Page 1, Photographer: Mikael Svensson/Johner Page 5, Photographer: Nathan Anderson/Unsplash Page 6, Photographer: Ole Berg-Rusten, NTB Page 9, Photographer: Alexey Topolyanskiy /Unsplash Page 17, Photographer: Bevan Goldswain/Offset.com Page 19, Photographer: Aurora Photos, USA / Offset.com Page 20, Photographer: Michael Nolan /Offset.com Page 23, Photographer: Unsplash Page 25, Photographer: Sarah Bridgeman/Offset.com Page 26, Photographer: Shutterstock/TunedIn by Westend61 Page 27, Photographer: Maskot/Offset.com Page 30, Photographer: Olga Kashubin Page 32, Photographer: Shutterstock/KYTan Page 35, Photographer: Maskot Bildbyrå /Johnér Bildbyrå AB Page 37, Photographer: Shutterstock/Syda Productions Page 38, Photographer: Kate Vredevoogd/Offset.com Page 43, Photographer: Shutterstock / Halfpoint Page 45, Photographer: Shutterstock Page 47, Photographer: Colourbox.com Page 51, Photographer: The Good Brigade/Offset.com Page 53, Photographer: Mikael Svensson / Johner Bildbyra AB / Offset.com Page 59, Photographer: Cultura / Offset.com Page 60, Photographer: Shutterstock / Kamil Macniak Page 63, Photographer: Unsplash Page 67, Photographer: Shutterstock/loreanto Page 71, Photographer: Storebrand archive Page 75, Photographer: Maskot/Offset.com Page 76, Photographer: Nixon Johansen Cáceres/Johnér Bildbyrå AB Page 77, Photographer: Martin Pålsson/Offset.com Page 85, Photographer: Shutterstock/Westend61 Premium Page 197, Photographer: Maskot/Offset.com Page 209, Photographer: Luigi Vaccarella/SIME Page 221, Photographer: Johnér Images/Karl Forsberg
Storebrand is Norway’s largest private asset manager. A buoyant financial market combined with prudent management of assets under management (AuM) resulted in us managing a total of 831 billion Norwegian kroner on behalf of our customers at the end of 2019. We had a strong financial result, delivering a profit before amortisation of NOK 3.037 billion Norwegian kroner.
In a rapidly changing world, no business can take their existence for granted. The finance sector is undergoing a digital transformation, and our customers expect seamless experiences from all the products and services they buy. To meet our customers’ expectations to high quality digital services, we established two new roles to bring a stronger focus on technology and innovation into our group management team. This is in addition to an increased focus on digitalisation throughout our business.
We continue our focus on delivering products and services that create good financial returns and are also aligned with the objectives of the UN Sustainable Development Goals. Almost one third of our AuM is now invested in fossil-free solutions. The reduction in carbon emissions from our portfolio is driven primarily by customer expectations, as well as our duty to manage financial risk on behalf of our customers and shareholders. This fits well with our overall ambition to be net carbon neutral by 2050 - in line with the Paris Agreement. We became one of the 12 founding members of the Net-Zero Asset Owner Alliance in 2019. We came second in the Ethical Bank Guide’s ranking of sustainable financial institutions.
Storebrand is a financial group, headquartered in Oslo, Norway. We offer pension, savings, insurance and banking products to individuals, businesses and public enterprises. We work hard to understand our customers well enough to consistently meet their expectations. Customers shall be safe in the know ledge that we put their needs first.
Consists of the Group’s risk products in Norway and Sweden. This comprises health insurance in the corporate and retail markets, employer’s liability insurance and pension-related insurance in the corporate market as well ass property, accident, and personal risk insurance products in the Norwegian retail market.
From back left to front right: Liv Sandbæk (Member of the Board), Magnus Gard (Employee Representative), Arne Fredrik Håstein (Employee Representative ), Heidi Storruste (Employee Representative), Martin Skancke (Member of the Board) Karl Sandlund (Member of the Board), Laila S. Dahlen (Member of the Board), Didrik Munch (Chairman of the Board), Karin Bing Orgland (Member of the Board).
SUSTAINABILITY AS CORE BUSINESS In 2019, the UN released the results of the most thorough planetary health check ever undertaken, the IPBES3) report on biodiversity and ecosystem services. In conclusion, the report made it clear that human society is threatened from the accelerating decline of our planet’s natural life-support systems. The backdrop to this report is the UN special report on global warming in 2018, which concluded that the transition towards a low-carbon society requires accelerated action to keep warming under 2oC. The transition represents huge economic risks and opportunities that we as investors cannot ignore.
Companies with sustainability at the core of their business strategy are typically financially robust and well positioned to weather global climate and sustainability risks and to benefit from opportunities. A growing body of evidence indicates that companies with a comprehensive strategy in line with the SDGs and Paris Agreement will create better long-term returns and may be better positioned to succeed in future markets.
SUSTAINABILITY GOVERNANCE Sustainability is integrated in our business strategy and implemented across the entire business, including investments, products and product development, procurement, employment policies and business management.
At an operational level, our work on sustainability is divided into three areas: people and business management, products and services and communication and stakeholder engagement.
OVERALL STRATEGIC GOALS Storebrand’s ambition is to build a world-class savings group, supported by insurance. We create first-class customer experiences in the core areas of savings and pensions.
Our strategy is built upon three overall goals: maintain a leading position in occupational pensions, leverage a unique position in the private savings market and build our asset management services with strong competitive advantages and good growth opportunities. Our position as Norway’s leading provider of occupational pensions provides a solid foundation to further build our business, including as an emerging leader in the Swedish market. Broad insurance offerings to both retail and corporate markets are aimed at supporting our strategic goals.
Our strategy is based on a genuine commitment to sustainable investments. We create long-term returns for both our owners and customers.
• Developing robust yet flexible technological platforms is key to succeeding in satisfying customers’ needs, and in realising cost efficiencies in operations.
We are experiencing a transformation in the way customers buy our products, with rapid growth in sales through digital channels. In response to the increasing digitalisation of financial services, we implemented a new organisational structure, introducing three new business areas: Technology, Digital Innovation and People. Digitalisation creates new opportunities, enables new business models and partnerships, and the revised organisational structure will enable the Storebrand Group to more effectively capitalise on these.2)
2) For more details on our strategy, see Director’s Report 3) The Intergovernmental Science-Policy Platform on Biodiversity and Ecosystem Services
• We are a responsible employer. • Our processes and decisions are based on sustainability outcomes – from the board and management, who have the ultimate responsibility, to each employee who promotes sustainability in their respective business area.
We have identified three SDGs (right) which we can significantly impact by the way we manage our group’s business and people processes.
PRODUCTS AND SERVICES Storebrand is a leading player in the Nordic market and a pioneer within the field of sustainable investments. We have been at the forefront of sustainable investing since the mid 1990’s and were recognised for excellent performance on sustainable investments by UN PRI (Principles for Responsible Investments) in 2019. When our CEO was invited to speak at the COP 25 in 2019, this was an important recognition of our actions to reduce carbon emissions from our portfolios. All our assets are managed according to strict sustainability criteria. In addition, nearly one third of assets under management – NOK 277 billion – was invested in fossil free funds at the end of 2019. All assets under management in SPP Fonder are now fossil free. We have identified eight SDGs (below) where we can have the greatest impact through our investment activities. We use these sustainability goals actively in asset management, for example when applying our sustainability rating. In addition, we consider accountability and anti-corruption (SDG 16) when engaging with the companies we invest in (see page 28). For specific measures and targets related to these SDGs in our asset management, see the section Financial Capital and Investment Universe .
COMMUNICATION AND STAKEHOLDER ENGAGEMENT We are transparent about our work on sustainability, and report in accordance with several leading reporting standards, including GRI, TCFD and CDP, in line with expectations from a range of key stakeholders. Setting clear strategic ambitions, and communicating openly on progress towards specific targets are key success criteria in managing our stakeholder expectations.
MATERIAL ISSUES To ensure that we have a comprehensive and long-term approach to creating value for our shareholders, customers, employees and society at large, we conducted a materiality analysis in 2017. This has been adjusted, following ongoing stakeholder engagement, both in 2018 and 2019.
The focus areas and associated issues are presented in our materiality matrix above.
This integrated report is built around these four focus areas, with the approach, goals, initiatives and results stipulated under each section. Key performance indicators for each focus area are reported to the executive management regularly and to the board annually.
This report covers Storebrand’s business activities in Norway and Sweden. Environmental data specified in Section 6 of this report and in our official CDP Report excludes Skagen and Cubera offices in Norway as they have recently been integrated into the Group. From 2020, the boundary for our environmental data will be increased to include these offices. For more information on companies within the Storebrand Group, see page 207.
Climate Risk and Opportunity In developing our climate strategy, we have considered both how we affect climate change as well as how to avoid or mitigate being negatively affected by climate change and climate policy.
Norway. A potential trigger is if the policy is abruptly strengthened to achieve Norway’s goals based on the Paris agreement. A potential effect is a country-specific fall in interest rate.
Successful climate policy that delivers a swift transition to a low-emission society, achieving the goal of limiting average global warming to 1.5oC by 2100. No significant self-reinforcing mechanisms in the climate system are triggered. Climate changes are moderate, and worldwide economic implications are relatively minor as a consequence.
Low returns from companies unable to adapt to a low carbon economy, such as the risk of stranded assets6) in the short to medium term.
Delayed changes to climate policy result in average global warming above 2oC by 2100. The economic and policy implications are considerably more pronounced than in the first scenario. In the short term, the transition presents less challenges for companies than in scenario 1. Late and more demanding climate policy increases the risk of financial instability in the long term.
This is a scenario involving political failure and/or the triggering of major self-reinforcing mechanisms in the climate system, driving average global warming above 3oC by 2100 and resulting in economic instability in the long term.
The economic implications of the potentially catastrophic climate change impact resulting from scenario 3 cannot be meaningfully quantified. We have therefore based our assessment on scenari os 1 and 2.
5)Since climate risk has been integrated into our structured risk assessment framework, which only looks at these two terms, we have not included the longer- term risks occurring beyond 10 years 6)Stranded assets are assets that have suffered from unanticipated or premature write-downs, devaluations or conversion to liabilities
SCENARIO ANALYSIS European Central Banks and Supervisors have established the Network for Greening the Financial System (NGFS). Storebrand has used the NGFS framework to assess climate risks in different scenarios. The scenarios differ in two dimensions. One dimension is the strength of the physical risk and the other dimension is whether the transition is orderly or disorderly.
The scenario analysis incorporates findings from the Norwegian government’s Climate Risk Commission that relate to three core business areas: asset management, property investments, and insurance. Based on the scenarios below, we identified the potential risks and opportunities and assessed them in the short (1-3 years) and medium-long term (3-10 years)5). A simplified description of the scenarios used illustrated below:
In addition, Storebrand Asset Management stress tested its investments through the 2 Degrees Investing Initiative scenario analysis tool PACTA7) in 2019. 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 to reference portfolios.
CO2e per 1 million of sales income NOK/SEK (vs 22.1 Index) 8)
• Carbon footprint in bonds investments: 8.4 Tonnes CO2e per 1 million of sales income NOK/SEK (vs 14.8 Index)9)
• Number of active company engagements around climate -related risk and opportunity: 135.
• Equity investments in fossil energy, billion NOK/ percentage of equity investments: 7.5 BNOK/2.6%
TARGETS AND METRICS • 100% environmentally certified real estate by 2030
The share of direct property investments that held a green building certificate in 2019 was 41%. Our target for 2025 is to increase this to 74%.
7) Paris Agreement Capital Transition Assessment. 8) Data available up to Q3 2019. 9) Data available up to Q3 2019. 10) GRESB assesses and benchmarks the ESG performance of real estate assets, providing standardised and validated data to capital markets.
INSURANCE The direct impact on insurance liabilities from climate change is limited for Storebrand. The greatest climate-related financial risk for our real estate and casualty insurance business is physical risk in the form of increased payments due to climate -related damage. In the long term, rising sea levels and changes in weather patterns may also have an impact. We believe that transitional risks, such as changing customer behaviour, technological developments and new regulations, will affect the real estate and casualty insurance markets. Our most important initiatives to mitigate climate risks are: • Risk assessment and pricing: climate factors are included in risk assessment and pricing in the underwriting process.
• Diversified risk through national plan: Participation in Norwegian natural perils pool is statutory and provides joint reinsurance protection linked to property insurance for real estate and housing.
• Pilot project under the auspices of UNEP FI: We are currently participating as one of 18 insurance companies to further develop standardised reporting for insurance providers in accordance with TCFD. The work is expected to be finalised in 2020.
• Rewarding damage prevention: We actively communicate with our customers, encouraging damage prevention measures, such as securing property during periods prone to flooding.
26 Provide a return to owners and customers 27 A driving force for sustainable investments 33 Key performance indicators
Our dividend policy states that the aim is to pay an ordinary dividend of more than 50% of the group result after tax and at least the same nominal amount as the previous year. Ordinary dividends will be paid at a solvency margin of more than 150%. If the solvency margin is above 180%, the board intends to propose special dividends or share buy backs. To create further value, our ambition is to continue investment in prioritised growth areas and deliver an overall return on equity of at least 10%.
INITIATIVES In 2019 we announced that we will re-enter the Norwegian municipal occupational pension market following recent pension reforms. This opens up a completely new market estimated to be over double the size of the private sector market, when measured in assets under management (NOK 552 billion and NOK 248 billion respectively).
Storebrand’s asset management team further increased its focus on ESG-enhanced solutions in 2019. We acquired the private equity firm Cubera, strengthening our alternative investment offering. Storebrand asset management also launched some of its ESG funds for international sales.
Invest in companies that provide climate solutions and contribute to achieving the Paris Agreement.
Invest in companies that provide solutions within sustainable management and efficient use of natural resources. Promote circular economy and improved waste management during a product’s life cycle.
Invest in companies that promote energy efficiency and enable increased production, distribution and use of renewable energy in the global energy mix. Increase investments in clean energy infrastructure, grid, storage and technology.
Reduction of water use and GHG emissions within intensive livestock producers. Raise environmental standards in key sectors, such as palm oil.
Promote measures to avoid corruption and bribery related to corporate governance issues and systematic failure to detect fraud and corruption. Use voting rights to encourage greater accountability and transparency.
ENGAGING WITH COMPANIES TO REALISE SDGSSCORING INVESTMENT OUTCOMES FOR SDG OPPORTUNITIES
Companies with more than 5% of revenue from the production or distribution of tobacco or recreational drugs.
Companies that derive more than 5% of their revenue from the production or distribution or fossil fuel reserves exceeding 100 million tonnes CO2.
Our coal exit strategy commits Storebrand to excluding companies that derive high revenues from coal. Storebrand will effectively divest from coal investments by 2026.
Storebrand’s ambition is to have an investment portfolio that does not contribute to deforestation by 2025. A key objective is to ensure that we do not finance operations that are illegal, fail to protect high conservation value forests/land or violate the rights of workers and local people, as reflected in Storebrand’s policy on deforestation launched in 2019.
INITIATIVES Pathway Towards Decarbonisation We are members of Climate Action 100+, hailed as one of the most important global investor initiatives for tackling climate change, with more than 370 investors and USD 35 trillion in assets under management.
We participate in and support the Accounting for Sustainability (A4S) initiative13). In 2019, 37 CFOs worldwide, Storebrand’s included, committed to helping their organisation achieve net zero emissions.
We released a deforestation policy in 2019 to encourage the elimination of deforestation through engagement with companies and investors14). The policy lays out what we expect of companies regarding their disclosure and management of deforestation risks.
V) pr. 4th quarter 2018 16) Read our proxy voting policy at 17) Read more about the PRI Leaders Group at 18) 19) 20)
We had excluded 181 companies from our investment universe at the end of 2019 due to violations of our sustainability standard. Of these, 94 were due to serious climate and environmental damage, and 61 due to revenues exceeding 25% from the coal industry in line with our coal exit strategy.
Key performance indicators Result 2017 Result 2018 Result 2019 Goal 2020 Goal 2025
Billion NOK invested in fossil-free products 21) 60 68 277 N/A N/A
Carbon footprint from bonds investments: tonnes CO2e per 1 million NOK/SEK sales revenue (vs. index) New New 8(15) N/A N/A
Investment in solutions (solution companies, Green Bonds, and real estate with Green Building Certificate ): Billion NOK/percentage of AuM22) New 38.8 BNOK / 5.5% 53.7 BNOK/6.5% 8% 15%
Investment in solution companies, Billion NOK/Percentage equity investments New New 24.3 / 9.3% - -
Number / percentage votes at AGM to promote ESG issues25) New 530 / 41,6% 151 / 4.3% N/A N/A
Energy intensity, real estate investments 189 kWh/m2 198 kWh/m2 184 kWh/m2 183 kWh/m2 172 kWh/m2
CO2 emissions real estate investments26 ): total / tonnes CO2e per m2 10551 / 10.25 10818 / 9.96 10228 / 9.12 8.6 6,5
24) The number of companies engaged with has increased, while the percentage of investment universe has decreased due to an overall increase in the number of companies in our investment universe. 25) The total number of votes in 2018 was significantly higher in 2018 due to us testing out this model for engagement. In 2019, we launched our policy for voting, incorporating lessons learned from 2018. This has resulted in a more goal-oriented approach to active ownership, despite a reduction in total votes 26) Emissions factors have increased since we reported in 2018. We have therefore recalculated our emissions for 2017, 2018 and 2019 using the new factors in order to provide comparability over this three-year period 27) Di rect real estate investments in Norway only. Due to an earlier error in our calculation of sorted waste, this number has been revised for 2017 and 2018. Goals for 2020 and 2025 have also been increased to drive performance further.
36 Financial freedom in all stages of life 38 Engaging, relevant and responsible advice 40 Engaging our customers through digital experiences 41 Digital trust 42 Key performance indicators
Customers shall be secure in the knowledge that we manage savings in a highly professional manner, contributing to a good return on investment. We provide information and advice to our corporate customers so that they can help their employees making better financial decisions. We focus on building strong relations with our corporate customers and between Storebrand and individual employees.
We believe that the reasons we are a preferred provider of pension services include our customer seminars, easy access to qualified advisors and a simple communication without complex financial jargon.
In 2019 we developed an app that will provide customers with a complete overview of their expected financial situation during retirement.
RESULTS Nearly half a million Norwegians have checked their pension entitlement through our website since launching the service in 2013, and nearly 30% of these have purchased at least one product from Storebrand.
In 2019, 70,000 customers found information relating to their pension entitlement through our website.
We continuously work towards encouraging and expanding access to banking, insurance and financial services for all (target 8.10).
APPROACH The starting point for all customer contact is the principle of “the customer first”. This is reflected in our service standards: • Trustworthy – I keep what I promise and I am professional
• Caring – I treat everyone individually and I help them and give advice
High ethical standards, expert advisory services and a focus on customer care, are fundamental. Our advisers are authorised either through a national authorisation scheme for financial advisers (AFR) or the approval scheme for salespersons and advisors in the area of property and casualty insurance (GOS).
“Our ambition is to become the industry leader when it comes to customer satisfaction.”
Both schemes are overseen by the Financial Services Industry. Our authorisation and qualification requirements are communicated to customers across digital platforms.
Our ambition is to become the industry leader when it comes to customer satisfaction. Our goal for 2019 was to be among the top three. We also aim to improve customer relations and revenue per customer by increasing the number of products each customer has at Storebrand.
We are working on a project for customers who are nearing retirement, called Retirement Management. By offering pension advice, combined with smart digital solutions, we aim to realise the potential in a customer group with uncovered needs.
In 2019 we launched a new learning program for authorising new employees. We increased the number of authorised advisors and included bank and insurance advisors in the program. We also introduced a dedicated learning program for insurance advisors and started developing an authorisation program for credit advisors.
With a market share of 20% in 2019, we maintained our position as one of the market leaders in Individual Pension Savings (IPS) amidst strong competition.
WHY Of all the changes affecting our industry, technological progress and digitalisation are probably the greatest. Technology affects our entire business: our customers’ behaviour and expectations, opportunities to deliver services to customers, as well as opportunities to automate and transform how our products are delivered and experienced.
APPROACH Digital & Innovation was established as a separate commercial group unit in 2019, creating better integration of technology expertise into our business development and operations.
We maintain a close relationship with our customers in order to better understand their behaviour, challenges and service needs.
Employees of our corporate customers are now being served by My pension. This mobile app helps users understand the value of their pension schemes, how it influences their total saving needs, and what actions to take in order to ensure that savings generate a sufficient income throughout retirement. Our app for health insurance Get well was revamped with improved functionality, including direct booking of appointments and fully automated digital claims handling. We partnered with Eyr for in-app video consultations with doctors, Myworkout Go to measure and improve the physical age of our customers and incentivise better health outcomes, provided access to the user’s electronic health journal from Helsenorge, and Eprescription for viewing and renewing electronic prescriptions.
We developed and expanded our cooperation with the app Dreams, which motivates customers to save through a supportive community and personalised savings strategies. We developed a new service in the Dreams application in 2019, which supports Norwegian households in reducing their debt burden.
My pension was further developed in 2019, making the user experience more intuitive, catering to the needs of employees of our corporate customers. This includes a digital savings advisor.
RESULTS The total number of digital sales reached 150,000 in 2019, corresponding to over 40% of total sales, and an increase of almost 15% from 2018 and more than triple compared to 2016.
Results from the Digital Net Promotor System (Digital NPS), where customers are asked how likely they are to recommend Storebrand based on their digital experience, showed that more customers gave a very high score (9 or 10) than those giving a very low score (6 or lower). This indicates that customer satisfaction with our digital solutions continued to increase in 2019. The mobile application My pension, has a high ranking, and had been installed 17,000 times by the end of 2019.
Sajna, a fully digital occupational pension offered to customers in Sweden, won Digital Project of the Year at this year’s CIO Awards.
New technology and intelligent use of information, and personal data, enable us to better understand our customers and their needs. We can only do this because we have established a high level of trust amongst our customers. This will provide us with the necessary foundation for developing better, more relevant and more customer-centric products and services.
In cases where the risk of a breach is assessed as being either medium or high, customers are contacted directly by telephone or email. In such cases, we inform customers what has happened, what measures we have implemented, and, where necessary, what action the customer should take to protect their personal data.
GOALS AND AMBITIONS Our ambition is to engage our customers and build long-term relationships through delivering first-class customer experience in all channels. This requires that we take responsibility for safeguarding our customers’ rights under the Personal Data Act.
INITIATIVES The managing director of each company in the Group is responsible for personal data management, including ensuring that internal control procedures are implemented and reviewed regularly. All managers at Storebrand are responsible for ensuring that employees with access to personal data have the necessary competence and are suitably qualified to secure our customers’ personal data rights, through following our procedures for information security.
Information security and data protection training are mandatory for all employees and are a part of our onboarding program for new employees. Employees who collect, process or have access to customer data receive mandatory training in data privacy.
We also launched an improved version of our data protection declaration on our website and improved our online customer portal to provide individual customers with a better overview of their data protection settings31).
RESULTS In 2019 all employees handling customer data received mandatory training on data protection. All new employees received the same training. In addition, several topic-specific workshops were held throughout the Group.
In 2019, 48 incidents32) related to the processing of personal data were reported. We reported 10 of these as non-conformities (substantiated complaints) to the Norwegian Data Protection Authority in accordance with the General Data Protection Regulation.
Key performance indicators33) Result 2017 Result 2018 Result 2019 Goal 2020 Goal 2025
Recognised for sustainable value creation (Corporate Market Norway) New 2019 New 2019 #1 #1 #1
Customer satisfaction (Net Promoter System, Corporate Market Sweden) #8 #7 #5 Top 3 Top 3
Expected pension as percentage of salary (My Pension) 58% 59% 60% Increase Increase 33) We have discontinued reporting for two indicators from 2019: a) GDPR courses, due to this being an important indicator to check implementation of new routines. We are however confident that these routines work well and that all relevant employees receive GDPR training as part of their induction; b) Sustainable Brand Index scores for UK and Sweden are being replaced by other indicators. In addition, complaints are now discussed under section 6 below.
46 A culture for learning 47 Committed and courageous employees 48 Diversity and equal opportunities 50 Key performance indicators
APPROACH We recruit people who are dedicated to finding the best solutions for our customers. At Storebrand, all employees shall be able to develop in line with the company’s needs. In 2019, we developed our learning management systems to better facilitate access to digital learning resources, strengthening our employees’ ability to take responsibility for their own learning. A working life with increased focus on knowledge as competitive advantage and higher levels of autonomy, requires employees to master the skill of self-management. A key aspect of this is the ability to continuously and proactively acquire new knowledge and apply this to create good customer experiences.
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.
We continued the rollout of our working method “Build, Measure, Learn”, and our focus on developing an agile mindset in management training, self-organised learning networks and other gatherings. We aim to adopt this working method in product and service design throughout the Group.
RESULTS In 2019, we offered 115 courses via the Campus Storebrand digital learning platform. A total of 1949 people attended one or more courses and completed a total of 5,696 hours of learning, with an average of 2.9 hours per person. However, this number does not accurately reflect all digital learning taking place, given that many employees complete training on many other webbased platforms such as Udacity, Coursera and LinkedIn, which are not tracked for completion. By the end of 2019, more than 70 % of our employees35) had completed training for the new Personal Data Act.
GOALS AND AMBITIONS Our ambition is to strengthen employee satisfaction, job satisfaction and engagement through meaningful work, good management, a motivating working environment, development opportunities and trust in the management. Our managers are responsible for setting clear objectives and for encouraging employees to collaborate with peers around how to achieve both collective and individual goals.
RESULTS On average, 83% of the employees responded to the engagement surveys at least once during the last quarter of 2019. The engagement score measured in the surveys increased from 7.9 to 8.0 in 2019, on a scale of 1–10, where 1 is the lowest and 10 is the highest score. In the last half of 2019 the measurements also showed high scores in drivers regarding equality and diversity, freedom of opinion, high degree of autonomy, trust in open and honest communication with leaders and trust in colleagues doing quality work. The results also showed room for improvement on working environment regarding tools and equipment. Ongoing initiatives aimed at addressing these concerns are the upgrade of both hardware and software, with the ambition of fostering agile collaboration across the organisation.
Storebrand works systematically to ensure diversity and equality in recruitment, reorganisation processes, salary adjustments and offers of management training and other development initiatives.
Storebrand has participated in a tripartite program called the IA Agreement since 2002. This program is based on the premise that involvement in activity through work promotes good health and well-being, and that early, active intervention can prevent absenteeism. The Group’s managers have established routines for inclusive follow-up of employees in the event of illness.
GOALS AND AMBITIONS We aim to offer a good candidate journey throughout the recruitment process, ensuring that Storebrand is considered an attractive workplace. We will continue to develop our employees and promote individual development of management skills amongst women.
We aim to achieve decent work for all our employees. We have a goal of equal pay for work of equal value (target 8.5). Our policy on discrimination and our active promotion of good health and well-being at work support these objectives.
Throughout 2019, 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.
RESULTS Our work on diversity and gender equality continues to be a focus area going forward. At a group level, women account for 39% of all management level staff. This equates to 35% in Norway and 53% in Sweden. When it comes to employees, 45% are women in Norway and 53% are women in Sweden.
In 2019, 44% of Storebrand ASA’s board members were women. Three of the ten members (30%) of the executive management team were women. Unfortunately, this is a reduction compared to 2018. Among the managers who reported directly to the executive management, 41% were women.
The same number of women and men participated in the management development offerings of the Storebrand Academy and Storebrand Leadership Weekly, as well as in the Sandbox programme for summer interns and Storebrand Future Impact program for graduates.
The Group salary levels were reviewed in cooperation with the elected representatives during the salary adjustment process in 2019. We observed a slightly lower average salary for women than for men.
The average age in the Storebrand Group was 43 at the end of the year. Average seniority was eleven years in Norway and ten years in Sweden. The Storebrand Group had 1,742 employees37) as of 31 December 2019.
STOREBRAND ANNUAL REPORT 2019 38) From 2019 gender indicators for management levels 1-3 will only be reported as percentage 39) Changes to the reported figures for average salaries for 2018 are due to the fact that the boundary for reporting people data now includes Skagen, Cubera and Vardalsbruk.
This also applies to share of salary for men/women using the Hay grade scales.
Turnover rate for women for group New 4.1 % 4.7 % - -
Number women hired during the year New 78 78 - -
Female Directors in Group Board New 5 out of 9 4 of 9 50% 50%
Extended top management, share of men's salary per position category (haygrade 21-23) New 110.3 % 100.5 % 100% 100%
CEO - Average worker pay ratio New New 8.2:1 - -
Corruption is a criminal offence under the Norwegian Criminal Act 2005.
APPROACH We work actively against corruption throughout our business operations, with suppliers and other business partners.
Employees shall act with integrity and fully disclose any private business agreements or business-related services they provide to companies, individuals, friends or family members.
We expect all employees and contractors to act in manner that builds trust for both the individual concerned and for the Storebrand Group.
Gifts that are offered on behalf of Storebrand are subject to the same threshold value. No gifts shall be offered or accepted where there is an expectation of reciprocity, or to achieve any form of advantage, privately, or for any Storebrand company. All events held on behalf of Storebrand shall be consistent with our role in society, all content shall be professionally relevant, and shall otherwise adhere to our guidelines for events.
GOALS AND AMBITIONS We have a zero-tolerance policy towards corruption, and our ambition is to avoid all incidences of corruption.
16.6 We are committed to developing effective, accountable and transparent companies.
INITIATIVES The organisation uses e-learning to facilitate training in ethics, anti-corruption, anti-money laundering and terror financing. These courses are mandatory to complete every year to ensure solid business practice in line with our code of conduct.
We have developed a designated area on our intranet for anti-corruption, with information about our expectations to business conduct for employees, including routines for dealing with grievances, harassment and improper conduct. We have an independent, third-party managed whistle-blowing system40) where employees and external business partners can register concerns, including relating to corruption.
WHY We are a key player in the finance market in the Nordics. Our reputation is contingent upon our ability to avoid being misused to finance terrorism, launder money or commit any other type of financial crime.
APPROACH We have established guidelines to avoid money laundering (AML) and terror financing, which are reviewed and approved by the board. These guidelines build upon our ethical guidelines.
All employees are required to familiarise themselves with our guidelines for preventing financial crime, and shall complete our mandatory training program on AML and terror financing. All new employees complete mandatory training as part of their onboarding process.
The training also provides employees with a basic understanding of the regulatory framework concerning financial crime and terror financing, as well as our requirements to employees and managers. Senior managers and board members for the Group and for each subsidiary also receive mandatory training in financial crime.
GOALS AND AMBITIONS Storebrand shall act consistently and in compliance with relevant legislation regarding cases related to money laundering, terror financing and financial crime in general.
We work systematically to ensure that our companies are not used for money laundering, terror financing or other forms of financial crime. All employees shall take mandatory training annually.
RESULTS In 2019, 44 issues relating to financial crime were reported to the Norwegian National Authority for Investigation and Prosecution of Economic and Environmental Crime, and six issues to the police. Issues varied in gravity from suspected money-laundering, terror financing and tax evasion to document falsification.
“We work systematically to ensure that our companies are not used for money laundering, terror financing or other forms of financial crime.”
WHY At Storebrand, sustainability is integrated into our strategy, and we aim to be a role model. This is relevant for both the products and services we offer to our customers, but also for how we run our daily operations.
APPROACH As early as in 2008, Storebrand became «climate neutral», as Norway’s first financial group. We achieve this by setting stringent requirements and establishing specific goals to minimise our carbon footprint. Storebrand’s environmental management system has been certified by Eco-Lighthouse since 2009, and we report publicly on environmental performance annually.
41) So that the goal of limiting the average global heating to 1.5oC by 2100 is reached aligned with the Paris Agreement 42)The Science Based Target initiative is still working on which targets will be recognised as in line with the Paris Agreement
To reduce unnecessary waste, we removed all plastic water cups, and introduced a discount for bringing your own cup to the coffee bar.
We increased our electric car and electric bicycle fleet to make it easier and more reliable for employees to choose low- emissions travel where train travel is not feasible.
RESULTS We saw reduced emissions from our headquarters, but unfortunately saw an increase in air travel and a reduced sorting rate. We will implement several initiatives, including an internal carbon price and updating our travel policy. We started working on re-designing the sorting stations in the cafeteria. Measures will be followed up closely, and more initiatives implemented if necessary.
12.5 We aim to substantially reduce waste generation through prevention, reduction, recycling and reuse.
13.1 We strengthen resilience and adaptive capacity to climate-related hazards and natural disasters in our operations and in our investments.
APPROACH We set clear requirements to our suppliers and business partners, by Storebrand’s Standard Annex for Sustainability. This is an annex to all tender requests and supplier contracts. In addition to following our internal procurement guidelines, a key principle is that goods and services purchased shall support our key objective of cost effective, sustainable business operations.
43) The governing documents include the “Guidelines for Outsourced Activities”, “Guidelines for Granting
INITIATIVES We are 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, environmental management and business integrity. For purchases of certain goods, or goods over a certain threshold value, we ask suppliers to document the life cycle cost and environmental properties of these products. All suppliers should observe the Guidelines of the Ethical Trading Initiative and/or the SA 8000 Standard.
We continuously follow up strategic suppliers in the largest procurement categories. In 2019, we replaced all PCs for staff at our head office and through ongoing dialogue with our supplier, have ensured that all these PCs and all future IT hardware purchases are TCO-certified.
RESULTS In 2019, contracts exceeding NOK 1 million accounted for a total spend of NOK 2.6 billion. This represents 91% of our total spend and includes the management and development of direct property investments. Of this volume, 57% is environmentally certified in accordance with our procurement policy. This volume is distributed between 297 suppliers, 65 of which (22%) are certified against a recognised environmental management standard.
WHY As a leading financial institution in Norway and Sweden, our role as a corporate citizen is important. A part of our sustainability work includes being active in the society we operate in beyond our role as a provider of financial services.
APPROACH We have three main corporate citizenship activities: collaborations and sponsorships, donations and employee volunteering. These are aligned with our strategy, and should promote and increase awareness about sustainability, as well as demonstrating the connection between sustainability and financial prosperity.
Voluntary community activities are a strong part of the Norwegian culture, and people from local communities or sports teams regularly volunteer to help local sports clubs and activity centres. Our «We cheer for» competition is one way we can provide financial support to local and global initiatives that are beneficial for the environment and society.
RESULTS 337 YE start-ups competed in the sustainability category. The winning team invented a product that reduces micro-plastic waste from washing machines.
Scope 2 emissions tCO2 / tCO2 per FTE 320 / 0.19 201 / 0.13 179 / 0.11 - -
Water use48), main offices (m3 per m2) 0.3 0.29 0.32 0.31 0.3
Total waste Headquarters (total tonnes / kg per FTE) 201 / 122 209 / 130 203 / 123 200 / 121 190 / 110
E-learning49) completed: ethics (total / percentage of FTE) New New 1518 / 88.9 % 100% 100%
Shareholder matters FOREIGN OWNERSHIP As at 31 December 2019, foreign ownership totalled 56.2%, compared to 56.3% at the end of the 2018.
SHARE PRICE PERFORMANCE Shares in Storebrand yielded a total return (including dividends) of 16.9% during 2019. In the same period, the Oslo Stock Exchange’s OSEBX Index ended at 16.5%, whereas the European Insurance Index Beinsur yielded a total return of 24% for the corresponding period.
SHARE CAPITAL, RIGHTS ISSUES AND NUMBER OF SHARES Shares in Storebrand are listed on the Oslo Stock Exchange (Oslo Børs) under the ticker code STB. Storebrand ASA’s share capital at the beginning of 2020 was 2,339.1 million kroner. The Company has 467,813,982 shares with a nominal value of NOK 5. As of 31 December 2019, the Company owned 943,190 treasury shares, which corresponds to 0.2% of the total shares. The Company has not issued any options that can dilute the existing share capital.
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 2019, each employee was given the opportunity to buy shares in Storebrand. 820 employees, around 47%, participated and purchased a total of 361,970 shares.
Number of ordinary shares 31/12 (1000s of shares) 467,814 467,814 467,814 449,910 449,910 449,910
GENERAL MEETING Storebrand has one class of shares, each share carrying one vote. The Company holds its Annual General Meeting each year by the end of June. Shareholders who wish to attend the General Meeting must notify the Company no later than 4:00 p.m. three business days before the General Meeting. Shareholders who do not give notice of attendance before the deadline expires will be able to attend the General Meeting, but concede their right to vote.
SHAREHOLDERS’ CONTACT WITH THE COMPANY Shareholders should generally contact the operator of their securities account for questions or notification of changes, such as change of address.
68 Strategy 72 Capital situation, rating & risk 74 Regulatory changes 77 Working environment and HSE 78 Group financial results 83 Official financial statements
We continued to focus on our three strategic growth ambitions in 2019: Maintain a leading position in occupational pensions, leverage a unique position in the retail savings market and build on our asset management with strong competitive advantages and good growth opportunities. A broad insurance offering in both the retail and corporate market further supports the strategic ambitions.
A. Cost discipline B. SII capital management framework C. Increased return
We have the following operational goals to succeed with our strategic ambitions: • Maintain a market leading position within occupational pensions in Norway and continue the challenger role in Sweden with double-digit annual growth within occupational pensions; • Strengthen the Norwegian retail savings position through double-digit annual growth in savings; • Maintain a leading market position within asset management in Norway while strengthening our international presence; • Grow annual premiums by 5% within insurance at a combined ratio of 90-92%.
The decision to re-enter the municipal market for occupational pensions in Norway after recent pension reforms is an opportunity to further strengthen our position as the leading pension provider.
In the retail market, growth initiatives within insurance distribution contributed to an overall growth rate in the Insurance segment of 5%. The growth is primarily attributed to property and casualty (P&C insurance) in the retail market where premiums grew by 10% in 2019.
COMPETITIVE ASSET MANAGEMENT SERVICES – KEY RESULTS Continued strong growth in occupational pensions and competitive returns to customers contributed to NOK 124 billion in increased assets under management in 2019. Our role as Norway ’s largest private asset manager was affirmed with NOK 831 billion under management at year end.
*) After tax, adjusted for amortisation of intangible assets. This report contains alternative performance measures (APM) as defined by the European Securities and Market Authority (ESMA). There is summary of the
During the year, we increased the focus on ESG-enhanced investment solutions and launched several funds for international sales through Skagen’s existing distribution channels in Europe. To complement our institutional offering of alternative asset classes, we also acquired the private equity funds-offunds provider Cubera. Storebrand was in 2019 identified as an investor with excellent responsible investment practices in PRI Leader’s Group and the only Norwegian asset manager to receive this recognition.
The implementation of a common technological platform for our brands Storebrand, SKAGEN, SPP Fonder and Delphi was completed during the year. This will contribute to greater efficiency and enable further scalable growth in the future.
MANAGE BALANCE SHEET AND CAPITAL Historically, the core product used to be Defined Benefit pensions with a guaranteed rate of return. Guaranteed pensions are now in long-term decline and mostly closed for new business.
Just over half of the pension assets managed, or NOK 263 billion of reserves, still carry a guaranteed rate of return. Despite volatile interest rate markets in 2019, we strengthened our solvency ratio and delivered returns above the guaranteed rate. This has helped build additional customer buffers against potential future market shocks. The average policyholder with such a contract is over 62 years old, which means that the majority of these pensions will soon be under payment. These products are managed with strong cost control and a disciplined use of capital and risk taking in order to increase return to shareholders and customers.
DIVIDEND FOR 2019 The board has established a framework for capital management that links dividends to the solvency ratio. The dividend policy shall reflect the growth in fee-based earnings, more volatile financial market earnings and future capital release from the guaranteed business that is in long term run-off. The Board’s ambition is to pay a gradually and growing ordinary dividend. In addition, the expected release of capital will increase returns over time, primarily in the form of share buybacks.
The Board proposes to the Annual General Meeting an ordinary dividend of NOK 1,517 million, corresponding to an ordinary dividend of NOK 3.25 per share for 2019.
Trade tensions and weak economic indicators globally contributed to financial market uncertainty during 2019. While stock markets rebounded significantly during the year after sharp declines towards the end of 2018, global as well as Norwegian and Swedish long-term interest rates were volatile, ending the year at a lower level than at the start. However, the Norwegian and Swedish central banks increased rates in 2019, resulting in higher short-term rates compared with levels at the start of the year. The Norwegian central bank forecasts a stable policy rate. Market risks are managed within a well-established risk framework, described in more detail in the section on risk below.
Storebrand’s dividend policy: 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 above 150%. If the solvency margin is above 180%, the Board of Directors intends to propose special dividends or share buybacks.
We have maintained nominally flat costs between 2012 and 2019. This is despite assets under management nearly doubling in the period and with continued investments in selected growth initiatives. This implies a reduction in real costs. The cost ambition is excluding any performance related costs in Asset Management or potential acquisitions. Lower cost through automation, digitalisation and partnerships are expected to cover normal investments in business growth and inflation the coming years.
Capital Management The solvency ratio at the end of the fourth quarter was 176%, against our target of 150%. This means that the Group’s solidity is robust. We expect a gradual improvement of approximately 5 percentage points net of dividends in the solvency margin in the coming years form our ongoing business. Reduced capital requirements in the Guaranteed business may improve the solvency further. 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 a gradually and growing ordinary dividend. When the solvency margin reaches 180%, the board intends to initiate a share buyback program. The purpose of the buyback program is to return excess capital released from the guaranteed liabilities that are in long-term run-off. A review of the solvency level and related share buybacks will normally be conducted in connection with first half and full year results, starting first half 2020.
CAPITAL SITUATION We adapt 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 are important drivers 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.
Storebrand Life Insurance Group’s solidity capital consists of equity, subordinated loan capital, market value adjustment reserves, additional statutory reserves, conditional bonuses and risk equalisation reserves. The solidity capital strengthened by NOK 3.4 billion to NOK 62.4 billion in 2019. The market value adjustment reserve increased by NOK 3.3 billion due to good market performance and amounted to NOK 5.5 billion by the end of the year. Conditional bonuses increased by NOK 1.1 billion and amounted to NOK 9.3 billion. Additional statutory reserves increased NOK 0.5 billion due to preliminary application of the investment return and amounted to NOK 9.0 billion at the end of the year. The excess value of bonds and loans that are assessed at amortised cost decreased by NOK 0.3 billion due to increases in interest rates and amounted to NOK 4.7 billion as at 31 December 2019. The excess value of bonds and loans at amortised cost is not included in the financial statements.
Storebrand ASA (holding) 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. It held liquid assets of NOK 3.3 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 1.3 billion at the end of the year. This corresponds to a net liquidity ratio of 9.8%. The next maturity date for bond debt for Storebrand ASA is in May 2020. 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 3,230 million for 2019. Dividends allocated to shareholders amounted to NOK 1,517 million.
RISK Our risk management framework is designed to help protect customers, owners, employees and other stakeholders from adverse events or losses and covers all risks to which Storebrand is or may be exposed. Our main risks are business risk, financial market risk, insurance risk, counterparty risk, operational risk, climate risk50) and liquidity risk.
The Board of Directors of Storebrand ASA and the Boards of subsidiaries adopt a risk appetite and risk strategy at least annually. Risk-taking should contribute to achieving our strategic and commercial goals, including customers receiving a competitive return on their pension assets and Storebrand receiving adequate payment for assuming risk. Risk appetite is defined as the overall risk level and what types of risk are deemed acceptable. The guidelines from the risk appetite are incorporated in our risk strategy, which sets the targets and frameworks. Based on these, more detailed strategies are compiled for different risk categories. Storebrand publishes an annual Solvency and Financial Condition Report (SFCR) which helps customers and other stakeholders understand the risks in the business and how these are managed.
In property and casualty insurance, most of the risk is linked to developments in claims payments from car and home insurance. Climate change is one factor which may affect future claims (see page 21-23).
Savings Savings consists of unit-linked insurance and other non-guaranteed pensions, the asset management business and the banking business.
Guaranteed Pension Guaranteed Pension encompasses savings and pension products with guaranteed interest rates. The greatest risks are financial market risk and longevity risk.
The guaranteed insurance liabilities are sensitive to changes in interest rates, where lower rates will increase the value of the liabilities and make it harder to achieve the guaranteed rate. We aim to control the risk through the investments, but there is a residual risk from lower interest rates.
EUROPEAN REGULATIONS Solvency II 2020 review The European Insurance and Occupational Pension Authority (EIOPA) has launched a public consultation on changes in the Solvency II standard model. EIOPA has proposed changes in the interest rate risk module that appear to increase the solvency capital requirement for NOK and SEK. EIOPA will present final proposals to the Commission in June 2020, and final conclusions drawn by the Commission, the Parliament and the Council in 2022.
3. Reference values for carbon emissions (carbon benchmarks). The new EU regulations will establish standards for sustainable asset management and stipulate requirements for reporting and customer information. We consider this a positive step, providing improved rigour to financial and non-financial disclosure, better information to key stakeholders, as well as improved benchmarking through comparable data across the finance sector. Our current level of disclosure is deemed to be enough to meet the requirements of the proposed regulations, and as such do not represent a key risk in terms of compliance.
The Commission will consider developing a labelling scheme (EU Ecolabel) for sustainable investments based on the taxonomy. The taxonomy will come into force in December 2021.
The employer will cover asset management cost for contributions during current employment (active part) while the employee will cover asset management costs for previous earnings (pension capital certificates that are transferred to the new pension account).
A key aim of the reform is to reduce the costs associated with the administration of pension contributions from previous employers. This will in turn entail lower income for the providers.
When collective guaranteed pension contracts are transferred to other providers, the provider which the customer transfers from can withhold market value adjustment reserves up to two per cent of technical provisions. The Ministry of Finance has abolished this regulation with effect from December 2019. Storebrand views this as having a mainly positive impact on the market for public sector pensions, facilitating competition by creating a more level playing field and increasing transfer values for municipal customers moving from KLP.
SWEDISH REGULATIONS Official report on the premium pension (PPM) of the national retirement pension system The second report on the PPM was published in November 2019. From January 2021, a new law will require funds on the platform to be selected through a procurement procedure under new criteria for fees, quality and sustainability. The report proposes Sweden’s AP7 fund to be given the authority to manage the procurement proceedings in addition to managing the default investment option in the PPM system and run under the new name “Authority for the Premium Pension Fund Management”. The procurements are expected to start in 2021 and the reform shall be fully implemented by 2024. The PPM fund platform is a large distribution channel for Storebrand funds. The new fund platform is expected to offer fewer funds than what is available on the platform today.
New transfer market regulation A new regulation with the purpose of increasing the transferability of pensions policies came into force in January 2020. The new rules limit the amount of fees that can be charged upon transferring pensions rights to competing providers. In accordance with the new regulation, SPP adjusted its transfer fees. SPP is a proponent of increased transfer rights and welcomes the new regulation. The Swedish government has been asked by the parliament to propose further measures that could lead to further adjustments in the fee models.
Every year managers must confirm in writing that they have discussed ethics and ethical dilemmas, information security, financial crime and HSE in departmental meetings.
Storebrand’s absence due to illness has been at a stable low level for many years. Absence due to illness was 3.1% in Norway and 2.5% in the Swedish business. Storebrand has been an “inclusive workplace” (IA) company since 2002, and the Group’s managers have over the years built up routines for the follow -up of employees who are ill. All managers with Norwegian employees must complete a mandatory HSE course, in which following up illness is part of the training.
There was one injury to a staff member in 2019. No damage to property was reported, and no accidents were otherwise reported in the Storebrand Group in 2019.
Operational costs amounted to NOK 4,015 million (NOK 3,786), but adjusted for performance related costs, the consolidation of Cubera and restructuring costs, the Group’s underlying operational costs were in line with the cost target. Our goal is to keep the costs nominally flat between 2012 to 2020, which will entail a reduction in the real costs.
SAVINGS The Savings business had a year with strong growth in assets under management fuelled by good market returns, growth in new business and improved relative fund performance.
Extra Cautious Cautious Moderate Aggressive Extra Aggressive 2019 3 years Since inception
INSURANCE Insurance delivered an overall combined ratio and premium growth in in line with our ambition, supported by successful growth initiatives in the retail market. Higher disability claims in 2019 as opposed to a positive effect from dissolution of reserves in 2018 resulted in a lower insurance result in 2019.
Balance sheet and market performance The Insurance segment offers a broad range of products to the retail market in Norway, as well as to the corporate market in both Norway and Sweden. The total premiums written for the segment at the end of 2019 amounted to NOK 4.7 billion (NOK 4.5 billion), an increase of 5% in line with our growth target. Of these, NOK 1.9 billion (NOK 1.7 billion) is in the retail market and NOK 2.8 billion (NOK 2.8 billion) in the corporate market. Our growth in the retail market has increased both within P&C and Individual Life due to a strong contribution from sales agents. In combination with our own distribution channels, this should contribute to profitable growth. Margins within the segment remain attractive and Storebrand aims to continue grow its market share from today’s small levels.
GUARANTEED PENSION Guaranteed Pension delivered a strong financial and risk result supported by positive market developments.
Financial performance The profit for Guaranteed Pension amounted to NOK 1,029 million (NOK 1,148 million). While the operating profit and risk result improved in 2019, net profit sharing in 2019 was lower than in 2018 due to dissolution of reserves of NOK 200 million last year.
The risk result was NOK 215 million (NOK 191 million) in 2019, largely stemming from the Norwegian paid-up policy portfolio due to good disability results and reactivation.
The profit-sharing result was NOK 157 million (NOK 333 million) in 2019. The result has essentially been generated in SPP. The lower result in 2019 is explained by dissolution of reserves of NOK 200 million in 2018. Positive investment returns resulted in lower deferred capital contributions (DCC) in 2019.
All products achieved a return above the guaranteed rate on average in 2019, resulting in 16% growth in buffer capital. In Norway, the average value adjusted return was 5.5% while the average guaranteed rate was 3.2%. In Sweden, the average value adjusted return was 7.9% while the average guaranteed rate was 2.9%.
Financial performance The profit before amortisation in the Other segment was NOK 205 million (NOK 5 million) in 2019. The Fee and administration income as well as the operational costs declined in 2019 due the sale of Nordben and the run-off of the corporate bank.
The Storebrand Life Insurance Group is funded by a combination of equity and subordinated loans. Assuming the current interest rate at the end of 2019, interest expenses are expected to be approximately NOK 90 million quarterly.
53) Excludes eliminations. The segment result consists of the sum total of results for the business activities in Other plus eliminations.
Storebrand ASA reported a pre-tax profit of NOK 3,125 million in 2019, compared with NOK 4,074 million in 2018. Group contributions from investments in subsidiaries amounted to NOK 3,230 million, compared with NOK 4,131 million for the previous year.
The Board proposes a dividend of NOK 1,517 million to the General Meeting, corresponding to an ordinary dividend of NOK 3.25 per share for 2019 financial year.
Storebrand Group 86 Income statement 87 Statement of total comprehensive income 88 Statement of finacial position 90 Statement of changes in equity 91 Statement of cash flow 93 Notes
Storebrand ASA 171 Income statement 171 Statement of total comprehensive income 172 Statement of finacial position 173 Statement of changes in equity 174 Statement of cash flow 175 Notes 188 Declaration by member of the Board and the CEO 189 Independent auditor´s report
Total other comprehensive income elements that may be classified to profit/loss -204 -374
Total comprehensive attribute to: Share of total comprehensive income - shareholders 1,879 3,286
Intangible assets and excess value on purchased insurance contracts 27 6,220 6,106
Financial assets at amortised cost: - Bonds held-to-maturity 10,30,31 13,377 14,403
Financial assets at fair value: - Equities and other units 8,12,30,35 194,020 157,066 - Bonds and other fixed-income securities 8,10,12,30,36 128,127 133,531
Financial liabilities: - Liabilities to financial institutions 9,12,30 446 2 - Deposits from banking customers 9,12,30 14,404 14,419 - Other non-current liabilities 1,037
Net receipts/payments - loans to and claims from other financial institutions 443 -153
Cash and cash equivalents at the end of the period 1) 3,160 3,951 1) Consist of: Loans to financial institutions 41 318
Investment activities Includes cash flows for holdings in group companies and tangible fixed assets.
Cash/cash equivalents Cash/cash equivalents are defined as claims on central banks and loans to and claims from financial institutions. 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.
Note 28: Tangible fixed assets Tangible fixed assets and lease contracts
2. 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 and this exemption is applied for insurance contracts in the consolidated financial statements. This is discussed in section 14.
Financial instruments - IFRS 9 IFRS 9 Financial Instruments replaces the current IAS 39, and was generally applicable from 1 January 2018. However, for insurance- dominated groups and companies, IFRS 4 allows for either the implementation of IFRS 9 to be deferred (deferral approach) or to enter the differences between IAS 39 and IFRS 9 through other comprehensive income (overlay approach) until implementation of IFRS 17. The Storebrand Group qualifies for temporary deferral of IFRS 9 because over 90 per cent of the Group’s total liabilities as of 31 December 2015 were linked to the insurance businesses. For the Storebrand Group, IFRS 9 will be implemented together with IFRS 17, which is expected to be applicable from 1 January 2022.
Debt raised by issuance of securities AC AC 17,529 17,565 18,729 18,728
Insurance liabilities must be adequate and cover liabilities relating to issued insurance contracts. Various methods and principles are used in the Group when assessing the reserves for different insurance contracts. A considerable part of the insurance liabilities relate to insurance contracts with interest guarantees. The recognised liabilities related to Norwegian insurance contracts with guaranteed interest rates are discounted by the basic interest rate (which corresponds to the guaranteed return/interest rate) for the respective insurance contracts.
IBNS reserves are measured using actuarial models based on historical information about the portfolio.
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 IAS 17. The present value of fixed lease payments shall be recognised in the balance sheet as debt and the right to use the leased asset during the lease period is recognised as an asset. Short-term leases and leases in which the leased asset has a low value are not recognised. Storebrand has chosen to classify the right to use the asset as tangible fixed assets and the lease liability as other non-current liabilities. 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 increased assets and liabilities by approximately NOK 1.1 billion for the Storebrand Group on the transition date. Leases with a duration of less than 12 months as at 1 January 2019 and leases that include assets valued at less than NOK 50,000 will not be recognised in the balance sheet, but will be recognised as an operating expense over the lease period. For further information regarding the accounting effect of IFRS 16, see Note 28 Tangible fixed assets and leases.
Hedge accounting Storebrand has selected early implementation of “Interest Rate Benchmark Reform – Amendments to IAS 39 and IFRS 7” that was issued in September 2019. In accordance with the transitional rules, the amendments have been subsequently applied to hedging
arrangements that existed at the start of the reporting period or were identified thereafter and to the amount accumulated in the cash flow hedge reserve on that date. The amendments provide temporary relief from applying specific requirements for hedge accounting of hedging arrangements that are directly affected by the IBOR reform. This has the effect that the IBOR reform will not generally result in the conclusion of hedge accounting. However, all hedge effectiveness will still be recognised in the income statement. The stipulated amendments also determine when the relaxation of the rules shall no longer apply, which includes the uncertainty resulting from the Interest Rate Benchmark Reform no longer existing. See the discussion in Note 41.
FRS 17: IFRS 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.
There are no other new or changed accounting standards that have not entered into force that are expected to have a significant effect on Storebrand’s consolidated financial statements.
6. Consolidation The consolidated financial statements include Storebrand ASA and companies controlled by Storebrand ASA. Minority interests are included in the Group’s equity, unless there are options or other conditions that entail minority interests being measured as liabilities.
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 financial statements. The reason for this is that the result in the customer portfolio is assigned to the customers each financial year and must not influence the result and equity of the company. Pursuant to the life insurance regulations, transactions with customer portfolios are carried out at fair value.
9. Income recognition Premium income Net premium income includes the year’s premiums written (including savings elements, administration premium, fees for issuing Norwegian interest rate guarantees and profit element risk), premium reserves transferred and ceded reinsurance. Annual premiums are generally accrued on a straight-line basis over the coverage period.
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 relevant discounted cash flow is less than the carrying value, goodwill will be written down. 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.
12. Investment properties Investment 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.
Impairment of financial assets For financial assets carried at amortised cost, an assessment is made on each reporting date as to whether there is any objective evidence that a financial asset or group of financial assets have incurred losses.
Loans and receivables Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market, with the exception of assets that the company intends to sell immediately or in the near term that are classified as held for trading and those that the company upon initial recognition designates at fair value through profit or loss. Loans and receivables are recognised at amortised cost using the effective interest method. The category is used in the Norwegian life insurance business linked to insurance contracts with a guaranteed interest rate, and in the banking business.
Some of the Group’s insurance contracts contain embedded derivatives such as interest rate guarantees. These insurance contracts do not follow the accounting standard IAS 39 Financial Instruments, but instead follow the accounting standard IFRS 4 Insurance Contracts, and the embedded derivatives are not continually measured at fair value.
13-4. Hedge accounting Fair value hedging Storebrand uses fair value hedging for the interest rate risk. The items hedged are financial liabilities measured at amortised cost. Derivatives are recognised at fair value through profit or loss. Changes in the value of the hedged item that are attributable to the hedged risk adjust the carrying amount of the hedged item and are recognised through profit or loss.
Hedging of net investments Hedging of net investments in foreign businesses is recognised in the accounts in the same way as cash flow hedging. Gains and losses on the hedging instrument that relate to the effective part of the hedging are recognised through total comprehensive income, while gains and losses that relate to the ineffective part are recognised in the income statement. The total loss or gain in equity is recognised in the income statement when the foreign business is sold or wound up.
14-1. General – life insurance Claims for own account Claims for own account comprise claims settlements paid out, less reinsurance received, premium reserves transferred to other companies, and reinsurance ceded.
Insurance liabilities (premium reserve) The premium reserve represents the present value of the company’s total expected 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.
Premium fund, deposit reserve and pensioners’ surplus fund The premium fund contains premiums prepaid by policyholders as a result of taxation regulations for individual and group pension insurance and allocated profit shares. The contribution fund contains payments and deposits for employees who have been members for less than 12 months. Credits and withdrawals are not recognised through the income statement but are taken directly to the balance sheet.
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 as part of the buffer capital.
The claims reserve is a reserve for expected claims that have been reported, but not settled (RBNS). The reserve also covers expected claims for losses that have been incurred, but have not been reported (IBNR) at the expiry of the accounting period. In addition, claims reserves shall include a separate provision for future claims on losses that have not been settled.
18. Provision for dividends The proposed dividend is classified as equity until approved by the general meeting and presented as liabilities after this date. The proposed dividend is not included in the calculation of the solvency capital.
In the consolidated accounts, insurance liabilities with a guaranteed interest rate are included, but using different principles in the Norwegian and the Swedish activities. An immaterial asset (value of business in-force – VIF) linked to the insurance contracts in the Swedish activities is also included. This asset originated from Storebrand’s purchase of the insurance business. There are several factors that may have an impact on the size of the insurance liabilities including VIF, such as biometric factors relating to higher life expectancy, future returns and invalidity, as well as the development of future costs and legal aspects, such as amendments to legislation and judgments handed down in court cases, etc.
In the Swedish business, there are no contracts with an annual interest rate guarantee, but there are insurance contracts with interest rate guarantees which enable them to receive a guaranteed terminal value. 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 cost, mortality and other biometric 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.
Reference is also made to Note 12 in which the valuation of financial instruments at fair value is described in more detail.
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 consolidated income statement. Below is an overall description of the most important differences.
Net profit sharing Storebrand Livsforsikring AS A modified profit-sharing regime was introduced for old and new individual contracts that have left group pension insurance policies (paid-up policies), which allows the company to retain up to 20 per cent of the profit from returns after any allocations to additional statutory reserves. The modified profit-sharing model means that any negative risk result can be deducted from the customers’ interest profit before sharing, if it is not covered by the risk equalisation fund.
SPP Pension & Försäkring AB For premiums paid from and including 2016, previous profit sharing is replaced by a guarantee fee for premium-determined insurance (IF portfolio). 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 -11 -46 83 71 372 525
Buffer capital in % of customer reserves Storebrand Life Group 1) 8.6% 6.4%
Buffer capital in % of customer reserves SPP 2) 10.7% 8.7%
The boards of directors of both Storebrand ASA and the group companies have the overall responsibility for limiting and following up the risks associated with the activities. The boards set annual limits and guidelines for risk-taking in the company, receive reports on the actual risk levels, and perform a forward-looking assessment of the risk situation.
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.
Risk management shall ensure that the risk level at any time is compatible with the appetite for risk and within internal and regulatory frameworks. The Group seeks to reduce operational risk through an effective system for internal control. Risks are followed up through the management’s risk reviews, with documentation of risks, measures and the follow-up of incidents. In addition, Internal Audit carries out independent checks through audit projects adopted by the Board.
The insurance risk associated with an increase in life expectancy and thereby an increase in future pension payments (longevity) is the greatest risk for the Group. Other risks include disability risk and mortality risk. The life insurance risks are: 1. Long life expectancy – The risk of erroneously estimating life expectancy and future pension payments. Historical developments have shown that an increasing number of people attain retirement age and live longer as pensioners than was previously the case. There is a great deal of uncertainty surrounding future mortality development In the event of longer life expectancy beyond that assumed in the premium tariffs, the owner could risk higher charges on the owner’s result in order to cover necessary statutory provisions.
Over the last few years, a decrease in mortality and fewer young surviving relatives have been registered, compared with earlier years.
events that occur in the period. The risk result takes into account insured events that have not yet been reported, but which the company, on the basis of experience, assumes have occurred.
For guaranteed customer portfolios, the risk is affected by changes in the interest rate level. Falling interest rates are positive for the investment return in the short term due to price appreciation for bonds and interest rate swaps, but negative in the long term because it reduces the probability of achieving a return higher than the guarantee. Long-term interest rates fell slightly in both Norway and Sweden in 2019. Short-term money market rates increased slightly in both Norway and Sweden.
The composition of the assets within each sub-portfolio is determined by the company’s investment strategy. The investment strategy also establishes guidelines and limits for the company’s risk management, credit exposure, counterparty exposure, currency risk, use of derivatives, and requirements regarding liquidity
Foreign exchange risk primarily arises as a result of investments in international securities, including as a result of ownership in SPP.
Storebrand Life Insurance: The company hedges most of the foreign exchange risk in the customer portfolios on an ongoing basis. Foreign exchange risk exists primarily as a result of investments in international securities, as well as subordinated loans in a foreign currency to a certain extent. Hedging is performed by means of forward foreign exchange contracts at the portfolio level, and the currency positions are monitored continuously against a total limit. Negative currency positions are closed out no later than the day after they arose. In addition, separate limits have been defined so that active currency positions can be taken. Storebrand employs a currency hedging principle called block hedging, which makes the execution of currency hedging more efficient.
Storebrand Livsforsikring The annual guaranteed return to the customers follows the basic interest rate. 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.
that the return is below the guaranteed level. The risk management must therefore balance the risk of the profit for the year (interest rate increase) with the reinvestment risk if interest rates fall below the guarantee in the future. Bonds at amortised cost are an important risk management tool.
Sensitivity analyses The tables show the fall in value for Storebrand Life Insurance and SPP’s investment portfolios as a result of immediate changes in value 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. The stresses have been applied to the company portfolio and guaranteed customer portfolios as at 31 December 2019. The effect of each stress changes the return in each profile.
Sensitivity NOK million Share of portfolio SEK million Share of portfolio
SPP Pension & Insurance For SPP it is stress test 1, which includes a fall in interest rates, that creates the greatest impact. The overall market risk is SEK 3.5 billion, which is equivalent to 3.8 per cent of the investment portfolio. The buffer situation for the individual contracts will determine if all or portions of the fall in value will affect the financial result. Only the portion of the fall in value that cannot be settled against the customer buffer will be charged to the result. In addition, the reduced profit sharing or loss of the indexing fees may affect the financial result.
Liquidity risk is one of the largest risk factors for the banking business, and the regulations stipulate requirements for liquidity management and liquidity indicators. The guidelines for liquidity risk specify principles for liquidity management, and limits stipulated by the Board for different minimum liquidity and financing indicators. In addition to this, an annual funding strategy and funding plan are being drawn up that set out the overall limits for the bank’s funding activities.
Total subordinated loans and hybrid tier 1 capital 2018 8,224 1) Storebrand Bank ASA has issued hybrid tier 1 capital bonds/hybrid capital that is classified as equity. See the statement of changes in equity.
Covered bonds For issued covered bonds, a regulatory requirement for over-collateralisation of 102 per cent and an over-collateralisation requirement of 109.5 per cent for bonds issued before 21 June 2017 apply.
Total derivatives excluding derivatives in bond funds 2018 2,484 1,490 77 596 4,646
This year's change in fair value due to change in credit risk -276 -712
Total loans to and receivables from customers 20191) 60,659 1 3,155 63,815 73 52 -28 97
As of 31 December 2019, Storebrand had loans to customers totalling NOK 60.7 billion net after provisions for losses of NOK 0.1 billion. Of this, NOK 13.2 billion was to the corporate market and NOK 47.5 billion to the retail market.
In the retail market, most of the loans are secured by means of home mortgages. Customers are evaluated according to their capacity and intent to repay the loan. In addition to their capacity to service debt, checks are conducted of customers in relation to policy rules and they are given a credit rating.
The weighted average loan-to-value ratio for home loans is approximately 58 per cent. Over 97 per cent of home loans have a loan to value ratio within 85 per cent and approximately 99.3 per cent are within a 100 per cent loan to value ratio. Approximately 50 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.
Commitments are regarded as non-performing and loss exposed when a credit facility has been overdrawn for more than 90 days and when an instalment loan has arrears older than 90 days and the amount is at least NOK 2000.
The financial market and investment risks are largely related to the customer portfolios in the life insurance business. The risk associated with a negative outcome in the financial market is described and quantified in Note 8, financial market risk. The banking business has little direct exposure to types of risk other than credit.
The Group conducts a comprehensive process to ensure that financial instruments are valued as closely as possible to their market value. Publicly listed financial instruments are valued on the basis of the official closing price on stock exchanges, supplied by Reuters and Bloomberg. Fund units are generally valued at the updated official NAV prices when such prices exist. Bonds are generally valued based on prices collected from Nordic bond pricing and Bloomberg. Bonds that are not regularly quoted will normally be valued using recognised theoretical models. This principally applies to bonds denominated in Norwegian kroner. Discount rates composed of the swap rates plus a credit premium are used as a basis for these types of valuations. The credit premium will most often be specific to the issuer.
Bonds, certificates or equivalent instruments issued by national governments are generally classified as level 1. When it comes to derivatives, standardised stock index futures and interest rate futures will also be included at this level.
Level 3: Financial instruments valued on the basis of information that is not observable in accordance with level 2 Equities classified as level 3 are primarily investments in unlisted/private companies as well as funds consisting of these. These include investments in forestry, microfinance, infrastructure and property. Private equity is generally classified at this level through direct investments or investments in funds. Private customer loans and funds consisting of these are also at level 3.
Equities Forestry represents most of the value of the level 3 shares. An external valuation was carried out as at 31 December which forms the basis for the valuation of the company’s investments. The valuation is based on models that include non-observable assumptions.
Alternative investments organised as limited liability companies (such as microfinance, property and infrastructure) are equity investments that are valued based on the value-adjusted equity reported by external sources when available.
Indirect real estate investments are primarily investments in funds with underlying real estate investments where Storebrand’s intention is to own the investments throughout the fund’s lifetime. The valuation of the property funds is carried out based on information received from each fund manager, adjusted for cash flows in the period from the most recent valuation until the reporting date. Estimated values prepared by the fund companies will be used if these are available.
Corporate bonds Among level 3 bonds, non-performing loans will be left for estimated expected payment.
The required rate of return is divided into the following elements: • Risk-free interest • Risk premium, adjusted for: • Type of property • Location • Structural standard • Environmental standard • Duration of contract • Quality of tenant • Other factors such as transactions and perception in the market, vacancy and general knowledge about the market and the individual property.
Total bonds and other fixed-income securities 31.12.19 10,818 140,316 5,505 156,639
Derivatives: - of which derivatives with a positive market value 5,314 5,314 4,646 - of which derivatives with a negative market value -995 -995 -4,607
Net gains/losses on financial instruments 30 1,300 94 2 -49 716 -34
Debt raised by issuance of securities 18,728 18,728 18,729 17,565 17,529
Loans from SPP Pension & Försäkring AB are appraised at fair value. The value of these loans is determined by future cash flows being discounted by an associated swap curve adjusted for a customer-specific credit spread
Corporate bonds Corporate bonds at level 3 are typical non-performing loans 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.
Storebrand has the goal of paying a dividend of more than 50% of the Group profit after tax. The board has the ambition of ordinary dividends per share being, at a minimum, at the same nominal level as the previous year. The normal dividend is paid with a sustainable solvency margin of more than 150%. If there is a solvency margin of more than 180%, the board’s intention is to propose extraordinary dividends or share buy-backs. In general, equity in the Group can be controlled without material limitations if the capital requirement is met and the respective legal entities have sufficient solvency.
Net primary capital for companies included in the CRD IV report 2,970 3,311
Guaranteed pension: Defined Benefit (fee based) Storebrand Life Insurance 3,110 3,086
Of which premium reserve transferred to company 6,239 4,566 1) Individual life and disability, property and caualty insurance 2) Group life, workers comp. And health insurance
Profit on equities and fund units 1,357 3,858 32,143 37,358 40 37,318 -5,258
Profit on bonds and other fixedincome securities at fair value 2,424 156 2,188 4,767 600 4,167 1,023
Net income bonds to amortised cost, loans and accounts receivables 4,115 11 4,126 214 3,912 4,370
Realised losses on loans where no provisions have previously been made -11
Of which premium reserve transferred to company -6,357 -5,265 1) Individual life and disability, property and caualty insurance 2) Group life, workers comp. And health insurance
The overview also excludes the ”Naturskadepool”, Norwegian Motor Insurers’ Bureau (TFF), reinsurance and claim settlement costs on all products.
Employees and former employees who had salaries in excess of 12G until 31 December 2014 were offered a cash redemption option for their accrued rights with payment at the start of 2015. For employees who were a part of the executive management team, these payments were distributed over 5 years, with last payment in 2019.
The pension in the BTP2 agreement (defined-benefit occupational pension that is a closed scheme) amounts to 10 per cent of the annual salary up to 7.5 times the “basic income amount” (which was SEK 64,400 in 2019 and will be SEK 66.800 in 2020), 65 per cent of salary in the interval from 7.5 to 20, and 32.5 per cent in the interval from 20 to 30. No retirement pension is paid for the portion of salary in excess of 30 times the ”basic income amount”. Full pension entitlement is reached after 30 years of membership in the pension scheme. In addition to the defined-benefit part, the BTP plan has a smaller defined-contribution component. Here the employees can decide themselves how assets are to be invested (traditional insurance or unit-linked insurance). The defined-contribution part is 2 per cent of the annual salary.
The ordinary retirement age is 65 in accordance with the pension agreement between the Employer’s Association of the Swedish Banking Institutions (BAO) and the trade unions that are part of BTP, and will be changed to age 68 from 2020.
The pension for the employees at Euroben Life and Pension LTD is covered by a defined-contribution scheme.
PENSION ASSETS ARE BASED ON THE FINANCIAL ASSETS HELD BY STOREBRAND LIFE INSURANCE/SPP COMPOSED AT 31.12: Storebrand Livsforsikring SPP
The table shows the percentage asset allocation of pension assets at year-end managed by Storebrand Livsforsikring and SPP.
Actuarial assumptions: In Norway standardised assumptions on rates of mortality and disability as well as other demographic factors are prepared by Finance Norway. With effect from 2014 a new mortality basis, K2013, has been introduced for group pension insurance in life insurance companies and pension funds. Storebrand has used the mortality table K2013BE (best estimate) in the actuarial calculations at 31 December 2019.
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.
Discount rate Expected earnings growth Mortality - change in expected life expectancy
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 Act, Section 7-26..
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.
Pension scheme and insurance The Company shall arrange and pay for ordinary group pension scheme common to all employees, from the moment employment commences, and in accordance with the pension rules in force at any given time. All employees are also included in group insurance schemes which apply in the event of illness, disability or death. Since 2015, the Company has had defined-contribution pension schemes for all employees. For executive 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 was paid out over a five-year period, with the final payment in 2019. The payment period was fixed, regardless of whether the employee left the company before the end of that period.
Severance pay The CEO is entitled to 24 months of severance pay. Other members of the executive management have severance pay agreements of up to 18 months from the agreed resignation date. The amount of potential severance pay will be subject to an assessment in accordance with the individual agreements and relevant rules pertaining to remuneration.
The severance pay corresponds to the pensionable salary at the end of the employment, excluding any bonus schemes. Deductions are made to the severance pay for all work-related income, including fees from the provision of services, offices held, etc.
Like other employees of 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.
3. STATEMENT ON THE EXECUTIVE EMPLOYEE REMUNERATION POLICY DURING THE PREVIOUS FINANCIAL YEAR The guidelines for the executive remuneration policy set for 2019 have been followed. The annual independent assessment of the guidelines and the practising of these guidelines in connection with bonuses to be paid in 2020 will be carried out during 2020.
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 purchase of shares will take place once a year.
2) The effective tax rate is influenced by the fact that the Group has operations in countries with tax rates that are different from Norway. The income tax expense is also influenced by tax effects relating to previous years. The tax rate for companies in Norway was changed from 23 to 22 per cent with effect from 1 January 2019. It was also agreed to keep the rate at 25 per cent for companies subject to the financial 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). The tax rate for companies in Sweden was changed from 22 per cent in 2018 to 21.4 per cent in 2019.
Uncertain tax positions The tax rules for the insurance industry have undergone changes in recent years. In some cases, Storebrand and the Norwegian Tax Administration have had different interpretations of the tax rules and associated transitional rules. As a result of this, uncertain tax positions arise in connection with the recognised tax expenses. Whether or not the uncertain tax positions have to be recognised in the financial statements is assessed in accordance with IAS 12 and IFRIC 23. Uncertain tax positions will only be recognised in the financial statements if the company considers it to be preponderance that the Norwegian Tax Administration’s interpretation will be accepted in a court of law. Significant uncertain tax positions are described below.
Currency differences on converting foreign units -7 -376 -26 -31 -440 -256
Acc. depreciation and write-downs 31.12 -590 -6,827 -959 -305 -8,681 -8,498 1) Value of business-in-force, the difference between market value and book value of the insurance in SPP and Silver.
Value of business in force SPP 20 years 5% Straight line 2,522
Value of business in force Silver 10 years 10% Straight line 225
Intangible assets linked to acquisition of SPP In 2007, Storebrand Livsforsikring AS acquired SPP Pension & Försäkring AB and its subsidiaries (SPP). The majority of the intangible assets linked to the acquisition of SPP include the value of business in force (VIF), for which liability adequacy tests are conducted in accordance with the requirements in IFRS 4. To determine whether goodwill and other intangible assets linked to SPP have declined in value, an estimate is made of the recoverable amount by calculating the entity specific value of the business. SPP is considered to be a separate cash flow generating unit.
Calculations related to the future are uncertain. The value will be impacted by various growth parameters, expected return and the required rate of return used as a basis, etc. The aim of the calculations is to achieve a satisfactory level of certainty that the recoverable amount, cf. IAS 36, is not lower than the value recognised in the accounts.
Intangible assets linked to the banking business When assessing the recoverable amount for the banking business an estimate for the entity specific value has been found by using a discounted cash flow model of the expected profits after tax. Budgets and forecasts approved by the Board of Directors for the next three years (2020 to 2022) are used as the basis for the valuation.
There is 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, the discount rate. The aim of the calculations is to achieve a satisfactory level of certainty that the recoverable amount, cf. IAS 36, is not lower than the value recognised in the accounts.
There is uncertainty related to the assumptions that have been made in the valuation. The value will be influenced by changes in the assumptions regarding expected returns of the financial markets, costs, management fees, growth parameters, and the discount rate. The aim of the calculations is to achieve a satisfactory level of certainty that the entity specific value, cf. IAS 36, is not lower than the value recognised in the accounts.
SPECIFICATION OF TANGIBLE FIXED ASSETS AND LEASE AGREEMENTS IN BALANCE SHEET
Investments, held to maturity Fair value, held for sale Fair value
Allocation by company and customers: Net loans to customers - company 30,187 28,457 net loans to customers - customers with guarantee 30,471 30,978
Allocation by company and customers: Properties - customers with guarantee 26,901 26,333
The investments are classified as “Investment in associated Ccmpanies and joint ventures” in the Consolidated Financial Statements. Storebrand Eiendomsfond Norge KS and Ruseløkkveien 26, Oslo invest exclusively in real estate at fair value.
Sale: No further property sales has been agreed on in Storebrand/SPP in addiition to the figures that has been finalised and included in the finacial statements as of 31 December 2019
Allocation by company and customers: Accounts receivable and other short-term receivables - company 4,824 7,005
Allocation by company and customers: Equities and fund units - company 323 295
Allocation by company and customers: Bonds and other fixed-income securities - company 28,512 24,055
Bonds and other fixed-income securities - customers without guarantee 44,245 41,637
Distribution between company and customers: Derivatives - customers with guarantee 2,320
Debt raised through issuance of securities 800 798 21 2,350 2,406 45 1) Book values as at 31.12.
Hedging of net investment in Storebrand Holding AB In 2019, Storebrand used hedge accounting for its net investment in Storebrand Holding AB. Three-month rolling currency derivatives were used, and the spot element of these was used as a hedging instrument. A time-limited subordinated loan of SEK 1,000 million was taken up in 2019. The loan was used as a hedging instrument linked to the hedging of the net investment in Storebrand Holding AB. The effective share of the hedging instruments is recognised in total comprehensive income. There is partial hedging of the net investment in Storebrand Holding AB and it is therefore expected that the hedge effectiveness in the future will be about 100 per cent.
Storebrand hedges an exposure of EUR 300 million nominal value in EURIBOR 3M.
Storebrand follows market developments relating to the discontinuation of reference interest rates. New reference interest rates will influence the management of customer portfolios, but the scope and efficiency will particularly depend on the future for NIBOR and STIBOR .
The derivative that hedges the EURIBOR 3M risk is a cross currency swap of EUR 300 million nominal value.
Book value of bonds pledged as collateral for the bank's lending from Norges Bank 904 1,205
Securities pledged as collateral are linked to lending access in Norges Bank for which, pursuant to the regulations, the loans must be fully guaranteed with collateral in interest-bearing securities and/or the bank’s deposits in Norges bank. Storebrand Bank ASA has none F-loan in Norges Bank as per 31.12.2019.
Nordben Life and Pension Insurance Co. Ltd og Interben Trustees Ltd are sold out from the Group during 2019.
Investments in trading portfolio: - equities and other units 9 44 22 - bonds and other fixed-income securities 10, 12 3,260 1,820 - financial derivatives/other financial instruments 11, 12, 15 3 9
Own share bought back 2) -5 -63 -68 1) 467 813 982 shares with a nominal value of NOK 5.
2) In 2019, Storebrand ASA has bought 1 000 000 own shares. In 2019, 487 950 shares were sold to our own employees. Holding of own shares 31. December 2019 was 943 190.
Net receipts/payments - sale/purchase of property and fixed assets -1 2
Cash and cash equivalents at start of the period 34 53
Cash and cash equivalents at the end of the period 34 34
Tangible fixed assets Tangible fixed assets for own use are recognised at acquisition cost less accumulated depreciation. Write-downs are made if the book value exceeds the recoverable amount of the asset.
The defined-contribution pension scheme involves the company paying an annual contribution to the employees’ collective pension savings. The future pension will depend upon the size of the contribution and the annual return on the pension savings. The company does not have any further work-related obligations after the annual contribution has been paid. No provisions are made for ongoing pension liabilities for these types of schemes. Defined-contribution pension schemes are recognised directly in the financial statements.
Tax The tax cost in the profit and loss account consists of tax payable and changes in deferred tax. Deferred tax and deferred tax assets are calculated on the differences between accounting and tax values of assets and liabilities. Deferred tax assets are recorded on the balance sheet to the extent it is considered likely that the company will have sufficient taxable profit in the future to make use of the tax asset. Deferred tax is applied directly against equity to the extent that it relates to items that are themselves directly applied against equity.
Fair value hedging Storebrand uses fair value hedging, and the hedged items are fixed rate funding measured at amortised cost. Derivatives that fall within this category are recognised at fair value through profit or loss. Changes in the value of the hedged item that relate to the hedged risk are applied to the book value of the item and recognised through profit or loss
Net income and gains from financial assets at fair value 54 -9 1 47 20
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 2019. 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
CHANGES IN THE FAIR VALUE OF PENSION ASSETS NOK million 2019 2018
Expected premium payments are estimated to be NOK 1 million and the payments from operations are estimated to be NOK 11 million in 2020.
PENSION ASSETS ARE BASED ON THE FINANCIAL ASSETS HELD BY STOREBRAND LIFE INSURANCE, WHICH ARE COMPOSED OF AS PER 31.12.: NOK million 2019 2018
Booked returns on assets managed by Storebrand Life Insurance were: 3.6% 2.2%
Net pension cost booked to profit and loss accounts in the period 8 9
Expected annual increase in pensions in payment 0.0 % 0.0 %
Other reporting duties 20 33 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.
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 22 in the Storebrand Group.
3) Group contribution in 2019 of NOK 35 million as capital contribution.
NOK million 0-6 months 7-12 months 2-3 years 4-5 years Total value Carrying amount
Storebrand ASA had as per 31 December 2019 liquid assets of NOK 3,3 billion.
Total bond and bank loans 2) 1,309 1,813 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 3,230 4,131
Statement of financial position items: Due from group companies 3,166 4,092
We have audited the financial statements of Storebrand ASA, which comprise: • The financial statements of the parent company Storebrand ASA (the Company), which comprise the statement of financial position as at 31 December 2019, the income statement, statement of total comprehensive income, statement of changes in equity and statement of cash flow for the year then ended, and notes to the financial statements, including a summary of significant accounting policies, and
Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the financial statements of the current period. These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. The group’s activities are largely unchanged compared to last year.
The Group has investment properties that mainly consists of office and retail
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 management had established controls to ensure assessment of market rent and discount rate. We found that routines to ensure that these elements regularly were checked against both external valuations and marked data was established. Those controls that we elected to base our audit on, was in our view working efficiently.
Most of the financial assets that are measured at fair value is based on quoted prices in active markets (level 1 investments), or derived from observable market information (level 2 investments). Routines and processes that ensures an accurate basis for the valuation is important for these assets.
For a sample of investments, we also tested that fair value was in accordance with external valuations. We considered the reliability of the sources of information, when relevant. Our tests did not reveal substantial deviations.
Tax rules for life insurance companies and financial groups are complex and has changed significantly during the last couple of years. As described in note 26 uncertain tax positions have occurred as part of the group’s activities related to liquidation of a subsidiary in 2015 and new tax rules for life insurance companies in 2018. Management applied significant judgment in their assessment of whether the uncertain tax positions should be recognized in the financial statements. The uncertain tax positions has therefore been a focus area.
Storebrand’s corporate governance principles have been laid down in accordance with the Norwegian Corporate Governance Board’s (NUES) Code of Practice. The Board of Directors of Storebrand ASA (hereafter referred to as the board) and management an annual review of Storebrand’s corporate governance policies and compliance therewith. Storebrand reports in accordance with section 3-3b of the Norwegian Accounting Act and the NUES Code of Practice.
2. BUSINESS (NO DEVIATIONS FROM THE CODE OF PRACTICE) Storebrand ASA is the parent company in a financial group, and its statutory object is to manage its equity interests in Storebrand’s subsidiaries in compliance with the current legislation. Storebrand’s main business areas encompass pensions and savings, insurance and banking. The Articles of Association are available in their entirety on the Storebrand’s website www.storebrand.no.
Storebrand has conducted a materiality assessment to define the most important focus areas. These are described in section 1 above. Increased diversity is an important part of Storebrand ’s recruitment policy. Storebrand seeks to maintain and develop an organisation with real equality. Read more on our work with diversity in Section 5 above.
3. EQUITY AND DIVIDENDS (DEVIATIONS FROM THE CODE OF PRACTICE) The Board of Storebrand ASA continuously monitors Storebrand ’s capital adequacy in light of its goals, strategy and risk profile. Read more under the heading “Capital situation, rating and risk” in the Directors’ Report.
The dividend is adopted by the General Meeting, based on a proposal put forward by the Board of Directors. The General Meeting may, by simple majority, authorise the Board of Directors to distribute a dividend pursuant to Section 8-1, second paragraph of the Norwegian Public Limited Companies Act. This shall be based on the annual financial statements adopted by the General Meeting. This authorisation may not be granted for a period longer than until the next Annual General Meeting. In addition, the authorisation shall be based on the adopted dividend policy. The General Meeting was not requested to provide such authorisation in 2019.
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 7 above.
5. FREELY NEGOTIABLE SHARES (NO DEVIATIONS FROM THE CODE OF PRACTICE) Shares in Storebrand ASA are listed on Oslo Børs (Oslo Stock Exchange). The shares are freely negotiable, and the Articles of Association do thus not contain any restrictions with regard to the negotiability of the shares. All the shares carry equal rights, cf. point 4 above.
• including the consolidated income statement and balance sheet, and the auditor’s report,
• decide upon adoption of the income statement and balance sheet,
• elect the auditor, • appoint members to the Nomination Committee, and this should include the Chairman of the Nomination Commit-
• adopt the remuneration of the members of the Board of Directors and board committees,
• adopt the remuneration of the members of the Nomination Committee,
• adopt the remuneration of the auditor, • and transact any other business listed on the agenda. Decisions are generally made on the basis of an ordinary majority. Pursuant to Norwegian law, however, a special majority is required for certain decisions, including decisions about setting aside pre-emptive rights in connection with any share issues, mergers, spin-offs, amendments to the Articles of Association or authorisations to increase or reduce the share capital. Such decisions require approval by at least two-thirds of both the votes cast and the share capital represented at the General Meeting.
7. NOMINATION COMMITTEE (NO DEVIATIONS FROM THE CODE OF PRACTICE) Storebrand ASA’s Articles of Association regulate the Nomination Committee, which consists of four or five members and an observer elected by the employees. For 2019-2020 election period, the Nomination Committee has four members. The Chairman of the Nomination Committee and the other members are elected annually by the General Meeting. The employees’ representative will participate as a permanent member of the Committee in discussions and nominations concerning the election of the Chairman of the Board of Directors, as well as in other contexts where this would be natural, in accordance with an invitation from the Chairman of the Committee.
The majority of the Nomination Committee is independent of the Board of Directors and the management. The Nomination Committee is composed with a view to safeguarding the interests of the community of shareholders. In the General Meeting’s rules of procedure for the Nomination Committee, there are provisions concerning the rotation of members of the Nomination Committee.
The Articles of Association stipulate that the Nomination Committee should work in accordance with the rules of procedure adopted by the General Meeting. The Nomination Committee’s rules of procedure were adopted at the 2019 Annual General Meeting. In accordance with the rules of procedure, the Nomination Committee shall, for example, give attention to the following when preparing nominations for representatives for the companies’ governing and controlling bodies: expertise, experience, capacity, gender distribution, independence and the interests of the community of shareholders. More information about the members has been published on Storebrand’s website.
The Nomination Committee annually writes to the Company’s 30 largest shareholders with an invitation to suggest candidates for the Board of Directors and Nomination Committee. A corresponding request to the shareholders is published on the company’s website. The Nomination Committee is tasked with proposing candidates and remuneration for the Board of Directors and Nomination Committee, through recommendations to the General Meeting.
An attempt is made to adapt the remuneration of the members of the Nomination Committee to the nature of the tasks and time spent on committee work. The Nomination Committee held 14 meetings in 2019.
8. THE COMPOSITION AND INDEPENDENCE OF THE BOARD OF DIRECTORS (NO DEVIATIONS FROM THE CODE OF PRACTICE ) The Articles of Association stipulate that between five and seven Board members shall be elected by the General Meeting based on nominations from the Nomination Committee. The Board Chairman shall be elected by the General Meeting.
The Board shall stay informed about Storebrand’s financial position and development, and it shall ensure that the Company ’s value creation and profitability are safeguarded in the best possible manner on behalf of the owners. The Board shall also ensure that the activities are subjected to adequate control and ensure that Storebrand has adequate capital based on the scope of, and risks associated with, its activities.
Board Committees The Board has established three subcommittees in the form of the Compensation Committee, Audit Committee and Risk Committee. The composition helps ensure a thorough and independent consideration of matters that concern internal control, financial reporting, risk assessment and remuneration of executive personnel. The committees are preparatory and advisory working committees and assist the Board with the preparation of items for consideration. Decisions are made, however, by the full Board. The committees are able to hold meetings and consider matters at their own initiative and without the participation of company management.
The Compensation Committee assists the Board with all matters concerning the Chief Executive Officer’s remuneration. The Committee monitors the remuneration of Storebrand’s executive personnel and proposes guidelines for fixing executive personnel remuneration and the Board’s statement on the fixing of executive personnel remuneration, which is presented to the General Meeting annually. In addition, the Committee safeguards the areas required by the Compensation Regulations in Norway and Sweden. The Compensation Committee held three meetings in 2019.
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 2019, including a joint meeting with the Audit Committee.
10. RISK MANAGEMENT AND INTERNAL CONTROL (NO DEVIATIONS FROM THE CODE OF PRACTICE) Management and control The Board of Directors has drawn up general policies and guidelines for management and control. These policies deal with the Board’s responsibility for determining Storebrand’s appetite for risk and risk profile, approval of the organisation of the business, assignment of areas of responsibility and authority, requirements concerning reporting lines and information, and risk management and internal control requirements. The Board’s and Chief Executive Officer’s areas of responsibility are defined in the rules of procedure for the Board and the instructions for the Chief Executive Officer, respectively. The Board of Directors has drawn up instructions for Storebrand’s subsidiaries that are to ensure that they implement and comply with Storebrand’s management and control policies and guidelines.
Storebrand Compass is the company’s monitoring tool. It provides comprehensive reports for management and the Board concerning financial and operational targets. In addition, the Board of Directors receives risk reports from the risk management function, which monitors the development of key figures for risk and solidity.
STOREBRAND ANNUAL REPORT 2019 on Storebrand’s financial performance and solvency. This provides important premises for the Board’s general discussion of risk appetite, risk allocation and capital adequacy.
The appraisal of all Storebrand employees is integrated into corporate governance and is designed to ensure that the adopted strategies are implemented. The policies for earning and paying any variable remuneration to Storebrand’s risk managers comply with the regulations relating to remuneration in financial institutions, cf. Section 12 below. The Chief Risk Officer and employees with control functions related to risk management, internal control and compliance only have fixed salaries.
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.
12. REMUNERATION OF EXECUTIVE PERSONNEL (NO DEVIATIONS FROM THE CODE OF PRACTICE) The Board determines the structure of the remuneration of
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.
14. TAKEOVERS (NO DEVIATIONS FROM THE CODE OF PRACTICE) The Board of Directors has prepared guidelines for how to act in the event of a possible takeover bid for the company. These guidelines are based on the Board of Directors ensuring the transparency of the process and that all the shareholders are treated equally and given an opportunity to evaluate the bid that has been made. It follows from the guidelines that the Board of Directors will evaluate the bid and issue a statement on the Board’s opinion of the bid, in addition to obtaining a valuation from an independent expert. In addition, the Board of Directors will, in the event of any takeover bid, seek whenever possible to maximise the shareholders’ assets. The guidelines cover the situation before and after a bid is made.
15. AUDITOR (NO DEVIATIONS FROM THE CODE OF PRACTICE) The external auditor is elected by the General Meeting of Storebrand ASA and is responsible for the financial auditing. The external auditor issues an auditor’s report in connection with the annual financial statements and conducts limited audits of the interim financial statements. The external auditor attends board meetings in which interim financial statements are reviewed and all meetings of the Audit Committee, unless the items on the agenda do not require the presence of the auditor. The Board has decided that the external auditor must rotate the partner responsible for the audit assignment every seven years. The external auditor’s work and independence are evaluated annually by the Board’s Audit Committee. The auditor shall also meet with the Board of Directors at least once a year without the management being present. The other companies in Storebrand use the same auditor as Storebrand ASA.
Statement in accordance with Section 3-3b, second paragraph of the Norwegian Accounting Act
2. The Norwegian Code of Practice for Corporate Governance is available at www.nues.no.
Sustainability assurance 210 TCFD index 212 GRI index 218 Auditor’s statement on sustainability
TCFD Recommended Disclosures Page Reference a Describe the climate-related risks and opportunities Storebrand has identified over the short, medium and long term b Describe the impact of climate-related risks and opportunities on Storebrand’s businesses, strategy, and financial planning c Describe the resilience of Storebrand’s strategy, taking into consideration different climate-related scenarios
TCFD Recommended Disclosures Page Reference a Describe Storebrand’s processes for identifying and assessing climate-related risks b Describe Storebrand’s processes for managing climate-related risks c Describe how processes for identifying, assessing and managing climate-related risks are integrated into Storebrand’s overall risk management
Storebrand ASA GRI Index GRI Index 102-2 Activities, brands, products, and services
Professor Kohts vei 9, Lysaker, Oslo, Norge GRI Index GRI Index Full 102-4 Location of operations This is Storebrand Our purpose and vision Full
UN PRI UN Global Compact Global Reporting Initiative UN Sustainable Development Goals Task Force on Climate-Related Financial Disclosures (TCFD) Paris Agreement 2015 Carbon Disclosure Project Global 100 UN Principles for Responsible Business Conduct UN Declaration for Human Rights UN environmental conventions UN Principle for Sustainable Insurance UNEP Finance Initiaitive Portfolio Decarbonisation Coalition Accounting for Sustainability UN Convention Against Corruption ILO’s Fundamental Conventions Montreal Pledge Tobacco-Free Portfolios UN Women Empowerment Principles
UNEP FI investor goup on TCFD Climate Action 100+ Net-Zero Asset Owner Alliance Global Real Estate Sustainability Benchmark (GRESB) NORSIF PRI Investor Commitment to Support a Just Transition on Climate Change
This is Storebrand Climate Risk and Opportunity Finanical Capital and Our Investment Universe
This is Storebrand Keep Our Own House in Order Director’s Report
Director’s Report This is Storebrand Financial Capital and our Investment Universe
Financial Freedom in all Stages of Life; Digital Trust; 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.
Key performance indicators for sustainability are the tables containing sustainability indicators that Storebrand ASA measure and control. The tables are available and included in Storebrand ASA’s annual report 2019, specifically at the end of the four chapters titled «Financial capital and our investment universe», «Customer and community relations», «People» and «Keeping our house in order». Storebrand has defined the key performance indicators and explained how they are measured in the tables (criteria). We have examined the basis for the measurements and checked the calculations of the measurements.
Our independence and quality control We are independent of the company in accordance with applicable laws and regulations and the Code of Ethics for Professional Accountants (IESBA Code) and with the ethical requirements that are relevant to our independent statement, and we have fulfilled our ethical obligations in accordance with these requirements and IESBA Code. We use ISQC 1 - Quality Control for Firms that Perform Audits and Reviews of Financial Statements, and Other Assurance and Related Services Engagements and maintains a comprehensive quality control system including documented policies and procedures of the ethical standards, professional standards and applicable legal and regulatory claim.
GRI Index 2019 is, in all material respects, developed and presented in accordance with the requirements of the Standards published by The Global Reporting Initiative; and
3. FINANCIAL CAPITAL AND INVESTMENT UNIVERSE Return On Equity: Return on equity
Percentage AuM screened for sustainability: All companies in our investment universe is screened for sustainability according to our standards: Fossil-free products: These companies should not have more than 5% revenue from the production or distribution of fossil fuels, and fossil reserves should not exceed 100 million tonnes of CO2.
Certified green property: Direct real estate investments under operational control in Norway and Sweden with a Green building certification.
Percentage waste sorted for recycling: 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.
Market Share: Savings, Retail Market Norway Based on Q3 figures from Finance Norway and VFF (Verdipapirfondenes forening).
Recognised for sustainable value creation: Results from survey asking how many connect the Storebrand brand name with sustainability, environmental stewardship and corporate responsibility.
Expected pension as percentage of salary: The pension percentage (median) is the customers expected pension from all sources (including private savings, folketrygden, AFP and defined benefit/defined contribution pension), as a percentage of customer’s existing salary.
Gender balance, management: Share of female employees. Defined as a management position with personnel responsibilities. Project managers are not included.
Management level 1-3: Level 1= Chief Executive Officer Level 2 = Executive management Level 3 = Reporting to executive management
New hires: Number of hires during from 1st January to 31st December in Norway and Sweden.
Hay Grade: The figures only applies for Storebrand in Norway. Hay Grade above 24 is not included, as only men are represented here (applies f or 3 positions only). Hay Grade is a widely recognised method to ena ble 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.
CEO - Average Worker Pay Ratio: Basic salary as a ratio of mean average salary for all employees.
6. KEEPING OWN HOUSE IN ORDER Environmentally-certified procurement: Percentage og spend for contracts with a total value exceeding 1 million NOK with active suppliers certified or fulfilling requirements according to one or several of the following environmental certifications: Miljøbas, Eco-Lighthouse, Svanen, ISO 14001, CO2 neutral, ISO 14001.
CO2e emissions from air travel: Total CO2e emissions from air travel divided by the average number of number of full-time equivalent employees in Norway and Sweden from 1st January to 31st December.
Scope 2 emissions: Ton CO2-equivalents, measured in accordance to Greenhouse gas protocol, per FTE.
Scope 3 emissions: Ton CO2-equivalents, measured in accordance to Greenhouse gas protocol, per FTE.
Water use: Water consumption in cubic meters per square meter of heated area in head offices in Norway and Sweden. Consumption measured and registered in the environmental monitoring system..
Paper use: Consumption of office paper (copy- and bond paper), envelopes, advertising, including externally reprinted and regulatory letter attachments in Kg per full time employee in Norwegian and Swedish operations.
Number of complaints handled by the Norwegian Financial Services Complaints Board: Complaints being handled by Norwegian Financial Services Complaints Board (Finansklagenemda) throughout the year.
Number of shares as of 31 December 2019: LARS AA. LØDDESØL (1964) Group Chief Financial Officer
Bond trading, Svenska Handelsbanken 1996–2003: Head of Fixed Income, Alfred Berg
Number of shares as at 31 December 2019: JAN ERIK SAUGESTAD (1965) Executive Vice President,
Number of shares as of 31 December 2019: TERJE LØKEN (1975) Executive Vice President
Team Champion, Digital Business Development , Storebrand Livsforsikring AS (2017 – 2019)
Main office: Professor Kohts vei 9 Postboks 500, 1327 Lysaker, Norway storebrand.no