SPP’s first advertising campaign named fourth best Swedish advert in ”Sveriges Bästa Reklam” and best online campaign.
Storebrand introduces six group principles. Together with its vision and core values the principles represent the Storebrand Group’s guidelines.
Storebrand qualifies for the Dow Jones Sustainability Index (DJSI) for the tenth time.
• 1861 Storebrand’s owners establish Idun, the first privately owned life insurance company in Norway.
• 1992 UNI Storebrand’s negotiations with Skandia concerning establishing a major Norwegianled company fail to reach agreement.
Key figures 2008 2007 No. of customers 80,905 61,671 Annual premiums NOK 243 million NOK 198 million
Storebrand Group The Storebrand Group is made up of four business areas: life insurance, P&C, asset management and banking. The group’s head office is in Oslo and it has a nationwide network of offices in Norway. It has also established life insurance, asset management and health insurance activities in Sweden. Following the acquisition of the Swedish life insurance and pensions provider SPP in December 2007, Storebrand is now the Nordic region’s leading provider of life insurance and pensions. Storebrand offers a comprehensive range of products to retail customers, corporate customers, municipalities and the public sector.
Storebrand can trace its history back to 1767. The company has provided occupational pensions to Norwegian employees since 1917, the same year SPP was established in Sweden. Storebrand Bank opened for business in 1996, and in 2006 the group relaunched its property and casualty insurance business as a service for the retail market and selected segments of the corporate market.
Storebrand’s ambition is to be a leader within corporate responsibility and socially responsible investments. Both the group’s financial and non-financial goals and results are presented in the group’s annual report and show how corporate responsibility forms an integral part of our core activities.
Strengthened market position Our position as a pensions provider has strengthened in both the Swedish and the
Sweden’s three best life insurance companies measured by returns on customer funds. The target for total synergies from the integration was adjusted upwards during the year to
Financial theory establishes a comprehensive framework for risk and the interrelationship between risk, return and the costs of ascertaining risks.
At the start of 2008 Storebrand held a position in equities comprising nearly 30 percent. The substantial fall in the equity markets brought about a rapid reduction in the allocation to equities, and by the end of the first quarter the allocation to equities was already down to around 15 percent. In the spring of 2008 the financial markets were marked by uncertainty. However, the equity markets, and particularly the Norwegian market, continued to be marked by high share prices, simultaneously with the deterioration of the credit crisis. The proportion invested in equities was down to 5 percent at year end.
This article describes why a life insurance company such as Storebrand assumes financial risks and how such are managed.
As the markets gradually normalise and the buffers increase, the portion allocated to equities and the risk will increase again such that the returns will be the best possible for customers and owners.
Corporate responsibility is about balancing our activities to ensure they provide long-term financial, environmental and social benefits.
Responsible investments Storebrand’s responsible investments work started in 1995 and our ambition is to be a leader within this area. We are one of the few private companies in Europe with our own analysis department. We have established a corporate standard for responsible investments which stipulates strict requirements concerning which securities Storebrand can purchase. In 2008, we also started to implement this standard in SPP, which became part of Storebrand in 2007.
We do not invest in companies that participate in breaches of human rights, corruption, serious environmental harm or the production of landmines, cluster munitions, nuclear weapons or tobacco products. We also avoid companies that operate in high-risk industries1 and have serious flaws in their risk management. In 2008, Storebrand expanded its environmental analyses by stipulating stricter requirements with respect to climate measures.
label was designed for those funds that are wholly or partly managed by external managers and illustrates the fact that we systematically focus on corporate responsibility in relation to these actors as well.
Storebrand uses 18 external asset managers. During a review of the portfolios after
Norwegian market. All of the companies listed on the OSE main index received a questionnaire concerning their guidelines, control systems and board’s role in relation to a number of corporate responsibility topics.
In November 2007, the department for responsible investments discovered that Jinhui Shipping and
“After the company’s largest Norwegian shareholder, Storebrand, raised the trade in a conference call with Jinhui’s management, the same Mr. Ching answered a little ambiguously that they
Together with the media and NGOs we helped to convince Jinhui, and in June 2008 they confirmed that the company had ended its activities in Western Sahara.
Small contributions - big impact What microfinance and active ownership have in common is that small contributions can have a big impact. A small loan can secure a large family’s livelihood. A single question from an investor can initiate processes that are of major environmental or social importance.
Handelsbanken is one of our external asset managers with which we have a good partnership.
In October 2008, Storebrand discovered that some of our investments in Handelsbanken breached our corporate standard for responsible investments. Some funds had invested in companies that were involved in unethical business practices. Storebrand contacted Handels banken and asked them to withdraw from these companies. Just a month later, Handels banken informed us that they were working on comprehensive guidelines for responsible investments, and that they had withdrawn from five of the companies, which were involved in the production of cluster munitions, nuclear weapons and landmines.
Life insurance: The new insurance law involves altered earnings and allocations of profits. Under the old body of regulations, the profits for industries without profit-sharing accrued in their entirety to the company and for industries with profit-sharing the company had the opportunity to withhold up to 35 percent of the profits. The primary principle under the new body of regulations is that the prices will be established with final effect and paid in advance.
3 million compared with NOK 13 million in 2007. The company has had a positive trend in premiums with an increase of 23 percent in comparison with 2007. The company offers treatment insurance in the corporate and retail markets.
Previous positions: 2001–2005: CEO, NetCom AS • 1995–2001: CEO, Midelfart & Co AS • 1998–1995: EVP Sales and Marketing, Midelfart & Co AS • 1987–1988: Product Manager, AS Denofa and Lilleborg Fabrikker • 1984–1987: Product Manager, -General Foods Corp. • 1983: Marketing, PepsiCo • 1981-1983: Marketing Assistant, General Foods Corp. Positions of trust: 2006–: Board Member for SCA AB, Board Member for Norfolier AS • Board Member and Member of Compensation Committee for Tandberg ASA • 2005–: Board Member for Stokke AS, Board Member for Fleming Invest AS • 2003–: Board Member for Electrolux AB.
NOK 13 million was expected and was due to start-up costs associated with the new business in Storebrand Skade AS still being in an early phase. Gross premiums due have increased by 91 percent to NOK 225 million during the course of the year. The claim ratio has increased by 9 percentage points in relation to 2007 and ended at 79.5 percent.
45 million. Storebrand ASA does not present its company accounts pursuant to IFRS. The deficit of NOK 14 million has been booked against other equity as per 31 December 2008.
SPP: The year of 2008 has been marked by systematic improvement and development work on several fronts. The goal has been to increase the company’s competitiveness in the Swedish market. During the course of the year, the company has introduced
During the fourth quarter, the bank utilised the bonds with pre-emptive rights issued by the credit institution to participate in the packages of measures implemented by the authorities aimed at the financial industry.
ERIK HAuG HANSEN (54), Sales Manager Corporate Market, Storebrand Livsforsikring AS. Employee Representative Board Member for Storebrand ASA since 2004.
• Group internal • Real estate (Group internal) • External discretionary • Mutual funds • SPP
Storebrand. The requirements apply to both equities and bonds, in Norway and internationally. Exclusion is however not a goal in itself. Through dialogues with the companies, Storebrand is attempting to influence them towards a more sustainable path of development.
Storebrand Skadeforsikring continued to grow during 2008 with an increase of 86 percent in the annual premium represented by the portfolio. The number of customers increased during the same period from 16,000 to nearly 28,000. Throughout 2008, Internet sales have continued to be the company’s most important sales channel. A total of 53 percent of the portfolio of premiums was subscribed to via the Internet solution. In addition to Internet sales, telephone-based sales and customer centres are the most important sales channels for Storebrand Skadeforsikring.
The retail P&C insurance market in Norway continues to be deemed to be profitable, however there has been an increase in the number of claims and the volume of compensation through 2008. The establishment of a number of new participants during the course of 2008 has also contributed to a further intensification of the competition in the Norwegian market. In addition to the start-ups, the large participants are contributing to pressures on the margins by the active use of customer retention discounts in order to keep their customers.
Authorised Financial Analyst (AFA), NHHK/NFF. 1989, MBA, University of San Francisco. 1986, Cand. Mag., University of Bergen.
insurance business areas. Storebrand’s financial assets fluctuate in value due to the risk associated with the financial markets –
In connection with the instability in the financial markets in 2008, Storebrand Life
Storebrand Bank ASA‘s financial risk primarily consists of credit, liquidity, interest rate and foreign currency risk. Credit risk is regarded as the most important. Storebrand
Storebrand Skade: The main risk for the newly established P&C business is that it will initially have a small portfolio to absorb claims. This could mean that single large claims may have a disproportionate impact on profit. The largest claims will typically arise from liability cover in motor insurance.
Livsforsikring AS also has a goal of attaining a rating on the A level. The holding company
has a credit facility of EUR 225 million falling due in December 2010, on which at the end of the year EUR 150 million had been drawn.
In 2008 a number of corporate responsibility measures were also commenced at SPP. This has been an important contribution in repositioning the company in the Swedish market.
Storebrand is aiming to reduce the environmental impact of its business operations through reduced energy and paper consumption waste sorting, recycling of electronic waste, an environmentally aware travel policy and water consumption. In the management of our properties, we impose specific requirements linked to the impact on the internal and external environment. This has given results. The group has, among other things, reduced its energy consumption at its head office by 16 percent in 2008, significantly better than the goal that had been established. The degree of sorting for waste has increased from 55 to 59 percent.
School Association, Storebrand has developed and launched an ecological driving course on the Internet. More than 10,000 persons have taken the course up to now.
A number of measures have been initiated in order to reduce the group’s emissions of carbon dioxide (CO2). Energy follow-up systems have been installed for most of the self-managed buildings, and financial environmental incentives are included in the company vehicle programme. Even though we are working actively to reduce emissions, as per the present it is not possible to reduce CO2 emissions to a zero level. In order to compensate for this, Storebrand is buying UN-certified climate quotas (CER, certified emissions reductions). Storebrand is the first Nordic financial enterprise to be climate-neutral, by buying climate quotas for its total CO2 emissions from air travel, energy consumption and company vehicles.
Storebrand places great weight on the development of its employees at all levels.
The co-operation with the environments that are working with continuous improvements have also become tighter. This contributes to amplifying the effects of improvement projects by adjusting the content of the training, based upon the knowledge that emerges during the improvement projects. Work is also being done on adapting the competency offerings for specific development paths for out employees.
Ethical issues are a standard agenda item at all gatherings of new employees and have been integrated into training modules for all managers. Employees can pose questions concerning ethical problems directly to the manager of the auditing committee of
Storebrand ASA (so-called whistle-blowing), and in 2009 we will be revising and relaunching a separate question and answer service on the Internet where employees can pose questions anonymously concerning ethics.
Training in ethics was conducted in 2008 for the group’s sales mechanism in
Storebrand has systematically worked to reduce sick leave over many years, and the group has participated in the “Inclusive workplace” scheme since 2002. Sick leave in the group in 2008 was 3.8 percent compared with 4.6 percent in 2007 and 5.1 percent in 2006. Internal guidelines, entitled “If you fall ill”, have been produced to support this work and the health of the individual employees.
Storebrand established its policy on corporate governance in 1998. The Board reviews these principles every year. In December of 2004 a recommendation for a national standard for good corporate governance was presented. This was revised on 4 December 2007. Storebrand’s principles for corporate governance correspond in all major respects to this recommendation. The question of whether to elect a Deputy Chairman for the
Lundius was elected as a new Board Member when the Board was expanded by one member.
Marius Steen was promoted from a deputy to a permanent member. Lydur Gudmundsson was elected as a new deputy member.
The Board wishes to thank the retiring members of the Boards and Committees for the valuable contributions they have made to the company.
December 2007 expands the group’s market area from one covering Norway to one covering the Nordic region. Storebrand’s results for 2008 were significantly affected by developments in the financial markets. The company expects continued turbulence in the financial markets, but through the company’s active risk and portfolio management its vulnerability to continued weak capital markets has been reduced. Storebrand thus has a solid financial and market-related foundation for its further development.
Storebrand Kapitalforvaltning took over the management of the bulk of SPP’s portfolio as per 1 January 2009. This will contribute to increased revenues for Storebrand Kapitalforvaltning and reduced costs for SPP beginning in 2009. This is one of several examples of how the group is attempting to utilise competence and economies of scale across the organisation and across national boundaries.
Storebrand´s objective is to be the leading and most respected institution in the Nordic market for long-term savings and insurance
In connection with the acquisition of SPP, the company‘s extraordinary general meeting held on 24 October 2007 voted to conduct a rights issue of 200,090,786 new shares. Following the issue the company has 449,909,891 shares each with a par value of NOK 5.
December 2008, the company held 4,577,240 of its own shares, equivalent to 1.02% of the total share capital. The company has not issued any options that could dilute share capital.
Shareholders Storebrand ASA is one of the largest companies listed on the OSE measured by number of shareholders. The company has shareholders from almost all the municipalities in
Norway and from 41 countries. In terms of market capitalisation, Storebrand was the 14th largest company listed on the OSE at the close of 2008.
Foreign ownership As of 31 December 2008, total foreign ownership amounted to 48.5 percent, compared to 75.7 percent at the close of 2007.
(OSEBX) fell by 54 percent over the same period. Over the last three years, the Storebrand share has produced a total return of -62 percent, while the OSEBX index showed a return of -32 percent for the same period
Capital gains taxation On 1 January 2006, new rules came into force in Norway concerning the taxation of dividends and gains on shares held by private individuals. The new rules are termed the “shareholder model” and replace the previous RISK and tax credit systems. Under the new shareholder model, the amount of a dividend, less a standard deduction, is taxable, currently at 28 percent. If shares are sold, any unutilised standard deduction can be deducted from the gain on sale. The standard deduction is calculated on the basis of the cost price of the share multiplied by the average three-month interest rate on treasury bills, which is effectively the risk-free rate of interest. The interest rate for calculating deductions in 2008 is set at 3.8 percent.
Storebrand has had a Corporate Governance Committee since 2006. The committee is responsible for ensuring good corporate governance practice across the Storebrand group.
A report covering the main features of Storebrand ’s corporate governance is provided below. The report covers a number of issues that are not included in the Code of Practice, but which we consider central to the discussion of corporate governance. The headings used below refer to the equivalent sections of the Code of Practice, with comments on any deviations from the Code. We have chosen to cover certain other issues related to corporate governance elsewhere, e.g. the application of financial risk management (page and 5 of the CoP), and the corporate responsibility Storebrand exercises as an investor and asset manager (page 10).
Implementing and reporting the group’s objectives, strategies and values (CoP sections 1 and 2) The Articles of Association of Storebrand ASA
An account of the definition and implementation of Storebrand’s corporate values is available on Storebrand’s website. The group has drawn up its own ethical guidelines, see page 25 of the annual report for further information. You can read more about the company’s objectives and main strategies on page 38. In addition, Storebrand keeps the market informed of its objectives and strategies through investor presentations held in connection with presentations of its interim and annual reports and other specialised presentations, such as the capital market days that are held every second year, most recently on 12 November 2008.
Practice: Storebrand’s Articles of Association stipulate that the chairman of the Board of
elects 2/3 of the Board of Representatives, which elects the chairman. The arrangement is therefore assumed to satisfy the principle that the composition of an election committee should be decided by the AGM.
The duties of the Board of Representatives include making recommendations to the AGM
Three members are elected by and from among the employees. The Chief Executive
The work of the Board of Directors (CoP section 9) The Board meets at least nine times each year. In 2008, the Board held 15 meetings and one Board conference. The attendance records of individual Board members can be found on the group’s website. The work of the Board is subject to a specific mandate. In order to ensure sound and well-considered decisions, meetings of the Board are well prepared so that all members can participate in the decision making process. The Board prepares an annual schedule for its meetings and the issues to be considered. The agenda for next board meeting is normally presented to the Board based on the approved schedule for the year and a list of matters carried forward from previous meetings. The final agenda is fixed in consultation with the Chairman of the Board. Time is made available at every second Board meeting to discuss matters without the management present. The Board is entitled to appoint external advisers whenever it considers this necessary.
Group management Internal management bodies The CEO of Storebrand ASA is the chairman of the boards of Storebrand Life Insurance,
ble for the group’s overall profitability and for making optimal use of resources across the entire group. Storebrand works systematically to build up the system value of expertise across the group, and annually carries out succession planning for the entire executive management team which is dealt with by the
Relationship between Storebrand’s corporate bodies and control functions (CoP sections 10 and 15) The Board of Storebrand has adopted guidelines for overall management and control.
The internal auditor is appointed by and reports to the boards of the respective group companies.
The Storebrand group’s Intranet also provides both rules and practical guidance on the security of information, contingency planning, money laundering and financial criminality.
The Board’s declaration concerning the setting of the executive management’s remuneration, etc has been presented to the
Information and communications (CoP section 13) The Board has issued guidelines for the company’s reporting of financial and other information and for contact with shareholders other than through the AGM. The group’s financial calendar is published both on the
Take-overs (CoP section 14) The Articles of Association do not impose any restrictions on the purchase of shares in Storebrand. The Board has determined guiding principles on how a take-over bid will be handled. The Board will ensure that all shareholders are treated equally and have an opportunity to consider the presented bid. The Board will, as far as possible, obtain information about the bidder and make this available to all shareholders. The Board will also consider the bid and seek to issue a statement on the Board’s assessment of the bid. The Board will in the event of any take-over bid seek, to the extent possible, to maximise the shareholders’ assets.
2. ROAR THORESEN (51), Executive Vice President, Chief Operating Officer. Programme for Executive Development (PED), IMD Lausanne. Master of Science, Naval Technology, Norwegian Institute of Technology (NTH). 2002-2006 Executive Vice President, Strategic Business Development. 1989-2002 Consultant, Managing Partner and CEO, PA Consulting AS. 1986-1989 Vice President, Mandator AS. 1982-1985 Arthur Andersen & Co.
4. HANS AASNæS (45), Executive Vice President, Long Term Savings and Asset Management, Managing Director, Storebrand Investments. Agronomist, Agricultural University of Norway. Advanced Studies Business Analysis, Norwegian School of Economics and Business Administration (NHH). Authorised Financial Analyst (AFA), programme for Executive development (IMD). 2001-2005 Investment Director, Storebrand Investments. 1994-2001 Head of Norwegian and International Equities, Storebrand Investments. 1990-1994 Derivatives Specialist, Orkla Finans.
6. IDAR KREuTzER (46), CEO, Storebrand ASA. Master’s degree in economics and business administration, Norwegian School of Economics and Business Administration (NHH). 1995-2000 CFO, Storebrand. 1992-1995 various positions within corporate finance and internal audit Storebrand. 1988-1991 Director, Medinor Project. 1986-1987 Political Advisor, City of Oslo.
9. ODD ARILD GREFSTAD (43), Executive Vice President, Chief Financial Officer. State Authorised Public Accountant and Authorised Financial Analyst (AFA). 1998-2002 Head of Business Control, Storebrand ASA. 1997-1998 Group Controller, Life Insurance, Storebrand ASA. 1994-1997 Vice President, Internal Audit, Storebrand ASA. 1989-1994 Arthur Andersen & Co.
11. ELIN M. MyRMEL-JOHANSEN (35), Executive Vice President, Corporate Responsibility. Master of Science in Political Science, University of Bergen. Master of Science in Comparative Politics, LSE, UK. 2005–2007 Manager, Corporate Responsibility, Storebrand. 2004 Internal Brand Manager, Storebrand. 2002–2003 Acting Manager, Corporate Responsibility, Storebrand.
Management report: Financial performance and business development This report describes the Storebrand Group’s financial performance and business development in 2008. It covers its historical development and the trends apparent at the start of 2009. The company’s risk management is discussed in this report and in a separate article earlier in the annual report.
This report should be read in conjunction with the information provided in the Report of the Board of Directors, the consolidated accounts and the notes to the accounts. Further information on the accounts and notes to the accounts for subsidiaries can be found in the subsidiaries’
Insurance customers' funds inclusive accrued profit (exclusive conditional bonuses) (traditional business) 98,627 95,824
Of which assets under management for external clients 58,445 57,661 54,800 49,700 25,400
SPP’s vision is more limited from a geographic and product-related perspective than the group’s vision: “SPP shall be Sweden’s leading and most respected institution within pensions”. SPP’s vision entails delivering the same enhanced value as the rest of the group and making a positive contribution to social responsibility in its domestic market.
Storebrand has systematically reduced costs over a number of years by streamlining its processes. The benefits of this will be more apparent in 2009 than in previous years as they are reaped through cost reductions that improve the company’s profitability.
One area in which Storebrand is a leader in parts of its activities is serving customers via direct channels. More then 90 percent of Storebrand P&C’s sales are made online and via incoming telephone calls. Storebrand believes these distribution methods are both cost-effective and well suited to the needs of today’s customers. Storebrand is therefore expanding and developing its focus on direct distribution.
direct product and is sold online and over the telephone. It was marketed to the public and employees of corporate occupational pensions customers during the autumn. By year-end 2008, 1,453 Storebrand customers had paid in
Storebrand’s subsidiaries are currently adequately and effectively capitalised for the growth expected over the next few years.
Storebrand ASA (the holding company) aims to achieve zero net indebtedness over time.
Maintaining an efficient capital base is a prerequisite for ensuring the company’s capacity to generate a satisfactory annual profit relative to the group’s equity (return on equity). The group’s capital management aims to balance capital costs considerations with the goals of a competitive return on equity and adequate capital based on the regulatory and ratings companies’ requirements.
Sustainability Index for the tenth time in 2008, and is thus among the top 10 percent of companies in the world in relation to sustainability.
In 2008, we focused on integrating corporate responsibility into SPP. We appointed a person with specific responsibility for its corporate responsibility in August. SPP raised its corporate responsibility profile in the Swedish market through a series of measures, gaining positive media coverage. The corporate responsibility measures helped to reposition and reinforce SPP’s competitiveness.
The creation of an inclusive working environment characterised by job satisfaction and high ethical awareness among its employees is very important to Storebrand. Employee surveys in 2008 reported a very high degree of employee satisfaction. 83 percent of the
competence and experience. We therefore focus on ensuring that our employees are satisfied with their development opportunities. In 2008, 63 percent of employees reported they were pleased with their development opportunities, a reduction compared to 2007. And internal survey also revealed that the employees’ awareness of ethics were not as high in 2008 as in 2007. We will therefore focus on employee development and ethics in 2009 through dilemma training and new monitoring and evaluation tools.
awareness of and competence in how they can contribute to the group’s work on corporate responsibility will be reinforced through common training measures. One important future task will be to translate the employees’
Ensuring good availability for our customers is very important to us. The switchboard’s availability is stable and high, but this fell somewhat in the call centre in 2008. Improving availability will be prioritised in 2009.
The group continues to systematically reduce the environmental impact of its own operations, property administration, investments and purchasing. One of the group’s greatest environmental impacts is the energy consumed at the head office. During 2007-2008 we managed to reduce this by 16 percent.
In 2008, Storebrand launched Norway’s first online eco-driving course in partnership with the Norwegian Association of Authorised
Holding AB reports as a separate group under the name SPP. Besides the main activities in
The largest deviations are associated with the activities of Storebrand Life Insurance, which experiences large differences between the accounting revenue and taxable revenue linked to investments in shares within the
EEA area. In line with the taxation exemption principle, total gains and dividends from such shares are taxed at a low rate of 3 percent.
Given the group’s sizeable tax losses carried forward and the low tax rate expected for life insurance activities in normal financial market conditions, it is unlikely that Storebrand will pay any tax for several years.
SPP will create the leading life insurance and pensions provider in the Nordic region with premium income of NOK 24 billion in 2008.
Storebrand Life Insurance is one of Norway’s leading companies within pensions and life insurance products for private individuals, companies and public sector bodies. The company had a market share of 27.4 percent
A total of more than 10,000 contracts were sold and Storebrand gained a market share of around 13 percent. A large proportion of these sales took place via direct channels and to employees in companies with occupational pension schemes in Storebrand.
Storebrand has made significant savings in the cost of managing paid-up policies in recent years through improved efficiency. This is improving the pensions of Storebrand’s paid-up policies customers.
Our HSE advice helps corporate customers improve their working environments and reduce sick leave. Storebrand has established an HSE and senior policy fund for the public sector. The fund can be used for various HSE
Improvements of over 30 percent have already been attained in some of the business processes. Improving efficiency also plays a role in ensuring the company can cope with growth while at the same time improving customer satisfaction.
SPP introduced Lean methodology in 2008, which has been developed and used in
Storebrand Life Insurance expects balance sheet growth of between 6 percent and 8 percent per annum in the corporate market. The market for long-term saving is developing positively. The introduction of mandatory occupational pensions (OTP) in 2006 increased Norwegians’ awareness of
the need for private savings. The group’s approximately 16,000 new corporate customers and their approximately 200,000 employees will be important for the retail market in the years ahead. The new customers will be offered good solutions for private insurance and private supplementary saving. The pensions reform that will be implemented in 2011 will substantially increase the importance of good occupational pension schemes and supplementary individual saving.
Pursuant to the new Insurance Activities Act the guaranteed return for group pension contracts with a guaranteed return must be priced upfront. The level of the guaranteed return, size of the buffer capital (i.e. additional statutory reserves and unrealised gains)
Act stipulates the maximum size of additional statutory reserves. The insurance company bears all the downside risk, and must build up reserves against the contract if the buffer provisions are insufficient or unavailable.
Pre-tax profit -1,796 1,635 2008 was a very turbulent financial year and the world’s share indices experienced heavy falls. The Oslo Stock Exchange was no exception, even though Q2 was special due to strong increases in oil prices. The Oslo Stock
The retail market was affected by new business not being signed in traditional individual endowment insurance and interest/pension insurance, and a reduction in savings agreements without fixed periods. Unit-linked grew by 109 percent in 2008 due to good sales of guaranteed return accounts, especially in the first six months of the year, and the new system for individual pension saving with tax deductions, IPS, launched in autumn 2008. More than 10,000 contracts were sold, and Storebrand captured a 13 percent market share. Risk products show an overall increase of 8 percent in 2008.
Group life and personal insurance policies sold well during the year. Group pension sales were somewhat weaker than in 2007, but still satisfactory. Sales of individual pension policies were weaker, which was partly due to the instability in the financial markets and higher bank interest rates. The outflow of savings agreements without fixed-rate periods was 35 percent higher in 2008 than in 2007.
The profit allocated to the owner pursuant to the new insurance act is less dependent on the return recognised in the customer portfolios due to upfront pricing of the guaranteed return and profit from risk. In 2008, total income of around NOK 398 million was recognised as upfront fee income. The risk result consists of allocations to the risk equalisation fund of NOK 112 million and a negative risk result for public sector group pensions of NOK
The security fund for risk products was dissolved and included in the risk result in the amount of NOK 99 million. The administration result for products with no profit sharing of minus NOK 118 million in 2008 was charged to the profit allocated to the owner. Overall the profitability in risk products is satisfactory.
The security fund for paid-up policies was transferred to the risk equalisation fund as per 1 January 2008. It amounted to NOK 33 million.
Paid-up policies achieved a positive administration result in 2008 of NOK 13 million.
• Equities • Money market • HTM • Real estate • Alpha • Other
• Equity • Subordinated loan capital • Risk equalisation fund • Market value adjustment reserve • Additional statutory reserves • Conditional bonus • Excess value of bonds at amortised cost
• Egenkapital • Ansvarlig lånekapital • Risikoutjevningsfond • Kursreguleringsfond • Tilleggsavsetninger • Villkorad återbäring • Oververdi obligasjoner til amortisert kost • Opptjent resultat
SPP is a leading Swedish provider of life insurance and occupational pension. SPP offers pension and insurance solutions, and advice to companies in the competitive segment of the occupation pensions market. The company also offers private pension savings and security solutions in the form of illness and nursing insurance. In addition SPP offers qualified consultancy services within occupational pensions and insurance, as well as administrative solutions for municipalities and other public enterprises. SPP is also active
SPP’s administration result amounted to minus NOK 103 million in 2008 compared to
“Other profit” amounted to NOK 293 million in 2008 compared to NOK 284 million in 2007. A
Compared with last year, new policies, excluding Euroben, increased by a total of 42 percent measured by APE. The increase was primarily achieved through sales via broker channels. New policies coming through broker channels more than doubled during the year compared with 2007. New policies for ongoing premiums increased by 21 percent in 2008 in relation to the previous year.
Despite the extremely demanding financial climate, SPP delivered a positive average return in 2008.
The new asset management model also affects how SPP invests in more types of papers and industries than before, at the same as the company is increasing the global spread of its investments. The new investment principle entails, among other things, increased investments in real estate, infrastructure, unlisted papers and raw materials.
guaranteed interest rates. From 1 October 2008, management has been divided into three different guarantee groups with different investment principles. The change means the link between guaranteed interest and expected extra return is clearer.
Storebrand Life Group. It includes business written in Storebrand Livsforsikring AS (SBL) and
of NOK 1,583 million and NOK 516 million, respectively. Margins in the Norwegian business increased in relation to comparable figures for 2007, and the calculated value of new business was NOK 504 million.
Storebrand Investments offers a complete asset management concept that includes discretionary portfolio management of
In May 2008, the assets management activities underwent a legal restructuring. The funds activities were spun off into a separate funds management company, Storebrand
NOK 229 billion of assets under management at the close of 2008. This is made up of discretionary portfolios and mutual funds marketed under the brand names Storebrand and Delphi.
The figures for 2007 have not been updated using the new methodology, and hence are not directly comparable with the 2008 figures. • The sensitivity at the group level is not necessarily the simple sum of the underlying companies, since changes may have differing effects. • The sensitivity for a decline in rates of profitability was computed with the incorrect sign in 2007. For the sake of simplicity, the same sign has been presumed for 2008.• The effects of collateral assets are reflected.• Changes in the market value of mutual fund products are not included.•
strategy is to be a solid partner for customers in difficult times as well and, through strong relationships, tie customers closer to Storebrand
SPP Livsförsäkring AB’s savings portfolios on 1 January, which entailed an increase of NOK
The company’s income primarily comes from management fees, fixed and performancebased, and sales commission and performance - based fees. The management companies ’ total income increased by 26 percent compared to 2007. The main reasons for the increase in income were larger fixed fees and the income from the activities in the former
This increase can primarily be ascribed to two factors. Following the merger-demerger conducted in May, the costs that were previously in Storebrand Alternative Investments are now included, this amounts to around NOK
The operating margin developed well. Overhead costs as part of fixed and volume-based income improved from 69 percent in 2007 to 66 percent in 2008. Total costs as part of total income (including SBE) were reduced from 65 percent in 2007 to 57 percent in 2008.
The volume under management from the real estate portfolio also increased during the period.
Storebrand Life Insurance. The return on this portfolio was weak in 2008, primarily due to a series of weak returns in bond and money market portfolios driven by the abnormal spread outcomes in this market. However, the other portfolios also experienced weak returns. Three alpha satellites were shut down due to the weak results.
January 2009, the bank took over responsibility for its own call centre and established its own banking distribution system. A new retail market strategy was produced in 2008 which focuses on customer growth, cross-sales and increased deposits.
Net interest income amounted to NOK 512 million (NOK 413 million). Net interest income as a percentage of average assets under management amounted to 1.17 percent (1.07 percent).
Net recognition of losses on loans and guarantees as expenses amounted to NOK
The following table shows the profit before tax of Storebrand ASA in accordance with
66 million in 2007. The increase in expenses was largely due to higher offering costs than provided for in the 2007 accounts. In addition to this come increased audit and consultancy services costs.
Oslo Reinsurance Company, 100 percent owned by Storebrand Skadeforsikring AS, is principally involved in the run-off of its own reinsurance business. The Oslo Re group’s strategy was further refined in 2008. Most of the business was run-off through Scheme of
Growth in new sales in SPP measured by APE 16% na na na Satisfactory
Growth in investment management fees from external clients, last year (Storebrand Investments) (NOK million) -43 38 36 -28
Reinsurance Company ASA experienced a loss before tax of minus NOK 13 million in 2008, compared to minus NOK 8 million in 2007.
The retail P&C market in Norway is still regarded as profitable, but the establishment of a number of new players during 2008 further increased competition in the Norwegian market. In addition to the new competitors, the major players contributed to an increase in the pressure on margins through the active use of salvage discounts to retain customers.
The main challenge in 2009 will be to choose solutions that support the cost-effective operation of the company, enabling it to achieve the desired profitability and volume growth.
In addition to monitoring financial and accounting results, Storebrand also monitors the group’s performance in relation to defined value drivers. This allows the Board and management to identify trends at an early stage, implement measures and focus on long-term value creation.
In SPP’s activities, the long-term pension liabilities are a key source of financial risk for Storebrand as the owner. The annual guaranteed interest rate and the long-term pension liabilities indicate how the capital in
For instance, “Conditional Value at Risk” is used as a method for calculating the potential for losses on a one-year horizon for a given probability, including worst-case losses.
A new Insurance Activities Act came into force in Norway on 1 January 2008. This means that company assets and customers’ assets are no longer managed in the same portfolio.
As part of the risk management, Storebrand continuously ensures that all statutory requirements, such as, for example, capital adequacy, solvency margins and the traffic light tests in Sweden, are met by a satisfactory margin. The Board adopts limits for these and other risk goals for the company.
Financial markets can fluctuate dramatically in a short space of time and thus affect the company’s risk exposure. Storebrand continually manages its risk exposure to keep it within limits approved by the Board of
Storebrand implemented measures to limit the consequences of this, first through active risk management that continuously reduced the proportion of equities during 2008, and secondly through adjusting duration and investments in the “loans and receivables”
Storebrand believe that some exposure to emerging markets though both interest and equity investments is sensible. All such investments present challenges in relation to
Storebrand is therefore actively working to contribute to an appropriate formulation and introduction of Solvency II in Norway.
The total risk in the portfolio has been falling strongly in recent years and the proportion of long-term repayment loans within 80 percent of the valuation of the collateral has increased significantly.
The bank places great importance on the quality of its counterparties, and it limits its exposure to any one counterparty in order to avoid loss and ensure high liquidity in its holdings of securities.
European Embedded Value. The framework enables consistent calculations and analyses, and facilitates integrated management of the risk, capital and value in the business. Correspondingly, in connection with the Basel II
regulations the banking business has developed methods and systems for identifying and managing risk in the group.
Developing a framework for comprehensive risk management in the group forms part of the continuous development of Storebrand’s value-based management system, and improves the basis for making decisions concerning the management of the group.
Net receipts/payments - securities at fair value: - Shares and other equity participations 26,356.5 3,358.5 - Bonds and other fixed-income securities -33,265.0 926.5 - Financial derivatives and other financial instruments -336.8 -3,998.0
Net receipts/payments - issuing of certificate loan and other short-term loans -3,948.9 743.8
Cash and cash equivalent assets at the end of the period 1 20,178.9 25,569.0
Basic policies The consolidated accounts of Storebrand ASA are prepared in accordance with the EU-approved International Financial Reporting Standards (IFRS) and accompanying interpretations, as well as the other Norwegian obligations to disclose that follow from the Accounting Act, the Stock Exchange Regulations and the stock exchange’s rules.
New profit and loss account and balance sheet statements The group’s profit and loss and balance sheet statements have been changed from 2008 to provide a better picture of the company’s results pursuant to the new insurance act for life insurance that came into effect on 1 January 2008. The new act introduces a clearer division between the assets and returns of customers and owners and because of this it has not been possible to produce comparable figures. The consequences of the new insurance act are described in more detail in note 4.
Standards and interpretations of existing standards and where Storebrand has not chosen early application. The following standards and interpretations, approved by the EU, which are not mandatory for annual accounts prepared as per 31 December 2008 have not been adopted by Storebrand: IFRS 8 Operating Segments, revised IFRS 3 Business Combinations, revised IAS 27, revised IAS 23 Borrowing Costs, revised IAS 1 Presentation of Financial Statements, changed IFRS 2 and 5, changed IAS 19, 20, 28, 36,38, 39, 40 and 41, as well as IFRIC 13, 15 and 16.
Segment reporting The group is organised into life insurance activities, banking activities, asset management activities and other activities, which include P&C insurance. Segment information is presented for both business areas and geographic areas. Business areas are the group’s primary reporting segments. Financial information in respect of these segments is presented in note 8.
Equipment, fixtures and fittings, and vehicles are valued at acquisition cost reduced by accumulated depreciation and any write-downs.
Intangible assets with unspecified usable lifetimes are not written down, but are tested for impairment annually and at other times if there are indications of a fall in their value with a consequent need for a write-down.
The effect of differences between assumptions and actual experience (experience adjustments) and changes in assumptions are recognised against equity in the statement of recognised income, expenses and value changes in the period they arose. The effect of changes to the pension scheme are recognised in the profit and loss account as they are incurred, unless the change is conditional on future accrual of pension entitlement. In such a case, the effect is amortised linearly over the time until the entitlement is fully earned. Employer’s social security contributions are included in pension liability and in experience adjustments shown in equity.
Definition of fair value Fair value is the amount for which an asset could be exchanged, or a liability settled, between knowledgeable, independent parties in an arm’s length transaction. The fair value of financial assets listed on a stock exchange or in another regulated market place in which regular trading takes place 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.
If there is objective evidence that impairment has occurred, the amount of the loss is measured as the difference between the asset’s book value and the present value of estimated 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 the time of inception). The book value of the asset is reduced either directly or by using a provision account. The amount of the loss is recognised in the profit and loss account.
Held for sale A financial asset is classified as held for sale if it is: • acquired or incurred 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 for which there is evidence of a recent actual pattern of short-term profit-taking, or
Loans and receivables Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market, with the exception of such assets that the company intends to sell immediately or in the short term that are classified as held for sale and such assets that the company designates at inception as assets at fair value in the profit and loss account.
Loans and receivables are valued at amortised cost using the effective interest method.
Accounting treatment of derivatives for hedging Fair value hedging Storebrand uses fair value hedging, where the items hedged are financial assets and financial liabilities measured at amortised cost. Derivatives that fall within this category are recognised at fair value in the profit and loss account, while changes in the value of the hedged item that relate to the risk hedged are applied to the book value of the item and are recognised in the profit and loss account.
Notes Storebrand Group directly against equity, while gains and losses that relate to the ineffective part are recognised in the accounts in the profit and loss account immediately.
Financial liabilities Subsequent to inception, all financial liabilities are measured at amortised cost using the effective interest method.
Commercial paper/bonds The accounting treatment applied is the same as for structured products.
Interest income and interest expense banking Interest income and interest expense are charged to profit and loss at amortised cost using the effective interest method. The effective interest method includes set-up charges.
Transfers of premium reserves, etc Transfers of premium reserves resulting from transfers of policies between insurance companies are booked to profit and loss as premiums for own account in the case of reserves received and claims for own account in the case of reserves paid out. The recognition of cost/income takes place at the date the insured risk is transferred. The premium reserve in the insurance reserves is reduced/increased on the same date. The premium reserve transferred includes the policy’s share in additional statutory reserves, the market value adjustment reserve and the year’s profit. Transferred additional statutory reserves are not shown as part of premium income but are reported separately as changes in insurance reserves. Transfer amounts are classified as current receivables/liabilities until such time as the transfer takes place. Interest arising in the time taken to complete transfers is recognised as part of the item ‘other income and expenses’.
Premium reserve Premium reserve represents the present value (discounted at a rate equivalent to the guaranteed interest rate) of the company’s total insurance obligations including administration costs in accordance with the individual insurance contracts, after deducting the present value of 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 percent of the guaranteed surrender/transfer value of insurance contracts prior to any charges for early surrender/transfer and the policies’ share of the market value adjustment reserve.
Selling expenses Selling expenses in the Norwegian life insurance business are recognised as costs, while in the Swedish subsidiaries selling expenses are recognised in the balance sheet. Pursuant to IFRS 4 non-uniform accounting policies can be used for insurance contracts in subsidiaries.
Estimates and judgements are continually evaluated on the basis of historical experience and anticipated future events. In the future, actual experience may deviate from these accounting estimates, but the estimates are based on best judgement at the time the accounts are produced. The estimates and assumptions that have a significant risk of causing a material adjustment to the balance sheet values of assets and liabilities are discussed below.
A change in the required rate of return of 0.25% will result in a change in the recognised values of around 2.8%. Any changes in expected market rents will also affect the recognised values. The properties are included in the customer portfolios in the life insurance company. Any effect of a change in value on the owner’s capital (equity) will also depend on other recognised returns in the life insurance company, as well as any use of additional statutory reserves necessary to achieve an overall return equal to the insurance contracts’ guaranteed interest. If the recognised return, including any use of additional statutory reserves, in one financial year is lower than the contracts’ guaranteed interest, the owner’s capital will be charged with the shortfall in the return. The average guaranteed interest rate is around 3.5% as per 31 December 2008. Please also refer to note 4, which discusses of the effects of the new insurance act of 2008.
The major areas of risk and uncertainty in the rest of the life insurance business are associated with the incidence of death and disability. Changes to the rules for payment from the national social security scheme for disability benefits, etc. may have a significant effect on insurance companies in terms of the number of claims for disability and disability reserves. In terms of death benefits, increasing life expectancy could affect future expected payments and reserves. In the Norwegian life insurance business the majority of the calculated payments are discounted by the appropriate guaranteed interest rate, while in the Swedish business (SPP) market interest rates are used for discounting. Any changes in the discount rate can have a significant effect on the recognised insurance obligations.
Financial instruments The situation in the financial markets has resulted in the proportion of financial instruments that can be valued based on observable prices or assumptions having fallen. The valuations of the types of securities priced on the basis of non-observable assumptions are more uncertain than they were in 2007. Any changes to the assumptions could affect the recognised values. The majority of such financial instruments are included in the customer portfolio. Please refer to the paragraph above concerning properties in which the possible effects of changes in value on the owner’s capital is described. Please also refer to note 6 in which the valuation of financial instruments is described in more detail.
Technical insurance reserves Technical insurance reserves in life insurance are based on assumptions concerning lifetimes, mortality, disability, etc. Changes in such assumptions will affect the size of the liabilities. SPP’s liabilities are discounted using a yield curve in which parts of the yield curve are not liquid. Any changes in the discounting rate will affect the size of the liabilities.
Previously the operating profit was showed as an undistributed profit between customers and owners, but from which the guaranteed return was deducted . The operating profit has now been taken out of the profit and loss layout. A new line has been included for the amortisation of intangible assets since after the acquisition of SPP there is a larger cost for the amortisation of purchased intangible assets (value of business in force – “VIF“). This provides a better insight into the profit when it is shown on a separate line. The profit before and after the amortisation of intangible assets is shown.
“Old“ profit sharing/regime (individual policies): A positive total result (booked) is shared between the customers and the owner, though a maximum of 35 percent of the total result can be allocated to the owner. A negative result that is not covered by the additional statutory reserves is allocated to the owner.
Acquisition of other companies Ring Eiendomsmegling AS acquired 12 companies within real estate for a total purchase price of NOK 47.7 million. Storebrand Bank ASA acquired 75.4% of the shares in Hadrian Utvikling, which operates within commercial property, for a purchase price of NOK 9.2 million.
Private Equity The majority of Storebrand’s private equity investments are investments in private equity funds. It also has a number of direct investments.
In the case of investments in Storebrand participates as a co-investor together with a leading investor who carries out valuations, and there is no recent transaction, this value will be used once it has been quality assured by Storebrand. In the case of investments for which Storebrand has not received an up-to-date valuation as per 31 December from a leading investor by the time the annual accounts are closed, the previous valuation is used and adjusted for any market effects during the period from the last valuation up to the reporting date. In those cases where no valuation is available from a leading investor in the syndicate, a separate valuation will be made, as described above.
Bonds and other fixed-income securities The bonds that are valued using models based on unobservable assumptions primarily include investments in non-guaranteed foreign asset backed securities that are not traded in an active market. These asset back securities are valued on the basis of prices from external providers and quality assured using price checks at the close of the year, primarily by comparing prices with prices delivered by various price providers.
General Storebrand Life Insurance’s financial risk is principally associated with its ability to meet the annual return guarantee. This makes great demands on how the capital is invested in different securities and assets, and how the company practises its risk management.
Liquidity risk Storebrand has established liquidity buffers in the group, and continuously monitors liquidity reserves against internal limits. Committed credit lines from banks have also been established that the companies can draw on if necessary.
Storebrand Life Insurance is contractually committed to guarantee an annual return for around 95% of its savings customers, 3.5% on average. The guaranteed annual return places particular demands on how the capital is invested in different securities and assets. Following the introduction of the new Insurance Activities Act, Storebrand Life Insurance’s company assets and customer assets have been spilt. The investment strategy and thus the market risk for the different sub-portfolios in Storebrand Life Insurance are tailored to the risk tolerances Storebrand Life Insurance applies to the various products, policies and the company’s primary capital. Given the current investment portfolio, the annual return will normally fluctuate between 3% and 9%. Smaller portions of the portfolio are invested in profiles with somewhat lower and somewhat higher market risk. The share capital is invested such that it is exposed to a low level of risk. Dynamic risk management and hedging transactions reduce the likelihood of a low investment return. If investment return is not sufficient to meet the guaranteed interest rate, the shortfall will be met by using risk capital built up from previous surpluses. Risk capital primarily consists of additional statutory reserves and unrealised gains. The owner is responsible for meeting any shortfall that cannot be covered from risk capital. The average guaranteed interest rate is expected to fall in future years. New contracts include a guaranteed interest rate of 2.75%. Under current legislation and regulations, the technical insurance reserves that Storebrand Life Insurance is required to hold are not affected by changes in market interest rates.
General In the case of the Swedish activities in SPP the portfolio is divided into defined benefit pensions, defined contribution pensions and unit-linked policies. Both the defined benefit pensions and the defined contribution pensions in SPP have associated guarantees. This results in the generation of financial risk in the event of falling stock markets and falling interest rates. In the case of some policies, the risk that the customerportfolio has against the equity also arises from strongly rising interests rates. Due to the somewhat more complex financial risk picture in SPP than in the Norwegian activities, risk is managed through derivative transactions in SPP’s company portfolio. The investment strategy and risk management in SPP comprises three main pillars: • asset allocation that results in a good return over time for customers and the owner • the continuous implementation of risk management measures in the customer portfolios • tailored hedging of certain selected insurance policies in the company’s portfolio
Market risk Market risk is the risk of price changes in the financial markets, i.e. the interest rate, currency, equity, commodity or property markets, affecting the value of the company’s financial instruments. Dynamic risk management is practised which dampens the effect of market movements on the financial result in order to manage the exposure to different market risks. Stress tests are continuously conducted using historical changes to assess the possible effects on the company’s capital base.
Products with profit sharing Products without profit sharing including share capital Banking
Products without profit sharing This segment consists of group pension insurance with upfront pricing, defined contribution pensions and related risk cover, individual insurance with investment choice annually renewable products including group life insurance, health insurance, child insurance, industrial injuries and others.
Other/eliminations Principally comprises the holding company Storebrand ASA and Storebrand Skadeforsikring.
Key figures are presented in accordance with NGAAP, except for premiums and policyholders’ funds that are presented in accordance with IFRS.1 Consists of equity, subordinated loan capital, market value adjustment reserve, risk equalisation, capital gains hold to maturity bonds, additional statutory reserves, 2 conditional bonuses and accrued profit. Excluding customer funds in Norben and in securities funds.3
Currency diffs. from converting foreign units 9.1 26.4 448.9 37.8 522.2
The majority of the intangible assets associated with SPP are assets of VIF (value of business in force), for which a separate sufficiency test has been performed as per the requirements of IFRS 4. In order to determine whether goodwill and other intangible assets connected with SPP has been the subject of a drop in value, estimates are made of the recyclable amount for the relevant cash-flow generating units. Recyclable amounts are established by computing the enterprise’s utility value. SPP is regarded as being one cash flow-generating unit. In the computation of this utility value, the management have made use of Board-addressed budgets and prognoses for a three-year period, and furthermore with an expectation of moderate growth in the total market and the market share. Cash flows after this period are projected at between 5 and 7 percent per annum for the period spanning 2012 to 2018. After 2018, an estimate has been made of annual nominal growth of around 3.9 percent. Future results connected with future administration results, risk results and financial results for SPP will affect its utility value. In general, the market for occupational pension schemes is expected to grow in consequence of the following central growth-related factors: • Demographics, with an expected increase in the number of retirees • Growth in employment • Regulatory conditions, including the transition from defined benefit pensions to defined contribution-based pensions
Rights to withdraw fees from SPP Fonder 10 years linear 8.9
Lease contracts include office premises and property, plant and equipment. External lease contracts for office premises last for 2–7 years and with an option for corresponding renewal.
Storebrand Employees are insured through a defined benefit pension equivalent to 70 percent of pensionable salary at the time of retirement. The ordinary retirement age is 65. Staff pensions are provided by a group pension scheme with Storebrand Livsforsikring AS. Pension payments from this scheme come into effect from the pension age, which is 67 for employees and 65 for underwriters. Pension payments to employees between 65 and 67 and pensions linked to salaries of more than 12 times the national insurance basic amount (G) are paid directly by the company. A guarantee has been pledged for earned pensions for salaries of more than 12 G upon retirement before 65 years old. As of 31 December 2008, 12 G amounts to NOK 843,000. The company’s pension scheme satisfies the requirements of this act.
Reconciliation of pension assets and liabilities in the balance sheet: NOK million 2008 2007
Net pension liability at 1.1. including provision for employer's national insurance contributions
Net pension cost booked to profit and loss account in the period
Notes Storebrand Group 17 Remuneration of senior employees and elected officers of the company
(cf. Accounting Act § 7-26). 3 Outstanding in bonus bank at 31.12.2008 less Storebrand’s initial contribution. Senior executives are contractually entitled to performance related bonuses related to the group’s value-based management system. The group’s value creation finances the overall amount of the bonus, but individual performance determines what proportion of the bonus is allocated. The bonus allocated to an individual is credited to a bonus account, and 1/3 of the balance on the bonus account is paid each year. If the total annual payments exceed the total bonuses awarded and return this will result in parts of Storebrand’s initial contribution forming part of the annual payment. Senior employees, with the exception of the CEO, received an initial contribution when the bonus bank was established. If the employee leaves the company, the positive amount of the initial deposit will be retained by Storebrand. The balance of the bonus account is exposed 50% to Storebrand’s share price and 50% to the best interest rate paid by Storebrand Bank. Over time the balances in the ”share bank“ and ”interest bank“ will grow separately. In accordance with the annual general meeting’s decision a long-term incentive scheme was established in 2008 for the group’s management team and other senior employees. In connection the establishment of this, the previously withheld bonuses earned from 2008 and before have been paid. The company has also made an extra contribution that equals the size of this amount. The payment was reported as salary/bonus and taxed as income. The net payment, less tax, was in its entirety spent on purchasing shares with a lock-in period of 3 years.
4 The return on the ”share bank“ shows the annual gain in value of the individual’s bonus account caused by the performance of the Storebrand share price in 2008 adjusted for dividend.
The Board’s declaration The Board of Storebrand ASA will submit a statement to the annual general meeting on the salary and other remuneration of senior employees, cf. Section 6–16a of the Public Limited Liabilities Companies Act, based on the group’s previously adopted guidelines concerning remuneration for senior employees in Storebrand.
The executive management receive on average less than 25% expected variable remuneration calculated in relation to fixed remuneration. There was no basis for ordinary bonus financing in the 2008 income year. Therefore no contribution was made to the bonus bank for senior employees. The outstanding balance in the bonus bank is paid out at a rate of 1/3 after the return is calculated according to the bank interest rate and development of the Storebrand share respectively between 01.01.08 to 31.12.08.
Other reporting duties 1.6 1.6 3.5 19 Investments in associated companies
The biological assets recognised in the balance sheet consist of forest.
Specification of solvency capital that is not included in primary capital
Net unrealised gains/losses on shares and other equity investments -21,767.0 -3,644.4
Interest expense for Storebrand Bank is included in net interest income for banking enterprises.1
Realised losses on loans where no provisions have previously been made 0.6 -1.0
Notes Storebrand Group 31 Fair value of financial assets and liabilities
In connection with the package of measures by the authorities concerning the banks, Storebrand Bank ASA has entered into an agreement involving the following amounts, conditions and terms for a swap arrangement of covered bonds for state treasury bills: NOK 1,008.0 million in an auction of 1 December 2008, with settlement on 3 December 2008 and term expiring on 15 September 2010 NOK 1,000.0 million in an auction on 15 December 2008, with settlement on 17 December 2008 and term expiring on 21 December 2011. Interest rate conditions are Nibor minus 20 bp.
Hedging effectiveness – prospective for hedging contracts at Storebrand Bank ASA 98% 94%
Hedging effectiveness – retrospective for hedging contracts at Storebrand Livsforsikring AS 98%
Other bonds at amortised cost 24,163.7 21,382.1 22,364.7 22,049.4 13,272.3 12,447.8
Fund units managed by SB Investments Norway 7,217.5 6,389.1 312.7 11,993.5 2,056.9
Fund units managed by SB Investments within EEA 60.4 63.7 633.7
Fund units managed by SB Investments outside EEA 1,081.5 1,190.4 1,190.4
Total shares and other equity instruments 60,563.6 53,838.7 53,838.7 73,661.1 73,661.1
Direct investments in bonds and commercial paper 16,731.8 152,300.1 169,031.9 4,823.4 583.6 174,438.9 112,684.2
The effective yield for each security is calculated using the observed market price. Calculated effective yields are weighted to give an average effective yield on the basis of each security’s share of the total interest rate sensitivity.
Interest rate futures 4,532.3 11,446.2 1,233.5 - of which indirect investments 2008 -262.6 -235.7
Storebrand Livsforsikring AS 1,500,0 NOK 3 mnth NIBOR + 4.0% 2018 1,474.5
Storebrand Livsforsikring AS 1,700,0 NOK 3 mnth NIBOR + 3.5% 2014 1,680.7
Storebrand Livsforsikring AS 175,0 EUR 3 mnth EURIBOR + 0.9% 2009 1,674.9
Short-term holdings of interest-bearing securities AAA AA A BBB NIG Total
Interest-bearing securities at amortised cost AAA AA A BBB NIG Total
Total bank deposits and loans to financial institutions 2008 1,556,2 9,744,6 7,763,9 1,448,0 20,512,6
Rating classes are based on Standard & Poor’s ratings. NIG = Non-investment grade.
Commitments overdue by more than 90 days distributed by geographic area: NOK million
Foreign currency Storebrand exclusive SPP The group actively hedges the major part of its foreign currency risk. Currency risk arises from investments in international securities, and to a lesser extent from subordinated loans denominated in foreign currencies. Currency risk is hedged through forward foreign exchange contracts at the portfolio level, and currency positions are regularly monitored within specified total limits Short positions are closed no later than the business day following the date on which they arise. In addition, there are separate limits for creating active currency positions. These positions are included in the note relating to short-term debt instruments and bonds. The currency positions outstanding at 31 December 2008 are typical of the group’s small limits for currency positions.
SPP In the note, the effect on SPP Livförsäkring’s financial result (excluding sharing of the return) is shown for some selected market changes based upon the company’s financial positions and actions as per 31 December 2008. Because it is market changes that are shown in the note above, the dynamic risk management will not affect the outcome. If it is assumed that the market changes will occur over a period of time, then the dynamic risk management would reduce the effect of the negative outcomes and reinforce the positive.
Notes Storebrand Group 47 Storebrand Group – Reconciliation of changes in equity
Profit and loss items applied directly to equity: Change in pension experience adjust-
Equity transactions with owners: Purchase/sale of minority interests -56.4 -56.4 114.3 57.9
The equity changes with the result for the individual period, equity capital transactions with the owners and items that are entered directly on the balance sheet. Share capital, the share premium fund and other equity capital is evaluated and managed as a whole. The share premium fund may be used to cover a loss, and other equity capital may be used in accordance with the provisions of the Public Limited Liabilities Company Act.
Total insurance liabilities life insurance 74,885.1 11,345.3 1,601.1 75,904.8 113,254.2 276,990.6 280,952.8
Total realised changes in insurance liabilities -806.1 -2,385.6 38.4 679.0 -2,474.3 -3,340.6 -5,814.9
Total non-realised changes in insurance liabilities 2,323.4 66.3 -1,009.2 1,380.5 -755.0 625.5
Bonds that are placed in the category ”loans and receivables” have an unrealised loss at the end of 2008 of NOK 0.3 billion that is not included in the booked values.
Products without profit sharing consist, as in previous years, of defined contribution pensions, personal insurance policies with investment choice, group life insurance, annual risk policies (including non-life cover) in the life account and annual policies in connection with group pension insurance that do not include entitlement to paid-up value. The profit or loss earned on these products is entirely for the account of the owner.
For the group pension private and group pension public products, which are often referred to as the ”fee-based” portfolio, the investment results accrue to the customers. If the return is below the guaranteed interest, but positive, Storebrand will use the contract’s additional statutory reserves in order to cover the lacking return. If the additional statutory reserves are not enough, the company will have to cover the lacking guaranteed interest from its equity. If the return is negative, Storebrand will, for that part of the return that is negative, also have to use equity in order to fulfil the interest rate guarantee. Any possible surplus on biometric risk accrues accrues to the customer. Storebrand can set aside up to 50% of this risk return in the risk equalisation fund. Storebrand has the intention of setting aside the maximum for the risk equalisation fund during those years in which such is possible.
The insurance company utilises reinsurance to dampen the fluctuations in the risk result. In other words to avoid larger fluctuations in the risk result than the company believes are financially justifiable. The company does not want to take some risks and these are covered partly or wholly through reinsurance.
Pooling is a form of reinsurance at a global level. In the case of larger groups with activities in multiple countries there is a possibility that the group will balance its risk result via pooling by offsetting losses in one country against gains in another country.
Risk exposure/sensitivity Storebrand Life Insurance Death and disability The following table shows the net annual risk premium for the most common types of cover. The premiums apply to persons of normal health and risk.
Risk of death, individual endowment insurance 122 324 1,416 61 162 711
Risk of death, group life insurance 55 146 821 33 88 493
Risk of death, group pension insurance 48 146 743 23 77 403
New business written in 2008 is subject to a 2.75 percent basic interest rate. In the case of policies transferred to the company, the basic interest rate is determined by the rate applied to the policy by the insurance company from which the business is transferred, subject to a maximum of 4 percent.
In 2008, Storebrand continued its existing practice from the year before and conducted a test pursuant to Section 16. The required analysis is carried out on the basis of Norwegian principles for premium reserves and applies conservative calculation elements. The established form of analysis is based on the assumptions used for the calculation of Embedded Value in which we use the best estimates for the future base elements based on current experience . The sufficiency test is carried out by analysing the current margins between the assumptions used for setting reserves and the assumptions in the Embedded Value analysis.
Limiting insurance risk Before a risk policy – products that ensure financial compensation in the event of death and illness/disability – is granted, SPP conducts a medical insurance risk assessment of the policyholder. The purpose of this is to determine whether and on which terms the policyholder can take out a policy based on the policyholder’s health status. This is necessary in order to enable the company to offer policies with the correct level of premium in the longterm. The desired policy should satisfy the policyholder’s insurance needs and debt servicing capacity. The assessment of risk therefore also includes an examination of debt servicing capacity.
The sufficiency test is done on a net liability in the balance sheet. SPP satisfies the test. The test has no effects on the profits shown on the annual accounts for 2008.
Claims reserve for claims from prior years (before 2003) 0.1 0.1
In 2000, Storebrand Skadeforsikring transferred all its run-off land-based Norwegian non-life insurance and all direct marine insurance to If through a 100 percent reinsurance arrangement. The result is that the company has retained fronting responsibility, but has no commercial responsibility for the business transferred unless If becomes insolvent. This risk is therefore limited to a credit exposure to If. If has a Standard & Poor’s rating of ’A’, which suggests that this represents a very limited risk exposure for Storebrand.
Oslo Reinsurance Company’s claims experience over recent years has largely been affected by the extent to which the company has succeeded in commuting its incoming reinsurance contracts, i.e. reaching agreement on early settlement of its liability to policyholders (cedents). The company has been particularly active in commuting policies in liability-related lines, and this has caused a reduction in exposure and IBNR requirements.
Cash and bank deposits at the end of the period 553.2 257.7
The accounts of Storebrand ASA have been prepared in accordance with the Accounting Act, generally accepted accounting policies in Norway, and the Regulations relating to annual accounts, etc, for insurance companies. The company has not elected to use IFRS for the company’s unconsolidated accounts.
Bonds and other fixed income securities are recognised at fair value. Fair value is the amount for which an asset could be exchanged, or a liability settled, between knowledgeable, willing parties in an arm’s length transaction. For financial assets that are listed on a stock exchange or another 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.
Employees are insured through a defined benefit pension equivalent to 70 percent of pensionable salary at the time of retirement. The ordinary retirement age is 65. Staff pensions are provided by a group pension scheme with Storebrand Livsforsikring AS. Pension payments from this scheme come into effect from the pension age, which is 67 for employees and 65 for underwriters. Pension payments to employees between 65 and 67 and pensions linked to salaries that exceed 12 times the national insurance basic amount (G) are paid directly by the companies. A guarantee has been pledged for earned pensions for salaries that exceed 12G in the event of retirement before turning 65. As per 31 December 2008, 12 G amounts to NOK 843,000. The pension terms follow from the pension decisions in the Storebrand group.
The company is obliged to have an occupational pension scheme pursuant to the Act relating to Mandatory Occupational Pensions. The company’s pension scheme satisfies the requirements of this act.
Present value of uninsured pension benefit obligations including employer's social security contributions 226.3 203.2
Pension cost including provision for employer's social security contributions 2.0 3.0
Reconciliation to show the change in fair value of pension assets in the period
In accordance with the AGM’s decision. a long-term incentive scheme was established in 2008 for the group management team and other senior employees. Previously 1 withheld bonuses earned in 2007 and earlier were paid out in connection with the establishment of the scheme. The company has also given an extra contribution that corresponds to the size of this amount. The payment is reported as pay/bonus and was taxed as income from employment. The net payment. less tax. has in its entirety been spent on buying shares with a lock-in period of 3 years.
Idar Kreutzer is the Chief Executive Officer of Storebrand ASA and the figures provided in the notes are for total remuneration from the group. He is entitled to 24 months’ salary following the expiry of the normal notice period. All forms of work-related income from other sources. including consultancy assignments. will be deducted from such payments. Kreutzer is entitled to a performance-related bonus based on the group’s ordinary bonus scheme. which is linked to the group’s value-based management system. The group’s value creation finances the overall amount of the bonus. but individual performance determines allocation. Kreutzer’s individual bonus entitlement is credited to a bonus account. and 1/3 of the balance on the bonus account is paid each year. The amount credited to the bonus bank is exposed 50% to Storebrand’s share price and 50% to the best interest rate paid by Storebrand Bank. The balance of the bonus bank as per 31 December 2008 was NOK 3.0 million. The CEO is a member of the Storebrand pension scheme. The discounted present value of his pension entitlement amounts to NOK 15.6 million. The scheme is calculated linearly based on the financial assumptions applied in the accounts.
The bonus system The Storebrand group’s bonus scheme. which is offered in addition to basic pay. is a performance-related bonus scheme linked to the group’s valuebased management system. The value creation of the group finances the overall amount of the bonus. but the employees’ performance determines how large a proportion of the financed bonus is awarded. The bonus entitlement is credited to a bonus account. The amount credited to the bonus bank is exposed 50 percent to Storebrand’s share price and 50 percent to the bank interest rate paid. 1/3 of the balance on the bonus account is paid each year. A long-term incentive scheme has been established for members of the group management team and some other senior employees. with the exception of the CEO. In this scheme half of the paid bonus must be used to buy Storebrand shares at market price. These shares are subject to a lock-in period of 3 years meaning the participants’ holdings could. based on reasonable assumptions. amount to around one year’s pay in a 3-5 years perspective. The establishment of the long-term incentive scheme is described in the last section of “Management remuneration policy practised in 2008“.
The executive management receive on average less than 25 percent expected variable remuneration calculated in relation to fixed remuneration. There was no basis for ordinary bonus funding in 2008. Therefore no deposits were made in the bonus bank for senior employees. 1/3 of the existing balances in the bonus bank are paid out after calculating the return from the bank interest rate and the development of the Storebrand share respectively from 1 January 2008 to 31 December 2008.
Interest rate risk Interest rate sensitivity is a measure of interest rate risk based on how changes in interest rates will affect the market value of bonds and other securities. An increase/reduction of 1.5 percentage points in the interest rate will change the value of bonds and securities by NOK 22 million.
Standard covenant requirements are linked to sign loan agreements. The terms and conditions for sign loan agreements have been fulfilled for all loans. Storebrand ASA has an undrawn committed credit facility of EUR 75 million.
Balance sheet items: Subordinated loans to group companies 1 699.8 4 604.5
No. of full time equivalent positions as per 31 Dec 44 9
On this date, the Board and CEO have processed and approved the Board of Directors’ report, the consolidated accounts and the annual accounts for Storebrand ASA and the Storebrand Group for the 2008 fiscal year and as per 31 December 2008 (the 2008 annual report).
It is the best judgement of the Board and CEO that the annual accounts and consolidated accounts for 2008 have been prepared in accordance with the applicable accounting standards, and that the information in the accounts provides a true and fair picture for the parent company and the group of their assets, liabilities, financial standing and results as a whole as per 31 December 2008. It is the best judgement of the
• the group accounts are prepared in accordance with law and regulations and give a true and fair view of the financial postition of the Group as of 31 December 2008, and the results of its operations and its cash flows and the recognized income and expense for the year then ended, in accordance with International Financial Reporting Standards as adopted by the EU
• the information in the Board of Directors’ report concerning the financial statements, the going concern assumption and the proposal for the coverage of the loss is consistent with the financial statements and complies with law and regulations.
At its meeting on 5 March 2009, the Control Committee of Storebrand
ASA reviewed the Board of Directors’ proposed company accounts, consolidated accounts and annual report for 2008 for Storebrand
With reference to the auditor’s report of 3 March 2009, the Control Committee recommends that the proposed company accounts, consolidated accounts and annual report be adopted as the Annual
Percentage of tel. calls answered (customer centre) - - - 90%
Customer satisfaction in the business market No. 1 in the industry
Investment in microfinance 3 NOK 81 million Increase, given sensible investment opportunities
Male/female participation in internal training programmes 55% women – 45% men
Ensure all parts of the Group receive necessary info and training
Society Satisfaction with Storebrand among our partners Not measured 80% 87% 80%
Reduce by 5% Reduced by 16% 160 kWh/m in 2010 7
Waste sorted by type (tenants of managed properties) 42% 50% 47% 50%
Water consumption (head office) 26,766 m³ Stable level 26,315 m³ Reduce to
Water consumption (managed properties) 94,957 m³ Analyse trend 106,267 m³ Stable level
Proportion of electronic equipment recycled or reused 100% 100% 100% 100%
Result for 2008 base don same survey used for 2007 (conducted autumn 2007)1 Return compared to the Morgan Stanley Capital International World Index, annualised, last 5 years.2 Storebrand has committed NOK 191 million to microfinancing, of which NOK 127 million, is invested per 31.12.2008.3 Figures from the Great Place to Work survey. 4 Figures from internal survey conducted in February 2009.5 Percentage reduction in relation to 2006 measurement.6 This is a two-year reduction target and takes energy consumption as per 2008 as its starting point.7 Calculated externally by the company CO8 -focus AS.
We have reviewed the reporting on 2008 Corporate Responsibility Indicators presented in the “Status of Action Plan for Corporate Responsibility 2007-2008 and new targets for 2009-2010”, pages 142–143 in the Annual Report 2008 Storebrand ASA. The selection of indicators and the information presented are the responsibility of and have been approved by the management of the Company. Our responsibility is to draw a conclusion based on our review.
Financial Information”, issued by the International Auditing and Assurance Standards Board. The objective and scope of the engagement were agreed with the management of the Company and included those subject matters on which we have concluded below.
We believe that our work provides an appropriate basis for us to conclude with a limited level of assurance on the subject matters. In such an engagement, less assurance is obtained than would be the case had an audit-level engagement been performed.
In conclusion, in all material respect, nothing has come to our attention that causes us not to believe that: • Storebrand ASA has applied procedures, as summarised on page 143, for the purpose of collecting, compiling and validating data for 2008 for the selected indicators, to be included in the presentation on pages 142–143 in the Annual Report 2008 Storebrand ASA.
The average remaining term of cash flow on interest bearing securities. Modified duration is calculated on the basis of duration and is an expression of sensitivity to changes in underlying interest rates.
The calculation of earnings per ordinary share is based on profit after tax adjusted for changes in statutory security reserves after tax in respect of non-life insurance. These statutory reserves include security and administration reserves, as well as the guarantee reserve. The number of shares used in the calculation is taken as the average number of ordinary shares outstanding over the course of the year. In case of new issues of shares, the new shares are included from the date of subscription.
Tier 1 capital is part of primary capital and consists of equity capital less the minimum requirement for reinsurance provisions in P&C insurance, goodwill, other intangible assets and net prepaid pensions.
Tier 2 capital is part of primary capital and consists of subordinated loan capital. In order to be eligible as primary capital, Tier 2 capital cannot exceed Tier 1 capital. Perpetual subordinated loan capital, together with other Tier 2 capital, cannot exceed 100 percent of Tier 1 capital, whilst dated subordinated loan capital cannot exceed 50 percent of Tier 1 capital. To be fully eligible as primary capital, the remaining term must be at least five years. If the remaining term is less, the eligible portion is reduced by 20 percent for each year.
The difference between actual costs and those assumed for the premium tariffs.
Return on capital shows net realised income from financial assets and changes in the value of real estate, expressed as a percentage of the year’s average capital in customer funds with guarantees and in the company portfolio respectively. Value-adjusted return on capital shows the total of realised income from financial assets, changes in the value of real estate and the year’s change in unrealised gains or losses, expressed as a percentage of the year’s average total capital in customer funds with guarantees and in the company portfolio respectively at market value.
The result arising from financial income deviating from that assumed for the premium tariffs.
The conditional bonus is that part of the insurance capital in SPP
However, the bonus cannot exceed more than 15 percent of the total insurance capital. When the bonus is higher, the excess part is converted into guaranteed bonus. This applies to insurance with individually calculated bonus. Similar principles apply to other policies.
Financial derivatives The term “financial derivatives“ embraces a wide range of financial instruments for which the current value and future price movements are determined by equities, bonds, foreign currencies or other traditional financial instruments. Derivatives require less capital than is the case for traditional financial instruments such as equities and bonds, and are used as a flexible and cost effective supplement to traditional instruments in portfolio management. Financial derivatives can be used to hedge against unwanted financial risks, or to create a desired risk exposure in place of using traditional financial instruments.
Interest rate swaps/asset swaps are agreements between two parties to exchange interest rate terms for a specified period. This is normally an agreement to exchange floating rate payments for fixed rate payments, and this instrument is used in the management of long term interest rate risk.
Storebrand ASA Filipstad Brygge 1 P. O. Box 1380 Vika N-0114 Oslo, Norway www.storebrand.no
Concept, design and production: signatur.no • 290014 • Photos: Olav H eggø (Fotovisjon AS), Getty Im ages, Scanpix and Storebrand