We enable our customers to make the most of their financial position, life situation and health.
Storebrand Life Insurance page 20 Storebrand Investments page 26 Storebrand’s Banking Activities page 30 Non-Life Insurance page 36
No. of employees (full time equivalents) 1 337 1 473 1 478 1 636 4 001
Average number of ordinary shares (000's) 277 715 277 554 277 464 277 209 277 079
Dividend per ordinary share (NOK) 1.10 1.00 *) Calculation is based on profit for the year adjusted for the year's legally required post-tax allocations to security reserves etc. for non-life insurance. **) Calculation base for 1999 has been adjusted for capital gain on sale of non-life insurance after tax and extraordinary items.
Storebrand Bank approves a reorganisation involving a reduction in headcount. Finansbanken decides to concentrate its Norwegian activities at its head office in Oslo.
Storebrand ASA issues an exchangeable bond. The issue is heavily oversubscribed. The proceeds of the issue are used to strengthen Storebrand ASA's liquidity and repay outstanding borrowings.
Storebrand and MMI carry out a nationwide savings and insurance market research survey. 3 500 Norwegians reply to questions on their personal finances.
Deloitte & Touche is appointed by Storebrand to carry out an independent review of the discrepancies that
The review concludes that Storebrand’s accounts are in accordance with generally accepted accounting principles.
The Labour Court announces its ruling. The municipalities involved are given until 1 July 2003 to bring their pension arrangements in line with the Court's interpretation of the main collective employment tariff. In order to ensure a competitive marketplace, Storebrand applies for permission to offer the same product as KLP.
Standard & Poor's publishes a ranking of all the mutual funds sold in Norway. Storebrand and Delphi achieve the highest average score of all companies.
The Board of Directors of Storebrand ASA approves the issue of a NOK 1.5 billion bond to refinance the company's existing bond that matures in June 2003.
Skadeforsikring AS to Storebrand ASA, in a move to make Storebrand Non-Life a pure run-off company.
Storebrand seeks to create value through strong customer focus, highly motivated employees and profitable operations. The company's activities combine environmental, social and financial targets. Storebrand is an knowledge-based company, and is committed to the personal development of its employees through targeted training and other measures. Through satisfied customers and skilled employees, Storebrand will provide a satisfactory return on the capital employed.
Storebrand increased its market share for mutual funds in 2002. Its share of the equity funds market increased by 1 percentage point. Gross inflows from new and existing institutional customers amounted to almost
Storebrand Life Insurance intends to retain and strengthen its position as the market leader for sales of pensions and life insurance products to the Norwegian corporate and retail market. In addition the company aims to expand its activities in the market for public sector pensions. The key factors that will help to ensure that Storebrand Life
Total assets: Finansbanken (million) 15 641 **) Of which 4 539 are corporate customers.
Storebrand Bank ASA will build upon the expertise and customer base of the two banks and the products and services they offer. The bank will develop, produce, market and sell financial products to the
Norwegian retail market and to corporate customers of the Storebrand group. In addition the new bank will target selected corporate customers and high net worth individuals in the Oslo and surrounding areas, where close relationships with customers and the market combined with key competencies will enable significant value creation for the bank and its customers.
Total assets of the group's banking activities 28.5 billion *) Incl. subsidiaries and 36 employees in Storebrand ASA
We are committed to being seen as dependable, forward-looking, easy to work with and a creator of new opportunities. These core values form the basis for Storebrand to enable customers to make the most of their finances, life situation and health.
Individual policies - early leavers from group pension schemes3) 239 738
Health insurance reduces sick leave Health insurance ensures quick access to high-quality treatment in private hospitals in Norway and abroad. Storebrand’s health insurance activities account for over 50% of premium income in the rapidly growing health insurance market. Our broad range of health insurance products meets the individual's need to be sure of access to medical attention, and gives companies the reassurance that they can avoid long periods of sick leave. The recent decision to make health insurance provided by an employer tax deductible, will help make the benefits of health insurance available to an increasing number of employees in the years to come.
Storebrand can trace its roots back to 1767. Our long history makes us resilient to short-term fluctuations, and provides a sound background against which to make important choices for the future. This was particularly important in the past year.
A challenging year 2002 was a year of financial turbulence, falling equity markets around the world and very weak earnings. In addition the extensive clear up that proved necessary at Finansbanken held back our results. Storebrand did not achieve its targets for value creation in 2002.
Openness, trust and respect pave the way for the healthy dialogue between management and employees that is essential for the continuing development of Storebrand as a competitive company.
Storebrand's activities are built up around three strategic business areas: life insurance, asset management and banking, with group pension products forming the basis for our strong market position. Storebrand is clearly the leading pensions provider for the
Norwegian corporate market, and the introduction of defined contribution pension schemes in 2001 opened up new growth opportunities for our pensions business. The progress we made in 2002 served to confirm the value of the investment and preparation
We are well positioned to take part in the strong growth expected due to each person`s need to save more for the future, and based on that every few Norwegians have sufficient life and health insurance cover.
By way of example only 10% of the 1 million Norwegians under the age of 17 are insured against illness and disability, and this is in stark contrast to the situation in neighbouring Sweden where more than 80% of the equivalent age group benefits from insurance. We saw a sound increase in sales of life and health insur-
ance in 2002, and it was particularly pleasing to see that our emphasis on health insurance is now producing very encouraging results. The strong growth currently seen in sales of health insurance is expected to be further encouraged now that the
NOK 100 billion. Storebrand Investments adopts a specialist approach, focusing its investment skills on the areas where we have a particular advantage. This commitment to a cost efficient and specialised strategy will ensure that Storebrand further strengthens its position as the leading asset manager in Norway.
We have taken steps to create a more efficient banking operation by merging Storebrand Bank and Finansbanken. The combined operation will have a lower cost base and a stronger balance sheet, giving it a more powerful presence in the market.
Storebrand’s customers will find that the merger gives them easier access to greater expertise.
Unfortunately many people still tend to see If and Storebrand as two sides of the same coin, and there is insufficient understanding in the market of what we represent and want to provide for our customers. It is therefore a priority for us to make our targets and ambitions more visible as we move forward, both internally and externally.
In order for a company to succeed in attracting the right employees, managers, customers and owners over the longer term, it is essential that it is firmly rooted in a clear and visible platform of corporate values. It takes time to build confidence and trust.
Storebrand is building and developing a shared platform of corporate values with the help of common core values, clear guidelines for business ethics and its commitment to corporate social responsibility.
We have put behind us a year of weak results, and were very much affected by the worst conditions seen in the equity markets for some 70 years. We used the year to carry out changes and improve efficiency, and we have strengthened the group's ability to deliver, based upon our strong and skilled team of employees. We are totally committed to success, and we will do what is necessary to create added value for our customers, owners and employees.
Storebrand, which has its head office in Oslo, is a leading financial group in the markets for pensions, life and health insurance as well as banking services and asset management, and has interests in non-life insurance through its shareholding in If Skadeförsäkring.
Norwegian banking market. In order to simplify the structure of the group's non-life insurance activities with a view to further restructuring and to improve focus on the group's core activities,
The Boards of Directors of DnB and Storebrand entered into an agreement on 29 May 2002 for the intended merger of the two financial groups. DnB cancelled this agreement on 29 June, and on 30 June the Board of Storebrand resolved to abandon negotiations. It had not proved possible to reach agreement on the exchange ratio and the further progress of the merger process.
Financial results: The group result showed a loss of NOK 1 701 million for 2002, as compared to a loss of NOK 1 430 million in 2001. This cannot be considered satisfactory.
Storebrand Livsforsikring: The company reported a loss for the year before allocation between policyholders and the owner of
line with the previous year. The pre-tax loss for the year after the release of additional statutory reserves was NOK 241 million as compared to a loss of NOK 15 million in 2001.
Storebrand's asset management activities reported a consolidated pre-tax loss of NOK 13 million for 2002 as compared to a profit of
NOK 14 million for the previous year. The weaker earnings reported for 2002 reflect the sharp falls seen in equity markets and the low level of net inflows to equity funds. Measures to restructure the asset management activities onto a lower cost base were intensified in 2002, and the year's results included a non-recurring charge of NOK 18 million in this respect. Ordinary activities therefore produced a profit of NOK 5 million. The good investment performance achieved for both equity and fixed income portfolios caused an increase in performance-based fees from 2001.
Socially responsible investment (SRI) is attracting increasing demand. Storebrand Investments is the only asset manager in
Norway with a developed in-house research capability that ranks companies on the basis of a variety of SRI criteria.
Finansbanken: The Finansbanken ASA group reported a pre-tax loss of NOK 409 million as compared to a loss of NOK 74 million for 2001. Profit before loan loss provisions was NOK 44 million as compared to NOK 228 million in 2001. The bank reduced its total gross lending over the course of the year, and this together with an increase in the volume of loans on which interest is no longer accrued caused a reduction in net interest income. Non-interest income was lower as a result of weaker sales of savings and mutual fund products. Significant non-recurring costs were incurred in 2002. This included costs related to the reorganisation of the asset management area and conversion of IT systems.
Finansbanken worked hard in 2002 on improving its risk management and reducing overall credit risk, and the results of these efforts were seen in the form of a drop in the volume of loans in default towards the end of the year.
Company ASA held through Storebrand Skadeforsikring AS and a 50% interest in Fair Forsikring in Denmark held by Storebrand ASA.
NOK 426 million for 2001. The group's non-life insurance results are largely determined by the performance of If and the pace at which Storebrand Skadeforsikring can release security reserves to its profit and loss account. Storebrand's share of If's results for 2002 was a loss of NOK 244 million as compared to a loss of
Denmark. The company reported increased sales in 2002, but as a relatively new company the business volumes achieved are not yet of sufficient size to permit a positive accounting result.
Storebrand's normal business activities as a financial group expose it to a wide range of financial risks. Through particular focus on managing market risk in its investment portfolios, Storebrand has maintained a satisfactory risk bearing capacity despite the turbulent conditions seen in capital markets over the last three years.
Storebrand Livsforsikring continually adjusts its exposure to market risk in response to the company's solidity. This relationship is also monitored by the relevant authorities and followed by the rating agencies. The group's capital base, which is made up of equity, subordinated debt, the market value adjustment reserve and additional statutory reserves in the life insurance company, amounted to NOK 14.6 billion at 31 December 2002 as compared to NOK
18.7 billion at the close of 2001. Of these amounts, the life insurance company’s capital base accounted for NOK 8.6 billion in 2002 as compared to NOK 11.8 billion in 2001. Storebrand has taken steps to significantly reduce the level of risk to which its activities are exposed in pace with the reduction in its capital base. This has included reducing the risk exposure of the life company's investment portfolio and strengthening the group's loss provisions, particularly in Finansbanken. In addition to the capital needed to meet the minimum capital adequacy requirement of 8%, the group has a capital base (risk capital) of NOK 6.3 billion.
Equity markets both in Norway and internationally have suffered the sharpest and most protracted fall in value seen for more than 70 years. Through its active risk management, Storebrand has maintained a satisfactory risk bearing capacity that gives it the opportunity to maintain a risk profile which offers potential in relation to a future upturn in market conditions.
Storebrand Livsforsikring reports its risk bearing capacity and market exposure frequently, even daily when necessary. Storebrand makes use of financial instruments as part of its portfolio management and risk management in accordance with the relevant legislation, regulations and internal guidelines.
Storebrand Bank is managed through standardised credit approval procedures and delegated credit authorities approved by the
The level of technical insurance risk incurred by the group is regulated by tariffs that are reported to the authorities. These tariffs are based on historical statistics.
4 668 million at 31 December 2002. The group’s capital ratio was 16.0 percent at the end of 2002, representing an increase of 3.1 percentage points from the previous year. In March 2002
In December 2002 Storebrand ASA issued a NOK 1.5 billion five-year bond in the Norwegian market to refinance in part an outstanding bond of NOK 1.8 billion due to mature in June 2003.
Moody's respectively. Storebrand Bank and Storebrand ASA are both rated Baa 1 (negative outlook) by Moody's. Storebrand ASA
Storebrand’s overall human resources objective is to ensure that the group can at all times attract, retain and develop highly motivated employees who have the capacity to cope with change.
Storebrand places great importance on management and staff training, and runs a number of programs in this respect. New developments in 2002 included a separate management development program for experienced managers. Storebrand has a wellregarded group trainee program which has been voted the best trainee program in the Norwegian financial sector for the last two years.
On 15 February 2002 Storebrand became the first company in the financial sector to enter into a collaboration agreement with the
Board more effective in these important areas. This also allows the
Board to focus more attention on the group's operational activities. Storebrand's management structure is described in more detail in the Corporate Governance section on page 42.
ASA in 2002 after having been a member since 1995. Grace
Reksten Skaugen was elected as a new member. Two of the members of the Board of Representatives elected by shareholders, Kristian Zachariassen and Tor Brandeggen, passed away in 2002. In addition Lucy Smith, Svein Rennemo, Sandra Riise and
Hoel, who was previously a deputy for the shareholder elected members, was elected as a member of the Board of Representatives.
Board of Representatives for the valuable contribution they have made to the company.
Storebrand’s core activities concentrate on long-term savings, asset management and personal risk products. Storebrand's results for 2002 were very much affected by conditions in the financial markets. Storebrand expects turbulent market conditions to persist, but the group's focus on risk and portfolio management has significantly reduced its sensitivity to continuing weak market conditions. Storebrand does not expect to see any early improvement in the prospects for sales of equity-related savings products, but the positive trends seen in 2002 for sales of personal risk and health insurance products are expected to continue.
Storebrand’s main focus will be on ensuring the profitability of its core activities. This will include making full use of the new opportunities available in the pensions and life insurance market, including areas such as defined contribution pensions, personal risk products and health insurance. The announced merger of the group's banking activities is proceeding according to plan. This will lead to new synergy benefits while at the same time aligning the banking strategy more closely with the group's overall strategic direction. Work on greater specialisation and efficiency in the group's asset management activities is continuing. At the same time active risk management for all parts of the group will play an important role in managing the company's liquidity and protecting its financial condition at a time of turbulent market conditions.
Storebrand has maintained the strong corporate culture it has built around its core values. The group will continue to develop this corporate culture and further demonstrate its commitment to corporate social responsibility.
Storebrand ASA recorded a loss for the year of NOK 73.7 million.
Detailed CVs may be found under More Information on the Investor Relations site at www.storebrand.com
A richer life for pensioners Freedom from financial worries is an important factor in a happy retirement. More than 7 000 companies with over 200 000 employees rely on Storebrand for their group pension schemes. In addition almost 100 000 Norwegians have private pension policies with us. We are currently paying pensions to around 170 000 pensioners who have arranged private policies or are members of company pension schemes. We intend to strengthen our leading position through continuously developing and improving the products and services we offer so that we continue to offer attractive pensions solutions for our institutional and individual costomers.
Storebrand can trace the origins of its life insurance activities back to 1861. More than 7 000 companies with over 200 000 employees rely on Storebrand for their group pension schemes.
A major feature of the corporate pensions market is that around half of the companies setting up a pension scheme for the first time now choose a defined contribution scheme. Storebrand has enjoyed success in this market, and expects to see further strong growth in 2003.
Storebrand achieved satisfactory growth in both premiums written and premium reserves transferred to the company in 2002.
It seemed likely that 2002 would see even more transfers of public sector pension schemes from KLP to private sector providers than in 2001. The Labour Court ruled on 8 October 2002 that private sector providers should be granted an exemption to permit them to continue to offer pension schemes for municipalities.
Sales to the retail market showed a number of encouraging trends in 2002, but overall sales volumes were weaker than expected. Sales of savings-related products were adversely affected by the turbulent conditions seen in equity markets, and sales of Storebrand’s unit linked products in 2002 were little changed from the previous year at approximately NOK 1 billion.
Sales increased by around 40% in 2001, with a further 35%
growth in 2002. With effect from 1 January 2003 health insurance premiums paid by employers are no longer subject to tax or employer's social security payments. This will create significant further growth potential in this market.
Storebrand Life Insurance reported an operating loss of NOK 1 253 million for 2002 as compared to a loss of NOK 422 million for 2001.
Storebrand has released NOK 1 012 million of additional statutory reserves to meet the shortfall. The remaining additional statutory reserves amount to NOK 3 034 million. The owner incurred a deficit of NOK 241 million for the year.
The risk result was NOK 194 million in 2002 as compared to NOK
238 million in 2001. The fall of NOK 44 million relates to group
(NOK -35 million), while the risk result for group pension insurance showed an improvement of NOK 27 million and non-life insurance products improved by NOK 2 million.
Operating costs for Storebrand Life Insurance totalled NOK 917 million in 2002 as compared to NOK 875 million in 2001. The increase of NOK 42 million is largely due to inflation and increased costs in the area of customer services. These costs relate to the introduction of new products and measures implemented to further improve the service the company offers its customers.
Interest result is the difference between the realised return and the guaranteed return on policies. The average guaranteed return on insurance policies in 2002 was 3.8%. Risk result arises as a consequence of the incidence of mortality and disability during the period differing from that assumed for the premium tariffs.
Embedded Value (EmbV) is defined as the net present value of future post-tax profits for the company's owner, and is based on the best possible forecast of the expected post-tax profits from existing business that will be allocated to the company's owner plus the value of unrestricted equity. Calculations of EmbV are based on international standards and are used as an analytical tool for the valuation of life insurance companies.
Total profit allocated to the shareholder’s 1) Storebrand Life Insurance Group reported a loss of
The future prospects for conditions in the capital markets still look very uncertain. This demands a particularly active approach to managing the market risk to which the company is exposed and the risk capital available to the company.
This makes it possible to retain an exposure to higher-risk assets in order to participate in a future market upturn.
Storebrand has introduced new techniques for active risk management that proved to work well in the challenging situation in which the company found itself in 2002.
Group Group Individual Individual pension life capital pension Non-life Total Total Total
NOK million insurance insurance insurance insurance insurance 2002 2001 2000 -of which transferred to premium reserve -150.2 -11.3 -161.5 -217.3 -206.7
Change in premium reserve/sec. fund -240.9 -0.5 -0.4 0.7 -241.1 -25.2 -55.0
To(-)/from(+) owner's equity -net return on share capitalb) -363.8 -0.40% of policyholders' funds -375.5 -risk margin earned by owner's equity -55.2
Storebrand Investments offers a complete asset management concept based on active management using a specialised investment process. Storebrand's internationally competitive specialist products and its leading position for socially responsible investment will make Storebrand Investments the preferred asset manager in Norway whilst also attracting international asset management mandates.
Storebrand Kapitalforvaltning (Storebrand Investments) manages assets totalling NOK 140 billion for pension funds, private and public sector institutions, private individuals and the Storebrand group companies. Storebrand offers both Norwegian and international customers discretionary asset management services, a wide range of Norwegian and international mutual funds and investment products with a particular focus on socially responsible investment (SRI). Storebrand Investments has an active global investment strategy based on analysis of fundamentals and strong risk management resources.
The developments seen in equity markets over recent years have put the entire asset management industry to the test. The difference in results obtained by good and poor asset managers has become much more apparent. Of the 61 Norwegian equity funds marketed in Norway, only 38% managed to outperform their benchmark index in 2002. These trends serve to stress the importance of a well-structured and consistent investment philosophy and investment process.
Storebrand Investments continued to increase the level of specialisation in its asset management organisation in 2002. First-class asset management demands continual monitoring of each investment portfolio, paying full attention to a range of factors including market risk, liquidity and currency hedging. Storebrand has now separated all operational functions from the task of security selection. This has led to improved value added, both for the running operations and for the investment management decision process itself. The objective of a more specialised approach is to focus on areas which are particularly suited to Storebrand
Falling volumes of assets under management have reduced the income base of the entire asset management industry. The total value of assets under management for Norwegian registered equity funds has fallen by NOK 59 billion since August 2000, equivalent to 56%. The winning players in this market are the companies that prove able to adapt their organisation to meet continuously changing conditions. Storebrand Investments started to reduce its costs in early 2001, and an expanded program of measures was implemented in 2002 which will restructure the organisation onto a cost base that is 20% lower than in 2001.
(Morgan Stanley World index). Weak equity market performance caused sales of mutual fund-based savings to fall well short of expectations.
Storebrand Investments made the task of maintaining its customer relationships a priority in 2002. It increased the number of its institutional customers by 21, principally from the municipal sector. Gross sales to the institutional market amounted to almost
2 260 million. Other fund management companies saw a net outflow of NOK 755 million over the same period. This helped to increase Storebrand’s share of the Norwegian mutual fund market from 10.1% to 10.8%. The group's market share for equity funds increased from 13.0% to 14.0%.
was NOK 12.5 million as compared to a pre-tax profit of
NOK 14 million in 2001. The restructuring implemented in 2002 included measures that will lead to a reduction of staff numbers from 160 to 132.
Market conditions caused a drop in the value of total assets under management, and this caused a reduction in the income base.
Management fees earned from mutual funds were 21% lower in 2002 (compared to 2001). Performance-based fees showed a sharp improvement from 2001, and this can be explained by the strong management performance achieved for both equity and fixed income portfolios.
Storebrand Investments generated a generally strong relative investment performance in 2002. By way of example, 68% of discretionary portfolios for external clients outperformed their benchmark index, while 33 of 57 mutual funds produced a better return before management fees than their respective indices.
Verdi’ was the second best Norwegian equity fund in the market.
The group's more growth-oriented funds produced weaker results as a natural consequence of their investment strategy. The majority of the group's international equity funds and most of its fixed income funds outperformed their benchmark index in 2002.
During 2002 Storebrand Investments focused both on developing its existing products as well as new ones. The company strengthened the fixed income sector of its product range, and a new team with a forward-looking asset management concept was established for global bond and foreign exchange. Storebrand also launched its first in-house hedge fund-of-funds, ‘Summit Uno’, in 2002.
Socially Responsible Investments (SRI) are attracting increasing demand both in Norway and internationally. Storebrand
Investments is the only asset manager in Norway which has developed in-house research capability for SRI. Investments are ranked by identifying the companies that perform best in relation to specific social responsibility criteria. In addition the process excludes companies involved in areas such as alcohol, tobacco, weapons, nuclear power and certain types of genetically modified organisms. Considerable effort is also devoted to continuously monitoring any corporate breaches of human rights.
Storebrand has until now carried out its banking activities through two separate banks, Storebrand Bank and Finansbanken. Storebrand decided in Autumn 2002 to merge the two banks. The new bank will have total assets of some NOK 29 million, and will make Storebrand a more powerful player in the Norwegian banking market.
Following an evaluation over the course of 2002 of how to best co-ordinate the group's two banking operations, Storebrand decided in November to merge Storebrand Bank and Finansbanken.
Bank ASA will build on the expertise and customer base of the two banks and the products and services they offer.
The merger will offer Storebrand’s customers a more broadly based banking service, with a wider range of products to choose from while retaining a personal style of service and financial advice.
Storebrand Bank has overall responsibility for Storebrand’s functions related to advice-based sales and customer services for savings, banking and insurance products and services, targeting the general retail market and the affluent segment of the market in particular. In addition Storebrand Bank distributes certain products provided by external suppliers.
Norway as well as 20 agents. The bank also operates a leading
Storebrand Funds has a total market share for equity mutual funds of 22% in terms of gross inflows, and it had a 13% market share of total funds under management at the close of the year.
The negative trends seen in the savings market in 2001 continued throughout 2002. This can be illustrated by figures for net new inflows to mutual funds, which fell by all of 60% in 2002. The
higher than in 2001, but weak conditions in the financial markets were reflected in depressed sales of savings products. The bank increased its lending by 4% in 2002, and attracted a 14% increase in deposits.
Acta and Storebrand Finans are excluded, the underlying pre-tax loss was NOK 26.1 million for 2002 as compared to a loss of
NOK 156.9 million in 2001. The 2002 accounts include a provision of NOK 20.8 million for restructuring costs expected in 2003.
Total assets amounted to NOK 12 919 million at the close of 2002. The proportion of lending funded by customer deposits increased to 65% from 59% a year earlier. In addition to ordinary customer deposits, Storebrand Bank takes deposits in the form of bonds issued to its customers in connection with sales of structured products. If these deposits are also taken into account,
Storebrand Bank maintains a prudent balance of short-term and long-term external funding. The total capital base amounted to
114.5 million before restructuring costs, write-downs and loan losses. This is equivalent to 0.63% of average total assets. Costs and provisions for restructuring amounted to NOK 25.9 million, while write-downs of goodwill and fixed assets in connection with restructuring amounted to NOK 45.1 million. The net increase in loan loss provisions amounted to NOK 401.3 million for the year.
The bank also recognised a loss of NOK 50.8 million on securities classified as financial fixed assets, including a loss of NOK 31.3 million in connection with the sale of E*Trade Norge. The pre-tax loss for 2002 was therefore NOK 408.5 million, with a net loss for the year after a tax write-back of NOK 85.4 million of NOK
Net interest income amounted to NOK 388.3 million, equivalent to a net interest margin of 2.14% of average total assets. Interest income weakened over the course of the year as a result of lower gross lending volumes and an increase in the volume of loans on which interest is no longer accrued.
Denmark and Finansbanken Formuesforvaltning, provisions and write-downs of fixed assets totalling NOK 25.0 million were recognised in the fourth quarter. In addition goodwill in
Gross lending to customers fell by NOK 2 991 million in 2002, equivalent to a reduction of 17.3%. This was due in part to the previously announced measures to reduce the bank's exposure to shipping, and the shipping portfolio fell by NOK 1 836 million to NOK 1 403 million over the course of 2002. The bank also reduced its exposure to securities financing and, to a lesser extent, to real estate financing. Considerable effort was devoted in 2002 to improving the bank's risk management and reducing
The group's capital base at the close of 2002 amounted to NOK
An upward trend in the volume of non-performing loans in the first three quarters of the year was reversed in the fourth quarter.
492 million was NOK 1 750 million, equivalent to 12.2% of gross lending.
Net loan loss provisions for the year were NOK 401.3 million.
Total unspecified provisions amounted to NOK 296.8 million at the close of 2002, equivalent to 2.1% of gross lending.
The bank held repossessed assets totalling NOK 12.6 million at 31 December 2002.
Storebrand's banking activities were heavily involved throughout 2002 in implementing measures to improve profitability, and there have been extensive restructurings at both banks.
Finansbanken also restructured its activities and reduced staff numbers, and this together with the cancellation of certain costintensive projects and activities has created significant cost savings which will have full effect from 2003 onwards. Staff numbers were reduced by 42 full-time equivalent positions in 2002.
For Finansbanken 2002 was a year of extensive work on the lending portfolio, especially in respect of shipping and lending to financial investors. Finansbanken also restructured and reduced its asset management activities, and closed its offices in Bergen and
Storebrand’s involvement in Non-Life insurance comprises the activities of Storebrand Skadeforsikring AS (Storebrand Non-Life),
owns 100%, 22.47% and 50% respectively of the share capital of these companies. Storebrand Non-Life owns 100% of Oslo
In 1999 Storebrand Non-Life and Skandia entered into an agreement to establish If, and both groups transferred their Non-Life insurance activities into If. This caused a change in the role of
Storebrand Non-Life from being an operational Non-Life company principally active in the Norwegian market to becoming the owner of a 44% interest in the largest Nordic Non-Life insurance company.
Denmark of 31.4%, 26.0%, 34.0% and 5.3% respectively. If had 7,582 employees at the close of 2002. The following table shows the shareholding structure of If: Company Ownership interest
Fair Forsikring AS operates a Non-Life insurance business for the retail market in Denmark. The company was incorporated in
November 1998. Fair has built up a visible presence in the Danish market over a relatively short time, and is growing rapidly.
Storebrand ASA in December 2002. The transaction was approved by the Norwegian Banking, Insurance and Securities Commission and the Norwegian Ministry of Finance. Storebrand Non-Life will continue to operate the group's remaining run-off business
Non-Life insurance activities reported a net profit for the year of
NOK 125 million in 2002 as compared to a loss of NOK 566 million in the previous year. The year produced an operating loss of
SEK 2 080 million for 2002 (100% in accordance with Swedish accounting principles - S GAAP). The combined ratio was 106.1% in 2002 as compared to 113.1% in 2001 (pro forma). The improvement in underwriting result reflects the measures implemented in respect of premiums and costs, as well as an improvement in claims paid. All business areas showed an improvement, but
NOK 43 million, which is NOK 19 million better than in 2001.
Oslo Re reported an operating profit of NOK 17 million in 2002, representing an increase of NOK 17 million from 2001. This was principally due to non-recurring income resulting from write-backs of receivables previously written off and currency effects. Total technical reserves for own account fell by NOK 126 million to stand at NOK 420 million at the close of 2002.
The statutory security reserves were reduced further in 2002, releasing NOK 200 million to the profit and loss account. These reserves amounted to NOK 284 million at the close of 2002.
Net profit/loss from non-life insurance 125 -225 -566 *) NOK 17 million in gain on sale of If- shares comes in addition.
**) Investment result includes the actual investment result for If and an estimate of the return on the non-life portfolio transferred from Sampo. Aggregate return was 2.5%.
A driving force for sustainable investment An increasing number of customers expect the companies they deal with to demonstrate a commitment to ethical business practices. Storebrand has identified corporate social responsibility (CSR) as one of the central pillars for our activities, and our CSR action plan encompasses virtually all of the group's activities. For instance Storebrand Life Insurance was the first life insurance company in Norway to apply ethical criteria to all its investments in Norwegian and international equities.
The new action plan features some changes from the previous plan.
We now aim to apply the action plan to all the group’s activities, and have set concrete targets for implementation and against which progress can be monitored. We intend to report performance in terms of the triple bottom line, which focuses on financial results, environmental impact and social responsibility. Reporting will be based on the internationally recognised system Global Reporting Initiative (GRI). In addition we have chosen to base the plan on Storebrand’s relationship with its most important stakeholder groups: employees, customers, shareholders, suppliers, the Norwegian community and the international community. The new plan runs for two years rather than the previous three-year plan. This will ensure better co-ordination with the group's normal business operations and make it easier to keep the action plan up to date. With the new plan for 2003-2004, we go one step further with regard to integrating corporate social responsibility into all the group’s activities.
Storebrand sees the action plan as an important tool in the overall task of setting concrete targets for its commitment to corporate social responsibility. Using a detailed action plan helps us to continually develop our understanding of how we can contribute to more sustainable development across a range of different areas. This process does of course take time, and we learn not only from our successes but also from the difficulties we experience along the way.
Storebrand Funds launched the Norwegian Red Cross Global Fund in 1999. In view of the low level of interest shown in this fund,
Objective 3: Management of the company's premises and real estate investments
Storebrand's real estate management function has initiated a variety of measures to improve the environmental standard of all the office premises it manages, including seminars and training for its tenants.
Storebrand has introduced environmental requirements in respect of the general purchasing, catering supplies and premises management carried out through Adviso. All supply contracts will be reviewed during the new action plan period in order to implement more stringent requirements wherever possible.
Storebrand produced a revised business ethics handbook which was discussed and approved by the Board of Directors in February 2001 and is now available on the intranet and Internet.
Cross and the MOT Foundation, while the Venture Cup project has now finished. Storebrand entered into a new collaboration with the
Norwegian Cancer Society in 2001. We allocate funds to support a variety of charitable initiatives through the biannuall "You can do it"
Environment Program insurance initiative, and has provided the chairman of this body throughout its existence. Our involvement in these international bodies allows us to learn from other companies, share our own experience and be a driving force for these issues in the Norwegian financial sector.
"Storebrand Investments ranks among the top three world's best practice SRI fund managers" Mistra, 2001 www.mistra-research.se
A more detailed description of Storebrand’s ambitions in the area of corporate social responsibility for 2003-2004 and a report on corporate social responsibility in 2000-2002 can be found at www.storebrand.no/fsa. Copies of the new action plan can be ordered by sending an e-mail to samfunnsansvar@storebrand.no
STOREBRAND'S MANAGEMENT STRUCTURE Board of Directors The Board of Directors of Storebrand ASA has nine members, each elected for a two-year term of office. Six members of the
Board are elected by the Board of Representatives on the basis of nominations put forward by the election committee. Three members of the Board are elected by and from among the employees.
The Board meets at least nine times each year. In 2002 the Board held 25 meetings and one Board conference. The work of the
Board is subject to a specific mandate. In order to ensure sound and well considered descisions, considerable importance is attached to ensuring that meetings of the Board are well prepared and that all memebers are, so far as possible, able to participate fully in the decision making process. The Board approves an annual schedule for the dates and topics of its meetings. The agenda for each meeting is determined by the chairman on the basis of the annual schedule together with the list of matters carried forward from previous meetings. The agenda items are prepared in advance by way of written reports to the members of the Board, and Board papers are normally distributed one week before each meeting. A Board Secretary supports the Board.
Board committees The Board has established a Remuneration Committee and an
Members are each elected for a two-year term of office. The duties of the Board of Representatives include making recommendations to the General Meeting in respect of the Board of Directors’ proposal for the annual report and accounts and the election of six of the nine members of the Board of Directors, including the chairman of the Board. The Board of Representatives also determines the mandate
Control Committee The Control Committee has five members elected by the General
Meeting. Each member is elected for a two-year term of office.
General Meetings Storebrand ASA holds its Annual General Meeting no later than the end of June each year. Storebrand has only one class of shares. All shareholders are entitled to participate in general meetings of the company, and arrangements are also made for proxy voting. There are no specific restrictions on ownership of shares or voting rights in the company other than the general restrictions in Section 2-2 of the Financial Institutions Act. The
The external auditor is appointed by the General Meeting and is responsible for the financial audit of the company. The external auditor delivers the Auditors’ Report in respect of the Annual Accounts, and also undertakes a limited-scope audit of the interim accounts.
Executive management The Board approves a specific mandate for duties of the Chief
Executive Officer (CEO) of Storebrand ASA in respect of the management of Storebrand. The CEO of Storebrand ASA is the chairman of the Board of Directors of all the important subsidiaries in the group
The strategy and planning process is carried out on an annual basis, and produces a rolling three-year plan. The annual process is initiated by the Board of Directors’ review of group and portfolio strategies, financial targets and guidelines that provides the executive management with the necessary basis for its work. The management of each business area then produces forecasts and proposals for overall objectives, action plans, investment policy, budgets and forecasts. These proposals are first approved by the board of each subsidiary before submission to the Board of Directors. This process identifies target parameters for the scorecard components of finance, customers, internal processes and learning/growth that are addressed by the action plans and play a central role in ensuring that the overall targets set by the strategy and planning process are achieved. These parameters provide the basis for ongoing management reporting ("Storebrand Kompass").
Storebrand Kompass is the monitoring tool used by the company for reporting to the Executive Committee and Board of Directors on financial and operational target figures, trends and corrective measures. The report is based on balanced scorecard management, and is designed to provide early indications of any activity showing an adverse deviation in order that corrective measures can be implemented rapidly. All the group’s business areas produce monthly reports of the complete range of the target parameters, and these reports are amalgamated into a joint report for the whole group.
Each employee works with his or her manager to produce a personal scorecards and action plan for the year. The personal scorecards combines individual targets with targets for the department in which the individual works in order to encourage co-operation with colleagues and enhance performance.
International research studies demonstrate a clear relationship between employee remuneration systems and corporate value creation. Storebrand's remuneration systems follow internationally recognised remuneration principles. Employee appraisal linked to bonus payments ensures that employees have a personal interest in the group's financial performance.
Processes Do our internal processes meet our standards for quality and cost effectiveness?
Storebrand conducts its ownership interests in listed Norwegian companies on the basis of the policy guidelines it established in 1998. In addition Storebrand plays an active role in the development of corporate governance through its membership of the
Eierforum, a forum representing Norway's largest institutional investors. The members of Eierforum have developed 10 ‘rules’
for corporate governance, and these also form the guidelines for Storebrand’s policy on corporate governance in respect of its own shareholders. More information on Storebrand’s Corporate
>> Corporate bodies. Membership of a company’s corporate bodies should ensure that the interests of all shareholders are represented.
>> Investor relations. A company should have a consistent policy for the distribution of information to the market, and the information provided should be sufficient to form the basis for a thorough analysis of the company and to prepare for voting at general meetings etc.
>> Incentive arrangements. Information on a company’s arrangements for rewarding its senior management and directors, including salaries, bonuses, share options etc., is considered to be an important issue. Storebrand takes a positive view of an element of variable remuneration determined by factors such as profits or share price performance, so long as the arrangement can be seen as a real incentive for the individuals involved. The overall level of each individual's remuneration should be related to his or her workload and responsibility, as well as the results actually achieved. Members of a company's board should not normally hold share options, but it is desirable for them to own shares in the company.
>> Transactions involving share capital. All proposals to undertake transactions involving a company’s share capital should be soundly based in terms of structure, timing and scale. This may include various forms of share issues, buybacks of the company’s own shares, mergers and de-mergers.
Storebrand will maintain a dialogue with a company’s management as part of its normal analysis work, particularly where
>> Communication with the board of directors. It is natural for
Storebrand to discuss its views with the board of directors, and this may include issues such as strategy and senior management.
>> Composition of the board of directors. Storebrand participates in company election committees and supervisory boards in order to exercise influence on the composition of the board of directors and the work of the board. Storebrand plays an active role in proposing suitably experienced candidates for nomination to boards, and intends to pay particular attention to encouraging a higher proportion of female board members. It is not normally desirable for Storebrand to be represented on the boards of listed companies in view of the extensive restrictions this creates in respect of trading in these companies’ shares >> Collaboration with other shareholders.It may from time to time be appropriate, or even in some cases essential, for
>> Socially responsible investments Storebrand carries out its own investment research on companies that are included in the indices used in Socially Responsible Investment (SRI)
>> Voting. For Norwegian companies, Storebrand will in most cases exercise its voting rights at company general meetings.
Shares in Storebrand ASA are quoted on the Oslo Stock Exchange
(Oslo Børs) with the ticker code STB. Storebrand ASA’s share capital at the start of 2002 was NOK 1 388.4 million. Following a new issue of shares placed with employees in May 2002 of NOK 610 500, share capital at 31 December 2002 amounted to NOK 1 389.0 million, made up of 277 802 422 shares each with a face value of NOK 5.
Storebrand ASA is one of the largest companies listed on Oslo
Børs in terms of the number of shareholders. The company has shareholders from all the municipalities in Norway and from 39 countries. Storebrand’s ownership structure is characterised by a disproportionate number of shareholders with small numbers of shares, and 63% of all shareholders own 100 shares or less. The company had 38 194 shareholders at 31 December 2002 as compared to 37 717 at 31 December 2001. The 20 largest shareholders own in total 197 291 940 shares, representing 71% of the share capital.
The 20 largest shareholders at 31.12.2002 Shareholder Country No. of shares %
State Street Bank & Co. (NOM)* USA 4 510 169 1.62
The Board of Storebrand ASA has been granted a mandate by each Annual General Meeting since 1996 to increase the company 's share capital to permit shares to be placed with employees of the Storebrand Group. The intention is to involve the employees more closely in value creation in the company. On 24 April 2002 the Annual General Meeting granted the Board a mandate to increase the company's share capital by up to NOK 3 million through one or more issues for cash. This mandate is valid until the 2003 Annual General Meeting. In May 2002 every employee was given the opportunity to buy 165 ordinary shares at a price of NOK 40 per share. As many as 53% of the employees took advantage of this offer, and 122 100 shares were subscribed.
11 934 million, down from NOK 18 798 in 2001. Turnover in relation to the average number of shares outstanding in 2002 shows a rate of turnover of 108.7%, making the Storebrand share one of the most heavily traded shares on the Oslo Stock Exchange.
19.20 respectively. The price on 31 December 2002 was NOK 26.
This represents a fall of 50% over the course of 2002. The fall in
Storebrand’s share price was largely related to a general fall in share prices, and was in line with indices for European insurance companies.
However in view of the weak results reported for 2002, the Board has decided to recommend to the Annual General Meeting to be held on 29 April 2003 that no dividend be paid in respect of the 2002 accounting year.
Annual Report and is included here by way of explanation for the international reader: There are particular rules for shareholders resident in Norway relating to the taxable gain or loss on the sale of shares. When shares in Storebrand ASA are sold by shareholders resident in
On a sale of shares, the opening value/purchase price of the shares will be adjusted by the total of the RISK amounts during the period of ownership.
As one of the country’s leading financial institutions, Storebrand is dependent on maintaining an orderly relationship with the financial markets and supervisory authorities. The company therefore places particular emphasis on ensuring that its routines and guidelines satisfy the formal requirements imposed by the authorities on securities trading. In this connection the company has produced internal guidelines for trading in the company's shares by those with inside knowledge. These guidelines are based upon the current legislation and regulations governing insider trading. The company has its own compliance system to ensure that the guidelines are followed.
Storebrand wishes to maintain and further develop the company’s good contacts with all participants in the national and international capital markets. The group has a separate investor relations unit within its finance department. This unit is responsible for establishing and co-ordinating contact between the company and external contacts , such as analysts, the stock exchange, shareholders and investors. The provision of timely and relevant information forms an important part of the company's commitment to provide information to the stock market.
Storebrand continuously strives to improve the efficiency of our activities from both a financial and environmental perspective. As part of this process the company has decided to replace the printed form of its interim reports with an electronic edition. All quarterly interim reports together with the related presentations and press releases will be published on the company's web pages at www.storebrand.no.
Anyone wishing to receive interim reports in printed form should contact the company to make the necessary arrangements.
Storebrand has one class of shares, each carrying one vote. The company holds its Annual General Meeting each year before the end of June. Shareholders who wish to vote in a general meeting must notify the company no later than 16.00 hours on the third business day before the date of the meeting.
office, telephone +47 22 31 26 20, can also provide guidance and information.
Active management of customers' savings By the close of 2002, customer assets under management by Storebrand totalled almost NOK 140 billion. The group's banks had NOK 14 billion of deposits from customers. Storebrand strives to generate the best possible investment return for customers. In 2002 Storebrand launched a global fund offering active asset allocation between equities and fixed income, making it the first Norwegian asset manager to offer such a fund. The asset managers responsible for this fund follow market developments closely and invest in the companies, sectors and regions that are expected to produce the strongest growth. This means that ‘Storebrand Aktiv Allokering’ will always allocate assets where the asset managers believe returns will be highest.
Profit and Loss Account Storebrand ASA 1 January - 31 December
Shares and participations in group companies 6 8 972.8 7 418.2 7 217.0
Total equity capital and liabilities 12 122.1 11 173.6 11 599.1
Insurance premiums for own account 10 170.1 9 579.3 9 595.9
To (from) market value adjustment reserve 843.9 2 154.2 5 598.2
To (from) additional statutory reserves - life-insurance 1 011.7 407.6 -450.9
Changes in security reserve etc. - non-life insurance 199.2 278.8 335.7
Paid in capital and retained earnings 37 8 534.5 9 616.7 10 544.8
Liabilities to other financial institutions 35 4 290.6 4 350.7 4 280.5
Deposits from and due to customers 35 13 198.9 13 900.2 14 047.0
Claims and benefits paid - direct insurance -6 395.4 -7 447.3 -6 528.8 Claims settlement from reinsurance in respect of claims and benefits paid 115.7 170.1 31.4
Cash flow from investment activities Receipts from loans to and claims on other financial institutions 21.3 -146.9 -126.6 Receipts on claims previously written off 0.3 0.7
Cash flow from financing activities Deposits from customers 18 897.0 18 285.2 20 610.4
Deposits from Norges Bank and other financial institutions 30 935.8 23 451.0 18 732.7 Repayment of deposits from Norges Bank and other financial institutions -30 316.5 -23 395.4 -17 569.0 Repayment of long term lending -1 432.9 -130.7 -1 004.9 -1 432.9 -192.6 -410.7 Receipts from taking up term loans 2 732.5 500.0 2 753.3 732.5 107.7 Receipts from issue of short-term debt instruments 3 055.8 5 338.6 4 417.3 Repayment of short-term debt instruments -5 038.7 -5 787.9 -1 750.0 Receipts from subordinated loan capital 86.5 198.5 Repayment of subordinated loans -964.8 -703.1 Receipts from issue of bonds and other long term funding -111.5 1 437.3 906.4 1 114.1 Repayment of bonds and other long term funding 391.9 910.3 -1.0 Receipts from issue of new capital 5.8 5.8 5.8 282.2 307.8 277.4 Receipts from issue of other capital 117.1 72.4 Payments on redemption of share capital 2.0 Dividend/group contribution payments -644.1 -277.4 -305.3 -277.4 Receipts/payments of group contribution/dividend 2 598.7 1 589.7 Net cash flow from financing activities 1 193.9 2 329.7 313.2 6.7 1 664.5 7 211.8
Net movement in cash and cash equivalent assets -29.2 -7.2 -197.4 3 887.0 -851.3 1 687.4 Cash and cash equivalent assets at start of the period for new companies 20.6 6.7 Cash and cash equivalent assets at start of the period 121.8 129.0 326.4 4 069.0 4 913.6 3 226.2 Cash and cash equivalent assets at the end of the period 92.6 121.8 129.0 7 976.6 4 069.0 4 913.6
Write-down of fixed assets 323.0 136.7 430.2 Other non-cash items 25.7 645.5 6 751.8 Difference between booked pension cost and payments/receipts to pension scheme -64.8 -57.2 7.8 -5.0 Items classified as investment or financing activities 17.8 325.1 -2 648.2 81.1 367.3 -783.2
Net cash flow from operational activities for the year -680.8 -283.2 -398.9 2 158.0 -2 430.6 7 130.2
Receipts on sale of real estate Payments on purchase of real estate
To the Annual General Meeting of Storebrand ASA Auditors’ Report for 2002
We have conducted our audit in accordance with the Norwegian Act on Auditing and Auditors and good auditing practice in Norway.
Good auditing practice requires that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a sample basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. To the extent required by law and good accounting practice an audit also comprises a review of the management of the Company's financial affairs and its accounting and internal control systems. We believe that our audit provides a reasonable basis for our opinion.
• the company’s management has fulfilled its duty to produce proper and clearly set out registration and documentation of accounting information in accordance with the law and good accounting practice.
With reference to the auditor's report of 24 February 2003 the Control Committee recommends that the Annual Report and Accounts proposed be adopted as the Annual Report and Accounts of Storebrand ASA and the Storebrand Group for 2002.
Change in insurance reserves for own account -3 333.1 -1 905.4 -1 194.3
Expenses arising from financial assets -18 496.8 -17 465.6 -20 588.3 - of which operating expenses -139.1 -123.2 -144.9
Shares and other equity investments 10 692.3 22 060.4 35 180.3
Bonds and other securities - fixed yield 14 346.2 28 102.4 28 043.5
Complete Annual Report for Storebrand Life Insurance Group can be found at: www.storebrand.com./ir
Note 6: Parent company's shares in subsidiaries and associated companies s. 64
Note 16: Senior executives, non-executive officers and other connected parties s. 67
Note 21: Net interest and commission income: banking activities s. 71
Note 35: Analysis of deposits from customers and liabilities to other financial institutions s. 80
Accounting Act are applied to all other activities. The presentation of the accounts and the information provided in the notes is based on the requirements set out in the Accounting Act and adapted for the group's activities in order to provide the best possible picture of the group's overall activities.
Investments considered to be of strategic importance where the group owns between 20% and 50% of the voting capital (associated companies ), are consolidated in accordance with the equity method. This implies in general terms that the ownership interest is recognised in the accounts in line with the consolidation principles described in this section, but is presented as a single line in the profit and loss account and balance sheet respectively (‘single line consolidation’).
Translation of foreign subsidiaries The profit and loss accounts of foreign subsidiaries are translated to NOK
Elimination of internal transactions Internal receivables and payables, internal profits and losses, interest and dividends, etc. between group companies are eliminated in the consolidated accounts. Gains and losses on internal sales to/from Storebrand
Deferred tax The tax charge in the profit and loss account consists of tax payable and changes in deferred tax and deferred tax assets. Tax payable is calculated on the basis of the taxable profit for the year. Deferred tax and deferred tax assets are calculated on the basis of timing differences between accounting and tax values and losses and unused allowances carried forward. Net deferred tax assets are recorded in the balance sheet to the extent that it is considered likely that it will be possible to make use of the benefit they represent at some future date.
The method used to value properties and real estate in the accounts differs as between the life insurance business and the group’s other businesses. The group's life insurance activities value properties and real estate at market value in the accounts. Market value is reassessed annually for the purposes of the annual accounts, and any changes in valuation are recognised to profit and loss. Normal financial deprecation is not applied to real estate. The entry in the accounts for properties and real estate includes all types of property and real estate, including real estate assets held through a separate limited company or through a
Norwegian partnership (ANS). The accounting principle for property and real estate is that reality should take precedence over form. For the purposes of the life insurance company, these holdings are investments in property and real estate in just the same way as directly owned property and real estate assets.
and an assessment of the future development in market rents. The yield requirement is based on the expected future risk-free interest rate and an individually determined risk premium, dependent on the letting situation and the building’s location and standard.
Loans Loans advanced are carried at nominal values in the balance sheet, reduced by provisions for losses calculated in accordance with the
These include losses arising on the borrower’s bankruptcy, insolvency or composition with creditors, or where the companies consider it is overwhelmingly likely that the loss is final. When an evaluation of a facility in default identifies the need for a specific loan loss 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 writedown as a result of a fall in value of such properties, are recognised as part of loan losses.
Arrangement of long term funding/subordinated loans/bond loans The direct costs involved in taking up long-term funding are capitalised and are amortised to the next interest fixing date/maturity if the costs are material. Premiums/discounts on the issue of debt are recognised as income/expense by adjusting the interest expense of the bond issued over the period to maturity or the next interest fixing date. Holdings of own bonds are netted against bond indebtedness. Where own bonds are purchased in order to be cancelled, any losses or gains arising as a result of the purchase are recognised to the profit and loss account. The group's banking activities routinely buy back own bonds as part of their continuing funding activities. Losses or gains arising as a result of the purchase or sale of own bonds for this purpose are amortised over the remaining maturity.
Equity index bonds The issue of equity index bonds comprises three elements: the issue of a bond loan, the issue of a call option related to a stock exchange index and the purchase of an option to fully hedge the option element of the index bond. The bond loan and the option agreements are entered into simultaneously. The discount on the bond element is amortised up to nominal value in the period to maturity as an interest expense. The option premium received on the option issued and the option premium paid on the option bought are recorded gross. The difference between premium paid and received and the amount of commission paid is recognised to profit and loss at the date of issue.
Storebrand Livsforsikring AS applies the equity method of accounting to investments in subsidiaries and associated companies in accordance with the regulations for the annual accounts of insurance companies.
Exchange on the last trading day of the year, and the market price (last traded/bid price) in the case of shares listed on foreign stock exchanges.
The market value of shares in other companies is determined on the basis of an evaluation of the information available. 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.
Bonds to be held to maturity Bonds owned by Storebrand Livsforsikring AS that are classified as hold to maturity are managed in accordance with the Norwegian Banking,
Insurance and Securities Commission’s guidelines. Such bonds are booked at cost price at the time of purchase. Premiums/ discounts in relation to par value are amortised over the bonds’ remaining term and recorded in the profit and loss account as an interest element. Bonds in default are valued in line with the Norwegian Banking, Insurance and Securities
In the group’s banking activities, only financial derivatives entered into in respect of proprietary trading (the trading portfolio) are valued at market value. The various categories of financial derivatives are described in ‘Terms and Expressions’ on page 86.
Forward foreign exchange contracts and foreign exchange options Forward foreign exchange contracts and foreign exchange options are principally used to hedge holdings of securities, other financial instruments and insurance related entries. As part of the accounting recognition of hedging transactions, contracts entered into for hedging purposes are valued at market price in the financial accounts, and unrealised gains or losses are taken to profit and loss.
STOREBRAND ASA Dividends and group contribution The cost method of accounting is used to arrive at the value of subsidiaries in the parent company accounts. 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. This treatment can only be applied to income earned by the subsidiaries during the period of Storebrand’s ownership. When this is not the case receipts are recognised as equity transactions, and this implies that the value of the investment in the subsidiary is reduced by the amount of group contribution or dividend received.
LIFE INSURANCE Premium income for own account Premiums for own account comprise premium amounts which fall due during the year, transfers of premium reserve and premiums on reinsurance ceded. Accrual of premiums earned is made through allocations to premium reserve in the insurance reserve.
Claims for own account Claims for own account comprise claims settlements paid out, including reinsurance assumed, premium reserves transferred from other companies, reinsurance ceded and changes in claims reserves. The allocation for unsettled disability and death benefits is made through an allocation to the premium reserve in the insurance fund.
ment reserve with the exception of gains or losses on forward exchange contracts in respect of open currency positions. The market value adjustment reserve can never have a negative value. Unrealised losses are recognised to profit and loss on the basis of write-downs carried out on a portfolio basis.
Premium reserve in the insurance fund The premium reserve represents the cash value of the company’s total insurance obligations in accordance with the individual insurance agreements after deducting the cash value of future premiums. The calculation principles are set out in the Insurance Activities Act. The calculations are made by an actuary.
Security fund The security fund is a statutory reserve to cover unexpected insurance risks. The calculations are made by an actuary in accordance with regulations published by the Norwegian Banking, Insurance and Securities
It is possible to increase the fund by 50% above the minimum allocation. In special situations the Norwegian Banking, Insurance and
Effect of changed assumptions not booked to P&L 182.9 38.7 221.6 46.2 -94.6
Net liability in the balance sheet 509.4 -237.7 -49.7 222.0 155.5 73.8
Auditor's fees for consultancy services **) 9 000 3 000 1 000 *) The Control Committee covers all the Norwegian companies in the group which are required to have a Control Committee, except for Storebrand Bank AS, Finansbanken ASA and Oslo Reinsurance Company ASA which have their own Control Committees.
The terms of employment for Idar Kreutzer, Managing Director of Storebrand ASA, provide a guarantee of 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 bonus scheme based on the performance of Storebrand’s share price (see note 16) and he is a member of the Storebrand pension scheme on normal terms.
+ Prior year dividend from subsidiaries 530.6 0.8 - Current year dividend from subsidiaries -267.8 -530.6
Storebrand Felix kurs og konferanse AS Oslo 1.0 1 1 000 100.0% 8.0
If Skadefõrsãkring Holding AB Sweden 22.47% 3 213.0 *) Capital of NOK 1 777.6 million was repaid in 2002 and a group contribution of NOK 99.6 million was treated as an equity transaction.
Short-term debt instruments and bonds held as current assets 996.2 1 002.5 383.0 384.2 1 379.2 1 386.7 *) Finansbanken ASA convertible bonds.
Orkla shares from Storebrand Livsforsikring AS. Both at the time the bonds were issued and on subsequent reporting dates the value of the call option issued and the bonds issued will be calculated separately. The difference between the original value of the bonds issued and the contractual redemption price in March 2006 will be amortised as interest expense over the period of the loan. The loan is recognised in the balance sheet at the amortised value.
Both the call option issued and the call option purchased from Storebrand Livsforsikring AS are valued at actual value calculated using generally accepted methods for this type of instrument. A fall in the price of the Orkla share in isolation represents a gain on the call option issued. The accumulated value of any such gain is limited to the value of the option when first issued. Save for this, the call option does not represent a hedge against losses on the holding of Orkla shares. An increase in the price of the Orkla share in isolation represents a loss on the call option issued which will be matched by a gain on the company's holding of Orkla shares and on the call option purchased from Storebrand Livsforsikring AS.
Note 11: Financial derivatives Nominal volume Credit risk exposed Acquisition Market
Straight line depreciation periods for operating assets are as follows: Equipment and inventory: 4 years
**) 277 802 422 shares each with a face value of NOK 5.
Exchangeable bond *) 2.25 % EUR 1 109.1 Orkla AS 2006 *) Hedged with a foreign exchange swap.
**) Storebrand Group has a cash bonus scheme for key managers which is linked to the share price development of the Storebrand share. The bonus, which can be paid out no earlier than 2 to 3 years after it is awarded, is calculated as the difference between market share price and the contract share price of NOK 60, and is paid out in cash. The bonus scheme has defined periods in which it can be exercised, and expires no later than 2009.
*****) Idar Kreutzer is entitled to a cash bonus scheme participation of 560 000 units representing the difference between the actual share price at a future date and the allocation price. The allocation price for 500 000 units was fixed by reference to the closing share price on Oslo Børs over the week before his appointment as CEO was announced (NOK 59.33) and is adjusted monthly on the 1st of every month with a cost of capital of 10% per annum less any dividend for the period. The allocation price for the 500 000 units at 31 December 2002 was therefore NOK 70.58. These units can be exercised between 1 January 2004 and 31
Shares held by non-executive officers and their close relations of Storebrand ASA as per 31.12.2002
Name No. of shares Close relations Total Name No. of shares Close relations Total
Stein Erik Hagen 0 27 500 000*) Harriet Hagan 2 000
**) Held in the name of Ferd Invest ***) Has rights to 200 000 shares, in addition to rights to a further 4 800 000 shares via close relations.
Balance sheet items: Long term debt within the group 19.4 196.0 328.7
Net accounts payable and receivable (short-term, inc. group contribution) 18.0 1 095.0 1 492.5
Storebrand ASA has issued the following guarantees: Currency Terms Accounts provision 1) Institute of London Underwriters (ILU) *) GBP No specified amount 0 2) Norges Bank **) NOK No specified amount 0 3) Undertaking given to a banking syndicate in respect of a subsidiary's capital.
*) Counter indemnity of Oslo Reinsurance Company ASA (formerly UNI Storebrand International Insurance AS).
Management and Euroben. Asset management comprises: Storebrand Kapitalforvaltning, Storebrand Fondene, Storebrand Kapitalforvaltning
Income from group and associated companies 5.6 7.7 4.5 -238.1 -761.6 -283.8
Income from properties and real estate 950.7 942.2 858.9 950.7 943.1 864.0
Gains on sale of fixed-income securities 5 928.8 2 504.4 4 054.1 5 931.4 2 547.9 4 067.6
Costs arising from properties and real estate *) -135.6 -130.4 -72.1 -135.6 -130.6 -57.1
Loss on sale of interest bearing instruments -6 669.1 -1 653.1 -4 314.6 -6 679.8 -1 663.6 -4 332.7
Unrealised loss on interest bearing instruments -55.9 118.4 692.3 -63.1 110.2 692.7
Total costs of financial assets -18 496.8 -17 465.6 -20 588.3 -19 401.2 -18 210.8 -21 592.3
Total net income from financial assets 1 884.8 1 437.8 3 365.5 1 068.5 300.1 3 074.9 *) Of which administration costs -5.8 -6.7 -15.0 **) Of which administration costs -133.3 -116.5 -129.9
Interest and related income from short-term debts instruments, bonds and other interest
Other interest and related income 129.4 164.6 254.2 -0.1 5.0 0.7 129.3 169.6 254.9
Total interest and related expenses -884.8 -882.5 -698.7 -1 111.9 -1 165.3 -992.6 -1 996.7 -2 047.8 -1 691.3
Net interest and commission income 214.6 176.0 177.8 388.2 447.3 401.1 602.8 623.3 578.9
Change in specific loan loss provisions for the period 3.6 174.7 178.3 -3.4 127.5
Realised losses on loans where specific provisions have previously been made 90.5 90.5 147.0 89.6
Recovery of loan losses realised previously -0.4 -0.3 -0.7 -23.5 -47.4
Ordinary wage and salary expense 279.7 183.1 141.4 256.0 860.2 815.9 841.0
Storebrand has established a bonus scheme for employees. The bonus scheme is based on the company's value creation as well as each individual's performance. The bonus scheme is described in more detail in the Corporate Governance section.
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 defined benefit plans. The following assumptions have been used in the calculations: Financial assumptions - Return on pension fund 8.0%
Actuarial assumptions: -Standardised assumptions on mortality/disability and other demographic factors as produced by the
Market value of pension funds 2 655.3 2 655.3 2 748.2 2 818.0
Scheme changes not applied to profit and loss **) 2.1 2.1
Net pension liability as shown in the balance sheet 590.8 -404.0 -52.1 134.8 58.4 -15.9 *) Deviations from estimates are booked against the "corridor" in accordance with Norwegian Accounting Standards and amounts in excess of the corridor are recognised to profit and loss over the remaining period for accrual of pension rights (cf. Accounting Principles).
Total tax increasing timing differences 4 860.6 5 240.7 8 732.0
Net timing differences before losses carried forward 2 528.4 1 642.6 5 056.0
Shopping centres (inc. parking and storage) 4 620.0 1 318 3.0 312 838 99.2%
Total shares and other equity investments (current assets) 12 495.9 11 301.9
The effective yield for each security is calculated using the booked value and the observed market price (market value). Where no market price is available, the effective yield is calculated on the basis of the interest period and classification of the security in terms of liquidity and credit risk. Calculated effective yields are weighted to give an average effective yield for the total portfolio on the basis of each security's share of the total interest rate sensitivity.
The concepts applied in the following tables are set out in the following section.
Financial derivative contracts are related to underlying amounts which are not capitalised in the balance sheet. In order to quantify a derivative position, reference is made to underlying concepts such as nominal principal, nominal volume, etc. Nominal volume is arrived at differently for different classes of derivatives, and gives an indication of the size of the position and risk the derivative creates. Gross nominal volume principally indicates the size of the exposure, whilst net nominal volume gives an indication of the risk exposure. However nominal volume is not a measure which necessarily provides a comparison of the risk represented by different types of derivatives.
EUR option sold - Orkla shares 822.1 961.4 -822.1 84.8 39.6
(note 33 cont.) position position position contracts in currency in NOK
Note 34: Lending to customers SB Life SB Bank Finansbanken Non-life SB Group
Note 35: Analysis of deposits from customers and liabilities to other financial institutions
Salary account holders (private persons) 5 669.2 1 966.7 7 635.9 7 455.7 7 019.7
Loans and deposits from financial institutions on demand or with no fixed maturity 7.5 7.5 6.1 13.8
Loans and deposits from financial institutions with agreed notice period or fixed maturity 587.5 3 695.6 4 283.1 4 344.6 4 266.7
Norben Life and Pension Insurance Co. Ltd. 25% 31.0 37.7 14.1 -6.2 45.6
Equity capital excluding minority interests 8 534.5 9 616.7 10 544.8
NOK million company NOK Currency amount rate in % date gain/loss
Subordinated loan 1999-2009 SB Life 1 020.7 EUR 135 4.09% 2004 -49.6
USD 10 mill, Libor +1.3% Finansbanken 70.0 USD 10 3.40% 29.09.05
Subordinated loan 2000-2010, 3 m. NIBOR +1.3% Finansbanken 110.0 NOK 8.18% 27.09.05
Subordinated loan 2000-2012, 3 m. NIBOR +2.0% Finansbanken 100.0 NOK 8.96% 29.05.07
Residual commitment to subscribe capital to limited partnerships 995.0 1 200.0 1 562.0
Storebrand and Scandia when If was first established. The agreement states that any losses in this portfolio will be split in accordance with the former equity shares, which was 44% for Storebrand as opposed to the present 22.47% . The agreement expires after 5 years and is limited to NOK 130 million in the case of Storebrand. Due amongst others to excess provisioning/sale of run-off, costs of NOK 61.5 million connected with possible losses on this agreement have been charged to Storebrand's accounts.
Description of the differences between N GAAP and US GAAP Capitalised contract acquisition costs Under N GAAP all costs and expenses directly or indirectly incurred in originating new insurance contracts and renewing existing policies are charged to expense as they are incurred, whilst under US GAAP these costs are capitalised and charged to expenses against the future incomes with which they are associated.
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 profit and loss. Gains and losses in respect of the foreign exchange element of hedged securities which are defined as "available for sale" are recognised to profit and loss in the same period as the hedging contract cf. FAS 133.
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. For Euroben and the Unit Linked activities carried on by Storebrand Fondsforsikring AS these differences are allocated in full to profit and equity.
standards in 2005. The introduction of IFRS is expected to lead to major changes, especially in the treatment of financial instruments and insurance contracts. However it is not possible at this stage to provide any indication of the likely changes to the group's accounts.
Finansbanken ASA 100.0% Finansbanken AS 100.0% Aktiv Invest ASA 100.0% Finansbanken Index ASA 100.0% Industri & Skipsbanken Fonds AS 100.0% Industri & Skipsbanken Invest I AS 100.0% Skipskredittforeningen AS 100.0% Morningstar Norge AS 49.0% Finansbanken Forvaltning AS 100.0% Finansbanken Plasseringsrådgivning ASA 100.0% Finansbanken Formuesforvaltning ASA 100.0% Delphi SMB I AS 100.0% Delphi SMB II AS 100.0%
Storebrand Skadeforsikring AS 100.0% Oslo Reinsurance Company ASA 100.0% Oslo Reinsurance Company (UK) Ltd. 100.0%
Earnings per ordinary share: The calculation of earnings per ordinary share is based on profit after tax adjusted for changes in statutory security reserves etc. in respect of non-life insurance. These statutory reserves include security, reinsurance and administration reserves, as well as the guarantee reserve. The total number of shares used in the calculation is taken as the average number of ordinary shares in issue over the course of the year. In case of new issues of shares, the new shares are included from the date of subscription.
Equity capital: Equity capital consists of share capital subscribed and accrued earnings.
Share capital subscribed is recorded as share capital and share premium reserve. Accrued earnings are recorded as a reserve for valuation differences and other equity.
Capital adequacy 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 the policyholders' fund during the course of the year. The average yield should be seen as a gross yield before deducting costs, and is accordingly not comparable with the interest return reported by other financial institutions. The average yield is calculated in accordance with rules set by the Banking, Insurance and Securities Commission.
Endowment insurance: Individual life insurance where the insured amount is payable on either the expiry of the insurance period or the death of the insured if earlier.
Such insurance can be extended to provide disability pensions or disability insurance.
Commission. The 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 average of the company's total assets over the year at market value.
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 pays the sum of a fixed instalment amount and a reducing interest amount at each instalment date. Payments accordingly reduce over the life of the loan assuming a fixed interest rate.
Foreign exchange options: The purchase of a foreign exchange option confers a right (but not an obligation) to buy or sell a currency at a pre-determined exchange rate.
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 pre-determined price. Interest rate options can be used as a flexible instrument for the management of both long and shortterm interest rate exposure.
Share options: The purchase of share options confers a right (but not an obligation) to buy or sell shares at a pre-determined price. Share options may be related to stock market indices as well as to specific individual stocks. The sale of share options implies the equivalent one-sided obligation. In the main exchange traded and cleared options are used.
Maalfrid Brath (37) Head of Storebrand Group Private Sector Distribution State Authorized Accountant, Norwegian School of Economics and Business Administration (NHH) Master of General Business, Norwegian School of Management (BI)
Odd Arild Grefstad (37) Executive Vice President, Chief Financial Controller State Authorized Public Accountant, Authorized Finance Analyst (AFA) Norwegian School of Economics and Business Administration (NHH)
Financial calender 2003: 29 April Annual General Meeting 8 May 1st quarter results 13 August 2nd quarter results 5 November 3rd quarter results
Group companies: Finansbanken ASA P O Box 817 Sentrum Stortingsgt. 8 N-0104 Oslo Norway Tel: +47 22 47 40 00 www.finansbanken.no
Finansbanken Forvaltning AS P O Box 267 Sentrum Stortingsgt. 8 N-0103 Oslo Norway
Adviso AS Fyrstikkalleen 1 P O Box 1375 Vika N-0114 Oslo www.adviso.no
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