Today's Storebrand is the result of a long history of companies variously joining forces and going their own way over the years since 1767. As is the case for quite a number of the large players in Norwegian business, Storebrand represents the aggregation of a number of different players and businesses.
Last year saw the transfer of Storebrand's non-life insurance business into the separate Nordic nonlife insurance company If. We took the opportunity at the same time to make it more obvious that the activities remaining in Storebrand represent four independent businesses. Behind the recognised and well-respected brand name of Storebrand, we have created a fertile environment for the separate business areas of life insurance, asset management,
In the same way as the beam of light shown on the front of this year's Annual Report, each of our growth areas will follow its own unique direction.
The colours of the beam of light are repeated throughout this Annual Report to identify the separate businesses that make up the group.
The Storebrand group The Storebrand group is a leading player in the market for life and health insurance, banking and asset management. The group’s activities are carried out through four main business areas: Life Insurance, Storebrand Bank, Finansbanken, and Asset Management. In addition Storebrand has a 44% interest in the non-life insurance company If.
Storebrand Bank has the overall responsibility for distribution, customer service and marketing of financial products and services to the retail market. The bank serves its customers through financial advisers, customer centres and the Internet, and its objective is to be a leading supplier of financial services to private individuals in Norway who have the capacity for savings and investment.
Finansbanken is a specialist bank for high net worth individuals and certain specific segments of the corporate market. The bank’s main areas of activity are real estate and securities financing and managing private customers’ assets, often described as ”Private Banking”. Finansbanken’s ambition is to be a leading financial partner for the high net worth retail market throughout the Nordic countries.
Storebrand's asset management area is the largest private sector asset management operation in Norway. The group’s asset management business area is responsible for the management of the financial assets of all Storebrand group companies and the group's real estate portfolio, as well as providing discretionary management services for external customers. Storebrand offers Norwegian and international mutual securities funds, both for equities and fixed income investment, through Storebrand Fondene.
Storebrand’s customers • Customer base - life and pensions (excl. unit linked) 278,161 *) • Life and pension insurance: policyholders’ funds NOK 100 billion • Funds under discretionary management NOK 13.5 billion • Customer base - banking **) 46,662 • Deposits from banking customers **) NOK 5.7 billion • Customer base - mutual funds ***) 92,937 • Customer’s investments in mutal funds **) NOK 12.2 billion • Customer base - lending products **) 31,527
No. of employees (full time equivalents) **) 1,378 1,636 4,001 3,736 4,029
Dividend per ordinary share (NOK) 1.10 1.00 Dividend per preference share (NOK) 0.50 0.70 *) Consists of equity plus non-life insurance security reserves. **) Including Norden Bedriftservice in 1999. ***) Calculation is based on profit for the year adjusted for the year's post-tax allocations to security reserves etc. as legally required in respect of non-life insurance.
****) The calculation for 1999 is adjusted for the gain on sale of non-life insurance activities after tax and for extraordinary items.
January: • If Skadeförsäkring becomes a reality on 1 January, and Storebrand’s involvement in non-life insurance now takes the form of its ownership interest in this new Nordic non-life insurance company.
• Storebrand ASA and IBM Norway sign the largest strategic outsourcing agreement seen so far in Northern Europe. The agreement makes IBM the strategic partner for Storebrand’s IT infrastructure and the operation of Storebrand’s IT systems.
June: • Storebrand simplifies its management structure. The new model more clearly identifies the role of Storebrand ASA as a holding company with the four independent business areas Storebrand Livsforsikring AS, Storebrand Kapitalforvaltning Holding AS, Finansbanken ASA and Storebrand Bank AS.
• The World Wildlife Fund-Sweden selects Storebrand Kapitalforvaltning. WWF will invest at least SEK 50 million in a new fund called Storebrand Global WWF.
November: • The Norwegian Financial Services Association publishes statistics for value-adjusted investment returns. Storebrand takes first place in the three most important categories, and emerges as the company with the best investment record in the Norwegian life insurance industry over the 1990s.
Storebrand, which has its head office in Oslo, is a leading financial group in the markets for life, pension and health insurance as well as banking services and asset management.
A reorganisation of the Storebrand group was carried out in the summer of 2000 to increase the group’s business focus and competitiveness.
Unsatisfactory results The group reports a profit of NOK 523 million for 2000 as compared to NOK 1,166 million in 1999. The results achieved by the core activities were acceptable, but the overall result for the group was not satisfactory. Earnings for the year were adversely affected by very weak results from If Skadeförsäkring, in which Storebrand has a 44 percent interest, as well as significant loanloss provisions at Finansbanken and lower financial income.
Business development and market conditions The group’s life insurance activities again made the largest contribution to group profit in 2000. Sales of traditional life insurance products to smaller and medium-sized corporate customers were at a good level, but sales to larger companies and the public sector recorded a weaker performance. Sales of unit linked products performed well, and the group achieved a total market share for new sales of 22 percent in 2000. It proved necessary to strengthen the technical insurance reserves for certain product groups, and this caused a reduction in the risk result. Tight control of costs was reflected in a reduction in operating costs as a percentage of total policyholders’ funds. The life company’s unrealised gains continue to be at a good level taking into account the overall developments seen in financial markets.
Storebrand Bank AS reported total interest income of NOK 877 million, up by 75 percent from 1999. The Storebrand Bank Group produced a pre-tax operating profit of NOK 53 million as compared to NOK 5 million in 1999. The bank’s total assets increased from NOK 8.1 billion to NOK 11.3 billion. Balance sheet growth is largely the result of increased residential mortgage lending.
The group’s asset management activities reported an aggregate operating profit of NOK 67 million, representing a 90 percent increase from 1999. Both Storebrand Fondene and Storebrand Kapitalforvaltning reported significantly higher earnings, reflecting both increased assets under management and a higher proportion of equity investment in their portfolios.
Storebrand has a 50 percent interest in Fair Forsikring AS, a non-life insurance company serving the Danish retail market. The company was consolidated with effect from the second quarter of 2000, and reported an operating loss of
Risk management The group’s exposure to risk arises principally from investment risk and insurance risk. Investment risk is regulated by investment policies determined by the boards of the individual group companies on an annual basis. Risk management pays particular attention to market (price) risk and credit risk as well as exposure to movements in interest rates and currency exchange rates. Investment policies are structured to ensure the best possible return over time subject to maintaining an acceptable level of risk in relation to insurance liabilities, and investments are monitored on a daily basis by Storebrand Kapitalforvaltning.
The Board of Storebrand ASA. From top left: Leiv L. Nergaard (chairman), Halvor Stenstadvold, Brit K. S. Rugland, Harald Tyrdal, Knut G. Heje, Rune Bjerke, Rune Eikeland, Arild Thoresen and Nina E. S. Seiersten.
The asset management company is also responsible for ensuring that risk exposure is within the approved limits at all times. A report on risk exposure throughout the group is reviewed by the Board on a quarterly basis.
The level of technical insurance risk incurred by the group as a whole is considered to be within appropriate limits in relation to the group’s risk bearing capacity.
Personnel and organisation Employment in the group totalled 1,378 full time equivalent positions at the end of 2000 as compared to 1,424 at the start of the year. The number of staff leaving the group’s employment was equivalent to 345 full time equivalent positions, whilst new recruitment was equivalent to 299 full time equivalent positions. The main cause for the number of staff reported as leaving the group’s employment was the outsourcing of IT operations to IBM and of internal audit to Arthur Andersen, which accounted for 151 full time equivalent positions. The acquisition by Finansbanken of Delphi and Den Københavnske Bank accounts for 88 of the 299 positions recruited.
The average age of the group’s employees is 42, with an average length of service of 12 years. This reflects the well-balanced composition of the group’s staffing, which strives to maximise the contribution of both experienced and younger members of staff. Considerable importance is attached to maintaining a good working environment. The employees’ representatives participate in the forums required by the group’s collective employment agreement, and regular meetings are held between staff representatives and the company’s management.
The graduate trainee program is of two years duration, and gives new recruits the opportunity to familiarise themselves with the various business areas of the group. The Young Professionals Program is of one year duration and is targeted at younger managers in the age range 27-35 who are identified as having particular management potential. The programme helps to ensure that the group continuously develops management expertise to meet its needs for the development of the various business areas.
Shareholder matters Storebrand ASA had 38,575 shareholders at the end of 2000, representing a reduction of 1,739 over the course of the year. The proportion of share capital held by foreign shareholders increased over the course of the year from 32.1 percent at the end of 1999 to 38.6 percent at the end of 2000. The company has shareholders from all the municipalities in Norway and from 37 foreign countries. The company again carried out a share issue placed with its employees in 2000. Every employee was given the opportunity to buy 150 shares at a price of NOK 40.00, and approximately 60 percent of employees subscribed for a total of 117,000 shares.
as compared to 1999. The minimum legal requirement is for a capital ratio of 8 percent. The capital ratios of Storebrand Livsforsikring, Finansbanken and Storebrand Bank at the end of 2000 were 10.5 percent, 9.7 percent and 12.5 percent respectively.
The sale of Vesta Skadeforsikring by If Skadeförsäkring in 1999 resulted in a distribution to Storebrand Skadeforsikring AS in the order of SEK 1,450 million in autumn 2000. Against this background Storebrand Skadeforsikring AS paid an extraordinary dividend of NOK 800 million to Storebrand ASA in December 2000.
The international credit rating agency Moody’s upgraded its outlook for Storebrand Livsforsikring from “stable” to “positive” and maintained the company’s rating as A2. Standard & Poor’s maintained its rating of A+ for Storebrand Livsforsikring in 2000.
Application of Storebrand ASA’s profit for the year Storebrand ASA recorded a profit for the year of NOK 1,955 million. The Board has decided to recommend the payment of a dividend of NOK 1.10 per share for 2000. In accordance with the company’s stated dividend policy, the Board seeks to operate a dividend policy that is long-term in nature and that endeavours to ensure relatively stable growth in dividend per share over future years. The total dividend payment proposed will amount to NOK 305 million. In addition the Board proposes making provision for a group contribution of NOK 470 million to Storebrand Bank AS, which will represent an allocation of NOK 339 million after tax. The Board therefore proposes that the balance of profit for the year of NOK 1,311 million, together with a dividend of NOK 470 million received from Storebrand Bank AS making a total of NOK 1,781 million, be transferred to other equity.
Board of Representatives and Board of Directors Three of the members of the Board of Representatives elected by shareholders left the Board of Representatives in 2000. This included Halvor Stenstadvold and Harald Tyrdal, both of whom were elected as new members of the Board of Directors of Storebrand ASA, as well as Reidar Flod Johansen. Johan H. Andresen jr. was elected as a new member of the Board of Representatives, and Brit Hoel and Inger Bonnie Gjerde were elected as a new deputy members. Amongst the members of the Board of Representatives elected by employees, Jorun Erstad, Hans Fystro, Arild Lorentzen, Morten Rambech Dahl, Tore Fredriksen, Edrund Olaisen, Einar Sørensen, Cecilie Frivold and Arild Thoresen left the Board of Representatives in 2000, whilst Per Alm Knudsen, Tor Haugom, Ann Magnussen, Pål Ersvik, Per Ivar Laneskog, Alf Bruun, May Molderhauer, Paul Eggen jr. and Anne Oseid were elected as new members. Jon R. Gundersen, Jens Ulltveit-Moe, Tom Vidar Rygh and Peter Ruzicka left their positions as shareholder elected members of the Board of Directors in 2000, whilst Halvor Stenstadvold, Knut G. Heje, Rune Bjerke and Harald Tyrdal were elected as new members. Amongst the members of the Board of Directors elected by employees Mathias Dannevig, Per-Olav Myrtrøen and Dagfin Lea left the Board and were replaced by Rune Eikeland, Arild Thoresen and Nina E. S. Seiersten.
Remuneration Remuneration of the current and previous Chief Executive Officer of Storebrand ASA, other senior employees, the auditor and non-executive officers, and obligations in the event of termination or a change in management employment contracts, are detailed in Notes 4 and 14 to the Accounts.
2000 - a demanding year 2000 was a demanding year for Storebrand’s employees. In a year when the company should have concentrated all its attention on its business activities, for a period during the autumn the group’s everyday activities were overshadowed by significant changes in the company’s senior management and Board of Directors.
The Board of Directors took the view that these matters were very damaging for Storebrand’s credibility. The Board accordingly resolved at a meeting held on 4 October 2000 to request Mr Korsvold to step down from his position, and this he agreed to do. The Board appointed Idar Kreutzer, Head of Accounting and Finance, as acting Chief Executive Officer.
As a result of these matters, and having due consideration to the general level of confidence in the Storebrand group, the chairman of the Board, Jon R. Gundersen, asked to be released from his appointment at a meeting of the Board of Representatives held on 10 October 2000, and the Board of representatives accepted this request.
Subsequent to these events, both the Banking, Insurance and Securities Commission and Storebrand’s Control Committee carried out comprehensive reviews of the matters that led to Mr Korsvold’s departure.
The Board would like to thank all employees for their commitment and loyalty through a turbulent and difficult time for the company.
The aim of the Board of Directors and the group as a whole is to provide a sound return for shareholders. This will be achieved through taking a pro-active approach to structural opportunities combined with a strong operational focus on the group’s business activities.
Leiv L. Nergaard Halvor Stenstadvold Brit K.S. Rugland Harald Tyrdal Knut G. Heje
The best investment return in the market We are now seeing the next generation of pension products reach the market in pace with the introduction of new legislation in this area. Storebrand Livsforsikring has devoted considerable resources to these changes, and is well positioned to expand its activities in the defined contribution pensions market.
The track record of investment returns produced by a life insurance company is a major factor when competing for the management of corporate pension funds. Figures from the Norwegian Financial Services Association demonstrate that Storebrand’s cost efficient asset management operation and its strong investment processes have enabled us to produce the best net investment yield in the Norwegian market over the last seven years (1992-1999).
Storebrand enjoyed a busy and demanding year in 2000. Perhaps the most demanding aspect was the question raised over the integrity of certain of the group's senior management and non-executive officers. There can scarcely be any other sector so dependent on the confidence and trust of its customers as the finance sector.
The life insurance business area continues to pursue its long-term strategy for business with public sector organisations by taking steps to position the company for this market. Storebrand’s continuing record of strong investment returns, together with the development of additional products and communication systems, represent key factors for Storebrand to win market share in the public sector.
With effect from 2001, defined contribution pension schemes now attract the same tax treatment as defined benefit schemes.
A defined contribution scheme, as its name suggests, fixes the amount to be paid into the scheme rather than the amount of pension that will be paid. The future pension available for employees is accordingly determined by the contributions made and the investment return achieved.
There has been little or no choice in the market for company pension schemes for almost a century, but a pensions revolution is now upon us.
Nine out of ten cases of death or disability result from sickness rather than accidents Storebrand has offered sound insurance policies against death and disability for many years. Insurance can also cover sickness and personal accident. More than 90% of all deaths and cases of disability are caused not by accident but by sickness.
Over recent years Storebrand has developed its own insurance product for serious illnesses (Critical Illness). These policies provide benefits if the insured individual develops e.g. cancer or suffers a heart attack or cerebral haemorrhage, and the payments made can be used by the individual policyholder as he or she sees fit. In addition Storebrand offers a health insurance product (Health Treatment Agreement) through Storebrand Helseforsikring AS.
Storebrand has recently launched a child insurance product. This product pays benefits if, for example, the insured child requires a long stay in hospital, develops certain serious illnesses or distinction. The national insurance system provides only limited support for younger disabled people. The child insurance product can also be linked to a disability pension, so that a child will receive an annual payment through to pension age in the event of disability. No other Norwegian company currently offers this type of product.
Health checks The health checks carried out by insurance companies in connection with policy applications have attracted considerable debate. Storebrand has put considerable effort over the past few years into improving the health checks it carries out. We have produced a better self-declaration form, and we have introduced new information material and authorisation forms to ensure that the interests of the applicant are properly protected. 95% of all applications for life insurance are accepted on normal terms, and only 0.5% are rejected.
The ability to insure risks represents the most important contribution that insurance companies make to society. In the case of a life insurance company, the products it offers provide financial security for the individual or his dependants in the event of unforeseen events.
A total system Storebrand’s concept for the integration of salary, employment benefits and bonus arrangements is known as Total Compensation Management (TCM) to reflect the fact that it encompasses a company’s entire employee remuneration and compensation system.
For the employee the system offers an Internet based service giving a total overview of all the elements making up the individual employment package. After entering a personal password, he or she can access a range of Internet based services that provide easy access to information on all aspects of the salary and benefits package provided by the employer, together with the value the various elements represent.
Better management of human resources policy The TCM system offers a number of advantages for employers. The system offers a simple and straightforward way of administering all the various benefits a company offers. It also plays an important role in identifying for employees the value of the benefits they receive from the company. This is an important exercise for many companies since they often expend considerable amounts on pension and insurance arrangements for employees in addition to other benefits.
In addition the TCM system gives employers access to a portfolio of services ranging from cleaning and laundry through to home services, training and mobile telephones. This allows the employer to construct a menu of benefits suitable for its employees, and different menus can be offered to different groups of employees. This allows the employer to achieve a targeted effect in respect of recruitment, staff motivation and the development of internal expertise.
Cost savings and control Cost savings can also be achieved by using the TCM system. By offering an employee the choice of a range of benefits within a total budget the employer can encourage employees to choose which benefits they really need. A typical menu might ask the employee to chose between benefits such as parking, mobile telephone, newspaper subscription or home PC.
Many employees of companies and other organisations have little idea of the value of the employment benefits they receive in addition to their salary. Employment benefits represent a “hidden” salary for which the employer receives little recognition, and the structure of benefits often gives employees very little freedom of choice.
Storebrand Asset Management is a leading Norwegianbased supplier of asset management services to all types of institutional investors. The company currently carries out discretionary asset management for 68 institutional investors, and 46 of these represent new mandates awarded over the course of the last three years. An important milestone in this respect was the company 's success in winning a mandate for the management of European equities from the Norwegian Government Petroleum Fund against foreign competition in 1999.
Storebrand has doubled its market share in the mutual funds market over the last three years. By the close of 2000 Storebrand Fondene AS and Delphi Fondsforvaltning AS (owned by Storebrand through Finansbanken ASA) had a combined share of 9.5% of a total market of NOK 142.2 billion (figures from the Norwegian Mutual Fund Association). Moreover Storebrand’s market share of new subscriptions to all securities funds was 13.5%, and for subscriptions to equity funds its market share reached 22.6%.
Increased demand for international equity and industry funds International funds attracted 86% of net new subscriptions to all equity funds in 2000, as compared to 79% in 1999. Total investment in international equity funds moved ahead of the amount invested in Norwegian equity funds for the first time in 2000. There was also an increase in the demand for industry-specific funds in 2000, and it is becoming ever more important that fund companies offer the right products at the right time. Storebrand launched 10 new funds in 2000, of which eight are Norwegian registered and two are registered in Luxembourg.
Use of mutual funds for pension savings Much of the growth seen in the mutual funds market over recent years is the result of funds being used for pensions and other long-term savings. The new Norwegian legislation on defined contribution pensions is expected to lead to a strong increase in the flow of savings into funds in the future. Defined contribution schemes will allow companies and individual employees to make their own investment decisions, and fundsbased alternatives are expected to be very popular. Storebrand is particularly well placed to take a large share of this market given its strong position in the areas of pensions, asset management and financial advice.
Sweden The asset management operation has six staff in its Stockholm branch, and in 2000 it entered into co-operation with the World Wildlife Fund on the development and distribution of a new fund to be launched in January 2001. In addition agreement was reached in 2000 with one of Sweden's largest asset management companies, SPP, for distribution of the Storebrand Principle Global Fund.
An important milestone for the Swedish activities was the company's inclusion by the Swedish authorities in the list of funds offered for the new premium pension scheme. Storebrand Fondene was represented by eight funds, and approximately 23,000 Swedes have invested a total of SEK 70 million in Storebrand funds.
London Storebrand has entered into a co-operation agreement with the Sancroft Group, a leading environmental consulting firm, for the distribution and marketing of SRI products in England.
Sancroft is run by The Right Honourable John Gummer, who was at one time Minister for the Environment in the UK government. New regulations have been introduced that require English pension funds to document their approach to environmental, ethical and human rights issues, and this has led to increased focus on SRI products. Storebrand's representatives in its London office have, together with the Sancroft Group, established Storebrand as a recognised asset manager with investment consulting firms and many of the large pension funds.
Paris The branch office in Paris was opened in 2000. During the course of the year Storebrand received very positive press coverage, and was invited to give a presentation of SRI to the French Senate. The prospects for sales in the French market so far look very promising, and Storebrand offers its SRI products through channels such as one of the country's best-known fund investment portals.
Growth from the public sector Growth in funds under management from the public sector reflected the restructuring taking place in the power generation market. Many Norwegian local authorities have sold their interests in power generation, and have invested the sales proceeds in liquid securities and funds through discretionary asset management agreements. It is estimated that local authorities raised approximately NOK 11 billion from sales of power stations in 1999 and NOK 16 billion in 2000. The amounts involved are expected to increase further in 2001 as a result of the further acceleration seen in the consolidation and restructuring of the Norwegian power market.
Increased investment in securities funds The range of funds intended for the institutional market has increased, and now offers significantly broader coverage. Storebrand launched seven new funds targeted at the institutional investor market in 2000, and the company plans to launch a number of new funds in 2001. Figures from the Norwegian Mutual Fund Association show that at 31 December 2000 some 42% of the funds managed by Norwegian fund management companies were invested by companies, local authorities and institutional customers, and approximately 44% of new sales in 2000 came from the institutional market.
Storebrand Bank Storebrand Bank AS was established in 1996 as a direct banking operation. In 2000 all of the Storebrand group's distribution activities for the retail market were integrated into Storebrand Bank. The bank now has overall responsibility for distribution, customer service and marketing of financial products and services to the retail market.
Storebrand Bank offers the services of some 200 personal financial advisers located at 20 financial centres and 35 satellite offices, as well as being represented by agents. In addition the bank operates a customer service centre employing 50 advisers and provides a leading Internet banking service that has won a number of awards as the best Internet banking service in Norway. Most recently the publication Kapital Data named Storebrand Bank's Internet banking service as the best of all Internet services in Norway in 2001, regardless of industry.
Strategy Storebrand Bank intends to be a leading supplier of personal financial advice to retail market customers with an interest in savings, and aims to offer its customers a broad range of high quality financial services through the Internet, telephone and personal contact.
Storebrand Bank has attached great importance to developing a first rate system to use for giving financial advice that gives customers a very sound base for making the right decisions on their financial situation, both now and in the future. By offering a unified and good quality range of products from both Storebrand and third party suppliers, as well as attractive customer loyalty programs and reporting systems that give customers a good overview of their personal financial situation, Storebrand Bank aims to be the preferred partner for financial products and services.
Billboards throughout the country carried Storebrand Bank's recruiting campaign for more financial advisers. The same message was broadcast through the television and over the Internet. This recruiting campaign reflects Storebrand Bank's commitment to becoming the leading provider of personal financial advice in
Storebrand Bank was very visible in the Norwegian media at the end of year 2000.
This may take the form of a holiday home in the mountains or on the coast, or perhaps the journey of a lifetime around the world, or it may mean financial security in retirement. For other people a more fulfilling life may mean human rather than financial values. Everyone is different, but most people's hopes and ambitions do need some degree of financial planning.
Help with financial planning is precisely what Storebrand Bank aims to offer its customers. By helping our customers plan their financial affairs we can help them to achieve their ambitions. Financial Plan is a tool used to build up a comprehensive personal overview that summarises the customer's financial situation both now and in the future. This takes into account all of a customer ’s financial needs in respect of saving and investment, insurance and borrowing. Financial Plan is unique in the breadth of its approach and the total picture it provides for every customer.
Customer loyalty program Storebrand Partner is an exclusive customer loyalty program. The core feature of this service is that it gives the customer access to a dedicated personal financial adviser and assistance in putting together a financial plan. In addition to offering a number of financial benefits, the program also gives the customer access to a number of unique non-financial benefits. The Partner program is tailor-made for Storebrand’s most important customers with the most extensive requirements.
Storebrand Bank will put more than 200 financial advisers through comprehensive financial planning training program between now and 2003. Financial advisers employed by Storebrand Bank are required to complete a two-year certification program put together in co-operation with the Norwegian School of Management BI. This program provides comprehensive training in personal financial planning, advice, financial theory, products and systems. Storebrand is the only Norwegian financial institution to put its employees through such an extensive certification program.
The mutual funds account offers customers the opportunity to switch between funds at any time without incurring charges. This makes it very simple to invest in a number of funds through a single product, and with just a single debit from the customer's bank account. This allows all savings invested in funds to be brought together by the customer’s financial adviser and the account can be monitored through a unique and comprehensive statement. This statement will be updated daily on the customer's own Internet page at Storebrand Bank. The mutual funds account concept will also be made available for unit linked annuity savings with the additional tax benefits that unit linked products offer. A further benefit in this respect will be that customers will be able to roll investment over into other unit linked funds without being taxed on any capital gains.
Specialist expertise Storebrand Bank has entered into a strategic corporation with PricewaterhouseCoopers to assist customers who need detailed advice in areas such as tax, legal matters and inheritance. This gives Storebrand Bank the best basis on which to offer comprehensive advice in the majority of areas that affect our customers' financial situation today and in the future.
Storebrand Bank has entered into co-operation with a number of external suppliers to ensure that it can offer all its customers the best and most suitable products. This makes it possible for us to satisfy all the financial requirements that our customers may have.
The bank’s asset management activities include discretionary asset management, mutual funds products, capital market products and index-related investment products. Asset management activities are based on an absolute yield approach, and the bank’s fund managers actively manage positions in the market. The bank’s goal is to be a leading player for asset management and the development of savings products for high net worth private customers.
Project financing is principally focused on sectors that are dependent on short lines of communication and rapid decision-making for the financing of large projects. This principally applies to the financing of real estate and securities.
Norway does not as yet represent a mature market for private banking, and no one institution has set the standard for what the private banking service concept should encompass in the Norwegian context. It is traditionally the case that private banking services are characterised by strong personal relationships between the customer and his or her account manager at the bank.
Electronic media will never replace personal service. However the use of technology improves the bank’s support and service functions, and will help to ensure that customers enjoy better reporting as well as quicker and more readily available access to information tailored to their requirements.
Products and services The main ‘product’ in any private banking relationship is financial advice. The main focus for Finansbanken’s private banking activity will be on giving good advice to its customers, and this will cover a broad range from investment advice through to inheritance planning, wills and trusts.
Future prospects Finansbanken is well positioned to meet future charges. We do not intend to turn our back on the personal relationships that are so important in private banking, but we will strengthen the relationship and financial advice concept that is traditional in private banking with strong IT resources and improved communications. Finansbanken intends to be recognised as a modern private bank that is still traditional in its approach.
Customers also benefit from the strong results that Storebrand has reported for a number of years. Statistics from the Norwegian Financial Services Association show that Storebrand has produced the highest average return in the Norwegian life insurance market for all product groups over recent years.
Corporate market Storebrand is a market leader in the corporate market, with a 25% market share of total premiums in the collective pensions market at the end of the third quarter of 2000.
The internationalisation of Norwegian business and industry creates an increasing demand for international products. The company’s activities in this area performed very strongly in 2000. During the course of the year Storebrand received all the permissions and licenses necessary for Euroben to be established in Dublin with branches in Norway and Sweden.
Storebrand is the only company that has not attracted criticism for its public sector pension product from the local authority sector pensions working group, and this represents a valuable stamp of quality at the start of 2001 from the parties to the national employment conditions.
The year 2000 was a good year for sales of Storebrand’s unit linked products, which comprise IPA Link and Annuity Link. These unit linked products attracted inflows of savings totalling NOK 1.63 billion in 2000 as compared to NOK 1.26 billion in 1999, and the company was therefore again the leading company in the unit linked market in 2000.
Costs Operating costs for Storebrand Livsforsikring AS totalled NOK 930 million in 2000 as compared to NOK 896 million in 1999. The increase is largely due to the resources committed to new products and the changes required by new legislation on company pension schemes and defined contribution pensions. Storebrand’s cost ratio relative to average policyholders’ funds showed an improvement from 0.96% in 1999 to 0.94% in 2000.
As part of its objective to maintain a high investment return, Storebrand’s strategy is to hold a relatively high proportion of the investment portfolio in equities. The company’s high risk-bearing capacity and its well-diversified portfolio make this possible. The company has built up its solidity over a number of years, maintaining a high level of buffer capital to give freedom for manoeuvre in asset allocation. The proportion of total assets invested in equity markets at the end of 2000 was in the order of 31.3% (32.4% if derivative positions are included ). In order to achieve a diversified and liquid portfolio, approximately 68% of the equity portfolio is invested in international markets.
The turbulent conditions seen in equity markets in 2000 caused a reduction in the market value adjustment reserve of NOK 5.6 billion to NOK 3.0 billion. Additional statutory reserves are conditionally allocated customer reserves which act as risk capital to absorb price movements in the investment portfolio. These reserves amounted to NOK 4.8 billion at the end of 2000. With effect from 2000 the company has introduced a limit to the additional statutory reserves attributable to individual policyholders. The limit is set at twice the guaranteed return, and this causes a reduction in additional statutory reserves for many customers. In order to compensate in part for this change, the company has allocated one percentage point of the year’s return to additional statutory reserves. The total level of additional statutory reserves is lower than before, but it nonetheless covers more than one year’s guaranteed return. The life insurance company’s capital ratio was 10.5% in 2000 as compared to 12.0% in 1999. The minimum capital requirement is 8%. The company’s strong liquidity gives it continuing flexibility in its future asset allocation.
By sub-portfolio Market Expo- Market ExpoNOK million % value % sure value sure
Analysis of results The analysis of results table shows the composition of operating profit and its allocation by type of insurance.
The risk result arises as a consequence of the incidence of mortality and disability during the period differing from that assumed for the premium tariffs.
The requirements set by the Banking, Insurance and Securities Commission for strengthening the administration reserve in respect of collective pension schemes by no later than 1 January 2001 were satisfied in full.
b) Includes: Security reserve, subordinated loan capital and book equity. c) Includes: 0.40% of policyholders' funds in 2000. In 1999 this was 0.42 % of policyholders' funds.
Main features of 2000 • Assets under management increased by NOK
7 billion. • 15 new discretionary asset management mandates in 2000.
• First asset management operation in Norway to gain GIPS certification.
Storebrand Kapitalforvaltning ASA and Storebrand Fondene AS serve 68 institutional customers and 147,000 private customers from offices in Oslo, Stockholm, London, Paris and Luxembourg.
• A good track record of investment return through discretionary asset management.
• Flexible systems for customers, with a high degree of tailor-made reporting and readily comprehensible customer information.
Internationalisation During the course of 2000 Storebrand Kapitalforvaltning established and staffed branch offices in Sweden, Great Britain and France. Storebrand Fondene has an established subsidiary in Luxembourg. In addition, distribution agreements have been established with partners in Great Britain and Australia/New Zealand, and this has laid the foundation for future organic growth outside Storebrand’s home market.
In Sweden more than 23,000 customers have chosen Storebrand for their investments for the new state administered premium pension scheme. In addition Storebrand has established a new fund in co-operation with the World Wildlife Fund in Sweden. Other examples of international mandates awarded during the course of 2000 include SPP in Sweden, Cortal Banque and HSBC/Apogee in France and Tower Asset Management in Australia/New Zealand.
In the institutional investment market, there is a clear trend for an increasing proportion of asset management mandates to be awarded through independent advisers that specialise in developing investment strategies and selecting asset managers. In the case of Sweden, for example, it
is thought that more than 2/3rds of all institutional asset management mandates are arranged through independent advisers, and we are now seeing a similar trend in the Norwegian market. This has contributed to increasing the professionalism of the Norwegian institutional market, and has increased international competition for asset management in this market.
First in Norway to achieve GIPS certification Increasing international competition and the internationalisation of the market both represent new challenges for Norwegian asset managers in that their activities are now being compared and evaluated on the same criteria as are applied internationally. In order to respond to this challenge, Storebrand Kapitalforvaltning ASA and Storebrand Fondene AS achieved certification for the Global Investment Performance Standard TM (GIPS) at the start of 2001. Certification to this standard was carried out by Cap Gemini Ernst & Young, and applies to the period 31 December 1995 to 31 December 2000. Storebrand is accordingly the first group in Norway to gain certification for both a mutual fund management company and an asset management company.
The purpose of GIPS TM is to ensure that customers receive complete, accurate, open and consistent information on the investment results their asset manager produces. This standard is the product of global co-operation between a number of organisations, and is intended to function as an ethical framework for dialogue between asset managers and customers. The review carried out as part of GIPS TM certification also includes an audit of the company’s internal control for the activities covered by the standard.
Asset management products The products and services offered by Storebrand Kapitalforvaltning ASA and Storebrand Fondene AS comprise active discretionary asset management, a total of 44 equity and fixed income funds, tactical asset allocation and Private Equity investment, as well as environmental and ethical investments (SRI - Socially Responsible Investment).
The investment objective of both Storebrand Kapitalforvaltning and Storebrand Fondene is to generate a return superior to that of the comparable market. In any one year the extent to which performance exceeds the benchmark return can typically be expected to represent 2-5 percentage points for equity products and 0.25-0.75 percentage points for fixed income products.
The construction of portfolios attaches particular importance to focusing on taking actively managed positions. All other forms of risk which do not form part of the preferred position to be taken are minimised with the assistance of quantitative portfolio optimisation.
Storebrand Kapitalforvaltning Holding AS, which is wholly owned by Storebrand ASA. A total of 152 staff representing nine nationalities will work in the new asset management group, making it one of Norway’s largest asset management operations. The asset management team will consist of 35 asset managers, with an average length of service of five years.
For the purposes of operational management, Storebrand Eiendom will also be organised as part of the asset management group.
At the end of 1998 Storebrand Kapitalforvaltning established a separate unit for tactical asset allocation. The work of this unit contributed approximately NOK 40 million (+ 4 basis points) to the investment return of Storebrand Livsforsikring in 2000. In 1999 the contribution was + 25 basis points, equivalent to more than NOK 200 million.
Earnings and profitability Storebrand Kapitalforvaltning ASA and Storebrand Fondene AS achieved total pre-tax profit of NOK 67 million in 2000. This represents an improvement of NOK 33 million from the previous year. Gross revenue has shown annual growth over the last three years of 30%, and amounted to NOK 403 million in 2000. Significant resources have been invested in developing the expertise of the companies’ personnel as well as building up the systems and infrastructure needed to achieve a scalable structure, and growth in costs over the last three years has been at a higher than normal level. By way of example it can be noted that all the costs incurred in respect of internationalising the asset management activities have been recognised to the profit and loss account as incurred.
Real estate Storebrand is currently one of the largest private real estate investors in Norway, and is accordingly a significant player in the Norwegian real estate market. The total value of the real estate portfolio amounts to NOK 10.9 billion, representing 744,000 sq. m. of property, the majority of which is owned by Storebrand Livsforsikring AS.
Office properties are managed by Storebrand Eiendom AS, while shopping centre properties are managed by Steen & Strøm ASA, and are marketed as part of the Steen & Strøm chain.
The real estate portfolio produced a total return of 8.2% in 2000, including an upward revaluation of 0.8%.
*) The ‘relative to index’ column shows the manager’s performance relative to the relevant benchmark index.
Organisational structure Storebrand Bank AS is a wholly owned subsidiary of Storebrand ASA. The Storebrand Bank group comprises Storebrand Bank AS, its subsidiary Storebrand Finans AS and a 50% interest in Bertel O. Steen Finans AS (BOS Finans).
Storebrand Finans is a debt-collecting business engaged in both collecting its own receivables and receivables for other companies in the Storebrand group. BOS Finans was incorporated in March 1999, and offers financing through the Bertel O. Steen network of car dealers. With effect from 1 January 2000, Storebrand Bank is responsible for all the functions of the Storebrand group in respect of distribution and customer service for the retail market.
The Storebrand Bank group recognised a writeback of NOK 47.3 million in respect of loan losses and provisions in 2000 as compared to a writeback of NOK 36.6 million in 1999. This related largely to the activities of Storebrand Finans. Loan losses and provisions for Storebrand Bank AS amounted to NOK 3.7 million, up by NOK 1.0 million from 1999. Loan losses and provisions redu-
Balance sheet The Storebrand Bank group increased its total assets by NOK 3,219 million in 2000 to reach NOK 11,310 million by the end of the year. The increase in total assets was driven by growth in lending. Net lending amounted to NOK 9,157 million at year-end, representing an increase of NOK 6,811 million from 31 December 1999. The bank's lending mainly consists of residential mortgage loans. Growth in lending represents a combination of new residential mortgage lending and equity index bonds. Storebrand Bank's investment assets increased in pace with the overall balance sheet, growing from NOK 926 million at the end of 1999 to NOK 1,172 million at the end of 2000. The bank's securities portfolio, which comprises certificates and bonds with limited credit market risk, is recognised at the lower of acquisition cost and market value at year-end. Storebrand Bank does not hold any securities classified as trading portfolio.
Capital base The total capital base amounts to NOK 671.3 million, equivalent to a capital ratio of 12.5%.
Financial condition and business development 2000 was the first full year of operations following the integration of Storebrand’s retail market distribution activities into Storebrand Bank. The results achieved for the year are in line with the bank's plans, and the bank made good progress in the development of both sales and customer numbers.
Significant resources have been committed to establishing the bank's advisory concept. This has involved the development of a first-class system for giving financial advice and related support systems, training and education of financial advisers and refurbishment of the bank's financial centres. At the same time the decision has been taken to discontinue the franchise distribution concept in order to concentrate activities on the financial advisory concept. Further improvements were made to Storebrand Bank's Internet banking service in 2000, and this is now recognised as the leading Internet service in Norway. Additional resources have also been committed to automating production and processing customer applications. The product range was expanded in 2000 by introducing equity index bonds, credit cards and customer loyalty programs.
The bank enjoyed stable growth in lending over the course of 2000, and net interest income increased despite downward pressure on interest margins. Non-interest income increased as a proportion of total income from 11.2% in 1999 to
Profit and loss account Net interest income amounted to NOK 401.1 million (NOK 329.2 million), equivalent to an interest margin of 2.28% (2.50%) of average total assets. Net interest income increased from NOK 90.3 million in the first quarter to NOK 109.0 million in the fourth quarter. Interest margin fell over the course of the year as a result of higher interest rates and somewhat higher funding costs.
Net interest income 401 329 321 Non-interest income 162 40 30 Other operating expenses -250 -129 -108
Profit before loan losses and provisions 313 240 243 Loan losses and provisions -295 -72 -100
Capital adequacy will be strengthened first quarter 2001 by injection of share capital from Storebrand ASA.
Non-performing loans, loan losses and assets repossessed Gross non-performing and problem loans at the end of 2000 amounted to NOK 1,400 million (NOK 549 million) of which NOK 564 million (NOK 440 million) represents loans where interest income is no longer accrued. Net nonperforming and problem loans amounted to NOK 1,114 million (NOK 433 million) after specific loan-loss provisions of NOK 287 million, equivalent 6.58% of gross lending. The current volume of non-performing loans and the increase seen in this category relate to a small number of larger lending relationships, especially in the shipping and offshore sectors. The shipping portfolio was reviewed by independent consultants during autumn 2000. The bank has now decided to adopt a more focused strategy for its shipping finance activities, and the problem loans are monitored very closely.
At the end of 2000 the bank held repossessed assets totalling NOK 43 million (NOK 135 million ) in respect of two lending relationships in the areas of shipping and securities financing. The level of repossessed assets held was sharply reduced over the course of the year, and the bank expects to further reduce the level of repossessed assets in the first half of 2001.
Group information and subsidiaries Finansbanken entered into an agreement in the fourth quarter of 1999 to acquire 89% of the share capital of Delphi Forvaltning AS. The company was consolidated with effect from 1 January 2000. Finansbanken subsequently agreed to purchase Den Københavnske Bank (DKB), and this bank was consolidated in the accounts with effect from 30 June 2000. The acquisition of DKB represents part of Finansbanken's planned expansion in the Nordic market for private banking.
The remaining shares in Finansbanken Index (19%) was aquired and consolidated with effect from 1 May 2000.
• However a low investment return caused If to report weak earnings
• If repaid capital to its owners, and Storebrand’s share amounted to NOK 1.4 billion
• Sound performance from Oslo Re, with an operating profit of NOK 96 million (NOK 67 million in 1999)
The entire travel insurance business of Europeiske Reiseforsikring AS was transferred to If in
Financial review Profit for the year from non-life insurance activities amounted to NOK 106 million in 2000 as compared to NOK 2,655 million in the previous year. The year produced an operating loss of NOK 72 million as compared to an operating profit of NOK 302 million in 1999. The establishment of If led to a significant change in the character of the group’s non-life insurance activities between 1999 and 2000. In addition the 1999 accounts include a significant gain recognised in connection with the establishment of If. The results reported for the two years are accordingly not comparable.
The mandatory security reserves maintained by the company, principally reinsurance reserves, reduce in pace with the scale of insurance claims customers have against Storebrand Skadeforsikring. This resulted in a total release of reserves to profit of NOK 336 million in 2000 as compared to NOK 155 million in 1999.
The figure shown for tax in the 2000 accounts is equivalent to 60 percent of pre-tax profit. This is because the recognition of operating profit in accordance with the equity capital method records Storebrand’s share in the results of If on a post-tax basis. This leads to a higher tax charge in the accounts when If reports a loss. After adjusting for the effect of the equity method, the tax rate for the non-life activities is 22.7 percent.
Premiums earned 17,545 15,674 Claims incurred -15,220 -14,988 Operating expenses -4,115 -3,835
Financial income 1,079 2,684 Other expenses -108 -92 Launch costs in Q2 -170
**) Excludes launch costs. Cost ratio and Combined ratio would be 24.4% and 111.2% respectively after including Q2 launch costs.
Share purchase arrangements for employees It was resolved at the Annual General Meeting of Storebrand ASA held on 28 April 1999 that the Board be empowered to increase the share capital by up to 1.4 million shares, each of NOK 5 nominal value in the period to the end of 2000. The issue of these shares was restricted to employees of the Storebrand Group. The intention was to involve the employees more closely in value creation in the company by making as many as possible shareholders.
In 2000 every employee was given the opportunity to buy 150 ordinary shares at a calculated subscription price of NOK 40.00 per share. Approximately 60% of the employees subscribed for a total of 117,000 shares.
Share price development Storebrand’s share price on 31 December 1999 was NOK 61.00. The high and low prices seen during 2000 were NOK 70.00 and NOK 48.80 respectively. The price on 31 December 2000 was NOK 62.50. This represents an increase of 2.5% over the course of 2000. The share price has risen by 9% over the past two years, by 18% over the past three years and by 69% over the past four years.
The company’s ownership structure still shows a disproportionate number of shareholders with small numbers of shares in that approximately 64% of all shareholders still own 100 shares or less. The company had a total of 38,575 shareholders as at 31 December 2000 as compared to
Compliance The officers in the governing bodies and senior employees of Storebrand ASA, Storebrand Livsforsikring AS, Storebrand Kapitalforvaltning ASA, Storebrand Bank AS and Finansbanken ASA are subject to rules - based on the provisions in the relevant legislation and regulations - regarding the trading of securities issued by Storebrand ASA.
As one of the country’s leading financial institutions, Storebrand is dependent on maintaining an orderly relationship with the financial markets and control authorities. The company therefore places particular emphasis on ensuring that routines and guidelines satisfy the formal requirements imposed by the authorities on securities trading. The company has its own compliance system which ensures that routines are complied with.
Dividend policy The Board of Directors of Storebrand ASA has approved a dividend policy for Storebrand. The policy will contribute to ensuring that shareholders receive a competitive return, whilst also ensuring that the company maintains an optimal capital structure.
The general RISK amount at 1 January 2001 is estimated as NOK 1.97 per share.
The 20 largest shareholders own in total 191,378,952 shares, which represents 68.96% of the share capital.
*) See the first paragraph of the section headed ‘Shareholders’ above.
Financial income and financial expenses Interest income from securities 17.7 58.6 120.2 Other interest income 22.8 37.2 18.1
Gain on sale of securities 31.7 60.3 28.7 Unrealised gain on securities 34.9 101.4 Other financial income 2.7 1.1 1.1
Loss on sale of securities -17.4 -46.3 -53.0 Unrealised loss on securities -60.7 Other financial expenses -2.4 -14.3 -14.5
Intra-group receivables 14 2,292.1 1,580.9 Other receivables and other assets 64.1 42.2 Fixed assets excluding real estate 9 147.1 139.0 Cash and bank 129.0 326.4 Pre-paid pension 3 439.0 79.5
Short term borrowings 874.9 Intra-group liabilities 14 799.6 466.5 Other liabilities 95.5 151.1 Other accrued costs and deferred income 136.1 118.3
Insurance claims for own account -10,326.5 -7,791.5 -6,662.7 Change in insurance reserves - life insurance -1,821.5 -6,499.7 -4,952.4 Interest and related expense - banking 19 -1,691.3 -675.7 -232.0
Changes in security reserve etc. - non life insurance 335.7 154.3 -161.8 Profit on sale of non-life insurance business 3,230.0
Earnings per ordinary share 1.67 12.23 1.98 Earnings per ordinary share excluding extraordinary items 3.54
Minority interests' share in equity 11.6 13.2 Subordinated loan capital 39 4,041.0 4,536.2 Market value adjustment reserve 2,998.1 8,596.3
Liabilities to other financial institutions 34 4,280.5 3,116.8 Deposits from and due to customers 34 14,047.0 10,759.3
Other liabilities 3,202.9 2,303.4 Accrued costs and deferred income 907.3 702.8
Cash flow from operational activities Premiums received - direct insurance 5,747.4 14,404.0 Premiums received - insurance assumed 5.9 3.4 Premiums paid - reinsurance 14.5 -1,166.6 Claims and benefits paid - direct insurance -6,528.8 -13,633.2 Claims settlement from reinsurance in respect of claims and benefits paid 31.4 806.4 Receipts from policy transfers 2,347.5 3,872.3 Payments on policy transfers -2,822.3 -2,070.3 Interest, commission and fees received from customers 2,528.2 1,572.9 Interest, commission and fees paid to customers -1,371.6 -726.6 Payments to third parties for goods and services -24.9 333.7 -650.8 -1,198.0 Payments to employees, pensioners, employment taxes etc. -218.9 -435.3 -1,235.8 -2,498.2
Cash flow from investment activities Receipts from loans to and claims on other financial institutions -126.6 200.8 Receipts on claims previously written off 7.4 Loans disbursed to customers -8,964.4 -8,650.2 Loan repayments by customers 3,530.4 7,479.1 Receipts from sales of shares and other equity investments 207.0 803.1 26,235.5 18,824.5 Payments for purchase of shares and other equity investments -814.0 -2,566.1 -33,666.9 -22,883.5 Receipts from sales of bonds 1,939.0 2,205.6 37,921.0 23,561.4 Payments on purchase of bonds -1,760.0 -1,447.2 -35,694.3 -32,514.1 Receipts on sale of certificates 670.0 1,701.0 20,610.5 22,875.9 Payments on purchase of certificates -538.0 -1,818.4 -22,951.0 -23,078.1 Receipts on sale of real estate 20.7 170.4 885.1 Payments on purchase of real estate -2.4 -41.0 -839.2 -2,358.2 Net cash movement on purchase/sale of other securities 279.0 40.9 214.4 Net payments on purchase of fixed assets etc. -92.3 -95.2 -46.7 -3.2
Cash flow from financing activities Deposits from customers 20,610.4 10,861.4 Repayment of customer deposits -17,607.5 -9,708.6 Deposits from Norges Bank and other financial institutions 18,732.7 662.5 Repayment of deposits from Norges Bank and other financial institutions -17,569.0 -125.0 Repayment of long term lending -1,004.9 -130.7 -130.7 -130.7 Receipts from taking up term loans 932.9 1,040.6 932.9 Receipts from issue of certificates/short term loans 4,417.3 0.6 Repayment of certificates/short term loans -1,750.0 Receipts from subordinated loan capital 198.5 1,238.9 Repayment of subordinated loans -703.1 -78.3 Receipts from issue of bond loans and other long term funding 1,113.8 965.5 Repayment of bond loans and other long term funding -1.0 -121.4 Receipts from issue of new capital 5.8 14.6 283.6 Receipts from issue of other capital 0.2 Payments on redemption of share capital Dividend payments -277.4 -277.4 Receipts/payments of group contribution/dividend 1,589.7 820.6
Cash and cash equivalent assets at the end of the period 129.0 326.4 5,321.2 3,226.2
Write-down of fixed assets 430.2 Other non-cash items 6,751.8 6,018.3 Difference between booked pension cost and payments/receipts to pension scheme -51.7 -56.7 -55.6 Items classified as investment or financing activities -2,648.2 -1,818.2 46.8 -352.7
Opinion In our opinion, • the financial statements are prepared in accordance with the law and regulations and present the financial position of the Company and of the Group as of 31 December 2000 and the results of its operations and its cash flows for the year then ended, in accordance with good accounting practice in Norway.
• the company’s management has fulfilled its duty to produce a proper and clearly set out registration and documentation of accounting information in accordance with the law and good accounting practice.
Ole M. Klette Arne Frogner State Authorised Public Accountant State Authorised Public Accountant
The Board of Representatives raises no objections to the Board's proposal regarding the allocation of the 2000 profit for the year of Storebrand ASA, including the proposed dividend in respect of the 2000 financial year.
Total insurance related operating costs for own account -784.6 -755.3 -718.3
Transfer to insurance fund: premium reserve -1,618.7 -1,867.9 -341.5 Transfer to insurance fund: premium/pension adjustment fund -1,881.8 -2,465.0 -944.0
Other assets 1,889.7 1,684.5 Prepaid expenses and accrued income 1,333.4 1,522.8
Equity capital and liabilities Share capital 1,361.2 1,361.2 Accumulated equity 1,764.6 1,587.6
Note 6: Parent company's shares in subsidiaries and associated 56 companies
Note 34: Analysis of deposits from customers and liabilities to 72 other financial institutions
The Group accounts consolidate all subsidiaries of which Storebrand ASA directly or indirectly owns more
Goodwill is valued at actual value on the basis of is expected lifetime, which will not normally be longer than 20 years.
Translation of foreign subsidiaries The profit and loss accounts of foreign subsidiaries are translated to NOK at the average exchange rates for the year, whilst the balance sheets are translated at the rate ruling at the end of the year. Any translation differences are posted against unrestricted equity.
Gains and losses on internal sales to/from Storebrand Livsforsikring AS are not eliminated due to the fact that the profit of the life company is to be divided between customers and shareholders.
Pension costs The net pension cost for the period is included under "salary and personnel costs" and consists of the sum of pension liabilities accrued in the period, the interest charge on the estimated liability and the expected return on the pension funds.
The cumulative effect of changes in assumptions, deviations between calculated and estimated pension liabilities, and the difference between the expected and actual return achieved on pension funds is not charged to profit and loss until such time as it exceeds 10% of the higher of either the pension liability or pension funds at the start of the year ("the corridor approach").
Other Certain properties are owned via Norwegian partnerships. These are treated in the accounts in the same manner as other properties and are thus included under the same items in the accounts.
Loans Loans advanced are carried at nominal values in the balance sheet, reduced by provisions for losses calculated in accordance with the Banking, Insurance and Securities Commission's regulations.
When an evaluation of a facility in default identifies the need for a specific loan losses provision to be established and the collateral security available is insufficient to cover interest and commission due, the accrual of interest, commissions and fees in respect of the facility ceases. In addition all interest, commissions and fees recognised to income in respect of the facility for the current year are reversed. When an evaluation of a facility not in default nonetheless identifies the need for a specific loan loss provision to be established, consideration is given to ceasing the accrual of interest, commissions and fees.
When a loan previously classified as bad or doubtful is brought back into good order, interest which has accrued but not been recognised to profit and loss is recognised as interest income and specific loan loss provisions in respect of the loan are reversed.
Properties repossessed in respect of loans in default are valued at their estimated realisable value. Any gains or losses upon sale, or any write-down as result of a fall in value of such properties, are recognised as part of loan losses.
basis if these are not due to reasons which are temporary or of an insignificant nature.
In the group's banking activities, shares held as current assets that are not intended for short-term trading are valued as a single portfolio at the lowest of purchase cost and market value.
In the group's banking activities, bonds held as current assets that are not intended for short-term trading are valued as a single portfolio at the lowest of purchase cost and market value.
In the group's banking activities, only financial directives entered into in respect of proprietary trading (the trading portfolio) are valued at market value.
Stock futures and interest rate futures Futures contracts (including stock futures) are reconciled daily on the basis of the previous day's market prices. Changes in the values of futures contracts are recorded in the accounts as they occur as realised profit or loss.
FRA - Forward rate agreements Forward rate agreements (FRA) are valued at market value and are settled on the first day of the period which is the subject of the agreement.
Unrealised gains or losses recognised to profit and loss do not affect the market value adjustment reserve in the life insurance companies, but changes in the value of forward foreign exchange contracts in respect of any active currency positions do affect the market value adjustment reserve.
Income and expenses of financial assets - Market value adjustment reserve The income and expenses arising from financial assets reflect both realised items and changes in unrealised value. Unrealised additional value is applied to a market value adjustment reserve and do not affect profit and loss. Financial expenses include the administration costs associated with the financial activities.
Transfer of premium reserves, etc. Transferred premium reserves in the insurance fund on the transfer of policies between insurance companies are booked to the profit and loss account at the date the risk is transferred. The year's mandatory allocations to the premium reserve are correspondingly reduced. In addition, the premium reserve transferred includes the policy's share in the year's realised and unrealised profit.
Insurance reserves Insurance reserves comprise the insurance fund and the statutory security fund. The insurance fund includes premium reserve, additional statutory allocation, premium fund/pension adjustment fund and claims reserves.
Premium fund/pension adjustment fund in the insurance fund The premium fund contains premiums prepaid by policyholders on individual and collective pension insurance as a result of taxation regulations. The pension adjustment fund consists of payments from policyholders on collective pension insurance also resulting from taxation regulations. The fund is to be applied in payments of future benefit increases to pensioners.
The premium fund is required to have the same return as the premium reserve.
Unit Linked Unit linked products are sold through Storebrand Fondsforsikring AS. Financial assets are recorded at market value. The level of technical reserves required in respect of such contracts is determined by the market value of the financial assets. The financial risk associated with such investments is borne by the policyholder.
The main income of Storebrand ASA is the return on capital invested in subsidiaries. In the company's accounts group contributions and dividends received in respect of these investments are therefore recorded as ordinary operating income. Group contributions are recognised to the profit and loss account before tax and dividend in the current accounting year.
Group contribution Storebrand Skadeforsikring AS 1,200.0 800.0 483.0 Storebrand Livsforsikring AS 642.8 Storebrand Fondene AS 31.0 11.0 5.5 Storebrand Kapitalforvaltning ASA 37.0 15.1 Finansbanken ASA 120.0 AS Værdalsbruket 0.3
Dividends Storebrand Skadeforsikring AS 800.0 Storebrand Livsforsikring AS 530.6 371.8 AS Værdalsbruket 0.1 0.8
In addition, Storebrand ASA will receive NOK 470,5 million in dividend from Storebrand Bank AS which will be booked as an equity transaction.
Estimated effect of future salary growth -180.0 -26.5 -206.5 -32.8 -28.6
Net liability in the balance sheet 439.0 -233.4 -131.8 73.8 -135.4 -184.3
Chairman of the Board ****) 398 200 200 Board of Directors 1,418 1,190 971 Auditor's fees for audit and related control functions 1,205 1,418 1,093 Auditor's fees for consultancy services 1,000 677 1,353
Registered Share No. of shares Par value Interest Capitalised NOK million office capital (1,000) NOK in % value
Total 7,217.0 *) 74.9% held by Storebrand Livsforsikring AS. Minority interests amount to 0.2%.
*) Figures for 2000 relate to the salary of Åge Korsvold for the period 01.01. - 04.10 in amount NOK 1,960,000 and the salary of Idar Kreutzer for the period 05.10. - 31.12 in amount NOK 548,000.
****) Figures for 2000 relate to Directors' fees paid to Leiv L. Nergaard and Jon R. Gundersen.
Tax payable *) -450.4 -117.1 - Tax allowances carried forward 318.7 115.7
Certificates and bonds held as current assets 192.9 193.0 32.9 32.9 225.8 225.9
Of which listed 158.0 0.1 158.1 Denominated in NOK 193.0 32.9 225.9 *) Convertible bonds issued by Finansbanken ASA.
Accrued pension liabilities 365.2 215.0 150.2 Profit and loss account 13.1 16.4 3.3
Deferred tax/deferred tax allowances (changes applied to profit and loss) 22.4 129.3
Disposals at acquisition cost -1.5 -1.5 Aggregate depreciation and write-downs at 31.12 -0.6 -308.4 -309.0
20 largest shareholders Skandinaviska Enskilda Banken *) 10.53 Folketrygdfondet 9.97 Orkla ASA 9.96 Steen & Strøm ASA 6.31 The Chase Manhattan Bank 5.16 Canica AS 3.60 Nordstjernen Holding AS 2.67 Hartog & Co. A/S 2.52 DnB Markets 2.52 Bankers Trust Company 2.25 State Street Bank & Trust Co. 2.20 KLP Forsikring 1.80 The Northern Trust Co. 1.53 Morgan Stanley & Co. 1.52 Euroclear Bank S.A./N.V. 1.44 Vital Forsikring ASA 1.36 Commerzbank AG 0.95 Deutsche Bank AG 0.91 Gjensidige NOR Spareforsikring 0.88 Salomon Brothers International 0.88
*) No single investor is permitted to hold more than 10% of the shares of a financial institution. However banks may, with the approval of the authorities, hold more than 10% in their capacity as a manager of assets in their capacity as a manager of assets.
The Annual General Meeting of Storebrand ASA held on 28 April 1999 authorised the Board to increase the share capital by issuing up to 1.4 million ordinary shares reserved for Storebrand employees prior to the end of 2000. The subscription period was 27 March - 11 April 2000, and the subscription price was set at NOK 40 per share. Every employee was entitled to purchase 150 shares, and the subscription price represented a total taxfree discount of NOK 1,500. A total of 117,000 new shares were issued, causing an increase in share capital of NOK 585,000. In accordance with the Accounting Circular issue by the Oslo Stock Exchange, the issue was recorded in the accounts at market value. Equity increased in total by NOK 5.8 million.
Board of Representatives Sven Ullring 0 Jens P. Heyerdahl d.y. 6,881 Mette Johnsen 420 Stein Erik Hagen 0 Mille-Marie Treschow 2,349 Tor Brandeggen 0 Kristian Zachariassen 100 Erling Steigum 0 Terje R. Venold 0 Erik G. Braathen 840 Ole Enger 2,000 Sandra Riise 0
NOK thousand No. of shares No. of Loan Interest rate Repayment owned *) bonus units at 31.12.00 basis ****)
Board of Directors Leiv L. Nergaard 4,000 Halvor Stenstadvold 93 Brit Kristin Sæbøm Rugland 18 Knut G. Heje Rune Bjerke 2,970 8.25 AN 2020 Harald Tyrdal 100
Arild Thoresen 150 664 6.6 AN/SE 2024 *) The summary shows the number of shares owed by the individual, as well as his close family and companies where the individual exercises significant influence (cf. Accounting Act §7-26).
**) A number of senior employees are contractually entitled to performance related bonuses. A new bonus system is to be introduced for the group in 2001. It is intended that this system will extend to all employees by the end of 2002. The central feature of the new system is that bonus payments are related to the group's value-based management system.
****) AN = Level payment loan, SE - Installment loan, final payment.
No. of employees at 31.12 64 No. of full time equivalent positions at 31.12 61 Average no. of employees 145
Revaluation of real estate 476.5 166.6 476.5 166.6 Reversal of valuation adjustments - shares 23.0 1.2 30.8 1.2 Reversal of valuation adjustments - interest bearing instruments 3.6 0.9 2.4 31.5 0.9 2.4 Gains on sale of shares 13,748.2 8,160.2 6,384.3 14,381.7 8,167.4 6,385.1 Gains on sale of interest bearing instruments 4,054.1 3,588.6 4,137.4 4,067.6 3,589.8 4,137.4 Unrealised gains on shares 7,407.8 7,834.7 10.2 Unrealised gains on fixed-income securities -1,539.4 9.7 -1,539.1 0.7
Total income from financial assets 23,953.8 23,119.7 15,685.8 24,974.1 23,560.9 15,661.6
Net interest and commission income 177.8 106.9 59.6 401.1 140.8 578.9 247.7 59.6 *) Figures for Finansbanken are from 1 August 1999 to 31 December 1999
Costs arising from properties and real estate *) -72.1 -134.5 -79.8 -57.1 -121.1 -66.4
Staff pensions are provided by a group pension scheme, primarily with Storebrand Livsforsikring AS in accordance with the rules on private occupational pension schemes. Pensions are payable at pension age which is 67 for executives and 65 for underwriters. The ordinary retirement age is 65, and a retirement pension equivalent to 70% of pensionable salary becomes payable on retirement. Pension benefits form a part of the group collective employment terms applicable to employment by Storebrand ASA. Early retirees are defined as those who retire before reaching 65 years of age.
Pension costs and pension liabilities are treated for accounting purposes in accordance with the accounting standards for pension costs issued by the Norwegian Accounting Standards Board (see also Accounting principles ). Both insured and uninsured schemes are treated as benefits plans. The following assumptions have been used in the calculations: Financial assumptions – Return on pension fund 8.0% – Discount rate 7.0% – Annual earnings growth 3.0% – Expected adjustment of Social
The calculations apply to 1,490 employees and 2,340 pensioners. Net accrued pension costs are shown in the table below.
Ordinary wage and salary expenses 281.1 184.5 99.8 275.6 841.0 837.7 729.9 Social security contributions 34.1 21.1 16.3 50.5 121.4 132.4 113.1 Pension expense (inc. employers' social security contributions.) 15.4 13.6 8.8 13.7 52.1 58.3 98.8
Other operating costs/recharges 509.6 -207.1 33.8 -33.4 303.0 -346.5 -432.3 Depreciation 8.6 7.7 16.0 99.9 132.2 172.6 105.3 *) Of which insurance related 784.6 76.1 860.7 769.8 725.2 **) Of which costs incurred by subsidiaries 50.1
Owned Intangible assets Goodwill depreciation Deprec. NOK million by 2000 1999 2000 1999 rate
Storebrand Systemutvikling AS SB ASA 60.8 Aktuar Systemer AS SB Life 1.8 3.5 -1.8 -1.8 20%
The table shows the accounting effect of the acquisitions made in 2000: Date Accounting Owner- Cost Goodwill/ Balance of NOK million consolidated method ship price neg. goodwill goodwill
Estimated effect of future salary growth -283.3 -52.8 -336.1 -114.8 -353.9
Market Ave. rent Term of Sq. m. Percentage NOK million value per sq. m. lease let
Purchase cost as at 1 January 9,575.8 575.3 10,151.1 Revaluation for the year 171.3 Previous revaluations 726.3 726.3
Geographic distribution (Life company) Oslo-Vika/Filipstad Brygge 3,938.6 Oslo - other 3,641.8 Stavanger 1,330.4 Norway - other 1,937.6 USA 58.8
Of which listed Norwegian shares 10,250.2 Of which listed international shares 21,468.1
Note 31: Financial derivatives The concepts applied in the following tables are set out in the following section.
Average gross nominal volume The average figures are based on daily calculations of gross nominal volume.
Nominal Acquisition Book Market Amortisation NOK million value cost value value outstanding
Salary account holders (private persons) 1,976.1 9,233.8 3,790.5 9.1 15,009.5 12,595.1
Norben Life and Pension Insurance Co. Ltd. 0.4 33.1 1.3 32.7 Bertel & Steen Finans AS -0.6 2.1 -0.4 2.1 Morningstar Norge AS 0.3 3.0 E Trade AS -5.7 34.6 Delphi SMB II AS 1.0 Delphi Asset Management -0.3 0.6 If Skadeforsäkring Holding AB *) -306.9 3,371.1 5,075.1 *) Share in profit and loss in If was booked directly to equity in 1999.
Ownership interest (44%) in If on the equity method of accounting: Tangible Storebrand's share Capitalised NOK million assets of goodwill value
Opening balance at 1.1.2000 3,838.4 1,236.7 5,075.1 Share in profits of If -412.5 -412.5 Goodwill depreciation -62.3 -62.3 Tax 115.5 52.4 167.9
Note 34: Analysis of deposits from customers and liabilities to other financial institutions
Equity capital at 1 January 10,112.5 6,420.7 Profit for the year 705.7 3,500.0 Sale of non-life insurance activities 428.7
Goodwill depreciation - Finansbanken -16.4 Allocated for dividend -305.3 -277.4 Accumulated result of Fair before consolidation -77.5 Share issue (net proceeds) 5.8 14.6 Other capital movements 92.0 -9.1
Storebrand Livsforsikring AS *) 2,080.9 Storebrand Finans AS 93.9 Storebrand Investment Management AS 1.2 Storebrand Systemutvikling AS 3.6 Storebrand Helseforsikring AS 21.7 Storebrand Felix kurs og konferansesenter AS 1.6 Storebrand Leieforvaltning AS 10.8 Oslo Reinsurance Company (UK) 195.9
Total 2,409.6 *) In addition the group has unused allowances deductible from tax of NOK 665 million, equivalent to losses carried forward of NOK 2,377 million. Unused allowances deductible from tax are divided as to NOK 243 million for Storebrand ASA, NOK 363 million for Storebrand Livsforsikring AS and NOK 59 million in Storebrand Bank AS.
Loss carried forward 2,409.6 2,099.8 309.8 Tax allowances carried forward *) 2,377.0 2,291.1 85.9
Deferred tax/tax allowances in the balance sheet **) 125.1 175.6 50.5 *) Amount calculated to be comparable with losses carried forward. Unused credits deductible from tax total NOK 641 million. (28% of losses carried forward)
Loan guarantees 83.4 26.7 Payment guarantees 436.8 491.8 Contract guarantees 229.3 156.9 Other guarantees 56.1 19.9 Book value of assets pledged as security for loans etc. 1,517.3 1,115.3 Residual commitment to subscribe capital to Ltd. Partnerships 1,562.0
Own Amount Currency Interest Currency NOK million company NOK Currency amount rate in % Maturity gain/loss
Reconciliaton of net income and equity between N GAAP and US GAAP for the group’s life insurance activities
Financial instruments Under N GAAP interest bearing securities, shares and financial derivatives are carried at fair value. Unrealised changes in value are transferred to a market value adjustment reserve, but changes in unrealised value arising from the exchange rate at the balance sheet date are recognised to income.
Under US GAAP listed interest bearing securities are carried at market value with any premium or discount being amortised over the remaining maturity. Equities classified as "available for sale" are carried at market value. Differences between market value and the amortised value of interest bearing securities/historic cost of equities are applied directed to equity. Financial derivatives are carried at market value and changes in value are recognised to income. Gains and losses in respect of the foreign exchange element of hedged securities which are defined as "available for sale" are recognised to income in the same period as the hedging contract cf. FAS 133.
Profit for the year - Life insurance- N GAAP 711.0 706.8 457.4
Life insurance activities - shareholders’ equity - N GAAP 3,228.4 2,984.0
US GAAP would also apply a minimum allocation of 65% to the differences in profit which arise between N GAAP and US GAAP which are of a timing nature and affect measurement of the profit available for distribution between policyholders and owners. In the unit linked activities carried on by Storebrand Fondsforsikring AS these differences are allocated in full to income and equity. Under US GAAP where “available for sale” investments which are subject to FAS 115 give rise to a difference between market value and amortised cost in the case of interest bearing securities or between market value and historic cost in the case of equities, these differences are booked directly to equity. Norwegian legislation requires that 75% of any such unrealised gains be allocated to policyholders when policies mature or are transferred. The same percentage is used under US GAAP for allocations to policyholders ' funds.
Dividends Under US GAAP a dividend is deducted from equity as soon as its distribution is formally approved.
Capital ratio: Eligible primary capital as a percentage of the riskweighted balance sheet. Individual assets and offbalance sheet items are given a risk weighting based on the estimated credit risk they represent.
Primary capital: Primary capital is capital eligible to fulfil the capital requirements under the authorities' regulations. Primary capital may comprise Tier 1 capital and Tier 2 capital.
Average yield: Average yield is an expression for the average return the company has obtained on policyholders' funds during the course of the year. The average yield is a gross yield before deducting costs and will thus not be comparable with interest reported by other financial institutions. The average yield is calculated in accordance with rules set by the Banking, Insurance and Securities Commission.
Group life insurance: Collective life insurance in which an insured sum is payable on the death of an insured member of the group. Such insurance can be extended to cover disability insurance.
Instalment loan: An instalment loan is a loan on which the borrower makes regular partial repayments of principal in equal amount throughout the entire repayment period. The borrower accordingly pays the sum of a fixed instalment amount and a reducing interest amount at each instalment date, giving a reduction in payments over the life of the loan assuming a fixed interest rate.
The term financial derivatives embraces a wide range of financial instruments for which the current value and future price movements are determined by shares, bonds, foreign currencies or traditional financial instruments. Derivatives require less capital than is the case for traditional financial instruments such as shares and bonds, and are used as a flexible and cost effective supplement to traditional financial 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 futures: Interest rate futures contracts are related to government bond rates or short term reference interest rates. Interest rate futures are standardised contracts which are exchange traded and are subject to established clearing arrangements. Profits and losses on futures contracts are recognised daily, and are settled on the following day.
Interest rate option: Interest rate options can be related to either bond yields or money market rates. The purchase of interest rate options related to bonds (also known as bond options) confers a right (but not an obligation) to buy or sell bonds at a predetermined price. Interest rate options can be used as a flexible instrument for the management of both long and short-term interest rate exposure.
Storebrand Livsforsikring AS 100.0% NOK 1,361.2 Storebrand Eiendom AS 100.0% NOK 1.0 Storebrand Pensjonstjenester AS 100.0% NOK 3.7 Aktuar Consult AS 100.0% NOK 1.0 Aktuar Systemer AS 100.0% NOK 4.1 Scanvik Corporation 100.0% USD 8.0 Storebrand Kjøpesenter Holding AS 100.0% NOK 14.0 Storebrand Nybygg AS 100.0% NOK 112.0 AS Værdalsbruket *) 74.9% NOK 4.8
Subsidiaries of the subsidiary company Delphi Forvaltning AS Delphi Investor Service ASA 100.0% NOK 8.0 Delphi Aktiv Forvaltning ASA 100.0% NOK 5.0 Delphi Fondsforvaltning AS 100.0% NOK 1.6 Delphi Asset Management 50.0% USD 0.2 E*Trade AS 34.0% NOK 8.7
Storebrand Helseforsikring AS 50.0% NOK 30.0 Fair Financial Ireland Ltd. 50.0% DKK 250.0 Euroben Life & Pension Ltd. 50.0% EUR 1.0 Storebrand Leieforvaltning AS 100.0% NOK 10.0 Felix kurs- og konferansesenter AS 100.0% NOK 1.0 Norden Bedriftservice AS 50.0% NOK 15.0 Storebrand Systemutvikling AS 100.0% NOK 5.0 *) Storebrand ASA owns 24.9% and Storebrand's total interest is 99.8%.
Internet address: Group companies: Finansbanken ASA Stortingsgt. 8 P O Box 817 Sentrum N-0104 Oslo Telephone: +47 22 47 40 00 Internet: Storebrand Finans AS Munkedamsveien 45-4C P O Box 1380 Vika N-0114 Oslo