on 4 May 1847, the P&C insurance company ”Christiania almindelige brandforsikrings -Selskab for Varer og effecter” is incorporated by private subscription. the company is referred to as Storebrand.
Storebrand acquires nearly all of the shares in Idun. the rest, with a couple of exceptions, are acquired during the 1970s.
Storebrand initiates a new wave of acquisitions and mergers by acquiring norrøna, which was experiencing financial problems.
Storebrand acquires norske Fortuna. brage and Fram merge to become the country’s largest life insurance company. Storebrand and Idun move into their own new premises in the restored Vest-Vika area of oslo. brage-Fram and norske Folk follow their lead.
1978 Storebrand changes its logo and introduces “the link” as an easily recognisable trademark. the formal name of the holding company is changed to a/S Storebrandgruppen.
History of Storebrand 1954: the acquisition department (sales department) in Kirkegata 24.
Storebrand, Skandia and Pohjola consolidate their P&C insurance activities in the new nordic, Swedish registered company, If Skadeförsäkring ab. Storebrand sells its stake five years later.
norwegian and international stock markets fall sharply from September 2000 to February 2003.
Storebrand confirms it has been in talks about a possible merger with Gjensidige. the talks conclude without result.
the debt crisis and uncertainty in the eurozone are causing considerable anxiety and turbulence in the financial markets. Storebrand’s results for the year have been affected by these disturbances.
Storebrand launches its new vision in January: "recommended by our customers ". Six customer promises, a new position and adjusted core values are also introduced.
2012: everyone sits in an open floor plan at Storebrand's offices at lysaker. the 35,000 m2 building is interconnected by lifts, stairs and walkways.
Group result before amortisation and tax1 1,960 1,279 1,612 1,245 1,310 earnings per ordinary share (noK) 2.25 1.51 3.30 2.08 -5.01
Sick leave in the Storebrand Group was 3.4 per cent in 2012, a reduction of 0,4% from last year.
14. all the investments in Storebrand’s funds and portfolios are continuously assessed in accordance with our sustainability criteria.
Vision and values 12 Cash flow analysis 72 business areas 14 notes 74
Sustainable investments - recommended by our customers 20 Cash flow analysis 144
Shareholder matters 22 declaration of the board and the Ceo 157
Management 58 auditor's report on corporate sustainability 161 board of directors 60 Scorecard for sustainability 162
the responsibility of individuals to save for their pension has increased in recent years. For individuals and companies this will require more knowledge of savings and economics. However, it will also require that the industry describe savings and pensions in a simpler manner that everyone can understand.
Your pension figure is the sum total of the money you have to live off of when you retire – which is to be distributed over a number of years. Changes to the norwegian pension system entail that you have a greater responsibility now for your pension figure. the choices you make throughout your life will affect the size of your pension figure the day you retire. do you know the size of the pension you will receive and are you doing anything to affect your pension figure?
Storebrand's child insurance customers receive confirmation that they have purchased norway's best child insurance (as ranked by norsk Familieøkonomi).
the sustainability fund Storebrand trippel Smart is launched on 1 october. the fund is well received by the market.
EMPLOyEES at the end of 2012 there were 2,250 employees in the group, compared with 2,221 at the start of the year. Women represent 51 per cent of our employees. the average age is 41 and the average seniority is 9 years. all employees of Storebrand are treated equally, regardless of age, gender, disability, religious beliefs, cultural differences or sexual orientation.
CUSTOMERS 1.8 million people have a customer relationship with Storebrand. our vision is to serve them so well that we are ”recommended by our customers”.
NEW COMMUNICATION PLATFORM We combine our vision, core values and customer promises by introducing a communication platform for the Group. this platform tells us how we best can communicate with our customers in a simple and understandable manner.
2nd quarter CUSTOMER-DRIvEN IMPROvEMENT Storebrand introduces the net Promoter Score (nPS) as a management tool. nPS is just one of several measures that show how Storebrand works in a focused manner with our vision.
IDAR KREUTzER RESIGNS Idar Kreutzer resigns as the Ceo of Storebrand and becomes the new Managing director of the norwegian Financial Services association.
E-LEARNING COURSE IN COMPLAINT HANDLING the course is about how we can meet our customers in a good way, even when they are not satisfied. We can reduce the number of complaints and make our customers more satisfied if we take our customers' feedback seriously.
TOMORROW'S OCCUPATIONAL PENSION PRODUCTS the banking Law Commission proposed a new set of rules for private occupational pensions adapted to the new national Insurance scheme. the proposed rules provide a great deal of flexibility in the design of the schemes, and the taxation framework allows the creation of good pension schemes for employees.
STRENGTHENED ExECUTIvE MANAGEMENT Storebrand stands at the cusp of an exciting period in which new product rules will result in a more dynamic market and greater requirements for efficient operations. the executive management team is therefore expanded by four persons. the Managing director of Storebrand Livsforsikring aS Geir Holmgren and Managing director of Storebrand bank aSa truls nergaard are made part of the executive management team. In addition, robin Kamark is recruited as a new Chief Commercial officer (CCo) and Heidi Skaaret is recruited as Chief operating officer (Coo).
OUT OF THE PUbLIC SECTOR the board of Storebrand Livsforsikring aS decides to wind up defined-benefit pensions aimed at the public sector in norway. this decision encompasses insured pension solutions in both municipalities and public enterprises.
NORWAy'S bEST CHILD INSURANCE Storebrand's child insurance customers receive confirmation that they have purchased norway's best child insurance (as ranked by norsk Familieøkonomi).
8 | Storebrand aSa odd arild Grefstad took the helm of the Storebrand Group in the summer of 2012, during what can be described as a period of upheaval for the entire life insurance industry. Major changes in the companies' regulatory framework and a market that is becoming ever more oriented toward the individuals demands a great deal of change.
NEW REGULATORy FRAMEWORK We are seeing the contours of the future pension system in the private sector. What challenges will the industry be facing in the coming years? – new pension savings in the private sector will be based on annual savings and will to a large extent be based on defined contributions. one challenge is to illustrate the value of pension schemes as the most important employee benefit after pay at a workplace. We must help illustrate to the employees the fact that defined-contribution schemes with good savings rates are a completely satisfactory alternative to the old defined benefit schemes, which are being phased out regardless. With significantly higher maximum savings rates and long-term management with a significant share of equities, I believe that the new schemes will match the old ones. If we meet this challenge, companies will prioritise good pension schemes in the future as well.
Secondly, we have good systems for management of the guaranteed portfolios. dynamic risk management ensures that risk is continuously adapted to the buffer capital. this means that we have reduced the risk inherent to guaranteed portfolios, reducing fluctuations and future capital requirements.
A major portion of the cost cuts will be made through workforce reduction. An estimated 300 employees will be eliminated in Norway and Sweden. Such processes are never easy. To what extent does this effect daily operations and the atmosphere in the company? – It is undoubtedly a demanding situation, but I find that there is a great deal of understanding for the need to make changes among the employees and their representatives.
It is never easy when individuals are affected. We have, however, good processes, compensation schemes and an open dialogue. We are attempting at the same time to achieve as much as possible through voluntary solutions and a restrictive recruitment policy.
Storebrand discontinued defined-benefit pensions in the public sector in Norway toward the end of 2012. Is it not a defeat to withdraw from a market that was formerly a high priority area? – no, it is the level of profitability that is decisive. the public sector pension market never opened up as we had hoped. It has nearly always been a monopoly. When we see at the same time a great deal of sluggishness in the transfer market, high levels of capital tied up and little progress in the transition to new pension solutions, we cannot justify remaining in the defined-benefit pension market in the public sector. our profitability has been too low in relation to the capital that is tied up, and this profitability will be reduced even more under Solvency II. Having said this: We are not withdrawing from public sector pensions. We believe that pension fund solutions are the best solutions for very many public sector customers. We are making an all-out effort here!
Are these measures adequate for maintaining margins and profit in the current environment? – It is difficult to talk about margins and profit without talking about capital. Seen in isolation, these new products will have lower margins than the old products, but they will tie up much less capital due to the elimination of guarantees. this must be viewed in the proper context.
FROM DEFINED-bENEFIT TO DEFINED-CONTRIbUTION The new Occupational Pensions Act is expected to become effective in 2014. What does this mean to the customers, and what is Storebrand doing to adapt? – In January 2013 the banking Law Commission submitted a proposal for flexible transitional rules for the transition from definedbenefit to defined-contribution schemes. a significant increase in the maximum rates for the current defined-contribution schemes has been proposed. the rates are so high that they can match those of good definedbenefit schemes. this is positive for the customers. Corporate customers must spend time on familiarising themselves with the new schemes, and Storebrand will help them.
We will ensure that we have the market's best, simplest and most cost-effective solutions for defined-contribution pensions. these may be the current definedcontribution pensions or selected variants within the range of new hybrid products. Concurrently we are working hard to understand what customers want and to create these products. We can benefit from our Swedish business, which has worked on defined-contribution pension products for a long time.
FIND yOUR PENSION FIGURE In recent months Storebrand has been running a major advertising campaign in newspapers, on the Internet and television, in which people are encouraged to check their pension figures. Exactly what is included in these figures? – We want to make pensions simple. It is important to keep track of three figures in order to ensure that you have a good pension: What will your pension be? How much do you think you will need? How big is the difference? We can give you a good overview of what you will receive, and assist you in determining how much you will need. For many people it is surprising how little in monthly savings are required for a good supplemental pension, provided that you start at the right time. therefore we have created a simplified pension calculator that will give you these figures. More than 460,000 norwegians have already visited storebrand.no to check their pension figures – which testifies to a high level of interest!
What results are you the most and the least satisfied with? – I am the most satisfied with the fact that the return for our pension and fund customers was very competitive last year. Storebrand asset Management delivered an excess return – return higher than the benchmark indices – of noK 2.6 billion to its customers in 2012. If we look at the return for our norwegian defined contribution pension customers, this was also good. our most common defined contribution profile, balanced Pension, yielded a return of 11.6 per cent in 2012, which ranks at the very top. I would also like to point out the corporate market sales in norway, where we can report a net transfer of noK 525 million to Storebrand. We also see that customer satisfaction and the sale of private products increased throughout 2012. We have, however, high ambitions for our concepts in the retail market, and we are planning to deliver even better results next year.
What will your pension be? How much do you think you will need? How big is the difference?
the national Pension system has undergone several changes over the last years. the banking Law Commission has submitted a proposal for a new occupational Pensions act, as well as transitional rules for the current defined-benefit schemes. the intention is to adapt private occupational pensions to the rules in the new national Pension system. new pension accrual in the private sector will be based on annual savings and will to a large extent be based on definedcontributions. the new rules will not go into effect until 1 January 2014 at the earliest.
NEW OCCUPATIONAL PENSION PRODUCTS the banking Law Commission has proposed two new main models for occupational pensions; the standard- and the basic model. Common features for both models are: • all-years principle for accrual. • the annual premium being set as a percentage of the employee's wages. the maximum limits are 7-8 per cent for income under 7.1 G and 25-26 per cent for income between 7.1 and 12 G (G = national Insurance base amount).
TRANSITIONAL PERIOD OF THREE yEARS the banking Law Commission is proposing flexible transitional rules for enterprises that currently have defined-benefit pensions. In the future, new pension savings will take place either through the new occupational pension products or the current defined-contribution schemes. the banking Law Commission proposes that enterprises will be allowed a transitional period of three years to adapt the current defined-benefit pensions to the new occupational pension products.
PAID-UP POLICIES bECOME PENSION CERTIFICATES It has been proposed that paid-up policies should be converted into pension certificates when the new rules are introduced. While paid-up policy customers currently receive an annual interest rate guarantee on their pension holdings, the banking Law Commission proposes that the pension benefits at the time of payout are what should be guaranteed. Pension holdings are to be sufficient to meet these obligations at the time of payout.
12 | Storebrand aSa our vision: (Vision: Image of the future, a dream to aspire to.
KEy FIGURES (NOK MILLION) 2012 2011 2010 profit before amortisation and tax 652 481 783 assets under management 230,000 213,000 212,000 additional statutory reserves 5,746 5,442 5,439
Storebrand’s asset management business includes the companies Storebrand Kapitalforvaltning aS, Storebrand Fondene aS, SPP Fonder ab, Storebrand eiendom aS and Storebrand realinvestering aS. all the management activities have a guaranteed sustainable profile. the company manages the assets of Storebrand Life Insurance and SPP. Storebrand offers a wide range of mutual funds to retail customers and institutions under the delphi, Storebrand and SPP Fonder brand names. Storebrand eiendom aS is one of norway’s largest real estate companies.
KEy FIGURES (NOK MILLION) 2012 2011 2010 profit before amortisation and tax 144 293 333
Storebrand bank aims to establish itself as norway’s leading direct bank in the retail market, and is also a leading provider of advice, transaction services and financing to corporate customers within commercial property. Storebrand bank has noK 41 billion in assets under management.
all numbers are exclusive the result for sold/discountined business (ring eiendomsmegling).
Sustainable development is development that meets the needs of the present without compromising the ability of future generations to meet their own needs. For Storebrand, sustainability relates to our customers' security and our long-term perspective. as a long-term pension savings provider, it is important that we have the ability to focus in a long-term perspective and generate a return for our customers, without threatening the world that our customers will be retiring in.
SUSTAINAbILITy – AN INTEGRAL PART OF OUR CORE OPERATIONS at Storebrand sustainability is an integral part of our core operations. this means that economic, social and environmental aspects are assessed before we make a decision. all of the Group's business areas are responsible for integrating relevant sustainability questions in all of their operations, from sales to asset management. Work with sustainable investments has a long history. Storebrand's sustainability strategy applies to all types of investments, such as real estate, forestry, shares in listed and unlisted companies, investments in government bonds and microfinance. at Storebrand Insurance sustainability entails helping customers make more sustainable choices, and making an effort to prevent injury and disease. this can be accomplished, for example, by means of an eco-driving course at storebrand.no, reminders of how important fire detection is at home, and by requiring environmentally friendly garages to repair damaged vehicles and granting discounts for electric cars and environmental houses. Preventive HSe work for enterprises is another example of such important work.
efforts to prevent insurance fraud and other activities that are harmful to society have high priority.
COOPERATION THAT ENRICHES Storebrand has cooperated with the norwegian Cancer Society in the fight against cancer for a number of years. Several campaigns have been conducted in which our customers have been informed of various ways that cancer can be prevented. In Sweden, SPP has cooperated with Fryshuset, which supports vulnerable children and young people, since 2011. this cooperation has contributed, for example, to increasing young people's knowledge and understanding of personal finance and the importance of long-term savings.
Storebrand has arranged You Can competitions in local communities for several years. Grants are awarded annually to projects or associations that require a small amount of money to start or develop an idea that can make the world a better place. In norway in 2012 the norwegian Society for Sea rescue in oslo og akershus received a grant for information days for seamanship for school- children and the Society for the Prevention of Cruelty to animals in bergen received a grant to renovate a house for animals. In Sweden grants were awarded to the association Chubby Children, which seeks to reduce childhood obesity in Sweden, and Skjutsgruppen, which has developed a web service to coordinate carpooling to and from work.
See page 162-165 and storebrand.no for more information, results and targets related to Storebrand's sustainability work.
the world is changing rapidly, very rapidly. the population of the earth is growing and each and every one of us is consuming more. at the same time, the world is experiencing a scarcity of resources and ecosystems under pressure. there is every indication that this trend will continue.
What is becoming ever clearer is that the changes we are now seeing will have an impact on the companies we invest in. Population growth and the scarcity of resources will influence commodity prices. Changes in consumer behaviour will create new markets. Companies that operate in emerging economies will be forced to deal with challenges resulting from inadequate monitoring of human rights and repeated demands for bribes. Managing these changes is no simple task. It requires a fundamental shift in the way we assess risk and an increase in our capacity to manufacture goods and services sustainably. However, while such extensive social change produces considerable risk, for companies able to adapt to a new set of circumstances, it will also create new business opportunities.
Storebrand has several billion norwegian kroner under management. this money will be distributed to our pension and insurance customers this year, in five years and in 40 years. With such longterm commitments, we must be able to assess all types of risk that can affect the company's bottom line. this also includes risk related to corruption, human rights, climate and the environment. We need to be able to assess whether an energy company's anticorruption systems are adequate when operating in Kazakhstan, whether a textile company has control over its supply chain in bangladesh, and whether a finance company has considered environmental risk when they finance dam projects in South america. all of these examples could in our opinion have potentially major consequences for the companies we invest in.
our team of eight sustainability analysts evaluates precisely this kind of sustainability risk, a type of risk that is not normally found in traditional financial models. our team's research methods and daily interaction with our fund managers enable Storebrand to assess the entire risk picture that the companies we invest in are facing. We use this knowledge to make the best possible investment decisions for Storebrand's customers.
First we eliminate companies that do not satisfy our minimum requirements. then our specialists actively search for the most sustainable companies across all industries. thereafter we pick the most sustainable companies in each sector and add these 100 companies to Storebrand trippel Smart.
the world is changing. Companies are changing too. We continuously monitor the companies to make sure that we always invest in the 100 best.
1. FINANCIALLy RObUST COMPANIES We invest in companies that show solid earnings. With commitments to our customers for many decades to come, we must have a long-term perspective.
3. POSITIONING IN RELATION TO GLObAL TRENDS the world is changing. We believe that the companies that adapt their business model to the new world in which we must accomplish more, for more people, with fewer resources, will be winners.
MICROFINANCE In Storebrand's microfinance portfolios we contribute to new financing solutions for contractors and small enterprises in low to medium income countries. new investments in 2012 within agriculture and health.
PRINCIPLES Sustainable investments in Storebrand are primarily based on guidelines set out by the United nations Global Compact, the United nations Principles for responsible Investments (PrI) and the United nations Principles for Sustainable Insurance (PSI). our criteria are based on the United nations Universal declaration of Human rights; core United nations and ILo conventions; the United nations Convention against Corruption; core United nations conventions regarding environmental issues and the Kyoto protocol; the ottawa treaty in regards to anti-personnel mines; the Convention on Cluster Munitions (CCM) and the non-Proliferation treaty in regards to nuclear weapons.
• The Group shall make provisions for a reduced environmental impact from our own operations. • We shall actively seek to prevent any activities that are harmful to society or criminal acts in connection with our operations. • The Group shall have a transparent management structure in accordance with national and international corporate governance standards. • Storebrand's goal is to be leading in sustainability in the nordic region and one of the foremost companies in the world in the area of sustainable investments.
WE HAvE qUALIFIED FOR:WE SUPPORT AND HAvE SIGNED:WE ARE CERTIFIED: Government bonds: 32 countries excluded 120 companies excluded
We require that the companies we invest in work systematically with environmental management, anti-corruption and human rights.
the Ujjivan Microfinance Institute is one of Storebrand's investments. Shanthi, who is one of the borrowers, is sharing her story here.
With a better income and a less stressful life, Shanthi spends time thinking about what’s next for her business and family. Her new goal is to be able to open a savings account and put money aside for her children’s education. She hopes that one day they can become doctors or engineers. as a consequence of Storebrand 's financing to Ujiivan, a local microfinance institution, she has become the ability to raise a housing loan, which enables her to expand and have a larger shop.
Microenterprise 61% agriculture 19% Health care 8% Small & mediumsized enterprises 6% other 5%
the vision statement of dnV is to have ‘global impact for a safe and sustainable future’. We live that vision through the services and standards we provide, through how we operate the company, and through the partners we work with. Hence, sustainable investments forms part of taking our own medicine. dnV has been a signee of Un Global Compact since 2003.
UnIFor manage endowments mainly associated with universities, the University of oslo, ntnU and the norwegian University of Life Sciences, important research- and educational institutions in norway. In order to ensure stable and predictable distributions we depend on long term returns, which is dependent on sustainable development in environmental, social and governance, as well as the placement of capital in well-functioning, legitimate and efficient markets.
WHICH AREA WITHIN SUSTAINAbLE INvESTMENTS DO yOU THINK WILL HAvE THE GREATEST EFFECT ON THE COMPANIES' bOTTOM LINES OvER THE NExT 10 yEARS?
We see that companies building their business on products which work in harmony with the cycle of nature, i.e. do not violate the four system conditions for sustainability, are the future winners. tomorrow belongs to those companies and organizations that do not depend on (finite) resources and energy become scarcer and more expensive.
It will be the corporations' ability to see and understand that the current use of nonrenewable resources and pollution issues are not sustainable. With the current resource consumption, we will use 2.5 times the earth's resources by 2050. Corporations that contribute to new technology or changing their production processes to be sustainable, will probably have better access to capital and growth opportunities in their markets as the demands of the authorities are increasing.
We believe that you are one of the few financial players with a credible sustainability work, where you rest on long-term decisions and build your business around to us important factors.
SHAREHOLDERS Storebrand aSa is one of the largest companies listed on oslo børs measured by the number of shareholders. the company has shareholders from almost all the municipalities in norway and from 46 countries.
TRADING vOLUME FOR SHARES IN STOREbRAND almost 881 million shares in Storebrand were traded in 2012, which is an increase of 40 per cent over 2011. the trading volume in monetary terms totalled noK 21,924 million in 2012, down from noK 25,386 million in 2011. In monetary terms Storebrand was the 14th most traded share on oslo børs in 2012. In relation to the average total number of shares, the turnover rate for shares in Storebrand was 195.9 per cent.
Shareholder matters norway 47% UK 21% USa 13% Luxembourg 8% Sweden 2% others 9%
SHARES by COUNTRy 2012 SHARES by COUNTRy 2011 20 larGeSt SHareHolDerS aS at 31 DeCemBer 2012 aCCount numBer oF SHareS % CountrY
14 Jpmorgan Chase Bank nom 4,171,598 0.93% Gbr 15 Jpmorgan Chase Bank nom 4,105,800 0.91% Gbr 16 the Bank of new York mellon nom 3,943,843 0.88% USa 17 State Street Bank & trust Co. nom 3,568,561 0.79% USa 18 JpmCB re SHB Swedish Funds lending 3,493,410 0.78% SWe 19 the northern trust Co. nom 3,488,962 0.78% GGY
by private individuals. the new rules are referred to as the “shareholder model”. Under the shareholder model, dividends, less a standard deduction, are taxable, currently at a rate of 28 per cent. If shares are sold, any unused standard deduction can be deducted from the gain on the sale. the standard deduction is calculated on the basis of the cost price of the share multiplied by the average three-month interest rate on treasury bills, which is effectively a risk-free rate of interest. the interest rate for calculating deductions in 2012 has been set at 1.1 per cent.
INvESTOR RELATIONS Storebrand attaches importance to comprehensive and efficient communication with financial markets. Maintaining a continuous dialogue with shareholders, investors and analysts both in norway and internationally is a high priority. the group has a special investor relations unit responsible for establishing and coordinating contact between the company and external parties such as the stock exchange, analysts, shareholders and other investors. all interim reports, press releases and presentations of interim reports are published on Storebrand’s website storebrand.no/ir.
GENERAL MEETING Storebrand has one class of shares, each share carrying one vote. the company holds its aGM 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 not vote.
Historical share prices have been adjusted to take account of the split between shares and subscription rights implemented in 2007.
the life insurance industry has worked on new mortality tables, in cooperation with the Financial Supervisory authority of norway, which take higher life expectancy into account. there is an ongoing process with the authorities to ensure that a long enough period of time is allowed for building up reserves.
Given the low interest rates, regulatory changes and other work on capital effectiveness, Storebrand has raised the price of the interest rate guarantee for group defined benefit pensions in the private sector. Prices for guarantee products in SPP have also been raised. the reduction of equity risk in most traditional products with an interest rate guarantee and the building up of reserves for longevity mean that customers cannot expect returns above their guarantee in the immediate future. Storebrand is therefore reaching out to inform these customers of their opportunities to transfer to other fund-based products both in norway and Sweden.
NEW REGULATIONS FOR OCCUPATIONAL PENSIONS bEING DRAWN UP the occupational pensions market in norway is characterised by the switch from defined benefit to defined contribution pensions. Storebrand enjoys strong positions in both markets. the banking Law Commission presented its proposed new act for occupational pensions adapted to the new national Insurance Scheme in the summer. the new occupational pensions will replace today's defined benefit pensions and are, like today's defined contribution pensions, based on a company paying annual contributions that are a percentage of the employee's salary. Work will be done on putting transitional rules into place during 2013.
the board has updated its future financial targets given the uncertainty surrounding the framework conditions. See the outlook on page 48 of the report of the board of directors for a more detailed description.
26 | Storebrand aSa the banking Law Commission proposed two main models for occupational pensions: the standard and the basic models. Common to both models are: • All-years principle for accrual.
the main difference is that pension stocks in the standard model are regulated by wage inflation, while pension stocks in the basic model are regulated by the actual return.
Storebrand is positive towards the proposal which is well-adapted to the new national Insurance Scheme and the new capital requirements due to Solvency II. the tax-related contribution framework allows room for good pension schemes for employees. the proposal provides for greater flexibility and more predictable costs, compared with today's defined benefit schemes, for employers. Capital requirements arising from the new products will be risk-manageable. the products' zero guarantee reduces the return risk and the longevity risk is significantly reduced as a result of longevity adjustments.
the report proposes: • Raising the maximum saving ceilings in current defined contribution schemes so that they match the proposed ceilings for the new hybrid products (the contribution limits would be raised from the current 5 per cent for salaries up to 6 G and 8 per cent for salaries between 6 G and 12 G to 8 per cent for salaries up to 7.1 G and 26.1 per cent for salaries between 7.1 G and 12 G). • That new pension rights be accumulated via either new hybrid products or today's defined contribution schemes. That companies must change their schemes by no later than 3 years after the act comes into force. although employees who were born in 1962 or earlier will nevertheless have an opportunity to continue with their defined benefit pension. Premiums for continued defined benefit pensions will be based on new mortality tariffs. • A transitional scheme where already accumulated defined benefit pension rights can be continued within the pension scheme. The premium reserve and additional statutory reserves linked to the accumulated pension rights from the defined benefit scheme would in these circumstances be continued as separate pension stocks that would be kept separate from the new accumulation of pension rights. the costs of these pension stocks would be covered by the employer. • Paid-up policies can be converted to pension certificates based on the same principles. Pension stocks must be sufficient to meet these obligations at the time of payout. an escalation plan will be implemented if there is any under-reserving. the Ministry of Finance would lay down rules for such escalation plans in regulations. • Pension rights from a defined benefit scheme can be transferred by customers to investment choice without a guaranteed return.
Storebrand welcomes the proposal to increase the maximum saving ceilings for today's defined contribution pension schemes and the fact that the proposal facilitates long-term adaptation for longevity through escalation plans. these escalation plans, which the Ministry of Finance will lay down more detailed rules for in regulations, may, depending on their formulation, also facilitate more appropriate guarantee structures. new occupational pension accrual will generally take place in defined contribution occupational pension products that are well adapted
to Solvency II and the low interest rate level. the challenges for paid-up policies that were described in noU 2012:3 "Paid-up polices and capital requirements" are, however, not resolved by the measures proposed in this report. the importance of the capital requirement proposals under Solvency II will depend on the design of the escalation plans, how earned rights from old schemes are ultimately handled, and the market-related adaptation to new products and transitional rules.
SOLvENCy II AND NEW NORWEGIAN OCCUPATIONAL PENSIONS Solvency II is a set of rules covering solvency that will apply to all insurance companies in the eU and eea. the rules were to take effect from 1 January 2014. due to major delays in the schedule, however, their introduction will be postponed. no new schedule has been announced.
the capital requirements shall reflect all significant risks, including financial market risk, insurance risk, counter-party risk, and operational risk. the ultimate formulation of the capital requirements, including possible transitional arrangements, are still not ready, but it is likely that the capital requirements will be higher than the capital requirements under Solvency I.
Calculating solvency capital will be based on the fair value of both assets and liabilities. this implies that the value of insurance liabilities will vary depending on the interest rate level. Under current investment adjustment and product regulations, interest rate sensitivity is considerably higher for insurance liabilities than it is for assets. this implies that a fall in interest rates weakens the solvency position. Paid-up policies and traditional individual insurance products with guarantees present the greatest risk, because the premium has been fully paid.
LIFE INSURANCE REPORT the final life insurance report was submitted to the Swedish government for its consideration in autumn 2012. In short, the proposal is that a transfer right be introduced for defined contribution-based occupational pension insurance (dC) regardless of whether they are group or not. according to the proposal, the obligatory transfer right will nonetheless not apply to premium paying group defined contribution-based occupational pension insurance. Policies for these can regulate whether or not the transfer right applies. the report suggests that the transfer right should not apply to defined benefit-based occupational pension insurance (db).
the Storebrand Group prepares its consolidated financial statements in accordance with the eU approved International Financial reporting Standards (IFrS). the financial statements of the parent company, Storebrand aSa, are prepared pursuant to norwegian accounting law. IFrS is not applied to the parent company‘s financial statements.
Group pre-tax profit 1,559 885 the Storebrand Group's group result before the amortisation of intangible assets was noK 1,960 million in 2012, compared with noK 1,279 million in 2011. after amortisation, the group result was noK 1,599 million compared with noK 885 million in 2011. the Group's tax charge amounted to noK 550 million, of which noK 10 million is payable. the tax exemption method for customer portfolios in life insurance was eliminated with effect from 1 January 2012. Capital gains or losses realised on equities within the eea are thus taxable or deductible, respectively, for equities that are owned by customer portfolios in life insurance companies. this change will entail a normalised income tax cost for the Group over time.
the shift from products with an guaranteed interest rates to Unit Linked insurance products continues in the life insurance businesses. these products are showing good growth in Storebrand Life Insurance and in SPP. Storebrand Life Insurance's income from products with upfront pricing of the interest rate guarantee and profit from risk increased due to both volume changes and price rises. Storebrand prioritises using profit from group pensions to strengthen the premium reserve to meet higher life expectancy in the future. the underlying development of the administration result was satisfactory, but marked by provisions in the costs programme. Growth in the financial markets contributed to a significant increase in SPP's financial result. the risk result was marked by a good disability result, but, as expected, was lower than last year which was affected by non-recurring income. the reduced asset management's result is attributed to both lower operating income and higher costs. Volume-based revenues are declining due to customers switching to lower risk products, but performance-based income is showing an increase. Storebrand bank improved its results in a number of key areas in 2012 and reports low loan losses. Insurance's results developed well with a good underlying risk trend and improved key figures, including combined ratio. See the business area sections below for a more detailed analysis of the results.
Pursuant to norwegian accounting legislation, the board of directors confirms that the company meets the requirements for preparing the financial statements on the basis of a going concern assumption. the board is not aware of any events of material importance to the annual and consolidated financial statements that have occurred since the balance sheet date.
Storebrand is a financial group consisting of the following business areas: life and pensions, asset management, banking and insurance. Most of our activities are conducted in norway and Sweden. Storebrand‘s head office is in Lysaker in the municipality of bærum in norway.
Administration result the underlying administration result for 2012 was good, but was pulled down by provisions made in the second half of the year for expected future restructuring in line with the Group's costs programme. a portfolio was also bought back from an external distributor. In total the provisions and transaction amounted to noK 110 million in 2012. Income developed well, especially for defined contribution pensions, due to portfolio growth.
Financial result the financial result consists of the net return on the company portfolio and the company's share of profit sharing.
Storebrand has completed the ongoing plan to increase reserves due to expected lower mortality for individual pension insurance policies. In accordance with this plan, provisions of noK 172 million were made in 2012, meaning provisions totalling noK 642 million were made in the period 2010 to 2012. the build-up of reserves for the year 2012 was covered by the positive investment result.
there is also a need to strengthen the reserves in the group pension insurance area to meet the projected higher life expectancy. noK 3.2 billion of the customers' investment result was set aside in 2012.
Price of interest rate guarantee and profit risk noK 545 million was recognised as income from upfront pricing of the interest rate guarantee and profit from risk for group defined benefit in 2012, an increase of noK 25 million compared with the same period last year. the increase was due to both volume changes and price rises in the portfolio. as a result of the low interest rate level, a decision was made in autumn 2012 to increase prices for the interest rate guarantee and profit risk for group defined benefit pensions from 1 January 2013 by around 20 per cent in the private sector and 25 per cent in the public sector.
bALANCE SHEET allocations to equities and held-to-maturity bonds in customer portfolios with a guarantee were reduced in 2012 while money market allocations increased correspondingly. the held-to-maturity bond allocations in the company portfolio declined somewhat during 2012. Money market allocations increased correspondingly.
Sales Storebrand achieved good sales results in 2012, particularly in the corporate segment. a number of large tenders for defined contribution pensions, personal insurance and group life insurance were won during the year. the booked net transfer to Storebrand was noK 525 million in 2012, compared with minus noK 4,690 million in 2011. the booked figures for 2012 were affected by three municipalities resolving to transfer their pension schemes from Storebrand in 2011, with effect in the accounts from 1 January 2012.
Total individual pension and savings 1,875 1,629 equities bonds Money market bomds at amortised cost real estate alpha other
32 | Storebrand aSa the decision to withdraw from the market was made due to a number of factors: there is no firm timetable for the future switch to new pension solutions in the public sector as is the case in the market for private occupational pension schemes. Continuing on the basis of the current framework conditions in the public sector requires a level of investment that is considered too high. the introduction of new capital requirements will also tie up a substantial amount of capital for products with long-term interest rate guarantees. therefore, Storebrand has concluded that the sum total of these factors means it would be financially unjustifiable to continue offering these products. Storebrand will consider re-entering the public sector pension scheme market should the framework conditions change in the future.
It should be stressed that Storebrand Life Insurance will continue to offer management and administration services for public sector pension funds. establishing a pension fund will be an attractive alternative for municipalities and public bodies that wish to improve their ability to influence the management of their pension funds.
SPP the SPP business area offers pension and insurance solutions, as well as advice to companies in the competitive segment of the occupational pensions market. It also offers private pension savings, as well as medical and health insurance.
RESULT In 2012, the SPP Group achieved a result of noK 803 million before amortisation and depreciation, compared with noK 291 million in 2011.
Financial result the financial result was positive for 2012 and amounted to noK 395 million. the positive development of the equity and credit market and falling interest rates contributed to the financial result. equity-related investments increased by 12 per cent and mortgage bonds increased by 6 per cent. the returns in the various portfolios depend on developments in the financial markets. the portfolios have different exposures to, for example, equity, fixed income and currency markets, since they have investment profiles that are adapted to the liabilities. the returns in the portfolios will therefore vary. all portfolios enjoyed positive returns during the period, which resulted in profit sharing of noK 288 million in 2012 compared with noK 105 million in 2011.
If the assets in the defined benefit portfolio total more than 107 per cent of the insurance liabilities as at the 3rd quarter, the company can charge an indexing fee. Consolidation at the end of the 3rd quarter was 108.3 per cent. this provided a basis for indexing fees of noK 114 million for the year, compared with noK 2 million in 2011.
Previously, a hedge portfolio had been established to reduce the effect of falling equity markets on the result. this was wound up in the 4th quarter 2012 and has only had a marginal effect on the result. the deferred capital contribution (dCC) reduced the financial result by minus noK 6 million in 2012 and minus noK 748 million in 2011. deferred capital contributions can be reversed in the event of good portfolio returns and/or higher market interest rates.
Other result the result of noK 161 million mainly consists of the return on the company portfolio, which is entirely invested in short-term interestbearing securities. the result developed positively in 2012.
bALANCE SHEET SPP adjusts its exposure to equities in line with developments in the market and risk-bearing capacity in the portfolios by means of so-called dynamic risk management. SPP has continued to adapt the investment risk in guaranteed insurance to the future international solvency regulations. the proportion of equities was therefore reduced in all portfolios in 2012.
New business new sales measured as new premiums (aPe) amounted to noK 977 million in 2012 compared with noK 1,034 million in 2011, a 5 per cent reduction. However, the positive trend for the company's own sales force continued. Sales rose by 9 per cent compared with 2011. Sales staff focused on increased productivity during the year, which had a positive effect on sales. the workforce remained relatively unchanged. the Unit Linked concept has developed positively and it has been well-received by customers. Customers are increasingly choosing Unit Linked insurance, which resulted in a 16 per cent increase in sales by the company's sales force. Sales via brokers decreased. the broker market saw a shift towards traditional management and so-called depository insurance. the weaker result for option programmes is attributed to a large degree to few people making an active choice. the proportion for Unit Linked insurance remains unchanged from 2011 and amounted to 67 per cent of total new business in 2012.
• Guaranteed products: NOK 313 million (NOK 323 million). • Unit Linked: NOK 650 million (NOK 695 million). • Other: NOK 14 million (NOK 16 million).
the asset management business area provides a full range of savings and investment products for institutional, external and internal customers, as well as securities funds for the retail market.
TOTAL ASSETS at the end of 2012, Storebrand asset Management managed noK 442 billion in mutual funds, fund-in-funds, individual portfolios for fund management companies, insurance companies, pension funds, municipalities, institutional investors and investment companies. as per 31 december 2011, the assets under management amounted to noK 414 billion. Group customers accounted for noK 20 billion and external fund customers noK 8 billion of the growth in 2012.
SUSTAINAbLE INvESTMENTS Sustainability forms an integral part of Storebrand's business activities. We believe that companies who work strategically and actively with sustainability will be among the most profitable in the long term. More than 3,500 companies around the world are monitored and analysed, both to identify investment opportunities and to reduce risk. You can read more about Storebrand's sustainability work in the separate article nearer the front of the annual report and further down in this report.
Stable growth in income and costs, coupled with low loan losses gave the bank group a profit before tax from continuing operations of noK 204 million, compared with noK 190 million in 2011. the profit after tax for the sold/discontinued business in ring eiendoms- megling was plus noK 3 million for 2012, compared with minus noK 60 million for 2011.
net commission income amounted to noK 71 million, virtually unchanged compared with 2011. other operating income increased by noK 23 million to a total of noK 55 million. operating costs for bank activities totalled noK 386 million, an increase of noK 41 million from 2011. the cost ratio was 64 per cent in 2012, compared with 66 per cent in 2011. operating costs include around noK 21 million in non-recurring costs linked to the Group's costs programme.
Corporate loans account for 33 per cent of the portfolio and at the end of 2012 about 74 per cent of these loans were for incomegenerating properties and 26 per cent of the loans were for construction projects. Few customers are in default, and the level of losses for the portfolio is low.
the retail market unit maintained its competitiveness throughout the year and enjoyed good lending growth. the Group's focus on advice for customers who are expected to benefit from moving their guaranteed life account assets has resulted in growth in deposit volumes. adjusting the pricing model for fees has contributed to the bank's higher earnings. the bank had 72,000 retail customers at the end of 2012.
one example of the bank's competitiveness is its naming as one of norway's best banks in 2012 by norsk Familieøkonomi. Storebrand bank ranked third in both the "best overall bank" and the "best mortgage for more than noK 2 million" categories.
Corporate market the bank's commitment to the business market is aimed at the professional property market. the bank's competitive advantage is linked to its extensive experience and cutting-edge expertise in this market segment, and its ability to offer comprehensive solutions and excellent service. the proportion of major professional customers grew in 2012. In addition, the corporate market department, together with other units in the Storebrand Group, offers services to selected niche markets, including investors and the SMb segment.
STOREbRAND INSURANCE the insurance business area is responsible for the Group’s one-year risk products. through cost-effective distribution and customerfriendly network solutions the unit offers health insurance in the norwegian and Swedish corporate and retail markets, P&C insurance and personal risk products in the norwegian retail market, and personal insurance in the norwegian corporate market.
Storebrand Insurance's financial performance was good throughout the year. the insurance result was noK 265 million for 2012 compared with noK 161 million for 2011, with a total combined ratio of 87 per cent and 91 per cent in 2011. the insurance result reflects a good underlying risk performance in the portfolio combined with efficient operations within the organisation. Premium income increased by 9 per cent compared with the previous year and reflects continued stable growth in the unit.
the result before amortisation was noK 402 million, an result improvement of noK 121 million from 2011.
Storebrand Insurance achieved a strong overall risk result for the year with a claims ratio that was 5 percentage points lower than in 2011. the risk result reflects an improved risk trend for mortality and disability risk, fewer fires than in a normal year, and a mild winter. the underlying risk performance is thus good for all of the product areas, which is a result of continuously refining the pricing models together with specific product initiatives.
MARKET Profitability in the market remains good, but competition appears to be growing in the retail market, and is particularly strong for major corporate customers. total annual premiums amounted to noK 2.34 billion at the end of the 2012. noK 1.6 billion of this came from the retail market and noK 1.18 billion from the corporate market.
the corporate market is generally a mature market with the exception of health insurance, which is enjoying an annual growth rate of 20 per cent. Measured by annual premiums, Storebrand holds a market-leading position in health insurance. Sales growth was strong throughout the year and reflects both our focus on health insurance and the continued high demand in the market. Storebrand is one of several major players within other personal insurance segments and won several major tenders throughout the year, which contributed to the stronger growth.
demand for products which link health and personal insurance plus disability cover continues to grow. this is driven by the desire of companies to reduce sick leave, improve job satisfaction and reduce overall insurance costs.
RISK the largest risk for the Group is associated with its life insurance activities. the combination of low interest rates and guarantee commitments, as well as higher life expectancy, represents a risk to earnings and the capitalisation of life insurance activities in the future. the most important risk factors for the banking activities are credit- and liquidity risk. For the insurance business the most important risk is insurance risk and for asset management its risk is mainly associated with the development of the financial markets and operational errors.
Continuous monitoring and active risk management are core areas of the Group’s activities. the basis for risk management is laid down in the board's annual review of the strategy and planning process, which sets the appetite for risk, risk targets and overriding risk limits for the operations. risk management and internal control form an integral part of management responsibility in Storebrand.
the share capital, which consists of equity and subordinated loans, is invested at low market risk, mainly in interest-bearing investments of good credit quality and short duration.
defined contribution pension and Unit Linked contracts include individual investment choice in which the individual bears the risk of falls in value, but also reaps the entire upside in rising markets. Storebrand has made a new standard solution available that automatically adjusts the proportion of equities according to the individual's age and time horizon. the opportunities within investment choice are thus better exploited and the customer receives a sensible potential return and risk level depending on their age. beyond the facilitated standard solutions individuals are completely free to choose alternative solutions in which they can determine the investment risk themselves.
the company’s total risk picture is monitored continuously using tools such as the Financial Supervisory authority of norway’s riskbased supervision tool, rbt, and self-developed risk goals. the self-developed risk goals are monitored on a daily basis.
the solvency capital in the life insurance group increased by noK 6.8 billion in 2012, mainly due to increased customer buffers. the solvency capital does not include the noK 4.3 billion that has been set aside within group pensions to build up reserves for higher life expectancy. the largest changes are increased excess values for bonds that are recognised at amortised costs (noK 3.5 billion), increased market value adjustment reserve (noK 1.0 billion) and increased buffers in the form of conditional bonuses in SPP (noK 1.2 billion). In addition to this come retained earnings of noK 1.1 billion.
the Storebrand Life Insurance Group’s solvency margin increased from 161 per cent to 162 per cent at the end of the year. the solvency margin was positively impacted by the noK 550 million capital increase from Storebrand aSa in July. at the end of the 2nd quarter 2012, Storebrand changed the method it uses for calculating the solvency margin for the Swedish business by adopting the evaluation principles used in solvency calculations at a national level. Swedish solvency calculations for insurance liabilities are discounted by a combination of government bond yields and mortgage rates, while the recognised accounting insurance liabilities are discounted on the basis of a swap rate. different interest rate changes can result in volatility in the solvency margin.
SPP SPP is exposed to the same types of risks as Storebrand Life Insurance. However, differences in product design, regulatory framework and asset allocation result in a somewhat different risk situation. SPP's defined benefit-based products are adjusted for inflation. the company is thus exposed to inflation risk in parts of the portfolio. Interest rate risk is reflected in the liabilities since their market values are assessed under Swedish rules, both in the financial statements and for the calculation of solvency capital. the investment portfolio is continuously adjusted to the current interest rate sensitivity of insurance liabilities in the financial statements. different calculation methods mean interest rate sensitivity is greater in the calculation of SPP's solvency than in the financial statements.
Customer returns were good in 2012. the largest positive contribution to customer returns came from the bond portfolios, especially portfolios with low credit risk, following the sharp fall in long Swedish interest rates.
If the value of the assets is lower than the value of the liabilities to customers, as a result of returns lower than the interest rate guarantees that have been issued, a so-called deferred capital contribution (dCC) arises, for which provisions are made in the accounts. deferred capital contributions can be reversed in the event of good portfolio returns and/or higher market interest rates.
SPP's group structure has been changed such that SPP Liv Fondförsäkring ab is no longer a subsidiary but is instead a sister company of SPP Livförsäkring ab. SPP Livförsäkring ab's solvency margin was 222 per cent and SPP Liv Fondförsäkring ab's solvency margin was 221 per cent at the end of the year, compared with 169 per cent and 188 per cent respectively in 2011. In Sweden the solvency calculation discounts insurance liabilities using a market interest rate. Swedish interest rates fell in 2012. during the year, SPP changed its yield curve principle and switched from using a 10-year yield curve to a 30-year yield curve. Since the 30-year yield exceeds the 10-year yield this has resulted in a fall in the value of the insurance liabilities in the solvency calculation and increased solvency capital.
Solvency margin SPP Liv Fondförsäkring ab Solvency margin SPP Livförsäkring ab 4.
the standard method is used for credit risk in capital adequacy regulations and the basic method for operational risk. the company's ICaaP process assesses the total need for capital. In addition to credit, market and operational risk, capital requirement estimates take into account additional capital requirements related to concentration, liquidity, market, and reputational risk, etc. the company's credit risk is considered low, and it is considered well-capitalised in relation to its risk profile. the company has a good liquidity buffer and continuously monitors liquidity reserves in relation to internal limits.
Its market risk is low since investments in securities are restricted to investing surplus liquidity. Its own investments are in norwegian government papers. the company is exposed to the market risk associated with this. However, the company‘s results are indirectly affected by developments in the securities markets, primarily through fees being linked to the market value of assets under management. Some equity funds, like delphi Global, also have performance-related management fees. Higher management fees are charged if the fund beats the benchmark index in a calendar year. If the fund loses against the benchmark index, lower management fees are charged. Furthermore, a weak return can affect the customers‘ capacity and willingness to take risks through actively managed mandates, as well as affect the customers‘ asset composition, which in turn can result in a shift from products with high margins to products with lower margins.
STOREbRAND bANK the risk in Storebrand bank is closely monitored in accordance with guidelines for risk management and internal control that have been approved by the board. the bank's appetite for risk is expressed through the risk strategy, which is designed to support the goals of the business. Policy documents stating the measurement parameters are prepared for each form of risk defined in the guidelines. developments in these parameters are followed up through risk reporting to the bank's board.
the cash flow loans are characterised by a well-diversified tenant profile and good lease durations. Such loans ensure cash flow for the bank from the tenants. at the same time, the buildings provide collateral. tenant diversification ensures the corresponding divers- ification of cash flows. this considerably minimises the overall risk in the portfolio.
Credit risk in the corporate market portfolio improved during the year as new lower risk loans have been made and current loans have developed in a positive direction. around 95 per cent of the portfolio has a loan to value ratio of within 85 per cent.
the bank group's aggregate market risk through interest rate and exchange rate exposure and the maximum risk of loss on its liquidity portfolio are restricted through low exposure limits. nor does the bank have an active investment strategy for equities.
STOREbRAND INSURANCE Insurance risk is the greatest risk for Storebrand Insurance. a one percentage point rise or fall in the claims ratio will amount to about a noK 20 million improvement or impairment in the 2012 result. to limit the impact, several risk-reducing measures have been introduced. ahead of events the most important risk-reducing measures are the underwriting regulations and risk pricing. after events the risk is limited by reinsurance contracts. the need for reinsurance is assessed for each product range in relation to the volatility of the risk results. Storebrand Insurance's largest exposures to insurance risk mainly relate to property fires and contents, third party liability for motor, personal risk in group life, and occupational injury and disability pensions. to reduce the risk in these areas, Storebrand has entered into reinsurance contracts with sound reinsurers.
Storebrand Insurance has a conservative investment profile with some variation between the different investment portfolios relating to P&C, health, private and personal insurance. the investment portfolios are invested primarily in fixed income securities with short to medium term durations and a low credit risk. the durations of assets and liabilities are well matched. on the whole, Storebrand Insurance's financial risk is limited.
CAPITAL SITUATION Storebrand pays particular attention to the levels of equity and loans in the Group, which are continually and systematically optimised. the level is adjusted for the financial risk and capital requirements. the growth and composition of business segments are important driving forces behind the need for capital. the purpose of capital management is to ensure an efficient capital structure and ensure an appropriate balance between internal goals and regulatory requirements. the Group's goal is to achieve a solvency margin ratio for the life insurance business of more than 150 per cent. the core (tier 1) capital ratio target for the bank is 11 per cent. From 2015 the target for the core capital ratio will, given the current balance sheet structure, be set at 12.5 per cent. Storebrand Livsforsikring aS also aims to achieve an a level rating. the Group's parent company has established a goal to achieve a net debt-equity ratio of zero over time.
Storebrand aSa has only one class of share. all shares have equal rights and are freely negotiable. the company is not aware of the existence of agreements between shareholders that limit rights to sell shares or to exercise related voting rights.
the Storebrand Life Insurance Group's solvency margin was 162 per cent at the end of the year, an increase of 1 percentage point in 2012. SPP's solvency margin was 222 per cent at the end of 2012. Storebrand bank had a capital adequacy ratio of 11.8 per cent and a core (tier I) capital ratio of 11.2 per cent. the Storebrand Life Insurance Group's capital adequacy ratio was 12.2 per cent and the core capital (tier I) ratio was 8.5 per cent. the Storebrand Group's capital adequacy ratio was 11.7 per cent. the regulatory requirement for capital adequacy is 8 per cent. the core (tier I) capital ratio was 8.5 per cent as per 31 december 2012.
Storebrand aSa had total liquid assets amounting to noK 1.8 billion at the end of 2012 and also has an undrawn credit facility of eUr 240 million. Storebrand aSa's total interest bearing liabilities amounted to noK 3.5 billion at the end of the year. Storebrand aSa has a noK 479 million bond that matures in 2013 and in 2012 redeemed a noK 282 million bond and a noK 502 million bank loan, bought back a noK 121 million bond, and issued new bonds worth noK 850 million. Storebrand aSa's debt is normally refinanced well before maturity.
P = positive outlook, S = stabile outlook, n = negative outlook.
SUSTAINAbILITy the Storebrand Group has worked systematically and purposefully on sustainability for almost 20 years. Sustainable products and relationships are one of Storebrand's customer promises and form an integral part of the Group's brand. during 2012, Storebrand carried out a number of activities to strengthen its work on sustainability and ensure that sustainability is a differentiating factor that brings us closer to our vision: "recommended by our customers".
FUNDAMENTAL PRINCIPLES Storebrand has signed the Un Global Compact, the Un's principles for responsible companies. the Principles for responsible Investments (PrI) play a key role in the work on sustainable investments. In 2012, we signed the Principles for Sustainable Insurance (PSI), which will be used in the work on further developing sustainable insurance.
during 2012, the analysis unit for sustainable investments established a new and unique sustainability rating system. all of the companies in Morgan Stanley's Global Index will be assigned a sustainability score. the rating is based on three main factors: financial strength, current sustainable practices, and future positioning based on global challenges such the scarcity of resources and changed consumption patterns. all asset managers have access to this sustainability rating. this is how the eSG parameters are being integrated into all investment decisions in the Group.
WORLD-CLASS SUSTAINAbLE OPERATIONS the Group requires sustainability in all internal processes and decisions. Sustainability is one of the Purchasing department's three essential criteria. ethics, developing talent and employee satisfaction are high on Hr's agenda. Product development integrates sustainability into its work. this contributed to Storebrand being named a Global 100 company as "the most sustainable finance service company in the world" by the davos World economic Forum (January 2013). Storebrand qualified for the dow Jones Sustainability Index for the 14th year in a row as one of the 10 per cent most sustainable companies in the world. Storebrand also qualified for FtSe4Good and was nominated as Sustainable asset Manager of the Year, a distinction awarded by the IFC and the Financial times. Storebrand reports the status of its climate change work to the Carbon disclosure Project and has been eco-lighthouse certified for the last 3 years.
ENvIRONMENT Storebrand systematically strives to reduce the company's impact on the environment due to our business activities, investments, procurement and property management. the best way we can influence the environment is through sustainable investments.
We continuously work to reduce energy consumption in all the properties we manage. the Group is working on eco-labelling its properties. by the end of 2012, 62 per cent of the properties Storebrand runs and manages were eco-lighthouse certified. all of them are energy labelled.
Storebrand systematically works to reduce Co2 emissions, including by keeping flights to an absolute minimum and using video conferencing. Storebrand purchases Un certified emissions reductions (Cer) to compensate for Co2 emissions from flights and energy consumption.
EqUALITy AND DIvERSITy Storebrand focuses on retaining and improving the development of talented female employees. a programme aimed at increasing the number of women in senior positions in the Group started in spring 2012. the programme will be expanded to include men in 2013 in order to ensure broader provision for all those with a talent for management. this compensates for some of the effects of the Group deciding to end the trainee programme due to cost reductions.
no injuries to people, property damage, or accidents were reported in the Storebrand Group in 2012.
ETHICS AND TRUST trust is the lifeblood of Storebrand. the company sets strict requirements concerning high ethical standards for the Group's employees. the Group has a common code of conduct that is available on our intranet. this sets rules for employees' personal conduct, business practices and whistleblowing. the company has rules for both internal and external whistleblowing.
Nomination Committee no changes to the committee's composition in 2012. the board wishes to thank the retiring members of the board of directors, board of representatives and the Control Committee for their valuable contributions to the Group.
MACROECONOMIC SITUATION 2012 was marked by uncertainty in the financial markets linked to the debt situation of countries in Southern europe. this has contributed to high unemployment and low growth in several european countries. the norwegian economy is performing well compared with the rest of europe. Growth in the oil industry and low interest rates are making a positive contribution. the downturn internationally is nevertheless dampening growth in norway and Sweden to some extent. europe is expected to see low growth in the next few years. the low interest rate level is challenging for insurance companies that have to cover an annual interest rate guarantee. However, Storebrand believes there are still good investment opportunities in the market with expected returns that exceed the average interest rate guarantee. Growth is expected in Storebrand's core markets, driven by continued low unemployment and good wage growth. Growth in the life and pensions market is marked by a shift in demand from defined benefit pensions with an interest rate guarantee to defined contribution products without an interest rate guarantee.
SOLvENCy II Solvency II is a set of rules covering solvency that will apply to all insurance companies in the eU and eea. the capital requirements shall reflect all significant risks, including financial market risk, insurance risk, counter-party risk, and operational risk. the rules were to take effect from 1 January 2014. due to major delays in the schedule, however, it is clear that the introduction will be postponed until 1 January 2015 at the earliest, although further postponement cannot be ruled out.
the board is maintaining the solvency ratio target for the Storebrand Life Insurance Group of more than 150 per cent and the target of an a level rating for Storebrand Life Insurance.
as described above the board is maintaining the previous dividend rate target.
Good corporate governance is important to ensure that an enterprise can achieve its defined goals, as well as the best possible utilisation of resources and good value creation in the company. Storebrand focuses strongly on continuous improvement of the Group's overall decision-making processes and the day-to-day management of the company.
STATEMENT IN ACCORDANCE WITH THE NORWEGIAN CODE OF PRACTICE FOR CORPORATE GOvERNANCE the statement below describes how Storebrand complies with the 15 sections of the Code of Practice.
1. IMPLEMENTATION AND REPORTING ON CORPORATE GOvERNANCE (no deviations from the Code of practice)
Storebrand’s corporate values are described in the Group vision and core values. Combined they provide the Group with a common direction and goals. the vision describes the Group’s goals and ambitions. the three core values characterise what Storebrand stands for as a company. Further discussion and clarification of the Group’s corporate values may be found on the Group’s website.
Storebrand’s principal focus within sustainability is sustainable investments. the Group has more than 15 years of experience within systematic, goal-oriented sustainability, and its work is based on the Group’s vision and core values. the Group’s sustainability guidelines are based on the principles set forth in the Un Global Compact and the Un’s Principles for responsible Investment.
the Group also has its own code of ethics, as well as guidelines for whistle-blowing, social events, combating corruption, etc. an employee survey was conducted within the Group in 2012, and this survey showed that on a scale of 0-100, employees responded on average 85 that they had a clear picture of the importance of the ethical guidelines in their day-to-day work.
the market is kept informed of the Group's goals and strategies through quarterly investor presentations held in connection with interim and annual reports and other specialised presentations, such as the Capital Markets days. the next is the Investor and analyst Update on 15 March 2013. You can read more about the company’s goals and main strategies on page 25.
the board continually monitors the company ’s capital solidity in light of its goals, strategy and risk profile. You can read more about Storebrand’s solvency capital and capital situation on page 40 of the board of directors' report. the board has adopted a dividend policy that states that the dividend paid to shareholders shall normally amount to more than 35 per cent of the profit for the year after tax, but before amortisation costs. the dividend is set by the annual General Meeting (aGM), based on a proposal put forward by the board. read more about Storebrand's dividend policy on page 22.
Storebrand aSa would like to have various tools available for its efforts to maintain an optimal capital structure for the Group. at the 2012 aGM the board was granted authorisation to increase the share capital through issuing new shares for a total maximum value of noK 224,954,945. this authorisation may be used for the acquisition of businesses in consideration for new shares or increasing the share capital by other means. the board of directors may decide to waive the shareholders’ preferential rights to subscribe for new shares in accordance with the authorisation. this authorisation may be used for one or more new issues. the authorisation is valid until the next aGM.
otherwise there are no provisions in Storebrand 's articles of association that regulate the buyback or issuance of shares.
the general competence rules for board members and executive personnel may be found in the rules of procedure for the board of Storebrand aSa and the Group’s code of ethics. board members must inform the company if they have direct or indirect material interests in an agreement concluded by one of the Group’s companies. the board shall ensure that an independent third party assesses the value of transactions that are not insubstantial in nature. Furthermore, the rules of procedure for the board stipulate that no board member may participate in discussions or a decision concerning matters that are of such material importance to them or a close associate that the member must be regarded as having a conspicuous personal or special financial interest in the matter. each board member has a responsibility to continuously assess whether or not such a situation exists. transactions with close associates involving the Group’s employees and other officers of the Group are regulated by the Group’s code of ethics. employees shall on their own initiative immediately report conflicts of interest that may arise to their immediate superior as soon as they become aware of such a situation. In general, an employee is defined as disqualified if circumstances exist that could result in others questioning the person ’s impartiality in relation to matters other than the interests of the Storebrand Group.
the share capital has not been increased in 2012, but an authorisation has been granted to increase the share capital, cf. section 3 above. the board of directors may decide to waive the shareholders’ preferential rights in connection with share capital increases.
6. GENERAL MEETINGS AND CONTROL COMMITTEE (no deviations from the Code of practice)
General meetings Pursuant to the company’s articles of association, Storebrand aSa’s aGM shall be held by the end of June each year. the 2012 aGM was held on 18 april. all shareholders with a known address will receive written notice of the aGM by post, which will be sent out no later than 21 days before the aGM. the deadline for registration is three working days before the aGM.
the total holdings of treasury shares must, however, never exceed 10 per cent of the group’s share capital.
52 | Storebrand aSa the aGM makes decisions concerning the following: • approval of the annual report, financial statements and any dividend proposed by the board of directors.
• remuneration of the board of representatives, nomination Committee and Control Committee.
• election of an external auditor and fixing the auditor’s remuneration.
• any matters listed on the agenda enclosed with the notice of the meeting.
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, demergers, 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 aGM.
Control Committee Storebrand is legally required to have a Control Committee. Storebrand aSa, Storebrand Livsforsikring aS, Storebrand Forsikring aS, Storebrand bank aSa and Storebrand boligkreditt aS share a committee, which consists of five members and an alternate member, all of which are elected by the aGM. the alternate member attends all the Control Committee meetings. the composition of the committee is identical for Storebrand aSa and all of the aforementioned subsidiaries or group companies. the committee is independent of the respective boards and management of the companies. the term of office is two years. the Control Committee is responsible for ensuring that the Group conducts its activities in a prudent and proper manner. the Storebrand Group believes a good working partnership with the Control Committee is important. the Committee ensures that the Group complies with all relevant legislation and regulations, and that it operates in accordance with the articles of association and resolutions adopted by the Group’s decision-making bodies. the committee is entitled to look into any matter and has access to all relevant documentation and information. the committee has the power to demand information from any employee and any member of the governing bodies. the committee held ten meetings in 2012 and reports semi-annually on the committee’s work to the board of representatives, most recently in September 2012.
Committee and nomination Committee, and the remuneration for the members of these bodies. the Committee’s members are also members of the nomination committees of Storebrand Livsforsikring aS, Storebrand bank aSa and Storebrand boligkreditt aS.
8. bOARD OF REPRESENTATIvES AND bOARD OF DIRECTORS, COMPOSITION AND INDEPENDENCE (no deviations from the Code of practice)
the duties of the board of representatives include making recommendations to the aGM regarding the board’s proposed annual report and financial statements, electing between five and seven shareholder-elected board members, including the Chairman of the board, fixing the remuneration paid to board members, prescribing the rules of procedure for the Control Committees' work, and considering reports from the Control Committees. the board of representatives is entitled to make recommendations to the board on any matter.
based on nominations from the nomination Committee. two members, or three members if the board of representatives elects six or seven directors, shall be elected by and from among the employees. the board members are elected for one year at a time. the day-to-day management is not represented on the board of directors. In 2012 the board of directors consisted of ten members (six men and four women) up until September, when one of the female members resigned to accept a position as an executive vice president of Storebrand aSa. the gender representation requirement pursuant to section 6-11 a of the norwegian Public Limited Companies act was not met after this. It follows from the provision that each gender shall be represented by four individuals if there are nine members on the board of directors. the nomination Committee is working on finding a replacement so that this matter can be rectified.
none of the members elected by the board of representatives have any employment, professional or consultancy relationship with the Group beyond their appointment to the board of directors. the backgrounds of the individual board members are described on page 60-61 of the annual report and on the Group’s website. the composition of the board of directors satisfies the independence requirements set forth in the Code of Practice. there are few instances of disqualification during the consideration of matters by the board. the board’s assessment of each board member’s independence is commented on in the overview of governing and controlling bodies on page 62. an overview of the number of shares in the Storebrand Group owned by members of governing bodies as at 31 december 2012 is included in the notes to the financial statements for Storebrand aSa (Information about close associates) on page 155-156.
Board’s duties the board meets at least 11 times a year. a total of 14 board meetings and one board seminar on Solvency II were held in 2012. the Group’s future strategy is discussed at the board’s annual strategy meeting, which establishes guidelines for the management’s preparation of plans and budgets in connection with the annual planning process, which must be approved by the board.
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 the Group has adequate capital based on the scope of, and risks associated with, its activities. the attendance records of individual board members are provided in the overview of the governing and controlling bodies on page 62. the work of the board is regulated by special rules of procedure for the board, which are reviewed annually. In order to ensure sound and well-considered decisions, importance is attached to ensuring that meetings of the board are well prepared so that all the members can participate in the decisionmaking process. the board prepares an annual schedule for its meetings and the topics it will consider. the agenda for the next board meeting is normally presented to the board based on the approved schedule for the year and a list of matters carried forward from previous meetings. the final agenda is fixed in consultation with the Chairman of the board. time is set aside at each board meeting to evaluate the meeting without the management present. the board is entitled to appoint external advisers to help it with its work whenever it deems this necessary. the board has also drawn up instructions for the Ceo.
the board conducts an annual evaluation of its work and methods, which provides a basis for changes and measures. the results of the board’s evaluation are made available to the nomination Committee, which uses the evaluation in its work.
the audit Committee assists the board of directors by reviewing, evaluating and, where necessary, proposing appropriate measures with respect to the Group’s overall controls, financial and operational reporting, risk management, and internal the Board of representatives elects the Board’s members and supervises the management of the company by the Board and Ceo.
Management and control Storebrand aSa’s board of directors has drawn up general policies and guidelines for management and control. these policies deal with the board’s responsibility for determining the Group’s 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 Ceo’s areas of responsibility are defined in the rules of procedure for the board and instructions for the Ceo, respectively.
Storebrand aSa’s board of directors has drawn up instructions for the Group’s subsidiaries that are to ensure that they implement and comply with the Group’s management and control policies and guidelines.
the Group’s corporate responsibility guidelines summarise how corporate responsibility is an integral part of the Group’s management and control processes for investments, product development, purchasing, employee monitoring and internal operations. the Group’s corporate sustainability goals are adopted by the board, and the sustainability scorecard is followed up by the Group's executive management team. the Group also complies with the GrI (Global reporting Initiative) international reporting standard. the results are audited by the Group’s external auditor. For the 14th year in a row the Group qualified for the international dow Jones Sustainability Index, which includes the top 10 per cent most sustainable companies within all industries on a global basis.
as an extension of the general policies and guidelines, a code of ethics has been drawn up that applies to all employees and representatives of the Group, in addition to corporate rules for areas such as risk management and internal control, financial reporting, handling inside information and share trading by primary insiders. Guidelines and information about information security, contingency plans and financial criminality have also been drawn up. the Group is subject to statutory supervision in the countries where it has operations that require a licence, including the Financial Supervisory authority of norway, as well as its own supervisory bodies and external auditor.
Risk management and internal control the assessment and management of risk are integrated into the Group’s value-based management system. this management system shall ensure that there is a correlation between goals and actions at all levels of the Group and the overall policy of creating value for Storebrand’s stakeholders. the system is based on a balanced scorecard, which reflects both short-term and longterm value creation in the Group.
risk assessment forms part of the managerial responsibilities in the organisation. the purpose of this is to identify, assess and manage risks that can hamper a unit’s ability to achieve its goals. developments in the financial markets are important risk factors in relation to the Group’s earnings and solvency position. In addition to assessing the effects of sudden shifts in the equity markets or interest rates (stress tests), scenario analysis is used to estimate the effect of various sequences of events in the financial markets on the Group’s financial performance and solvency. this is important input for the board’s general discussion about risk appetite and risk allocation.
the basis for Storebrand's continuous management reporting is formed in the strategy and planning process through the stipulation of goals and action plans. Storebrand Compass is the company’s monitoring tool and provides comprehensive reports for management and the board concerning financial and operational targets for earnings, risk and solvency.
the appraisal of Storebrand employees forms an integral part of the value-based management system and is designed to ensure that the Group’s strategies are implemented. the policies for earning and
For the 14th year in a row the group qualified for the international Dow Jones Sustainability index, which includes the top 10 per cent most sustainable companies within all industries on a global basis.
paying bonuses to the Group’s risk managers comply with the regulations relating to remuneration in financial institutions. CFo, Cro and employees with control functions related to risk management, internal control and compliance only have fixed salaries.
Storebrand’s consolidated financial statements are prepared by the Consolidated Financial Statements unit, which reports to the Group’s CFo. Key executives in the Consolidated Financial Statements unit receive a fixed annual remuneration that is not affected by the Group’s financial earnings. the work involved in the preparation of the financial statements is organised in such a way that the Consolidated Financial Statements unit does not carry out valuations of investment assets. Instead it exercises a control function in relation to the accounting processes of the group companies.
a series of risk assessment and control measures have been established in connection with the preparation of the financial statements. Specific reporting instructions are drawn up each quarter and communicated to the subsidiaries. Internal meetings are held prior to the subsidiaries reporting, as well as meetings in which the external auditor participates, to identify risk factors and measures linked to significant accounting items or other factors. Corresponding quarterly meetings also held with various specialist areas in the Group that play an important role in the assessment and appraisal of insurance obligations, investment properties and financial instruments, including lending. these meetings particularly focus on any changes in the market, specific situations relating to individual investments, transactions and operational factors, etc. Valuations associated with significant accounting items and any changes to policies, etc., are described in a separate document (Valuation Items Memo). the board’s audit
Monthly and quarterly operating reports are prepared in which the results per business area and product area are analysed and assessed against set budgets. Particular attention is paid to analysing the development of the financial results, risk results and administration results. the operating reports are reconciled against other financial reporting. otherwise, continuous reconciliation of specialist systems, etc. takes place against the accounting system.
11. REMUNERATION OF THE bOARD OF DIRECTORS (no deviations from the Code of practice)
the Storebrand Group has chosen to only pay fixed salaries to employees for whom control functions make up a large part of their duties. this is to ensure independence in the execution of the control functions. For other executive personnel and employees who influence the company’s risk, as defined by the authorities, the most important objectives of the bonus model are for the bonuses to guide their actions so that they are generally commensurate with the owners’ long-term interests, promote good management and control of the company’s risk, counter high levels of risk-taking, and act as an incentive for long-term value creation and contribution towards good profitability.
56 | Storebrand aSa will remain there for three years. actual shares are not purchased. at the end of the period an amount corresponding to the market price of the shares awarded is paid. Half of the amount paid (after tax) from the share bank is used to purchase actual shares in Storebrand with a lock-in period of 3 years. no payments are made from the share bank until the end of the 3-year period, even if the employee withdraws from the scheme or leaves the company.
the external auditor is elected by the aGM and is responsible for the financial auditing of the Group. 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, all meetings of the Control Committee, and all meetings of the audit Committee, unless the items on the agenda do not require the presence of the auditor. In 2007, the board 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 every year by the board’s audit Committee. deloitte has been elected by Storebrand aSa’s aGM as the company’s external auditor. the other companies in the Group use the same auditor as Storebrand aSa.
STATEMENT IN ACCORDANCE WITH SECTION 3-3b, SECOND PARAGRAPH OF THE NORWEGIAN ACCOUNTING ACT a summary of the matters that Storebrand is to report on in accordance with Section 3-3b, second paragraph of the norwegian accounting act follow here. the points follow the numbering used in the provision.
1. the principles for Storebrand's corporate governance have been prepared in accordance with norwegian law, and they are based on the norwegian Code of Practice for Corporate Governance published by the norwegian Corporate Governance board (nUeS).
monthly and quarterly operating reports are prepared in which the results per business area and product area are analyzed and assessed against set budgets.
58 | Storebrand aSa lars aa. løddesøl (48) Group CFo number of shares: 38 071 2 Løddesøl has worked for the Storebrand Group since 2001, as the Managing director of Storebrand Livsforsikring aS, deputy Managing director of Storebrand bank aSa and the Group's finance director. Løddesøl has previously worked for companies such as Citibank and the airline SaS.
5 Geir Holmgren (40) Managing director Storebrand Life Insurance number of shares: 4 460
Holmgren has worked for the Storebrand Group since 1997, in executive roles in the area of life and pension insurance. He has long experience with business policy issues through positions at Storebrand and a seat on the board of the norwegian Financial Services association for the last ten years.
McPhee has worked for SPP since 2008. She has broad experience from the financial sector and has held executive positions at aMF Pension, Fjärde aP-Fonden and Ge Capital norden.
8 Gunnar rogstad (56) Managing director Insurance number of shares: 117 764 rogstad has worked for Storebrand during the period from 1982 to 1990 and since 2006, and he has long experience in the area of general and life insurance. He has also held executive positions at If and Sampo.
9 truls nergaard (53) Managing director Storebrand bank aSa number of shares: 14 658 nergaard came to Storebrand bank in 2008 as the Corporate Market director. He has long-standing banking experience from norway and abroad, including as the manager of dnb's operations in the USa.
He is the board Chairman of Hafslund aSa and bMenu a/S, a member of the board of aschehoug, Kristian Gerhard Jebsen Group, Harward business Publishing and WeVideo Inc., as well as the foundations Kristian Gerhard Jebsen and active against Cancer.
attended 13 out of 14 board meetings in 2012. number of shares: 8,645 2 Stenstadvold is an independent advisor. He has formerly been a member of orkla's executive management, Managing director of orkla's corporate staff functions, Senior VP of Christiania bank and Parliamentary Secretary.
Stenstadvold is the board Chairman of SoS barnebyer and the Henie onstad art Centre, as well as a member of the board of navamedic aSa, Statkraft SF and Statskraft aS, Kongsberg automotive aSa, SoS USa and SoS International.
nielsen is a member of the board of KIrK Kapital, Finansiel Stabilitet aS, novenco aS and arkil aS.
attended 13 out of 14 board meetings in 2012. number of shares: 6,500 5 Jacobsen is the Procurement director at Statoil aSa. His previous positions have included executive Vice President of refining and Marketing and CFo at Statoil aSa. Jacobsen has held various positions at den norske bank aSa: Head of oil Section, Head of Industrial Section and Head of Industrial and Financial Institutions in the Corporate Customer division, as well as General Manager of Singapore branch with responsibility for dnb's operations in aSean.
attended 14 out of 14 board meetings in 2012. number of shares: 0 6 Caneman's previous positions have included deputy Ceo and Member of the Group executive Committee at Seb. She has also been Head of Corporates & Institutions, Head of retail Services and Head of nordic and baltic operations.
He is the board Chairman of the Housing Foundation Youth Housing in asker, a member of the board of the asker and bærum Housing Cooperative, member of the Council for banking, Insurance and Finance Studies (bI), member of the Professional Council for Financial education in europe, Manager of the Project to Coordinate Competence in the Financial Services Industry (norwegian Financial Services association) and a deputy on the local council in asker.
ann-mari Gjøstein (49) employee-elected board Member of Storebrand aSa since 2007.
attended 14 out of 14 board meetings in 2012. number of shares: 258 9 Gjøstein is a Senior Union representative for employees at Storebrand. Her previous positions include training manager and professional consultant at Storebrand bank aSa, and a financial/funds adviser at dnb and dnb Investor.
Members of Storebrand's corporate bodies bOARD OF REPRESENTATIvES CHAIRMAN terje r. Venold (2,031)
DEPUTy MEMbERS (ELECTED by SHAREHOLDERS) anne-Lise aukner (0) Jostein Furnes (0) Lars tronsgaard (0) Mats Gottschalk (0)
DEPUTy MEMbERS (ELECTED by EMPLOyEES) Joachim ales (1,595) Per-erik Hauge (2,018)
MEMbERS (ELECTED by SHAREHOLDERS): Helge Leiro baastad (0) Kjetil Houg (0) olaug Svarva (0)
1) not independent, see page 50 regarding corporate governance. ( ) number of Shares.
Statement of the Control Comittee and The Board of Representatives note 41 Accounts receivable and other short-term receivables 131 note 42 Equities and units 131 note 43 Bonds and other fixed-income securities 132 note 44 Derivatives 132 note 45 Currency exposure 133 note 46 Technical insurance reserves - life insurance 134 note 47 Technical insurance reserves - P&C insurance 136 note 48 Deposits from Banking customers 136 note 49 Other current liabilities 137 note 50 Hedge accounting 137
Other notes note 51 Collateral 138 note 52 Contingent liabilities 138 note 53 Securities lending and buy-back guarantees 139 note 54 Capital adequacy and solvency requirements 140 note 55 Information about close associates 141 note 56 Sold business and discontinued operations 141
Net income from financial assets and real estate for the company: - equities and other units at fair value 15 26 - bonds and other fixed-income securities at fair value 15 658 503 - financial derivatives at fair value 15 9 38 - net income from bonds at amortised cost 15 101 50 - net income from real estate 16 33 71 - result from investments in associated companies 32 -3 -4
Profit/loss for the year due to: Majority's share of profit 1,006 674
Average number of shares as basis for calculation (million) 446.7 446.3
Financial assets at fair value: - Equities and other units 7,11,34,42 53 322 - Bonds and other fixed-income securities 7,9,11,34,43 21,496 20,059
Financial assets at amortised cost: - Bonds held to maturity 9,34,35,36 10,496 7,983
equity changes with the result for the individual period, equity transactions with the owners and items recognised in the total comprehensive income. the share premium fund and other equity is evaluated and managed together. the share premium fund may be used to cover a loss, and other equity may be used in accordance with the provisions of the Public Limited Liabilities Company act.
Storebrand pays particular attention to the active management of equity in the Group. this management is tailored to the business-related financial risk and capital requirements in which the composition of its business areas and their growth will be an important driver for the Group’s capital requirements. the goal of the capital management is to ensure an effective capital structure and reserve an appropriate balance between internal goals in relation to regulatory and the rating companies’ requirements. If there is a need for new equity, this is procured by the holding company Storebrand aSa, which is listed on the stock exchange and the Group's parent company.
Net cash flow from financial assets and banking customers 2,117 369
Net receipts/payments - sale/purchase of property and fixed assets -7 -14
Net cash flow for the period -640 1,050 - of which net cash flow in the period before financial assets and banking customers -2,757 681
Cash and cash equivalents at the end of the period1 3,552 4,192 1) Consist of: Lending to financial institutions 255 269
the cash flow analysis shows the Group's cash flows for operational, investment and financial activities pursuant to the direct method. the cash flows show the overall change in means of payment over the year.
INvESTMENT ACTIvITIES Includes cash flows for holdings in group companies and tangible fixed assets.
FINANCING ACTIvITIES Financing activities include cash flows for equity, subordinated loans and other borrowing that helps fund the Group's activities. Payments of interest on borrowing and payments of share dividends to shareholders are financial activities.
Storebrand aSa's consolidated financial statements are presented using eU-approved International Financial reporting Standards (IFrS) and related interpretations, as well as other norwegian disclosure requirements laid down in legislation and regulations.
USE OF ESTIMATES IN PREPARING THE ANNUAL FINANCIAL STATEMENTS the preparation of the annual financial statements in accordance with IFrS requires the management to make judgements, estimates and assumptions that affect assets, liabilities, revenue, expenses, the notes to the financial statements and information on potential liabilities. actual amounts may differ from these estimates. See note 2 for further information about this.
other amendments to the IFrS regulations that apply or can be applied to IFrS accounts that are prepared after 1 January 2013 are listed below. the amendments are not expected to have any significant effect on the consolidated financial statements.
the liabilities side of the Group's statement of financial position comprises, for the most part, financial instruments (liabilities) and technical insurance reserves. With the exception of derivatives that are stated at fair value, the majority of the financial liabilities are stated at amortised cost. technical insurance reserves are intended to cover liabilities relating to issued insurance contracts, and the requirement is that these reserves shall be adequate. Various methods and principles are used when assessing the reserves for different insurance contracts. a considerable part of the insurance liabilities relate to insurance contracts with interest guarantees. recognised liabilities relating to norwegian insurance contracts with interest guarantees are discounted at the premium calculation rate. recognised liabilities relating to Swedish insurance contracts with interest guarantees are discounted at the market rate. In the case of Unit Linked insurance contracts, reserves for the savings element will correspond to the related asset portfolios.
5. CONSOLIDATION the consolidated financial statements combine Storebrand aSa and companies where Storebrand aSa has a controlling interest. a controlling influence is normally achieved when the Group owns, either directly or indirectly, more than 50 per cent of the shares in the company and the Group is in a position to exercise actual control over the company. Minority interests are included in the Group's equity.
COMPANy INTEGRATION the acquisition method is applied when accounting for business combinations. the acquisition cost is measured at fair value after accounting for any equity instruments plus any costs directly attributable to the acquisition. any expenses relating to the issuance of shares are not included in the acquisition cost, and are charged to equity.
PREMIUM INCOME net premium income includes the year's premiums written (including savings elements), premium reserves transferred and ceded reinsurance. annual premiums are accrued on a straight-line basis. Fees for issuing norwegian interest guarantees and profit element risk are included in the premium income.
OTHER INCOME Fees are recognised when the income is reliable and earned, fixed fees are recognised as income in line with the delivery of the service, and performance fees are recognised as income once the success criteria have been met.
7. GOODWILL additional value on the acquisition of a business that is not directly attributable to assets or liabilities on the date of the acquisition is classified as goodwill on the statement of financial position. Goodwill is valued at acquisition cost on the date of the acquisition. Goodwill arising from the acquisition of subsidiaries is classified as an intangible asset.
If the discounted present value of the pertinent future cash flows is less than the carrying value, goodwill will be written down to its fair value. reversal of an impairment loss for goodwill is prohibited even if information later comes to light showing that there is no longer a need for the write-down or the impairment loss has been reduced. Goodwill is allocated to the relevant cash flow generating units that are expected to benefit from the acquisition so that it can subsequently be tested for impairment. Cash flow generating units are identified according to operational segments.
9. INvESTMENT PROPERTIES Investment properties are valued at fair value Fair value is the amount for which an asset could be exchanged between knowledgeable, willing parties in an arm’s length transaction.
Primarily, investment properties consist of centrally located office buildings and shopping centres. Properties leased to tenants outside the Group are classified as investment properties. In the case of properties partly occupied by the Group for its own use and partly let to tenants, the identifiable tenanted portion is treated as an investment property. refer to note 39 for further information on investment properties.
DEFINITION OF AMORTISED COST Subsequent to initial recognition, held-to-maturity investments, loans and receivables as well as financial liabilities not at fair value in profit or loss, are measured at amortised cost using the effective interest method. the calculation of the effective interest rate involves
IMPAIRMENT OF FINANCIAL ASSETS For financial assets carried at amortised cost, an assessment is made at each reporting date whether there is any objective evidence that a financial asset or group of financial assets is impaired.
Losses expected as a result of future events, no matter how likely, are not recognised.
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 such 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 as at fair value through profit or loss.
AvAILAbLE FOR SALE Financial assets are classified as available for sale if they are non-derivative financial assets that are designated as available for sale or are not classified as a) loans and receivables, b) investments held to maturity, or c) financial assets at fair value through profit or loss.
ACCOUNTING TREATMENT OF DERIvATIvES THAT ARE NOT HEDGING derivatives that do not meet the criteria for hedge accounting are treated as financial instruments held for trading. the fair value of such derivatives is classified as either an asset or a liability with changes in fair value through profit or loss.
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 recorded directly against equity, while gains and losses that relate to the ineffective part are recognised immediately in the accounts in the profit and loss account.
the total loss or gain in equity is recognised in the profit and loss account when the foreign business is sold or wound up.
10-5. FINANCIAL LIAbILITIES Subsequent to initial recognition, all financial liabilities are measured at amortised cost using an effective interest method, or at fair value.
an explanation of the accounting policies for the most important technical insurance reserves can be found below.
Premium reserve Premium reserve represents the present value of the company’s total insurance liabilities, including future administration costs in accordance with the individual insurance contracts, after deducting the present value of agreed future premiums. In the case of individual account policies with flexible premium payments, the total policy value is included in the premium reserve. the premium reserve is equivalent to 100 per cent of the guaranteed surrender/transfer value of insurance contracts prior to any fees for early surrender/transfer and the policies’ share of the market value adjustment reserve.
the premium reserve is calculated using the same assumptions as those used to calculate premiums for the individual insurance contracts, i.e. assumptions about mortality and disability rates, interest rates and costs. Premium tariffs are based on the observed level of mortality and disability in the population with the addition of security margins that take into account, inter alia, expected future developments in this respect.
the premium reserve includes reserve amounts for future administration costs for all lines of insurance including settlement costs (administration reserve). In the case of paid-up policies, the present value of all future administration costs is allocated in full to the premium reserve. In the case of policies with future premium payments, a deduction is made for the proportion of future administration costs expected to be financed by future premium receipts.
INSURANCE LIAbILITIES, SPECIAL INvESTMENTS PORTFOLIO the insurance reserves allocated to cover liabilities associated with the value of the special investments portfolio must always equal the value of the investments portfolio assigned to the contract. the proportion of profit in the risk result is included. the company is not exposed to investment risk on customer assets, since the customers are not guaranteed a minimum return. the only exception is in the event of death, when the beneficiaries are repaid the amount originally paid in for annuity insurance.
TRANSFERS OF PREMIUM RESERvES, ETC. (TRANSFERS) transfers of premium reserves resulting from transfers of policies between insurance companies are recorded in the profit and loss account as net premiums for own account in the case of reserves received and claims for own account in the case of reserves paid out. the recognition of cost/income takes place at the date the insured risk is ceded. the premium reserve in the insurance liabilities is reduced/increased on the same date. the premium reserve transferred includes the policy’s share of additional statutory reserves, the market value adjustment reserve and the year’s profit. transferred additional reserves are not shown as part of premium income, but are reported separately as changes in insurance liabilities. transferred amounts are classified as current receivables/ liabilities until the transfer takes place.
SELLING COSTS Selling costs in the norwegian life insurance business are expensed, whilst in the Swedish subsidiaries selling expenses are recorded in the statement of financial position and amortised.
However, the company is allowed to apply a higher multiple of the basic interest rate than that defined by the Financial Supervisory authority of norway. the allocation to additional statutory reserves is a conditional allocation to policyholders that is recognised in the profit and loss account as a statutory reserve and accordingly reduces net profit. additional statutory reserves can be used to meet a shortfall in the individual customer’s guaranteed return, and are shown in the profit and loss account in the item to/ from additional statutory reserves. the amount released cannot exceed the equivalent of one year’s interest rate guarantee.
PREMIUM FUND, DEPOSIT RESERvE AND PENSIONERS’ SURPLUS FUND the premium fund contains premiums prepaid by policyholders as a result of taxation regulations for individual and group pension insurance and allocated profit shares. Credits and withdrawals are not recognised through the profit and loss account but are taken directly to the statement of financial position.
the pensioners’ surplus fund comprises surplus assigned to the premium reserve in respect of pensions in group payments. the fund is applied each year as a single premium payment to secure additional benefits for pensioners.
INSURANCE LIAbILITIES, SPECIAL INvESTMENTS PORTFOLIO If a return guarantee is linked to a special investments portfolio, a supplementary provision is made to cover the guarantee obligation. the supplementary provision to cover the company’s liability pursuant to section 11-1, fourth paragraph, of the Companies Pension act shall equal the difference between the capitalised value of the company’s liabilities vis-à-vis the insured, calculated pursuant to section 9-16 of the Insurance act and the value of the investment portfolio.
80 | Storebrand aSa currencies that can be attributed to fluctuations in exchange rates is not transferred to the market value adjustment reserve. Similarly, the change in the value of the hedging instrument is not transferred to the market value adjustment reserve, but is charged directly to the profit and loss account. the foreign exchange fluctuations associated with investments denominated in foreign currencies are largely hedged through foreign exchange contracts on a portfolio basis. transactions with In accordance with legal security funds are considered realisations inasmuch as the company, as an investor, cannot be considered to have control over the securities fund. Pursuant to accounting standard for insurance contracts (IFrS 4) the market value adjustment reserve is shown as a liability.
RESERvES FOR UNFIxED INSURANCE CASES the reserves for incurred insurance events consist of reserves for disability pensions, established claims, unestablished claims and claims processing reserves. When assessing the reserves for disability pensions, a risk-free market interest rate is used, which takes into account future index adjustment of the payments. In addition, provisions are made for calculated claims that have been incurred but not reported (Ibnr).
the claims reserve is a reserve for expected claims that have been reported, but not settled. the reserve also covers expected claims for losses that have been incurred, but have not been reported at the expiry of the accounting period. the reserve includes the full amount of claims reported, but not settled. a calculated provision is made in the reserve for claims incurred but not reported (Ibnr) and claims reported but not settled (rbnS). In addition, claims reserves shall include a separate provision for future claims on losses that have not been settled.
the insurance companies in the Group are subject to their own specific legal requirements for technical insurance reserves, including security reserves etc. In Storebrand’s consolidated financial statements, security reserves with high security margin are not defined as liabilities and are thus not recognised in the Group’s equity. the technical insurance reserves shall be adequate pursuant to IFrS 4.
12. PENSION LIAbILITIES FOR OWN EMPLOyEES Storebrand Group has country-specific pension schemes for its employees. With effect from 1 January 2011, the Storebrand Group in norway provides it employees with defined contribution pension schemes. Up until 31 december 2010, Storebrand had a defined benefit scheme for its norwegian employees. the norwegian defined benefit scheme was closed to new members with effect from 1 January 2011, and existing members could elect to transfer to the defined contribution scheme.
In Sweden, SPP, has agreed, in accordance with the Finance Companies' Service Pension Plan (btP Plan), predefined collective pension plans for its employees. a predefined pension implies that an employee is guaranteed a certain pension based on the pay scale at the time of retirement on termination of the employment.
actuarial gains/losses and the effects of changes in assumptions are included in the total comprehensive income in the income statement for the period in which they occur. the effects of changes in the pension scheme are recognised on an ongoing basis, unless the
as at 31 december 2012 an interest rate derived from high quality corporate bonds is used as the discount rate. Government bond rates were used earlier. See note 23 for further details.
Storebrand has an insured and an uninsured pension plan. the insured plan in norway is written by Storebrand Livsforsikring aS, which is part of the Storebrand Group. Premiums relating to employees in norway are eliminated in premium income in the consolidated accounts.
12-2. DEFINED CONTRIbUTION SCHEME the defined contribution pension scheme involves the Group in 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 Group 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.
equipment, fixtures and fittings and vehicles are valued at acquisition cost less accumulated write-downs and any write-downs.
the write-downs period and method are reviewed annually to ensure that the method and period being used both correspond to the useful economic life of the asset. the disposal value is similarly reviewed. Properties are split into components if different parts have different useful economic lives. the depreciation period and method of depreciation are evaluated separately for each component.
14. TAx the tax expense in the income statement comprises current tax and change in deferred tax and is based on the accounting standard IaS 12 Income taxes. tax is recognised in the income statement, except to the extent that it relates to items recognised directly in equity. deferred tax and deferred tax assets are calculated on the differences between accounting and tax values of assets and liabilities.
effective 1 January 2012, the norwegian taxation rules were amended by the fact that the exemption method for equities etc. no longer applied to customer portfolios in life insurance companies.
deferred tax is calculated on the basis of the Group's tax loss carryforwards, deductible temporary differences and taxable temporary differences. the Group's tax-increasing temporary differences also include temporary differences linked to the Group's investment properties. these properties are primarily found in the norwegian life company's customer portfolio and in companies that are owned by Storebrand eiendom Holding aS, which in turn is directly owned by Storebrand Livsforsikring aS. even though these property companies are included in the customer portfolio, and can be sold virtually free of tax, the tax-increasing temporary differences linked to the underlying properties are included in the Group's temporary differences, where deferred tax is calculated at a 28 per cent nominal tax rate.
15. PROvISION FOR DIvIDENDS Pursuant to IaS 10, which deals with events after the balance sheet date, proposed dividends/group contributions are classified as equity until approved by the general meeting.
16. LEASING a lease is classified as a finance lease if it transfers substantially the risk and rewards incident to ownership. other leases are classified as operating leases. Storebrand has no financial lease agreements.
17. STATEMENT OF CASH FLOWS the statement of cash flows is prepared using the direct method and shows cash flows grouped by sources and use. Cash is defined as cash, receivables from central banks and receivables from credit institutions with no agreed period of notice. the statement of cash flows is classified according to operating, investing and financing activities.
the Group's critical estimates and judgements that could result in material adjustment of recognised amounts are discussed below.
LIFE INSURANCE IN GENERAL 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. 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 and disability, 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 long term, a low interest rate will represent a challenge for insurance contracts with a guaranteed interest rate and, together with a reduced customer buffer, can have an impact on the amount recorded that is linked to the insurance contracts. the norwegian insurance contracts with guaranteed interest rates are discounted at the premium calculation rate (around 3.5 per cent on average). For the Swedish insurance liabilities with a guaranteed interest rate, the discount is based on an estimated swap yield curve, where portions of the yield curve are not liquid. the non-liquid portion of the yield curve has been estimated based on long-term expectations regarding real interest rates and inflation.
In accordance with the accounting standard IFrS 4 Insurance Contracts, the insurance liabilities that are included shall be adequate and a liability adequacy test shall be performed. the norwegian insurance liabilities are calculated in accordance with special norwegian rules, including the Insurance activity act and regulations. For the norwegian life insurance liabilities a test is performed at a general level by conducting an analysis based on the norwegian premium reserve principles. the established analysis is based on the assumptions that apply to the calculation of embedded value, in which the company uses the best estimates for the future basic elements based on the current experience. the test entails then that the company analyses the current margins between the assumptions used as a basis for reserves and the assumptions in the embedded Value analysis. this test was also performed for the introduction of IFrS.
In the norwegian life insurance activities, a significant share of the insurance contracts have a series of annual interest rate guarantees. 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 market value adjustment reserve and additional statutory reserves, so that the effect on the owner's result may be limited.
• Owners’ costs. • Technical standard and any need for upgrading.
• Discount rates for both certain and uncertain cash flows, as well as residual value.
In the Swedish business (SPP), the insurance liabilities are largely discounted using an estimated swap yield curve, in which parts of the yield curve are not liquid, and insurance liabilities in the Swedish business are impacted by changes in the market rate. Since different rate are used for assets and liabilities, changes in interest rates will affect the owner's result and equity.
INTANGIbLE ASSETS Goodwill and intangible assets with undefined useful economic lives are tested annually for impairment. Goodwill is allocated to the Group's cash generating units. the test's valuation method involves estimating cash flows arising in the relevant cash flow generating unit, as well as applying the relevant discount rate. tangible fixed assets and other intangible assets are assessed annually to ensure that the method and time period used correspond with economic realities.
• The company intends to complete the intangible asset and either use it or sell it. • The company's ability to either use or sell the intangible asset.
the norwegian legislation for defined benefit schemes may change in the coming years. a public commission has proposed new schemes that generally contain reduced guarantees compared with the current defined benefit scheme. Changes as a result of this work may affect the size of the recognised liabilities.
In 2012 the tax legislation for norwegian life insurance companies was amended by making dividends and capital gains on equities etc. included in the group or investment option portfolios taxable as ordinary income, while losses on the realisation of such equities will be deductible.
CONTINGENT LIAbILITIES the companies in the Storebrand Group operate an extensive business in norway and abroad, and may become a party to litigations. Contingent liabilities are assessed in each case and will be based on legal considerations.
Storebrand’s income is dependent on external factors that are associated with uncertainty. the most important external risk factors are the development of the capital markets and changes in life expectancy in the norwegian and Swedish populations. Certain internal operational factors can also result in losses, e.g. errors in the management of the customers’ assets.
Storebrand Group's life insurance customers want security for their own economy in the event that anything unforeseen might occur, and they want to be able to maintain their purchasing power as pensioners. to satisfy these needs, for a considerable time the Group has sold various pension products and products that secure future earnings if, for example, the customer should become disabled. the products pose an insurance risk, where i.a. the customers' life expectancy and work capacity are risk factors. because of the annual return guarantees, the products also present a financial market risk in the form of an interest rate risk. In the Swedish activities, this interest rate risk is reflected in the financial accounts, since the liabilities are recognised at market value. the introduction of the Solvency II rules with will imply that the market value of the insurance liabilities will be very important to the norwegian business as well.
Managers at all levels in the organisation are responsible for risks, risk management and internal control within their own area of responsibility, and shall continuously consider the implementation of internal control. the managements prepare annual internal control reports that show how the internal control that has been established functions. at least once a year, the Chief executive officer shall prepare an overall review of the risk situation and submit this to the board of directors for action.
Storebrand has dedicated functions to follow up and manage risks for various product groups and for the company as a whole. Control functions for risk management, internal control and compliance shall support the line organisation in identifying, assessing, managing and controlling risk-taking. responsibility for the Group's control functions for risk management and internal control lie with the Group's Chief Financial officer.
INTERNAL AUDITING Storebrand has entered into an agreement with an external accounting firm concerning the internal audit function. the responsible partner in the accounting firm reports directly to the board of Storebrand aSa, which stipulates the instructions for the internal audit and approves the annual audit plan. the audit plan also includes an independent evaluation of the Group's control functions.
RISK MANAGEMENT IN CERTAIN AREAS IN DETAIL below follows a description of the special situation concerning risk management of life insurance linked to the relationship between customers and the owner. as far as the risk associated with the business in the Group is concerned, this is, apart from life insurance, risk that essentially affects the owner. Insurance risk, financial market risk, liquidity risk, credit risk, and operational risk are described in more detail in notes 6-10.
STOREbRAND LIFE INSURANCE NORWAy a significant proportion of savings products in the norwegian life insurance business incorporate a guaranteed annual return. Financial risk relates primarily to the ability to meet the customers’ guaranteed return, which for the majority of the products applies for one year at a time. therefore, risk management in this business aims to reduce the probability of the return falling below the annual guaranteed return for the various product groups in any single year.
the composition of the financial assets is determined by the company’s investment strategy. the investment strategy establishes guidelines and limits for the company’s risk management, credit exposure, counterparty exposure, currency risk, the use of derivatives, and requirements regarding the liquidity in the asset portfolio. the objectives of this dynamic risk management are to maintain good risk bearing capacity and to adjust the financial risk to the company’s financial strength. by exercising this type of risk management, the company expects to create good returns both for individual years and over time. Given the current investment portfolio and dynamic risk management strategy, the annual return for the main product groups will normally fluctuate between 2 per cent and 6 per cent. Smaller portions of the portfolio are invested in profiles with somewhat lower and somewhat higher market risk. dynamic risk management and hedging transactions reduce the likelihood of a low investment return. If the investment return is not sufficient to meet the guaranteed interest rate, the shortfall will be met by using risk capital built up from previous years' surpluses. risk capital primarily consists of additional statutory reserves and unrealised gains. the owner is responsible for meeting any shortfall that cannot be covered. the average interest rate guarantee is expected to decline in the years ahead and from 2012 all new earnings will be linked to a basic interest rate of 2.5 per cent. the share capital is invested with a low market risk. the financial risk related to contracts in the Unit Linked and defined contribution pension product categories is borne by the insured person himself, and the insured person can also choose the risk profile himself.
86 | Storebrand aSa sented by the customer portfolio is also managed through derivative transactions in SPP’s company portfolio. the investment strategy and risk management in SPP comprises four main pillars: • Assets’ interest rate sensitivity is continuously adjusted to the insurance liabilities. • Asset allocation that results in a good return over time. • Continuous implementation of risk management measures in the customer portfolio through dynamic risk management. • Adjusted hedging in the company portfolio of parts of the financial risk the customer portfolios expose the equity to.
this note provides a description of the content of the various elements of the total profit generated and an overview of the results allocated to owners and customers.
ADMINISTRATION RESULT the administration result line includes all products apart from traditional individual products with profit sharing. administration and management costs are paid annually in advance. the insurance company must then meet any deficit in the administration and management result, and similarly any profit passes to the company.
PROFIT SHARING Profit sharing is also included in the financial result line. a modified profit sharing regime was introduced for old and new individual policies 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.
Individual endowment insurance and pensions written by the company prior to 1 January 2008 will continue to apply the profit rules effective prior to 2008. new contracts may not be established in this portfolio. the company can retain up to 35 per cent of the total result after allocations to additional statutory reserves.
PRICE OF RETURN GUARANTEE AND PROFIT RISK the return guarantees in group pension insurance with a return guarantee must be priced upfront. the level of the return guarantee, size of the buffer capital (additional statutory reserves and unrealised gains), and the investment risk of the portfolio in which the pensions assets are invested determines the price that the customer pays for his or her return guarantee. return guarantees are priced on the basis of the risk to which the equity is exposed. Group pension customers can choose an investment profile with a low proportion of equities, which normally results in a lower risk of losses and lower expected return. a larger proportion of equities will normally result in a higher expected return, but also a higher price for the return guarantee. the insurance company bears all the downside risk, and must carry reserves against the policy if the buffer reserves are insufficient or unavailable.
88 | Storebrand aSa lower than for an annual return guarantee over the same period. However, there is a requirement that the liabilities to the insured must at all times be covered by adequate technical insurance reserves, and that, if necessary, equity can also be used to ensure adequate reserves during the agreement period. Greater contractual freedom exists between the customer and the company in the regulations pertaining to multi-year return guarantees. For example, customers can pledge their own buffer capital as collateral for returns under the calculated interest rate applied to the insurance. Such an increase in the customer’s risk also reduces the total price of the return guarantee charged to the customer.
ADMINISTRATION RESULT the administration result for all products are paid to or charged to the result allocated to owners. Income and costs related to SPP’s consultancy and service activities are included in the administration result.
RISK RESULT the risk result is paid to the owners in its entirety for all products.
In the case of defined benefit contracts (db portfolio), the company is entitled to charge an indexing fee if the group profit allows the indexing of the insurance, up to a maximum equalling the change in the consumer price index (CPI). the indexing is based on the return between 1 october to 30 September. Half of the fee is charged if the pensions can be indexed by the entire change in the CPI. the entire fee can be charged if the paid-up policies can also be indexed by the entire change in the CPI. a 100 per cent fee equals 0.8 per cent of the insurance capital.
the guaranteed liability is continuously monitored. If the guaranteed liability is higher than the value of assets, a provision must be made in the form of a deferred capital contribution. If the assets are lower than the guaranteed liability when the insurance payments start, the company supplies capital up to the guaranteed value in the form of a realised capital contribution. Changes in the deferred capital contribution are included in the financial result. the financial result also includes the result of the hedging programme, which the company uses to protect itself against effects in deferred capital contribution.
OTHER RESULTS other results consist of the return on assets not managed for account of the policyholders, equity and depreciation on intangible assets and interest expenses on subordinated loans.
Solvency II is a set of rules covering solvency that will apply to all insurance companies in the eU and the eeC area. the rules were to take effect from 1 January 2014. due to major delays in the schedule, however, it is clear that the introduction will be postponed. no new schedule has been announced.
the risk entailed in the guaranteed annual return arises because it relates only to the asset side. by increasing interest rate sensitivity, the fluctuations in the annual return on assets increase and a risk management dilemma arises. High interest rate sensitivity represents a small risk to the company's solvency position, but a large risk of a negative return in the case of a rise in interest rates. Low interest rate sensitivity represents a small risk to the result, but a major risk to solvency in the event of a decline in interest rates.
the challenge is linked to the existing reserves and how the transitional rules will be formulated. the banking Law Commission's proposal for transitional rules was made public on 7 January. the proposed transitional rules are based on the rights to pension benefits that have been earned at the time of the transition being protected by the constitution. Given that the rights to benefits will be maintained, it implies that there will still be a large capital requirement when Solvency II is introduced. the report has been distributed for public consultation. the Ministry of Finance is planning to introduce a bill to the Storting in the spring. an effort is being made so that the new rules can take effect from 1 January 2014, but the schedule is tight and there is a risk of delays.
INSURANCE RISK Life insurance represents a significant portion of the overall insurance risk and comprises: 1. Death – the risk of erroneous estimation of mortality (before retirement age) or erroneous estimation of payment to surviving relatives. over the last few years, a decrease in mortality and fewer young surviving relatives have been registered, compared with earlier years. 2. Long life – the risk of erroneously estimating life expectancy and future pension payments. Historical developments have shown that an increasing number 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. 3. Disability – the risk of erroneous estimation of future illness and disability. as of today, the disability risk in norway and Sweden is greater than in other oeCd countries. there will be uncertainty surrounding the future development of disability in norway and Sweden.
Storebrand has primarily life insurance risk in norway (SbL) and Sweden (SPP), in addition to Ireland and Guernsey (benCo).
SPP AND bENCO the risk premium for group contracts is an equalised premium based on the group's age and gender composition.
the majority of SPP's risk policies are annual. In other words, the company can change the premium every year. errors in the estimate of the premium for life and disability cover can therefore be corrected, which has a rapid effect on the company’s risk result.
4) REINSURANCE the company also manages its insurance risk through a variety of reinsurance programmes. through catastrophe reinsurance (excess of loss), the company covers losses (single claims and reserves provisions) where a single event causes more than 2 deaths or disability cases. this cover is also subject to an upper limit. Surplus reinsurance on life policies covers death and disability risk that exceeds the maximum risk amount for own account the company practices. the company’s maximum risk amount for own account is relatively high, and the risk reinsured is therefore relatively modest.
6) TRAFFIC LIGHT REPORTING (ONLy SPP) In order to ensure that insurance companies have adequate capital to meet their insurance liabilities, Finansinspektionen (Swedish Financial Supervisory authority) requires the sector to stress test all of its insurance business using so-called traffic light calculations. the elements tested are the premium income side and the insurance liabilities. From 2007, the companies are also required to stress changes with respect to insurance risks. this also applies to so-called cancellation risk, which is the risk that a policyholder will terminate the policy and thus stop paying premiums. the level of stress testing generally follows the guidelines issued by eIoPa (european Insurance and occupational Pensions authority) and their work on Solvency II.
the risk result in the table above shows the total risk result for distribution to customers and owner.
TRANSFER RIGHT a transfer right exists that allows for the transferring of insurance liabilities linked to group and individual pension insurance contracts to or from other insurance companies. the transfer right may constitute a liquidity risk.
STOREbRAND LIFE INSURANCE NORWAy the Financial Supervisory authority of norway sets the highest basic interest rate permitted for new policies and for new members/ new accrual of benefits in group pension insurance. the highest basic interest rate for new policies was set at 3 per cent in 1993 and subsequently reduced in 2005 to 2.75 per cent for policies entered into after 1 January 2006. the highest basic interest rate for new members/new accrual of benefits in group pension insurance was reduced from 4 per cent to 3 per cent with effect from annual renewals in 2004. the guaranteed rate has been set at 2.5 per cent for new contracts with effect from 1 January. the basic interest rate is the annual guaranteed return to the customers.
the average overall interest rate guarantee for all sectors was 3.4 per cent in 2012. the interest rate guarantee must be fulfilled on an annual basis. If the company’s investment return in any given year is lower than the guaranteed interest rate, current legislation permits the equivalent of up to one year’s guaranteed return for the individual policy to be covered by transfers from the policy’s additional statutory reserves.
• Occupational injury. • Critical illness and cancer insurance. • Accident insurance.
In the P&C business, large claims or special events represent the greatest risk. the largest claims will typically be in the group life and occupational injury sectors. to reduce the risk Storebrand has taken out excess of loss reinsurance at the group level.
Market risk is the risk of incurring losses on open positions in financial instruments due to changes in market variables and/or market conditions within a specified time horizon. therefore, market risk is the risk of price changes in the financial markets, including changes in interest rates, and in the currency, equity, property or commodity markets, affecting the value of the company’s financial instruments. Storebrand continuously monitors market risk using a range of evaluation methods. the potential for losses in the investment portfolio on a one-year horizon is calculated and the portfolios are stress tested pursuant to the statutorily defined stress tests as well as internal models.
STOREbRAND LIFE INSURANCE NORWAy the largest contributions to short-term, result-related market risk for the norwegian life insurance business are falls in the value of equities and real estate, increased risk for corporate bonds and rapid increases in interest rates. In the longer term, low market interest rates over time represent a significant market risk for the company. the current formulation of the regulations means that the value of the insurance liabilities in Storebrand Life Insurance are not affected by changes in market interest rates. When Solvency II is introduced, the value of the insurance liabilities will be interest rate sensitive in the solvency accounts for the norwegian business as well.
SENSITIvITy ANALySES the stress tests were applied to the investment portfolio as at 31 december 2012 and the outcome shows the estimated effect on profits for one stress after the other for the year as a whole. the analysis was done with immediate individual stresses, i.e. a class of assets experiences a day with sharp market fluctuations, and the associated effect on the result.
LIFE INSURANCE Since it is the immediate market changes that are shown in the note above, the dynamic risk management for the Group's life insurance companies will not affect the outcome. If it is assumed that the market changes occur over a period of time, then dynamic risk management would reduce the effect of the negative outcomes and reinforce the positive to some extent.
STOREbRAND LIFE INSURANCE NORWAy the stress tests were carried out on all investment profiles with a guaranteed return and the effect of each stress changes the expected return in each profile. For the negative stress tests (equities down, interest rates up and property down) the return in some individual profiles will fall below the guarantee. the guarantee and buffer situation for each contract will then decide how much equity the company must use if the return remains at this level in 2013. In addition to the need to use equity to cover the guaranteed return, it is the changes in profit sharing on paid-up policies and individual contracts, as well as the return and interest costs in the company portfolio, that give the greatest deviation from the expected result in 2013. the effect of negative stresses has declined since last year. the most important reason for this is the reduction in the equity holdings in the life portfolios.
the stresses were applied individually, but the overall market risk has used the correlations between the stresses, and thus it is less than the sum of the individual stresses. In addition to the negative result effect for the owner, the expected building up of buffer capital will, to a substantial degree, fall away in the negative stress tests. In the case of the positive stresses, greater building up of buffer capital is also assumed, in addition to the positive result effects for the owner in the form of the market value adjustment reserve and additional statutory reserves.
OTHER OPERATIONS the other companies in the Storebrand Group are not included in the sensitivity analyses, as there is little market risk in these areas. the equity of these companies is invested with little or no allocation to high-risk assets, and the products do not entail a direct risk for the company as a result of price fluctuations in the capital market.
the table below shows the exposure to selected countries, not including indirect exposure.
NOK million months months 1-3 years 3-5 years > 5 years
1) of which the minority interests in Storebrand eiendomsfond KS amount to noK 2,022 million. after 3 years, participants can present a demand for redemption every year. redemption is conditional on a total demand of noK 100 million. the redemption sum is set at 98.75 per cent of value-adjusted equity. See also note 49.
Total debt raised through issuance of securities 18,033 13,626 the loan agreements contain standard covenants. Storebrand bank aSa and Storebrand boligkreditt aS were in compliance with all relevant covenants in 2012. Under the loan programme in Storebrand boligkreditt aS, the company’s overcollateralisation requirement was 109.5 per cent fulfilled. as at 31 december 2012, Storebrand bank aSa had only one current credit facility. a noK 750 million revolving Credit Facility was signed in october 2010. the credit facility agreement for noK 750 million contains certain special covenants. In 2012, Storebrand bank aSa fulfilled all the terms and conditions of the agreement.
Credit risk and liquidity risk are the two most important forms of risk for banking activities. the bank’s risk strategy establishes overall limits for how much credit risk the bank group is willing to assume. the willingness to accept risk is adjusted to the bank’s risk appetite and target risk profile, capital adequacy and growth. Credit policies establish general principles for granting credit. the bank group’s routines for credit management are set forth in special credit handbooks. the most important control of credit risk is carried out and administered by the Credit Control unit.
the maximum credit exposure is the sum of gross loans, guarantees, amounts drawn from credit lines and undrawn amounts of credit
bonds and derivatives are presented below by rating and lending by customer groups.
Category by issuer or guarantor AAA AA A BBB Other NIG Total
Non-interest bearing securities managed by Storebrand 1) excluding underlying investments in external funds
Lending to financial institutions 142 113 255 rating classes based on Standard & poors's. niG = non-investment grade.
the average weighted loan-to-value ratio (LVr) in the bank group is approximately 53 per cent for housing loans, and approximately 96 per cent of the housing loans re within an 80 per cent LVr. about 99 per cent are within 90 per cent LVr. In the bank group, about 61 per cent of the housing commitments have a 60 per cent LVr. the portfolio is considered to have a low risk. the portfolio is considered to have a low credit risk.
In the case of default, Storebrand bank aSa will sell the securities or repossess the properties if this is most suitable. the bank has two repossessed properties that are held as part of the Storebrand bank Group in separate subsidiaries, and internal transactions are eliminated in the normal manner.
The difference between the liabilities' book value and the contractual amount at maturity 1 4
Accumulated change in fair value of liabilities due to changes in credit risk 1 -2
NOTE 10 | Operational risk the assessment of operational risks is linked to the ability to achieve targets and to implement plans. operational risk is defined as the risk of financial losses or reduced reputation due to inadequate or the failure of internal processes, control routines, systems, human error or external incidents.
the Group categorises financial instruments valued at fair value on three different levels, which are described in more detail below. the levels express the differing degrees of liquidity and different measurement methods used. the company has established valuation models to gather information from a wide range of well-informed sources with a view to minimising the uncertainty of valuations.
LEvEL 1: FINANCIAL INSTRUMENTS vALUED ON THE bASIS OF qUOTED PRICES FOR IDENTICAL ASSETS IN ACTIvE MARKETS this category encompasses listed equities that over the previous three months have experienced average daily trading equivalent to approximately noK 15 million or more. based on this, the equities are regarded as sufficiently liquid to be included at this level. 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.
the types of mutual funds classified as level 3 are discussed in more detail below with a reference to the type of mutual fund and the valuation method. Storebrand is of the opinion that the valuation method used represents a best estimate of the mutual fund’s market value.
the valuation of indirect property investments will be sensitive to a change in the required rate of return and the expected future cash flow. the indirect property investments are leveraged structures. the portfolio is leveraged 55 per cent on average.
Total derivatives 2,701 2,701 - of which derivatives with a positive market value - of which derivatives with a negative market value liabilities
Storebrand's activities are operationally divided into five business areas: life and pensions, asset management, bank and P&C insurance. two result areas are reported for life and pensions: Life and Pensions norway (LPn) and Life and Pensions Sweden (LPS). Storebrand is the nordic region's leading provider of life insurance and pensions, and offers a comprehensive range of products to retail customers, local authorities, and the public sector.
STOREBRAND lIFE INSuRANCE Includes the companies in the Storebrand Life Insurance Group, except Storebrand eiendom aS, Storebrand realinvesteringer aS and Storebrand Holding ab, and personal risk and employee cover in Storebrand Livsforsikring aS. Storebrand Life Insurance offers a wide range of products within occupational pensions, private pension savings and life insurance to companies, public sector entities and private individuals. Storebrand Life Insurance's branch in Sweden provides occupational pensions products based on norwegian law in the Swedish market. benCo is also included and offers pension products to multinational companies via nordben and euroben.
SPP Consists of the companies in the SPP Group (Storebrand Holding Group excluding SPP Fonder ab). SPP offers a wide range of pension solutions to companies, organisations and private individuals in Sweden. SPP holds a particularly strong position in traditional products - policies with guaranteed interest rates - in the Swedish corporate market.
ASSET MANAGEMENT Storebrand's asset management activities include the companies Storebrand Kapitalforvaltning aS, Storebrand Fondene aS, Storebrand eiendom aS, and Storebrand realinvesteringer aS and SPP Fonder ab. all the management activities have a guaranteed socially responsible profile. Storebrand offers a wide range of mutual funds to retail customers and institutions under the delphi and Storebrand Fondene brand names. Storebrand eiendom is one of norway's largest real estate companies and manages real estate portfolios both in norway and abroad.
BANK Storebrand bank offers traditional banking services such as accounts and loans in the retail market and project financing to selected corporate customers.
INSuRANCE the insurance segment comprises the companies Storebrand Forsikring aS, Storebrand Helseforsikring aS (50 per cent stake) and P&C insurance in Storebrand Livsforsikring aS. Storebrand Insurance aS offers standard insurance products in the norwegian retail market, and some corporate insurance in the SMb market. Storebrand Health Insurance aS offers treatment insurance in the norwegian and Swedish corporate and retail markets. It also includes personal risk insurance in the norwegian retail market and employee insurance in the corporate market in norway, which is included in Storebrand Livsforsikring aS.
Write-downs and amortisation of intangible assets 1) income from external customers includes the total premium income including savings premiums and transferred premium fund from other companies, net financial return and other income. 2) income from other group companies: Storebrand investments manages financial assets for other group companies. asset management fees are made up of fixed management fees and performance-related fees. performance-based fees apply to the portfolios qualifying for such fees at any given time, and are recognised as income when they are assured. Storebrand livsforsikring aS earns revenue from other group companies for product sales and management. these services are priced on commercial terms.
Deposits from and due customers as percentage of gross lending 56% 55%
Fixed income and similar income from lending to and receivables from financial institutions 13 21
Interest and similar costs from liabilities to financial institutions -104 -225
INTEREST COSTS AND vAluE ChANGES ON BORROwING AT FAIR vAluE (FvO)
Real estate equities and units in Norway and Sweden1 -57 73
Realised gains/losses sold real estate -26 82 1) are classified as equities and other units in the statement of financial position.
NOTE 21 | Losses from lendings and reversal of previous losses
Realised losses on loans where provisions have previously been made -9 -95
Realised losses on loans where no provisions have previously been made -6 -7
Recovery of loan losses realised previously 6 18 write-downs/income recognition for lending and guarantees for the period 8 14
NOTE 23 | Pension costs and pension liabilities the Storebrand Group has country-specific pension schemes.
Storebrand's employees in norway have both a defined contribution pension scheme and a defined benefit pension scheme that have been established in Storebrand Livsforsikring aS, but the Group will not participate in the aFP early retirement scheme until 1 January 2013. From 1 January 2011 the defined benefit scheme was closed to new members. at the same date a defined contribution pension scheme was established. the contribution based scheme applies to all new employees from 1 January 2011 and to those who chose to transfer from a defined benefit to a defined contribution pension arrangement. In the case of the defined contribution scheme, the cost is equal to the period's contribution to the employees' pension savings, which amounts to 5 per cent of the contribution basis between 1G and 6G (G = national Insurance Scheme basic amount as at 31 december 2011, amounting to noK 82,122), plus 8 per cent of the contribution basis between 6G and 12G, as well as the defined-contribution scheme that is funded from operations that annually comprises 20 per cent of the contribution basis for salaries over 12G. the contributions are deposited in the employees' pension accounts each month. the future pension depends upon the amount of the contributions and the return on pension savings.
all the members of the pension schemes have an associated survivor's and disability cover.
the pension for the employees of nordben Life and Pension Insurance Company Ltd and euroben Life and Pension Ltd is covered by a defined contribution scheme. In addition, the employees of nordben are covered by a lump sum upon death during their period of service.
Pension assets are based on the financial assets held by Storebrand Life Insurance/SPP composed at 31.12: Storebrand life Insurance SPP
the table shows the percentage asset allocation of pension assets at year-end managed by Storebrand Life Insurance.
Expected annual increase in pensions in payment 1,5% 1,5% 2,0% 2,0%
FINANCIAL ASSUMPTIONS the financial assumptions have been determined on the basis of the regulations in IaS 19. Long term assumptions such as future inflation, real interest rates, real wage growth and adjustment of the basic amount are particularly subject to a high degree of uncertainty.
With a few exceptions involving unrated securities, all of the rated covered bonds in norway have a rating of aa- or higher. the norwegian covered bond market is quite young, but the market has undergone major development in recent years. the outstanding covered bond volume was more than noK 530 billion as at the fourth quarter of 2012. the bid/ask spreads do not normally exceed more than a 2-3 basis point yield in this market. average daily trading in 2012 has been around noK 650 million, and the average new issue volume was approximately 7.5 billion per month in 2012. around 20 per cent of the market consists of fixed income securities, while around 80 per cent of the market consists of securities with adjustable interest rates. as is the case for the rest of the norwegian corporate bond market, the norwegian swap interest rates are used as a basis for calculation of the price/yield. the norwegian swap interest rates are considered very liquid.
based on the market and volume development observed, the norwegian covered bond market must be perceived as a deep market in relation to the provisions in IaS 19 in the opinion of Storebrand. this conclusion is based on the regular activity that takes place in both the primary and secondary markets, as well as the transparency that exists due to the fact that the trades observed on the exchange are close to the indicative levels quoted by the banks. broad participation by all of the largest bond brokers in the reporting system of the norwegian Mutual Fund association (VFF) supports the reliability of the available data. reference is made to the statement of 13 december 2012 from the norwegian accounting Standards board related to the use of covered bonds as the discount rate. as of the fourth quarter of 2012 Storebrand has used a discount rate based on the covered bond rate in norway. this change is considered to be a change in the estimate. the corresponding interest rate in Sweden is also used for the Swedish operations.
ACTUARIAL ASSUMPTIONS In norway, there are standardised assumptions for mortality/disability trends, and other demographic factors, that have been prepared by Finance norway. the mortality table K2005 is used until new mutual mortality tariffs are adopted by the industry and can provide a basis for more precise calculations. the average employee turnover rate is 2-3 per cent for the entire work force as a whole, and falling turnover with increasing age is assumed.
the actuarial assumptions in Sweden follow the industry's mutual mortality table dUS06 adjusted for corporate differences. the average employee turnover rate is estimated to be 4 per cent p.a.
if the government rate has been used as the discount rate as at 31 December 2012 instead of the high quality corporate bond rate, it is estimated that the pension liabilities would have increased by around 25 per cent for the norwegian operations when the other assumptions in the calculations remain unchanged.
NOTE 24 | Remuneration to senior employees and elected officers of the company
*) intervals indicate that there are several loans with differing interest rates and repayment periods. 1) Comprises company car, telephone, insurance, concessionary interest rate, other taxable benefits. 2) Ceo for the period from January 1st 2012 to may 31st 2012. See also note 6 in the annual finacial statement s iof Storebrand aSa.
Ole Klette 233 *) intervals indicate that there are several loans with differing interest rates and repayment periods. 1) Comprises company car, telephone, insurance, concessionary interest rate, other taxable benefits.
2) Ceo for the period from January 1st 2012 to may 31st 2012. See also note 6 in the annual finacial statement s iof Storebrand aSa. 3) 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. 4) earned bonus at 31 December 2012. Senior executives are contractually entitled to performance related bonuses. 50 per cent of the earned bonus is paid in cash. the remaining amount is converted to synthetic shares based on the market priice. these are registered in a share bank with a lock-in period of three years. at the end of three years, the value of the synthetic share is calculated at a new market price. Half of the amount paid from the share bank shall, after tax, be used to purchase shares in Storebrand aSa at market price, with a new three-year lock-in period. 5) the retirement age for Spp‘s Ceo is 62 years old. Spp‘s Ceo is covered by a defined contribution based scheme in addition to a defined benefits scheme. 6) Control committee covers all the norwegian companies in the group wich are required to have a control committee.
1. ADvISORy GUIDELINES FOR THE COMING FINANCIAL yEAR Storebrand aims to base remuneration on competitive and stimulating principles that help attract, develop and retain highly qualified staff. optimised financial remuneration helps create a performance culture with clear goals for all employees, and correct assessments by managers, who differentiate between performances that are good and less good.
Financial remuneration should be designed to: 1. Help support continuous improvement, stimulate internal cooperation and create a value-based performance culture. 2. Help focus the efforts of employees. 3. ensure that the Group's strategy and plans provide the basis for the goals and requirements set for the employees' performance. 4. ensure that remuneration is based on long-term thinking, balanced goal-oriented management and real value creation. 5. ensure that remuneration is based on an assessment of the individual‘s results and compliance with the core values. 6. Facilitate a clear, transparent and team-based process for setting goals and goal structures. 7. ensure that both the development of financial remuneration and job requirements are embedded in the employee‘s role, responsibilities and influence in the Group. ensure that the composition and level of the components of the financial remuneration are balanced and in line with the market.
The salaries of executive employees are determined based on the position's responsibilities and complexity. Regular comparisons are made with corresponding positions in the market in order to adjust the pay level to the market. Storebrand does not wish to be a pay leader in relation to the sector.
Senior employees at Storebrand may, in addition to their fixed salary, receive remuneration in the form of an annual bonus, participation in the Group's group pension scheme, as well as other personal benefits. Senior employees may also be entitled to a severance pay arrangement, which guarantees that they will receive their salary less other income for a specified period of up to 24 months upon the conclusion of their employment.
bONUS SySTEM Senior employees and employees who influence the company's risk are divided into two categories with regard to financial remuneration. Senior employees for whom accounting and control functions make up a large part of their duties receive fixed salaries only. the other senior employees have a bonus scheme linked to value creation in the Group, in the unit and through the performances of individual employees.
Funding Specific quantitative goals for how the value creation in the company will fund bonuses are set each year. the value creation target is based on the risk-adjusted result, which excludes market-dependent results and profit sharing. Significant one-time effects must also be eliminated by adjustment. Funding is calculated on the basis of value creation for the last two years. For 2013, the value creation will be the average target attainment percentages for 2012 and 2013, respectively. the overall group result must also be in excess of a predetermined level to prevent curtailment of bonus earnings based on the risk-adjusted result. negative group profit before tax gives a full deduction and zero bonuses. In addition, an roe (before tax) greater than 5 per cent and satisfactory financial strength are required.
the board of Storebrand aSa sets the target that determines how the risk-adjusted value creation will fund the bonus.
Allocation The allocation result depends on both the unit‘s result and individual target attainment.
over time the target bonus for senior employees should be between 20 and 40 per cent of their fixed salary. the maximum target attainment for funding and allocation is 150 per cent, respectively. Senior employees' bonus entitlements are calculated using the following formula: Target bonus level x Funding result x Allocation result. the maximum possible bonus entitlement is 90 per cent of the annual fixed salary. For senior employees in Stb bank, 50 per cent is the maximum.
Half of the amount paid, after tax, from the share bank is to be used to purchase actual shares in Storebrand aSa at the market price with a new lock-in period of 3 years. no payments are made from the share bank until the end of the 3-year period, even if the employee withdraws from the scheme or leaves the company, but the payment will be made on the date that was specified at the time the allocation was made.
1.3. SEvERANCE PAy the Chief executive officer and executive vice presidents are entitled to severance pay if their contracts are terminated by the Company. entitlement to severance pay is also triggered by resignation if this is due to substantial organisational changes or equivalent situations that make it unreasonable for the employee to remain in his or her position. If the employment is brought to an end due to a gross breach of duty or other material non-performance of the employment contract, the provisions in this section do not apply.
4. STATEMENT CONCERNING THE EFFECTS OF SHARE-bASED REMUNERATION AGREEMENTS ON THE COMPANy AND SHAREHOLDERS In accordance with the new guidelines, cf. section 2.1 above, half of the amount paid from the share bank shall be used to purchase shares in Storebrand aSa at the market price with a new 3-year lock-in period.
CAlCulATION OF DEFERRED TAx ASSETS AND DEFERRED TAx ON TEMPORARy DIFFERENCES AND lOSSES CARRIED FORwARD
Deferred tax 721 1) the national Budget 2013, which was adopted by the Storting in December 2012, called for elimination of the tax exemption method for customer portfolios in life insurance companies with effect from 1 January 2012. this change does not affect the Group's activities in Sweden.
the exemption method for equities (for customer portfolios), as it was previously formulated, including the deductibility of allocations to insurance reserves, implies that life insurance companies may have a profit for tax purposes in the case of a decline in the values and a loss for tax purposes in the case of an increase in the value of equities not encompassed by the exemption method. the Storebrand Group has therefore a significant loss for tax purposes linked to the norwegian life insurance activities.
Acc. depreciation and write-downs 31.12 1) Value of business-in-force, the difference between market value and book value of the insurance liabilities in Spp. 2) noK 22 million was classified as depreciation under operating costs.
Value of business in force SPP 20 years 5% Straight line 4,310
NOK million Equipment vehicles Fixtures & fittings Real estate 2012 2011
MINIMuM FuTuRE PAyMENTS ON OPERATIONAl lEASES FOR FIxED ASSETS ARE AS FOllOwS
Lease payments through profit and loss account 154 130 this primarily concerns lease of office buildings at Lysaker and in Stockholm, as well as some movables. the external lease regarding office buildings durate from 2013 until 2019 in norway and from 2013 to 2023 in Sweden, with an optional renewal.
ThE CONSOlIDATED FINANCIAl STATEMENTS INCluDE ThE FOllOwING COMPANIES wITh ThE AMOuNTS ShOwN
Loans to and due from financial institutions 255 255 269 269
bONDS AT AMORTISED COST as a general rule, the fair value of bonds is based on prices obtained from reuters and bloomberg. bonds that are not quoted regularly will normally be valued on the basis of recognised theoretical models. the latter is particularly true for bonds denominated in noK. these sorts of valuations are based on discount rates consisting of swap interest rates plus a credit premium. the credit premium will often be issuer specific and normally based on a consensus of credit spreads quoted by a selected brokerage house. the impariment tests carried out have resulted in no need for write.downs in 2012.
DEbT ISSUED by ISSUANCE OF SECURITIES the bonds are recognised on the basis of our theoretical models using the issuer-specific credit spead over swap. bonds are valued on the basis of registered sales of the bonds and quoted prices from brokers. all prices are quality assured in relation to eoM (end of month) reports from brokers.
SUbORDINATED LOAN CAPITAL the fair value of subordinated loan capital is determined on the basis of registered sales of the bonds and quoted prices from brokers. all prices are quality assured in relation to eoM (end of month) reports from brokers.
Total bonds at amortised cost 55,267 55,490 56,703 60,962 64,961 66,385
Distribution beween company and customers: Bonds held to maturity - company 222
Distribution by company and customers: Total income from real estate 28,723 28,796 1) Consists of investment properties in Storebrand life insurance Group and taken over properties in Storebrand Bank Group.
ExTERNAL vALUATIONS to ensure that every property will be taxated as a minimum every third year, there is a methodic approach in order to choose a representative selection of property to taxate every quarter. as per 31 december 2012, valuations had been obtained for approximately 95 per cent of Storebrand's property portfolio in norway.
ThE PROPERTIES ARE vAluED ON ThE BASIS OF ThE FOllOwING EFFECTIvE REQuIRED RATE OF RETuRN (INCl. 2.5 PER CENT INFlATION)
Biological assets booked in the statement of financial statement consist of forests in the subsidiaries AS Værdalsbruket and Foran Real
a long position in an equity derivative produces a gain in value if the share price increases. For interest rate derivatives, a long position produces a gain if interest rates fall, as is the case for bonds. For currency derivatives, a long position results in a positive change in value if the relevant exchange rate strengthens against the noK. average gross nominal volume are based on daily calculations of gross nominal volume.
Derivatives - customers without guarantee 1) Values 31 December. 2) average for the year.
Total net currency positions 2011 13,058 1) SeK 4,5 billion are related to Spp/Benco. 2) equity and bond funds denominated in noK with foreign currency exposurein i.a. eur and uSD noK 11 billion.
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. these positions are included in the note under short-term positions. Storebrand employs a currency hedging principle called block hedging, which makes the execution of currency hedging more efficient. Currency hedging of investments in the subsidiary Storebrand Holding ab have been reduced since 2011, and currency hedging has not been used for the subsidiary benCo since 2011.
Storebrand bank aSa hedges net balance sheet items by means of forward contracts.
the excess value of bonds at amortised cost is not included in the financial statements.
Other technical reserves - of which premium income received in advance
Total market value adjustment reserves at fair value 1,027 1,027 -1,971
Debt raised through issuance of securities 1) Book values as at 31 December.
CURRENCy HEDGING OF NET INvESTMENT IN SPP In 2012, Storebrand utilised cash flow hedging for the currency risk linked to Storebrand’s net investment in SPP. 3 month rolling currency derivatives were used in which the spot element in these is used as the hedging instrument. The effective share of hedging instruments is recognised in total profit. The net amount recognised in total profit in 2012, i.e. the effective share of the hedging instruments and the currency effect on the hedged object was NOK - 84 million. The net investment in SPP is partly hedged and therefore the expectation is that future hedge effectiveness will be around 100 per cent.
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 a F-loan for noK 500 million in norges bank as per 31 december 2012.
Storebrand Group companies are engaged in extensive activities in norway and abroad and may become a party in legal disputes.
the appeal is focused on questions of principle that are important beyond the case in question, and a negative outcome is assumed to have a significant economic effect on the portfolio. based on an overall assessment of the case, including the district Court's judgment, and based on external legal reviews, it is regarded as very unlikely that the judgement will be in favour of the appellants. therefore, no provisions have been made relating to this lawsuit.
KAUPTING bANK Storebrand Luxembourg Sa (Storebrand) is being sued by the bankruptcy estate of Kaupthing bank HF with a demand for payment of USd 11,812,109 plus interest and costs. Storebrand received the writ of summons on 25 June 2012. the claim is primarily against Guy butler Ltd., secondarily against rbC europe Limited, and thereafter against Storebrand. the case pertains to a sale of bonds with a nominal value of USd 11,000,000 issued by Kaupthing bank HF (US48632FaC59), which was performed by Storebrand active Credit Fund in September 2008. the complainant submits that Kaupthing bank HF was the real or final buyer of the bonds and that this is therefore a case of forced repayment of a debt that can be reversed. the proceedings are in an early phase, and no reason has as yet been found to make provisions in the accounts.
EqUITy INDEx bONDS In 2012 Storebrand (bank) has not received any new complaint cases requiring a hearing with regard to retail customers' investments in various equity index bonds in Storebrand bank aSa. a total of 70 private customers have complained to the norwegian Financial Services Complaints board about their investments in various equity index bonds in Storebrand bank. the bank is awaiting the final guidelines from the norwegian Financial Services Complaints board. no provisions have been made with regard to these lawsuits.
Book value associated with financial liabilities 1,986 3,497 transferred financial assets consist of swap agreements with the state through the Ministry of Finance concerning the posting of financial collateral (see note 51). the swap agreements are entered into through auctions that are administrated by norges bank. In the swap arrangement, the state sells treasury bills to the bank through a time-restricted swap for covered bonds. the bank can either keep the treasury bill and receive payment from the state when the bill falls due for repayment, or it may sell the treasury bill in the market. When bills matures within the term of the swap agreement, the bank must purchase new bills from the state at the price that is determined by the market price for treasury bills. this roll-over will be on-going throughout the entire term of the agreement. Upon expiry of the swap agreement, the bank is obliged to purchase the covered bonds back from the state at the same price that the state purchased them for. Storebrand bank aSa will receive the returns on the transferred covered bonds.
Primary capital consists of core capital and supplementary capital. Pursuant to the regulations for the calculation of primary capital, core capital is significantly different from the equity in the financial statements. the table on the next page shows a reconciliation of core capital relative to equity. Issued hybrid bonds can account for 15 per cent of core capital, while the remaining amount can be included in supplementary capital. Core capital is adjusted for the value judgments applied in the solvency calculations at the national level for foreign companies (Solvency regulations, Paragraph 4.7). For Storebrand Holding ab this will consist of an adjustment in SPP ab's estimated insurance liabilities, which use a different yield curve in the solvency calculation than that used in the financial statements. Supplementary capital consisting of subordinated debt may not exceed 100 per cent of core capital, while dated subordinated debt may not exceed 50 per cent of core capital.
Pursuant to basel II the capital requirement for primary capital is 8 per cent of the basis for calculating the credit risk, market risk and operational risk. the insurance companies in the Group are included in capital adequacy with a capital requirement pursuant to the regulations in basel I.
Companies in the Storebrand Group have transactions with close associates who are shareholders in Storebrand aSa and senior employees. these are transactions that are part of the products and services offered by the Group‘s companies to their customers. the transactions are entered into on commercial terms and include occupational pensions, private pensions savings, P&C insurance, leasing of premises, bank deposits, lending, asset management and fund saving. See note 24 for further information about senior employees.
Storebrand aSa‘s largest owner is Gjensidige Forsikring with an ownership interest of 24.3 per cent. Storebrand Kapitalforvaltning aS sells some management services to Gjensidige Forsikring. these services are provided on normal commercial conditions.
Net income and gains from financial instruments: - bonds and other fixed-income securities 3 67 73 - financial derivatives/other financial instruments 3 13 -12
Investments in trading portfolio: - bonds and other fixed-income securities 10,12 1,754 1,268 - financial derivatives/other financial instruments 11,12,16 52 53
Lysaker, 12 February 2013 board of directors of Storebrand aSa translation - not to be signed.
Cash and cash equivalents at the end of the period 48 126
NOTE 1 | Accounting policies the financial statements of Storebrand aSa have been prepared in accordance with the norwegian accounting act, generally accepted accounting policies in norway, and the norwegian regulations relating to annual accounts, etc. for insurance companies. Storebrand aSa does not apply IFrS to the company’s financial statements.
USE OF ESTIMATES AND DISCRETIONARy ASSUMPTIONS In preparing the annual financial statements, Storebrand has made assumptions and used estimates that affect the reported value of assets, liabilities, revenues, costs, as well as the information provided on contingent liabilities. Future events may cause these estimates to change. Such changes will be recognised in the financial statements when there is a sufficient basis for using new estimates.
DIvIDENDS AND GROUP CONTRIbUTIONS In the company’s accounts, investments in subsidiaries and associated companies are valued at the acquisition cost less any writedowns. Storebrand aSa's primary income is the return on capital invested in subsidiaries. Group contributions and dividends received in respect of these investments are therefore recorded as ordinary operating income. Proposed and approved dividends and group contributions from subsidiaries at the end of the year are recognised in the financial statements of Storebrand aSa as income in that financial year.
a prerequisite for recognition is that this is income earned by a subsidiary that Storebrand owns. otherwise, this is recorded as an equity transaction. this means that the ownership interest in the subsidiary is reduced by dividends or group contributions that are received.
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.
Pension costs and pension liabilities for defined benefits schemes are calculated based on a straight-line earnings profile and anticipated final salary as the calculation basis, based on assumptions relating to the discount rate, future wage adjustments, pensions and national Insurance benefits, future return on pension assets and actuarial assumptions relating to mortality, disability, and voluntary retirement.
as at 31 december 2012 an interest rate derived from high quality corporate bonds is used as the discount rate. Government bond rates were used earlier. See note 5 for further details.
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.
CURRENCy Current assets and liabilities are translated at the exchange rate on the balance sheet date. Shares held as fixed assets are translated at the exchange rate on the date of acquisition.
other equities and units are valued at fair value. For securities listed on an exchange or other regulated market, fair value is determined as the bid price on the last trading day immediately prior to or on the balance sheet date.
any repurchase of own shares is dealt with as an equity transaction, and own shares (treasury stock) are presented as a reduction in equity.
bonds and other fixed income securities are recognised at fair value. Fair value is the amount for which an asset could be sold for, or a liability settled with, between knowledgeable, willing parties in an arm’s length transaction. For financial assets that are listed on an exchange or other regulated market place, fair value is determined as the bid price on the last trading day up to and including the balance sheet date, and in the case of an asset that is to be acquired or a liability that is held, the offer price.
FINANCIAL DERIvATIvES Financial derivatives are recognised at fair value. the fair value of such derivatives is classified as either an asset or a liability with changes in fair value through profit or loss.
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.
– of which FVO (Fair Value Option) 74 11 -19 66 73
Net pension liabilities in the statement of financial position 3 149
Expected premium payments are estimated to be NOK 46 million and the payments from operations are estimated to be NOK 12 million in 2013.
PENSION ASSETS ARE BASED ON ThE FINANCIAl ASSETS hElD By STOREBRAND lIFE INSuRANCE, whICh ARE COMPOSED OF AS PER 31.12
Booked returns on assets managed by Storebrand Life Insurance 5.8% 4.5%
NET PENSION COST BOOKED TO PROFIT AND lOSS ACCOuNTS IN ThE PERIOD
Net pension cost booked to profit and loss accounts in the period -7 1
Expected return on pension fund assets in the period 4.0% 4.6%
FINANCIAL ASSUMPTIONS The financial assumptions have been determined on the basis of the regulations in IAS 19. Long term assumptions such as future inflation, real interest rates, real wage growth and adjustment of the basic amount are particularly subject to a high degree of uncertainty. IAS 19.78 states that high quality corporate bond rates shall be used as the discount rate. In countries where there is no deep market for such bonds, the government bond rates shall be used. As at 31 December 2011 Storebrand used government bond rates as the discount rate. Recently evaluations of whether there is a deep market for covered bonds in Norway have been made, and whether such securities satisfy the definition of corporate bond in accordance with IAS 19.78.
NOTE 6 | Remuneration of the CEO and elected officers of the company
Other non-audit services 26 1,364 1) remuneration for 2012 includes remuneration from the Group to odd arild Grefstad. He has been the Ceo of Storebrand aSa from 1 June 2012, and he was formerly the Ceo of Storebrand livsforsikring aS. He has a guaranteed salary for 24 months after the ordinary period of notice. all work-related income including consulting assignments will be deducted.
idar Kreutzer was the Ceo of Storebrand aSa until 31 may 2012. He has received a salary for 6 months during his period of notice, and he has received total remuneration of 5.5.1 million in 2012. noK 0.4 million of this amount is a bonus from 2011.
For additional specifications for senior executives in the Group, the Board of Directors, Control Committee and the Board of Directors' statement on the salary and other remuneration of senior executives, see note 24 under the Storebrand Group.
AS Værdalsbruket4 Værdal 25% 4 4 1) Group contribution in 2012 of noK 21 million as a capital injection. 2) Group contribution in 2012 of noK 70 million as a capital injection. 3) Group contribution in 2012 of noK 31 million as a capital injection. 4) 74,9 per cent owned by Storebrand life insurance aS.
The rating classes are based on Standard & Poors's. NIG = Non-investment grade.
Straight line depreciation periods for tangible fixed assets: Equipment. fixtures and fittings 4-8 years Vehicles 6 years IT systems 3 years
Monica Caneman 1) The summary shows the number of shares owned by the individual, as well as his or her immediate family and companies where the individual exercises significant influence, confer the Accounting Act, Section 7-26.
on this date, the board of directors and the Chief executive officer have considered and approved the annual report and annual financial statements for Storebrand aSa and the Storebrand Group for the 2012 financial year and as at 31 december 2012 (2012 annual report).
the consolidated financial statements have been prepared in accordance with the eU-approved International Financial reporting Standards (IFrS) and the associated interpretations, as well as the other disclosure obligations stipulated in the norwegian accounting act that must be applied as at 31 december 2012. the annual financial statements for the parent company have been prepared in accordance with the norwegian accounting act, norwegian regulations relating to annual accounts, etc. for insurance companies and the additional requirements in the norwegian Securities trading act. the annual report for the Group and parent company complies with the requirements of the norwegian accounting act and norwegian accounting Standard no. 16 as at 31 december 2012.
Kirsti V. Fløystøl ann-Mari Gjøstein odd arild Grefstad Chief executive officer declaration by the members of the board and the Ceo
Opinion on Registration and Documentation Based on our audit of the financial statements as described above, and control procedures we have considered necessary in accordance with the International Standard on Assurance Engagements (ISAE) 3000, «Assurance Engagements Other than Audits or Reviews of Historical Financial Information», it is our opinion that management has fulfilled its duty to produce a proper and clearly set out registration and documentation of the company’s accounting information in accordance with the law and bookkeeping standards and practices generally accepted in Norway.
Statement of the Control Commitee and the board of representatives for 2012
the board of representatives recommends that annual General Meeting approve the board's annual report and accounts of Storebrand aSa and the Storebrand Group.
No. 2 in the industry for companies > 20 employees No. 2 in the industry for companies < 20 employees
Processing time for complaints 55% within 3 weeks 61% within 3 weeks 70% within 3 weeks 70% within 3 weeks
Indicator developed with baseline; Environmental factors: score 66 of 100 points
Percentage reported from 2012 51% of new agreements contain environmental requirements 50% of new agreements contain environmental requirements
Head office: Energy consumption Water consumption Waste – rate of recycling 210 kWh/m2 0.35 m3/m2 194 kWh/m2 0.35 m3/m2 189 kWh/m2 0.35 m3/m2 160 kWh/m2 - -
Managed properties: Energy consumption Water consumption Waste – rate of recycling 253 kWh/m2 0.43 m3/m2
AbOUT OUR WORK ON SUSTAINAbILITy Storebrand has signed the Un Global Compact on responsible business practices. the principles encompass human rights, labour standards, and environment and anti-corruption standards. We support the Un Principles for responsible Investment (PrI) and the Un Principles for Sustainable Insurance (PSI). Storebrand has been a driving force behind the development of the World business Council for Sustainable developments Vision 2050, and we are thus working towards a world in 2050 where "9 billion people are living well within the resource limits of the planet". our sustainability work is regulated by guidelines that are revised annually and adopted by the board of Storebrand aSa.
AbOUT THE SCORECARD the sustainability scorecard shows the sustainability indicators defined by the Group – those that are the most important for Storebrand to report to the stock market. they are a key element in the reports submitted to relevant indices, such as the dow Jones Sustainability Index and FtSe4Good. the Group's sustainability manager owns and follows up the sustainability scorecard. ownership of the indicators is well-established within the Group. the sustainability manager and executive vice presidents for the business areas jointly set targets for Storebrand's sustainability work. Quarterly status reports are submitted to the executive management, and annual reports are submitted to the board of directors.
1) Status 2012 discontinued due to implementation of the new unpri model. reporting will be resumed and new targets for 2013 set when the new model has been implemented with baseline assessment. 2) Baseline assessment for 2012 applies to norway retail only. implemented during 2013; corporate customers in norway, retail and corporate customers in Sweden. 3) measures employee awareness, proportion of employees who complete e-learning course (every 3rd year), proportion who participate in dilemma training and proportion of managers who have reported on compliance with the code of ethics. 4) Certification according to the norwegian environmental standard "miljøfyrtårn", 13 of 21 managed properties are certified in 2012. in addition 13 of 14 externally managed shopping centres are certified.
Status 2012 discontinued due to implementation of the new UNPRI model.
Volume sustainability fund – Storebrand Trippel Smart 481 NOK million1 850 NOK million
Net Promoter Score (NPS) Replaces previous indicators: Customer satisfaction – retail customers and corporate customers
3rd Customer promise – All our relationships, solutions and measures are sustainable2 Baseline score 54 of 100 points Score 60 of 100 points
Diversity Score 77 of 100 points Score 77 of 100 points
We have added new indicators during the year. two of these merit special comment. the first indicator is a volume indicator for the assets under management in the sustainability fund Storebrand trippel Smart. this emphasises our intention to disseminate knowledge of and raise the importance of sustainable investments to our customers. the second indicator reports the average sustainability score for the life balance sheet investments. based on the sustainability analysis and points ranging from 0-100, which are used for Storebrand trippel Smart, the Group's life portfolios are screened and assigned an average sustainability score for equities, interest, forestry, real estate and alternative investments. the Group has set a target for the percentage of the balance sheet that should be invested in what we find to be in the forefront of the restructuring for sustainability. our ambition is that the life portfolios shall annually increase their share of investments in sustainable companies for all asset classes.
Number of dialogues with companies on violations of the Minimum standard 51 50 62
Number of external managers contacted about violations of the Minimum standard1 12 - -
Head office: Energy consumption Water consumption Waste – rate of recycling 189 kWh/m2
Managed properties: Energy consumption Water consumption Waste – rate of recycling 234 kWh/m2
Score 67 of 100 points. Two out of three customers should experience the deliverance of the 3rd customer promise.
Tier 2 capital is part of the primary capital and consists of subordinated loan capital and the portion of the hybrid tier 1 capital that is not counted as core (tier 1) capital. There is a 50 per cent deduction for any capital adequacy reserve and deduction for cross-ownership in other financial institutions.
In order to be eligible as primary capital, tier 2 capital cannot exceed core (tier 1) capital. Perpetual subordinated loan capital, together with other tier 2 capital, cannot exceed 100 per cent of core (tier 1)
Solvency II is a common set of European regulatory requirements for the insurance industry. Under