffers, the effect of the stresses on the result will be lower than the combined change in value in the table. As at 31 December 2018, the customer buffers are of such a size that the effects on the result are significantly lower.
SPP Pension & Insurance Based on the stress test, SPP has an overall market risk of SEK 2.4 billion, which is equivalent to 2.8 per cent of the investment portfolio.
NOK million 0-6 months 6-12 months 1-3 years 3-5 years > 5 years Total cashflows Total booked value
Credit facilities Storebrand ASA has an unused credit facility of EUR 240 million, expiration December 2023.
Facilities issued to Storebrand Boligkreditt AS Storebrand Bank has issued two credit facilities to Storebrand Boligkreditt AS. One of these is an ordinary overdraft facility, with a ceiling of NOK 6 billion. This has no expired date, but can be terminated by the bank with 15 months’ notice. The other facility may not be terminated by Storebrand Bank until at least 3 months after the maturity date of the covered bond and the associated derivates with the longest period to maturity. Both agreements provide a minimum capacity to cover at least interests and payments on covered bonds and derivatives the following 31 days.
NOK million Subordinated loan capital Liabilities to financial institutions Securities issued
Total derivatives excluding derivatives in bond funds 2018 2,484 1,490 77 876 4,926
Total derivatives excluding derivatives in bond funds 2017 3,089 797 105 73 4,064
Total bank deposits excluding bank deposits in bond funds 2018 376 6,303 2,218 15 19 159 9,090
Total bank deposits excluding bank deposits in bond funds 2017 472 7,207 699 11 35 8,424
Rating classes based on Standard & Poor’s. NIG = Non-investment grade.
Total loans to and receivables from customers 2018 1) 59,436 1 3,444 62,881 71 59 21 108
Total loans to and receivables from custo1 ) 2018: - Of which Storebrand 2) 2017: - Of which Storebrand
The majority of the loans at Storebrand consist of home loans to retail market customers. The home loans are approved and administered by Storebrand Bank, but an increasing share of the loans have been transferred to Storebrand Livsforsikring as a part of the investment portfolio. Storebrand Livsforsikring and SPP also have loans to companies as part of the investment portfolio. Storebrand Bank’s corporate market segment has largely been discontinued.
As of 31 December 2018, Storebrand had loans to customers totalling NOK 59.4 billion net after provisions for losses of NOK 0.1 billion. Of this, NOK 13 billion was to the corporate market and NOK 46.5 billion to the retail market.
The corporate market portfolio consists of income generating properties and development properties with few customers and low level of default that are primarily secured by mortgage in commercial property. Corporate market loans at Storebrand Bank have largely been discontinued and therefore everything other than NOK 0.1 billion of the loans has been provided by Storebrand Livsforsikring and SPP
The weighted average loan-to-value ratio for home loans is approximately 57 per cent. Over 97 per cent of home loans have a loan to value ratio within 85 per cent and approximately 99.6 per cent are within a 100 per cent loan to value ratio. Approximately 52 per cent of the home loans are within a 60 per cent LVR. The portfolio is considered to have a low to moderate credit risk.
Most of the risk for the Storebrand Group relates to the guaranteed pension products in the life insurance companies. These risks are consolidated in the Storebrand Life Insurance Group, which includes the Storebrand Livsforsikring AS, SPP Livförsäkring AB and the business in Ireland and Guernsey (BenCo). Other companies directly owned by Storebrand ASA that are exposed to significant risks are Storebrand Forsikring AS, Storebrand Helseforsikring AS, Storebrand Asset Management Group and Storebrand Bank Group.
In the asset management business, the principal risk is operational risk in the form of behaviour that can trigger claims and/ or impact on reputation. Since the asset management business is the principal manager of the insurance businesses, errors in asset management could result in errors in the insurance businesses.
In the case of direct private equity investments, the valuation is normally based on either the most recent transaction or a model in which a company that is in continuous operation is assessed by comparing the key figures with groups of equivalent listed companies.
Units Of the fund units, it is primarily private equity investments and property funds that represent the majority at level 3. Moreover, there are also some other types of funds, such as infrastructure funds and microfinance funds here. The majority of Storebrand ’s private equity investments are investments in private equity funds. These fund investments are valued based on the value reported by the funds. Most of the funds report on a quarterly basis, while a few report less often. Reporting typically takes place with a few months’ delay. The most recently received valuations are used as a basis, adjusted for cash flows and market effects in the period from the most recent valuation until the reporting date. For private equity, the market effect is calculated based on the development in value in the relevant index, multiplied by the estimated beta in relation to the relevant index.
Loans to customers The value of fixed-rate loans is determined by discounting the agreed cash flows over the remaining maturity by the current discount rate adjusted for market spread. The discount rate that is used is based on a swap interest rate (mid swap) with a maturity that corresponds to the remaining lock-in period for the underlying loans. The market spread that is used on the date of the balance sheet is determined by assessing the market conditions, market price and the associated swap interest rate. However, the fair value of loans to corporate customers with margin loans is lower than the amortised cost because certain loans run with lower margins that they would have done if they had been taken up as of the end of 2018. The value shortfall is calculated by discounting the difference between the agreed margin and the current market price over the remaining duration.
NOK million Equities Fund units Loans to customers Corporrate bonds Bond funds Investment properties
Net gains/losses on financial instruments -31 -2,397 42 10 134 -314
As of 31.12.18, Storebrand Livsforisikring had NOK 4.376 million invested in Storebrand Eiendomsfond Norge KS and Ruseløkkveien 26, Oslo. The investments are classified as “Investment in associated Ccmpanies and joint ventures” in the Consolidated Financial Statements.
Corporate bonds Corporate bonds at level 3 are microfinance funds, private equity debt funds and convertible bonds. They are not priced by a discount rate as bonds normally are, and therefore these investments are included in the same sensitivity test as private equity.
The valuation of property is particularly sensitive to a change in the required rate of return and the expected future cash flow. A change of 0.25 per cent in the required rate of return when everything else remains unchanged will result in a change in the value of Storebrand’s property portfolio of approximately 4.5 per cent. About 25 per cent of the property’s cash flow is linked to lease agreement. This means that the changes in the uncertain parts of the cash flow by 1 per cent result in a change in value of 0.75 per cent.
NOK million Total unlimited Group 1 limited Group 2 Group 3 Total
Total solvency capital available to cover the minimum capital requirement 34,623 31,591 1,089 1,942 39,294
Under Solvency II, the capital requirement from the CRD IV companies in the Group is included in accordance with their respective capital requirements. In a multi-sectoral financial group, all the capital requirements of the CRD IV companies are calculated based on their respective applicable requirements, including buffer requirement for the largest company in the Group (Storebrand Bank). This increases the total requirement from the CRD IV companies in relation to what is included in the Solvency II calculation. As at 31 December 2018, the difference amounted to NOK 232 million.
Guaranteed pension: Defined Benefit (fee based) Storebrand Life Insurance 3,086 3,142
Of which premium reserve transferred to company 4,566 2,758 1) Individual life and disability, property and caualty insurance 2) Group life, workers comp. And health insurance
Profit on bonds and other fixedincome securities at fair value 2,389 279 -1,470 1,198 286 912 3,664
Net income bonds to amortised cost, loans and accounts receivables 4,048 322 4,370 116 4,254 4,377
Write-downs/income recognition for loans and guarantees for the period -23 -13
Operating expenses (including maintenance and repairs) relating to properties that have provided rent income during the period 2) -327 -294
Allocation by company and customers: Total income from properties 1,487 2,556
Of which premium reserve transferred to company -4 238 -3 310
Guaranteed pension: Defined Benefit (fee based) Storebrand Life Insurance -1,219 -2,091
Of which premium reserve transferred to company -5,265 -3,982 1) Individual life and disability, property and caualty insurance 2) Group life, workers comp. And health insurance
Other changes in premium reserves customer funds with guaranteed return 6,149 331 3,386 9,866 10,021
The premiums and content of the defined-contribution pension scheme are as follows: - 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” was NOK 96,883 at 31 December 2018) - 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 2.5 % in 2018. 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.
NOK million 31.12.18 31.12.17 Present value of insured pension liabilities 1,018 994 Fair value of pension assets -913 -928 Net pension liabilities/assets insured scheme 105 66 Asset ceiling 5 Present value of unsecured liabilities 213 267 Net pension liabilities recognised in statement of financial position 317 338
”The table shows the percentage asset allocation of pension assets at year-end managed by Storebrand Life Insurance.”
Net pension cost recognised in profit and loss account in the period 203 207
Actuarial loss (gain) - change in other financial assumptions -17 -10
Sensitivity analysis pension calculations Storebrand’s risk associated with the pension scheme relates to the changes in the financial and actuarial assumptions that must be used in the calculations and the actual return on the pension funds. The pension liabilities are particularly sensitive to changes in the discount rate. A reduction of the discount rate will in isolation entail an increase in pension liabilities. For the Norwegian companies that have converted to defined contribution pensions as of 1 January 2015, the sensitivity has not been calculated, and the figures below illustrate the sensitivity for the Swedish companies.
Percentage change in pension: - The period's net pension costs -12 % 14 % 8 % -7 % 8 % -10 % -17 %
3) Employees can borrow up to NOK 7.0 million at a subsidised interest rate, which is set at 40 bp below the best current market interest rate. Excess loan amounts will be subject to market terms.
4) The summary shows the number of shares owned by the individual, as well as his or her close family and companies where the individual exercises significant influence, cf. the Accounting
Arne Fredrik Håstein 355 3,178 4,844 1) The summary shows the number of shares owned by the individual, as well as his or her close family and companies where the individual exercises significant influence, cf. the Accounting Act, Section 7-26.
STOREBRAND ASA – THE BOARD OF DIRECTORS’ STATEMENT ON THE FIXING OF SALARIES AND OTHER REMUNERATION OF EXECUTIVE PERSONNEL The Board of Directors of Storebrand ASA has had a dedicated Compensation Committee since 2000. The Compensation Committee is tasked with making a recommendation to the Board of Directors concerning all matters regarding the company’s remuneration of its Chief Executive Officer. The Committee is responsible for keeping itself informed and proposing guidelines for the determination of remuneration of executive employees in the Group. The Committee also acts as an advisory body to the Chief Executive Officer with regard to remuneration schemes that encompass all employees of the Storebrand Group, including Storebrand’s bonus and pension schemes. The Compensation Committee satisfies the follow-up requirements set forth in the remuneration schemes.
1.ADVISORY GUIDELINES FOR THE COMING FINANCIAL YEAR Storebrand aims to base remuneration on competitive and motivating principles that help attract, develop and retain highly qualified staff. Storebrand shall have an incentive model that supports the strategy, with emphasis on the customers’ interests and long-term perspective, an ambitious model of cooperation, as well as transparency that enhances the Group’s reputation. Therefore, the company will primarily stress a fixed salary as a means of overall financial compensation, and utilise variable remuneration to a limited extent. The salaries of executive employees are determined based on the position’s responsibilities and level of complexity. Comparisons with equivalent external positions are regularly made in order to adjust the salary level to the market rates. Storebrand does not wish to be a pay leader in relation to the industry.
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.
Pension scheme The company shall arrange and pay for ordinary group pension insurance common to all employees, from the moment employment commences, and in accordance with the pension rules in force at any given time. Since 2015, the company has had defined-contribution pension schemes for all employees. For group management, the calculated cash value of pension rights for pay above 12 G that was already earned as of the transition to a defined-contribution scheme will be paid out over a five-year period, with payment no later than 2019. The payment period is fixed regardless of whether the employee leaves the
Deductions are made to the termination pay for all work-related income, including fees from the provision of services, offices held, etc. The termination pay corresponds to the pensionable salary at the end of the employment, excluding any bonus schemes. The CEO is entitled to 24 months of termination pay. Other executive vice presidents are entitled to 18 months of termination pay.
Like other employees in Storebrand, executive employees have an opportunity to purchase a limited number of shares in Storebrand ASA at a discount in accordance with the share programme for employees.
4. STATEMENT ON THE EFFECTS OF SHARE-BASED REMUNERATION AGREEMENTS ON THE COMPANY AND THE SHAREHOLDERS A proportion of the executive management’s fixed salary will be linked to the purchase of physical Storebrand shares with a lock-in period of three years. The CEO can decide that a limited group of employees shall be covered by an equivalent scheme. The purchase of shares will take place once a year.
Net deferred tax assets/liabilities in balance sheet 1) 2) 3) -1,714 -399
A. I In 2015, Storebrand Livsforsikring AS discontinued a wholly-owned Norwegian subsidiary, Storebrand Eiendom Holding AS, with a tax loss of approximately NOK 6.5 billion and with a corresponding increase in the loss carryforward. In January 2018, Storebrand Livsforsikring received notice of an adjustment to the tax assessment for 2015 (dated 21 December 2017) which claimed that the calculated loss was excessive, but provided no further quantification. Storebrand Livsforsikring AS disagrees with the arguments that were put forward and submitted its response to the tax authorities on 2 March 2018. The notice is unclear. Based on the notice, a provision was made in the annual financial statements for 2017 for an uncertain tax position. The best estimate of the reduction in the loss, where Storebrand’s interpretation of the Norwegian Tax Administration’s notice is used as a basis, is approximately NOK 1.6 billion (appears as a reduction in the loss carryforward and, in isolation, gives an associated increased tax expense for 2017 of approximately NOK 400 million). The case is still being processed by the Norwegian Tax Administration and Storebrand Livsforsikring AS had still not received any new information when the annual financial statements for 2018 were prepared. Therefore, the uncertain tax position has been carried forward.
Note 27: Intangible assets and excess value on purchased insurance contracts
Currency differences on converting foreign units -3 -221 -15 -17 -256 590
Currency differences on converting foreign units 132 15 -1 147 -363
Intangible assets linked to the banking business A cash flow based valuation based on the expected result after tax is used when calculating the utility value of the banking business. Budgets and forecasts approved by the Board for the next three years (2019 to 2021) are used as the basis for the valuation.
The cash flow is based on two elements, profit/loss after tax to equity and change in expected regulatory tying-up of capital. It is also assumed that all capital in addition to regulatory tied-up capital, can be withdrawn at the end of each period. For the period after 2021, a growth rate of 2.0 percent has been used for the retail market which is also included in the calculation of the terminal value.The utility value is calculated using a required rate of return after tax of 5.4 per cent. The required rate of return is calculated based on the risk-free interest rate and added to a premium that reflects the risk of the business.
There will be uncertainty related to the assumptions that have been made in the valuation. The value will be affected by the assumptions for the interest rate margin, expected losses on lending, growth parameters and capital requirements, as well as what required rate of return is assumed, etc. It is pointed out that the aim of the calculations is to ensure adequate reliability that the utility value, cf. IAS 36, is not lower than the recognised value in the accounts. Simulation with reasonable, as well as conservative, assumptions indicates a value for the investment that justifies the book .
There will be uncertainty related to the assumptions that have been made in the valuation. The value will be influenced by the assumptions regarding expected returns in the financial markets, costs, management fees, growth parameters, and the required rate of return that is used as a basis. Please note that the aim of the calculations is to achieve a satisfactory level of certainty that the utility value, cf. IAS 36, is not lower than the value recognised in the accounts. Simulation using reasonable, as well as conservative, assumptions indicates a value for the investment that justifies the book value.
Calculations related to the future will be uncertain. The value will be impacted by various growth parameters, expected return and the required rate of return used as a basis, etc. Please note that the aim of the calculations is to achieve a satisfactory level of certainty that the utility value, cf. IAS 36, is not lower than the value recognised in the accounts. Simulation with reasonable and also conservative assumptions indicates a VIF that justifies the capitalised value.
NOK million Useful economic life Depr. rate Depr. method Book value 2018
In the Group’s financial statements, securities funds in which Storebrand has an ownership percentage of around 40 per cent or more, and which are also managed by management companies within the Storebrand Group, are consolidated 100 per cent on the balance sheet. Minority ownership interests in consolidated securities funds are shown on one line for assets and correspondingly on one line for liabilities. In consequence of other investors in the funds being able to request redemption of their ownership interests from the respective funds, such are deemed to be minority interests that are classified as liabilities in Storebrand’s consolidated financial statements.
Investments, held to maturity Fair value, held for sale Fair value,
Write-downs of loans losses -63 -80 1) Of which Storebrand Bank 29 360 2) Of which Storebrand Bank 28,464 27,257
Net non-performing loans 1) 108 222 1) The figures apply in their entirety Storebrand Bank
Other properties: Cultural/conference centres in Sweden 2) 224 264 6,8 14,0 18,757
Allocation by company and customers: Properties - customers with guarantee 26,333 25,857
2) All of the proporties in Sweden are appraised externally. The appraisal is based on the required rates of return in the market (including 2 per cent inflation)
Allocation by company and customers: Equities and fund units - company 295 363
Nominal volume Financial derivatives are related to underlying amounts which are not recognised in the statement of financial position. In order to quantify the scope of the derivatives, reference is made to amounts described as the underlying nominal principal, nominal volume, etc. Nominal volume is arrived at differently for different classes of derivatives, and provides some indication of the size of the position and risk the derivative presents.
Total insurance liabilities - life insurance 244,890 179,177 5,298 13,802 443,167 434,657 1) Including personal risk and employee insurance of the Insurance segment.
Claims reserve 581 632 - of which IBNS 553 602 - of which administration reserve 28 30
Fair value hedging of the interest rate risk and cash flow hedging of the credit margin Storebrand uses fair value hedging for interest risk. The hedged items are financial assets and financial liabilities measured at amortised cost. Derivatives are recognised at fair value over profit or loss . Changes in the value of the hedged item that can be attributed to the hedged risk are adjusted in the book value of the hedged item and reconised in the income statement.
Storebrand utilises cash flow hedging of its credit margin. The hedged items are liabilities that are measured at amortised cost. Derivatives are recognised at fair value in the accounts. The proportion of the gain or loss on the hedging instrument that is deemed to be effective hedging is recognised in total comprehensive income. The proportion is subsequently reclassified to profit or loss in step with the hedged item’s effect on earnings
Book value of bonds pledged as collateral for the bank's lending from Norges Bank 1,205 888
Total contingent liabilities 10,853 11,472 1) The debt instrument is conditional upon the company being released from administration
For further information about close associates, see notes 29 and 40.
In December 2018, an agreement was entered into for the sale of Nordben Life and Pension Insurance Company Ltd. The execution of the transaction is conditional upon government approval and is expected to be completed in the first quarter of 2019.
On February 12th, Storebrand Asset Management AS signed an agreement to acquire 100 % of the shares in Cubera Private Equity AS (Cubera). The purchase price of the acquisition is NOK 300 million. The purchase price may increase with up to NOK 225 million related to fundraising to new funds managed by Cubera.The transaction is settled with cash only. The transaction is contingent on public and private approvals. The transaction is expected to be completed during the first half of 2019.
Net income and gains from financial instruments: - equities and other units 3 1 - bonds and other fixed-income securities 3 26 36 - financial derivatives/other financial instruments 3 -7 -4
Own share bought back 2) 3 48 50 1) 467,813,982 shares with a nominal value of NOK 5.
Classification and valuation policies Assets intended for permanent ownership and use are classified as fixed assets, and assets and receivables due for payment within one year are classified as current assets. Equivalent policies have been applied to liability items.
Financial instruments Equities and units Equities and units are valued at fair value. For securities listed on an exchange or other regulated market, fair value is determined as the bid price on the last trading day immediately prior to or on the balance sheet date.
Any repurchase of own shares is dealt with as an equity transaction, and own shares (treasury stock) are presented as a reduction in equity.
Bonds and other fixed income securities Bonds and other fixed income securities are included i the statement of financial position from such time the company becomes party to the instrument’s contractual terms and conditions. Ordinary purchases and sales of financial instruments are recognised on the transaction date. When a financial asset or a financial liability is initially recognised in the financial statements, it is valued at fair value. Initial recognition includes transaction costs directly related to the acquisition or issue of the financial asset/liability.
Other benefits -6 -10 1) See the spesification in note 5
The premiums and content of the defined-contribution pension scheme are as follows: – 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” was NOK 96,883 as at 31 December 2018)
– 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
Net pension liabilities in the statement of financial position 161 176
PENSION ASSETS ARE BASED ON THE FINANCIAL ASSETS HELD BY STOREBRAND LIFE INSURANCE, WHICH ARE COMPOSED OF AS PER 31.12.: NOK million 2018 2017
Net pension cost booked to profit and loss accounts in the period 9 7
Other reporting duties 33 239 1) Odd Arild Grefstad is the CEO of Storebrand ASA and the amount stated in the note is the total remuneration from the Group. He has a guaranteed salary for 24 months after the ordinary period of notice. All work-related income including consulting assignments will be deducted. 2) A proportion of the executive management’s fixed salary will be linked to the purchase of physical STB shares with a lock-in period of three years. The purchase of shares will take place once a year. 3) Pension costs include accrual for the year. See also the description of the pension scheme in Note 5.
4) The Storebrand Group changed external auditor in 2018. Auditing expenses include expenses for both PwC and Deloitte.
For further information on senior employees, the Board of Directors and the Board’s statement on fixing the salary and other remuneration of senior employees, see note 24 in the Storebrand Group.
Net deferred tax asset/liability in the statement of financial position 47 134
Storebrand Livsforsikring AS 1) Oslo 100% 13,788 13,703 Storebrand Bank ASA 2) Oslo 100% 2,309 2,239
Cognizant Technologi Solutions Lithyanua UAB Vilnius - 6 1) Group contribution in 2018 of NOK 85 million as capital contribution. 2) Group contribution in 2018 of NOK 70 million as capital contribution. 3) Group contribution in 2018 of NOK 415 million as capital contribution.
The rating classes are based on Standard & Poors’s NIG = Non-investment grade.
NOK million 0-6 mnd 6-12 mnd 1-3 år 3-5 år Total verdi Balanseført verdi
Total bond and bank loans 2) 1 813 2 270 1) Loans with fixed rates are hedged by interest swaps, which are booked at fair value through profit and loss. Changes in values of loans that can be related to the hedged risk are included in the carrying amount and included in the result. 2) Loans are booked at amortised cost and include earned not due interest.
Profit and loss account items: Group contributions and dividends from subsidiaries 4,131 2,154
Statement of financial position items: Due from group companies 4,092 2,207
– Declaration by the members of the Board and the CEO
In the best judgment of the Board and the CEO, the annual financial statements for 2018 have been prepared in accordance with applicable accounting standards, and the information in the financial statements provides a fair and true picture of the parent company’s and Group’s assets, liabilities, financial standing and results as a whole as at 31 December 2018. In the best judgment of the Board and the CEO, the annual report provides a fair and true overview of important events during the accounting period and their effects on the annual financial statements for Storebrand ASA and the Storebrand Group. In the best judgement of the Board and the CEO, the descriptions of the most important elements of risk and uncertainty that the group faces in the next accounting period, and a description of related parties’ material transactions, also provide a true and fair view.
Key Audit Matter How our audit addressed the Key Audit Matter
The Group has investment properties that mainly consists of office and retail properties. We have focused on investment property because it represents an estimate
Through our audit we have assessed and tested design and effectiveness of established controls for review of applied assumptions and calculation methods, including the company’s internal valuation of investment properties. We particularly examined whether
We obtained, read through and understood the internal valuation model. We concluded that the model contain the elements required by the financial reporting framework and therefore is appropriate as a basis for determining fair value on the Group’s investment properties. We tested whether, and concluded that the model made mathematically correct calculations.
In our audit we considered design and tested effectiveness of Storebrand’s established controls over
financial assets represent a substantial part of the assets in the statement of financial position, and because the fair value in certain instances will have to be estimated using valuation models that apply judgement.
Storebrand has established a governance model and control activities related to the IT systems. We obtained an understanding of the Group’s governance model and control activities for the IT systems that were relevant for the financial reporting.
We have focused on this area as Storebrand’s financial reporting systems and operations are dependent on complex IT systems. Potential weaknesses in automated processes and associated ITdependent manual controls may cause problems related to the ongoing operations of the IT systems and risk of misstatements. Refer to note 6 for a further description of the Group’s management and operation of the IT systems
We conducted testing of selected general IT controls regarding access management, change management, and IT operations. The audit team has performed testing of application controls for key IT systems. We concluded that we could rely on these controls in our audit.
The Board of Directors and the Managing Director (Management) are responsible for the preparation in accordance with law and regulations, including fair presentation of the financial statements of the Company in accordance with the Norwegian Accounting Act and accounting standards and practices generally accepted in Norway, and for the preparation and fair presentation of the consolidated financial statements of the Group in accordance with International Financial Reporting Standards as adopted by the EU, and for such internal control as management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the financial statements, management is responsible for assessing the Company’s and the Group’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern. The financial statements of the Company use the going concern basis of accounting insofar as it is not likely that the enterprise will cease operations. The consolidated financial statements of the Group use the going concern basis of accounting unless management either intends to liquidate the Group or to cease operations, or has no realistic alternative but to do so.
• identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error. We design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.
• conclude on the appropriateness of management’s use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Company and the Group's ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Company and the Group to cease to continue as a going concern.
2. Financial capital and our investment universe Return On Equity: Return on equity
Dividends: Storebrand aims to pay a dividend of more than 50% of Group result after tax. The Board of Directors´ ambition is to pay ordinary dividends per share of at least the same nominal amount as the previous year. Ordinary dividends are subject to a sustainable solvency margin of above 150%. If the solvency margin is above 180%, the Board of Directors intends to propose special dividends or share buy backs.
Tonnes CO2e per 1 million of sales income NOK/SEK (vs index): Results per Q3 2018 based on TCFD’s definition. Total carbon footprint is the sum of the companies’ carbon emissions over the companies’ revenues, weighted for our ownership in the respective companies. The measurement unit shows carbon emissions per million fund currency in NOK.
Water consumption, property management (Norway): Water consumption in cubic meters per square meter of heated property area in direct real estate investments under operational control in Norway and Sweden. Consumption measured and registered in the environmental monitoring system.
Waste sorting, property management (N): Rate of waste from building operations including tenants, sorted at the source for recycling. The rest fraction is further sorted mechanically at the waste recycling centre, where non-recyclables goes to incineration with heat recovery. Includes direct real estate investments under operational control in Norway.
3. Customer and Community Relations Net Promoter System Norway Retail Market: Net Promoter System (NPS) is a measurement tool for customer satisfaction where the customer gives a score from 0 to 10 with 10 as the best result
Net Promoter System Sweden Corporate Market (priority enterprises): Net Promoter System (NPS) is a measurement tool for customer satisfaction where the customer gives a score from 0 to 10 with 10 as the best result
4. People and systems E-Learning courses in ethics/anti-corruption: Number and % of employees that finish the e-learning course (ethics/anti-corruption) In addition, all board members and executive management have completed training in anti-corruption. Other employees must complete courses every 3 years.
Gender-balanced management: Share of female employees. Defined as a management position with personnel responsibilities. Project managers are not included.
Number (share) of men/ women at executive levels 1–3: Level 1= Chief Executive Officer, Level 2 = Executive management, Level 3 = Reporting to executive management
Senior management, women’s share of men’s salary per position cateogory (Hay Grade 21-24)/All employees, women’s share of men’s salary per position category (Hay Grade 13-20): The figures only applies for Storebrand in Norway. Hay Grade above 24 is not included, as only men are represented here (applies for 3 positions only). Hay Grade is a widely recognised method to enable organisations to map and align roles. The system is used by several organisations in Norway and internationally. The systems allows for comparisons of salaries for positions with similar demands to competence, experience and complexity. The system is used for comparing salaries for positions across the organisation and similar positions with similar Hay Grade in the labor market.
Paper consumption, head offices, kg per full-time employee: Consumption of office paper (copy- and bond paper), envelopes, advertising, including externally reprinted and regulatory letter attachments in Kg per full time employee in both Norwegian and Swedish operations.
Scope 2 per employee: Tonnes CO2-equivalents, measured in accordance to Greenhouse gas protocol, per FTE
Ensure good public pension schemes and framework conditions. Contribute expertise in pension products and sustainable investments
Sustainable investments Fund products, exclusion of companies from our investment universe, development of an investment policy for sustainable investments
GRI 102 102-3 Location of head-quarters Professor Kohts vei 9, Lysaker, Oslo, Norway
GRI 102 102-4 Location of operations Section 1. This is Storebrand Organisation
Section 7. Audtors’ Report Group result Group result by business area
Information on employees and other workers a. Women in permanent positions: 795, men in permanent positions: 879, women in temporary positions: 17, men in temporary positions: 14 b. Permanen in Norway 1216, Permanent in Sweden: 458, Temporary in Norway: 28, Temporary in Sweden: 11 c. Women full-time: 762, Men full-time: 878, Women part-time: 50, Men part-time: 15 d. N/A e. N/A
Our vision and driving force Good environmental and working conditions throughout the entire value chain
GRI Index An index of the GRI indicators we are reporting on and where the report contains information about the indicators follows below.
Section 1: This is Storebrand, as well as Sections 2, 3 and 4, where the approach to each major theme is discussed.
Overall strategic objectives, About the materiality analysis 102-47 List of material topics Section 1. This is Storebrand Section 9. Sustainability data
Section 9. Sustainability data GRI Index 102-49 Changes in reporting No changes Section 9. Sustainability data GRI Index 102-50 Reporting period 2018 Section 9. Sustainability data GRI Index 102-51 Date of previous report Storebrand Annual Report for 2017
This report has been prepared in accordance with the GRI Standards: Core option.
Directors’ Report: Financial objectives and Section 2: Provide a return to the owners: Approach/initiatives /goals and ambitions
Financial implications and other risks and opportunities due to climate change
Section 4 People and systems, Section 2 Financial capital and our investment universe
Section 4: Order in our own house, Section 2: A driving force for sustainable investments: Results/key performance indicators 305-4 GHG emissions intensity
Section 2 Financial capital and our investment universe, Section 4 People and systems
Section 2. Financial capital and our investment universe, Section 4: People and systems
Section 2: A driving force for sustainable investments, Section 4: Good environmental and working conditions throughout the entire value chain
GRI 415 415-1 Political contributions Do not make contributions to political parties
Lifelong savings and Engaging, relevant and responsible advisory services for customers: Why/approach
Lifelong savings and Engaging, relevant and responsible advisory services for customers: Results and key performance indicators
Percentage and number of companies held in the institution's portfolio with which the reporting organisation as interacted on evironmental or social issues.
We have examined whether Storebrand ASA has developed GRI Index for 2018 and measurements and reporting of key performance indicators for sustainability (sustainability reporting).
Tasks and responsibilities of management Management is responsible for the GRI Index and that the index is developed in accordance with the Standards published by The Global Reporting Initiative. Management is also responsible for key performance indicators for sustainability and that these are developed in accordance with the definitions given in the tables at the end of the chapters «Financial capital and our investment universe», «Customer and community relations», and «People and systems». Their responsibility includes developing, implementing and maintaining internal controls that ensure the development and reporting of the GRI Index and key performance indicators for sustainability.
Storebrand’s GRI Index is an overview of which principles, aspects and indicators from the The Global Reporting Initiative guidelines that Storebrand ASA use to measure and report on sustainability; together with a reference to where material sustainability information is reported. Storebrand’s GRI Index 2018 is available on Storebrand’s website (www.Storebrand.no/sustainability/reports). We have examined whether Storebrand has developed a GRI Index for 2018 and whether mandatory disclosures are presented according the Standards published by The Global Reporting Initiative (www.globalreporting.org/standards) (criteria).
Engagements ISAE 3000: “Assurance engagements other than audits or review of historical financial information".
Our work involves performing procedures to obtain evidence that Storebrand’s GRI Index 2018 and key performance indicators for sustainability are developed in accordance with the Standards published by The Global Reporting Initiative and the criteria for reporting and measurement that are given in relation to each table containing key performance indicators. The procedures selected depend on our judgement, including assessments of the risks that the sustainability reporting as a whole are free from material misstatement, whether due to fraud or error. In making those risk assessments, we consider internal control relevant to the preparation of the subject matter. Therefore, we design procedures that are appropriate to the circumstances, but not for the purpose of expressing an opinion on the effectiveness of internal control. Our control also includes an assessment of whether the applied criteria are appropriate and an assessment of the overall presentation of the subject matter.
Our controls include meetings with representatives from Storebrand ASA that are responsible for the key areas covered by the sustainability reporting, including responsible for investing, HR and those responsible for the sustainability reporting for Storebrand ASA’s own operations and real estate portfolios; evaluating internal controls and procedures for reporting key performance indicators for sustainability; collecting and reviewing relevant information that supports the presentation of key performance indicators; evaluating the completeness and accuracy of the key performance indicators; and controlling the calculations of key performance indicators based on an assessment of the risk that the key performance indicators contain information that is incorrect.
In our opinion, sufficient evidence has been obtained and we consider that our work provides an appropriate basis to form our conclusion with a limited level of assurance.
The GRI Index is, in all material respects, developed and presented in accordance with the requirements of the Standards published by The Global Reporting Initiative; and