JANUARY Official opening of Lysaker Park the Mayor of bærum, odd Reinsfelt, officially opens storebrand’s new head office, lysaker park. the entertainment is provided by trondhjemsolistene and opera singers Cecilie Rønning and Cecilie shilling.
MARCH Major SRI conference storebrand arranges a conference on socially responsible investments for the ninth year in a row. Around 100 participants heard good ways of resolving the challenges business faces due to war and conflicts.
JUNE New CEO for Storebrand Bank ASA truls nergaard is appointed the new Ceo of storebrand bank AsA.
AUgUSt Huge interest in Lysaker Park Minister of the environment and International development erik solheim receives a guided tour of, and information about, our new head office at lysaker. solheim considers our new, modern office building as a building that can promote good climate initiatives.
NOVEMBER Launches new real estate fund storebrand launches the fund storebrand eiendomsfond norge. the fund will invest in centrally located, unmortgaged, fully developed real estate with long-term tenants.
Sustainable investments It is 15 years since storebrand launched its first environmental fund and became a european pioneer within sustainable investments.
The Storebrand Group is made up of the business areas life insurance, asset management, banking and P&C and health insurance. The group’s head office is at Lysaker and the company has also established life insurance, asset management and health insurance activities in Sweden. Storebrand is the Nordic region’s leading provider of life insurance and pensions, and offers a comprehensive range of products to retail customers, corporate customers, municipalities and the public sector.
Group result before tax (NOK million) 1 1,217 855 -1,716 2,029 1,585 energy consumption 3 220 kWh/m2 222 kWh/m2 216 kWh/m2 221 kWh/m2 257 kWh/m2
Qualified for dow Jones sustainability Index 4 Qualified Qualified Qualified Qualified Qualified
Average number of ordinary shares (NOK '000s) 7 446,037 445,658 445,091 251,517 247,965
At year-end 2010, the Storebrand Group had 2,206 employees compared to 2,280 at the start of the year. Of these, 52 percent were women. The average ages is 42 years and the average length of service is 10 years.
Storebrand believes diversity creates value. All Storebrand employees are treated equally, regardless of age, gender, disability, religious beliefs, cultural differences or sexual orientation.
Storebrand Skadeforsikring AS offers standard insurance products in the Norwegian retail market. The company was launched in autumn 2006. Its cost-effective distribution and extremely customer friendly online solution has enabled the company to quickly make its mark as a competitive insurer, offering peace of mind at low prices.
Storebrand Livsforsikring AS has the highest level of customer satisfaction in the occupational pensions market (Norwegian Customer Barometer). Together with strong growth, this has helped the company consolidate its position as the leading pensions provider in the Norwegian market.
Key figures (NOK million) 2010 2009 pre-tax profit 116 147 premium income after reinsurance 7,177 7,397
SPP offers pension and insurance solutions, and advice to companies in the competitive segment of the occupational pensions market. SPP also offers private pension savings and illness and health insurance. The company delivers qualified consultancy services within occupational pensions and insurance for companies and public sector entities.
Storebrand’s asset management business includes the companies Storebrand Kapitalforvaltning AS, Storebrand Fondene AS, SPP Fonder AB and Storebrand Eiendom AS. All the management activities have a guaranteed socially responsible profile. Storebrand offers a wide range of mutual funds to retail customers and institutions under the Delphi, Storebrand and SPP Fonder brand names. Storebrand Eiendom AS is one of Norway’s largest real estate companies and manages real estate portfolios both in Norway and abroad.
Key figures (NOK million) 2010 2009 number of customers 80,829 81,953
Storebrand Helseforsikring AS is jointly owned (50/50) by Storebrand ASA and Deutsche Krankenversicherung AG, and offers treatment insurance in the Norwegian and Swedish corporate and retail markets. The company was launched in autumn 1998 and continues to experience profitable growth.
The financial crisis has had major consequences in the real economy internationally, and 2010 saw s ignificant movements in the interest rate and credit markets. Stability in the financial markets has improved at the start of 2011, but
The life insurance sector has entered a period in which extensive regulatory changes are being prepared and implemented.
2010 was a year in which Storebrand’s financial performance was satisfactory and we delivered competitive financial returns.
The year-on-year result improvement was largely due to operational improvements. Efficiency has been increased in both the Norwegian and Swedish businesses, and the relationship between costs and income improved. From a European perspective
Life insurance companies have traditionally obtained their income from profit sharing between customers and owners. In years with high returns this provides good profits, while in years with low returns it results in correspondingly low profits. The transition from benefit-based to contribution-based pension schemes and from profit sharing to running payment for the pensions services delivered by companies are gradually changing this picture.
For Storebrand this transition entails greater income stability and increased capital efficiency. This trend can be illustrated by the fact that since 2005 Storebrand has gained 16.838 new defined contribution customers, while there has been a reduction in defined benefits schemes. This trend will continue and entails a transition from capital demanding guaranteed products to fund based products. The changed capital requirements associated with
Between 2009 and 2011 - a period of substantial growth - the nominal level of costs was reduced by more than NOK 200 million.
Individualisation within the occupational pensions area is increasing the need and opportunity for a closer dialogue with the individual employees in companies with pension schemes. Storebrand has seen strong customer growth in recent years and now has around 1.6 million individual customers in Norway and Sweden. Storebrand will strengthen its follow-up and servicing of its retail customer base.
In recent years we have seen that a steadily increasing number of
82 per cent of Storebrand P&C Insurance’s customers purchase insurance via telephone or online solutions, and more than half a million individuals visit our website every month.
Trust is the lifeblood of Storebrand. Our customers have to trust that we will be there when they need us and that we will run our business as transparently, simply and responsible as possible. Our corporate responsibility work is therefore anchored in our vision, our core values and our corporate principles, and is followed up in the business units’ targets and action plans. We are proud to have been named the world’s most sustainable financial company 2.
(PRI). 2010 saw the 15th anniversary of our pioneering, global launch of our first environmental fund.
In an industry in which competence is playing an increasingly greater role, every individual must feel a responsibility for knowledge and skills development. At the same time it is the employer’s responsibility to establish a framework that enables development of competencies. This is addressed in Storebrand through annual development plans agreed between managers and employees.
Norway and we are also pleased that over the last year the MTI of the Swedish business has also improved.
We create shareholder value through a transparent and trust- building dialogue with our customers. It is in the meeting between customers and competent staff that Storebrand’s brand is built. Our vision and ambition is to be the leading and most respected institution in the Nordic market for long-term savings and insurance.
the group’s growth in 2010 was affected by unstable financial markets and significant operational improvements.
2 named in “The Global 100 Most sustainable Corporations List 2011”, conducted by The Global responsible investment network. (link <
Development (WBCSD) project to describe how the world can be sustainable by 2050, and what the role of business is. It is both possible and profitable for business to make changes that help to ensure we do not consume more natural resources than we have. But it will require cooperation, leadership, new business models and new ways of measuring success. And it’s urgent.
1,319 storebrand employees moved into the new head office in lysaker in 2010. the new head office has gained a lot of attention due to its forward-looking environmental solutions and in February it was awarded the City prize, an acclaimed recognition in real estate.
one of the key success factors is that storebrand challenged established truths, i.e that the building’s temperature must never exceed 24 °C. by allowing temperatures up to 26 °C for a limited period, we have significantly reduced the need for cooling. such high temperatures primarily occur in late July, when the building is almost empty.
As the nordic region’s largest life insurance company, storebrand works with organisations that help to solve the challenges we are interested in.
The employees‘ bras as art in support of the Pink Ribbon campaign.
It is both possible and profitable for business to make changes that help to ensure we do not consume more natural resources than we have.
Microcredit received negative publicity in 2010 and the expectations to microcredit as a measure to reduce poverty became more realistic. In 2010, Storebrand exercised caution when investing in microcredit and examined other forms of investments.
An ethics indicator was developed to ensure that measures are effective and to monitor development over time. The indicator consists of four components that measure employee awareness, the proportion of employees who take the e-learning course, the proportion who undergo dilemma training, and the proportion of managers who report on compliance with the rules. The ethics indicator was in corporated as part of the group scorecard and senior executives’ individual scorecards.
the unep Finance Initiative (unep FI) – a global partnership between the un and 190 actors in the financial sector.
the Carbon disclosure project (Cdp) – an independent organisation that measures and reports climate information.
China, by 700. We now monitor a total of 4,500 companies.
Sustainable investments ensure good returns based on a viable environment and society. Sustainable investments require an understanding of both the risks and opportunities that arise in the wake of great population growth and eco-systems under intense pressure.
Tar sand the steel producer nucor was excluded from investments for two years due to forced labour in the production of pig iron in brazil. storebrand and a number of other managers in europe and the usA jointly demanded better conditions for the workers via unpRI. the company – which supplies car manufacturers around the world - has now sorted out the problems in its supply chain.
Innovation the annual analysis of the oil and gas industry assigns great importance to prevention and clearing up after accidents and discharges. only three companies qualified for best in Class status in 2010: bG Group, Cairn energy and santos.
We monitor 4,500 companies around the world. An internet search engine, identifies allegations of corruption, environmental damage and breaches of human rights. our analysts sift through information from more than 20,000 news articles every year. In serious cases we contact companies to learn what they are doing to rectify the situation and how they will reduce the risk of recurrence.
The Nordic market for occupational pensions and life insurance is the fifth largest in Europe measured by volume of premiums. Premiums in the Nordic occupational pensions market have grown by around 10 per cent in the last ten years and estimates indicate that future total growth will be between 5 per cent and 10 per cent in the period up to 2020 1. There is some uncertainty associated with these estimates, but three factors in particular will drive future growth: economic growth, demographic changes and regulatory changes.
1. The market is moving towards new capital-light, defined-contribution products. The trend of transitioning from defined-benefits based occupational pensions to definedcontribution based occupational pensions started 10 years ago and is expected to continue, in part due to the Solvency II regulations that will be introduced in 2013.
storebrand´s objective is to be the leading and most respected institution in the nordic market for long-term savings and insurance.
risk result: the risk result is the difference between the premium the company recognises as income from insuring life and health, measured against the payments related to the insurance products.
Price of the interest guarantee: storebrand pledges a financial guarantee in defined-benefits products that the return in one year will exceed a set level of guaranteed interest. the customers pay a fee as payment for this guarantee.
Profit sharing: not all parts of the defined-benefits portfolio involve a charge for an interest guarantee. the company charges for the financial guarantee it pledges for these products by dividing the return achieved on customer assets between the customers and owner, assuming the interest guarantee is met.
defined-contribution products largely obtain their income from administration results and risk results from relevant products. these earnings are normally more stable than those from definedbenefits products with profit sharing, where the income is also directly linked to developments in the financial markets.
• Given the customers’ increasing preference for online, telephone and email buying and service solutions, Storebrand has a relative advantage as a leading online provider that also has a tailored, competent physical sales network. Customers should meet Storebrand as one company regardless of which channel or form of contact a customer wishes to use.
During 2010, Storebrand reduced its absolute costs level by 9 per cent and is already among the most cost-effective life insurance companies in Europe 2. Further synergies will be realised in the group by increasing the coordination of shared core processes, consistent deliveries, increased automation and optimum resource division and allocation in the group.
As the Nordic region’s largest and most competent resource centre for and manager of pension capital, the regulatory changes and trends in the occupational pensions market represent great opportunities for Storebrand. These opportunities also increase the need to develop our range of services and corporate responsibility. Our level of ambition follows from our vision to be the leading and most respected institution in the nordic market for long-term savings and insurance. This means that private individuals and enterprises can be confident that no other insurance company will address customers increased need for advice better than or more responsibly than Storebrand – also in the future.
2. dynamic risk management ensures the risk of the individual contract varies in line with the contract’s risk bearing capacity. As a rule this is done by buying and selling equities in line with increased/reduced risk bearing capacity.
Capital requirements are currently calculated differently in different countries based on a proportional capital requirement in relation to the insurance reserves. For storebrand’s part this is around 4 per cent for reserves linked to defined-benefits pensions and 1 per cent for defined-contribution pensions.
Life and Pensions Norway policyholders' fund including accrued profit 191,243 175,920 164,016 165,120 153,567 -of which funds with guaranteed return 163,510 153,603 150,011 148,982 139,143
Banking deposits from and due customers as % of gross lending 55% 51% 47% 47% 43%
Gross defaulted and loss-exposed loans as % of gross lending 2.0% 2.5% 2.1% - -
4 Consist of equity, subordinated loan capital, market value adjustment reserve, risk equalisation fund, unrealised gains loans and receivables, additional statutory reserves, conditional bonuses and accrued profit.
7 The key-figures are for a 12 month rolling period. AuM = Assets under management. bp = basis points. Costs encompass storebrand Fondene As and storebrand Kapitalforvaltning As after eliminations. The income also includes the proportion of the result from storebrand eiendom As and sPP Fonder AB. 8 encompasses storebrand Bank AsA, storebrand Boligkreditt As and storebrand eiendomskreditt As.
Historically, the development in the result of the Storebrand-Group has been very dependent of the development in the financial markets.
Further streamlining operations, transferring processing tasks to its subsidiary Storebrand Baltic UAB and general prudence throughout the
The new business model establishes special resource centres for balance sheet management, marketing and product development. By integrating expert groups across business areas and national borders, the Group will be able to take advantage of cutting edge competence more efficiently throughout the organisation. This reorganisation will ensure efficient operations and extract cost synergies across the company.
Its risk management aims to create a competitive return for our customers and protect both the customers and the owners capital in unstable markets. Therefore, measures for ensuring the best possible risk management and funding were a priority in 2010. The financial markets were also volatile in 2010, with significant falls in interest rates in 2Q and 3Q being replaced by strongly climbing interest rates towards the end of the year. 2010 was also a year in which questions were asked about some European countries’ national debt and their ability to service it, which had ripple effects in the equity markets.
Report were updated during the year with a new operational target for result creation independent of movements in the financial markets. The new target was a NOK 550 million improvement in operations in 2010 in relation to 2009. As illustrated by the table on the next page, this target was achieved.
Previous positions: 1996-2009 EVP and Deputy CEO Schibsted ASA • 1985-1996 Partner McKinsey & Co • 1982-1984 General Manager Magnus Data • 1980-1982: Systems Consultant Honeywell Bull
Previous positions: 2003–2006 Advisor Nielsen + Axelsson Asp. • 1992–2003 CP/CFO FLS Industries AS • 1983–1992 Danske Bank (1990–1992 as Vice President)
Operations total operational improvement (deltaone) noK 550 million noK 588 million
Administration result life and pensions norway 3 >0 noK 19 million
Administration result life and pensions sweden 4 >seK 300 million n.A.
2 Corrected for one-time effect of tax income of NOK 411 million in 2010. 3 Allocated to owners by 2010. 4 Allocated to owners by 2011.
In 2001, the Norwegian government set up the pensions commission to prevent state pension expenses growing uncontrollably. Now, ten years later, the changes have entered into force throughout the entire pension system. The changes‘
Storebrand made the necessary adjustments such that our c ustomers and their employees were ready to meet the reform.
The Banking Law Commission will in 2011 and 2012 continue to work on adapting products to the other two main pillars of the new National Insurance Scheme: Every year’s earnings and life expectancy adjustments. This work will complete the adaptation of private occupational pensions to the pensions reform. They can be expected to come into force in a couple of years. The topics discussed include: New and adapted products tailored to the new National Insurance Scheme, life expectancy adjustments and maximum saving limits for defined contribution pensions.
Storebrand‘s products, system solutions and settlement processes have been renewed due to the pensions reform. The pensions calculator, which is available externally on the websites Mitt kunde forhold and Bedriftsportalen, was launched in January
2011 and enables customers to simulate a variety of pension and flexible withdrawal scenarios. The adjustments to processes the pensions reform and new system solutions bring with them are well embedded in all the affected areas in the Group. All of the aforementioned groups have undergone training in the final regulations and implemented solutions.
The Storebrand-Group is well-equipped to receive and advise customers who contact us about the pensions reform in general or about withdrawals in particular.
Solvency II is based on the principle that all assets and liabilities must be stated at fair value (market value). This entails a significant change in the valuation of insurance liabilities in relation to current solvency regulations and financial accounts, especially for Norwegian life insurance. The size of the capital requirement will be determined by the amount of risk to which the company is exposed. Market risk (financial markets), insurance risk, counterparty risk and operational risk must all be taken into account. Solvency II will therefore impose strict requirements concerning good risk measurement and management.
Group. The project has analysed the consequences the regulations are expected to have and will follow these up as new sections of the regulations are clarified. Important work in 2011 will be to continue preparing the Group for the new capital adequacy calculation and ensuring that the requirements concerning risk management and control are addressed.
NOK million 2010 2009 life and pensions norway 877 759 life and pensions sweden (spp) 464 487
Asset management 333 240 p&C and health insurance 8 -49 other activities -231 -255
Storebrand‘s result developed positively during the year. The targets achieved through the programme for improving operations affected both the income and costs sides positively. The administration result in life and pensions has significantly improved. The risk results have improved in Life and Pensions Sweden, but were affected by the build up of reserves in Life and Pensions Norway. Storebrand Bank delivered a result for 2010 that had significantly improved in a number of key areas compared with the two preceding years. The result in the asset management business developed positively and was driven by increases in volume-based income. P&C insurance also delivered good result development with a combined ratio of 110 per cent.
2010 was a volatile year in the equity markets, but ended with a solid upturn towards the end of the year. Market interest rates fell quite a lot in both Norway and internationally, but recovered strongly towards the end of the year. Storebrand asset management achieved a good return on the management of customer assets, both in absolute terms and in relation to benchmark indices.
In accordance with Norwegian accounting legislation, the Board confirms that the company meets the requirements for preparing the financial statements on the basis of a going concern assumption.
Storebrand‘s head office is in Lysaker in the Municipality of Bærum.
The new generation of products without guarantees (defined contribution pensions and unit linked) also contributed positive results totalling NOK 139 million compared to minus NOK 37 million in 2009.
59 years Deputy CEO Svenskt Näringsliv Board Member Storebrand ASA since 2008 1975 University of Lund LLB Law School • 1987 Associate Appellate Judge Svea Court of Appeal
Previous positions: 2002–2007 CEO Sveriges Försäkringsförbund and Försäkringsbranschens Arbets givarorganisation • 1996–2002 Legal Director Financial Council and Head of Financial Market Department, Ministry of Finance • 1994 Legal Director Swedish Ministry of Finance • 1993 Assistant Undersecretary Swedish Ministry of Finance • 1988 Legal Consultant Swedish Ministry of Justice • 1987 Research Secretary Swedish Department of Labour
December 2010 after allocations totalling NOK 67 million for group pensions.
• the spread contraction and fall in long interest rates in 2010, though there were significant fluctuations during the year
The contribution from products with profit sharing was a net NOK
64 million: NOK 60 million from individual endowment insurance and individual pensions and NOK 4 million from paid-up policies.
The company portfolio‘s result was minus NOK 55 million compared to NOK 92 million in 2009. The company portfolio is principally invested in low risk asset classes and achieved a gross return of 3.1 per cent for 2010. The money market portfolio now accounts for around 75 per cent of the investment portfolio. Storebrand
(including derivatives). The proportion of equities in portfolios with a guarantee increased in 2010. Changes in equity allocations
Tillitsverv: bla bla bla • bla bla bla corresponded to changes in short-term bond and money market allocations.
Individual with investment choice 1,993 2,073 risk products without profit sharing 1,103 1,040 1 Exclusive transfer of premium reserves.
Total premium income decreased by 3 per cent in 2010 compared with the year before. Premium income from group defined benefit pensions is falling gradually as more contracts are ending and being replaced by defined contribution pensions. New subscriptions are no longer being sold for pension accounts and life accounts. This strongly reduced premium income from traditional individual pensions from 2009 to 2010. The portfolio for defined contribution schemes for companies has developed well.
53 years Procurement Director Statoil ASA Board Member Storebrand ASA since 2009 1983 MBA University of Wisconsin • 1981 MA Business & Economics Norwegian School of Management (BI)
49 years Group Director Lindorff Group AB & CEO Lindorff AS Board Member Storebrand ASA since 2010 1986 Master’s degree in economics and business administration, University of Washington USA • 1983 Specialized courses College of Marketing, Oslo
Storebrand has been very successful within occupational pensions in recent years and has seen a net transfer balance in the last 6 years worth a net inflow around NOK 12 billion. The market was characterised by a marked transition from defined benefit pensions to defined contribution pensions. Storebrand is a market leader with a market share of 30 per cent measured in gross premiums written for defined contribution pensions and 43 per cent for defined benefit pensions (preliminary FNO statistics as per 4Q
and especially in 4Q. The year‘s returns for the recommended investment choices for defined contribution pensions were higher than the benchmarks for all profiles.
The SPP Group achieved a profit before the amortisation of intangible assets of NOK 464 million compared to NOK 487 million for 2009.
The risk result amounted to NOK 311 million for 2010 compared to
NOK 253 million for 2009. The increase was in large part due to a strong disability result. A substantial fall in new people on sick leave in recent years is the biggest single reason for the increased risk result. The long life result, thanks to increased life expectancy, and the mortality result were also positive.
Ap (retirement pension) 0.1 1.3 1 Maximum interest rate guarantee in the portfolios P250, P300 and P520 is 2.5 per cent, 4 per cent and 5.2 per cent respectively.
NOK 74 million in 2009. The result primarily reflects the return on the equity portfolio. The fall was primarily due to lower market interest rates. The majority of the portfolio is placed in short-term interest-bearing securities.
Previous positions: 2001–2007 Training Manager and Professional Consultant Storebrand Bank ASA • 1982-2001 DnB and DnB Investor
The buffer capital for overcapitalised pension contracts amounted to NOK 11.5 billion due to the return on the asset side increasing more than the change in technical insurance reserves on the liabilities side in pension portfolios with guarantees. This represents an increase of 24 per cent in 2010.
Guaranteed products 3,030 3,524 unit link 3,388 3,016 1 Excluding transfer of premium reserves.
Previous positions: 2006–2007 Key Account Manager Storebrand Livsforsikring AS • 2004–2006 Group Trainee Storebrand ASA
Storebrand‘s asset management business encompasses the companies Storebrand Kapitalforvaltning AS, Storebrand Fondene AS,
Group is a leading asset manager and its ambition is to become the preferred manager of long-term savings and pensions capital.
Pre-tax profit/loss 327 233 1 Includes the results of SPP Fonder AB and Storebrand Eiendom AS.
Fixed and volume-based incomes were higher and return-based income was lower in 2010 compared to the year before. Value creation was good in actively managed portfolios. Total operating income amounted to NOK 618 million compared to NOK 586 million in 2009. Costs were nonetheless somewhat lower in 2010 than in 2009, and total operating costs including performance-based costs amounted to NOK 422 million - a reduction of NOK 7 million.
NOK 13 billion of the growth was related to the take over of management for Euroben Life & Pension Limited and Nordben
Parts of the management for Storebrand Livsforsikring AS are in the process of being transferred to mutual funds. In 4Q, investments amounting to approximately NOK 14 billion were placed in mutual funds.
In 2010, the volume of net new sales amounted to NOK 14.7 billion compared to NOK 6.5 billion in 2009.
Previous positions: 1998–1999 Marketing Director Sparebank1 Livsforsikring • 1978–1998 Various positions Storebrand Livsforsikring AS • 1990–2006 Lecturer and author BI Centre for Financial Training and the Insurance Academy
Storebrand Kapitalforvaltning AS manages a full range of savings and investment products for the Group‘s product companies.
Companies that operate in high risk industries or whose risk management has severe deficiencies in relation to climate change and sustainable development in general are also excluded. The best companies within each industry grouping are assigned “Best in
The credit markets in Norway and Sweden also produced good returns, while international credit markets delivered weaker returns.
2010 was a very good year for active management. Total value creation (outperformance in NOK) for customer mandates and funds that are actively managed amounted to NOK 1.3 billion. No less than 91 per cent of the actively managed equity funds outperformed their benchmark index in 2010. All of the combination and allocation products and 79 per cent of bond funds beat their benchmark indices in 2010. Seven out of nine managed mandates for SPP Livförsäkring AB and Storebrand Livsforsikring AS
NOK million 2010 2009 net interest income 457 423 net commission income 74 76 other income 101 148 total income 631 647 operating costs -445 -504
The Storebrand Bank Group‘s result before amortisation amounted to NOK 158 million compared to NOK 63 million for 2009. Net recognised costs linked to losses from lending and guarantees, including taken over commitments, etc, amounted to NOK 29 million compared to NOK 81 million for 2009. Growth in net interest income, streamlining and low losses produced a pre-tax profit for the year for the bank group of NOK 129 million compared to NOK
Net commission income amounted to NOK 74 million for 2010 compared to NOK 76 million for 2009. Other income amounted to
The reduction in other income compared with the previous year was primarily due to value changes associated with the bank group‘s liquidity portfolio in fixed income securities.
The bank‘s costs programme has thus reduced operating costs in the bank group by NOK 57 million, which exceeds the programme‘s target. The number of staff in the parent bank has been reduced by 24 full time equivalent positions since year-end 2009. The implementation of new measures within the framework of the costs programme entails restructuring costs. Corrected for these and the growth in costs in the period, the real reduction in costs in the bank group substantially exceeds the target. The bank will continue its streamlining work and expects a continued moderate development in operating costs.
The bank group‘s non-performing and loss-exposed loans without impairment amounted to NOK 262 million compared to NOK 309 million for 2009. This is equivalent to 0.76 per cent of gross lending at year-end 2010 and 0.86 per cent at year-end 2009.
The volume of non-performing and loss-exposed commitments in bank activities amounted to NOK 698 million at year-end 2010, equivalent to 2.0 per cent of gross lending. This is an improvement since year-end 2009 when the volume amounted to NOK 884 million and 2.5 per cent of gross lending. Group write-downs in the
Gross lending to customers amounted to NOK 34 billion at yearend 2010. This is a reduction of NOK 2 billion, 5 per cent since year-end 2009. NOK 3 billion of the reduction in 2010 occurred in the retail portfolio, which amounted to NOK 22 billion at year-end 2010. The reduction in the retail portfolio has been slowing down during the year. This trend is expected and is primarily due to a reduction in loan portfolios linked to external distributors.
The bank has a balanced funding structure and bases its borrowing on customer deposits, issuing securities and financial institution bonds, both directly in the market and through the swap scheme with Norges Bank, as well as borrowing on the Norwegian and international capital markets.
At year-end 2010, the bank had committed, unused loans and drawing facilities amounting to NOK 1.25 billion.
Storebrand Bank‘s core (tier 1) capital ratio target is 10 per cent.
Norway‘s best direct bank. The launch of a new online bank in the first half of the year and the awarding of a prize for the best bank customer centre were important milestones. Competition in the retail market is characterised by price continuing to be an important factor in the recruitment of new banking customers. The bank‘s new price and product strategy that will be launched in early 2011 is intended to improve the bank‘s competitiveness and contribute to customer growth and cross-sales. At the same time the development of new services in the online bank and continuous improvements to the bank‘s customer services differentiate the bank from its competitors and will help it achieve its ambition in the retail market.
In the corporate market, Storebrand Bank ASA is a customer-focused partner for value creation that delivers a broad range of services to corporate customers within commercial real estate. The bank holds a strong position in the professional real estate market and in 2010 participated in a number of trendsetting transactions in the Norwegian market. Activities in the corporate customer segment include estate agency, project brokering, valuations and financing services. These services have been gathered under the brand name “Eiendomshuset
Storebrand Bank” and form a key part of the bank‘s focused effort on increasing other income by offering services along a far greater part of the value chain to both new and existing customers.
Premium income for own account increased by 46 per cent compared to the year before. This is satisfactory given the highly competitive market.
The P&C business continues to work with continuous efficiency improvements in the costs base through automation measures. The company‘s costs ratio developed satisfactorily and was 23 per cent compared to 38 per cent in 2009. This development is expected to continue in 2011.
Sales of insurance contracts in the P&C business continue to increase with the annual premium growing by 35 per cent in 2010. At year-end 2010 Storebrand Skadeforsikring AS had 51,400 customers and 154,100 insurance contracts. The most important sales channels for Storebrand Skadeforsikring AS in 2010 were online sales and the telephone-based sales and service centre. Together the telephone and online solutions accounted for more than 82 per cent of the total annual premium. Sales via external channels were on a par with the year before and direct distribution continues to be the P&C company‘s priority distribution channel at the start of 2011. Customer satisfaction surveys relating to claims settlements are very positive and confirm that Storebrand Skadeforsikring AS
provides a stable, high level of service and has satisfied customers.
The retail insurance market in Norway is still considered profitable, but there was an increase both in the number of claims and the average claim during 2010. The arrival of a number of new market players has increased pressure from competition in the market.
In addition to the new companies, the major players are helping to squeeze margins further by actively using rescue discounts to retain customers.
Storebrand Helseforsikring AS (Storebrand Health Insurance) was launched in the autumn of 1998 and is 50 per cent owned by
Storebrand Health Insurance achieved a positive result before amortisation of NOK 56 million for 2010 compared to NOK 12 million for 2009. Premium income grew by 12 per cent compared with 2009 and finished the year at NOK 295 million.
Claims costs amounted to NOK 164 million for 2010 compared to
The result from other activities amounted to minus NOK 231 million compared to minus NOK 255 million in 2009. The result essentially consists of operating income and operating costs in Storebrand ASA.
NOK 502 million compared to NOK 568 million in 2009. Group contributions from investments in subsidiaries amounted to NOK
The Storebrand-Group‘s income depends on external factors with which some uncertainty is associated. The most important of these is the development of the capital markets and changes in life expectancy in the Norwegian and Swedish populations.
Storebrand Livsforsikring AS and SPP Livsförsäkring AB utilise dynamic risk management. These methods are intended to ensure the companies maintain good risk-bearing capacity by continuously adapting asset allocations and the financial risk to the company‘s solvency and risk capital. This moderates the effect of market downturns and at the same time leaves customers and owners in a position to participate in market upturns. Daily calculations using a specific modelling tool provides, on the basis of market and portfolio developments in the last 24 hour period, a basis for making decisions about possible asset adjustments pursuant to predefined limits. By practising this type of risk management, the company expects to create good returns every year and over time.
Storebrand Livsforsikring AS continued its solvency based risk management in 2010 and has, due to the positive development of the market, been able to increase the proportion of equities in the customers‘
The greatest risk factors for Storebrand Livsforsikring AS are financial risk, especially from equities, real estate, interest rates and credit bonds, and insurance risk, in which increased life expectancy and a higher frequency of disability are the greatest risk factors.
The company‘s insurance contracts are by nature long-term commitments, and there are thus risks associated with the assumptions made about future life expectancy and disability. The tariffs used are reported to the authorities and build on statistical historical material. The company has also established strategies for how future needs to strengthen reserves should be met and how the owners‘ risk from portfolio changes should be reduced to the lowest possible level. The composition of financial assets and thus the company‘s financial risk is set by Storebrand Livsforsikring AS‘
investment strategy. This strategy, which is approved by the Board each year and revised every six months, defines limits for market risk, credit exposure, counterparty exposure, currency risk, using derivative instruments, and liquidity requirements, as well as limits for the company‘s risk management. Dynamic risk management is an important tool in the company‘s risk management. The objectives are to maintain good risk bearing capacity and continuously adjust the financial risk to the company’s financial strength.
The Norwegian FSA requires insurance business to be stress tested pursuant to predefined templates in order to ensure that insurance companies have adequate capital to service their liabilities. The stress tests cover both the assets and liabilities sides of the balance sheet and are referred to as “Risk-based Supervision”. The tests have been developed in line with the coming European regulations for life insurance, Solvency II. The tests are expected to be further refined to reflect the final version of the new solvency rules.
The greatest operational risks are associated with regulatory changes, major IT projects and the accompanying risk of operational and business-related consequences for Storebrand Livsforsikring AS.
• Additional statutory reserves in % of customer funds with guarantee
• Market value adjustment reserve in % of customer funds with guarantee
Market value adjustreserves on bonds held to maturity 1,097 40 -313 140 732
In total the life group‘s solidity capital increased by NOK 7.4 billion in 2010 due to the positive development of the result and increased customer buffers. Additional statutory reserves increased by NOK 0.8 billion, partly due to the allocation of the year‘s profit.
SPP is exposed to the same type of risks as the Norwegian part of the Storebrand Life Group. Nonetheless, differences in product design, general conditions and asset allocation mean that the contributions from the various types of risk differ somewhat. SPP
has insurance products with interest guarantees on paid premiums and unit-linked insurance in which the customers bear the financial risk. SPP‘s benefits-based products include adjustments for inflation and thus parts of the portfolio are exposed to inflation risk. Because the Swedish framework for life insurance has largely been tailored to the European Solvency II code of regulations, where the level of interest rates affects the magnitude of the insurance obligation, SPP‘s financial risk associated with movements in interest rates is different. This affects the assets on the statement of financial position as well as their risk management. The assets‘ interest rate sensitivity is continuously adjusted to the insurance liabilities. Interest rates rose significantly in the four last months of the year after falling relatively heavily during the first eight months of 2010. Together with a positive equity market this helped SPP strengthen its risk bearing capacity throughout the year.
The Swedish Financial Supervisory Authority, Finansinspektionen, applies a stress testing method for financial companies based on predefined templates. The stress tests cover both the asset and liability sides of the balance sheet and are known as “traffic light reporting”. They have been developed in line with the coming
Storebrand Kapitalforvaltning AS offers active management and management of fund-in fund structures for the customer‘s account and risk, and bears no risks above normal commercial and operational risk for this type of activity. Financial risks primarily consist of credit, market, liquidity and operational risk. Operational risk is considered the most important.
Storebrand Kapitalforvaltning AS utilises the standard method for credit risk in the capital adequacy regulations and the basic method for operational risk. Storebrand Kapitalforvaltning AS has assessed its total capital requirement via its ICAAP process. Apart from credit, market and operational risk, the calculated capital requirement also takes into account extra capital requirements linked to concentration, liquidity, residual, market, and reputation risk, etc. Storebrand Kapitalforvaltning AS is regarded as being well capitalised given its risk profile.
This segment principally consists of lending to building projects in the housing and office building segments in the central Oslo region.
A high proportion of advance sales are required for lending for new housing projects and the risk is considered satisfactory.
The quality of the credit portfolio in the retail market is considered very good. Almost the entire portfolio is secured by mortgages in real estate. The portfolio‘s high collateralisation indicates a limited risk of losses. The loan-to-collateral value ratio for the home mortgages is relatively low and only a very few loans have been granted in excess of 80 per cent of market value. The proportion of home equity loans has grown significantly and is expected to grow in the future as well.
ASA is rated by S&P and Moody’s, which place weight on relationships with multiple international banks and having established credit agreements with other banks. This ensures access to the international capital market and broadens the bank group‘s sources of funding. The Storebrand Bank Group increased the average borrowing term in 2010 and will continue this work in 2011.
The bank group‘s aggregate market risk through interest rate and foreign currency exposure and the maximum loss risk for its liquidity portfolio is limited by low exposure limits.
AS have securities portfolios that primarily consist of low risk interest-bearing papers. Assessments of exchange risk, interest risk, credit risk, and currency risk are important to the risk management of the portfolios, and the risk exposure is monitored against set limits.
The risk profile of the P&C business is affected by a relatively small portfolio to offset claims against. This means that single, large claims may have a disproportionate impact on profit. The largest claims will typically be in liability insurance and motor vehicle insurance. Special reinsurance agreements have been concluded to reduce this risk.
has been subject to a winding up process since 1994. The risk has been substantially reduced during the period and the company has been merged with Storebrand Skadeforsikring AS. Provisions are made on the basis of actuarial principles.
AS‘ goal is to attain an A level rating. The goal of the Group‘s parent company is to achieve a net debt-equity ratio of zero over time.
The Storebrand Life Insurance Group’s solvency margin was 164 per cent as per 31 December 2010. The solvency margin decreased in 2010 due to the growth in customer assets. SPP‘s solvency margin was 199 per cent at year-end 2010. Storebrand Bank‘s capital adequacy was 13.0 per cent and its core (tier 1) capital ratio was 10.6 per cent. The Storebrand Group‘s capital adequacy was 13.1 per cent and its core (tier 1) capital ratio was 9.8 per cent as per 31
Storebrand ASA had total liquid assets of NOK 1.4 billion at yearend 2010 and also has an undrawn credit facility of EUR 210 million. Total interest-bearing liabilities in Storebrand ASA amounted to NOK 2.9 billion at year-end 2009. Storebrand ASA has a NOK
ASA normally refinances its debt well in advance of it maturing.
Storebrand Bank ASA A3 (N) BBB+ (S) S = stable outlook
Today‘s results are not enough to ensure the Group will be a leader tomorrow. Therefore, our high level of ambition is followed up with comprehensive action plans containing concrete goals. The results for 2010 were audited by an independent third party and are provided on page 146-147. To achieve our goals we have to successfully integrate corporate responsibility into core processes such as product development, sales and employee monitoring.
The most important focus area in the Group‘s corporate responsibility work in 2010 was integrating corporate responsibility into our core activities. This entails increasing our employees‘ ownership of the work and analysing areas where the Group can combine profitability with helping to resolve some of the challenges society faces. Some examples are highlighted below, while you can read about others on pages 8-11 and on www.storebrand.no/samfunnsansvar.
Trust is the lifeblood of Storebrand. We do not sell a physical product; instead we sell a promise to be there when we are needed, whether that is tomorrow or in ten or forty years. This is why we expect the Group‘s employees to abide by high ethical standards. All employees are measured by results, conduct and attitude. One of the Group‘s core values is Reliable and one of its corporate principles is We take corporate responsibility. These provide a basis for the Group‘s code of ethics and our continuous work to ensure employees make wise, conscious choices every day.
In 2010, the Group focused on making the revised code of ethics known throughout the organisation. 93 per cent of employees have undergone the e-learning course in ethics, and the course has received good feedback. After the course all departments underwent dilemma training in which they discussed relevant scenarios and dilemmas. In addition to the employees, the Board of Storebrand ASA and the boards of the wholly owned subsidiaries in the Group were presented with the revised code of ethics and plan for the internal work on ethics.
• Score in the employee satisfaction survey that shows the ethical awareness of employees.
• The proportion of managers who have reported their code of ethics compliance status.
Some of the greatest social challenges we face in the Nordic region are linked to demographic trends. We are living longer, taking longer educations and working for shorter periods. Statistics also show that an increasing number of young people in Norway are for various reasons not participating in the labour market and receiving disability pensions.
As the Nordic region‘s largest life insurance company with long experience and a high level of competence in life and health,
The Group systematically strives to reduce the impact of business operations on the environment through its own operations, investments, purchasing, and property management. The Group sets strict environmental requirements for suppliers and the companies it invests in, and this means it is important its own house is in order.
The Group systematically tried to capitalise on its investment in environmentally friendly solutions in the new head office at Lysaker in 2010, and the head office‘s energy consumption decreased compared to 2009. The Group has invested in electronic communication solutions to improve communication, and this has reduced the need for business travel. The company car scheme was also wound up and the Group acquired five electric cars that employees at the head office can use for external meetings.
Group is working on energy labelling its properties. At year-end 2010, 90 per cent of the properties Storebrand operates or administers were energy labelled. In January 2010, Storebrand‘s Swedish subsidiary, SPP, in partnership with KF Fastigheter, started a property company with ambitious environmental and climate goals.
Even though the Group actively works to reduce emissions, it is currently impossible to reduce CO2 emissions to zero. To compensate for this, Storebrand purchases UN certified climate quotas, certified emissions reductions (CER), which cover its emissions from flights, energy consumption, and company cars. I 2008, the Group became Norway‘s first climate neutral financial actor.
Storebrand-Group is one of the few Norwegian companies that have managed this every year since the index was established in 1999.
(UNPRI). As an investor the Group is also signatories to the Carbon
The Storebrand-Group participates in the financial industry‘s management training programme for women, Futura, chairing the working group and contributing candidates and agents. The company requires that its partner recruitment agencies present final candidates of both genders for managerial positions. The company provides a series of employee benefits that contribute to
Diversity work forms part of the systematic job of including people from groups who are under-represented in the labour market, including people with disabilities and people with different ethnic backgrounds. A project was established in 2010 to further develop and boost the Group’s diversity work in the next three years.
Employees with immigrant backgrounds represented 5 per cent of employees in 2010. The Storebrand-Group‘s desire to lay the groundwork that enables applicants with impaired functional ability or immigrant backgrounds to gain employment and access to the workplace on a level playing field with other applicants has resulted in the applicable groups being able to choose whether they want to register these details or not.
Group in 2010. The figures for 2010 show a reduction in all absence in Norway, with a sick leave rate of 4.4 per cent. The Group‘s sick leave rate was 3.8 per cent, which is just below the target of 4.0 per cent. SPP had a sick leave rate of 2.4 per cent and Storebrand
Baltic 2.3 per cent. The Group became an “inclusive workplace” (IA)
The activities that form part of the follow-up of sick leave are defined in the Group’s Personnel Handbook, which is available on the intranet. The follow-up is continuous and both managers and employees are responsible for it.
Head office employees can work out in their own gym during working hours and the sports club, which is administratively r esponsible for activities in the gym, has more than 900 members.
Storebrand in which skills training in all arenas is combined. There is also a standardised course on offer that is readily available to all employees. This helps to raise awareness about skills training and learning.
The number of e-learning users and hours spent increased significantly in 2010. E-learning has become a recognised and respected teaching tool among managers and employees in the Group. It results in more efficient training, both in Norway and Sweden. Answers to the question about the employees‘
The authorisation scheme for financial advisers required major resources from HR skills training. It contributed to a big boost in skills both on the theoretical and the communications-related level.
The Storebrand-Group further developed the managerial programme in 2010, including preparing a handbook for all managers in Storebrand that defines a common managerial platform. Storebrand Leadership clarifies the requirements and expectations for managers in the Group. A common managerial platform provides an opportunity to create greater value across departments, areas and legal structures.
The Board carried out an evaluation of its work in 2010 in which the Storebrand’s administration participated. In 2010, the Board held 11 meetings and one Board conference. The work of the
Board of Representatives: Pål Syversen and Tore Eugen Kvalheim were elected as new members. Anne-Lise Aukner was elected as a new substitute member. Marius Steen, Per-Erik Hauge and Paul
There have been substantial fluctuations in the financial markets in the wake of the financial crisis. This trend has continued in 2010 with a high level of volatility in both the equity and interest rate markets. The real economy is nonetheless developing in a positive direction with the Swedish economy recovering strongly and continued good growth in the Norwegian economy. This provides a basis for continued growth in the Storebrand Group‘s core markets.
This trend will gradually improve the quality of the Group‘s earnings. The Storebrand Group has implemented a number of streamlining measures in recent years aimed at reducing the relative costs level in both the Norwegian and Swedish businesses. The work on streamlining operations continues and a programme for improving operations has been established in which both income increasing and cost reducing measures are closely monitored. The most important contributions to achieving this target will be cost reducing measures, growth in customer assets and measures on the income side. The programme for improving operations is developing as planned and
the work on streamlining the Group’s processes continues at full strength.
Storebrand is exposed to several types of risk through its business areas. Continuous monitoring and active risk management are therefore prioritised core areas in the Group. The development of both the equity and interest rate markets is important with respect to being able to deliver a return that exceeds the interest guarantee in the products over time. Developments in the level of interest rates and the property and equity markets are considered the most important risk factors that could affect the Group‘s result. The Storebrand Group adapts to changing market conditions through dynamic risk management, which aims to tailor financial risk to the company‘s risk bearing capacity.
The Board considers the Group‘s capital situation to be good in relation to its risk profile and ratings and will propose to the AGM
that a dividend of NOK 1.10 per share, excluding the company‘s holding of bought back shares, be paid for 2010, which amounts to
SharehoLderS Storebrand ASA is one of the largest companies listed on the OSE measured by number of shareholders. The company has shareholders from almost all the municipalities in Norway and from 44 countries. In terms of market capitalisation, Storebrand was the 15th largest company listed on the OSE at year-end 2010.
Fidelity Investments 42,210,774 9.38 private holdings less than 10k shares 14,814,515 3.29 standard life Investments 13,470,124 2.99 dnb nor Asset Management 10,479,550 2.33 ubs Global Asset Management 10,238,433 2.28 state of new Jersey 6,975,660 1.55 nordea Asset Management 6,598,627 1.47 people's bank of China 6,472,031 1.44
Cazenove Capital Management 4,024,156 0.89 storebrand AsA 3,838,932 0.85 oslo pensjonsforsikring 3,700,000 0.82 1 The data is provided by RD:IR and VPS, through the Nominee ID service. The data is obtained through the analysis of beneficial ownership and fund manager information provided in replies to disclosure of ownership notices issued to all custodians on the Storebrand share register. Whilst every reasonable effort is made to verify all data, neither RD:IR nor VPS can guarantee the accuracy of the analysis.
14,157 million in 2009. This made Storebrand the 17th most traded share on the OSE in 2010 in terms of monetary value. In relation to the average total number of shares, the turnover rate for Storebrand‘s share was 132 per cent.
On 1 January 2006, new rules came into force in Norway concerning the taxation of dividends and gains on shares held by private individuals. The new rules are termed the “shareholder model” and replaced the previous RISK and tax credit systems. Under the new shareholder model, the amount of a dividend, less a standard deduction, is taxable, currently at 28 per cent. If shares are sold, any unused standard deduction can be deducted from the gain on the sale. The standard deduction is calculated on the basis of the cost price of the share multiplied by the average three-month interest rate on treasury bills, which is effectively a risk-free rate of interest. The interest rate for calculating deductions in 2010 is set at 1,6 per cent.
Capital Markets Day 13 April: General meetings 14 April: Extraordinary dividend date 11 May: Result 1Q 2011 14 July: Result 2Q 2011 26 October: Result 3Q 2011
dividend for the accounting year 1.10 0.00 0.00 1.20 1.80 4.00 7.00 0.80 number of ordinary shares 31.12 (1,000 shares) 449,910 449,910 449,910 449,910 249,819 258,526 278,181 278,070
Storebrand has one class of shares, each carrying one vote. The company holds its AGM
Shareholders should generally contact the administrator of their share account with queries and notices of changes, e.g. changes of address. Storebrand’s own shareholders’
office can also provide guidance and information on Tel: (+47) 22 31 50 50.
Storebrand’s principal focus within corporate responsibility is sustainable investments. The group has more than 15 years experience within systematic, goal-oriented corporate responsi bility and its work is anchored in the group’s vision, core values and corporate principles.
The Board continually monitors the company’s capital solidity in light of its goals, strategy and risk profile. You can read more about
The Board currently has no mandate, and there are no authorising provisions in the articles of association, to increase Storebrand ASA’s capital.
The management and Board of directors conduct an annual review of Storebrand’s corporate governance principles and how they function in the group. Storebrand complies with the Norwegian code of Practice for corporate governance of 21 October 2010 1. The following article describes how Storebrand follows up with the code of Practice’s 15 points.
relation to things other than the interests of the Storebrand Group.
Board of Representatives shall chair the AGM. The Chairman of the
Board and at least one representative of the Election Committee and the external auditor must attend the AGM. The CEO and the group’s executive management team also participate. AGM minutes are available on the group’s website.
• Any matters listed on the agenda enclosed with the invitation.
Decisions are generally made on the basis of an ordinary majority.
Eiendomskreditt AS share a committee, which consists of five members and a substitute member elected by the AGM. The substitute members always attend control committee meetings. Storebrand Bank ASA and its subsidiaries used to have a seperate control committee. At the 2010
The committee is entitled to look into any matter and has access to all relevant documentation and information. The committee has the power to demand information from any employee and any member of the corporate bodies. The committee held 11 meetings in 2010 and reported on the committee’s work to the Board of Representatives on 7. NoMiNatioN coMMittee
Control Committee should work according to instructions adopted by the AGM. The Election Committee’s instructions were adopted by the 2010 AGM. According to the instructions, the factors the Election
Board, and is responsible for proposing candidates to the Board of
The duties of the Board of Representatives include making recommendations to the AGM regarding the Board’s proposed annual report and financial statements, electing the six, or up to seven, shareholder elected board members, including the Chairman of the
Board, setting the remuneration paid to board members, issuing instructions for the Control Committee’s work, and considering reports from the Control Committee. The Board of Representatives is entitled to make recommendations to the Board on any matter.
The articles of association stipulate that the Board of Directors can consist of nine or ten members. The Board’s members are elected for one year at a time. One new board member was elected at a meeting of the Board of Representatives in 2010. In 2010, the Board consisted of 10 members.
Board satisfies the independence requirements set forth in the Code of Practice. There are few instances of disqualification during the consideration of matters by the Board. The Board’s assessment of each board member’s independence is commented on in the overview of corporate bodies on page 49. An overview of the number of shares in the Storebrand Group owned by members of corporate bodies as per 31 December 2010 accompanies the notes to the financial statements for Storebrand ASA (Information about close associates) on page 139.
The Board conducts an annual evaluation of its work and methods which provides a basis for changes and measures. The results of the
The Remuneration Committee assists the Board with all matters concerning the CEO’s remuneration. The committee monitors the remuneration of the group’s executive personnel, and proposes guidelines for the setting of the executive personnel’s remuneration and the Board’s declaration concerning the setting of the executive personnel’s remuneration, which is presented to the AGM each year.
Committee held six meetings in 2010. The external and internal auditors participate in these meetings. The majority of the committee’s members are independent of the group.
Storebrand ASA’s Board has drawn up instructions for the group’s subsidiaries intended to ensure they implement and comply with the group’s management and control principles and guidelines.
The group’s corporate responsibility guidelines summarise how corporate responsibility is an integral part of the group’s management and control processes for investments, product development, purchasing, employee monitoring and internal operations. The group’s corporate responsibility goals are adopted by the Board. The group also complies with the GRI (Global Reporting Initiative) international reporting standard. The results are audited by the group’s external auditor. For the 12th year in a row the group qualified for the international Dow Jones Sustainability Index, which includes the top 10 per cent most sustainable companies within all industries on a global basis.
The investor relations guidelines ensure reliability, timeliness and equal information for investors, lenders and other interested parties in the securities market.
of events in the financial markets on the group’s financial performance and solvency. This is important input for the Board’s general discussion about risk appetite and risk allocation.
Assessments of operational risks are linked to a unit’s ability to achieve goals and implement plans. The process covers both the risk of incurring losses and failing profitability linked to economic downturns, changed general conditions, changed customer behaviour, etc, and the risk of incurring losses due to inadequate or failing internal processes, systems, human error or external events.
The internal audit function’s instructions and annual plan is set by the
The Storebrand Group publishes four interim financial statements in addition to the ordinary annual financial statements. The financial statements shall satisfy legal and regulatory requirements and be prepared in accordance with the adopted accounting policies, and be published according to the schedule adopted by the Board of
Board’s Audit Committee conducts preparatory reviews of interim financial statements and annual financial statements that particularly focus on the valuations and estimations that have been made on the basis of judgements before they are considered by the Board.
Monthly and quarterly operations reports are prepared in which results per business area and product area are analysed and assessed against set budgets. Particular attention is paid to analysing the development of the financial results, risk results and administration results.
The AGM fixes the Board’s annual remuneration on the basis of the recommendations of the Election Committee. The fees paid to the members of the Board are not linked to profits, option schemes or similar arrangements. The members of the Board do not receive incentive-based remuneration; instead they receive a fixed annual compensation. The shareholder elected members of the Board do not participate in the company’s pension arrangements. None of the shareholder elected members of the Board carries out any duties for the company other than their appointment to the Board. More detailed information on the remuneration, loans and shareholdings of board members can be found in notes 22 (Group) and 5 (ASA) of the notes to the accounts. Board members are encouraged to hold shares in the company.
personnel in Storebrand. The Board’s statement on fixing remuneration is presented to the AGM. The remuneration consists of fixed salaries, bonuses, pension schemes and other personal benefits deemed natural for a financial group. The Board believes the level of total remuneration should be competitive, but that it should not be a pay leader. An annual assessment is carried out based on external market data to ensure remuneration is adequate in relation to equivalent positions in the market. The authorities drew up new regulations in 2010 that regulate remuneration schemes in financial institutions. The
This is to ensure independence in the execution of the accounting and control tasks. The most important objectives of the bonus model for other executive personnel and employees who influence the company’s risk, as it is defined by the authorities, are that bonuses shall help to guide their actions such that they are generally commensurate with the owners’ long-term interests, promote good management and control of the company’s risk, counter high levels of risk taking, and act as an incentive.
The company is able to withhold previously awarded, but retained, bonuses in the bonus bank if these were obviously paid on the basis of misleading and/or incorrect information.
The Board has issued guidelines for the company’s reporting of financial and other information and for contact with share holders other than through the AGM. The group’s financial calendar is published both on the Internet and in the company’s annual report.
All reporting is based on the principle of transparency and takes into account the need for the equal treatment of all participants in the securities markets and the rules concerning good stock exchange practice. Further information can be found on page 40-42.
The articles of association do not impose any restrictions on the purchase of shares in Storebrand. The Board shall ensure that all shareholders are treated equally and have an opportunity to consider the presented bid. The Board will, as far as possible, obtain information about the bidder and make this available to all share holders. The Board will also consider the bid and seek to issue a statement on the Board’s assessment of the bid, as well as seek to obtain a valuation from an independent expert. The Board will in the event of any take-over bid seek, to the extent possible, to maximise the shareholders’ assets.
Committee. Deloitte has been elected by Storebrand ASA’s AGM as the company’s external auditor. The other companies in the group use the same auditors as Storebrand ASA.
Storebrand has considerable potential influence over the development of listed companies. Storebrand pays great attention to exercising its ownership on the basis of straightforward and consistent ownership principles. Storebrand applies the Norwegian Code of
Practice for Corporate Governance in this role. Storebrand has had an administrative Corporate Governance Committee since 2006. The committee is responsible for ensuring good corporate governance practice across the Storebrand Group. Storebrand has issued guidelines with respect to employees holding non-executive appointments in companies outside the group.
Observer (elected by employees): Rune Pedersen 1 Not independent, see page 43 regarding corporate governance.
Master’s degree in economics and business administration, Norwegian School of Economics and Business Administration (NHH).
Previous positions: 1995-2000 CFO, Storebrand ASA. Chair of Corporate Assembly and member of Nomination Committee, Orkla ASA. Deputy Chair of Corporate Assembly, Statoil ASA. Member of Corporate Assembly, Norsk Hydro ASA
Honorary: Board member, FNO. Board member, Fazer. Council Member, World Business Council for Sustainable Development (WBCSD).
State Authorised Public Accountant and Authorised Financial Analyst (AFA), Norwegian School of Economics and Business Administration (NHH).
46 years executive vice President, life and Pensions Norway and Managing director, Storebrand livsforsikring AS
Previous positions: 2004-2007 Executive Vice President, Corporate Market, Storebrand Livsforsikring AS. 2001-2004 Finance Director, Storebrand ASA. 1994-2001 Vice President, Citibank International plc. 1990-1994 Asst. Treasurer, Scandinavian Airlines Systems.
56 years executive vice President, life and Pensions Sweden and Managing director, SPP AB
Master’s degree in economics and business administration, Norwegian School of Management (formerly Handelsakademiet ), MBA, Thunderbird (AGSIM), USA.
Previous positions: 2009–2010 Director Corporate Market, Storebrand Bank. 2007–2009 Senior Adviser, DTZ Realkapital AS. 2004–2007 Executive Vice President, head of DnB NOR’s activities in the USA. 2002–2004 Corporate Finance, DnB Markets. 1996–2002 Bank Manager, DnB group customer division. 1987–2002 Account Manager, DnB group customers.
Previous positions: 2006-2009 CEO, Storebrand Skadeforsikring AS. 2005 Executive Vice President, Sampo. 2002-2005 Executive Vice President, Head of Business Area Private Nordic, If Skadeforsikring. 1999-2002 Nordic Head of Corporate Claims, If. 1984-1999 National and Regional Sales Manager, corporate life and non-life, UNI Storebrand. 1984 Product Manager, UNI Forsikring. 1982-1984 Product Manager/ Claims Handler, Norges Brannkasse.
Programme for Executive Development (PED), IMD Lausanne, Master of Science, Naval Technology, Norwegian Institute of Technology (now NTNU).
Previous positions: 2002-2006 Executive Vice President, Strategic Business Development, Storebrand ASA. 1989-2002 Consultant/ Managing Partner/CEO, PA Consulting Group. 1986-1989 Vice President, Mandator AS (now Bouvet ASA). 1982-1985 Consultant, Arthur Andersen & Co (now Accenture).
Cand. polit, University of Bergen, Master of Science in Comparative Politics, LSE.
Previous positions: 2005–2007 Manager, Corporate Responsibility, Storebrand ASA. 2004 Internal Brand Manager, Storebrand ASA. 2002-2003 Acting Manager, Corporate Responsibility, Storebrand ASA.
Storebrand Group profit and loss account 54 total comprehensive income 55 statement of financial position 56 reconciliation of changes in equity 58
Net income from financial assets and real estate for the customers: - equities and other units at fair value 13 9,031 7,058 - bonds and other fixed-income securities at fair value 13 3,197 6,668 - financial derivatives at fair value 13 2,494 2,988 - to (from) market value adjustment reserve 15 -1,940 -31 - net income from bonds at amortised cost 13 2,069 1,103 - net interest income lending 114 136 - net income from properties 14 1,389 967 - result from investments in associated companies 30 58 other income incl. fixed income and currency bank-company 16 1,995 1,766 other income incl. fixed income and currency bank-customers 16 96 -54 total income 48,241 48,360 insurance claims for own account 17 -21,956 -18,676
Change in insurance liabilities excl. guaranteed return 18 -10,283 -13,642 to/from additional statutory reserves - life insurance -766 -1,284
Guaranteed return and allocation to insurance customers 18 -9,284 -8,666 losses from lending/reversal of previous losses 19 -15 -46 other costs incl. currency bank 24 -294 -407 total costs before amortisation and write-downs -46,634 -47,115 profit before amortisation and write-downs 1,608 1,245
Group pre-tax profit 1,217 855 result after tax sold/discontinued operations 56 -37 31 profit/loss for the year 1,480 934 profit/loSS for the yearS due to majority's share of profit 1,471 928 minority's share of profit 9 5 earnings per ordinary share (noK) 3,30 2,08 average number of shares as basis for calculation (million) 446 446 there is no dilution of the shares profit and loss aCCount storebrand Group
Change in pension experience adjustments, net of tax -327 135 restatement differences, after tax 59 -27 adjustment of value of properties for own use, net of tax -57 -4
statement of finanCial position storebrand Group 1 January – 31 december
NOK million notes 2010 2009 aSSetS company portfolio deferred tax assets 26 132 213 tangible fixed assets 28,29 193 209 investments in associated companies 30 148 140
Financial assets at fair value: - equities and other units 6,9,32,40 351 365 - bonds and other fixed-income securities 6,8,9,32,41 19,013 20,834 assets sold/discontinued operations 56 73 total assets company 70,041 75,053 aSSetS cuStomer portfolio investments in associated companies 30 60 3
1 January – 31 december statement of finanCial position storebrand Group
NOK million share capital 1 own shares share premium reserve total paid in capital revaluation surplus pension experience
Change in pension experience adjustments -328 -328 -328 total comprehensive income for the period 0 -328 64 1,471 1,207 5 1,212 equity tranSactionS with ownerS
equity changes with the result for the individual period, equity transactions with the owners and items recognised in the total comprehensive income. share capital, the share premium fund and other equity is evaluated and managed together. the share premium fund may be used to cover a loss, and other equity may be used in accordance with the provisions of the public limited liabilities Company act.
the own shares column shows the nominal values of the holding of own shares. the amount paid in excess of the equity’s nominal value is booked as a reduction in other equity, such that the entire cost price for own shares is deducted from the Group’s equity. a positive amount on the “own shares” line is due to own shares being used in the shares scheme for employees.
for further information on the Group’s fulfilment of the capital requirements, see note 53.
net receipts - insurance 20,918 13,609 net payments claims and insurance benefits -18,092 -15,179 net receipts/payments - premium reserve transferred 1,007 -589 receipts - interest, commission and fees from customers 1,719 2,031 payments - interest, commission and fees to customers -474 -593 payment of income tax -5 payments relating to operations -2,997 -3,176 net receipts/payments - other operational activities 721 -3,700 net cash flow from operations before financial assets and banking customers 2,798 -7,597 net receipts/payments - lending to customers 2,092 2,942 net receipts/payments - deposits bank customers 473 31 net receipts/payments - financial investments 1,027 421 net receipts/payments - real estate investments -1,468 253 net change in bank deposits insurance customers 562 7,306 net cash flow from financial assets and banking customers 2,685 10,953 net cash flow from operational activities 5,483 3,356 caSh flow from inveStment activitieS
Cash and cash equivalents at start of the period for new companies 4
Cash and cash equivalents at start of the period 3,609 6,744 cash and cash equivalents at the end of the period 1 3,172 3,609 1 consist of: lending to financial institutions 701 425 bank deposits 2,472 3,184
Cash floW analysis storebrand Group the cash flow analysis shows the Group’s cash flows for operational, investment and financial activities pursuant to the direct method. the cash flows show the overall change in means of payment over the year.
operational activities a substantial part of the activities in a financial group will be classified as operational. all receipts and payments from insurance activities are included from the life insurance companies, and these cash flows are invested in financial assets that are also defined as operational activities. one subtotal is generated in the statement that shows the net cash flow from operations before financial assets and banking customers, and one subtotal that shows the cash flows from financial assets and banking customers. this shows that the composition of net cash flows from operational activities for a financial group includes cash flows from both operations and investments in financial assets. the life insurance companies’ balance sheets include substantial items linked to the insurance customers that are included on the individual lines in the cash flow analysis. since the cash flow analysis is intended to show the change in cash flow for the company, the change in bank deposits for insurance customers is included on an own line in operating activities to neutralise the cash flows associated with the customer portfolio in life insurance.
notes to the finanCial statements of storebrand Group 01 accounting policies the accounting policies used for the preparation of the consolidated financial statements are described below. the policies are applied consistently to similar transactions and to other events involving similar circumstances.
Use of estimates in preparing the annual financial statements the preparation of the annual financial statements in accordance with ifrs requires the management to make valuations, estimates and assumptions that affect assets, liabilities, revenue, costs, the notes to he financial statements and information on potential liabilities. the final values realised may differ from these estimates. see note 3 for further information about this.
Changes have been made to the following standards and these came into force on 1 January 2010: • IFRS 3 Business Combinations
Summary of central accounting policies for important statement of financial position items the assets side of the Group’s statement of financial position primarily consists of investment properties and financial instruments. investment properties are stated at fair value. the majority of financial instruments are stated at fair value, while other financial instruments that fall into the category lending and receivables are stated at amortised cost. the statement of financial position also includes activated intangible assets, which primarily consist of excess values linked to acquired insurance contracts. these excess values are stated at cost price less an annual amortisation.
the liabilities side of the Group’s statement of financial position primarily consists of financial instruments (liabilities) and technical insurance reserves. With the exception of derivatives that are stated at fair value, the majority of the financial liabilities are stated at amortised cost.
consolidation the consolidated financial statements combine storebrand asa and companies where storebrand asa has the power to exercise a controlling influence. a controlling influence is normally achieved where the Group owns, directly or indirectly, more than 50 per cent of the shares in a company and the Group has the power to exercise control over the company. minority interests are included in the Group’s equity.
Elimination of internal transactions internal receivables and payables, internal profits and losses, interest and dividends, etc. between Group companies are eliminated in the consolidated financial statements. transactions between customer portfolios and the company portfolio in life and pensions and between the customer portfolios in life and pensions and other units in the Group are not eliminated in the consolidated financial statements.
Integration of business the acquisition method is used when business is acquired. the acquisition cost is measured at its fair value after taking into account any equity instruments as well as direct expenses with respect to the acquisition. any share issue expenses are not included in the acquisition cost, but are charged to equity.
Goodwill is not amortised, but is tested annually for impairment. if the relevant discounted cash flow is lower than the book value, goodwill is written down to fair value. Write-downs of goodwill are never reversed, even if there is information in future periods that the impairment no longer exists or is of a lesser amount. Gains or losses on the sales of companies in the Group include the goodwill related to the company in question.
Goodwill is allocated to the relevant cash flow generating units that are expected to benefit from the acquisition so that it can subsequently be tested for impairment. Cash flow generating units are identified in relation to operational segments.
intangible assets intangible assets with limited usable lifetimes are stated at acquisition cost less accumulated depreciation and any write-downs. the depreciation period and the method of depreciation are reviewed annually. new intangible assets are only capitalised if it can be demonstrated that it is likely that the Group will gain future commercial benefit that is directly applicable to the asset in question. in addition, it must be possible to estimate the cost price of the asset reliably.
straight-line depreciation is applied over the following periods: • Contractual customer relationships 5-7 years
investment properties investment properties are stated at fair value. fair value is the amount an asset could be sold for in a transaction at arm’s length between well informed, voluntary parties.
financial liabilities are derecognised in the balance sheet when they cease to exist, i.e. once the contractual liability has been fulfilled, cancelled or has expired.
Definition of amortised cost subsequent to inception, hold-to-maturity financial assets, loans and receivables as well as financial liabilities not at fair value in the profit and loss account, are stated at amortised cost using the effective interest method. the calculation of the effective interest rate involves estimating all cash flows and all contractual terms of the financial instruments (for example early repayment, call options and equivalent options). the calculation includes all fees and margins paid or received between the parties to the contract that are an integral part of the effective interest rate, transaction costs and all other premiums or discounts.
impairment of financial assets in the case of financial assets that are not recognised at fair value, consideration is given on each statement of financial position date to whether there is objective evidence that the value of a financial asset or a Group of financial assets is impaired.
(effective interest rate calculated at the time of inception). the amount of the loss is recognised in the profit and loss account.
losses that are expected to occur as a result of future events are not included in the financial statements; regardless of how likely it is that the loss will occur.
• at fair value through profit or loss in accordance with the fair value option (FVO)
Held for sale a financial asset is classified as held-for-sale if it is: • acquired or incurred principally for the purpose of selling or repurchasing it in the near term, is part of a portfolio of identified financial instruments that are managed together and for which there is evidence of a recent actual pattern of short-term profit-taking, or
Hold-to-maturity investments hold-to-maturity investments are non-derivative financial assets with fixed or determinable payments and fixed maturity that the company has the intention and ability to hold-to-maturity, with the exclusion of: • assets that are designated at inception as assets at fair value in the profit and loss account, and
hold-to-maturity investments are recognised at amortised cost using the effective interest method. in 2008, all the financial instruments included in the hold-to-maturity category were reclassified and the residual holding was as per 31 december 2010 all included in the available-for-sale category. the hold-to-maturity category can again be used in storebrand’s consolidated financial statements from 1 January 2011.
Loans and receivables loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market, with the exception of such assets that the company intends to sell immediately or in the short term that are classified as held-for-sale and such assets that the company designates at inception as assets at fair value in the profit and loss account.
loans and receivables are stated at amortised cost using the effective interest method.
loans and receivables that are designated as hedged items are subject to measurement in accordance with the requirements of hedge accounting.
loans and receivables, b) hold-to-maturity investments, or c) financial assets at fair value through profit or loss.
• it will be settled at a future date accounting treatment of derivatives that are not hedging derivatives that do not meet the criteria for hedge accounting are treated as available for sale financial instruments. the fair value of such derivatives is classified as either an asset or a liability with changes in fair value in the profit and loss account.
accounting treatment of derivatives that are hedging Fair value hedging storebrand uses fair value hedging, where the items hedged are financial assets and financial liabilities measured at amortised cost. derivatives are recognised at fair value over the profit and loss account (fVo). Changes in the value of the hedged item that relate to the hedged risk are applied to the carrying amount of the item and are recognised in the profit and loss account.
the total loss or gain in equity is recognised in the profit and loss account when the foreign business is sold or run-off.
interest income and interest expense banking interest income and interest expense are recognised in the profit and loss account at amortised cost using the effective interest method. the effective interest method includes set-up charges.
accounting for the insurance business the accounting standard ifrs 4 insurance Contracts addresses the accounting treatment of insurance contracts. the storebrand Group’s insurance contracts fall within the scope of the standard. ifrs 4 is meant to be a temporary standard and it allows the use of non-uniform principles for the treatment of insurance contracts in consolidated financial statements. in the consolidated accounts the technical insurance reserves in the respective subsidiaries, calculated on the basis of the individual countries’ particular laws, are carried forward. this also applies to insurance contracts acquired via the integration of companies. in such cases, positive excess values, cf. ifrs 4 no. 31b), are activated as intangible assets.
General - life insurance profit allocated to insurance policyholders the guaranteed yield on the premium reserve and on the premium fund, as well as the other return for customers is recognised in the profit and loss account as part of the item ‘guaranteed yield and allocation to insurance policyholders’.
the premium reserve is calculated using the same assumptions as those used to calculate premiums for individual insurance contracts, i.e. assumptions about mortality and disability rates, interest rates and costs. premium tariffs are based on the observed level of mortality and disability in the population with the addition of security margins that take into account, inter alia, expected future developments in this respect.
Insurance obligations special investments portfolio the insurance reserves allocated to cover obligations associated with the value of the special investments portfolio must always equal the value of the investments portfolio assigned to the contract. the proportion of profit in the risk result is included. the company is not exposed to investment risk versus customer assets since the customers are not guaranteed a minimum return. the only exception is in the event of death when the beneficiaries are paid back the amount originally paid-in for annuity insurance.
Claims reserve amounts reserved for claims either not yet reported or not yet settled (ibnr and rbns). the reserve only covers amounts which might have been paid in the accounting year had the claim been settled.
Premium income net premium income comprises premium amounts that fall due (including savings elements) during the year, transfers of premium reserve and premiums on reinsurance ceded. upfront pricing of guaranteed interest and the risk profit element are included in premium income. accrual of premiums earned is made through allocations to the premium reserve in insurance reserves.
Transfers of premium reserves, etc (transfers) transfers of premium reserves resulting from transfers of policies between insurance companies are booked to profit and loss as premiums for own account in the case of reserves received and claims for own account in the case of reserves paid out. the recognition of cost/income takes place at the date the insured risk is transferred. the premium reserve in the insurance reserves is reduced/increased on the same date. the premium reserve transferred includes the policy’s share in additional statutory reserves, the market value adjustment reserve and the year’s profit. transferred additional statutory reserves are not shown as part of premium income but are reported separately as changes in insurance reserves. transfer amounts are classified as current receivables/
Selling expenses selling expenses in the norwegian life insurance business are recognised as costs, while in the swedish subsidiaries selling expenses are recognised in the statement of financial position and amortised.
the company is allowed to apply a higher multiple of the basic interest rate than that defined by the norwegian fsa. the allocation to additional statutory reserves is a conditional allocation to policyholders that is recognised in the profit and loss account as a statutory reserve and accordingly reduces net profit.
Premium fund, deposit reserve and pensioners’ surplus fund the premium fund contains premiums prepaid by policyholders as a result of taxation regulations for individual and group pension insurance and allocated profit share. Credits and withdrawals are not booked through the profit and loss account but are taken directly to the statement of financial position.
the fund is applied each year as a single premium payment to secure additional benefits for pensioners.
life insurance - Sweden Life insurance reserves in 2009, spp introduced a cash flow model for use when discounting life insurance reserves. the model employs a swap curve (monthly) for the term to maturity in those cases where it is assessed that there is sufficient liquidity in the swedish market.
a normal rate is fixed for other cash flows. this is the sum of the long-term inflation assumptions, real interest rate and risk premium.
the insurance companies in the Group are subject to their own specific legal requirements for technical insurance reserves, including administration reserves, security reserves, and guarantee reserves. in storebrand’s consolidated financial statements, which are prepared in accordance with ifrs, security reserves with high security margin, natural disaster fund, administration reserves, and guarantee reserves are not treated as liabilities and are thus recognised in the
income recognition for asset management activities management fees are recognised when the income is reliable and earned, fixed fees are recognised as income in line with the delivery of the service, and performance fees are recognised as income once the success criteria have been met.
the effect of differences between assumptions and actual experience (experience adjustments) and changes in assumptions are recognised against total comprehensive income in the statement of recognised income, expenses and value changes in the period they arose. the effects of changes to the pension scheme are recognised in the profit and loss account as they are incurred, unless the change is conditional on future accrual of pension entitlement. in such a case, the effect is amortised linearly over the time until the entitlement is fully earned. employer’s social security contributions are included in the pension liability and in experience adjustments shown in total comprehensive income.
tangible fixed assets the Group’s tangible fixed assets comprise of equipment, fixtures and fittings, vehicles, it systems and properties used by the Group for its own activities.
tax the tax cost in the profit and loss account consists of tax payable for the accounting year and changes in deferred tax. tax is recognised in the profit and loss account, except when it relates to items that are recognised directly against equity. deferred tax and deferred tax assets are calculated on the basis of differences between accounting and tax values of assets and liabilities. deferred tax assets are recognised in the statement of financial position to the extent it is considered likely that the companies in the Group will have sufficient taxable profit in the future to make use of the tax asset.
the result available for profit sharing between owners and customers can be divided up into the following elements: • Administration result the administration result is the difference between the premiums paid by customers pursuant to the tariff and the company’s actual operating costs. the income consists of fees based on the size of customer assets, premium volumes or number in the form of unit price. operating costs consist of, among other things, personnel costs, marketing, commissions and it costs.
life and pensions norway financial performance - life and pensions norway
individual endowment insurance and pensions in the company prior to 1 January 2008 will continue to apply the profit rules that applied prior to 2008.
Group pension customers can choose to invest their assets in a particular investment portfolio. the customers have freedom of choice in that they can choose between standardised risk profiles, or choose almost any investment option within the constraints set by the law and regulations at any given time.
Customers can define their investment policies almost as if the management was taking place through a pension fund.
Other result Consists of the result for subsidiaries and changes in the security and administration reserves for p&C insurance.
Customers’ result generation in the case of group with investment choice and unit linked based products the customers receive the returns on the invested assets. individual products receive 65 per cent of the total positive administration, risk and financial results. paid-up policies receive 80 per cent of the positive financial result as well as a minimum of 50 per cent of the positive risk result (up to 50 per cent of the risk result can be allocated to the risk equalisation fund). Group defined benefit fee-based receive the positive financial result as well as a minimum of 50 per cent of the positive risk result (up to 50 per cent of the risk result can be allocated to the risk equalisation fund).
Guaranteed products unit-linked benco company portfolio 2010 2009 result before amortisation and write-downs 335 35 49 44 464 486 amortisation intangible assets -348 -340 assets under management (noK billion) 75 32 15 10 132 127
in the case of defined benefit contracts (db portfolio), the company is entitled to charge an indexing fee if the group profit allows the indexing of the insurance, up to a maximum equalling the change in the consumer price index (Cpi). the indexing is based on the return between 1 october to 30 september.
the return on risk products is recognised in the financial result.
Other result the other result consists of the return on assets not managed at policyholders’ expense, equity and depreciation on intangible assets and interest expenses on subordinated loans.
03 important accounting estimates and judgements estimates and judgements are continually evaluated on the basis of historical experience and anticipated future events. in the future, actual experience may deviate from these accounting estimates, but the estimates are based on best judgement at the time the financial statements are produced.
a substantial proportion of the insurance contracts in the norwegian life insurance business include an annual interest guarantee. Changes to estimates and judgements may result in changed returns in customer portfolios. depending on the size of any fall in value, such a fall in value could be countered, wholly or partly, by a reduction in the market value adjustment reserve and additional statutory reserves such that the effect on the result allocated to owners can be limited.
there are also insurance contracts without an interest guarantee in the life insurance business in which customers bear the return guarantee. Changes to estimates and judgements may result in changed returns in relevant customer portfolios. the recognition of such value changes does not directly affect the owners’ result.
in general the following factors will often be key in the generation of the result for customers and/or the owners: • Development of interest rate and equity markets, as well as commercial property
• Composition of assets and risk management, and changes to the assets’ composition over the year
• Development of costs important estimates and assumptions that can result in material adjustments to the recognised values are discussed below.
financial instruments there will be some uncertainty associated with the pricing of financial instruments not priced in an active market. this is particularly true for the types of securities priced on the basis of non-observable assumptions. any changes to the assumptions could affect the recognised values. the majority of such financial instruments are included in the customer portfolio.
in the swedish business (spp) the insurance liabilities are largely discounted using a yield curve in which parts of the yield curve are not liquid. any changes in the discounting rate will affect the size of the liabilities.
the majority of the intangible assets recognised from the acquisition of spp were linked to the existing life insurance contracts at the time of the acquisition.
pensions own employees the discounted current value of pension liabilities depends on the economic and demographic assumptions used in the calculation. the assumptions used must be realistic, mutually consistent and kept up to date in the sense that they should be based on uniform expectations of future economic conditions. the pension liabilities as per 31 december 2010 were calculated by actuaries. any changes associated with the expected growth in pay and the discount rate, etc, could have a significant effect on the recognised pension obligations relating to our own employees. these pension liabilities are stated pursuant to ias 19.
the compliance officer in the individual company produces written reports on the company’s compliance with the regulations for the board of directors and executive management in the company. this is done on a regular basis and at least once a year. the reports shall, among other things, state whether or not preventive measures have been implemented to remedy any shortcomings. Compliance reporting is seen as being on a par with the Group companies’ internal control reporting, operation risk reporting and event reporting.
the Group’s Cfo is responsible for the Group’s control functions for risk management and internal control. Given the importance of financial market risk in relation to the Group’s activities, a central risk management function has been established. this has been tasked with supporting the board and Group’s notes to the finanCial statements of storebrand Group
executive management team in drawing up a risk strategy and operationalising the setting of limits and risk monitoring across the Group’s activities. a corporate control function has also been established which is tasked with administering the value-based management system, coordinating planning and budget processes, the management’s risk assessments and internal control reporting, as well as board and management reporting.
the internal audit function’s audit plan includes an independent assessment of Group Control and the compliance function’s procedures and control systems.
the company’s total risk picture is monitored continuously using tools such as the norwegian fsa’s risk based-supervision and self-developed risk goals.
Life and Pensions Sweden in spp the portfolios are divided into defined benefit pensions, defined contribution pensions and unit linked contracts, and both defined benefit pensions and defined contribution pensions have associated guaranteed returns. in portfolios with a guaranteed return, the differences in the investments’ and the insurance liabilities’ interest rate sensitivity is minimised and the short-term interest risk is therefore substantially reduced. however, financial risks are taken in order to achieve returns in excess of the guarantee, primarily via equities, credit bonds and alternative investments. the proportions of equities in the portfolios are dynamically adjusted based on their risk bearing capacity in order to dampen the effect of falls and at the same time participate in rises. due to the somewhat more complex financial risk picture in spp than in the norwegian life insurance business, the risk to equity represented by the customer portfolio is also managed through derivative transactions in spp’s company portfolio.
the investment strategy and risk management in spp comprises of four main pillars: • the assets’ interest rate sensitivity is continuously adjusted to the insurance liabilities
• adjusted hedging in the company portfolio of parts of the financial risk the customer portfolios expose the equity to in traditional insurance with an interest guarantee, spp bears the risk of a return equal to the guaranteed interest being achieved on the policyholders’
and changes in its size are recognised in the profit and loss account immediately. the contracts’ buffer capital must be intact in order for profit sharing to represent a net income for owners. When the contracts’ assets exceed the present value of the obligations, a buffer called the conditional bonus is established. Changes in this customer buffer are not recognised in the profit and loss account immediately. it is the policyholder who bears the financial risk in unit linked insurance contracts.
Various risk goals are used to monitor and manage the risk in the company, including its own Value at risk goal and the swedish financial supervisory authority’s traffic light model. in order to ensure that insurance companies have adequate capital to meet their insurance obligations, finansinspektionen
(swedish financial supervisory authority) requires that the sector stress test all of its insurance business using the so-called traffic light calculations. the elements tested are the premium income side and the insurance liabilities. in 2007, it was announced that companies would also be required to stress notes to the finanCial statements of storebrand Group
changes with respect to insurance liabilities in risk policies. this also applies to so-called cancellation risk, which is the risk that a policyholder will terminate the policy and thus stop paying premiums. the level of stress testing generally follows the guidelines issued by Ceiops (Committee of european insurance and occupational pensions supervisors) and their work on solvency ii.
simply put, insurance involves a sharing of risk between many policyholders in which the risk reflects the probability and consequences.
• Paid-up policies (defined benefit) and pension capital policy (defined contribution) are contracts with earned rights that are issued upon withdrawal from or the termination of pension contracts.
individual contracts: • Individual allocated annuity or pension insurance are guaranteed payments for as long as the insured person lives. alternatively it can be agreed that the pension will end at a specified age.
risk areas: life insurance is the dominant area within insurance for storebrand and covers the following three risk areas: • Death – payment to the policyholder’s surviving relatives.
future challenges mortality risk includes the probability of any survivors. this results in an overestimation of the risk for those who actually do not have survivors.
the number of payment years will increase for guaranteed lifelong benefits.
tighter general conditions in relation to profit sharing, upfront pricing and building up reserves.
economic cycle factors such as increased unemployment and reduced profitability for companies can result in increased disability.
1 Life expectancy in Norway and Sweden increased by 4 years for women and 6 years for men between 1980 and 2010.
With reference to the table above, it is the risk linked to “long life” that is the most challenging.
in the case of group pension insurance the premiums for traditional retirement and survivor cover follow the new industry tariff K2005 with security margins that take into account the reduction in mortality among policyholders observed in recent years. premiums for disability pensions are based on the company’s own experience. expense premiums are determined annually with a view to securing full cover for the next year’s expected costs.
the company’s tariffs do not involve any assumptions about inflation or voluntary termination/transfers.
men women 30 years 45 years 60 years 30 years 45 years 60 years risk of death, individual endowment insurance 122 324 1,416 61 162 711
Life and Pensions Sweden the risk premium for group contracts is an equalised premium, based on the group’s age and gender composition.
individual contracts ideally have individual risk premiums based on age and gender.
life expectancy in sweden is increasing sequentially (mortality is sinking). this is positive for life cover. on the other hand it may become a financial burden in the case of pension insurance (accident cover). the swedish insurance research Council (ftn), which is a sector organisation, conducted an analysis of mortality in 2006 that makes it possible to look at mortality forecasts that take account of changes in the level of change trends. such a forecast is crucial when it comes to setting prices for both life cover and pension insurance. insurance products are usually designed in such a way that the premium calculation for the entire period of cover is based on mortality/life expectancy at the time the policy issued.
the majority of spp risk policies are annual. in other words, the company can change the premium every year. errors in the estimate of the premium for life and disability cover can therefore be corrected, which has a rapid effect on the company’s risk result.
When writing individual risk cover, the customer is subject to a health check. the result of the health check is reflected in the level of premium quoted.
When arranging group policies with risk cover, all employees of small companies are subject to a health check, while for companies with many employees storebrand requires declarations of fitness for work. underwriting also takes into account the company’s industrial category, sector and sickness record.
• Control and monitoring of insurance risk insurance risk is separately monitored for every line of insurance in the current insurance portfolio. the risk result for each product group is broken down into the elements of mortality, long life and disability risks. the development of risk result is followed throughout the year. for each type of risk, the ordinary risk result for a period represents the difference between the risk premiums the company has collected for the period and the sum of provisions and payments that must be made for insured events that occur in the period. the risk result takes into account insured events that have not yet been reported but which the company, on the basis of its experience, assumes have occurred.
• Pooling the company also manages its insurance risk through international pooling. this means that multinational corporate customers can equalise the results between the various units internationally. the pooling applies to group life and risk cover within group defined benefit and defined contribution pensions.
in order to ensure that insurance companies have adequate capital to meet their insurance obligations, finansinspektionen (swedish financial supervisory authority) requires the sector to stress test all of its insurance business using so-called traffic light calculations. the elements tested are the premium income side and the insurance liabilities. in 2007, it was announced that companies would also be required to stress changes with respect to insurance liabilities in risk policies. this also applies to so-called cancellation risk, which is the risk that a policyholder will terminate the policy and thus stop paying premiums. the level of stress testing generally follows the guidelines issued by Ceiops (Committee of european insurance and occupational pensions supervisors) and their work on solvency ii.
a 20 per cent fall in mortality results in an annual risk result for spp that is approximately seK 124 million lower. if the probability of reactivation in the event of disability sinks by 20 per cent, this would entail an annual risk result that was approximately. seK 46 million lower. spp’s cancellation risk is very small since the majority of the policy portfolio cannot be repurchased.
the insurance risk constitutes a significant proportion of the total capital requirement that results from the stress test. in total the stress test affects the risk result in the amount of seK 170 million. With an expected risk result of around seK 346 million, this means that the majority of the risk result will disappear if the basis for the stress test should become a reality. the stress tests are based on a 1:200 scenario, or a confidence level of 99.5 per cent.
Sufficiency test storebrand is required by ifrs 4 to carry out a sufficiency test to ensure the company has sufficient margins in the various constituent elements that together make up the insurance liability. ifrs permits two alternative methods for the sufficiency test. Where a company has an established form of analysis that demonstrate the margins in the various constituent elements, section 16 of the standard allows this analysis to continue to be used to demonstrate that the test is satisfied. if such routines have not been established, the company is required to discount future cash flows in accordance with ias 37.
transfer right a transfer right exists that involves transferring insurance liabilities linked to group and individual pension insurance contracts to or from other insurance companies. the settlement deadline is two months for contracts where the transfer value exceeds noK 300 million. the transfer right can constitute a liquidity risk.
the following table shows the proportions of insurance fund reserves at 31 december 2010 relating to policies with various basic annual interest rates: interest rate guarantee 2010 2009 the above table includes the premium reserve, deposit reserve and pensioners’ surplus reserve with 3 per cent and additional statutory reserves with 0 per cent.
the total average guaranteed interest rate for all lines of insurance comprised 3.46 per cent in 2010. the guaranteed interest rate must be delivered on an annual basis. if the company’s investment return in a year is lower than the guaranteed interest rate, current legislation permits the equivalent of up to one year’s guaranteed return for the individual policy to be covered by transfers from the policy’s additional statutory reserves.
P&C insurance the Group offers the following products: • Motor vehicle
• Occupational hazard - offered via Storebrand P&C Insurance and Storebrand Life Insurance
35 million for other sectors. in addition, the risk exposure arising from travel insurance may increase sharply in the event of possible catastrophes such as the tsunami in south east asia in 2004. personal insurance such as travel, accident and occupational hazard insurance is therefore now also included in the
storebrand has no commercial responsibility for the business transferred unless Gard becomes insolvent. this risk is therefore limited to a credit exposure to
Gard. Gard has a standard & poor’s rating of ’a’, which suggests that this represents a very limited risk exposure for storebrand.
risk exposure and insurance risk for the residual portfolio from oslo reinsurance company (oslo re) the company’s commercial operations have concentrated on the run-off of its existing reinsurance portfolios, either by paying claims that are reported or by seeking to extricate itself from residual liability in policies by negotiating a settlement amount with the insured party (cedent).
an agreement concerning the sale of oslo re uK ltd has been signed. this means all the risk linked to oslo re uK ltd will finally be run-off by 30 June 2011.
Life and Pensions Sweden spp is largely exposed to the same market risk factors as storebrand life insurance, but differences in product design, general conditions and asset allocation nonetheless result in some differences in the contributions for different types of market risk. in the short-term the market risk from equities is relatively greater in spp than in storebrand life insurance, but at the same time the company is exposed to little risk from the asset class real estate. spp is also exposed to market risk from increased risk on credit bonds. however, as far as the result is concerned, the short-term risk from changes in interest rates is small in spp because of the adjustment of the assets’ interest rate sensitivity (duration) in relation to the liabilities’ interest rate sensitivity. however, the current regulatory requirements mean the company cannot have low interest rate sensitivity in the profit and loss account and in the solvency account at the same time, and falling interest rates will have a negative effect on the solvency ratio. lasting low interest rates also represent a substantial risk for spp as well, both for the financial result and the solvency margin percentage.
Sensitivity analyses the assets and liabilities side (borrowing and insurance liabilities in sweden) have been stress tested in order to show how much this can affect the owners’
result in relation to the expectations for 2011. an estimated normalised return is included in estimated effects throughout the year based on uncertain assumptions about future returns and other uncertain factors and uncertain assumptions. the stress tests were applied to the investment portfolio on 31 december 2010 and the outcome shows the estimated effect on profits for the year as a whole. the stresses that have been applied are equities +/- 20 per cent, interest +/-150 basis points and real estate +/- 12 per cent. With respect to currency risks, the investment portfolios are essentially fully currency hedged, and changes in exchanges rates will have little effect on the companies’ expected results for 2011.
this note applies to: storebrand livsforsikring as, spp, benCo, storebrand bank, storebrand p&C insurance and storebrand health insurance and storebrand asa.
Life and Pensions since it is market changes that are shown in the note above, dynamic risk management will not affect the outcome. if it is assumed that the market changes will occur over a period of time, then dynamic risk management would reduce the effect of the negative outcomes and reinforce the positive.
Life and Pensions Norway the stress tests have been done for all investment profiles and the effects of each stress test reduce or increase the expected return for each profile. for the negative stress tests (equities down, interest up and property down) the return in some individual profiles fall under the guarantee. the buffer situation for each contract will then determine how much equity the company will possibly have to use if the return stays at this level for 2011. beyond the need for utilising equity to cover returns below the guarantee, it is changes in the profit sharing for paid-up policies and individual contracts, as well as returns and interest expenses in the company portfolio that deviate from the expected result for 2011 to the greatest extent. Compared with equivalent sensitivity a year ago, the effect of the stress tests has decreased. the most important contributions to the reduction are the fact that the difference between the expected return and the interest guarantee has increased and that additional statutory reserves have been further strengthened at the same time as the company has at the beginning of 2011 a substantial market value adjustment reserve, which serves as a very effective buffer against such stresses on assets.
NOK million 2010 2009 interest rate +1.5% -168 -132 real estate +12% 610 331 notes to the finanCial statements of storebrand Group
the stress tests were applied individually. if several of the negative stress tests were to occur simultaneously, the negative effect would be greater than simply the sum of the two individual effects alone (a larger proportion of gross stresses would be retained by owners). in addition to the negative result effect for owners, the expected building up of buffer capital will, to a substantial degree, fall away in the negative stress tests. in the case of the positive stress tests, greater building up of buffer capital is also assumed in addition to the positive result effects for owners in the form of the market value adjustment reserve and additional statutory reserves.
Life and Pensions Sweden the note that shows the effect on the result/equity shows the effect of the financial result excluding profit sharing. all changes in market value do not affect the financial result. the part of a change in market value that affects the result is the part that cannot be offset against conditional bonuses.
Bank activities the table includes the accounting effect over a 12 month period of an immediate parallel change in interest rates of +1.5 percentage points and -1.5 percentage points respectively. account is taken of the one-time effect such an immediate interest rate change has on the items recognised at fair value and hedging value, and on the effects the interest rate change has on the result for the remainder of the interest rate duration period before the interest rate change has income and costs-related effect.
liquidity risk is one of the most important risk factors in bank activities. the company’s risk strategy establishes general limits for how much liquidity risk the bank Group is willing to accept. a policy has been drawn up that specifies principles for liquidity management and stress testing, minimum liquidity reserves and financing indicators for measuring liquidity risk. in addition to this an annual funding strategy and funding plan are drawn up that set out the overall limits for the bank’s funding activities.
in addition to clear strategies and the risk management of liquidity reserves in each subsidiary, the Group’s holding company has established a liquidity buffer. the development of the liquidity reserves is monitored continuously at an overall level in relation to internal limits. Committed credit lines from banks have also been established that the companies can draw on if necessary.
Credit risk is the risk of incurring losses due to a counterparty’s unwillingness or inability to meet his obligations. maximum limits for credit exposure to individual debtors and for overall credit exposure to rating categories are set by the boards of the individual companies in the Group. particular attention is paid to ensuring diversification of credit exposure to avoid concentrating credit exposure on any particular debtors or sectors. Changes in the credit standing of debtors are monitored and followed up. storebrand life insurance and spp use published credit ratings wherever possible, supplemented by the company’s own credit evaluation where there are no published ratings. the Group has framework agreements with counterparties to reduce their risk with respect to outstanding derivative transactions. these regulate how collateral against changes in market values, calculated on a daily basis, should be pledged.
Credit risk and liquidity risk are the two most important forms of risk for bank activities. the bank’s risk strategy establishes overall limits for how much credit risk the bank group is willing to accept. the willingness to accept risk is adjusted to the bank’s risk appetite and target risk profile, solvency, profitability, liquidity and growth, as well as the bank’s strategy otherwise, including equity requirement for credit activities. Credit policies establish general principles for granting credit. the bank group’s routines for credit management are set forth in special credit handbooks. the most important control of credit risk is carried out and administered by the Credit Control unit.
credit risk by counterparty bonds and other fixed-income securities at fair value aaa fair value aa fair value a fair value bbb fair value other fair value niG fair value total fair value category of issuer or guarantor
NOK million state and state guaranteed bonds 64,769 6,552 3,394 296 75,011 total interest-bearing securities stated by rating 90,250 13,993 29,825 12,847 200 2,165 149,279 bond funds not managed by storebrand 5,864 non-interest-bearing papers in bond funds not managed by storebrand 1,602 interest-bearing securities at amortised cost aaa fair value aa fair value a fair value bbb fair value niG fair value total fair value category of issuer or guarantor
NOK million state and state guaranteed bonds 17,675 1,623 2,904 22,202 aaa fair value aa fair value a fair value bbb fair value other fair value niG fair value total fair value counterparties
lending commitments by customer groups lending to and receivables from customers Guarantees unused credit line total commitments
net defaulted commitmentsNOK million sale and operation of real estate 10,895 253 2,364 13,512 339 49 290 - individual write-downs -174 -174 - Group write-downs -84 -84 total lending to and receivables from customers 2010 37,428 302 5,267 42,997 774 174 600 total lending to and receivables from customers 2009 39,501 330 3,452 43,283 884 182 702 in addition to the total commitments in this note, noK 817 million worth of commercial property mortgages had been granted at year-end 2010 that had not be paid to or accepted by customers. these loans are for income generating real estate within the sale and operation of real estate. the division into customer groups is based upon statistics norway’s standard for sector and business groupings. the placement of the individual customer is determined by the customer’s primary enterprise.
about 80 per cent of the loans are for income generating real estate. Just under 20 per cent are for building projects. less than 5 per cent of the corporate market’s portfolio is secured by collateral other than real estate. the portfolio’s collateral is principally investment/commercial properties.
listed financial instruments are valued on the basis of official final prices on bourses obtained via reuters and bloomberg. fund units are generally stated at the updated official naV prices where these exist. as a general rule, bonds are valued on the basis of prices from reuters and bloomberg. bonds that are not quoted regularly will normally be valued on the basis of recognised theoretical models. the latter is particularly true for bonds denominated in noK. these sorts of valuations are based on discount rates consisting of swap interest rates plus a credit premium. the credit premium will often be issuer specific and normally based on a consensus of credit spreads quoted by a selected brokerage house.
the company continuously performs checks to ensure the quality of the market data obtained from external sources. Generally such checks involve comparing multiple sources and checking and assessing the reasonableness of abnormal changes.
the Group categorises financial instruments valued at fair value on three different levels, which are described in more detail below. the levels express the differing degree of liquidity and different measuring methods.
storebrand is of the opinion that the valuation method used represents a best estimate of the mutual fund’s market value.
private equity the majority of storebrand’s private equity investments are investments in private equity funds. it also has a number of direct investments.
the investments in private equity funds are stated on the basis of the values reported by the funds. the private equity funds storebrand has invested in value their own investments in accordance with pricing guidelines stipulated by, among others, eVCa (european private equity Venture Capital association)
in the case of direct private equity investments, the valuation is based on either recently conducted transactions or a model in which a company that is in continuous operation is assessed by comparing the key figures with equivalent listed companies or groups of equivalent listed companies. in some cases the value is reduced by a liquidity discount, which can vary from investment to investment. Companies that are in a start up phase, have undergone previous expansions, or which are undergoing structural changes for some other reasons that make them harder to price in relation to a reference group will be stated at the lowest of costs and estimated value, where the estimated value is apparent from a variance analysis vis-à-vis its plans.
Sensitivity assessments forestry investments are characterised by, among other things, very long cash flow periods. there can be some uncertainty associated with future cash flows due to future income and costs growth, even though these assumptions are based on recognised sources. nonetheless, valuations of forestry investments will be particularly sensitive to the discounting rate used in the estimate. the company bases its valuation on external valuations. these utilise an estimated market-related required rate of return. as a reasonable alternative assumption to the required rate of return used, a change in the discounting rate of 0.25 per cent would result in an estimated change of around 4-6 per cent in value, depending on the maturity of the forest and other factors.
non- observable assumptions 2010 assets: equities and units - private equity fund investments 2,319 4,363 6,682 - indirect real estate fund 6 2,411 2,417 total equities and units 28,445 52,624 11,774 92,843 lending to customers 673 673 bonds and other fixed-income securities - state and state guaranteed bonds 33,530 26,283 59,813 - financial and corporate bonds 41,137 1,042 42,179 total bonds and other fixed-income securities 33,530 121,059 2,156 156,745 derivatives: - interest rate derivatives 1,994 1,994 total derivatives 3,712 3,712 - of which derivatives with a positive market value 4,964 4,964 - of which derivatives with a negative market value -1,252 -1,252 liabilities: liabilities to financial institutions 5,856 5,856 deposits from and debt to customers 179 179
from observable assumptions to quoted prices equities and units 46 156 level 1 encompasses listed equities that over the previous six months have experienced a daily average turnover equivalent to approximately noK 20 million or more. movements from level 1 to level 2 reflect reduced sales value in the relevant equities in the last measuring period. on the other hand, movements from level 2 to level 1 indicate increased sales value in the relevant equities in the last measuring period.
NOK million equities fund units private equity fund indirect real estate fund financial and corporate bonds asset backed securities net gains/losses on financial instruments 408 348 487 -64 726 36 transferred to quoted prices from observable assumptions 5 10 Segment reporting life and pensions norway 1 life and pensions Sweden 1 asset management banking revenue from other group companies 2 31 30 291 347 5 6
Group result before amortisation and write-downs of intangible assets 2 877 759 464 487 333 240 158 63
Write-downs of intangible assets and amortisation -348 -340 -5 -7 -28 -29 p&c insurance other eliminations Storebrand Group revenue from other group companies 2 835 147 -1,161 -530
Geographic presence storebrand activities primarily take place in norway and sweden. all of the segments, except life and pensions sweden have activities in norway, while life and pensions sweden has some activities outside sweden.
storebrand‘s activities are operationally divided into four business areas: life and pensions, asset management, bank and p&C insurance. two result areas are reported for life and pensions: life and pensions norway (lpn) and life and pensions sweden (lps). storebrand is the nordic region‘s leading provider of life insurance and pensions, and offers a comprehensive range of products to retail customers, local authorities, and the public sector.
life and pensions norway Consists of the companies in the storebrand life insurance Group, excluding storebrand eiendom as and storebrand holding ab. storebrand life insurance offers a wide range of products within occupational pensions, private pension savings and life insurance to companies, public sector entities and private individuals. storebrand life insurance‘s branch in sweden provides occupational pensions products based on norwegian law in the swedish market.
life and pensions Sweden Consists of the companies in the spp Group (storebrand holding Group excluding spp fonder ab). spp offers a wide range of pension solutions to companies, organisations and private individuals in sweden. spp holds a particularly strong position in traditional products - policies with guaranteed interest rates - in the swedish corporate market. benCo offers pension products to multinational companies via nordben and euroben.
asset management storebrand‘s asset management activities include the companies storebrand Kapitalforvaltning as, storebrand fondene as, storebrand eiendom as and spp fonder ab. all the management activities have a guaranteed socially responsible profile. storebrand offers a wide range of mutual funds to retail customers and institutions under the delphi and storebrand fondene brand names. storebrand eiendom is one of norway‘s largest real estate companies and manages real estate portfolios both in norway and abroad.
banking storebrand bank offers traditional banking services such as accounts and loans in the retail market and project financing to selected corporate customers, and is a no fees commercial bank. estate agency is also offered in this segment.
insurance offers standard insurance products in the norwegian retail market, and some corporate insurance in the smb market. storebrand helseforsikring as offers treatment insurance in the norwegian and swedish corporate and retail markets.
life and pensions norway premium income after reinsurance 15,518 16,073 net inflow of premium reserves 1,857 82 policyholders' fund incl. accrued profit 191,243 175,920 - of which products with guaranteed return 163,510 153,603 market return customer funds with guarantee 6.1% 4.7%
Costs/aum bp 2 10,4 12,2 banking net interest income as a percentage of average total assets 1.10% 0.95%
Gross defaulted and loss-exposed loans as % of gross lending 2.0% 2.5%
number of customers 51,423 40,499 1 Consists of equity, subordinated loan capital, market value adjustment reserve, risk equalisation fund, unrealised gains, bonds at amortised cost, additional statutory reserves, conditional bonus and accrued profit.
Changes in value of funding fVo -7 16 net costs borrowing at fair value (fvo): -228 -152 notes to the finanCial statements of storebrand Group
Wholly owned real estate investments - investment properties 154 -254 property equities and units in norway and sweden 1 96 -76 property units abroad 1 87 -974 total changes in value investment properties 336 -1,304 properties for own use -104 55 total changes in value in real estate 233 -1,250 realised gains/losses sold real estate 16 22 1 Is classified as equities and units in the statement of financial position and considered as Storebrand's total real estate exposure.
NOK million 2010 2009 change 2010 change 2009 market reserve's financial assets at fair value 1,971 31 1,940 31 notes to the finanCial statements of storebrand Group
NOK million 2010 2009 fee and commission income, banking 91 94 fee and commission expense, banking -18 -18 net fee and commission income, banking 74 76 management fees, asset management activities 357 190 interest income on bank deposits 38 63 revenue from real estate broking 103 101 other insurance related income 153 89 interest income, insurance 782 702 other revenue from companies other than banking and insurance 474 447 other income 15 97 total other income company 1,995 1,766 total fee and commission income from financial instruments not stated at fair value totalled noK 55 million in 2010. total fee and commission expenses on financial instruments not stated at fair value totalled noK 14 million in 2010.
NOK million 2010 2009 interest income on bank deposits 75 30
Group with investment choice -488 -269 individual endowment insurance and pensions -3,433 -3,044 individual with investment choice -1,550 -587 risk products without profit sharing 1 -691 -607 insurance claims for own account life and pensions norway -14,742 -11,928 of which premium reserve transferred from the company -3,522 -2,628 life and pensions Sweden: Guaranteed products -4,616 -4,133 unit link -1,207 -990 insurance claims for own account life and pensions Sweden -6,782 -6,438 of which premium reserve transferred from the company -1,053 -715 total insurance claims for own account -21,956 -18,676 of which premium reserve transferred from the company -4,575 -3,343 1 Includes P&C products in Storebrand Livsforsikring AS.
Change in conditional bonus 2,427 2,427 2,161 to/from premium fund/pensioners' surplus reserve 104 104 111 change in insurance liabilities excluding guaranteed return 6,495 3,788 10,283 13,642
Guaranteed return and allocation to customers 6,226 3,057 9,284 8,666 notes to the finanCial statements of storebrand Group
Change in grouped loan write-downs for the period 23 -19 other corrections to write-downs -2 -10 realised losses on loans where provisions have previously been made -103 -92 realised losses on loans where no provisions have previously been made -1 recovery of loan losses realised previously 5 8 write-downs/income recognition for lending and guarantees for the period -14 -46 interest on written down loans recognised as income 12 7 20 operating costs
Storebrand life insurance Group Storebrand bank other activities Storebrand Group 21 pensions costs and pension liabilities
Storebrand employees are insured through a defined benefit pension equivalent to 70 percent of pensionable salary at the time of retirement. the ordinary retirement age is 65. staff pensions are provided by a group pension scheme with storebrand livsforsikring as. pension payments from this scheme come into effect from the pension age, which is 67 for employees and 65 for underwriters. pension payments to employees between 65 and 67 and pensions linked to salaries of more than 12 times the national insurance basic amount (G) are paid directly by the company. a guarantee has been pledged for earned pensions for salaries of more than 12 G upon retirement before 65 years old. 12 G amounts as per 31 december 2010 to noK 907,692. the company’s pension scheme satisfies the requirements of this act.
the company is obliged to have an occupational pension scheme pursuant to the act relating to mandatory occupational pensions. the company‘s pension scheme satisfies the requirements of the act.
NOK million 2010 2009 present value of insured pension benefit liabilities 3,799 3,470 pension assets at fair value -3,066 -2,973 net pension liability/surplus for the insured schemes 733 497 present value of the uninsured pension liabilities 693 638 net pension liabilities in the balance sheet 1,427 1,135 includes employer's ni contributions on net underfunded liabilities included in gross liabilities booked in the statement of financial position
NOK million 2010 2009 pension assets 30 44 pension liabilities 1,456 1,179 pension experience adjustments booked in equity
NOK million 2010 2009 year's change in experience adjustments included in equity -328 135 accumulated experience adjustments included in equity -801 -473 changes in the net defined benefit pension liabilities in the period
NOK million 2010 2009 net pension liabilities 01.01 4,108 4,297 net pension cost recognised in the period 162 183 interest on pension liabilities 172 172 pension experience adjustments 255 -267 pensions paid -235 -238
the table shows the percentage asset allocation of pension assets at year-end managed by storebrand life insurance.
Storebrand life insurance Spp expected return on pension fund assets in the period 4.9% 6.0% 6.0% 5.0%
expected annual increase in social security pensions 3.8% 4.0% 3.0% 3.0%
actuarial assumptions standardised assumptions regarding the development of mortality/disability and other demographic factors as produced by the norwegian financial services association. average employee turnover rate of 2–3 per cent of entire workforce.
the pension liabilities are specifically sensitive to changes in the discounting rate a reduction in discounting rate would, seen in isolation, result in an increase in the pension liabilities.
NOK '000s ordinary salary bonus paid other benefits 1 post termination salary (months)
pension accrued for the year present value of pension loan interest rate at 31.12.2010 repayment period
NOK '000s number of shares held 2 bonus bank 3 return on shares bank 4 1/3 bonus bank 2011 3
NOK '000s remuneration number of shares held 2 loan interest rate at 31.12.2010 repayment period board of directors birger magnus 566 20,000 halvor stenstadvold 365 8,645
Camilla marianne Grieg 165 annika marie lundius 275 control committee elisabeth Wille 270 747 harald moen 200 595 ida hjort Kraby 200 ole Klette 200 erling naper 90 1 Comprises company car, telephone, insurance, concessionary interest rate, other contractual benefits. 2 The summary shows the number of shares owned by the individual, as well as his or her close family and companies where the individual exercises significant influence, confere
Accounting Act, Section 7-26. 3 Outstanding in bonus bank at 31.12.2010 less Storebrand’s initial contribution. Senior executives are contractually entitled to performance related bonuses related to the
5 The retirement age for SPP‘s CEO is 62 years old. SPP‘s CEO is covered by a defined contribution based scheme in addition to a defined benefits scheme.
Storebrand aSa – the board of director’S Statement on the fiXinG of the Salary and other remuneration for Senior employeeS
1 advisory guidelines for the coming financial year storebrand aims to base remuneration on competitive and stimulating principles that help to attract, develop and retain highly qualified staff.
optimised financial remuneration helps to create a performance culture with clear goals for all employees and correct assessments by managers that differentiate between good and less good performances.
senior employees in storebrand can, in addition to their fixed salary, receive remuneration in the form of an annual bonus, participation in the Group’s group pension scheme, usual benefits in the form of free newspapers, telephone, company car scheme, and other personal benefits. senior employees may also be entitled to a termination pay arrangement, which guarantees they will receive their salary less other income for a specific period of up to 24 months upon the conclusion of their employment.
Overall structure of the bonus scheme the overall structure of the bonus scheme is outlined in the figure below.
how should the pot be distributed among the employees in the scheme?
an additional requirement has been introduced that the total group result must be above a predefined level to avoid reductions in bonus entitlements based on the risk adjusted result. negative group results result in full reduction and zero bonus.
the target that determines how the risk adjusted value creation will fund the bonus is set by the board of storebrand asa.
specific goals are also set each year with respect to the senior employees‘ performance. this is documented using a special monitoring system. every employee has his or her own action plan anchored in the unit‘s goals. the action plan describes the targets an individual is responsible for and shall meet in a given year. employees are assessed annually. assessments are based on results in relation to an action plan, as well as an assessment of the individual‘s compliance with storebrand‘s corporate principles. action plan and corporate principles compliance assessments are given equal weight in the overall individual performance assessment.
Calculation of bonus entitlement the target bonus for senior employees is intended over time to amount to between 20 per cent and 40 per cent of fixed salary. the maximum target attainment for funding and allotment is 150 per cent respectively. senior employees‘ bonus entitlements are calculated using the following formula: expected bonus level x funding result x allotment result the maximum possible bonus entitlement is 90 per cent of annual salary.
Payment of bonus individual bonus banks have been set up for senior employees with bonus schemes. the bonus entitlement is not paid directly, but must be credited to the bonus bank. the amount credited to the bonus bank is exposed 50 percent to the bank interest rate and 50 percent to storebrand’s share price in the relevant qualifying year.
Compulsory purchase of shares in Storebrand ASA senior employees must spend half of the paid bonus, after tax, on purchasing storebrand asa shares at market price. spp‘s Ceo must spend 60 per cent on purchasing shares. these shares are subject to a lock-in period of 3 years. the lock-in period continues to apply if the employee leaves the company.
2.2 Pension scheme the company shall arrange and pay for an ordinary group pension insurance common to all employees and which applies from the moment employment commences. otherwise, the applicable pension rules at any given time apply. the current retirement age is 65 years old.
entitlement to termination pay is also triggered by resignation if this is due to substantial organisational changes or equivalent situations that make it unreasonable for the employee to remain in his or her position.
any income gained through work, including fees for service provision, the exercising of an office, etc shall result in an equal amount being deducted from the termination pay.
the Ceo is entitled to 24 months‘ termination pay. other executive vice presidents are entitled to 18 months‘ termination pay.
and the 20 per cent discount kept. this means that for purchases of shares that exceed noK 7,500, the discount on the excess amount is taxed as pay.
the number of shares bought by all members of the long-term incentive scheme in 2009 was 46,591.
this results in an average bonus entitlement of noK 829,224. this amount was credited to the bonus bank.
3.4 Calculation of bonus entitlement for 2010 the criteria for funding bonuses were achieved in 2010.
in 2010, the return on the cash portion of the bonus bank was 3.04 per cent and the return on the share portion of the bonus bank was 10.3 per cent.
Currency gains, insurance liabilities 40 loss on claims insurance -43 other costs -9 -138 total other costs -294 -407 25 interest expenses
NOK million 2010 2009 interest expense – funding -131 -129 interest expense – subordinated loans -517 -541 total interest expenses 1 -648 -670 1 Interest expenses for Storebrand Bank are included in net interest income for banking enterprises.
NOK million 2010 2009 ordinary pre-tax profit 1,217 855 expected tax on income at nominal rate -341 -240 tax effect of: realised/unrealised shares/aio 863 635 dividends received -10 181 associated companies -6 23 permanent differences 337 -142 write-down of deferred tax assets -1,174 -365
Change from earlier years 630 -46 total tax charge 300 47 notes to the finanCial statements of storebrand Group
calculation of deferred tax assets and deferred tax on temporary differences and losses carried forward
Gains/losses account 402 503 total tax increasing temporary differences 10,753 7,811 tax reducing temporary differences operating assets -43 -31 accrued pension liabilities -1,294 -795 securities liabilities -528
Gains/losses account -26 -32 total tax reducing temporary differences -4,953 -3,874 losses carried forward -10,451 -7,266 allowances carried forward -1,057 -1,243 total losses and allowances carried forward -11,507 -8,510 basis for net deferred tax/tax assets -5,708 -4,572
Write-down of basis for deferred tax assets 5,839 4,685 net basis for deferred tax/tax assets 132 113 net deferred tax asset/liability in the balance sheet 37 32 booked in the balance sheet deferred tax assets 132 213 deferred tax 169 182 deferred tax assets have been written down as a result of uncertainty as to whether future taxable income will be sufficient for all losses carried forward to be used for business in norway. the primary reason behind this is the exemption method from taxation for share dividends and gains/losses on shares in the eea area, and it is expected that in future years the Group will continue to derive income from such investments. allowances carried forward date from the years 2001–2003, and must be used within 10 years.
customer lists vif 1 rights Spp fonder other intangible assets Goodwill 2010 2009 additions in the period: developed in-house 32 32 31 acquired via mergers, acquisitions, etc 4 disposals in the period -1 -1
Intangible assets linked to bank activities a cash flow based valuation based on the expected pre-tax result is conducted when calculating the utility value for the banking group. the calculation is based on board approved budgets and prognoses for the coming three-year period. the prognosis assumes an improvement in the result where the costs programme is implemented, and growth in other income based on developments and the efforts made in recent years. a stable growth rate of 2.5 per cent is assumed in the calculation of the terminal value, equal to expected inflation. the utility value is calculated using a required rate of return after tax of 9 per cent. the required rate of return is computed on the basis of risk-free interest and added to a premium that reflects the risk in the enterprise.
the executive management has assessed the recoverable amount of goodwill as per 31 december 2010 and concluded that no write-down is necessary. sensitivity analyses are conducted with respect to the assumptions regarding the development of the result and required rate of return. the management are of the opinion that it is improbable that possible reasonable changes in the key presumptions would bring about a need for a write-down.
Value of business in force spp 10 years 10% straight line 4,937 rights to withdraw fees from spp fonder 2.5 years 40% straight line 5 total 5,600
Currency diffs. from converting foreign units 1 1 accumulated depreciation and write-downs opening balance -110 -17 -33 -26 -186 -165 accumulated depreciation and write-downs closing balance -110 -21 -44 -27 -202 -186 notes to the finanCial statements of storebrand Group
NOK million 2010 2009 disposals -1,128 revaluation booked in balance sheet 5 -6 depreciation/revaluation
Currency diffs. from converting foreign units -14 other changes -37 acquisition cost opening balance 1,718 1,679 acquisition cost closing balance 1,773 1,718 accumulated depreciation and write-downs opening balance 290 accumulated depreciation and write-downs closing balance -105
NOK million 2010 2009 income formuesforvalting as 310 257 handelsbodarna ab 31 result formuesforvalting as 21 -10 handelsbodarna ab -2 other assets formuesforvalting as 326 307 handelsbodarna ab 374 318 liabilities formuesforvalting as 166 125 handelsbodarna ab 368 318 ownership interests in associated companies
Share of other income and costs carrying amount booked in the statement of financial position: investments in associated companies - company 140 148 investments in associated companies - customers 3 60 total investments in associated companies 143 208 notes to the finanCial statements of storebrand Group
the consolidated financial statements include the following companies with the amounts shown
NOK million carrying amount fair value carrying amount fair value loans and receivables: loans to and due from financial institutions 699 698 425 425 bonds at amortised cost 48,194 48,926 44,718 44,858 financial liabilities liabilities to financial institutions 2,197 2,687 4,285 4,295 deposits from banking customers 18,629 18,629 18,143 18,143 lending to customers/liabilities to financial institutions/securities issued the fair value of lending to customers subject to variable interest rates is stated as book value. however, the fair value of lending to corporate customers with margin loans is slightly lower than book value since some loans have lower margins than they would have been taken out at year end 2010. the shortfall is calculated using a discounted difference between the agreed margin and the day‘s market price over the remaining term to maturity. fair value is also adjusted for individual write-downs.
the fair values of lending, liabilities to financial institutions and securities issued are based on valuation techniques. the valuation techniques use interest rate curves and credit spreads from external providers. the calculations are made using the qrm risk management system.
bonds at amortised cost as a general rule, the fair value of bonds is based on prices obtained from reuters and bloomberg. bonds that are not quoted regularly will normally be valued on the basis of recognised theoretical models. the latter is particularly true for bonds denominated in noK. these sorts of valuations are based on discount rates consisting of swap interest rates plus a credit premium. the credit premium will often be issuer specific and normally based on a consensus of credit spreads quoted by a selected brokerage house.
NOK million nominal value acquisition cost carrying amount fair value carrying amount fair value total bonds at amortised cost 48,843 47,695 48,194 48,926 44,718 44,858 modified duration 4.5 4.8 the effective yield for each security is calculated using the carrying amount and the observed market price (fair value). the effective yield of securities without observed market prices is calculated on the basis of the fixed interest rate period and classification of the individual security with respect to liquidity and credit risk. Calculated effective yields are weighted to give an average effective yield on the basis of each security’s share of the total interest rate sensitivity.
NOK million 2010 2009 non-performing and loss-exposed loans without identified impairment 436 309 non-performing and loss-exposed loans with identified impairment 262 575
Gross non-performing loans 698 884 individual write-downs -174 -182 net non-performing loans 524 702 for further information about lending, see note 8 credit risk.
NOK million 2010 2009 supply due to purchases 2,503 677 supply due to additions 476 305 to owner used properties -87 from owner used properties 1,128 net write-ups/write-downs 51 -199 exchange rate changes 21 -28 carrying amount 27,059 24,160 1 Consists of investment properties in Storebrand Life Insurance Group.
NOK million 2010 2009 duration of lease (years) m2 leased amount in
Office buildings (including parking and storage): shopping centres (including parking and storage) 10,656 11,180 3.3 468,735 92
Cultural/conference centres and offices in sweden 354 311 19.0 18,500 86 taken over properties 2 43 165 total investment properties 27,102 24,325 1,373,470 1 The leased amount is calculated in relation to floor space.
noK 372 million in storebrand and seK 1,302 million in spp have been committed but not drawn on in international real estate funds.
calculation of fair value for properties investment properties are valued at fair value. fair value is the amount an asset could be sold for in a transaction at arm’s length between well informed, voluntary parties.
internal value calculations an internal cash flow model is used to calculate fair value based on the following assumptions: the individual required rate of return for the individual investment is used to discount future net cash flows.
• all other information about property values, the market and the individual property the property’s market values is assessed on the basis of a long-term income perspective. office buildings and shopping centres account for a significant proportion of the properties. in the case of office buildings, a future income and costs picture is estimated for the first 10 years, and a final value calculated at the end of that 10 year period, based on existing leases, estimated market rent and estimated normal operating costs for the property. the net income stream takes into account existing and future reductions in income resulting from vacancy, necessary investments and an assessment of the future changes in market rents. in the case of shopping centres, the property’s value is calculated based on a market yield. in cases where it is known significant changes will occur to the expected cash flow in later years, this is taken account of in the valuation.
as per 31 december 2010, valuations were obtained for the equivalent of 37 per cent of storebrand’s property portfolio and which represent all the segments described below.
the properties are valued on the basis of the following effective required rate of return (incl. 2.5 per cent inflation): required rate of return volume
biological assets owned by the company are stated at fair value, which is defined on the basis of an alternative fair value calculation or the present value of expected net cash flow (ifrs 41 “agriculture” nos. 20 and 21). Write-ups of other assets are recognised in the profit and loss account. ownership rights relating to other assets are recognised at the time the purchase agreement is signed. annual income and expenses are calculated from forestry and land.
NOK million 2010 2009 accounts receivable 1,351 1,656 pre-paid commissions 349 270 interest earned/pre-paid expenses 246 199 remuneration fees earned external 140 232 receivables in connection with reinsurance 79 9
Claims on insurance brokers 389 other current receivables 1,698 1,188 allocation by company and customers: accounts receivable and other short-term receivables - company 1,900 2,041 accounts receivable and other short-term receivables - customers 1,964 1,902 age distribution for accounts receivable, etc 31.12 (gross)
NOK million acquisition cost fair value fair value total equities and units 86,383 92,843 72,828 41 bonds and other fixed-income securities
NOK million acquisition cost fair value fair value state and state guaranteed bonds 59,677 59,813 76,116 financial and corporate bonds 42,322 42,179 41,257 asset backed securities 25,389 25,049 23,846 total bonds and other fixed-income securities 157,607 156,745 155,715
Gross nominal volume 1 average nominal volume 2 net nominal volume 2 fair value 1
NOK million assets liabilities the above table includes net positions in indirect investments.
43 currency exposure financial assets and liabilities in foreign currencies balance sheet items items excl. currency derivatives currency forwards net position
NOK million net on balance sheet net Sales in currency in noK of which Spp Group in noK
bank activities storebrand bank asa hedges net items in the balance sheet with forward exchange contracts.
the average actual interest rate for reclassified paper was 4.09 percent as per 31 december 2009.
NOK million premium reserve additional statutory reserves claims reserve premium, deposit, pensioners ' surplus reserves norwegian business Spp Group total Storebrand Group realised changes in insurance liabilities risk result assigned insurance contracts 2 76 77 77 other assignment of profit 133 133 133
Currency differences from converting foreign units 7,799 7,799 adjustment of insurance liabilities from other profit
Total realised changes in insurance liabilities 12,132 789 79 615 13,616 13,448 27,064 unrealised changes in insurance liabilities transfers to/from the company 28 21 -351 -302 -131 -433
Total unrealised changes in insurance liabilities 97 3 -403 -302 -131 -433 46 technical insurance reserves - p&c insurance retail insurance products
The Norwegian FSA's minimum requirement 36 92 53 180 312 20 8 21 541 1,341
Governmental fees and tax withholding 511 541 accrued interest 16 5 short positions 525 liabilities in connection with direct insurance 1 306 1 669 liabilities in connection with reinsurance 48 161 liabilities fund arbitration 89 379 period tax liabilities 450 minority real estate fund 1 1 108 other current liabilities 1 181 877 1 After 3 years participants can present a demand for redemption every year. Redemption is conditional on a total demand of NOK 100 million. The redemption sum is set at 98.75 per cent of VEK.
Change due to discounting 2 2 3 notes to the finanCial statements of storebrand Group
49 hedge accounting fair value hedging of interest risk storebrand uses fair value hedging for interest risk. the hedged items are financial assets and financial liabilities measured at amortised cost. derivatives are recognised at fair value over the profit and loss account (fVo) Changes in the value of the hedged item that relate to the hedged risk are applied to the carrying amount of the item and are recognised in the profit and loss account.
the effectiveness of hedging is monitored at the individual security level, except in the case of structured bond loans where effectiveness is monitored at the portfolio level. each portfolio consists of swaps and hedging items that mature within the same half-year period.
hedging instrument/hedged item – fair value hedging contract/ nominal value carrying amount 1 booked contract/ nominal value carrying amount 1 bookedNOK million assets liabilities assets liabilities liabilities to financial institutions 500 503 1 Carrying amount 31.12.
Carrying amount for bonds pledged as collateral for the bank's lending from norges bank 2,926 3,143
NOK million 2010 2009 share lending 372 558 received collateral for shares lent 391 586 received collateral for security lending programme handelsbanken 296 523 received cash collateral reinvested in bonds 296 523 storebrand life insurance has a securities lending agreement with J.p.morgan. the agreement only applies to international equities. the agreement gives J.p. morgan the right to lend out equities from this portfolio. J.p. morgan is responsible for ensuring the lent equities are returned to storebrand life insurance‘s portfolio immediately storebrand investments sells an equity. J.p. morgan receives collateral from the equity borrower and the collateral can be placed in defined fixed income securities. storebrand investments receives daily summaries of the securities that have been lent out. income linked to lending equities is settled monthly and is shared according to the agreement between storebrand life insurance and J.p. morgan.
pursuant to basel ii the capital requirement for primary capital is 8 per cent of the basis for calculating the credit risk, market risk and operational risk. the insurance companies in the Group are included in capital adequacy with a capital requirement pursuant to the regulations in basel ii.
Goodwill and other intangible assets -6,918 -6,773 deferred tax assets -111 -213 risk equalisation fund -287 -225 deductions for investments in other financial institutions -44 security reserves -132 -101 minimum requirement reassurance allocation -7 -46
Capital adequacy reserve -399 -254 dividend not allocated in financial statements -491 core (tier 1) capital 15,285 13,938 hybrid tier 1 capital 47 perpetual subordinated capital 5,039 5,047 ordinary primary capital 500 675 deductions for investments in other financial institutions -44
Credit risk of which by business area: Capital requirements insurance 10,672 9,406
Capital requirements storebrand Group from capital adequacy statement 12,427 11,182 - capital requirements insurance companies -10,672 -9,406
Companies in the storebrand Group have transactions with close associates who are shareholders in storebrand asa and senior employees. these are transactions that are part of the products and services offered by the Group‘s companies to their customers. the transactions are entered into on commercial terms and include occupational pensions, private pensions savings, p&C insurance, leasing of premises, bank deposits, lending, asset management and fund saving. see note 22 for further information about senior employees.
storebrand asa‘s largest owner is Gjensidige forsikring with an ownership interest of 24.3 percent. storebrand Kapitalforvaltning as sells some management services to Gjensidige forsikring. these services are provided pursuant to commercial conditions.
notes to the finanCial statements of storebrand Group 56 Sold business and discontinued operations in 2010, storebrand skadeforsikring as sold the company oslo reinsurance Company ltd. an application for the uK authorities‘ approval has been submitted and a reply is awaited. because of the sale the rules in ifrs 5 must be followed and the total net profit after tax up to and including the time of the sale is shown on a separate line in the group result after the tax cost line. at the same time assets and liabilities are separated out in separate lines in the statement of financial position until the sale has been is completed. the table below provides the result, statement of financial position and cash flow for the sold business. sales of equities resulted in a group loss of noK 11 million. in addition to this, the accumulated amount for revaluation differences that were previously booked against total comprehensive income are included in the result in the amount of minus noK 32 million, confer ias 21.
NOK million 2010 net receipts/payments - insurance -23 payments relating to operations -6 net receipts/payments - other operational activities -1 cash flow from operational activities -30 net receipts/payments - sale/purchase of property and fixed assets cash flow from investment activities payments - repayment of share capital -46 cash flow from financing activities -46 net cash flow for the period -76
NOK million note 2010 2009 operatinG income income from investments in subsidiaries 2 1,158 835
owed within group 17 1,158 953 lending to group companies 17 17 17 other current receivables 22 11
payments - repayments of loans -966 -1,734 receipts - new loans 601 1,488 payments - interest on loans -149 -142 receipts - issuing of share capital 9 10 net cash flow from financing activities -505 -379 net cash flow for the period 26 -506 net movement in cash and cash equivalents 26 -506
Cash and cash equivalents at start of the period 48 553 cash and cash equivalents at the end of the period 74 48
use of estimates and assumptions the preparation of the annual financial statements has involved the use of estimates and assumptions that have affected assets, liabilities, revenue, costs and information on potential liabilities. future events may cause these estimates to change. such changes will be recognised in the financial statements when there is a sufficient basis for using new estimates.
dividends and group contributions in the company’s unconsolidated accounts, investments in subsidiaries and associated companies are valued at acquisition cost less any write-downs. the main income of storebrand asa is the return on capital invested in subsidiaries. Group contributions and dividends received in respect of these investments are therefore recorded as operating income. proposed and approved dividends and group contributions from subsidiaries are recognised in the unconsolidated financial statements of storebrand asa as income in the accounting year.
tangible fixed assets tangible fixed assets for own use are valued at acquisition cost less accumulated depreciation. fixed assets are written down if the carrying amount exceeds the recoverable value of the asset.
pension liabilities for own employees the company uses the norwegian standard for pensions accounting nrs 6, which permits the use of ias 19 employee benefits. With effect from 1 January 2010 storebrand asa booked actuarial gains and losses directly against equity. the entire effect of the change was recognised in 2010. the comparable figures remain unchanged.
tax the tax cost in the profit and loss account consists of tax payable for the accounting year and changes in deferred tax. deferred tax and deferred tax assets are calculated on the basis of differences between accounting and tax values of assets and liabilities. deferred tax assets are recorded in the statement of financial position to the extent it is considered likely that the company will have sufficient taxable profit in the future to make use of the tax asset. deferred tax is applied directly to equity to the extent that it relates to items that are themselves directly applied to equity.
financial instruments Equities and units investments in shares in subsidiaries and associated companies are valued at cost price less any write-down of value. the need for any write-down is assessed at the end of each accounting period.
bonds and other fixed income securities are recognised at fair value. fair value is the amount for which an asset could be exchanged, or a liability settled, between knowledgeable, willing parties in an arm’s length transaction. for financial assets that are listed on a stock exchange or another regulated market place, fair value is determined as the bid price on the last trading day up to and including the statement of financial position date, and in the case of an asset that is to be acquired or a liability that is held, the offer price.
financial derivatives financial derivatives are valued at fair value. the fair value of such derivatives is classified as either an asset or a liability with changes in fair value in the profit and loss account.
notes to the finanCial statements of storebrand asa pension assets are based on the financial assets held by Storebrand life insurance, which are composed of as per 31.12: NOK million 2010 2009 properties and real estate 16% 15%
net pension cost booked to profit and loss account in the period
expected return on pension fund assets in the period 4,9% 6,0%
disability table Ku Ku mortality table K2005 K2005 financial assumptions: the calculation assumptions are set based on the guidelines issued by the norwegian accounting standards board adjusted for company specific factors, including an expected return based on the selected investment profile.
actuarial assumptions: standardised assumptions regarding the development of mortality and other demographic factors as produced by the norwegian financial services association. average employee turnover rate of 2–3 per cent of entire workforce. the disability table was developed by storebrand livsforsikring as.
NOK million 2010 2009 discounted current value of defined benefit pension liabilities 1,813 1,894 fair value of pension assets 1,660 1,720
For further information on senior employees, the Board of Directors, the Control Committee and the Board’s statement on fixing the salary and other remuneration of senior employees, see note 22 in the Storebrand Group.
idar Kreutzer is the Chief executive officer of storebrand asa and the figures provided in the notes are for total remuneration from the group. he is entitled to 24 months’ salary following the expiry of the normal notice period. all forms of work-related income from other sources including consultancy assignments will be deducted from such payments. he is entitled to a performance-based bonus based on the group’s ordinary bonus scheme which is linked to the group’s value-based management system. the group’s value creation finances the overall amount of the bonus but individual performance determines allocation. the allocated bonus is credited to a bonus account and 1/3 of the balance on the bonus account is paid each year. the amount credited to the bonus bank is exposed 50 per cent to storebrand’s share price and 50 per cent to the best interest rate paid by storebrand bank. the balance of the bonus bank as per 31 december 2010 was noK 4.9 million.
the Ceo is a member of the storebrand pension scheme. the discounted present value of his pension entitlement amounts to noK 18 million. the scheme is calculated on a straight-line basis based on the financial assumptions applied in the financial statements.
NOK million 2010 2009 pre-tax profit 502 568 shares realised 22 1 permanent differences -502 -465
Change in deferred tax tax cost 0 0 calculation of deferred tax assets and deferred tax on temporary differences and losses carried forward
NOK million 2010 2009 tax increasing temporary differences securities 47 total tax increasing temporary differences 443 447 tax reducing temporary differences securities -3 operating assets -19 -23 accrued pension liabilities -183 -218 total tax reducing temporary differences -206 -243 net temporary differences before losses carried forward 237 203 losses carried forward -1,443 -1,423 allowances carried forward -546 -546
NOK million 2010 2009 pre-tax profit 502 568 expected tax at nominal rate (28%) -140 -159 tax effect of: dividends received 2 1 gains on equities -6 permanent differences 141 130 write-down of deferred tax assets 4 28 tax cost 0 0 effective tax rate 0% 0%
notes to the finanCial statements of storebrand asa 07 parent company’s shares in subsidiaries and associated companies business office interest/ votes in %
Subsidiaries storebrand livsforsikring as oslo 100,0% 13,153 13,153 storebrand bank asa 1 oslo 100,0% 2,630 3,055 storebrand Kapitalforvaltning as 2 oslo 100,0% 218 196 storebrand fondene as 3 oslo 100,0% 161 131 storebrand skadeforsikring as oslo 100,0% 359 324 storebrand leieforvaltning as oslo 100,0% 10 10
NOK million acquisition cost fair value acquisition cost fair value listed equities 86 59 unlisted equities 1 1 09 bonds and other fixed-income securities
NOK million acquisition cost fair value fair value state and state guaranteed 397 400 309 supranational organisations 36 36 local authority, county 70 total bonds and other fixed-income securities 1,304 1,313 1,152 modified duration 0,4 0,4 average effective yield 2,8% 2,4%
NOK million bank deposits 74 74 interest risk interest rate sensitivity is a measure of interest rate risk based on how changes in interest rates will affect the market value of bonds and other securities.
Straight line depreciation periods for tangible fixed assets are as follows equipment. fixtures and fittings 4-8 years
hedging instrument/hedged item – fair value hedging contract/ nominal value carrying amount 1 contract/ nominal value carrying amount 1
NOK million assets liabilities booked assets liabilities booked 1 Carrying amount 31.12.
J.p.morgan Chase bank 4.4 folketrygdfondet 4.3 state street bank 3.0 fidelity funds-europe 2.1
notes to the finanCial statements of storebrand asa 17 information about close associates number of shares 1
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The consolidated financial statements are prepared in accordance with the EU-approved International Financial Reporting Standards (IFRS)
and interpretations, as well as the other disclosure obligations stipulated in the Norwegian Accounting Act and which must be applied as per 31 December 2010. The annual financial statements for the parent company were prepared in accordance with the Norwegian
Act and Norwegian Accounting Standard no. 16 as per 31 December 2010.
storebrand asa – Control Committee’s statement for 2010 storebrand asa – board of representatiVes’ statement for 2010
The Board of Directors’ proposed annual report and the annual accounts, together with the auditor’s report and the Control Committee’s statement have, in the manner required by law, been presented to the Board of Representatives.
percentage of group profit after tax distributed as dividend 0% >35% 34%
Customer satisfaction in the corporate market 3 number 1 in the industry number 1 in the industry same level as others in industry
percentage of phone calls answered within 30 sec (switchboard) 5 employees sick leave 4.2% 4.0% 3.8%
proportion of storebrand employees satisfied with their development plans 6 proportion of employees who believe storebrand is a great place to work 6 proportion of female managers 8 37% 40% 38%
measures for improving diversity in storebrand some analysis initiated analysis analysis continued anti-corruption info and training given to employees ensure all parts of the Group receive necessary info and training info and training given to all parts of the Group proportion aware of what the code of ethics means in their daily work 6 proportion aware of storebrand's corporate responsibility work 6 76% 80% 75%
Water consumption (managed properties) 12 78,041 m3 stable level 71,774 m3 paper consumption 13 84 metric tons reduce by 10% to 80 metric tons 76 metric tons proportion of customers in storebrand p&C insurance with direct debit/electronic insurance documents 36%/54% 50%/60% 37%/53%
prepare all managed properties for energy labeling analysed analysis analysed proportion of electronic equipment recycled or reused 100 % 100 % 100 %
forest certification for Værdalsbruket Certified Certified Certified 1 Assessed in analysis performed by Storebrand 2010.
10 2009 and 2010 results are not directly comparable due to move to new head office. Energy consumption is for heated area, total consumption was 282 kWh/m2. 11 Based on same selection as in 2008. Energy consumption for all managed properties was 209 kWh/m2. 12 Based on same selection as in 2008. Water consumption for all managed properties was 88 384 m3. 13 The reduction target does not include SPP. Consumption without SPP was 67 metric tons in 2009 and 64 metric tons in 2010.
The aim of the action plan is to help us achieve our ambition to be a corporate responsibility leader in the Nordic region and a world leader in responsible investment. Setting specific targets for the next 2-year period shows our stakeholders what areas we consider most important and give us goals to aim for in our day-to-day work.
The action plan has been developed in close dialogue with key personnel in various parts of the Group The indicators and targets have been carefully selected in consultation with various expert groups in the Group and the measures to achieve the targets can be found in the scorecards and actions plans for business units. The action plan is considered and approved by Storebrand’s Board and the targets are followed up in the company’s various expert groups.
financial value creation shareholders solvency margin of storebrand life insurance 164% 150%
Customers un’s principles for responsible investments (unpri) in upper quartile in 1 out of 7 areas in upper quartile in 3 out of 7 areas proportion of investments that are sustainable 2 -- develop indicator + baseline assessment investments in microfinance and alternative asset classes 3 explored new opportunities explore new opportunities and increase investments if appropriate
Customer satisfaction - corporate customers same level as others in industry number 1 in the industry
diversity analysed measures develop indicator + baseline assessment productivity measurements lean -- develop indicator + baseline assessment employees' awareness and support of storebrand's corporate responsibility work suppliers environmental requirements for suppliers implemented guidelines 50% of new agreements contain environmental requirements environmental conSiderationS
Co2 emissions (metric tons) reduced by 35% to 1,836 reduce by 14% to 1,584 air travel (individual flights) 7,300 individual flights stable level energy consumption (externally managed properties) -- assess energy consumption (managed properties) 209 kWh/m2 reduce by 3% to 203 kWh/m2 energy consumption (head office) 220 kWh/m2 160 kWh/m2 environmental certification of managed properties 6 -- 50% certified 1 Project to calculate present value of Storebrand’s corporate responsibility work. 2 Project to identify proportion of investments that contribute substantially to sustainable development. 3 As per 31 December 2010, Storebrand had committed NOK 198 million to microfinancing investments, NOK 149 million of which has been invested. 4 Measures employee awareness, proportion of employees who complete e-learning course (every third year), proportion who participate in dilemma training and proportion of managers who have reported on compliance with the code of ethics.
1 SPP Livförsäkring AB owns 81.1 per cent and Storebrand Livsforsikring AS owns 8.9 per cent of Benco Insurance Holding BV. 2 Storebrand ASA owns 25.1 per cent and the total stake in Storebrand is 100 per cent of AS Værdalsbruket. 3 SPP Livförsäkring AB owns 27.9 per cent and Storebrand Life Insurance owns 62.2 per cent of SIA Front Real Estate. 4 Storebrand has concluded an agreement concerning the sale of the company. The approval of the British authorities is expected in 2011.
A capital requirement is calculated for credit risk, market risk and operational risk. Individual assets and off-balance sheet items are given a risk weighting based on the estimated risk they represent.
The capital requirement is 8 per cent of the basis for calculating credit risk, market risk and operational risk.
Primary capital must at least equal the calculated capital requirement. The capital adequacy ratio is calculated by measuring total primary capital in relation to the capital requirement of 8 per cent.
capital, while any excess can be included in the supplementary capital. A proportion of the conditional bonus is included in core
Reserves for the compensation of insured events that have incurred but not yet been reported to the company.
Reserves for the compensation of reported but not yet settled claims.
Group life insurance in which an insured sum is payable on the death of a member of the group. Such insurance can be extended to cover disability insurance.
Allocations to premium reserves for contractual liabilities shall, as a minimum, equal the difference between the capital value of the company’s future liabilities and the capital value of future net premiums (prospective calculation method). Additional benefits due to an added surplus are included.
The administration result is the difference between the premiums paid by customers pursuant to the tariff and the company’s actual operating costs. The income consists of fees based on the size of customer assets, premium volumes or number in the form of unit price. Operating costs consist of, among other things, personnel costs, marketing, commissions and IT costs.
The financial result consists of the net financial income from financial assets for the group portfolio (group and individual products without investment choice) less the guaranteed return.
The term solidity capital includes equity, subordinated loan capital, market value adjustment reserve, additional statutory reserves, conditional bonuses, surplus/deficit related to bonds at amortised cost and accrued profit. The solvency capital is also calculated as a percentage of total customer funds excluding additional statutory reserves and conditional bonus.
An expression of the risk associated with the insurance-related liabilities. Calculated on the basis of the insurance fund and the risk policies total for each insurance sector.
The true interest rate calculated when all borrowing costs are expressed as an annual payment of interest in arrears. In calculating the APR, allowance must be made for whether interest is paid in advance or arrears, the number of interest periods per annum, and all fees and commissions.
The term “financial derivatives“ embraces a wide range of financial instruments for which the current value and future price movements are determined by equities, bonds, foreign currencies or other traditional financial instruments. Derivatives require less capital than is the case for traditional financial instruments such as equities and bonds, and are used as a flexible and cost effective supplement to traditional instruments in portfolio management.
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.
Stock futures contracts can be related to individual shares, but are normally related to stock market indices. Stock futures contracts are standardised futures 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.
A basis swap is an agreement to exchange principle and interest rate terms in different currencies. At the maturity of the contract, the principal and interest rate terms are exchanged back to the original currency. Basis swaps are used for currency hedging of loans.
FRAs are agreements to pay or receive the difference between an agreed fixed rate of interest and the actual rate for a fixed amount and period of time. This difference is settled at the start of the future interest period. FRA contracts are particularly appropriate to the management of short-term interest rate exposure.
Forward foreign exchange contracts/foreign exchange swaps relate to the purchase or sale of a currency for an agreed price at a future date. These contracts are principally used to hedge the currency exposure arising from currency denominated securities, bank deposits, subordinated loans and insurance reserves. These contracts also include spot foreign exchange transactions.
on 4 may 1847, the p&C insurance company Christiania almindelige brandforsikrings- selskab for Varer og effecter is incorporated by private subscription. the company is referred to as storebrand.
storebrand changes its name in its articles of association from Christiania almindelige forsikrings-aksjeselskap (renamed in 1915) to Christiania almindelige forsikrings- aksjeselskap storebrand. this name is kept until 1971.
storebrand acquires norske fortuna. brage and fram merge to become the country’s largest life insurance company.
storebrand and idun move into their own new premises in the restored Vest-Vika area of oslo. brage-fram and norske folk follow their lead.
norske folk and norges brannkasse market themselves as a single entity under the name uni forsikring.
the financial crisis in the usa spreads to the global financial markets and during 2008 the new york stock exchange (dow Jones dJia) falls by 34 per cent and the oslo stock exchange by 54 per cent.
the world’s equities markets bottom out in march following the heaviest fall since the 1930s. in the second half of the year the real economies of the largest countries start to recover.
storebrand confirms it has been in talks about a possible merger with Gjensidige. the talks conclude without result.
storebrand emerges from the financial crisis in good shape. storebrand works hard to prepare both employees and customers for the new pensions reform which comes into effect on 1 January 2011.
storebrand’s new energy efficient head office gains a lot of attention. the building is awarded the acclaimed 2010 City prize by the real estate industry. the head office receives eco-lighthouse certification.
Call center: +47 08880 spp livförsäkring ab torsgatan 14 se-10539 stockholm, sweden www.spp.se storebrand Kapitalforvaltning as swedish branch torsgatan 14 p. o. box 5541 se-114 85 stockholm, sweden www.storebrand.se storebrand helseforsikring as swedish branch torsgatan 14 p. o. box 1057 se-101 39 stockholm, sweden www.dkvhalsa.se
storebrand asa headquarters: professor Kohts vei 9, p. o. box 500, no-1327 lysaker, norway. tel. 08880. www.storebrand.no
Consept, design and productions: signatur.no • 101098 Photos: Olav Heggø (Fotovisjon AS), Getty Im ages, Scanpix, YAY m icro and