Wenche Martinussen jobber kontinuerlig for å gjøre pensjon enkelt for våre kunder
A new group organisation lays the groundwork to make it easier to be a customer in Storebrand. 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.
Odd Arild Grefstad is appointed as the new CEO. Comprehensive change work associated with capital effectiveness, cost reductions, customer orientation and commercialization is initiated. The measures will ensure that the Group generates value for customers, employees and shareholders.
The Act on paid-up policies with investment choice entered into force on 1 September. Storebrand is the only provider of paid up policies.
Storebrand enters into new agreements for providing defined contribution pensions to major players such as NHO, NRK and Statoil. In November, Storebrand signs a strategic partnership agreement with the American IT company Cognizant, who at the same time purchase 66 per cent of Storebrand Baltic. The partnership will form the basis for an even more customer-oriented development of the Group’s IT solutions. Storebrand is chosen by Akademikerne (Federation of Norwegian Professional Associations) as their new partner for insurance.
The Confederation of Unions for Professionals (Unio) and Storebrand enter into an agreement that offers Unio's members home loans at one the best borrowing rates in the market. The objective is that this shall contribute to increased growth for the bank. We launch Pluss-fond in Sweden, which are fossil fuel free, near- index linked funds with a high sustainability rating - and the funds sell extremely well. Storebrand launches "Our driving force". Our driving force is what Storebrand stands for. We provide security today and a future you can look forward to.
Group result before amortisation and tax 2,913 1,722 3,423 2,938 1,960
Storebrand shall be best at saving for pensions. Our most important customers are companies, employees and former employees of companies with pensions from Storebrand. We will supply sustainable solutions adapted to the customers’ individual situation through market and customer concepts, so that each person receives a better pension.
Brokerage company Söderberg & Partners awards Storebrand subsidiary SPP the prize of Sustainable Operator of the Year and Unit-linked Company of the Year. The awards confirm our leading position within sustainable saving, and position us in a continually growing and more aware savings market.
We have implemented strong measures on both the cost and capital sides to adapt to Solvency II and the low interest rates. We are therefore very pleased that we have been able to maintain stable costs while succeeding with the offensive customer and market work. This means that we can now report a solvency ratio of 157 per cent.
Storebrand has a world-leading position within sustainable investments. SPP Global Pluss and SPP Tilvekstmarked Pluss were launched in Sweden. These are fossil fuel free, near-index linked funds with a high sustainability rating, which are in very high demand among customers. The funds now have approximately SEK 800 million in external capital.
Storebrand has the ambition of growth within P&C insurance by offering basic, customer-friendly solutions. Sales through third party providers are one of several possibilities that represent the potential for increased growth. Rema Forsikring was launched in September, with Storebrand as the collaborative partner.
The Consumer Council of Norway and Framtiden i våre hender (Future in our hands) launched the “Fair Finance Guide” in which 13 banks were placed under the spotlight. Storebrand Bank was ranked as the country’s second most sustainable bank and number two in the world out of the largest banks.
We have achieved strong growth in the retail market in Norway, with a 28 per cent increase in mortgages and a 6 per cent increase in insurance. Parts of this growth can be attributed to the increased focus on association agreements. The two largest agreements are with Akademikerne and Unio, to whose members we sell insurance and banking services respectively. In 2016 we also entered into a partnership with the newly established Rema Forsikring, which sells our insurance policies to its customers. These types of agreements strengthen our distribution capacity, which is important when we have so few sales offices.
I am proud that Storebrand has again in 2016 delivered good customer experiences to our 40,000 corporate customers within pensions and 1.9 million private customers. Figures from Norsk Kundebarometer show that Storebrand has the highest level of customer satisfaction of all pension providers in the corporate market in Norway and that we particularly distinguish ourselves in follow-up of employees category. It is also satisfying to see that an increasing number of the approximately 435,000 employees in companies with occupational pensions with us also purchase retail products. In 2012, this proportion was 12 per cent of the employees. Today, the proportion is 18 per cent. This proportion shall continue to grow.
Storebrand’s solvency position has improved strongly during 2016, driven by both own initiatives and rising interest rates. At year end, the solvency ratio was a solid 157 without transitional rules, and we can therefore state that the Group is back to a normalised capital situation with annual dividends. Storebrand is paying a dividend for the first time since 2011 and the Board of Directors have decided to pay NOK 1.55 per share.
The contractual early retirement pension (AFP) and public service pensions will be changed and adapted to the pension reform. 2/3rds of the pension capital in occupational pensions is in the public sector, even though only 1/3rds of the work force is employed there. There is currently no competition in this sector. I hope that this major market will be opened up when we have a new pension solution for the public sector. At any rate, we are ready to compete!
STOREBRAND IS DEVELOPING SUSTAINABILITY Managing large pension funds also involves great responsibility. We therefore support the UN Global Compact initiative. By agreeing to the ten principles, we commit to conducting sustainable development. We are a world- leader in sustainable investments. This means a great deal to our employees and we see that our customers are also becoming increasingly more aware of our sustainability work. Our customers do not want to invest their pension savings in “climate offenders”. They would prefer to invest in companies that are part of the solution to the earth’s climate challenges.
We are now developing sustainable products and services in other business areas. For example, in autumn we launched sustainable mortgages. With these, our customers receive the lowest interest rate in return for registering the energy rating of their homes and agreeing to receive tips about how they can achieve a more energy-efficient home. We want to help new and existing customers to move in a more sustainable direction in order for them to easily reduce their green house gas emissions from homes, cars and stock exchange.
In the coming year, we will celebrate our history together with employees, customers, owners and the community in general. We will also work hard to deliver even better customer experiences. I look forward to what lies ahead!
or ve years, Storebrand has been working with a two fold strategy. irst, achieve pro table growth within savings, banking and insurance. Second, manage our capital intensive guaranteed products during a period of new regulations, falling interest rates and increased life e pectancy. In , we have succeeded well with both.
The world needs to change course and Storebrand wants to be part of that change. We shall be brave trailblazers that enter the breach for more sustainable development by challenging the established practices. We are convinced that sustainability is bene�cial- for us, customers and the earth.
Pensions are at the heart of Storebrand’s work. A pension is not a “sealed” future account, but the sum total of all the minor and major �nancial decisions we make in life. We are ready to provide advice the entire way towards a better pension – simple and sustainable.
Occupational pension is our core product in both Norway and Sweden, and employees and former employees in our customer businesses in
Norway are also o�ered attractive solutions in the retail market for saving, insurance and banking. Our business strategy is to provide pro�table growth within these focus areas, while we also manage our historical portfolios in a capital-e�cient manner.
Our driving force is what Storebrand stands for. We provide security today and a future you can look forward to.
THE FINANCIAL SECTOR IN GENERAL AND STOREBRAND IN PARTICULAR – THE GREEN TRANSITION
UN’s 17 sustainable development goals. Included among these 17 goals is climate. In Norway, we have both the resources and expertise to lead the development of climate-adapted �nance. And when the �nancial sector �nds its approach to our new climate reality, this will have positive ripple e�ects far beyond the sector itself.
Investments that take the climate into consideration involve much more than funnelling money to entrepreneurs betting on environmental technology, which is a small niche in the market which is primarily covered by private investment funds or dedicated investors. The present regulations prevent the large �nancial institutions, which manage most of the capital, from making large-scale high risk investments. However, by systematically investing more in the operators that are working to reduce their emissions and adjust to a green transition, large institutional investors can also contribute to reducing green house gas emissions while at the same time reducing the risk associated with their own investments.
Investors, banks and insurance companies will notice the e�ects of climate change through their investment portfolios, not just in the form of oods and storms, but also indirectly through restructuring of industries and political measures for reducing greenhouse gas emissions. The
In the climate analyses, we also aim to identify companies with poor climate pro�les to avoid investing in these. This assessment can be based on the type of business activity (such as coal production), lack of operations that are adapted to climate change (energy intensive), or product portfolios that are poorly adapted to the green transition.
production based on renewable energy. However, a company will a high level of coal production will be less attractive. In this way we move money from activities with a major negative impact on the climate to companies that are part of the transition to a greener economy. It is when the consideration of climate change is broadly integrated into investment decisions that you see the greatest ripple e�ects.
As one of Norway’s leading pension companies, we strive to positively in�uence society. Our goal is to support and develop a transparent
Global Compact for advancing responsible business practices. The principles in the Global Compact cover human rights, labour standards and standards for the environment and combating of corruption. We support the UN principles for responsible investment and sustainable insurance. Storebrand has been a driving force behind the development of the World Business Council for Sustainable Development’s Vision 2050, and we are working towards a world in 2050 where “9 billion people are living well within the resource limits of the planet”. We have signed the “Montreal Pledge” regarding the reporting of our carbon footprint and joined the “Portfolio Decarbonisation Coalition” with the goal of reducing the climate risk and carbon footprint of our investments. Our sustainability work is controlled by guidelines that are revised annually and approved by the Board of Storebrand ASA.
Reporting and materiality can be found on www.storebrand.com/baerkraft. Storebrand strives for transparency and demands compliance and quality in the sustainability work. The report have therefore been reviewed and con�rmed by Deloitte AS.
Group. In addition, the disability and life expectancy trends represent important risks.
Storebrand’s asset management and the analysis is used for all managed funds.
Understanding of impact and transparency – Storebrand’s goal is to communicate the positive e ect we create through our business operations by preparing transparent reports about reduced climate risk for invested capital and increased �nancial value creation at individual and customer level through insurance and banking activities.
Storebrand has a positive impact on society through our core business. As Norway’s largest private asset manager, we create a more sustainable world through our investment strategy. We weed out the least sustainable companies, increase investments in more sustainable companies and exercise active ownership. “Find your pension �gure” is an important tool that combines all pension schemes from present and past employers, National Insurance and own saved funds. By assisting customers in understanding the future value of the current savings, we hope to in uence people in making safe choices today in order to have a better pension in the future.
Through our P&C insurance business, we ensure that Norwegians receive assistance when accidents occur and in 2016 we made 50,000 claims settlements. We also launched a video doctor service (Online Doktor) in our Bli Frisk app for customers who have health insurance with
Storebrand. By using Online Doktor our customers receive doctor’s appointments and avoid both the travel and waiting before they speak to the doctor.
Through our banking business, we help many Norwegians realise their dream of owning a home. In 2016, we approved a total of 10,000 new mortgages. We also introduced sustainable mortgages for customers who want to make their homes as environmentally friendly as possible.
Telematics on auto insurance 300 000 retirement-, disability-, survivor pension 3,000 life insurance settlements 500 children receive treatment
Water consumption main o�ce Norway and Sweden 0.32m /m 0.35m /m
Paper consumption main o�ce Norway and Sweden 44 kg/FTE 33 kg/FTE
For more information and de�nitions on Non Financial Key Figures please go to www.storebrand.no/sustainability
Shares in Storebrand are listed on Oslo Børs (Oslo Stock Exchange) with the ticker code STB. Storebrand ASA’s share capital at the start of 2016 was NOK 2,249.5 million. The company has 449,909,899 shares with a par value of NOK 5. As at 31/12/2016 the company owned 1,631,387 of its own shares, which corresponds to 0.36 per cent of the total share capital. The company has not issued any options that can dilute the existing share capital.
As at 31 December 2016, total foreign ownership amounted to 55.63 per cent, compared with 64.55 per cent at the end of 2015.
Storebrand has the goal of paying annual dividends of more than 35% of the Group pro�t after tax, adjusted for amortisation costs The dividend policy shall have a sustainable solvency ratio of more than 150%, including a minimum solvency ratio of 110% without transitional rules.
As one of the country’s leading �nancial institutions, Storebrand is dependent on maintaining an orderly relationship with the �nancial markets and supervisory authorities. The company therefore places particular emphasis on ensuring that its routines and guidelines satisfy the formal requirements imposed by the authorities on securities trading. In this context the company has prepared internal guidelines for insider trading and own account trading based on the current legislation and regulations. The company has its own compliance system to ensure that the guidelines are observed.
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.
Dividend per ordinary share (NOK) 1.55 0 0 0 0 0
If have health insurance in Storebrand you can get prescriptions, referrals and answers to questions about various symptoms and diseases –
In cooperation with Eyr we now o�er our insurance customers a service that allows you to take your doctor’s appointment over phone.
Storebrand is recently named the world’s most sustainable company in the category of �nance and pensions. In the same competition to – The
Global 100 – we are also rated as the second most sustainable company in any category.
This makes us both proud and humble. Proud, because sustainability is the core of everything we do, every single day. Humble, because we work for the 1.2 million pension customers will have a future to look forward to. In a simple and sustainable way.
For 250 years we have been standing �rm, played an important part in peoples lives buy insuring what they hold dear.
Storebrand provides better pensions – simple and sustainable. Retirement is the sum total of many minor and major �nancial decisions and the
Group therefore o�ers products within savings, insurance and banking to private individuals, companies and public sector entities. The Group is divided into the segments Savings, Insurance, Guaranteed Pension and Other. Savings and Insurance are the Group’s focus areas, while
2016 was marked by strong competition in Storebrand’s markets, a good equity market, historically low interest rates and the introduction of
During the year, Storebrand saw continued strong growth for unit linked savings, delivered a competitive and sustainable return to its customers and increased its assets under management to over NOK 577bn.
In a period of low interest rates and strengthening of reserves for higher projected life expectancy, lower earnings within group pensions are expected. At the same time, the bulk of the business is being shifted from guaranteed pensions to the Savings and Insurance segments. The
Storebrand has the following �nancial targets: Targets Status 2016 >10% 9.5%
Storebrand achieved a Group pro�t before amortisation and reserve strengthening of NOK 2,913m (NOK 1,722m) for 2016. The Group pro�t after tax was NOK 2,143m (NOK 1,382m). The �gures in parenthesis are from the corresponding period last year.
without guaranteed interest rates and a decline in income from products with guaranteed interest rates.
During the fourth quarter, there was also a pro�t-neutral change in principle for amortisation of intangible assets. [6]
Total fee and administration income increased by 4% from 2015 to 2016. Income growth is driven by the customers’ conversion from de�ned bene�t to de�ned contribution pension schemes in combination with new business and higher savings rates. In addition, volume growth and transaction-based fees in asset management contributed to growth. Strong growth reduced the net interest income for the bank. Net interest income for the year was 1.1% of average total assets compared with 1.25% last year. For the Norwegian Unit Linked products, increased competition contributes to pressure on margins, while there are relatively stable margins in the Swedish business and Asset Management.
De�ned contribution pensions continue to show strong growth due to a steadily rising number of companies choosing to convert from de�ned bene�t schemes to de�ned contribution-based schemes. This increases both the number of members and the current premium payments and management volume in the de�ned contribution-based pension schemes in both Norway and Sweden, in addition to growth through the return on premium reserves. Growth in customer assets was 20% in Norway and 11% in Sweden compared with the previous year.
Premium income amounted to NOK 14.2bn in 2016, which is NOK 1.9bn higher than in 2015. Total reserves for non-guaranteed life insurancerelated savings have grown by 9% to NOK 140bn since 2015.
Swedish corporate and retail markets, P&C insurance and personal risk products in the Norwegian retail market and employee-related and pension-related insurance in the Norwegian and Swedish corporate markets.
The cost percentage was 16% for the year (15% in 2015). As planned, increased volumes and ambitions of growth have resulted in higher allocated costs for the insurance area. The costs have been impacted by non-recurring e�ects as they were in the previous year. In 2016 the non-recurring e�ects were a net negative and related to restructuring costs, positive e�ects associated with the change in the pension scheme and write-downs on intangible assets. In 2015, restructuring costs were charged directly to the result. Adjusted for non-recurring e�ects, the cost percentage for both years was 15%.
Storebrand has enjoyed good success in the retail market with premium income growth of 9% compared with the previous year. This growth is driven by competitive prices, and simple and relevant products, as well as good cover. Our cooperation with Akademikerne (Federation of
Norwegian Professional Associations) is an important impetus for growth and the rate of sales is stable. REMA Forsikring was launched in autumn and the partner strategy is expected to give cost-e�ective growth in the years ahead. The growth in personal insurance was stable and in line with the general market growth.
The Guaranteed Pension business area includes long-term pension savings products that give customers a guaranteed rate of return. The business area covers de�ned bene�t pensions in Norway and Sweden, paid-up policies and individual capital and pension insurance.
541m compared with 2015. The results in 2016 were positively a�ected by the good result from pro�t sharing that was driven by good returns in the portfolios.
During 2016, fee and administration income developed in line with the fact that a large part of the portfolio is mature and in long-term decline.
Income was NOK 1,566m in 2016, compared with NOK 1,777m in the previous year. In 2016, income fell by 11.9% compared with 2015. New subscriptions for guaranteed pensions have been closed for most products, however, premium payments and the accumulation of returns for existing customers are leading to a long-term decline in reserves.
Operating costs were NOK 981m in 2016, which is NOK 176m less than in 2015. Costs in 2015 were a�ected by provisions for restructuring costs of NOK 41m in 2016, costs were negatively a�ected by NOK 1m.
The result from pro�t sharing and loan losses in the Guaranteed Pension segment consists of pro�t sharing and �nancial e�ects. The result was
Customer reserves for guaranteed pensions amounted to NOK 259bn at the end of 2016, compared with NOK 267bn at the start of the year.
The premium income for Guaranteed Pension (excluding transfers) was NOK 6.2bn in 2016. This represents a decline of 17%, compared with 2015. The majority of products are closed for new business and the customers’ choices about transferring from guaranteed to non-guaranteed products are in line with the Group’s strategy.
Bu�er capital in % of customer reserves Norway 5.7 % 5.8 %
The result for Storebrand ASA is reported under the Other segment, as well as the result for the company portfolios and small subsidiaries of
The Storebrand Life Insurance Group is funded by a combination of equity and subordinated loans. With the interest rate levels at the end of 2016, quarterly interest expenses of approximately NOK 100m are expected.
The �nancial result includes the return on the company portfolios in Storebrand Life Insurance and SPP, as well as the �nancial result of
Storebrand ASA. The �nancial result is weaker due to a lower return in the company portfolios.
Storebrand ASA (holding) held liquid assets of NOK 2.2bn at the end of the year. Liquid assets consist primarily of short-term �xed income securities. Storebrand ASA’s (holding’s) total interest-bearing liabilities were NOK 2.7bn at the end of the year. This corresponds to a net debtequity ratio of 2.9%. The next maturity date for bond debt is in May 2017. In addition to the liquidity portfolio, the company has an unused credit facility of EUR 240m that runs until December 2019. Storebrand ASA recognised dividends and group contributions of NOK 899m for 2016. Provisions for share dividends to the shareholders amounted to NOK 695m.
For insurance and pension products, Storebrand receives payment from companies and individuals to assume the risk that various insured events will occur. For pension products, it is necessary to assume �nancial market risk to create a return on pension assets. The banking business entails a risk of loan losses. In all parts of the business, operational risk arises due to errors that can in ict losses on customers and/or costs on Storebrand.
Risk management is about looking at both the positive and negative aspects of risk. Risk-taking should contribute to Storebrand achieving its strategic and commercial targets, including customers receiving a competitive return on their pension products and that Storebrand receives adequate payment for assuming risk in relation to de�ned rates of return.
Since 1 January 2016, the Group and the Group’s insurance companies have been subject to the Solvency II regulations, which expand and formalise the requirements for risk management. In Norway, the regulations are laid down in the Act on Financial Undertakings and Financial
For unit linked insurance, the customer bears the �nancial market risk. The disbursements are generally time limited, and therefore Storebrand bears low risk from increased life expectancy.
For Storebrand, the risk for unit linked insurance is primarily related to future income and cost changes. There is therefore an indirect market risk, because negative investment returns will reduce future income, without a corresponding reduction in costs. Incomes are also reduced if the customer chooses to leave. Market risk, particularly equity price risk and exit risk are therefore the greatest risks to unit linked insurance.
Insurance consists of risk products and property and casualty insurance. The price can normally be changed on an annual basis if there are any changes in the risk situation.
The greatest risk is the disability risk. Storebrand has the risk of there being more disability cases than expected and/or that fewer disabled persons are �t to work again (reactivation). The restructuring of disability cover in Norway’s National Insurance Scheme from 1 January 2016 has for many given better cover from the National Insurance Scheme for new incidents of disability. All else being equal, this will reduce the scope of
Storebrand’s disability risk. Storebrand also provides cover with death bene�ts, but Storebrand’s risk from this is very limited. Storebrand’s disability cover can generally be priced on an annual basis.
In property and casualty insurance, most of the risk is linked to the development of claims payments from car and home insurance.
Supervisory Authority of Norway has approved a seven-year escalation plan, and customer returns exceeding the guarantee can contribute to reserve strengthening. During the escalation period, it gives an increase in risk that may be compared with increasing the interest rate guarantee. Storebrand’s contribution must be at least 20% of the overall reserve strengthening. By the end of 2016, Storebrand had completed approximately 97 per cent of the reserve strengthening.
Interest rate risk is in a special position because changes in interest rates also a�ect the value of the insurance liability under Solvency II. Since pension disbursements may be many years in the future, the insurance liabilities are particularly sensitive to changes in interest rates, and they should ideally be balanced with the interest rate sensitivity of the investments. It is not possible to eliminate the interest rate risk in Norway, but accounting at amortised cost makes it possible to reduce the risk associated with the solvency position without increasing the risk from the annual guarantee. In Sweden, there is good correlation between the interest rate sensitivity of assets and liabilities.
There were goods returns for guaranteed customer portfolios in 2016. Good equity markets and high returns on property have made a positive contribution. In addition, a fall in interest rates and reduced credit spreads have given good returns for bonds. In Norway, the return has been more than adequate to cover the guarantee plus the expected contribution to reserve strengthening. In Sweden, the return on assets has been better than the increase in value of insurance liabilities.
Interest rates continued to fall in Sweden during 2016, while in Norway, interest rates were at about the same level as at the start of the year.
Low interest rates increase Storebrand’s risk, because this reduces the probability of achieving a return higher than the guarantee. In Norway, the e�ect will be dampened in the coming years by a large proportion of the investments being bonds held at amortised cost that will greatly bene�t from securities purchased at interest rate levels higher than the current levels.
The Other segment comprises Storebrand ASA, as well as the company portfolios and smaller subsidiaries in Storebrand Life Insurance and SPP.
The assets in Storebrand ASA and the company portfolios are invested at low risk, primarily in short-term interest-bearing securities with a high credit rating. Lending to commercial enterprises in Storebrand Bank will be discontinued and is being downscaled. The concentration risk in the portfolio will increase when the portfolio is being wound up.
The regulations that are adopted by the authorities are of great importance to Storebrand. Solvency II was introduced in 2016. The new Act on
The new European solvency regulations for insurance companies, Solvency II, entered into force on 1 January 2016. The EU has given notice of an evaluation of Solvency II in 2018.
Changes have been proposed that, as a whole, entail that the UFR for NOK is reduced from 4.2 per cent to 3.7 per cent. It is proposed that this reduction is phased in by a maximum of 20 basis points annually such that the level will not be 3.7 until June 2019.
Norwegian authorities are working on introducing requirements similar to Solvency II for pension funds. Pension funds follow the EU’s
Norway has proposed that the rules should apply to multiple products (paid-up policies with investment choice, pension capital certi�cates and individual pension savings) in Norway.
register. The directive balances measures that combat money laundering and terrorist �nancing against protection of privacy.
The tax rate on the ordinary income for companies subject to the �nancial tax will be continued at the 2016 level (25 per cent), while it will otherwise be reduced to 24 per cent.
This work has included: If employees should be entitled to establish a personal pension account with a pension provider selected by the employee.
The age and income from which contributions should start and the duration of the employment required to be able to receive contributions.
A report from a working group with representatives from the Ministry of Finance, Ministry of Labour and Social A�airs and the Financial
Supervisory Authority of Norway was presented in December 2016. Employee and employer organisations, the �nancial services industry and the Consumer Council of Norway have participated in a reference group for the work.
The report does not present any speci�c proposals, but discusses advantages and disadvantages of di�erent models for individual pension accounts and private savings for pensions. It will be up to the government, in consultation with the parties in business and industry, to assess how the report shall be followed up.
The Government is working with changes in the public sector occupational pensions schemes to fully adapt these to the pension reform. The
be taxed in connection with realisation, and will only be taxed when funds are withdrawn from the account. Dividends from shares and fund units that are part of the equity savings account do not go into the account, but are allocated directly to the shareholder and taxed as normal for pro�ts. When withdrawals are made from the account, it is the account holder’s deposit that is deemed to have been withdrawn �rst.
It has been proposed that the changes enter into force from and including the 2018 �nancial year. A transitional rule has been proposed that entails that the equity portion as of 1 January 2018 is used as a basis upon implementation of the rules, for investments in fund accounts made prior to 1 January 2018.
A government report proposing to introduce a �nancial tax in Sweden was presented in November 2016. It proposed a 15 % “�nancial undertakings tax” on the income base of �nance companies. As in Norway, the objective was to compensate for the lack of VAT on �nancial services.
The Swedish �nance minister has signaled that the proposal will be followed up and there appears to be broad political support for such a tax. It is expected that the Swedish �nancial tax will be introduced in 2018.
A government report from Sweden proposing extensive changes to the premium pension system was circulated for consultation until 1
February 2017. The report proposes transitioning from a model with free choice of fund to a model in which non-optional alternatives provided by the Seventh AP Fund will be of major importance. New pension savers shall be placed directly in this fund and must possibly actively select other funds themselves. Existing savers must actively con�rm their choice of fund every seventh year. They will receive information about this and if they do not actively con�rm their selection, all of the fund capital will be transferred to the non-optional alternative AP7 Såfa.
It appears as if the proposal will receive broad support in the bipartisan pension working group and it is considered probable that it will be implemented, most likely from 1 July 2017.
Storebrand is strongly committed to making a positive in uence on society through its products and services. Storebrand also uses global standards for the environment and human rights as a basis for its work with sustainability and sustainable �nancial products, for example, the
Sustainable development is characterised by a development that meets the needs of the present generation without this impacting on the ability of future generations to meet their own needs. For Storebrand, sustainability is about its own long-term commercial perspectives and security for customers. As a provider of pension saving schemes, it is essential that we are able to take a long-term perspective and generate returns for customers, without making a negative impact on the world in which our customers will retire.
Storebrand’s ambition is to contribute to solving society’s problems and to create sustainable development locally and globally through our products and services.
Storebrand will combine pro�table business operations with social, ethical and environmental goals and activities.
Storebrand makes demands with regard to sustainability, corporate social responsibility, environmental work and ethics within the Group and for all of our partners and suppliers.
Sustainability must permeate our development of new �nancial products and services, and it must be fully integrated with our asset management.
All of the Storebrand Group’s self-managed assets are subject to the Storebrand Standard, a minimum standard for sustainable investments, as de�ned by the executive management.
Storebrand shall integrate sustainability considerations in our insurance business, in the area of product development, customer service and marketing.
Storebrand shall actively seek to prevent any activities that are harmful to society or criminal acts taking place in connection with our operations.
In 2016, Storebrand renewed and reinforced its organisational commitment to sustainability and making a positive social impact.
The executive management launched a Group-wide consultation process in which all employees were asked to contribute to formulating
Storebrand’s sustainability goals. All employees were given the opportunity to contribute to both formulating the �nal objective and to identifying speci�c target areas for sustainability that Storebrand should focus on. Through a web-based survey and a series of working groups in Sweden and Norway, a new plan for quantifying and prioritising Storebrand’s social impact was established. The most important change is that social impact goals are determined in connection with commercial goals and continually followed up by the executive management and
UNEP FI, Swesift and the Swedish investment partnership, Sustainable Value Creation. In addition, Storebrand is a member of Swedish
In cooperation with WWF Norway, Storebrand hosted a conference during Arendal Week (Arendalsuka) at which national delegates from politics, the community and business met to discuss and develop guidelines for the present and the future. The topic was the green transition.
Storebrand has been climate neutral since 2008. Emissions from plane travel and energy consumption are compensated for through the purchase of credits from the REDD Programme and Veri�ed Carbon Standard. Storebrand cooperates with Wildlife Works on the purchase of emission allowances from the Kasigau Wildlife Corridor in Kenya, a threatened forest area of high biological importance.
Sustainability is also an important parameter when selecting providers. Companies that are excluded from investments due to sustainability considerations are automatically disquali�ed as suppliers to the Group. In connection with procurement processes, Storebrand follows a framework and expresses clear expectations regarding areas of improvement when necessary.
Storebrand is continuously improving the sustainability level through products and services. In Storebrand’s new social impact plan, goals have been formulated for direct impact on society. There are also goals for continued development and increase in sustainable products within all business areas.
Storebrand also exploits the opportunities to create better business in a sustainable economy through its own sustainable investments and by analysing how global trends such as population growth and scarcity of resources, growth in emerging economies and the demand for sustainable products will increasingly a�ect the business community in the future. Storebrand has a signi�cant in uence through its investments in several thousand companies in all sectors and regions of the world. Sustainability is about investing in companies that are wellpositioned to seize the major opportunities inherent to a transition to a green economy. The Storebrand standard applies to all of Storebrand’s self-managed funds and pension portfolios. The requirements apply to both equities and bonds in Norway, Sweden and internationally. The standard means that we exclude certain companies that are in violation of international norms and conventions or that are among the 10% of the least sustainable companies in high-risk industries.
Active ownership is exercised in a more sustainable direction. In uencing companies in the portfolio takes place through direct contact and cooperation with our external managers and through UNPRI.
Insurance works with sustainability based on two perspectives: Through bene�cial pricing when customers show sustainable behaviour and by developing products and concepts intended to prevent injury, disability and health problems. Storebrand monitors whether corporate customers operate their businesses based on principles of corporate social responsibility. For example, a company that is working well in the areas of health, environment and safety will be rewarded in the form of a lower price on employee insurance. This stimulates sustainability in customers’ operations.
It is Storebrand’s aim to contribute to preventing injury, disability and health problems. Insurance concepts that actively help employees who become ill to return to work quickly and thereby reduce the risk of incapacity for work are positive for the individual, society and the insurance company. An important instrument in this context is health insurance, where we can establish dialogue with the employee and implement a course of treatment to bring the employee back to work quickly.
Storebrand shall show customers what opportunities they have to also choose socially responsible alternatives within insurance. Through better customer communication and greater visibility in connection with the prevention of injury and product development, emphasis is placed on what customers can do, both through small and large companies, to contribute to a sustainable society. The goal is that customers shall act in a more sustainable manner in relation to social and �nancial issues, as well as the environment.
At the end of the year, 41 per cent of the managers in the Group were women, and 48 per cent of the employees were women. This represents a slight decrease on the previous year due to Storebrand no longer having an ownership stake in a Baltic company where the proportion of women was more than 50 per cent. In SPP, 49 per cent of the managers were women. Storebrand has for several years worked systematically on identifying future managerial candidates and promoting even gender distribution. There has been a focused e�ort on management development in the areas of strategic and operative management, communication and change. The aim is to ensure that future competence requirements are met, to develop Storebrand to meet the changing needs of society and the market.
In 2016, 40 per cent of the board members in Storebrand ASA are women. Storebrands subsidiaries had 31% share of women. The �gure for executive management was 22 per cent for the most part of the year.
There are no signi�cant di�erences in salaries attributable to gender di�erences. This is something the company will follow up and monitor regularly. The head o�ce is a universally designed building that was recerti�ed as a miljøfyrtårn (Eco-Lighthouse) in 2016.
The job satisfaction numbers have been stable from 2015 to 2016. The employer’s reputation is also positive and stable, and the numbers for loyalty, which is the combination of dependability and commitment among Storebrand’s employees, remain good. The decrease since 2015 is only one percentage point and this was during a period in which the number of employees was signi�cantly reduced and a subsidiary was sold.
Dependability is measured by the desire of employees to work at Storebrand and them recommending the company as a workplace to others.
When the employees are asked whether they think that it is valuable that the Storebrand Group desires to have a leading position in sustainability, the trend is still positive and stable.
The results show that employees have a stable, high level of trust in their immediate manager and score high (and higher than in 2015) for collaboration in the organisation. The Group also has good and stable results for the employees’ satisfaction with their job content, as well as learning and development.
The Group also has a mandatory ethics course for managers, which includes money laundering and corruption. At these courses, managers work with dilemmas taken from everyday life at Storebrand in the past 20 years. In addition, Storebrand’s management groups receive equivalent training, since it is the company’s experience that such discussions of dilemmas are very useful and better enable managers to recognise situations that may arise. Managers also train their sta� in the same way. The company’s authorised �nancial advisers complete a specially tailored training programme.
The Board carried out an evaluation in 2016, in which the executive management participated. A total of twelve board meetings were held in 2016. The work of the Board is regulated by special rules of procedure for the Board. The Board has established three advisory committees: the
Nils Are Karstad Lysø left the Board and Jan Chr. Opsahl was elected as a new member.
Disbanded in accordance with the Financial Undertakings Act by a decision at the Ordinary General Meeting in 2016.
Unit Linked increased by 21% from the previous year. Storebrand also has a strong challenger role for the sale of pension solutions to Swedish businesses and the growth in Unit Linked reserves at SPP was 10% compared with the previous year. Good sales growth for de�ned contribution pensions is expected in the future. Work is being carried out to improve pro�tability within this area.
�rst step in the downscaling of the central bank’s programme for purchasing �xed income securities has been taken and a gradual reduction in the programme is expected going forward. Germany is experiencing economic growth which exerts pressure when setting interest rates in
Market risk is the Group’s biggest risk. In the Board’s ORSA (self-assessment of risk and solvency) process, developments in interest rates, credit spreads, and equity and property values are considered to be the biggest risks that in uence the solvency of the Group. Storebrand has adapted to the low interest rates by building up bu�er capital. Over time the level of the annual interest rate guarantee will be reduced. In the long term, continued low interest rates will represent a risk for products with guaranteed high interest rates running at a loss, and it is therefore important to achieve a return that exceeds the interest rate guarantee associated with the products. Storebrand has therefore adjusted its assets by building a robust portfolio with bonds at amortised cost to achieve the guaranteed interest rate. For insurance risk, increased life expectancy and the development in disability are the factors that have greatest in uence on solvency. Operational risk is closely monitored and may also have a signi�cant e�ect on solvency.
Forward Rate (UFR) which, together with market interest rates, is used to determine the discount rates in Solvency II. The UFR is the combined total of an expected real interest rate (common for all currencies) and expected in ation (currency speci�c). Changes are proposed that, as a whole, entail that the UFR for NOK is reduced from 4.2% to 3.7% and that the change is phased in by a maximum of 20 basis points per year. If the proposal is approved, this will result in a lower solvency margin for Storebrand, depending on the interest rate. The matter is being assessed by EIPOA.
Possible solutions for individual additional savings in the occupational pension schemes.
The age and income from which contributions should start and the duration of the employment required to be able to receive contributions
Confederation of Trade Unions (LO) and the Confederation of Norwegian Enterprise (NHO)) and the government to determine how the report should be followed-up.
Financial tax on salaries. This is set at 5 per cent and will follow the rules for employer’s National Insurance contributions.
Storebrand ASA reported a pro�t before tax of NOK 829 m in 2016, compared with NOK 333 m in 2015. Group contributions from investments in subsidiaries totalled NOK 899 m, compared with NOK 519 m in 2015.
Other income statement elements that cannot subsequently be reclassi ed through the income statement.
The pro�t for Storebrand ASA for 2016 was NOK 738 m, compared with NOK 252 m in 2015.
Storebrand has established a framework for capital management that links dividends to the solvency ratio. The goal is a solvency ratio of over 150%, including transitional rules. The solvency ratio at the end of the fourth quarter was 157%. A minimum level for dividends is a solvency ratio without transitional rules of 110%. The solvency ratio without transitional rules at the end of the fourth quarter was 144%. The solvency level shows that the Group is robust for the risks the business faces. A gradual improvement is expected in the underlying solvency margin in the coming years. This is primarily due to the discontinuation of the strengthening of reserves for increased life expectancy, expected result achievement in the Group, and reduced capital requirements from guaranteed business. The strengthening of reserves for increased life expectancy is expected to conclude in 2017.
The Board has proposed a dividend to the General Meeting of NOK 695 m, equivalent to NOK 1.55 per share, for the 2016 �nancial year. A
For several decades, Storebrand has been among the best within sustainable investments and has taken an active approach to how we invest both our own capital and that of our customers. Storebrand believes that companies that integrate environmental, social and governance considerations in their business activities reduce risk and create new opportunities for the business activities and capital owners. Storebrand has the ambition of maintaining a position among the best companies by integrating this perspective in other business areas. Storebrand believes that this will create increased value for customers, owners, society and other stakeholders. See the separate article in the annual report on Materiality.
Articles of Association may be found on Storebrand’s website at www.storebrand.no.
The market is kept informed of Storebrand’s goals and strategies through quarterly result presentations and separate thematic presentations.
(AGM), based on a proposal put forward by the Board. Pursuant to Section 8-1, paragraph two of the Norwegian Public Limited Liability
Good corporate governance is important to ensure that an enterprise can achieve its defined goals, including best possible utilisation of resources and good value creation. The Storebrand
Directors of Storebrand ASA (hereafter referred to as the Board) conduct an annual review of
Storebrand's adopted corporate governance policies and compliance therewith. Storebrand reports in accordance with section 3-3b of the Norwegian Accounting Act and the Norwegian
the General Meeting may, by simple majority, authorise the Board of Directors to distribute a dividend. This shall be based on the annual
�nancial statements adopted by the General Meeting. This authorisation may not be granted for a period longer than until the next Annual
General Meeting. In addition, the authorisation shall be based on the adopted dividend policy. The General Meeting was not requested to provide such authorisation in 2016. Read more about Storebrand’s dividend policy in the Board of Directors Report.
Accordingly, it is appropriate to authorise the Board of Directors to buy shares in the market to cover the aforementioned needs or any other needs. The authorisation is valid until the next Annual General Meeting.
The share capital has not been increased in 2016, but an authorisation has been granted to increase the share capital, cf. section 3 above. The
Pursuant to the Articles of Association, Storebrand ASA’s General Meeting shall be held by the end of June each year. The General Meeting was held on 13 April 2016. All shareholders with a known address will receive notice of the General Meeting, which will be sent out no later than 21 days prior to the General Meeting. Pursuant to the Articles of Association, the deadline for giving notice of attendance shall be set at no later than �ve calendar days prior to the General Meeting. In accordance with Storebrand’s Articles of Association, the right to make other documentation available on Storebrand’s website is exercised, cf. Section 5-11 a of the Norwegian Public Limited Liability Companies Act.
However, a shareholder can still request to be sent these documents by ordinary mail.
All shareholders may participate at the General Meeting. Storebrand’s Articles of Association allow shareholders to vote in advance by means of electronic communication, cf. section 5-8b of the Norwegian Public Limited Liability Companies Act. The arrangement therefore gives the shareholders an opportunity to vote without being represented at the General Meeting. As many shareholders as possible are thus allowed to exert an in uence on Storebrand by exercising their voting rights.
It is also possible to vote by proxy. Provisions have been made so that the proxy form is linked to each individual item to be considered. We will seek whenever possible to design the form so that it allows voting for candidates who are to be elected. The voting rules for the General
Meeting allow separate votes for each member of the various bodies. Further information about voting in advance, use of proxies and shareholders’ rights to have matters discussed at the Annual General Meeting is available in the notice of the Annual General Meeting and on
Meeting. The Board members of Storebrand ASA are not obligated to attend, but are encouraged to. The CEO, executive management team and the Group Legal Director participate from the management. Minutes from the General Meeting are available on Storebrand’s website. The
General Meeting is opened by the Chairman. The Board organises an independent chairperson who is elected by the General Meeting.
The General Meeting shall: consider the annual accounts, consisting of the pro�t and loss statement, the balance sheet and the annual report, including the consolidated pro�t and loss statement and balance sheet, and the auditor’s report, decide upon adoption of the pro�t and loss statement and balance sheet,decide upon adoption of the consolidated pro�t and loss statement and balance sheet, decide upon the allocation of pro�t or manner of covering loss in accordance with the adopted balance sheet, and on the distribution of dividends, elect the auditor, appoint members to the Nomination Committee and this should include the Chairman of the Nomination Committee, elect members to the Board of Directors, and this should include the Chairman of the Board of Directors, consider the Board of Directors’ statement on the �xing of salaries and other remuneration to executive personnel, approve the remuneration of members of the Board of Directors and Board Committees, approve the remuneration of members of the Nomination Committee, approve the auditor’s fee, transact any other business listed on the agenda.
The chairman of the Nomination Committee and the other members are elected by the General Meeting. The representative for the employees shall participate as a permanent member of the committee in discussions and nominations concerning the election of the Chairman of the
The majority of the Nomination Committee is independent of the Board of Directors and the management. The Committee is established with the objective that the interests of the shareholder community are safeguarded. The General Meeting’s instructions for the Nomination
Board of Directors and Nomination Committee. A corresponding request to the shareholders is published on the company’s website
The Articles of Association stipulate that between �ve and seven board members shall be elected by the General Meeting based on nominations from the Nomination Committee. Two members, or three members if the General Meeting 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
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 Remuneration Committee assists the Board with all matters concerning the CEO’s remuneration. The committee monitors the remuneration of Storebrand’s executive personnel, and proposes guidelines for the �xing of the executive personnel’s remuneration and the
Group’s overall controls, �nancial and operational reporting, risk management/control, and internal and external auditing. The Audit Committee held nine meetings in 2016. The external and internal auditors attend the meetings. The majority of the Committee’s members are independent of the company. The Board of Directors has found that it is appropriate to have a combined Remuneration Committee for all of Storebrand.
The Board of Directors has drawn up general policies and guidelines for management and control. These policies deal with the Board’s responsibility for determining Storebrand’s appetite for risk and risk pro�le, 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.
Storebrand’s sustainability guidelines summarise how the work is an integral part of Storebrand’s overarching objectives and management and control processes. The guidelines encompass all parts of Storebrand’s business activities, including investing, product development, purchasing, follow-up of employees and internal operations. Storebrand’s sustainability goals are adopted by the Board of Directors, and the sustainability scorecard is followed up by the Group’s executive management team semi-annually. Storebrand also complies with the international reporting standard GRI (Global Reporting Initiative, version G4) and uses integrated reporting. The results are audited by Storebrand’s external auditor, see the auditor’s report. For the 17 year in a row, Storebrand quali�ed 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
implemented. The policies for earning and paying any variable remuneration to Storebrand’s risk managers comply with the regulations relating to remuneration in �nancial institutions, cf. Section 12 below. The CRO and employees with control functions related to risk management, internal control and compliance only have �xed salaries.
Storebrand publishes four interim �nancial statements, in addition to the ordinary annual �nancial statements. The �nancial statements shall satisfy legal and regulatory requirements and be prepared in accordance with the adopted accounting policies and published according to the schedule adopted by the Board of Storebrand ASA.
Monthly and quarterly operating reports are prepared in which the results by business area and product area are analysed and assessed against set budgets. The operating reports are reconciled against other �nancial reporting.
Board. More detailed information on the compensation, loans and shareholdings may be found in notes 25 (Group) and 6 and 16 (ASA). Board members are encouraged to hold shares in the company.
12. REMUNERATION OF EXECUTIVE PERSONNEL (NO DEVIATIONS FROM THE CODE OF PRACTICE)
Storebrand shall have an incentive model that supports the Group’s strategy, with emphasis on the customer’s interests and long-term perspective, an ambitious model of cooperation, as well as transparency that enhances the Storebrand’s reputation. Storebrand will therefore largely emphasise �xed salaries as an instrument of �nancial compensation, and make use of variable remuneration only to a limited extent.
Employee performance is followed up by a special monitoring system The unit and individual’s action plan are directly linked to the strategy adopted by the Board. This helps to further strengthen agreement between the owners and the management.
The external auditor is elected by the General Meeting and is responsible for the �nancial auditing. The external auditor issues an auditor’s report in connection with the annual �nancial statements and conducts limited audits of the interim �nancial statements. The external auditor attends Board meetings in which interim �nancial statements are reviewed, and all meetings of the Audit Committee, unless the items on the agenda do not require the presence of the auditor. The Board has decided that the external auditor must rotate the partner responsible for the audit assignment every seven years. The external auditor’s work and independence are evaluated every year by the Board’s Audit Committee.
Deloitte has been elected by Storebrand ASA’s General Meeting as the company’s external auditor. The other companies in Storebrand use the same auditor as Storebrand ASA.
Storebrand ASA’s Board of Directors, the Articles of Association, and ownership policies.
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.
6. The composition of the governing bodies and a description of the main elements in the current rules of procedure and guidelines can be found in sections 6, 7, 8 and 9 above.
Career 2008–2012: Lindor� Group AB, Executive Vice President Region Scandinavia, CEO Lindor� AS,
2011–: CIO, Storebrand Life Group 2008–2011: Investment Director, SPP Life Insurance AB
Career 2006–2015 Chief Investment O�cer, Storebrand Asset Management 1999–2006 Senior Portfolio Manager, Storebrand Asset Management 1997–1999 Sector Head Equities Energy/Shipping, Handelsbanken Markets 1995–1997 Partner, Marsoft Capital 1992–1995 Head of Research, Christiania Markets (now: Nordea Markets)
1995–2001: Senior Vice President Pizza and various Marketing positions, Orkla Foods AS
Managing Director in DNB succession of diverse management positions internally (1985–2013)
Master of Arts in International finance and accounting (University of Newcastle upon Tyne)
Senior Union Representative for Employees and head of the Finance Sector Union of Norway at
Total comprehensive attribute to: Share of total comprehensive income – shareholders 1,163 1,830
Share of total comprehensive income – hybrid capital investors 11 9
Financial assets at fair value: – Equities and other units 9,13,32,37 121 114
Net cash ow from nancial assets and banking customers 1,115 674
Net receipts/payments – lending to and claims from other �nancial institutions -9 396
Receipts – issuing of share capital / sale of shares to own employees 14 10
A substantial part of the activities in a �nancial group will be classi�ed as operational. All receipts and payments from insurance activities are included from the insurance companies, and these cash ows are invested in �nancial assets that are also de�ned as operational activities. One subtotal is generated in the statement that shows the net cash ow from operations before �nancial assets and banking customers, and one subtotal that shows the cash ows from �nancial assets and banking customers. This shows that the composition of net cash ows from operational activities for a �nancial group includes cash ows from both operations and investments in �nancial assets. The life insurance companies’ balance sheets include substantial items linked to the insurance customers that are included on the individual lines in the cash ow analysis. Since the cash ow analysis is intended to show the change in cash ow for the company, the change in bank deposits for insurance customers is included on its own line in operating activities to neutralise the cash ows associated with the customer portfolio in life insurance.
Financing activities include cash ows 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 �nancial activities.
Note 1 – Company information and accounting policies 1. Company information
Storebrand ASA is a Norwegian public limited company that is listed on the Oslo Stock Exchange. The consolidated financial statements for 2016 were approved by the Board of Directors of Storebrand ASA on 7 February 2017.
The Storebrand Group offers a comprehensive range of insurance and asset management services, as well as securities, banking and investment services, to private individuals, companies, municipalities, and the public sector. The Storebrand Group consists of the business areas Guaranteed Pensions, Savings, Insurance and Other. The Group’s head office is located at Professor Kohts vei 9, in Lysaker, Norway.
2. Summary of significant accounting policies for material items on the statement of financial position
The asset side of the Group’s statement of financial position comprises, for the most part, financial instruments and investment properties.
The statement of financial position also includes capitalised intangible assets, which consist essentially of excess value related to insurance contracts acquired as part of a business combination and are associated with the acquisition of the Swedish group Storebrand Holding (SPP) in 2007. This excess value is measured at historical cost less annual amortisation and write-downs.
The liabilities side of the Group’s statement of financial position comprises, for the most part, financial instruments (liabilities) and provisions relating to future pension and insurance payments (technical insurance reserves). With the exception of derivatives and insurance liabilities in
Technical insurance reserves must be adequate and cover liabilities relating to issued insurance contracts. Various methods and principles are used in the Group when assessing the reserves for different insurance contracts. A considerable part of the insurance liabilities relate to insurance contracts with interest guarantees. The recognised liabilities related to Norwegian insurance contracts with guaranteed interest rates are discounted by the basic interest rate (which corresponds to the guaranteed return / interest rate) for the respective insurance contracts.
The yield curve that is used was changed in the fourth quarter of 2015 and now corresponds essentially to the interest rate that is used in the
Incurred But Not Settled (IBNS) reserves consist of amounts reserved for claims either incurred but not yet reported or reported but not yet settled (Incurred But Not Reported “IBNR” and Reported But Not Settled “RBNS”). IBNS reserves are included in both the premium reserve and claims reserve. The claims reserve must only cover amounts which might have been paid in the accounting year had the claim been settled.
The accounting policies applied in the consolidated financial statements are described below. The policies are applied consistently to similar transactions and to other events involving similar circumstances. There is no required use of uniform accounting policies for insurance contracts.
New accounting standards that have a significant impact on the consolidated financial statements have not been implemented in 2016. For changes in estimates, see Note 2 for further information.
No new accounting standards that will have a significant impact on Storebrand’s consolidated financial statements are expected to be implemented in 2017.
Storebrand is working on adapting models and IT systems to IFRS9. It is expected that impairment losses on loans and guarantees will be recognised at an earlier stage due to the implementation of the standard and that the impairments can increase.
January 2021. It is assumed that the standard will require that the recognised value of insurance contracts shall consist of the following components: Probability weighted estimate of future contributions and payments related to the contracts
When entering into a contract, the expected profit is also set aside as a liability. This is recognised as income over the duration of the contract
The introduction of a new standard for insurance contracts may have an effect on Storebrand’s consolidated financial statements, but the standard has not been published and its scope has not been clarified. Implementation may result in changes in the income statements, a changed result, changed value of the insurance liabilities and could impact on the equity.
The consolidated financial statements combine Storebrand ASA and companies where Storebrand ASA has a controlling interest. Minority interests are included in the Group’s equity, unless there are options or other conditions that entail that minority interests are measured as liabilities.
Storebrand to make an application to maintain a group structure by the end of 2009. Storebrand has filed an application to maintain the existing group structure.
Storebrand consolidates certain funds in the Group’s statement of financial position when the requirement for control pursuant to IFRS10 has been met. This encompasses funds in which Storebrand has an ownership interest of approximately 40 per cent or more, which are managed by companies in the Storebrand Group. In the Group’s accounts, such funds are consolidated fully in the statement of financial position, and the minority ownership interests are shown on a line for assets and on a corresponding line for liabilities. Other investors in the relevant funds are considered to be minority interests, since they can demand redemption of their ownership interests and, as a result of this, the minority stake is classified as liabilities in the consolidated financial statements of Storebrand.
Internal receivables and payables, internal gains and losses, interest, dividends and similar between companies in the Group are eliminated in the consolidated financial statements. Transactions between the customer portfolios and the company portfolio in the life insurance business and between the customer portfolios in the life insurance business and other companies in the Group will not be eliminated in the consolidated accounts Pursuant to the life insurance regulations, transactions with customer portfolios are carried out a fair value.
Net premium income includes the year’s premiums written (including savings elements and administration premium), premium reserves transferred and ceded reinsurance. Annual premiums are generally accrued on a straight-line basis over the coverage period. Fees for issuing
Financial assets and liabilities are included in the statement of financial position from such time Storebrand becomes party to the instrument’s contractual terms and conditions. Normal purchases and sales of financial instruments are recorded on the transaction date. When a financial asset or a financial liability is initially recognised in the financial statements, it is valued at fair value.
If there is objective evidence that impairment has occurred, the amount of the loss is measured as the difference between the asset’s carrying amount and the present value of the estimated future cash flows (excluding future credit losses that have not occurred) discounted at the financial asset’s original effective interest rate (i.e. the effective interest rate calculated at initial recognition). The amount of the loss is recognised in profit or loss.
Financial assets are classified into one of the following categories: Financial assets held for trading
Financial assets at fair value through profit or loss in accordance with the fair value option (FVO)
A financial asset is held for trading if: it has been acquired principally for the purpose of selling or repurchasing it in the near term, is part of a portfolio of identified financial instruments that are managed together and there is evidence of a recent actual pattern of short-term profit-taking, or it is a derivative that is not designated and effective as a hedging instrument.
A significant proportion of Storebrand’s financial instruments are classified in the category fair value through profit or loss because: such classification reduces the mismatch in the measurement or recognition that would otherwise arise as a result of the different rules for measuring assets and liabilities, or the financial assets form part of a portfolio that is managed and reported on a fair value basis
Assets held to maturity are recognised at amortised costs using the effective interest method. The category is used in the Norwegian life insurance business in relation to insurance contracts with interest rate guarantees.
A derivative is a financial instrument or other contract within the scope of IAS39, and which has all three of the following characteristics: its value changes in response to the change in a specified interest rate, financial instrument price, commodity price, foreign exchange rate, index of prices or rates, credit rating or credit index, or other variable (sometimes called the ‘underlying’)
Storebrand uses fair value hedging, where the items hedged are financial assets and financial liabilities measured at amortised cost. Derivatives are recognised at fair value through profit or loss or are included in total comprehensive income. Changes in the value of the hedged item that are attributable to the hedged risk adjusts the carrying amount of the hedged item and is recognised through profit or loss.
Some borrowing in foreign currency is hedged by means of hedging instruments (derivatives). The cash flows in the hedged item coincide with the cash flows of the hedging instruments. Derivatives are recognised at fair value. Hedge accounting is carried out by dividing the hedge into fair value hedging of the interest and a cash flow hedging of the margin. Net changes in the value of the cash flow hedge are recognised in the
These comprise premium savings that are taken to income under premium income and that are paid under claims. This item also includes guaranteed returns on the premium reserve and the premium fund, as well as returns to customers beyond the guarantees.
The premium reserve represents the present value of the company’s total insurance liabilities, including future administration costs in accordance with the individual insurance contracts, after deducting the present value of agreed future premiums. In the case of individual account policies with flexible premium payments, the total policy value is included in the premium reserve. The premium reserve is equivalent to 100 per cent of the guaranteed surrender or transfer value of insurance contracts prior to any fees for early surrender or transfer and the policies’ share of the market value adjustment reserve.
(administration reserve). In the case of paid-up contracts, the present value of all future administration costs is allocated in full to the premium reserve. In the case of contracts with future premium payments, a deduction is made for the proportion of future administration costs expected to be financed by future premium receipts.
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 costs and income takes place on the date the insured risk is ceded. The premium reserve in the insurance liabilities is reduced/increased on the same date. The premium reserve transferred includes the policy’s share of additional statutory reserves, the market value adjustment reserve, conditional bonus and the profit for the year. Transferred additional reserves are not shown as part of premium income, but are reported separately as changes in insurance liabilities. Transferred amounts are classified as current receivables or liabilities until the transfer takes place.
The company is allowed to make allocations to the additional statutory reserves to ensure the solvency of its life insurance business. These additional reserves are divided among the contracts and can be used to cover a negative interest result up to the interest rate guarantee. In the event that the company does not achieve a return that equals the basic interest rate in any given year, the allocation can be reversed from the contract to enable the company to meet interest rate guarantee. This will result in a reduction in the additional statutory reserves and a corresponding increase in the premium reserve for the contract. For allocated annuities, the additional statutory reserves are paid in instalments over the disbursement period.
The reserves for incurred insurance events consist of reserves for disability and retirement pensions, established claims, undetermined claims and claims processing reserves. When assessing the reserves, the basic interest rate is used to determine the provision. In addition, provisions are made for calculated claims that have been incurred but not reported (IBNR).
Up to 50 per cent of the risk result for group pensions and paid-up policies can be allocated to the risk equalisation fund to cover any future negative risk result. The risk equalisation reserve is not considered to be a liability according to IFRS and is included as part of the equity
The life insurance reserves are estimated as the present value of the expected future guaranteed payments, administrative expenses and taxes, discounted by the current risk-free interest rate. Insurance reserves with guaranteed interest rates in SPP use a modelled discount rate. A
nominal risk-free interest rate is used to discount pure endowment insurance and health insurance in defined benefit schemes. For other risk insurance, a risk-free real interest rate, or nominal risk-free interest rate, is used in combination with the assumed inflation.
When calculating the life insurance reserves, the estimated future administrative expenses that may reasonably be expected to arise and can be attributed to the existing insurance contracts are taken into account. The expenses are estimated according to the company’s own cost analyses and are based on the actual operating costs during the the most recent year. Projection of the expected future costs follow the same principles on which Solvency II is based. Any future cost-rationalisation measures are not taken into account.
The conditional bonus arises when the value of customer assets is higher than the present value of the liabilities, and thus covers the portion of the insurance capital that is not guaranteed. In the case of contracts where customer assets are lower than liabilities, the owners’ result is charged via deferred capital contribution allocations. The conditional bonus and deferred capital contribution are recognised on the same line in the statement of financial position.
Pension costs and pension obligations for defined-benefit pension schemes are determined using a linear accrual formula and expected final salary as the basis for the entitlements, based on assumptions about the discount rate, future salary increases, pensions and National
The Group’s tangible fixed assets comprise equipment, fixtures and fittings, IT systems and properties used by the Group for its own activities.
Equipment, inventory and IT systems are valued at acquisition cost less accumulated depreciation and any write-downs.
Group for its own activities is recognised through total comprehensive income. Any write-down of the value of such a property is recognised first in the revaluation reserve for increases in the value of the property in question. If the write-down exceeds the revaluation reserve for the property in question, the excess is expensed over the profit and loss account.
The value of a tangible fixed asset is tested when there are indications that its value has been impaired. Any impairment losses are charged to the income statement as the difference between the carrying value and the recoverable amount. The recoverable amount is the greater of the fair value less costs of sale and the value in use. On each reporting date a determination is made as to whether to reverse previous impairment losses on non-financial assets.
companies, 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 which are also included in the Norwegian tax group, are included in the Group’s temporary differences where provisions have been made for deferred tax.
In connection with the national budget for 2017, it was agreed to introduce a financial tax consisting of two elements: Financial tax on salaries. This is set at 5 per cent and will follow the rules for employer’s National Insurance contributions.
The tax rate on the ordinary income for companies subject to the financial tax will be continued at the 2016 level (25 per cent), while it will otherwise be reduced to 24 per cent.
The financial tax applies from and including the 2017 financial year.
Pursuant to IAS10, which deals with events after the balance sheet date, proposed dividends and/or group contributions are classified as equity until approved by the general meeting.
The statement of cash flows is classified according to operating, investing and financing activities.
In preparing the Group’s financial statements the management are required to make judgements, estimates and assumptions of uncertain amounts. The estimates and underlying assumptions are reviewed on an ongoing basis and are based on historical experience and expectations of future events and represent the management’s best judgement at the time the financial statements were prepared.
In accordance with the accounting standard IFRS4 Insurance Contracts, the insurance liabilities that are included shall be adequate and a liability adequacy test shall be performed. The insurance liabilities are calculated in accordance with rules stipulated by the national supervisory authorities, including the Insurance Activity Act with regulations in Norway and the Insurance Business Act in Sweden. For the life insurance liabilities a test is performed at an overall, total level by conducting an analysis based on the Norwegian premium reserve principles. The established analysis is based on the assumptions that apply correspondingly to the calculation of the Solvency II liability, 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 based on the Solvency II calculations. This test was also performed for the introduction of IFRS.
In Storebrand’s life insurance activities, a change in the estimates related to technical insurance reserves, financial instruments or investment properties allocated to life insurance customers will not necessarily affect the owner’s result, but a change in the estimates and valuations may affect the owner’s result. A key factor will be whether the assets of the life insurance customers, including the return for the year, exceed the guaranteed liabilities.
may also have a significant impact on the recognised insurance liabilities. Changes in estimates and valuations may entail a change in the return on the customer portfolios. Depending on the size of any impairment in value, such impairment may be offset by a reduction in the conditional bonus, so that the effect on the owner’s result may be limited. If the value of the individual insurance contract is higher than the associated customer assets, the owner will have to cover the deficient capital.
The discount rate used for the Swedish business is essentially calculated by the same methods used for calculation of the discount rate under
For terms to maturity ranging from 10 to 20 years, interpolated forward interest rates are used to ensure a smooth transition from the most recent liquid market interest rate (at the 10-year point) to the long-term forward interest rate. The interpolation is carried out by means of the so-called Smith-Wilson model.
For terms to maturity in excess of 20 years, an equilibrium interest rate is determined based on the sum of the long-term expectations for inflation and real growth.
Investment properties are measured at fair value The commercial real estate market in Norway is not particularly liquid, nor particulary transparent. Uncertainty will be linked to the valuations, and they require exercise of professional judgement, especially in periods with turbulent finance markets.
Discount rates for both certain and uncertain cash flows, as well as residual value
There will be some uncertainty associated with the pricing of financial instruments, particularly instruments that are not priced in an active market. This is particularly true for the types of securities priced on the basis of non-observable assumptions, and for these investments various valuation techniques are applied in order to fix fair value. These include private equity investments, investments in foreign property funds, and other financial instruments where theoretical models are used in pricing. Any changes to the assumptions could affect recognised amounts. The majority of such financial instruments are included in the customer portfolio.
Financial instruments valued at amortised cost are measured on the reporting date to see whether there is any objective evidence that a financial asset or group of financial assets is impaired.
Goodwill and other intangible assets with undefined useful economic lives are tested annually for impairment. Goodwill is allocated to the
In 2015, the Financial Supervisory Authority of Norway approved Storebrand’s application for an escalation plan for reserves in accordance with
Public sector defined benefit pensions: Estimated future, direct use of equity was completed in 2015.
Private sector defined benefit pensions: Estimated future, direct use of equity was completed in 2016.
PRICE OF RETURN GUARANTEE AND PROFIT RISK (FEE INCOMES) – STOREBRAND LIFE INSURANCE AS
The administration result is the difference between the income paid by customers pursuant to the tariff and the company’s actual operating costs. The income consists of fees based on the size of customer assets, premium volumes or numbers in the form of unit prices. Among other things, operating expenses consist of personnel costs, return fees, marketing expenses, commissions and IT costs.
The administration result for all insurance products is paid to or charged to the result allocated to owners.
In the case of group defined-benefit pensions and paid-up policies, any positive risk result passes to the customers, while any deficit in the risk result must, in principle, be covered by the insurance company. However, up to half of any risk profit on a particular line of insurance may be retained in a risk equalisation fund. A deficit due to risk elements can be covered by the risk equalisation fund. The risk equalisation fund can, as a maximum, amount to 150 per cent of the total annual risk premium. The risk equalisation fund is classified as equity in the balance sheet.
The risk result is paid to the owners in its entirety for all insurance products
For premiums paid from and including 2016, previous profit sharing is replaced by a guarantee fee. The guarantee fee is annual and is calculated as a percentage of the capital. It goes to the company.
A change has been made to the alternative income statement in 2016. The purpose of the change was to more clearly di�erentiate between the result elements from operations and result elements from �nance. A new term “operating result” has been incorporated that is prior to the
�nancial results from the company portfolios and risk results from the guaranteed life insurance activities.
The result for the holding company Storebrand ASA is reported under the Other segment, as well as the result for the company portfolios and small subsidiaries of Storebrand Life Insurance and SPP. In addition, this includes, among other things, lending to the corporate market by
RECONCILIATION BETWEEN THE INCOME STATEMENT AND ALTERNATIVE STATEMENT OF THE RESULT (SEGMENT)
Fee and administration income consists of fees and �xed administrative income. In the Group’s income statement, the item is classi�ed as premium income, net interest income from bank or other income depending on the type of activity. The Group’s income statement also includes savings elements for insurance contracts and possibly transferred reserve.
Claims consist of paid-out claims and changes in claims incurred but not reported (IBNR) and claims reported but not settled (RBNS) relating to risk products that are classi�ed as claims in the Group’s income statement.
The nancial result consists of the return for the company portfolios of Storebrand ASA, Storebrand Livsforsikring AS and SPP Pension &
Försäkring AB (Other segment), while returns for the other company portfolios in the Group are a �nancial result within the segment which the business is associated with. Returns on company portfolios are classi�ed as net income from �nancial assets and property for companies in the
Storebrand Livsforsikring: Net pro�t sharing in the Norwegian business consists of up to 35 per cent of the overall result after allocations to additional statutory reserves for the products, traditional individual capital and pension products. Any negative returns on customer portfolios and returns lower than the interest guarantee that cannot be covered by additional statutory reserves must be covered by the company’s equity and will be included in the net pro�t-sharing and losses line. In the Group’s income statement, this item may be included in premium income, net income from �nancial assets and property for customers, other income, claims, change in insurance liabilities, change in bu�er capital, operating costs and other costs.
SPP Pension & Försäkring: Net pro�t sharing in the Swedish business consists of pro�t sharing if the total return on assets in one calendar year for a premium-determined insurance (IF portfolio) exceeds the guaranteed interest. When pro�t sharing is triggered, 90 per cent of the total return on assets passes to the policyholder and 10 per cent to the company. The company’s share of the total return on assets is included in the �nancial result.
Financial items and risk result life & pension 5 -4 233 206 284 -292
Group pro t before amortisation and longevity 1,063 1,001 575 482 870 329
Financial items and risk result life & pension 401 -16 924 -107
The Storebrand Group are represented in the following countries: Segment/Country Norway Sweden Latvia Ireland Guernsey
Storebrand’s income and performance are dependent on external factors that are associated with uncertainty. The most important external risk factors are the developments in the financial markets and changes in life expectancy in the Norwegian and Swedish populations. Certain internal operational factors can also result in losses, e.g. errors linked to the management of the customers’ assets or payment of pension.
The Group’s organisation of the responsibility for risk management follows a model based on three lines of defence. The objective of the model is to safeguard the responsibility for risk management at both company and Group level.
The Board of Storebrand ASA has established a Risk Committee consisting of 3-4 Board members. The main task of the Risk Committee is to prepare matters to be considered by the Board in the area of risk, with a special focus on the Group’s appetite for risk, risk strategy and investment strategy. The Committee should contribute forward-looking decision-making support related to the Board’s discussion of risk taking, financial forecasts and the treatment of risk reporting.
Independent control functions have been established for risk management for the business (Risk Management Function / Chief Risk Officer), for compliance with the regulations (Compliance Function), for ensuring the insurance liabilities are calculated correctly (Actuary Function) and for the bank’s lending. The functions have been established for both the Storebrand Group (the Group) and all of the companies requiring a licence.
In terms of function the independent control functions are affiliated with the Group CRO, which is organised directly under the CEO and reports to the board of directors of Storebrand ASA. The Group CRO shall ensure that all significant risks are identified, measured and appropriately reported. The Group CRO function shall be actively involved in the development of the Group’s risk strategy and maintain a holistic view of the company’s risk exposure. This includes responsibility for ensuring compliance with the relevant regulations for risk management and the consolidated companies’ operations.
The Group seeks to reduce operational risk through an effective system for internal control. Risks are followed up through the management’s risk reviews, with documentation of risks, measures and the follow-up of incidents. In addition, Internal Audit carries out independent checks through audit projects adopted by the Board.
Storebrand’s IT systems are vital for both operations and complete, precise and reliable financial reporting. Errors and disruptions may have consequences for operations and impact on the trust the Group has from both customers and shareholders. In the worst case, abnormal situations can result in penalties from the supervisory authorities. Storebrand’s IT platform is characterised by complexity and integration between different specialist systems and joint systems. The operation of the IT systems has largely been outsourced to different service providers. A management model has been established with close follow-up of providers and internal control activities in order to reduce the risk associated with the development, administration and operation of the IT systems, as well as information security. The bank platform and insurance platform are based on purchased standard systems that are operated and monitored through outsourcing agreements. There is a greater degree of own development for the life insurance activities, but the operation of this has also been outsourced and the individual portfolio is handled in a purchased standard system.
In the Guaranteed Pensions segment, the Group has a significant insurance risk relating to long life expectancy for group and individual insurance agreements. In addition, there is an insurance risk associated with disability and pensions left to spouses and/or children. The disability coverage in Guaranteed Pensions is primarily sold together with a retirement pension. The risk of mortality is low in Guaranteed
In the Insurance segment, the Group has an insurance risk associated with disability and death. In addition, there are insurance risks associated with occupational injury, critical illness, cancer insurance, child insurance, accident insurance and health insurance. For occupational injury, the risk is first and foremost potential errors in the assessment of the level of provisions, because the number of claim years can be up to 25 years.
The risk within critical illness, cancer, accident and health insurance is considered to be limited based on the volume and underlying volatility of the products. Within P&C insurance, the risk of house fire and personal injury for motor vehicle insurance constitute the main risks.
7. A hybrid pension (occupational pension scheme) is where the premium is stated as a percentage of salary, while the payments depend on the contributions and adjustment/return. The pension assets are managed collectively. The product is only offered in Norway.
11. Disability and survivor products in the payment phase without accrual of a paid-up policy.
Guaranteed Pension 2. Individual allocated annuity or pension insurance provides guaranteed payments for as long as the insured person lives. Alternatively, it can be agreed that the pension will end at a specified age. Premiums or payments may be waived in the event of disability. The product can be linked to disability pensions.
There was a need to strengthen the premium reserves as they relate to long life expectancy for Norwegian group defined-benefit pensions, including paid-up policies. The need for reserves applies in general to products that involve a guaranteed benefit, but the impact varies depending on the product composition and characteristics, as well as amendments to regulations, as a result of the pension reform, for example.
Today’s 50-year-olds are not expected to live as long as 50-year-olds in 20 years’ time. This factor is referred to as dynamic improvement in life expectancy. K2013 is thus a dynamic tariff.
From December 2014, Storebrand has priced new individual endowment policies without taking gender into account. In other words, gender will not be considered when calculating the premium.
When writing individual risk cover, the customer is subject to a health check. The result of the health check is reflected in the level of premium quoted. When arranging group policies with risk cover, all employees of small companies are subject to a health check, while for companies with many employees a declaration of fitness for work is required. In the assessment of risk (underwriting), the company’s industrial category, sector and sickness record are also taken into account.
The company 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. A reinsurance agreement for life policies covers death and disability risk that exceeds the maximum risk amount for own account the company practises. The company’s maximum risk amount for own account is relatively high, and the risk reinsured is therefore relatively modest.
See Note 4 on risk result for the principles for distributing the risk result between customers and the owner.
The most significant market risks for Storebrand are share market risk, credit risk, property price risk, interest rate risk and exchange rate risk.
For the life insurance companies, the financial assets are invested in a variety of sub-portfolios. Market risk affects Storebrand’s income and profit differently in the different portfolios. There are three main types of sub-portfolio: company portfolios, customer portfolios without a guarantee (unit linked insurance) and customer portfolios with a guarantee.
The market risk in unit linked insurance is at the customers’ risk and expense, meaning Storebrand is not directly affected by changes in value.
Nevertheless, changes in value do affect Storebrand’s profit indirectly. Income is based largely on the size of the reserves, while the costs tend to be fixed. Lower returns on the financial market than expected will therefore have a negative effect on Storebrand’s future income and profit.
Norway. In Sweden, the money market rate is negative. Sveriges RIksbank (Swedish National Bank) and Norges Bank have indicated that interest rates will be kept low for several years to come. Paid-up policies have a particularly high risk in a low interest rate scenario, because there are very limited opportunities for changing the price or terms. In Norway, the effect of low interest rates will be dampened by a large proportion of amortised cost portfolios that will greatly benefit from securities purchased at interest rate levels higher than the current levels.
Storebrand aims to take low financial risk for the company portfolios, and most of the funds were invested in short and medium-term fixed income securities with low credit risk.
The financial risk related to customer portfolios without a guarantee (unit linked insurance) is borne by the insured person, and the insured person can choose the risk profile. Storebrand’s role is to offer a good, broad range of funds, to assemble profiles adapted to different risk profiles, and to offer systematic reduction of risk towards retirement age. The most significant market risks are share market risk and exchange rate risk.
The most significant market risks facing guaranteed customer portfolios are linked to equity risk, interest rate risk, credit risk and property price risk. There were no major changes in the investment allocation during 2016. In Norway most of the credit risk is linked to securities, which are carried at amortised cost. This reduces the risk to the company’s profit significantly.
In the consolidated financial statements, the value of assets and results from the Swedish operations are affected by changes in the value of the
Swedish krona. Storebrand Livsforsikring AS has hedged part of the value of SPP.
SPP uses currency hedging for its investments to a certain degree. Currency exposure may be between 0 and 30 per cent in accordance with the investment strategy.
The annual guaranteed return to the customers follows the basic interest rate. In 2016, new premiums were taken in with a basic interest rate of 2.0, and pensions were adjusted upwards with a basic interest rate of 0.5 per cent.
The percentage distribution of the insurance reserves by the various basic annual interest rates as at 31 December is as follows: Interest rate
The method of calculation for the average guaranteed interest rate is altered for individual endowment insurance, such that the calculation coincides with the same calculations for other products. To achieve comparable value, the average interest rate guarantee for 2015 is calculated once more according to the new calculation method.
A new mortality tariff (K2013) has been introduced for group pensions and paid-up policies from 2014. For the existing reserves, the Financial
Supervisory Authority of Norway has approved a seven-year escalation plan, and customer returns exceeding the guarantee can contribute to reserve strengthening. During the escalation period, it gives an increase in risk that may be compared with increasing the interest rate guarantee. At least 20 per cent of the individual customer’s building up of reserves must be covered by Storebrand. At the end of 2016, remaining required reserve strengthening was NOK 352 million.
To achieve adequate returns, it is necessary to take an investment risk. This is primarily done by investing in shares, property and corporate bonds. It is possible to reduce market risk in the short term, but then the probability of achieving the necessary level of return is reduced. Risk management shall balance out these considerations.
SPP bears the risk of achieving a return equal to the guaranteed interest on the policyholders’ assets over time and that the level of the contracts’ assets is greater than the present value of the insurance liabilities. For individual defined contribution pensions (IF), SPP will receive profit sharing income if the return exceeds the guaranteed interest rate. The contracts’ buffer capital must be intact in order for profit sharing to represent a net income for SPP. For group defined benefit pensions (KF), a certain degree of consolidation, i.e. the assets are greater than the present value of the liabilities by a certain percentage, is required in order for the owner to receive profit sharing income.
The tables show the fall in value for Storebrand Life Insurance and SPP’s investment portfolios as a result of immediate value changes related to financial market risk. The stresses have been applied to the company portfolio and guaranteed customer portfolios as at 31 December 2016.
December 2016, the customer buffers are of such a size that the effects on the result are significantly lower.
The other companies in the Storebrand Group are not included in the sensitivity analysis, as there is little market risk in these areas. The equity of these companies is invested with little or no allocation to high-risk assets, and the products do not entail a direct risk for the company as a result of price fluctuations in the capital market.
The loan agreements contain standard covenants. Storebrand is in compliance with all relevants covenants in 2016.
This means that the company must at all times have assets in its cover pool that exceed at least 109,5 per cent of the total outstanding covered bonds.
Storebrand ASA has an unused credit facility of EUR 240 million.
Liabilities for which repayment may be demanded immediately are included in the 0-6 month column.[1]
Government and government guaranteed bonds 19,335 7,805 11,550 6,177 1,036 45,904
Total interest bearing securities stated by rating 69,845 26,631 33,097 30,778 1,141 161,492
Of which derivatives in bond funds, managed by Storebrand 65 58 5 129
Total derivatives excluding derivatives in bond funds 2016 1,806 2,277 238 506 4,827
Total derivatives excluding derivatives in bond funds 2015 2,127 2,014 436 127 4,703
Of which bank deposits in bond funds, managed by Storebrand 859 859
Total bank deposits excluding bank deposits in bond funds 2016 465 5,870 1,710 15 10 8,069
Total lending to and receivables from * 2016: – Of which Storebrand Livsforsikring 19,074 105 19,180 ** 2015: The division into customer groups is based on Statistics Norway’s standard for sector and business grouping. The placement of the individual customer is determined by the customer’s primary business
Investments subject to netting agreements 4,693 2,066 2,628 2,875 -588 341
In the life insurance businesses, most of the risk is taken on behalf of the customers. Much of the risk is borne by the customers in the form of customer buffers being reduced. This reduces the risk for the result. For other companies, the entire risk will affect Storebrand’s result.
For the life insurance businesses, the greatest risks are largely the same in Norway and Sweden. The market risk will depend significantly on global circumstances that influence the investment portfolios in all businesses. The insurance risk may be different for the various companies, and long life in particular can be influenced by universal trends.
This category encompasses �nancial instruments that are valued on the basis of market information that can be directly observable or indirectly observable. Market information that is indirectly observable means that the prices can be derived from observable related markets. Level 2 includes shares or equivalent equity instruments for which market prices are available, but where the volume of transactions is too limited to ful�l the criteria in level 1. Shares in this level will normally have been traded during the last month. Bonds and equivalent instruments are generally classi�ed in this level. Moreover, interest rate and foreign exchange swaps, as well as non-standardised interest rate and foreign exchange derivatives are classi�ed as level 2. Fund investments, with the exception of private equity funds, are generally classi�ed as level 2, and encompass equity, interest rate, and hedge funds.
Forestry represents a large portion of the shares at level 3. Comprehensive external valuations were carried out as at 31 December which form the basis for the valuation of the company’s investments. These valuations are based on models that include non-observable assumptions.
Alternative investments organised as limited liability companies (such as micro�nance, property and infrastructure) are equity investments that are valued based on the value-adjusted equity reported by external sources when available.
In the case of direct private equity investments, the valuation is normally based on either the most recent transaction or a model in which a company that is in continuous operation is assessed by comparing the key �gures with equivalent listed companies or groups of equivalent listed companies. In some instances, the value is reduced by a liquidity discount.
Among the bonds at level 3, we �nd micro�nance investments structured as loans. In addition, there are a small number of private equity investments organised as loans that are valued at the most recent reported value. Furthermore, non-performing loans will be at the estimated expected payment.
O ce properties and shopping centres in Norway: When calculating fair value, Storebrand uses an internal cash ow model. Net cash ows for the individual property are discounted by an individual required rate of return. A future income and expense picture for the �rst 10 years has been estimated for the o�ce properties and a
The required rate of return is divided into the following elements: Risk-free interest
External valuation: For properties in Norwegian activities, a methodical approach is taken to a selection of properties that are to be externally valued each quarter so that all properties have had an external valuation at least every three years. In 2016, external valuations were obtained for properties worth
NOK 9 billion (44 per cent of the portfolio’s value). In 2015, external valuations were obtained for all the properties in Storebrand’s property portfolio in Norway.
For properties in the Swedish business, external valuations are obtained for all wholly-owned property investments every quarter.
Total bonds and other �xed-income securities 31.12.15 28,792 161,626 358 190,776
– of which derivatives with a positive market value 4,827 4,827 4,703
NOK million Equities Units Lending to customers Corporrate bonds Investment properties Owner-occupied properties
Net gains/losses on �nancial instruments -128 -308 -10 -12 111 50
Storebrand Eiendomsfond Norge KS invests exclusively in real estate at fair value.
Large portions of the portfolio are priced using comparable listed companies, while smaller portions of the portfolio are listed. The valuation of the private equity portfolio will thus be sensitive to uctuations in global equity markets. The private equity portfolio has an estimated Beta relative to the MSCI World (Net – currency hedged to NOK) of around 0.45.
Loans from SPP Pension & Försäkring AB are appraised at fair value. The value of these loans is determined by future cash ows being discounted by an associated swap curve adjusted for a customer-speci�c credit spread.
This entails that the changes in the uncertain parts of the cash ow of 1 per cent will mean a change in value of 0.75 per cent.
Includes lending to customers/liabilities to �nancial institutions classi�ed at fair value through pro�t and loss[4]
Includes lending to customers/liabilities to �nancial institutions classi�ed at fair value through pro�t and loss[5]
Includes lending to customers/liabilities to �nancial institutions classi�ed at fair value through pro�t and loss[6]
Guaranteed pension: Defined Benefit (fee based) Storebrand Life Insurance 4,035 5,601
Total gains and losses on financial assets at fair value 5,451 4,352 8,736 18,538 701 17,837 6,458
– of which FVO (fair value option) 4,499 3,584 7,691 15,774 459 15,266 11,453
Applicable to the company’s share of the result is the minority interest's share of the pro�t from the sale of investment properties.[1]
Guaranteed pension: Defined Benefit (fee based) Storebrand Life Insurance -4,097 -6,003
At end of the policy year 369 391 461 513 690 793
Change in premium reserve customer funds without guaranteed return -11,256 49 -8,466 -19,673 -16,865
Realised losses on loans where provisions have previously been made -35
Realised losses on loans where no provisions have previously been made -7 -16
Write-downs/income recognition for lending and guarantees for the period -14 -58 1) Losses from lendings related to the customer portfolio are included in the line Net interest income lending 3 -13
The Norwegian companies participate in the Joint Scheme for Collective Agreement Pensions (AFP). The private AFP scheme provides a lifelong supplement to an ordinary pension and is a multi-employer pension scheme, but there is no reliable information available for inclusion of this liability on the statement of financial position. The scheme is financed by means of an annual premium that is defined as a percentage of salaries from 1 G to 7.1 G, and the premium rate was 2.5 % in 2016. Storebrand employees in Norway who were born before 1 January 1956 can choose between drawing an AFP scheme pension or retiring at the age of 65 and receiving a direct pension from the company until they reach the age of 67. Employees can choose to receive benefits from the AFP scheme from the age of 62 and still continue to work.
SPP has a defined-contribution occupational pension known as BTP1. All new employees were enrolled in this pension agreement from and including 1 January 2014. In BTP1, the employer pays a premium for pension savings that is calculated based on pensionable salary up to 30 times the “basic income amount” (inkomstbasbelopp). The insurance includes retirement pension with or without mortality inheritance, disability pension and children’s pension. The premium is calculated independently of age and is calculated primarily based on the monthly salary. The premium is paid monthly in two parts, a fixed part that is 2.5 per cent of the pensionable salary up to and including 7.5 times the
Net pension liabilities recognised in statement of financial position 289 465
NET PENSION COST BOOKED TO PROFIT AND LOSS ACCOUNT, SPECIFIED AS FOLLOWS
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.
Storebrand’s risk associated with the pension scheme relates to the changes in the financial and actuarial assumptions that must be used in the calculations and the actual return on the pension funds. The pension liabilities are particularly sensitive to changes in the discount rate. A
The following estimates are based on facts and circumstances as of 31 December 2015 and are calculated for each individual when all other assumptions are kept constant.
Note 25 – Remuneration to senior employees and elected o cers of the company
Ordinary salary [1] Other benefits [2] Loan [3] No. of shares owned [4]
The salaries of executive personnel are determined based on the position’s responsibilities and level of 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 wage leader in relation to the industry.
fi fi fi employees who were estimated to have a poorer position after the change. These schemes provide monthly additional savings for employees for a maximum of 36 months. Additional savings are taxed as wage income.
3. STATEMENT ON THE EXECUTIVE EMPLOYEE REMUNERATION POLICY DURING THE PREVIOUS FINANCIAL YEAR
Entitlement to a severance package is also available if the employee decides to leave the company due to substantial changes in the organisation, or equivalent circumstances, which result in the individual being unable to naturally continue in his position. If the employment is do not apply.
The remuneration paid to Deloitte AS and coadjutant companies amounts to: NOK million 2016 2015
During the year, property shares were sold (covered by the exemption method) which resulted in a reduction in tax-increasing temporary differences and related allocations for deferred tax being reversed. The equity includes a risk equalisation reserve, and tax deductions related to the build-up of this reserve are treated as a permanent difference between the financial and tax accounts (see further information on this under «Reconciliation of the Group's equity»). Use of the fund will, in isolation, entail a higher effective tax rate. The effective tax rate is also affected by the fact that the Group has operations in countries with tax rates that are different from Norway (25 per cent). In addition, the income tax expense is also influenced by tax effects relating to previous years.
1. 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
Acc. depreciation and write-downs 31.12 -410 -5,880 -597 -304 -7,190 -7,543
comprise the value of in-force business (VIF), for which a separate liability adequacy test has been performed in accordance with the fi
In calculating the utility value, the management have made use of budgets and forecasts approved by the Board for the next three years (2017 to 2019). The management has made assessments for the period from 2020 to 2026, and the annual growth for each element in the income wage growth in the market (which drive premium growth). The utility value is calculated using a required rate of return after tax of 5.8 per cent.
NOK million Useful economic life Depr. rate Depr. method Book value 2016
Distribution beween company and customers: Bonds held to maturity – customers with guarantees 15,644 15,648
Net lending ** 46,342 35,281 * Of which Storebrand Bank 1,550 2,372 ** Of which Storebrand Bank 27,268 29,262 ** Of which Storebrand Livsforsikring 19,074 6,019
Balance per 31.12.16 of mortages from Storebrand Bank ASA to sister company Storebrand Livsforsikring AS is NOK 9.7 billion. The mortgages were sold on commercial terms.
As of 31.12.16, Storebrand Life Insurance had NOK 1 928 million invested in Storebrand Eiendomsfond Norge KS.
The investment is classified as «Investment in Associated Companies» in the Consolidated
At the end of 2016, a total of 15.9 per cent (13.9 per cent) of the floor space in the investment properties was vacant.
At the end of 2016, there was practically no vacancy in the investment properties.
Transactions: Purchases: Further SEK 340 millions in property acquisitions in SPP have been agreed on in 4 quarter 2016 in addiition to the figures that has been finalised and included in the finacial statements as of 31 December 2016.
The real estate are valued on the basis of the following effective required rate of return (included 2.5 per cent inflation)[1]
All of the proporties in Sweden are appraised externally. The appraisal is based on the required rates of return in the market (including 2 per cent inflation)[3]
All of the proporties in Sweden are appraised externally. The appraisal is based on the required rates of return in the market (including 2 per cent inflation)[4]
All of the proporties in Sweden are appraised externally. The appraisal is based on the required rates of return in the market (including 2 per cent inflation)[5]
All of the proporties in Sweden are appraised externally. The appraisal is based on the required rates of return in the market (including 2 per cent inflation)[7]
Allocation by company and customers: Accounts receivable and other short-term receivables – company 2,647 2,999
Allocation by company and customers: Bonds and other fixed-income securities – company 30,504 29,123
Bonds and other fixed-income securities – customers without guarantee 26,654 30,147
Financial derivatives are related to underlying amounts which are not recognised in the statement of �nancial position. In order to quantify the scope of the derivatives, reference is made to amounts described as the underlying nominal principal, nominal volume, etc. Nominal volume is arrived at di�erently for di�erent classes of derivatives, and provides some indication of the size of the position and risk the derivative presents.
The excess value of bonds valued at amortised cost totalled NOK 8.785 million at the end of the 4th quarter, a decrease of 1.796 million since the turn of the year.
Subordinated loan in SPP Pension & Försäkring AB of SEK 700 million MSEK that is reclassified to current liabilities. The loan is repaid in January 2017[1]
Derivatives are recognised at fair value over profit or loss . Changes in the value of the hedged item that can be attributed to the hedged risk are adjusted in the book value of the hedged item and reconised in the income statement.
Storebrand utilises cash flow hedging of its credit margin. The hedged items are liabilities that are measured at amortised cost. Derivatives are recognised at fair value in the accounts. The proportion of the gain or loss on the hedging instrument that is deemed to be effective hedging is recognised in total comprehensive income. The proportion is subsequently reclassified to profit or loss in step with the hedged item’s effect on earnings.
In 2016, 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. In 2016, a time-limited subordinated loan of SEK
Booked value of securities pledged as collateral in other financial institutions 151
Loans in Storebrand Boligkreditt AS are security for covered bonds (covered bond rate) issued in the company and these assets are therefore mortgaged through the bondholder’s preferential right to the security holding in the company.
Storebrand Boligkreditt AS has over-collateralisation (OC) of 17.9 per cent, however committed OC is 12.8 per cent. Storebrand Boligkreditt AS
The Storebrand Group is an insurance-dominated, cross-sectoral financial group with capital requirements in accordance with Solvency II.
The models used as a basis for the calculation of capital requirements and solvency capital are based on a number of requirements and assumptions that are partly specified in the regulations and partly interpreted by Storebrand based on the regulations. The most important assumptions and estimates in the calculation relate to the risk-reducing capacity of deferred tax, future margins and reserve developments, as well as the value of the customers guarantees and options. The assumptions and estimates are reviewed on an ongoing basis and are based on historical experience and expexctations of future events and represent the management’s best judgement at the time the financial statement were prepared. Changes to the regulations, methods and interpretations may be made that could affect the Solvency II margin in the future
Subordinated loans issued prior to 17 January 2015 are covered by a transitional arrangement that will continue until 2026 and during this period these loans will qualify as Tier 1 capital despite them not fully satisfying the requirements for viable capital in the Solvency II regulations.
The companies in the group governed by CRD IV are included in the group’s solvency capital and solvency capital requirements with their respective primary capital and capital requirements.
Total solvency capital available to cover the minimum capital requirement 36,726 32,374 2,350 2,002
Capital requirements for subsidiaries regulated in accordance with CRD IV 2,537
Profit earned that is included as equity in the financial statements must be replaced by the reconciliation reserve in the solvency balance. The reconciliation reserve also includes profit earned, but based on the valuation of assets and liabilities in the solvency balance. The reconciliation reserve will also include the present value of future profits. The value of future profits is implicitly included as a consequence of the valuation of the insurance liability.
The Storebrand Group has a requirement to report capital adequacy in a multi-sectoral financial group (conglomerate directive). The calculation in accordance with the Solvency II regulations and capital adequacy calculation in accordance with the conglomerate directive give the same primary capital and essentially the same capital requirements.
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. The most important estimates and assessments are related to the valuation of the company’s subsidiaries and the assumptions used for pension calculations.
Assets intended for permanent ownership and use are classified as fixed assets, and assets and receivables due for payment within one year are classified as current assets. Equivalent policies have been applied to liability items.
Regulations relating to annual financial statements for nonlife insurance companies has not been used, a custom layout plan has been used.
Tangible fixed assets for own use are recognised at acquisition cost less accumulated depreciation. Write-downs are made if the book value exceeds the recoverable amount of the asset.
The defined-contribution pension scheme involves the company paying an annual contribution to the employees’ collective pension savings.
The future pension will depend upon the size of the contribution and the annual return on the pension savings. The company does not have any further work-related obligations after the annual contribution has been paid. No provisions are made for ongoing pension liabilities for these types of schemes. Defined-contribution pension schemes are recognised directly in the financial statements.
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.
When a financial asset or a financial liability is initially recognised in the financial statements, it is valued at fair value. Initial recognition includes transaction costs directly related to the acquisition or issue of the financial asset/liability.
Financial assets are derecognised when the contractual right to the cash flows from the financial asset expires, or when the company transfers the financial asset to another party in a transaction by which all, or virtually all, the risk and reward associated with ownership of the asset is transferred.
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.
Bond loans are recorded at amortised cost using the effective interest rate method. The amortised cost includes the transaction costs on the date of issue.
Note 3 – Net income for various classes of financial instruments
The premiums and content of the defined-contribution pension scheme are as follows: Saving starts from the first krone of salary
Savings rate for salary over 12 G is 20 per cent
Net pension liabilities in the statement of financial position 159 157
CHANGES IN THE NET DEFINED BENEFITS PENSION LIABILITIES IN THE PERIOD: NOK million 2016 2015
Expected premium payments are estimated to be NOK 1 million and the payments from operations are estimated to be NOK 16 million in 2017.
PENSION ASSETS ARE BASED ON THE FINANCIAL ASSETS HELD BY STOREBRAND LIFE INSURANCE, WHICH ARE COMPOSED OF AS PER 31.12.: NOK million 2016 2015
NET PENSION COST BOOKED TO PROFIT AND LOSS ACCOUNTS IN THE PERIOD
Net pension cost booked to profit and loss accounts in the period -3 7
Note 6 – Remuneration of the CEO and elected o�cers of the company
Odd Arild Grefstad is the CEO of Storebrand ASA and the amount stated in the note is the total remuneration from the Group. He has a guaranteed salary for 24 months after the ordinary period of notice. All work-related income including consulting assignments will be deducted.
Pension costs include accrual for the year. See also the description of the pension scheme in Note 5.[3]
THE DIFFERENCE BETWEEN THE FINANCIAL RESULTS AND THE TAX BASIS FOR THE YEAR IS PROVIDED BELOW.
Classi�cation SN2007), which exceed 30 per cent and are therefore subject to the �nancial tax, a tax rate of 25 per cent has been used for capitalising deferred tax/deferred tax assets.
Storebrand ASA has both interest-bearing securities and interest-bearing debt. A change in interest rates will have a limited effect on the company’s equity.
Loans are booked at amortised cost and include earned not due interest.[2]
Profit and loss account items: Group contributions and dividends from subsidiaries 899 519
Accounting Act and Norwegian Accounting Standard no. 16 as at 31 December 2016.
Equity consists of paid-in capital, retained earnings and minority interests. Paid-in capital includes share capital, share premium reserve and other paid-in capital. Retained earnings include other equity and reserves.
The earnings per share are calculated as the majority interest’s share of the pro�t after tax divided by the number of shares. The number of shares included in the calculation is the average number of shares outstanding over the course of the year. If new shares are issued, the shares will be included from the date of payment.
insurance, goodwill, other intangible assets, net prepaid pensions, 50 per cent of any capital adequacy reserve, and cross-ownership deductions in other �nancial institutions. The core (tier 1) capital will be adjusted for the valuations that are used as the basis for credit calculations at a national level for foreign companies. For Storebrand Holding AB this will entail an adjustment of SPP AB’s estimated insurance liabilities for which a di�erent yield curve is used for credit assessment than is used in the �nancial accounts. Issued hybrid tier 1 capital may account for 15 per cent of the core (tier 1) capital, while any amount exceeding 15 per cent may be included in the tier 2 capital.
The term solidity capital includes equity, subordinated loan capital, market value adjustment reserve, additional statutory reserves, conditional bonuses, surplus/de�cit related to bonds at amortised cost, risk equalization fund and retained earnings. The solvency capital is also calculated as a percentage of total customer funds, excluding additional statutory reserves and conditional bonuses.
Primary capital as in capital adequacy plus 50 per cent of additional statutory reserves and risk equalization fund, plus 55 per cent of the lower limit for the contingency funds in P&C insurance.
The return produced after allowing for actual or expected in ation. Preferably expressed as a nominal rate less the rate of in ation.
Derivatives require less capital than is the case for traditional �nancial instruments, such as equities and bonds, and are used as a exible and cost-e�ective supplement to traditional instruments in portfolio management. Financial derivatives can be used to hedge against unwanted
�nancial risks, or to create a desired risk exposure in place of using traditional �nancial instruments.
Stock futures contracts can be related to individual shares, but are normally related to stock market indices. Stock futures contracts are standardized futures contracts, which are exchange traded, and are subject to established clearing arrangements. Pro�ts and losses on futures contracts are recognized daily, and are settled on the following day.
A cross currency swap is an agreement to exchange principal and interest rate terms in di�erent currencies. At the maturity of the contract, the principal and interest rate terms are exchanged back to the original currency. Cross currency swaps are used, for example, to hedge returns in a speci�c currency or to hedge foreign currency exposure.