Following the split from denmark, management of the fire insurance scheme is transferred to Christiania, as the capital of norway was called at that time. In 1913 the scheme is converted into a public sector company called norges brannkasse.
Storebrand’s owners establish Idun, the first privately owned life insurance company in norway.
the P&C insurance company norden is established as a competitor to Storebrand.
”Christiania almindelige Forsikrings-aksjeselskap ” (renamed in 1915) to ”Christiania almindelige Forsikrings-aksjeselskap Storebrand”. this name is kept until 1971.
norske Folk and norges brannkasse market themselves as a single entity under the name UnI Forsikring.
new vision: «recommended by our customers ». Six customer promises implemented.
UnI Storebrand’s negotiations with Skandia concerning establishing a major nordic company fail to reach agreement.
the company changes its name to Storebrand aSa and establishes Storebrand bank aSa.
Storebrand acquires SPP, the Swedish life insurance and pensions provider, from Handelsbanken and forms the leading life insurance and pensions provider in the nordic region.
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.
Storebrand's Ceo for 12 years, Idar Kreutzer, resigns to become the new Managing director of Finance norway (Fno). odd arild Grefstad is appointed as the acting Ceo of Storebrand and is subsequently appointed permanently to the position.
two new external executive vice presidents are recruited in the autumn. Heidi Skaaret is responsible for Staff Functions and robin Kamark for business Support and Sales, Marketing and business development.
the year 2012 can be summed up by capital effectiveness, cost reductions, customer orientation and commercialisation. these initiatives will ensure that Storebrand creates value for its customers, employees and shareholders.
at the end of 2012 there were 2,250 employees in Storebrand. this corresponds to an increase of 1 per cent during 2011.
1) Figures for 2010 and 2011 are translated as a result of adjustments in the group structure. 2) adjusted for write-downs and amortisation of intangible assets, after tax.
Important events in 2012 7 Statement of total comprehensive income 67 a changing pension market - interview with the Ceo 8 Statement of financial position 68 new occupational pensions in the private sector 11 reconciliation of equity 70
REPORT OF THE bOARD AND CORPORATE GOvERNANCE Independent auditor's report 158 report of the board of directors 24 Statement of the Control Comittee and the board of representatives 160
trippel Smart the Board of Storebrand aSa appoints odd arild Grefstad as the new Ceo of Storebrand.
In brief the Storebrand Group is made up of the business areas life and pension, asset mangement, bank and insurance. the group’s head office is in norway 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.
HISTORy Storebrand can trace its history back to 1767. the company has provided occupational pensions to norwegian employees since 1917, the same year Storebrand’s subsidiary SPP was established in Sweden. Storebrand bank aSa opened for business in 1996, and in 2006 the group relaunched its property and casualty insurance business as a service for the retail market and selected segments of the corporate market.
Ambition: Storebrand is the best for pension savings. Our most important customers are employees and former employees of companies with pensions from Storebrand. We provide sustainable solutions adapted to our customers' circumstances through our market and customer concepts.
1st quarter NEW vISION AND CUSTOMER PROMISES Storebrand starts 2012 by launching a new vision, "recommended by our customers" and six customer promises.
SUSTAINAbILITy – SECURITy FOR OUR CUSTOMERS Storebrand qualifies once again for the important sustainability indices dow Jones Sustainability Index and Global 100.
PAID-UP POLICIES WITH INvESTMENT OPTIONS a legislative proposal from the banking Law Commission suggests that investment options should be allowed for paid-up policies. the customers are to be able to choose for themselves how they want their pension assets to be managed.
3rd quarter NEW CEO the board of Storebrand aSa appoints odd arild Grefstad as the new Ceo of Storebrand. Grefstad has worked for Storebrand since 1994 and has been a member of the executive management since 2002. Grefstad was the CFo from 2002 to 2011 and the Managing director of Storebrand Livsforsikring aS from 2011 until he was appointed as the acting Ceo on 1 June 2012.
COST PROGRAMME Storebrand launches an extensive cost programme to improve its operational implementation capacity.
4th quarter TRIPPEL SMART the sustainability fund Storebrand trippel Smart is launched on 1 october. the fund is well received by the market.
SAvINGS FOR LIFE We introduce Your Pension Figure in the Savings for Life campaign. the idea behind Your Pension Figure is to introduce something completely new and customer-oriented in the pension area. We launch a new pension calculator at the same time that easily shows what sort of pension can be expected, what sort of pension is desired and the monthly savings required to achieve the desired pension. We also point out specific savings alternatives. the calculator is also adapted for mobile and tablet use.
Moreover, life insurance companies will experience challenges in the future related to the guaranteed schemes, which are gradually being phased out. Lower interest rates and a higher life expectancy, combined with the introduction of Solvency II, make these products capital-intensive and not very profitable.
What is Storebrand doing to meet these challenges? – Firstly, we are making a great effort to be in the forefront of developing the best defined-contribution solutions for our customers. For example, we have recently introduced life-cycle allocation for definedcontribution pensions in both norway and Sweden, in which the percentage of equities is determined by the age of the individual. this will result in higher expected pensions for our customers, combined with good protection of the pensions as retirement approaches.
thirdly, we have taken a proactive stance in the retail market, and we have identified employees with occupational pension products from Storebrand as our most important customers. Storebrand aims to offer the best pension savings and to have good insurance and banking solutions.
Cost effectiveness is another measure that is very important for greater capital effectiveness in the future. In the summer of 2012, we introduced a cost programme with the goal of saving at least noK 400 million by 2014. We are on track to achieving our target.
There will be major changes in the pension market in the coming years. What will this market look like in ten years? – In ten years time I think we will see that all pension savings will be through defined-contribution solutions, and good risk cover will still be part of the package. there will be more individual options with regard to fund options, payment profiles, etc. national Insurance benefits will gradually account for less of the total pension benefits. occupational pensions will become relatively more important, and there will be a greater need for private pension savings. thus I believe that there will be a greater focus on tax-motivated private pension savings.
Storebrand's vision is: "Recommended by our customers". What is the Group doing to achieve this goal? – We live by trust. With the right focus we will acquire customers who are more loyal, buy more products and actively recommend us to their friends, colleagues and families. Key words in this connection are focus on the customer, simplification, customer-driven improvements and comprehensive customer service.
We are focusing on delivering on six specific promises to our customers. In particular, I like the promise: "We will contact you when changes we make may benefit you". For example, we contact customers who have fixed-rate deposits and offer an extension of their contract when the term expires.
the introduction of paid-up policies with investment options is the acid test of whether we are serious about our new customer-oriented vision. We believe that most customers, especially younger customers, will benefit from investment options with higher equity exposure. However, not everyone should trade in their guarantee. We will provide advice that is appropriate for each individual.
• Mortality inheritance. • annual zero guarantee. It is still possible to agree on investment options, when this guarantee does not apply.
Increased maximum rates have also been proposed for the current defined-contribution schemes, at the same level as in the basic model.
It has been proposed that defined-benefit pensions that have already accrued may be continued under the new occupational pension schemes. rights to pensions that customers have already earned are protected by the Constitution and will not be changed. Gradually customers will be given opportunities to make investment choices for what they have earned under their defined-benefit scheme.
the new occupational Pension act will not go into effect until 1 January 2014 at the earliest.
by the end of 2013, customers will probably be allowed to determine for themselves how pension capital from paid-up policies should be invested. Storebrand believes that this can give customers a higher expected pension, especially for young people who have several decades before retirement.
In 2013 around 1 million paid-up policy customers in Norway will be able to choose how their money is managed. This will mean opportunities for a higher pension for many individuals.
(Value: Emotional characteristics that are observed in the conduct of the organisation. Shall reflect the culture and priorities of the organisation.)
Storebrand Life Insurance is a leading provider of pensions in the norwegian market and 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 aims to be norway’s most customer-oriented life insurance company by offering customers the most attractive products, the best advice and the best customer service. Storebrand Life Insurance has a high 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 pension's provider in the norwegian market.
SPP offers pension and insurance solutions, and advice to companies and their employees in the competitive segment of the Swedish 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.
KeY FiGureS (noK million) 2012 2011 2010 profit before amortisation and tax 803 291 410
assets under management 442,162 413,950 406,922 1) the cost/income ratio in 2012 is high due to the cost of redundancy packages in the third quarter totalling noK 52 million.
the Insurance business unit is responsible for the group’s one-year risk products. these include injury and health insurance2 and personal risk and employee cover. through cost-effective distribution and customer-friendly network solutions the unit offers treatment insurance in the norwegian and Swedish corporate and retail markets, P&C insurance and personal risk products in the norwegian retail market and employee insurance in the norwegian corporate market.
KEy FIGURES (NOK MILLION) 2012 2011 2010 profit before amortisation and tax 402 281 155
ethical and responsible advisory services for customers are of key importance at Storebrand. every year we provide courses in advisory service ethics and other related topics to all of our financial advisors. Integrating sustainability in our core operations requires continuous skills development in this area. development of skills related to sustainability was therefore provided through sessions for the group's 35 top executives, sales organisation and customer service centre in 2012.
WORLD-CLASS SUSTAINAbILITy the Group requires that sustainability is taken into account in all of its internal processes and decisions. the purchasing department has sustainability as one of three decisive parameters for the choice of a supplier. equal opportunities, development of talent and employee satisfaction are high on the agenda in the Hr department. ethics and transparency permeates everything we do. this contributes to the fact that Storebrand qualified for the 14th year in a row for the dow Jones Sustainability Index, as one of the ten per cent most sustainable companies in the world. Storebrand also qualifies for the recognised sustainability index FtSe4Good and was nominated as a Sustainable asset Manager this year, which is a distinction awarded by the Financial times and IFC. We report annually to the Carbon disclosure Project and are certified as an environmental Lighthouse.
ONE OF THE FOUNDERS OF THE UN PRINCIPLES FOR SUSTAINAbLE INSURANCE (PSI) at the Un Conference on Sustainable development in the summer of 2012, Storebrand participated in the launch of a completely new initiative in the insurance industry. together with 30 other insurance companies and industry organisations, Storebrand signed UneP FI's Principles for Sustainable Insurance (PSI). Storebrand has been involved in the development of these principles since 2006. Storebrand hopes that PSI will be as meaningful in the insurance industry as its predecessor PrI
We aim to be a leading sustainability actor in our industry. We are therefore proud that Storebrand qualified for the 14th year in a row for the dow Jones Sustainability Index, as one of the ten per cent most sustainable companies in the world. Storebrand has also qualified for FtSe4Good and ranked sixth on the list of the 100 most sustainable companies in the world, which was published at the World economic Forum in davos in January 2013. For our work with sustainable investments, we were nominated as the Sustainable asset Manager of the Year, a distinction that is awarded by IFC and the Financial times.
Sustainability is an integral part of Storebrand's business activities. We believe that tomorrow's winners will be the companies who understand the opportunities and risks provided by changes in the regulatory framework. therefore we will invest in the companies that understand a changing world and act accordingly. In the trippel Smart fund we invest in the 100 companies in the world that we find to be the most sustainable. Companies that perform poorer than Storebrand 's minimum standard are excluded from all investments. this is the case for 120 companies at present.
2. SUSTAINAbLE PRACTICE Companies that have systems in place to handle environmental challenges, human rights and corruption will be better equipped to avoid undesired – and potentially costly – incidents.
MINIMUM STANDARD Covers all investments.Corruption and economic crime, human rights, climate and environment, controversial weapons, tobacco and low sustainability rating. 120 companies excluded.
PROPERTy Focus on ever higher environmental standards through upgrading and environmental certification of buildings and areas, environmentally efficient operations and cooperation with the tenants.
Sustainability is an integral part of our corporate values and customer promises. the following guidelines are fundamental to Storebrand: • The Group's ambition is to contribute to solving society's problems and cre- ate a sustainable development both locally and globally through our products and services. • The Group's aim is to combine profit- able business operations with social, ethical and environmental goals and measures. • We have implemented requirements with regard to sustainability, corporate social responsibility, environmental work and ethics internally and for all of our partners and suppliers. • The development of all types of financial products and services shall be based on sustainability and be fully integrated with our asset management.
Violations of human rights and international law (24) tobacco (21) Companies with low sustain- ability rating (40) Corruption and financial crime (15) environmental degradation (6) nuclear weapons (13) Cluster munitions (6)
during 2012 the focus has been on implementing the investment strategy for microfinance and social investments.
this was achieved primarily through increasing the proportion of investments in debt instruments, as well as diversifying the portfolio to several sectors in developing countries, such as agriculture and health. Four new investments were decided, and Storebrand had a significant role in creating financing for entrepreneurs and small businesses in low-and middle-income countries. For example, Storebrand has given capital to Fairtrade certified cooperatives in Latin america, as well as long-term debt financing to the leading microfinance institution in the Central asia.
Shanthi, a native of Madras, tamil nadu, is among the millions who migrate to bangalore and settle down in the city’s slums in search of jobs. With just five years of schooling, Shanthi found work at a local sari shop. She recognized that by opening up her own sari shop out of her home she could save on transportation costs, earn a larger income and devote more time to her family. Shanthi joined Ujjivan with a group of women and took her first business Loan of rs. 8,000 to open her shop. opening her own sari shop has not only increased Shanthi’s income (she now makes rs. 50 or more on each sari she sells), but it has also increased her skills. at her previous shop, her main job was making sari blouses. now, she makes the entire sari and adds intricate embroidery, which significantly increases its value.
Storebrand's Investments in Microfinance aims to go beyond financial returns and contribute to positive social and economic development in emerging countries. For this reason, we monitor not only financial returns from these investments, but also social performance. by collecting and presenting data in this way, we get a clearer picture of our borrowers, the regions in which they operate and the type of employment the loans primarily go to. our long-term goal is to be able to measure the real social impact our investments have created in these areas.
Sustainability is profitable. Investing responsibly and thereby contribute to the capital building the society we want is a necessary part of a sustainable society and absolutely obvious to us.
dnV’s core activity is to help our customers manage risk so they can improve their technical, operational, environmental, safety and business performance. eSG risks are an important part of this. Companies are often exposed to and must handle multiple risks. Hence, looking at the whole risk picture and having a long term focus is essential going forward.
dnV requires a credible eSG policy in addition to the right products and solid performance prior to any investment. We regard Storebrand as an important contributor to our sustainable investment strategy.
Storebrand has for years focused on sustainable investments in order to meet the future and integrated it in the asset management. this enables us to hope that our grandchildren will have an even better planet to live on.
Storebrand believes that sustainable investment is a good investment strategy for our customers. We are convinced that the most sustainable companies are the future winners. therefore we are pleased that an increasing number of customers are choosing Storebrand's sustainable solutions, not to be nice, but smart.
In 2012, Storebrand introduced the following six promises to customers: • You will receive feedback that is the most appropriate for you and your situation.
• We will provide you with an overview of your finances, today and tomorrow.
• You will receive a fast response to your inquiries through your desired channel.
SHARE CAPITAL, RIGHTS ISSUES AND NUMbER OF SHARES Shares in Storebrand are listed on oslo børs (oslo Stock exchange) with the ticker code Stb. Storebrand aSa's share capital at the start of 2012 was noK 2,249.5 million. the company has 449,909,891 shares with a par value of noK 5. as at 31 december 2012 the company owned 3,124,482 of its own shares, which corresponds to 0.7 per cent of the total share capital. the company has not issued any options that can dilute the existing share capital.
In terms of market capitalisation, Storebrand was the 17th largest company on oslo børs at the end of 2012.
SHARE PURCHASE SCHEME FOR EMPLOyEES every year since 1996 Storebrand aSa has given its employees an opportunity to purchase shares in the company through a share purchase scheme. the purpose of the scheme is to involve the employees more closely in the company's value creation. In March 2012 each employee was given the opportunity to buy between 66 and 1,323 shares in Storebrand at a price of noK 30.22 per share. around 18 per cent of the employees participated and purchased a total of 332,115 shares.
SHARE PRICE PERFORMANCE Storebrand generated a total return (including dividends) of minus 13.8 per cent in 2012. the oslo børs oSebX index rose 14.7 per cent for the corresponding period. over the last 5 years, Storebrand has shown a total return of minus 52.7 per cent, while the european insurance index beinsur showed a return of minus 25.9 per cent for the corresponding period.
CAPITAL GAINS TAxATION on 1 January 2006, new rules came into force in norway concerning the taxation of dividends and gains on shares held
norway 50% UK 17% USa 9% Luxembourg 6% Finland 5% others 13%
1 Gjensidige Forsikring asa 109,458,254 24.33% nor 3 Clearstream Banking S.a. nom 12,497,843 2.78% LUX
4 Varma mutual pension insurance 12,300,780 2.73% FIn 5 Jpmorgan Chase Bank nom 9,315,632 2.07% Gbr 6 State Street Bank and trust Co. nom 9,270,862 2.06% USa 7 tapiola mutual pension insurance 7,500,000 1.67% FIn 8 Jpmorgan Chase Bank nom 6,549,521 1.46% Gbr 9 the northern trust Co. nom 6,229,443 1.38% Gbr 10 prudental assurance Comp. limited 6,212,379 1.38% Gbr 11 the northern trust Co. nom 5,536,657 1.23% Gbr 12 Skandinaviska enskilda Banken nom 4,785,198 1.06% SWe 13 Deutsche Wertpapierservice Bbank aG nom 4,728,082 1.05% deU
COMPLIANCE as one of the country’s leading financial institutions, Storebrand is dependent on maintaining an orderly relationship with the financial markets and supervisory authorities. the company therefore places particular emphasis on ensuring that its routines and guidelines satisfy the formal requirements imposed by the authorities on securities trading. In this context the company has prepared internal guidelines for insider trading and own account trading based on the current legislation and regulations. the company has its own compliance system to ensure that the guidelines are observed.
SHAREHOLDERS’ CONTACT WITH THE COMPANy Shareholders should generally contact the operator of their securities account for questions or notification of changes, such as address changes.
13 February 15 march 17 april 18 april 24 april 12 July 30 october February 2014 results 4Q 2012 embedded Value 2012/ investor and analyst update annual General meeting ex-dividend date results 1Q 2013 results 2Q 2013 results 3Q 2013 results 4Q 2013 market cap 31.12
2012 was another year of uncertainty in the european financial markets. nevertheless, the leading equity markets around the world rose by around 15 per cent in 2012. the norwegian economy performed well compared with the rest of europe. Growth in the oil industry and low interest rates made a positive contribution, but the international downturn is still having something of a dampening effect in norway as well. europe is expected to see low growth in the next few years. this will affect the development of Storebrand's home markets. Low interest rates are a challenge for insurance companies that have to cover annual interest rate guarantees. However, Storebrand believes there are still good investment opportunities in the market with expected returns that exceed the average interest rate guarantee of 3.4 per cent.
Sales, marketing, business development and information were merged into a single business area in october as part of strengthening our commercial work.
Marketing activities for "Your Pension Figures" were launched in october. Storebrand has introduced figures that both make it easier for customers to save for their pension and encourage them to do so. the pension calculator on Storebrand.no makes it simpler for customers to see what they can expect as a pension and what they need to save to achieve the pension they want. Instead of talking about annual payments, we, for the first time, talk about a personal bag of money that the customer will consume during their retirement. this is the reality for more than one million defined contribution pension customers today, and this number will continue to grow. a great deal of interest has been shown in this and the launch of our new pension calculator resulted in record visitor numbers for storebrand.no.
COSTS AND CAPITAL EFFECTIvENESS In June, the board of directors approved a costs programme that is intended to reduce the Group's annual costs by a minimum of noK 400 million by 2014. the measures include the increased use of automation, digitalisation and direct distribution, renegotiating agreements and staffing reductions. the workforce will be reduced by 300 full-time equivalents through staffing reductions and natural turnover by 2014. the costs programme was on schedule at the end of 2012.
In december, the board of Storebrand Livsforsikring aS decided that Storebrand will withdraw from the market for insurance-based pensions business in the public sector. this business will be wound up gradually over a 3-year period. the management and administration of pension funds for the public sector will continue.
FINANCIAL TARGETS on capital markets day in March 2011, Storebrand announced that we aim to achieve a profit before profit sharing and loan losses of noK 2.5 billion in 2013. the turmoil in the financial markets resulted in Storebrand being behind schedule with respect to this plan at the end of 2012.
revenue growth has been lower than foreseen in the plan. this is due to lower customer funds than expected resulting from the poorer than expected growth in the financial markets. the board has approved a programme for reducing annual costs by more than noK 400 million by the end of 2104 to compensate for the weaker than expected revenue growth.
Profit before profit sharing and loan losses 3 2.5 NOK billion 1.5 NOK billion 1) (result after tax adjusted for amortisation costs)/(opening equity - dividends paid - half of repurchased shares during the year). 2) Solvency margin pursuant to solvency i regulations.
Considerable uncertainty exists surrounding several regulatory framework issues at the beginning of 2013. this applies to new legislation relating to occupational pensions in norway, plans for reserves for longevity and the solvency regulations (Solvency II), which are neither particularly well adapted to norwegian business rules nor take into account historically low interest rates.
• The annual premium being set as a percentage of the employee's wages. The maximum limits are 7-8 per cent for income under 7.1 G and 25-26 per cent for income between 7.1 and 12 G (G = national Insurance base amount). • Mortality inheritance. • Annual zero guarantee. It is still possible to agree investment options where this guarantee does not apply. • Life expectancy adjustment of the pension benefits by divisors.
the banking Law Commission proposed longevity adjustments based on divisors in the same way as in the new national Insurance Scheme. Following the consultation period, the Financial Supervisory authority of norway drew up a proposal concerning an alternative method for longevity adjustments based on new dynamic mortality tariffs. this proposal is currently being circulated for consultation, together with the proposed transitional rules.
TRANSITIONAL RULES the banking Law Commission's report noU 2013:3 was submitted to the Ministry of Finance on 7 January 2013. the report contains proposed rules for transitioning from the current defined benefit-based occupational pension schemes to the new defined contributionbased hybrid products proposed in noU 2012:13. the plan is for flexible transitional rules for companies that currently have defined benefit pensions and higher maximum rates for today's defined contribution pension schemes.
the risk entailed in the guaranteed annual return arises because it relates only to the asset side. Increasing interest rate sensitivity increases the fluctuations in the annual return on assets, and a risk management dilemma arises. High interest rate sensitivity represents a small risk to the company's solvency position, but a large risk of a negative return in the case of a rise in interest rates. Low interest rate sensitivity represents a small risk to the result, but a major risk to solvency in the event of a fall in interest rates.
FUTURE PROCESS the proposed transitional rules will be circulated for consultation until the beginning of april 2013. the Ministry of Finance has announced that the bill, which covers both the new products and transitional rules, will be presented for consideration by the norwegian parliament in autumn 2013. If this happens the plan is for the new regulations to come into force on 1 January 2014. However, there is a significant risk that the process will be delayed such that the regulations will not come into force until 1 January 2015.
In SPP's opinion the report contains important elements, but does not achieve the basic social goal that individuals should be able to make independent choices concerning their own savings. the transfer right should apply to all types of occupational pensions, old and new, such that individuals can choose which company they want to manage their savings. occupational pension regulations should promote an flexible labour market and conscious choice with respect to savings.
the report is being circulated for consultation with a response deadline of 28 February 2013. If the proposal is adopted, it is highly likely that it will have a major impact on the future life insurance market.
the financial statements show the results improved in all business areas, with the exception of asset management which was affected by switching from equity to interest investments and continued uncertainty in the financial markets. the Group's result was charged a nonrecurring charge of noK 195 million for restructuring and winding up business as part of the implementation of the costs programme.
the company portfolio achieved a net result of minus noK 65 million for 2012, compared with minus noK 120 million in 2011. Storebrand Life Insurance is funded by a combination of equity and subordinated loans. the proportion of subordinated loans of approximately 28 per cent and interest charges comprise a net amount of approximately noK 120 million per quarter at the current interest rate level. the company portfolio of noK 8.7 billion reported a gross return of 5.4 per cent for 2012, compared with 5.1 per cent for 2011. the lower credit spreads had a positive impact on the return.
30 | Storebrand aSa the average annual interest rate guarantee for the various customer portfolios is between 3.1 per cent and 3.7 per cent. the guarantee levels for new business have been reduced as a result of the low interest rate level. the booked return in the customer portfolios is adequate to cover the average annual interest rate guarantee. the booked return has also resulted in profits for customers in excess of the interest rate guarantee of noK 0.2 billion.
Return on capital the market return has been marked by an upturn in the equity markets, both nationally and internationally. Short-term interest rates have fallen in norway and internationally, while long-term interest rates have remained relatively stable at low levels.
the banking Law Commission's proposal for transitional rules endorses a great deal of flexibility for companies that currently have defined benefit pensions, and companies that already have a defined contribution pension will be given an opportunity to save significantly more for their employees than is the case today. the final clarifications will, however, not be available until the norwegian parliament has approved the new legislation. In the coming period, Storebrand will actively seek to inform, explain and advise our customers on how they can best adapt to the new rules. Storebrand is working on the development of product and service solutions that are adapted to customer needs and the new regulatory framework.
New business new premiums (aPe) totalling noK 834 million were signed in 2012, compared with noK 658 million in 2011. the increase was mainly due to a higher aPe for group defined benefit and contribution pensions.
• Guaranteed products: NOK 377 million (NOK 325 million). • Unit Linked insurance: NOK 411 million (NOK 299 million). • BenCo: NOK 46 million (NOK 34 million).
Administration result the administration result was noK 98 million for 2012. Income rose by 4 per cent (measured in local currency) compared with the previous year due to the growth in assets under management and thus higher capital fees. Costs rose by a total of 4 per cent (measured in local currency) for the year, which was in large part due to higher commission expenses, provisions for the costs programme, and moving to a new head office. the effects of the costs programme will be realised during 2013 and 2014.
1) maximum interest rate guarantee in the portfolio p250,p300 and p520 is 2.5 per cent, 4.0 per cent and 5.2 per cent respectivly.
the buffer capital (conditional bonuses) has increased by noK 1.4 billion and totalled noK 8.6 billion at the end of the year. this is mainly attributed to rising equity markets.
the total assets under management amounted to noK 115 billion at the end of 2012, which represents an increase of noK 4 billion during the year. the increase was in part due to improving equity markets. the assets under management within Unit Linked insurance at the end of the year totalled noK 36 billion (noK 32 billion).
MARKET the switch from traditional insurance to Unit Linked insurance continued in 2012. traditional insurance is still good for some customer groups, but the customer themselves, or in consultation with SPP, choose how they want to save based on their own views regarding risk and opportunities in the long-term. SPP's job is to look after the customers' interests as best as possible.
Premium income total premium income decreased by 2 per cent in 2012 compared with 2011. Premium income rose by 2 per cent for Unit Linked insurance. the proportion now accounts for 60 per cent of total premium income, an increase of 2 per cent.
net premium income (premium income less insurance claim payments and transfers) was positive within Unit Linked insurance and totalled noK 2,698 million. this is an increase in relation to the year before. the net premium income for guaranteed products was minus noK 2,821 million.
ASSET MANAGEMENT the asset management business area in Storebrand includes the companies Storebrand Kapitalforvaltning aS, Storebrand Fondene aS, Spp Fonder aB, Storebrand eiendom aS, and Storebrand realinvestering aS.
Fixed and volume-based income was slightly lower than in 2011, mainly due to the customers' reallocation from equities to interest rate products with lower management fees. the increase in assets under management of noK 28 billion was not enough to offset the shift towards low margin products.
MARKET TRENDS 2012 saw another year of weak economic growth in the global economy. Global growth will probably end up at around 2.5 per cent, which is weaker than in 2011. In the eurozone especially, tight fiscal policy and debt reduction contributed to a new recession and falls in GdP in 2012.
equity markets fell heavily in May due to the weakened global growth picture and increasing fear that Greece would leave the eurozone. equity markets improved in the second half of the year with the macro figures stabilising and the escalation of central bank measures. In particular the launch of a support programme by the european Central bank (eCb) dampened the fear of national debt in the eurozone. In total the global equity market provided a return of 15.7 per cent measured by the MSCI World index. the norwegian Stock Market provided a return of 15.4 per cent.
the escalation of central bank measures and weaker growth prospects resulted in both norwegian and government bond yields falling further in 2012. Government bond yields in debt-laden countries like Italy and Spain fell after the eCb launch further support measures. this affected the other credit markets by heavily reducing the risk premium in 2012.
bANKING Storebrand bank is a direct bank which offers a wide spectrum of banking services to the retail market. the bank is a leading provider of advice, transaction services and financing for corporate customers within commercial property.
RESULT the positive trend for Storebrand bank continues with a stronger result in 2012. at the same time losses are low and the volume of non-performing loans has decreased.
net interest income for the bank group amounted to noK 490 million, compared with noK 443 million in 2011. net interest income as a percentage of average total assets was 1.25 per cent in 2012; 0.12 percentage points higher than it was in 2011. Falling interest rates and lower funding costs resulted in an improvement in the bank's lending margins and falling deposit spreads throughout the year.
total net loan losses recognised in the income statement including write-downs on loans taken over amount to an income of noK 8 million compared with a net amount of noK 10 million recognised as income in 2011. the volume of non-performing loans has decreased and overall totals 0.8 per cent of gross lending compared with 1.0 per cent in 2011.
bALANCE SHEET at the end of 2012, the bank group had total assets of noK 40.7 billion. Gross lending to customers was noK 35.5 billion at the end of the year. this represents an increase of noK 2 billion. both the retail market portfolio and the corporate market portfolio developed positively throughout the year.
the bank group's retail market portfolio represents 67 per cent of total loans, and mainly consists of low risk home mortgages. the average weighted loan to value ratio (LVr) is about 54 per cent.
the bank has a balanced funding structure and bases its funding on customer deposits, the issuance of securities and mortgage bonds, both directly in the market and through a swap facility with norges bank, as well as borrowing in the norwegian and international capital markets. In 2012, the bank again prioritised maintaining a good deposit to loan ratio, and at year-end the deposit to loan ratio was 56 per cent. the Storebrand bank Group had net primary capital of noK 2.7 billion at the end of 2012. the capital adequacy ratio was 11.8 per cent and core (tier 1) capital ratio was 11.2 per cent, compared to 13.3 per cent and 11.4 per cent respectively at the end of 2011. the target for the core capital ratio is 11 per cent. From 2015 the target for the core capital ratio will, given the current balance sheet structure, be set at 12.5 per cent.
MARKET Retail market Storebrand bank is a web-based bank that offers traditional bank products to the norwegian market. banking is one of several product and services areas in Storebrand's retail market strategy and forms an integral part of the Group's complete customer concepts for defined customer segments. the concepts focus on the family's entire economy, long-term saving and saving for your pension.
our customer services are based on our vision, "recommended by our customers". Products, concepts and customer processes were improved and developed further in 2012. digitalisation, automation and the increased use of bankId are key measures. a complete range of web-based services is now offered, including an overview of financial services in the online bank. new opportunities were launched with the bank's innovative Mitt Forbruk (My Consumption) and Mitt budsjett (My budget) services. overall, customers have been given an even better tool for managing and controlling their personal finances. My Consumption won the "best useful Service" award in Gulltaggen 2012, an annual awards ceremony for the advertising industry.
the transaction volume in commercial property was slightly lower than expected, mainly due to the bank's restrictive lending practices. the bond market has taken over part of the funding from the banks, but demand far exceeds supply. the quality of the portfolio has been further improved and there are few cases of loan arrears and almost no non-performing loans. the corporate market is not expecting any volume growth in lending in 2013.
the cost ratio, operating costs as a percentage of premiums earned, amounted to 19 per cent, the same level as for 2011. Stabilisation of the cost ratio is temporary and consists essentially of the unit's provisions of noK 20 million for the estimated costs related to the Group's costs programme. the cost base will be further streamlined through increased automation and services sourcing, as well as increased sales via cost-effective and direct-based channels.
Storebrand Insurance's investment portfolio comprises noK 3.72 billion, which is mainly invested in short and medium term securities. Financial income was higher than in 2011 and reflects increased assets under management in combination with the realisation of funds and capital gains at the end of the year.
Storebrand enjoys a well-established position in the retail market for personal insurance and is in a challenger position within P&C insurance. the growth in personal insurance was stable and in line with general market growth. Sales of P&C insurance were stable with direct channels as the primary distribution channel. this contributes to a cost-effective distribution model.
Proft and loss other activities - 279 - 278 the result for other activities was minus noK 279 million, compared with minus noK 278 million in 2011. the result includes the companies Storebrand aSa, Storebrand baltic Uab, and accounting eliminations. net income from financial instruments in Storebrand aSa rose by noK 15 million, while interest charges increased by noK 9 million. operating costs in Storebrand aSa rose by noK 15 million.
OFFICIAL FINANCIAL STATEMENTS OF STOREbRAND ASA Storebrand aSa‘s official financial statements, which are prepared pursuant to norwegian accounting law, show a result before tax of minus noK 66 million, compared with noK 196 million in 2011. Group contributions from investments in subsidiaries amounted to noK 220 million, a noK 254 million reduction compared with 2011.
operational risk refers to the risk of incurring direct or indirect losses due to inadequate or failing internal processes or systems, human error or external events. Storebrand seeks to reduce operational risk by having plain routines, clear descriptions of responsibilities and documented authorisations. In addition, Internal audit carries out independent checks through audit projects adopted by the board. the greatest operational risks are associated with regulatory changes and major It projects and their accompanying risk of operational and business impacts. the executive management conducts annual risk assessments which result in an overview of risks and improvement measures. the risk assessments are presented to and considered by the boards of the individual companies and the Group's board of directors.
STOREbRAND LIFE INSURANCE a significant proportion of savings products in the norwegian life insurance business incorporate a guaranteed annual return. Financial risk relates primarily to the ability to meet the customers’ guaranteed return, which for the majority of the products applies for one year at a time. risk management in this business therefore aims to reduce the probability of the return falling below the annual guaranteed return for the various product groups in any single year.
over time, high interest rates are preferable to low interest rates for guaranteed business. the falling interest rates in 2011 and 2012 therefore entailed, everything else being equal, a greater risk for the company.
risk capital primarily consists of additional statutory reserves and unrealised gains. the owner is responsible for meeting any shortfall that cannot be covered. the average interest rate guarantee is expected to decline in the years ahead and from 2012 all new earnings will be linked to a basic interest rate of 2.5 per cent.
Market value adjustment reserve in % of customer funds with guarantee additional statutory reserve in % of customer funds with guarantee
the exposure to increased life expectancy and disability is linked to the insurance's lifelong benefits. the tariffs are based on empirical statistics. the company has strategies for implementing future demand for building up reserves and reducing the owner's risk from changes in portfolios to the lowest possible level.
the life insurance industry has worked on new mortality tables, in cooperation with the Financial Supervisory authority of norway, which take higher life expectancy into account. as a result of this, Storebrand will significantly build up its reserves in the coming years. due to the good returns in 2012, a total of noK 3.2 billion was allocated in 2012. Storebrand has set aside a total of noK 4.3 billion during the period from 2011 to 2012 for future reserves for longevity. there is an ongoing process with the authorities to ensure that a long enough period of time is allowed for building up reserves.
2012 saw good customer returns due to strong equity markets and good bond returns. the latter is due to falling interest rates and reduced credit premiums. the returns achieved in excess of the guarantee have mainly been used to build up reserves for higher life expectancy. on the other hand, low interest rates have a negative impact on Storebrand's ability to fulfil the nominal interest rate guarantee in coming years. this will become even more apparent when Solvency II is introduced.
ASSET MANAGEMENT asset management offers active management and the management of fund-in-fund structures for the customer‘s account and risk. there is no risk apart from normal commercial and operational risk for this type of business. operational risk is considered the company 's most important risk factor. the most common types of operational risk in the asset management business are errors that occur in the trading and settlement process, pricing errors, breaches of investment mandates, erroneous reporting and faults in core systems.
the company performs important monitoring tasks for its customers in accordance with the management agreements they sign. Investment portfolios are monitored on a daily basis in relation to a wide range of investment restrictions.
development projects involve somewhat greater risk and the total exposure here is around noK 4.1 billion. this segment is largely composed of loans to construction projects in the housing and office sector in and around the central oslo region. a high proportion of advance sales is required for loans for new housing projects.
the credit quality of the retail market portfolio is considered very good. almost the entire portfolio is secured by property mortgages. the portfolio's high collateral coverage indicates a limited risk of loss. the loan to value ratio for the mortgages is relatively low. only
the bank has established good liquidity buffers and attaches great importance to having a balanced funding structure in relation to the various maturities and issuances in various markets. Credit facilities/agreements have been established that Storebrand bank can draw down as required.
Compliance is monitored closely and the bank group seeks to reduce operational risk through systematic risk reviews of all of the bank's activities. these are carried out at least quarterly and when projects start or special events occur. at the end of 2012, the Storebrand bank Group had a core (tier 1) capital ratio of 11.2 per cent. the target for the core (tier 1) capital ratio is 11 per cent.
the Group's primary capital, which consists of equity, subordinated loans and market value adjustment reserve, additional statutory reserves, conditional bonus and other solvency capital in life insurance, amounted to noK 45 billion at year-end, compared with noK 42 billion a year earlier.
Storebrand Livsforsikring aS, Storebrand aSa, Storebrand bank aSa and Storebrand boligkreditt aS had the same rating from Moody’s and Standard & Poor’s respectively that they had at the end of the preceding year.
SUSTAINAbLE INvESTMENTS all managed assets in the Storebrand Group comply with Storebrand's minimum requirements. Investments are not made in companies that violate Un conventions or operate other non-sustainable activities. active ownership is exercised to influence companies in the direction of sustainability and to get to grips with challenges related to global environmental, social and governance (eSG) trends.
THE LIFE PORTFOLIOS REPORT SUSTAINAbILITy RATINGS based on the new sustainability rating system all of the Group's life portfolios have been assessed on the basis of sustainability criteria. our ambition is for the life portfolios to increase their share of investments in the most sustainable companies. this year, for the first time, a target was set for the proportion of the balance sheet that must be invested in companies regarded by Storebrand as being among the most sustainable in their respective industries.
NEW SMART CUTTING EDGE PRODUCT Storebrand launched "trippel Smart" in norway and Sweden in october 2012. the fund is a global equity fund that invests in 100 of the most sustainable companies in the whole world, and in all sectors.
ONE OF THE FOUNDERS OF THE UN PRINCIPLES FOR SUSTAINAbLE INSURANCE (PSI) Storebrand participated in the Un's conference on sustainable development in the summer and launched a new initiative in the insurance industry. together with 30 other insurance companies and industry organisations, Storebrand signed UneP FI's Principles for Sustainable Insurance. Storebrand has participated in the work on developing these principles since 2006 and hope they have as great an impact in the insurance industry as their forerunner PrI (Principles for responsible Investments) had in the financial sector. during 2013-2014, the work on implementing the principles in day-to-day operations will be intensified, and what sustainable insurance means for Storebrand and our customers will be defined.
You can read more about Storebrand's sustainability work in the separate article nearer the front of the annual report.
the Group has eliminated company cars and has electric cars and bicycles that employees can borrow. the environment is a weighty factor in all our procurements. In 2012, Storebrand was nominated as the purchaser of the year by the Swan network.
the Group had 2,250 employees at the end of the year, compared with 2,221 at the beginning of the year. 51 per cent of our employees are women. the average age of our employees is 41 years old and the average length of service is 9 years.
the Group participates in a number of external talent programmes for women in norway and Sweden. SPP participates in the "battle of the numbers", where the aim is to get more women into senior positions. In 2013, Storebrand will also participate in norway. SPP also participates in "ruter dam", a management development and mentor programme aimed at getting more female managers into senior positions in major companies.
Storebrand strives to ensure that all of its employees, regardless of cultural background, flourish. the same is true for people with disabilities who are employed and provided with access to the workplace on the same terms as other employees. Storebrand's workforce reflects a good example of age diversity. age is not a decisive criterion in either recruitment processes or later on during someone's employment. In order to be able to compare salaries between male and female employees, we prepare salary statistics for specified levels and types of positions.
46 | Storebrand aSa 44 per cent of Storebrand aSa's board members are women. the proportion of women on the subsidiaries' boards is 35 per cent and in the executive management it is 22 per cent. at the end of the year, women accounted for 43 per cent of people with managerial responsibilities in the Group. the company provides a number of benefits for employees that contribute to flexible solutions, including the right to a maximum of 15 days off in lieu, flexible working hours within the Group's core hours, and laptops. employees receive full pay during leave due to their own, a child's or a parent's sickness, and also during pregnancy.
In 2012, 12 employees older than 65 years old were still in post compared with 15 in 2011. 25 people over 45 were hired.
In July 2012, a noK 400 million costs programme was announced, primarily to adapt the Group's cost base to the future Solvency II regulations. the measures entail staffing reductions of around 300 full-time equivalents in the Group before 2104. Storebrand has good routines for reducing staffing and restructuring processes, which include formal discussions between the executive management and committee of employee representatives.
SKILLS Storebrand encourages lifelong learning to ensure that employees always perform at their best. all employees have easy access to formal e-learning and classroom courses. Just as important is trying to ensure that all employees learn as much as possible every single working day. In 2012, we became more aware of how work can become an effective learning arena. this work will continue in 2013.
Further improving customer relations forms an important part of achieving our vision: "recommended by our customers". training in customer communications and sales has been intensified. Storebrand has utilised internal resources for this boost in skills. Communication measures have been implemented in relation to both our retail customers and, not least, our corporate customers. both managers and staff have been involved. the scope of this work will increase in 2013.
Storebrand continuously works to improve personal and professional development in the Group and attaches great importance to performance appraisals as part of this. all employees go through two mandatory appraisals a year involving follow-up and the documentation of performance, teamwork and compliance with corporate values.
employees take the company's e-learning course on ethics. the company's authorised financial advisers must also undergo ethics training through the finance industry's own "Courage and trust" (Mot og tillit) booklet.
Storebrand's executive management and board of directors review Storebrand's corporate governance policies annually. the policies were established in 1998. In accordance with section 3-3b of the accounting act and the norwegian Code of Practice for Corporate Governance dated 23 october 2012, Storebrand issues a statement concerning its corporate governance principles and practices, see page 50-56.
the board carried out an evaluation in 2012, in which the executive management participated. 14 board meetings and one board seminar were held in 2012 in Storebrand aSa. the work of the board is regulated by special rules of procedure for the board. the board has established two advisory committees: the Compensation Committee and audit Committee. In September 2012, it was decided to merge the remuneration Committee, which was established in 2011 in connection with the entry into force of the remuneration regulations, with the Compensation Committee to form a joint Compensation Committee. at the same time, it was decided that the Compensation Committee should perform the function of the Swedish Compensation Committee pursuant to the relevant regulations for the Swedish operations.
the following changes to the membership of the Storebrand Group’s corporate bodies took place in 2012: board of Directors Heidi Skaaret stepped down from the board in September and took up the position of Coo in Storebrand aSa.
board of Representatives Mats Gottschalk was elected a new deputy member. deputy member tor Lønnum stepped down from the board of representatives.
Control Committee anne-Grete Steinkjær (former deputy member) was elected a new member. tone M. reierselmoen (former member) was elected a new deputy member.
RISK Storebrand is exposed to several types of risk through its business areas. the development of interest rate, property and equity markets are deemed to be the most important risk factors that can affect the Group's results, in addition to life expectancy and disability trends. over time, it is important to be able to deliver returns that exceed the interest rate guarantee attached to the products. risk management is therefore a prioritised core area for the group.
REGULATORy CHANGES IN PRIvATE OCCUPATIONAL PENSIONS In 2012 and January 2013, three reports were published by the banking Law Commission with proposed legislative amendments to adapt private occupational pensions to the national Insurance reform. the most important changes, transitional rules and future processes are describe earlier in the report of the board of directors in the chapter regulatory adaptation.
Storebrand is working actively to adapt to the new solvency regulations. the costs programme that has been adopted is an important part of the adaptation process. a number of other measures have also been implemented, including risk reduction in the investment portfolios, adaptations in the products and an optimal allocation of capital in the Group. Storebrand's aim is to adapt to the new regulatory framework without raising more equity.
AMENDMENT OF THE NORWEGIAN TAx CODE It became clear in the national budget 2013 that the tax exemption method for customer portfolios in life insurance will be eliminated with effect from 1 January 2012. Capital gains or losses realised on equities will thus be taxable or deductible, respectively, for equities that are owned by customer portfolios in life insurance companies. Capital gains or losses on equities within the eea area have not been taxable or deductible earlier. Life insurance companies will still receive a tax allowance for allocations to insurance reserves. this amendment entails that profits from life insurance will be taxed at a rate of up to 28 per cent. note 28 in the financial statements section will describe these changes in greater detail.
FUTURE RESERvES FOR PROjECTED HIGHER LIFE ExPECTANCy the life insurance industry has worked on new mortality tables, in cooperation with the Financial Supervisory authority of norway. there is a general need to build up reserves to boost provisions for higher life expectancy within group pensions. based on the mortality survey conducted by the life insurance industry, the Financial Supervisory authority of norway will set a minimum level for new mortality tariffs effective from 1 January 2014. Statistics norway's mean alternative for mortality plus a 10 per cent safety margin indicates a strengthening of the premium reserves of around 7 per cent, which corresponds to around noK 10 billion.
Storebrand has set aside a total of noK 4.3 billion during the period from 2011 to 2012 for future reserves for longevity. Customers must expect that Storebrand Life Insurance will once again set aside a considerable portion of the returns that exceed the interest rate guarantee to increase reserves for longevity in 2013 as well. the remaining build up of reserves is expected to be covered mainly through financial and risk profits. the Financial Supervisory authority of norway will clarify the final assumptions for the plan for building up reserves, including the length of the reserves period and the size of the company's contribution.
FINANCIAL TARGETS In a period of low interest rates and the building up of reserves for higher life expectancy, the profit sharing within group pensions will be substantially reduced. Changes to the taxation of the Group will result in a lower result after tax. the costs programme and expanding margins will have a positive effect on the result. overall, the effects are expected to reduce the return on equity for a transitional period. Given this, the board of directors has changed its target for the return on equity after tax but before amortisation to more than 10 per cent.
Storebrand aims to adapt to the changed regulatory framework without raising more equity. the board is maintaining a distribution target for a normal situation of more than 35 per cent of the result after tax, but before amortisation costs. the dividend policy states that dividends shall be adjusted such that the Group is assured the right capital structure.
the Group is in a situation where it needs to strengthen its reserves for higher life expectancy. therefore, the good return in 2012 has, in its entirety, been used to strengthen provisions for higher life expectancy. Customers will thus not receive an extra return. Given this, the board has decided to propose to the annual General Meeting that no dividend be paid and that the net profit for 2012 be allocated to other equity.
Storebrand's corporate governance principles are still in accordance with the norwegian Code of Practice for Corporate Governance. the management and board of directors of Storebrand conduct an annual review of Storebrand’s adopted corporate governance policies and how they function in the Group. Storebrand reports in accordance with section 3-3b of the norwegian accounting act and the norwegian Code of Practice for Corporate Governance.
there are no significant deviations between the Code of Practice and how Storebrand complies with the code. deviations have been accounted for below under section 3. Storebrand established its own corporate governance policies as early as 1998 and views the norwegian Code of Practice as a natural extension of its own policies. the board of directors (the board) has decided that the company will comply with the norwegian Code of Practice and refers to compliance with the Code of Practice in the board of directors' report on page 47.
at the same aGM the board was authorised to buy back shares for a maximum value of noK 224,954,945. the total holdings
Storebrand’s corporate values are described by the group’s position, vision, core values and corporate policies.
of treasury shares must, however, never exceed 10 per cent of the Group's share capital. the buyback of treasury shares may be a tool for the distribution of surplus capital to shareholders in addition to dividends. In addition, Storebrand aSa sells shares to employees from its own holdings in connection with the share purchase scheme and long-term incentive schemes for employees in the Group. It is accordingly appropriate to authorise the board to buy shares in the market to cover the aforementioned needs or any other needs. the authorisation is valid until the next aGM.
4. EqUAL TREATMENT OF SHARE HOLDERS AND TRANSACTIONS WITH CLOSE ASSOCIATES (no deviations from the Code of practice)
Storebrand aSa has only one class of shares. Storebrand has no specific restrictions on the ownership of shares or voting rights beyond the restrictions imposed by the Financial Institutions act. the management and board of directors of Storebrand focus strongly on the equal treatment of shareholders.
5. FREELy NEGOTIAbLE SHARES (no deviations from the Code of practice)
Shares in Storebrand aSa are listed on oslo børs (oslo Stock exchange). the shares are freely negotiable, and the articles of association do thus not contain any restrictions with regard to the negotiability of the shares. all the shares carry equal rights, cf. section 4 above.
at the 2010 aGM, the articles of association were amended so that the requirement in the norwegian Public Limited Companies act or the articles of association that documents concerning matters to be considered at the general meeting must be sent to the shareholders does not apply if the documents are made available to the shareholders on the company's website. this also applies to documents that are to be included in or attached to the notice of the general meeting pursuant to the norwegian Public Limited Companies act or the articles of association. a shareholder may nevertheless request that the documents concerning the items to be discussed are sent free of charge. this provision in the articles of association deviates from the main rule in chapter 5 of the norwegian Public Limited Companies act that the annual accounts, directors' report, auditor's report, board of representatives' statement and the board's statement on the remuneration of executive personnel shall be sent to all shareholders no later than one week prior to the aGM. the board's proposal to amend the articles of association on this point was justified by a desire to achieve environmental benefits and cost savings. the articles of association were amended at the 2011 aGM to allow shareholders to vote in advance by means of electronic communication, cf. section 5-8b of the norwegian Public Limited Companies act. the right to vote in advance was exercised for the first time at the aGM in 2012. this arrangement allows the shareholders to vote in advance without being represented at the aGM and enables thus as many shareholders as possible to exert an influence on the company through exercising their voting rights. all shareholders may participate at the aGM, and it is also possible to vote by proxy. Provisions have been made so that the proxy form is linked to each individual item to be considered, and we will seek whenever possible to design the form so that it allows voting for candidates who are to be elected. the voting rules for the aGM allow separate votes for each member of the various bodies. Further information about voting in advance, use of proxies and shareholders’ rights to have matters discussed at the aGM is available in the notice of the aGM and on Storebrand’s website.
Storebrand’s articles of association stipulate that the chairman of the board of representatives shall chair the aGM. the Chairman of the board, at least one representative from the nomination 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.
Storebrand aSa’s articles of association regulate the nomination Committee, which consists of four members and an observer elected by the employees. the chairman of the nomination Committee and the other members are elected by the aGM. the articles of association stipulate that the chairman of the board of representatives shall be a permanent member of the nomination Committee, if the person concerned has not already been elected by the aGM. an employee representative will also participate as a permanent member in discussions and recommendations concerning the election of the chairman and deputy chairman of the board of representatives and the Chairman of the board, as well as in other contexts where this would be natural pursuant to an invitation from the chairman of the committee. the nomination Committee is independent of the board and management, and its composition aims to ensure broad representation of the shareholders’ interests. Storebrand does not have any written provisions concerning the rotation of nomination Committee members. the articles of association stipulate that the nomination Committee should work in accordance with the rules of procedure adopted by the aGM. the nomination Committee's rules of procedure were adopted at the 2010 aGM. In accordance with the rules of procedure, the nomination Committee shall focus, for example, on the following when preparing nominations for representatives for the companies' governing and controlling bodies: competence, experience, capacity, gender distribution, independence and the interests of the community of shareholders. More information about the members has been published on the Group’s website. the nomination Committee reviews the annual appraisal of the work of the board and is responsible for proposing candidates to the board of representatives, boards, Control
the board of representatives elects the board’s members and supervises the management of the company by the board and Ceo. Storebrand aSa is legally required to have a board of representatives. It has 18 members, 12 of whom are elected by the aGM and six by the Group’s employees. Members are elected for a two-year term, so that half the members are up for election each year. It is a statutory requirement that the members elected by the aGM shall reflect the company’s stakeholders, customer structure and function in society. the company ’s shareholders are broadly represented through the elections that are held.
at the aGM in 2012, the articles of association were amended from stating that the company's board of directors shall consist of between nine and ten members to the board of directors shall consist of between seven and ten members. Furthermore, the articles of association stipulate that between five and seven board members shall be elected by the board of representatives all shareholders may participate at the aGm, and it is also possible to vote by proxy.
9. WORK OF THE bOARD OF DIRECTORS (no deviations from the Code of practice)
Board committees the board has established a remuneration Committee and an audit Committee. both committees consist of three board members, two shareholder-elected board members and one-employee elected board member. this helps ensure thorough and independent consideration of matters that concern internal control, financial reporting and the remuneration of executive personnel. the committees are preparatory and advisory working committees and assist the board with the preparation of items for consideration. decisions are made, however, by the full board. both committees are able to hold meetings and consider matters without the involvement of the company’s management.
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 fixing of the executive personnel’s remuneration and the board’s statement on the fixing of the executive personnel’s remuneration, which is presented to the aGM each year. the Compensation Committee held five meetings in 2012. In addition to the Compensation Committee, the board has appointed a joint remuneration Committee for five norwegian group companies pursuant to section 3, third paragraph of the Compensation regulations. the remuneration Committee shall advise the boards of the affected companies in any matters that concern the individual company 's compensation scheme for executive personnel, employees with duties of importance to the company's risk exposure and employees with control functions. In addition, the committee shall evaluate whether the company's compensation scheme and its practice makes good management and control of the company's risk possible, counteracts high risk-taking and contributes to the avoidance of conflicts of interest. the committee cannot make decisions on behalf of the individual board. the remuneration Committee has held two meetings in 2012. In october 2012 the board of directors decided to merge the Compensation Committee and remuneration Committee to form a joint Compensation Committee. the mandate of the Compensation Committee has been expanded to include the matters related to compensation as required by the Compensation regulations. the remuneration Committee as it was established in 2011 has been discontinued. It was decided at the same time that the Compensation Committee should also perform the function of the Swedish Compensation Committee pursuant to the relevant regulations for the Swedish operations.
54 | Storebrand aSa and external auditing. the audit Committee held eight meetings in 2012. the external and internal auditors participate in the meetings. the majority of the Committee’s members are independent of the Group. the board of directors has found that it is appropriate to have a combined remuneration Committee for the entire Storebrand Group.
the investor relations guidelines ensure reliable, timely and identical information to investors, lenders and other stakeholders in the securities market.
the Group’s strategy development is anchored in the board by means of an annual strategy meeting and as a permanent item on the board’s agenda. the board’s guidelines for the annual planning process are summarised in the form of challenge notes to the Group's executive management team. the final product is a board approved threeyear plan for the Group with goals and an action plan, financial forecasts and budgets, as well as a comprehensive assessment of the risk picture for the period covered by the plan.
assessment of operational risks is 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, changes in the 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 responsibility for the Group's control functions for risk management and internal control lies in the business Management unit under the management of the Chief risk officer (Cro). the Cro reports to the Group's CFo. the Cro function is responsible for supporting the board and Group's management team with respect to the establishment of a risk strategy and operationalisation of the setting of limits and risk monitoring across the Group's business areas. In addition, this function is responsible for managing the value-based management system, coordinating the financial planning process, and the management's risk assessment and internal control reporting, in addition to reporting from the board and management.
Financial information and the Group’s accounting process 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 published according to the schedule adopted by the board of Storebrand aSa.
12. REMUNERATION OF ExECUTIvE PERSONNEL (no deviations from the Code of practice)
the board determines the structure of the remuneration of executive personnel at Storebrand, and a statement on the fixing of remuneration is presented to the aGM. the remuneration consists of fixed salaries, bonuses, pension schemes and other fringe benefits deemed to be natural in a financial group. the aim of the remuneration is to motivate greater efforts to ensure longterm value creation and resource utilisation in the company. In the opinion of the board the overall remuneration shall be competitive, but not leading. 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 "target bonus" shall account for 20-40 per cent of the fixed salary. the bonus awarded for a given year is subject to a fixed ceiling and cannot exceed 90 per cent of the fixed salary. More detailed information about the remuneration of executive personnel may be found in notes 24 (Group) and 6 (aSa) and in the statement on the fixing of salaries and other compensation for executive personnel, which is included in the notice of the aGM, which is available at storebrand.no. executive personnel are encouraged to hold shares in the Group, even beyond the lock-in period.
13. INFORMATION AND COMMUNICATIONS (no deviations from the Code of practice)
the board has issued guidelines for the company’s reporting of financial and other information and for contact with shareholders other than through the aGM. the Group's financial calendar is published on the Internet and in the company's annual report. Financial information is published in the quarterly and annual reports, as described under section 10 – Financial information and the Group’s accounting process. any documentation that is published will be available on the company's website. 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 may be found on page 22-23. Storebrand has its own guidelines for handling insider information, see also section 10 – Management and control, above.
the board of directors has prepared guidelines for how to act in the event of a possible takeover bid for the company. these guidelines are based on the board of directors ensuring the transparency of the process and that all the shareholders are treated equally and given an opportunity to evaluate the bid that has been made. It follows from the guidelines that the board of directors will evaluate the bid and issue a statement on the board's opinion of the bid, in addition to obtaining a valuation from an independent expert. Moreover, the board will in the event of any takeover bid seek whenever possible to maximise the shareholders ’ assets. the guidelines cover the situation before and after a bid is made.
OTHER as one of the largest investors in the norwegian stock market, Storebrand has considerable potential influence over the development of listed companies. Storebrand attaches importance to exercising its ownership in listed companies 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 across the Storebrand Group. Storebrand has issued guidelines with respect to employees holding positions of trust in external companies, which regulate, for example, the number of external board positions.
Further information on Storebrand’s corporate governance may be found at storebrand.no where we have published an overview of the members of Storebrand’s governing and controlling bodies, CVs for the members of Storebrand aSa's board of directors, the articles of association, and ownership policies.
In ten years time I think we will see that all pension savings will be through defined-contribution solutions, and good risk cover will still be part of the package. Odd Arild Grefstad
odd arild Grefstad (47) Ceo number of shares: 53 769 1 Grefstad has worked for the Storebrand Group since 1994, as the Group's CFo, for example, and as the manager of the sales and marketing unit and Managing director of Storebrand Livsforsikring aS. Grefstad has previously worked for arthur andersen & Co.
Skaaret started at the Storebrand Group in the autumn of 2012. She has previously been the Managing director of Lindorff aS and Ikano bank Se, held executives positions at dnb and worked for bank of america in the USa.
Kamark started at the Storebrand Group in the autumn of 2012. He has previously worked for the SaS Group as the Chief Commercial officer and held other executive positions in the nordic region and internationally.
6 Sarah mcphee (58) Managing director SPP number of shares: 41 723
7 Hans aasnæs (49) Managing director asset Management number of shares: 61 400 aasnæs has worked for Storebrand asset Management since 1994 and has held a number of executive positions. aasnæs has a background from orkla Finans and as a research fellow at the norwegian School of economics (nHH).
Birger magnus (57) board Chairman of Storebrand aSa since 2009. attended 14 out of 14 board meetings in 2012. number of shares: 20,000 1 Magnus's previous positions have included executive vice president at Schibsted aSa and a partner at McKinsey & Co.
John Staunsbjerg Dueholm (61) board Member of Storebrand aSa since 2009.
attended 13 out of 14 board meetings in 2012. number of shares: 0 4 dueholm's previous positions have included executive Vice President & deputy Ceo of the SaS Group, executive Vice President at Group 4 Falck aS, executive Vice President at SaS technical division, executive Vice President at ISS Scandinavia aS, Ceo of SaS data a/S and executive Vice President at top danmark.
dueholm is the board Chairman of Jetpak ab and dMP aS, as well as a member of the board of Scan Global Logistics aS, Skadeservice Gruppen aS and alliance Plus aS.
Caneman is the board Chairman of Fourth Swedish national Pension Fund, arion bank hf. and big bag ab. She is a member of the board of SaS ab, Poolia ab, Intermail aS, Schibsted Sverige ab, My Safety ab and SoS Children’s Villages.
Kirsti Valborgland Fløystøl (32) employee-elected board Member of Storebrand aSa since 2010. attended 14 out of 14 board meetings in 2012. number of shares: 2,072 7 Valborgland Fløystøl is a project manager for business development at Storebrand. Her previous positions include project manager at Storebrand Livsforsikring aS, key account manager at Storebrand Livsforsikring aS and corporate trainee at Storebrand aSa.
Knut Dyre Haug (56) employee-elected board Member of Storebrand aSa since 2006. attended 14 out of 14 board meetings in 2012. number of shares: 11,963 8 dyre Haug is the Cto of the financial undertaking Storebrand Finansiell rådgivning aS. His previous positions include Marketing director at Sparebank1 and bI Centre for Financial education.
Gjøstein is a member of the executive Committee of the Finance Sector Union of norway.
MEMbERS (ELECTED by SHAREHOLDERS) Helge Leiro baastad (0) Karen Helene Ulltveit-Moe (0) Marianne Lie (0) tore eugen Kvalheim (0) Morten Fon (0) Maalfrid brath (8,063) olaug Svarva (0) Pål Syversen (0) terje andersen (4,000) trond berger (837)
MEMbERS (ELECTED by EMPLOyEES) annika Fallenius (0) nina Hjellup (3,119) rune Pedersen (7,663) tor Haugom (829) trond thire (2,499) Unn Kristin Johnsen (434)
bOARD MEMbERS Halvor Stenstadvold (8,645) birgitte nielsen (0) John S. dueholm (0) Jon arnt Jacobsen (6,500) Monica Caneman (0)
bOARD MEMbERS (ELECTED by EMPLOyEES)1 ann-Mari Gjøstein (258) Kirsti Valborgland Fløystøl (2,072) Knut dyre Haug (11,963)
MEMbERS anne Grete Steinkjer (1,800) Harald Moen (595) ole Klette (0)
Cash flow analysis 144 note 1 Accounting policies 145 note 2 Income from investments in subsidiaries 146 note 3 Net income for various classes of financial instruments 147 note 4 Personnel costs 147 note 5 Pensions costs and pension liabilities 147 note 6 Remuneration to the CEO and elected officers of the company note 7 Tax 150 note 8 Parent company’s shares in subsidiaries and associated companies note 9 Equities and units 152 note 10 Bonds and other fixed-income securities 152 note 11 Financial derivatives 152 note 12 Financial risks 153 note 13 Tangible fixed assets 153 note 14 Equity 154 note 15 Bond and bank loans 154 note 16 Hedge accounting 154 note 17 Shareholders 155 note 18 Information about close associates 155 note 19 Number of employees/person-years 156
Business and risk notes note 1 Corporate information and accounting policies 74 note 2 Important accounting estimates and discretionary judgements 82 note 3 Risk management and internal control 84 note 4 Profit sharing and result allocated to owners - life insurance 86 note 5 Solvency II 89 note 6 Insurance risk 89 note 7 Financial market risks 93 note 8 Liquidity risk 94 note 9 Credit risk 96 note 10 Operational risk 99 note 11 Valuation of financial instruments at fair value 99 note 12 Segment reporting 102
Profit and loss account notes note 13 Premium income 105 note 14 Net interest income - banking activities 105 note 15 Net income analysed by class of financial instrument 106 note 16 Net income from real estate 106 note 17 Other income (by company and customers) 107 note 18 Insurance claims for own account 107 note 19 Change in buffer capital 108 note 20 Changes in insurance liabilities – life insurance 109 note 21 Losses from lending and reversals of previous losses 109 note 22 Operating costs and number of employees 109 note 23 Pensions costs and pension liabilities 110 note 24 Remuneration to senior employees and elected officers of the company note 25 Remuneration paid to auditors 116 note 26 Other costs 117 note 27 Interest expenses 117 note 28 Tax 117
Statement of financial position notes note 29 Intangible assets 119 note 30 Tangible fixed assets 120 note 31 Tangible fixed assets - operational leasing 121 note 32 Investments and receivables in associated companies 122 note 33 Joint Ventures 123 note 34 Classification of financial assets and liabilities 124 note 35 Fair value of financial assets and liabilities at amortised cost 125 note 36 Bonds at amortised cost 126 note 37 Lendings to customers 127 note 38 Reinsurer's share of technical reserves 127 note 39 Real estate 127 note 40 Biological assets 130
Total comprehensive income due to: Majority's share of total comprehensive income 1,207 841
Financial assets at amortised cost: - Bonds held to maturity 9,34,35,36 222 169 - Lending to financial institutions 9,34,35 255 269
Financial assets at fair value: - Equities and other units 7,11,34,42 72,166 84,936 - Bonds and other fixed-income securities 7,9,11,34,43 164,208 128,034
Equity at 31 December 2012 1) 449,909,891 shares with a nominal value of noK 5. 2) includes undistributable funds in the risk equalisation fund amounting to noK 640 million and security reserves amounting noK 268 million. the risk equalisation reserve can only be used to increase allocations to the premium reserve with regard to risk linked to persons. the risk equalisation reserve and contingency reserves are not considered liabilities for accounting purposes in accordance with iFrS and are included in equity in their entirety. allocations to the risk equalisation reserve and contingency reserves are tax deductible when the allocations are made, and these deductions are treated as permanent differences between the financial and tax accounts in accordance with iaS 12 so that provisions are not made for deferred tax related to permanent differences.
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.
the Group's goals are to achieve a core (tier 1) capital ratio in the bank of more than 10 per cent and a solvency margin in life and pensions of more than 150 per cent over time. In general, the equity of the Group can be managed without material restrictions if the capital requirements are met and the respective legal entities have adequate solidity. Capital can be transferred from foreign legal entities with the consent of local supervisory authorities.
Net cash flow from operations before financial assets and banking customers -706 3,006
Net receits/payments - purchase/capitalization of associated companies and joint ventures -130 -217
Net receipts/payments - lending to and claims from other financial institutions -3,521
Net receipts/payments - deposits from Norges Bank and other financial institutions -2,044
Cash and cash equivalents at start of the period for new companies -25 -4
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 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 its own line in operating activities to neutralise the cash flows associated with the customer portfolio in life insurance.
NOTE 1 | Company information and accounting policies 1. COMPANy INFORMATION Storebrand aSa is a norwegian public limited company that is listed on the oslo Stock exchange. the consolidated financial statements for 2012 were approved by the board of directors on 12 February 2013.
Storebrand Group offers a comprehensive range of insurance and asset management services, as well as securities, banking and investment services, to private individuals, companies, municipalities, and the public sector. the Storebrand Group comprises the following business segments: life insurance, asset management, banking, P&C insurance and health insurance. the Group's head office is located at Professor Kohts vei 9, in Lysaker.
Storebrand Livsforsikring aS, Storebrand Kapitalforvaltning aS, Storebrand Fondene aS, Storebrand bank aSa and Storebrand Forsikring aS are significant subsidiaries owned directly by Storebrand aSa. Storebrand Livsforsikring aS also owns the Swedish holding company Storebrand Holding ab, which in turn owns SPP Livförsäkring ab and SPP Fondförsäkring ab. on acquiring the Swedish operations in 2007, the authorities instructed Storebrand to make an application to maintain a group structure by the end of 2009 Storebrand has submitted an application to maintain the current group structure, and it is of the opinion that it is natural to see possible changes in the group structure in light of the upcoming solvency framework (Solvency II).
2. bASIS FOR PREPARATION OF THE FINANCIAL STATEMENTS the accounting policies applied in the Group accounts are described below. the policies are applied consistently to similar transactions and to other events involving similar circumstances.
3. CHANGES IN ACCOUNTING POLICIES during the course of 2012 certain amendments were made to IaS 1 – Presentation of Financial Statements. the amendment to IaS 1 entails that the entities must group items under other Comprehensive Income (Statement of total Comprehensive Income) based on whether they are potentially reclassifiable to profit or loss subsequently. this amendment has not had any significant effect on the consolidated financial statements.
Major amendments have been adopted to IaS 19 – employee benefits. the corridor approach will no longer be allowed as an alternative from 1 January 2013, and the actuarial gains and losses must be recognised in oCI as they arise. the amendments will entail that the portion that is recognised in the ordinary profit and loss will be limited to net interest income (cost) and the pension accrual (service cost) for the period. the estimated return on the pension assets shall be calculated based on the discount rate that is used for the pension liabilities. the corridor approach is not used in Storebrand's consolidated financial statements, and all of the estimated pension liabilities for the company's own employees are already recognised on the balance sheet. the elimination of the corridor approach will thus not entail any change in Storebrand's consolidated financial statements.
• Amendments to IFRS 12: Defines minimum requirements for the disclosure of interests in other entities • Amendments to IFRS 13: Combines the regulation of fair value measurement in a single standard • IAS 32: Sets out the principles for presenting financial instruments as liabilities or equity and for offsetting financial assets and liabilities • IFRS 7: Amendment of the disclosure requirements with regard to the disclosure of an entity's netting rights for financial instruments for which a netting agreement has been entered into • IFRS 9: Replaces the provisions for the classification and measurement of financial instruments in IAS 39
IaSb has been working for several years on a new accounting standard for insurance contracts, which is often referred to as IFrS 4, Phase II. a new exposure draft (ed) is expected in the 1st half of 2013. a potential standard may be ready in 2014. It is uncertain when this will be implemented, but 2018 has been mentioned as an alternative (prior periods must, however, be restated). It is assumed that the standard will require that the value of insurance contracts consist of the following components: • Probability weighted estimate of future payments related to the contract.
• Cash flows discounted by a rate equivalent to the time value of money. • A supplement is added for the risk margin • When entering into a contract the expected profit is also set aside as a liability, residual margin, and this is recognised as income over the duration of the contract the introduction of a new standard for insurance contracts may have a significant impact on Storebrand's financial statements.
4. SUMMARy OF SIGNIFICANT ACCOUNTING POLICIES FOR MATERIAL STATEMENT OF FINANCIAL POSITION ITEMS the asset side of the Group's statement of financial position comprises, for the most part, financial instruments and investment properties. Investment properties are recognised at fair value. a large majority of the financial instruments are recognised at fair value, whilst other financial instruments that are included in the categories Loans and receivables and Held to maturity are recognised at amortised cost. Capitalised intangible assets, which mainly comprise excess value relating to insurance contracts upon a business combination, are also recognised on the balance sheet. this excess value is recognised at cost less an annual amortisation and write-down.
Identifiable tangible and intangible assets acquired and liabilities assumed are valued at fair value on the date of acquisition. If the acquisition costs exceed the value of the identified assets and liabilities, the difference is recognised in the financial statements as goodwill. With acquisitions of less than 100 per cent of a business, 100 per cent of the additional value and value shortfall are recognised in the statement of financial position with the exception of goodwill of which only Storebrand's share is included.
the acquisition method is applied when accounting for acquired units. Investments in associated companies (normally investments of between 20 per cent and 50 per cent of the company's equity) in which the Group exercises significant influence are consolidated in accordance with the equity method. Interests in joint ventures are consolidated in accordance with the proportionate consolidation method, which includes the share of revenues, expenses, assets and liabilities in the appropriate lines in the financial statements.
When purchasing investments, including investment properties, a decision is made as to whether the purchase is subject to IFrS 3 regulations for business combinations. When these purchases are not regarded as an acquisition of a business, the acquisition method pursuant to IFrS 3 business combinations is not applied and therefore a determination is not made of any additional value and a provision is not allocated for deferred tax as would have occurred in a business combination.
CURRENCIES AND TRANSLATION OF FOREIGN COMPANIES' ACCOUNTS the Group's presentation currency is norwegian kroner. Foreign companies included in the Group which use a different functional currency are translated into norwegian kroner. the income statement figures are translated using an average exchange rate for the year and the statement of financial position is translated using the exchange rate prevailing at the end of the financial year. as differences will arise between the exchange rates applied when recording items in the statement of financial position and the income statement, any translation differences are included in the total comprehensive income. any translation differences are included in the total comprehensive income.
ELIMINATION OF INTERNAL TRANSACTIONS Internal receivables and payables, internal gains and losses, interest, dividends and similar between companies in the Group are eliminated in the consolidated financial statements. transactions between customer portfolios and the life insurance company's or other Group unit portfolios, are not eliminated in the consolidated accounts. Pursuant to the life insurance regulations, transactions with customer portfolios are based on the arm's length principle.
NET INTEREST INCOME - bANKING Interest income is recognised in profit or loss using the effective interest method.
INCOME FROM PROPERTIES AND FINANCIAL ASSETS Income from properties and financial assets is described in Sections 9 and 10.
Goodwill is not amortised, instead it is tested for impairment. Goodwill is reviewed for impairment if there are indications that its value has become impaired. the review is conducted at least annually and determines the recoverable amount of goodwill.
Goodwill arising from the acquisition of interests in associated companies is included in investments in associated companies, and tested for impairment as part of the value of the write-down recognised in the investment.
8. INTANGIbLE ASSETS Intangible assets with limited useful economic lives are valued at acquisition cost less accumulated amortisation and any write downs. the useful life and amortisation method are reassessed each year. With initial recognition of intangible assets in the statement of financial position, it must be demonstrated that probable future economic benefits attributable to the asset will flow to the Group. the cost of the asset must also be measured reliably. the value of an intangible asset is tested for impairment when there are indications that its value has been impaired. In other respects intangible assets are subject to write-downs and reversals of write-downs in the same manner as described for tangible fixed assets. When insurance contracts are purchased as part of a business combination, the insurance liabilities are recognised on the basis of the underlying company’s accounting policies. excess value linked to these liabilities, often referred to as the value of business in force (VIF), is recognised as an asset. a liability adequacy test must be conducted of the insurance liability, including VIF, pursuant to IFrS 4, every time the financial statements are presented. the test conducted looks at the calculated present value of cash flows to the contract issuer, often called embedded value.
10-1. GENERAL POLICIES AND DEFINITIONS RECOGNITION AND DERECOGNITION Financial assets and liabilities are included in the statement of financial position from such time Storebrand becomes party to the instrument ’s contractual terms and conditions. normal purchases and sales of financial instruments are recorded on the transaction date. When a financial asset or a financial liability is initially recognised in the financial statements, it is valued at fair value. Initial recognition includes transaction costs directly related to the acquisition or issue of the financial asset or the financial liability if it is not a financial asset or a financial liability at fair value through profit or loss.
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.
DEFINITION OF FAIR vALUE refer to the definition of fair value in section 9. the fair value of financial assets listed on a stock exchange or on another regulated market in which regular trading takes place is determined as the bid price on the last trading day up to and including the reporting date.
If a market for a financial instrument is not active, fair value is determined by using valuation techniques. Such valuation techniques make use of recent arm's length market transactions between knowledgeable and independent parties where available, reference to the current fair value of another instrument that is substantially the same, discounted cash flow analysis, and options pricing models. If a valuation technique is in common use by participants in the market and this method has proved to provide reliable estimates of prices actually achieved in market transactions, this method is used.
If there is objective evidence that impairment has occurred, the amount of the loss is measured as the difference between the asset’s carrying amount and the present value of the estimated future cash flows (excluding future credit losses that have not occurred) discounted at the financial asset's original effective interest rate (i.e. the effective interest rate calculated at initial recognition). the amount of the loss is recognised in profit or loss.
10-2. CLASSIFICATION AND MEASUREMENT OF FINANCIAL ASSETS AND LIAbILITIES Financial assets are classified into one of the following categories: • Financial assets held for trading • Financial assets at fair value through profit or loss in accordance with the fair value option (FVO) • Financial assets, investments held to maturity • Financial assets, loans and receivables • Financial assets, available for sale
HELD FOR TRADING a financial asset is held for trading if: • it has been acquired principally for the purpose of selling or repurchasing it in the near term, or on initial recognition is part of portfolio of identified financial instruments that are managed together and has evidence of a recent actual pattern of short-term profit-taking, or • it is a derivative that is not designated and effective as a hedging instrument
With the exception of derivatives, only a limited proportion of Storebrand’s financial assets fall into this category. Financial assets held for trading are measured at fair value at the reporting date, with all changes in their fair value recognised in profit or loss.
AT FAIR vALUE THROUGH PROFIT OR LOSS IN ACCORDANCE WITH THE FAIR vALUE OPTION (FvO) a significant proportion of Storebrand’s financial instruments are classified at fair value through profit or loss because: • such classification reduces the mismatch in the measurement or recognition that would otherwise arise as a result of the different rules for measuring assets and liabilities, or that • the financial assets form part of a portfolio that is managed and reported on a fair value basis. the accounting treatment is equivalent to that for held for trading assets
INvESTMENTS HELD TO MATURITy Held to maturity investments are non-derivative financial assets with fixed or determinable payments and fixed maturity and that a company has the intention and ability to hold to maturity, with the exclusion of: • assets that are designated in initial recognition as assets at fair value through profit or loss, and • assets that are defined as loans and receivables assets held to maturity are recognised at amortised costs using the effective interest method.
Loans and receivables are carried at amortised cost using the effective interest method.
the majority of the derivatives used routinely for asset management fall into this category.
10-4. HEDGE ACCOUNTING 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 through profit or loss. Changes in the value of the hedged item that relate to the hedged risk are applied to the book value of the item and are recognised through profit or loss.
Storebrand uses the regulations governing hedging of net investments in respect of the investment in the subsidiary SPP.
11. 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 this 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 included. this also applies to insurance contracts acquired via business combinations. In such cases, positive excess values, cf. IFrS 4 no. 31b), are capitalised as intangible assets.
Pursuant to IFrS 4, the technical insurance reserves must be adequate. When assessing the adequacy associated with recognised acquired insurance contracts, including pertinent capitalised intangible assets, reference must also be made to IaS 37 Provisions, Contingent Liabilities and Contingent assets, and so-called embedded value calculations.
11-1. GGENERAL – LIFE INSURANCE CLAIMS FOR OWN ACCOUNT Claims for own account comprise claims settlements paid out, less reinsurance received, premium reserves transferred to other companies, reinsurance ceded and changes in claims reserves. Claims not settled or paid out are provided for by allocation to the claims reserve as part of allocations to technical insurance.
CHANGES IN INSURANCE LIAbILITIES these comprise premium savings that are taken to income under premium income and that are paid under claims. this item also includes guaranteed returns on the premium reserve and the premium fund, as well as returns to customers beyond the guarantees.
a substantial proportion of the norwegian insurance contracts have a 1-year interest guarantee, meaning that the guaranteed return must be achieved every year. on the other hand, a substantial proportion of the Swedish insurance contracts have a guaranteed return up to the time of the pension payments.
CLAIMS RESERvE this comprises amounts reserved for claims either occurred but not yet reported or reported but 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.
11-2. LIFE INSURANCE – NORWAy ADDITIONAL STATUTORy RESERvES the company is allowed to make additional statutory allocations to the insurance reserves in order to ensure the solvency of its life insurance business. the maximum additional statutory provision is set as the difference between the premium reserve calculated on the basis of a guaranteed return on policies outstanding, and the premium reserve calculated based on the actual guaranteed return in the policies. the Financial Supervisory authority of norway has specified a limit for the additional statutory reserves that applies to each policy. this is defined as the premium reserve for the policy multiplied by twice the guaranteed rate for the policy.
MARKET vALUE ADjUSTMENT RESERvE the current year's net unrealised gains/losses on financial assets at fair value in the group portfolio in Storebrand Livsforsikring aS are allocated to/reversed from the market value adjustment reserve in the statement of financial position assuming the portfolio has a net unrealised excess value. the portion of the current year's net unrealised gains/losses on financial current assets denominated in foreign
RISK EqUALISATION RESERvE Up to 50 per cent of the risk result for group pensions and paid/up policies can be allocated in the risk equalisation fund to cover any future negative risk result. the risk equalisation fund is included as part of equity.
11-3. LIFE INSURANCE – SPP LIFE INSURANCE RESERvES SPP has used a cash flow model for the calculation of life reserves since 2009. the model discounts cash flows by observed swap interest rates for the terms in question up to 10 years, which is the longest term for which the liquidity of the swap interest rates is considered adequate. For cash flows with a term of over 20 years, a normal interest rate is determined as the sum total of assumptions for inflation, real interest rates and maturity premium – based on assessments made by actors such as riksbanken and the national Institute of economic research. For cash flows between 10 and 20 years, discount rates that are the weighted average of the observed 10-year rate and the specified 20-year rate are used.
CONDITIONAL bONUS the conditional bonus arises when the value of customer assets is higher than the present value of the liabilities, and thus covers the portion of the insurance capital that is not guaranteed. In the case of contracts where customer assets are lower than liabilities, the owners’ result is charged via deferred capital contribution allocations. the conditional bonus and deferred capital contribution are recognised on the same line in the statement of financial position.
changes are conditional upon accrued future pension entitlements. In which case the benefit is apportioned on a straight line basis until the entitlement has been fully earned. the employer's national insurance contributions are included as part of the pension liability and are included in the actuarial gains/losses shown in the total comprehensive income.
13. TANGIbLE FIxED ASSETS the Group’s tangible fixed assets comprise equipment, fixtures and fittings, It systems and properties used by the Group for its own activities.
Properties used for the Group’s own activities are recorded at appreciated value less accumulated depreciation and write-downs. the fair value of these properties is tested annually in the same way as described for investment properties. the increase in value for buildings used by the Group for its own activities is recognised through other comprehensive income. any write-down of the value of such a property is first applied to the revaluation reserve for increases in the value of the property in question. If the write-down exceeds the revaluation reserve for the property in question, the excess is expensed over the profit and loss account.
the value of a tangible fixed asset is tested when there are indications that its value has been impaired. any impairment losses are charged to the income statement as the difference between the carrying value and the recoverable amount. the recoverable amount is the greater of the fair value less related costs of sale and the value in use. on each reporting date a determination is made as to whether to reverse previous impairment losses on non-financial assets.
18. bIOLOGICAL ASSETS Pursuant to IaS 41, investments in forestry are considered biological assets. biological assets are assessed at fair value, which is defined based on alternative fair value estimates, or the present value of expected net cash flows. Changes in the value of biological assets are recognised in the profit and loss account. ownership rights to biological assets are recognised at the point in time when the purchase agreement is signed. annual income and expenses are calculated for forestry and outlying fields.
82 | Storebrand aSa 19. SHARE-bASED REMUNERATION Storebrand Group has share-based remuneration for key personnel. the fair value of the share options is determined on the date of the allocation. Valuation is made on the basis of recognised valuation models adjusted to the characteristics of the actual options. the value determined on the date of the allocation is periodised in the income statement over the option's vesting period with a corresponding increase in equity. the amount is recognised as an expense and is adjusted to reflect the actual number of share options earned. the vesting period is the period of time from when the scheme is established until the options are fully vested.
In preparing the Group's financial statements the management are required to make judgements, estimates and assumptions of uncertain amounts. the estimates and underlying assumptions are reviewed on an ongoing basis and are based on historical experience and expectations of future events and represent the management's best judgement at the time the financial statements were prepared.
Upon the acquisition of the Swedish insurance group SPP, intangible assets related to the value of the SPP Group's insurance contracts were capitalised, while the SPP Group's recognised insurance reserves were maintained in Storebrand's consolidated financial statements. these intangible assets are often referred to as the "Value of business in force" (VIF), and these intangible assets, along with the associated capitalised selling costs and insurance liabilities, are tested with regard to their adequacy. the test is satisfied if the recognised liabilities in the financial statements are greater than or equal to the net liabilities valued at an estimated market value, included the expected owner's profit. In this test, the embedded value calculations and IaS 37 are taken into account. Storebrand satisfies the adequacy tests for 2012, and they have thus no impact on the financial statements for 2012. there will be uncertainty related to these tests. For further information see the discussion about the uncertainty related to insurance reserves below.
the life insurance industry is working on new mortality tables in cooperation with the Financial Supervisory authority of norway in norway. there is a general need for reserves to boost provisions for longer life expectancy within group pensions. based on the mortality survey conducted by the life insurance industry, the Financial Supervisory authority of norway will set a minimum level for new mortality tariffs effective from 1 January 2014. Statistic norway's mean mortality alternative with a 10 per cent safety margin indicates an increase in the premium reserves of around 7 per cent, which corresponds to approximately noK 10 billion. Storebrand has set aside a total of noK 4.3 billion during the period from 2011 to 2012 for future reserves for long life expectancy. Customers must also expect that Storebrand Livsforsikring will set aside a considerable amount of the return beyond the interest rate guarantee in 2013 to cover the projected longer life expectancy. It is expected that the remaining need for reserves will be mainly covered through financial and risk profits. the Financial Supervisory authority of norway will clarify the final prerequisites for the reserve build-up plan, including the length of the reserve period and size of the owner's contribution.
there are also insurance contracts without an interest guarantee in the life insurance activities in which customers bear the return guarantee. Changes in estimates and valuations may entail a change in the return on the associated customer portfolios. the recognition of such value changes does not directly affect the owner's result.
the profit sharing rules in life insurance are also discussed in more detail in note 4.
In general, the following will often be key factors in the generation of the result for customers and/or the owners: • Performance of interest rate and equity markets, as well as commercial property trends. • Composition of assets and risk management, and changes in the assets’ composition over the year. • Buffer capital level for various products. • Buffer capital related to the individual insurance contract.
• Life expectancy, mortality and illness trends – assumptions. • Development of costs – assumption.
INvESTMENT PROPERTIES Investment properties are valued at fair value the commercial real estate market in norway is not particularly liquid, nor is it transparent. Uncertainty will be linked to the valuations, and they require exercising judgment, especially in periods with turbulent finance markets.
Key elements included in valuations that require exercising judgment are: • Market rent and vacancy trends. • Quality and duration of rental income.
FINANCIAL INSTRUMENTS AT FAIR vALUE 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, and for these investments various valuation techniques are applied in order to fix fair value. these include private equity investments, investments in foreign properties, and other financial instruments where theoretical models are used in pricing. any changes to the assumptions could affect recognised amounts. the majority of such financial instruments are included in the customer portfolio.
Please also refer to note 11 in which the valuation of financial instruments is described in more detail.
a certain degree of judgement must be used in assessing whether impairment has occurred and the amount of the impairment loss. Uncertainty grows when there is turmoil in financial markets. the assessments include credit, market and liquidity risk. Changes in assumptions for these factors will affect an assessment of whether impairment is indicated. there will thus be uncertainty concerning the recognised amounts of individual and group write-downs. this will apply to provisions relating to loans in the private and the corporate markets and to bonds that are recognised at amortised cost.
TECHNICAL PROvISIONS technical insurance reserves in life insurance are based on assumptions concerning life expectancy, mortality, disability, interest rate levels, and future costs, etc. Changes in such assumptions will affect the size of the liabilities, which in turn can affect the owner's result. In the norwegian life insurance business, the majority of the calculated payments are discounted by the appropriate guaranteed interest rate. Storebrand continuously builds up reserves to new tariffs in connection with increased life expectancy, and the building up of reserves in a time-limited period can be charged to the running return. any deficient future return in connection with this may reduce the owner's future profit.
an intangible asset arising from development (or from the development phase of an internal project), should be recognised if all of the following points are documented: • The technical prerequisites for completing the intangible asset intended to be available for use or sale.
• How the intangible asset will probably generate future economic benefits As examples, the company can demonstrate that a market exists for the products of the intangible asset or for the intangible asset itself, or if it will be applied internally, the benefits from the intangible asset. • The availability of sufficient technical, financial and other resources to complete its development, and to use or sell the intangible asset. • The company's ability to reliably measure the expenses attributable to the intangible asset while it is being developed.
PENSIONS FOR OWN EMPLOyEES the present value of pension obligations depends upon the financial and demographic assumptions used in the calculation. the assumptions must be realistic, mutually consistent and up to date as they should be based on a cohesive set of estimates about future financial performance. the pension liability calculations are undertaken by actuaries. any changes to these estimates including forecast salary growth and the discount rate can have a substantial effect on the recognised pension liabilities relating to own employees. estimates of future real interest rates, real salary growth, future adjustments to the national insurance base amount and future inflation, are subject to significant uncertainty.
DEFERRED TAx the consolidated accounts contain significant temporary differences between the values of assets for accounting purposes and for tax purposes. the current norwegian tax regulations have been applied when calculating deferred tax in the norwegian business. In the case of certain investments and positions, the tax calculation will be based on estimates that may deviate from the final assessed figures. the will apply, for example, in particular to investments in foreign companies assessed as partnerships and investments in property.
Continuous monitoring and active risk management are therefore core areas of the Group’s activities and organisation. the basis for risk management is laid down in the board's annual review of the strategy and planning process, which sets the risk appetite, risk targets and overriding risk limits for the operations. In Storebrand Group, responsibility for risk management and internal control is an integral part of management responsibility.
Premiums paid are invested in various securities until the assets, including the yield, are repaid to the customers as pensions or compensation. the Storebrand Group assumes, therefore, a further financial market risk through its goal to achieve an excess return in the best interests of the customers.
ORGANISATION The Board of Directors shall ensure that the company has appropriate systems for risk management and internal control.
COMPLIANCE the compliance function is an advisory function that supports the board and management in managing and following up the risk of failing to comply with the external and internal rules and regulations that apply to the business.
the compliance function in the individual company prepares written reports for the board of directors and executive management in the company informing on the company's compliance with internal and external regulations. Compliance reporting is seen as being on a par with the Group companies’ internal control reporting, operational risk reporting and event reporting.
SPP 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 assumed in order to achieve returns in excess of the guarantee, primarily by means of equities, corporate bonds and alternative investments. the proportion of equities in the portfolios is dynamically adjusted based on their risk bearing capacity, in order to dampen the effect of falling markets and at the same time participate in rising markets. due to the somewhat more complex financial risk picture in SPP than in the norwegian life insurance business, the risk to equity repre-
In traditional insurance with an interest rate guarantee, SPP bears the risk of achieving a return equal to the guaranteed interest on the policyholders’ assets and that the level of the contracts’ assets is greater than the present value of the insurance liabilities. Profit sharing becomes relevant in SPP if the total return exceeds the guaranteed yield. In the case of some products a certain degree of consolidation, i.e. the assets are greater than the present value of the liabilities by a certain percentage, is required in order for the owner to have earnings. If the assets in an insurance contract in the company are smaller than the market value of the liability, an equity contribution is allocated that reflects this shortfall. this is termed a deferred capital contribution (dCC) and changes in its size are recognised in the profit and loss account as they occur. the contracts’ buffer capital must be intact in order for profit sharing to represent a net income for the owner. When the contracts’ assets exceed the present value of the liabilities, a buffer, which is termed the conditional bonus, is established. Changes in this customer buffer are not, however, recognised in the profit and loss account. It is the policyholder who bears the financial risk in Unit Linked insurance contracts.
STOREbRAND bANK Storebrand bank's board of directors has adopted guidelines for risk management and internal control that ensure that the bank has established effective and robust functions for risk management, internal control, compliance and internal auditing. the guidelines make sure that the bank's strategies are implemented correctly and that the risk-taking limits are complied with.
Storebrand bank has identified the following areas of risk: credit risk, liquidity risk, market risk, operational risk, business risk and compliance risk. the company's risk strategy forms the foundation for managing the risks through policies aimed at achieving the bank's desired risk profile. the risk strategy is determined by the board and is updated at least annually. the risk Management Unit prepares monthly risk reports, where the types of risk are followed up in line with the respective policies. the risk reports are considered by the balance sheet management committee and the board of the bank.
NOTE 4 | Profit sharing and result allocated to owners – life insurance the profit and loss account includes result elements relating to both customers and owners. Profit generation in a life insurance company comprises net return on the company's equity and risk products where the profit passes entirely to the owner. In the case of Storebrand, the risk products are included in the segment Insurance and are not part of life insurance segment. there are also products with profit sharing where the profit is allocated between customers and the owner as described in greater detail in this note. In addition, there are collective pension products with interest guarantees where the customer pays a fee for the interest guarantee. Unit linked products are fee based and without any interest guarantee.
If one were to regroup profit and loss, one could divide the profit between customers and owner in 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 numbers in the form of unit prices. among other things, operating expenses consist of personnel costs, return fees, marketing expenses, commissions and It costs.
• Financial result the financial result consists of the net financial income from financial assets for the group portfolio less the guaranteed return. In addition, there is the net return on the company capital, which consists of equity and subordinated loans. any returns-based fees for asset management are included in the financial result.
GENERATION OF PROFIT TO THE OWNER the following is a description of the results for the segments Storebrand Livsforsikring and SPP.
RISK RESULT In the case of group defined benefit pensions and newly established guaranteed individual products, any positive risk result passes to the customers, while any deficit in the risk result must, in principle, be covered by the insurance company. However, up to half of any risk profit on a particular line of insurance may be retained in a risk equalisation fund. a deficit due to risk elements can be covered by the risk equalisation fund. the risk equalisation fund can, as a maximum, amount to 150 per cent of the total annual risk premium. the risk equalisation fund is classified as equity.
FINANCIAL RESULT the net return on share capital passes to the company. Share capital consists of equity and subordinated loans.
any negative returns on customer portfolios and returns lower than the interest guarantee that cannot be covered by additional statutory reserves must be covered by the company’s equity and will be included in the financial result line.
Customers can choose long-term contracts with guarantee periods of up to 5 years. Prices for multi-year return guarantees will be
CUSTOMERS’ PROFIT 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).
FINANCIAL RESULT In the case of insurance products with guaranteed interest, the financial result is primarily affected by three components: • profit sharing • indexing fee • changes in deferred capital contribution to cover guaranteed capital
If the total return on assets in one calendar year for a premium determined insurance (dC portfolio) exceeds the guaranteed interest, profit sharing will be triggered. When profit sharing is triggered, 90 per cent of the total return on assets passes to the policyholder and 10 per cent on the company. the company’s share of the total return on assets is included in the financial result.
In the case of Unit Linked insurance, the technical insurance reserves are changed by the market return, regardless of whether it is positive or negative. this means the company has no financial result from Unit Linked insurance business.
Calculating solvency capital will be based on the fair value of both assets and liabilities. this implies that the value of insurance liabilities will vary depending on the interest rate level. Under current investment adjustment and product regulations, interest rate sensitivity is considerably higher for insurance liabilities than it is for assets. this implies that a fall in interest rates weakens the solvency position. this effect gets stronger as interest rates fall. Paid-up policies and traditional individual insurance products with guarantees present the greatest risk, because the premium has been fully paid.
DESCRIPTION OF PRODUCTS traditional life, pension and Unit Linked insurance contracts are offered as both group and individual contracts. For the traditional products a calculation interest rate is used to establish the premiums and reserves. the maximum calculation interest rate is set by the Financial Supervisory authority of norway and is 2.5 per cent as of 1 January 2011.
GROUP CONTRACTS 1. Group defined benefit pensions are guaranteed pension payments from a specified age for as long as the insured person lives. alternatively, it can be agreed that the pension will end at a specified age. the product is offered in both the private and public sectors. the cover includes retirement, disability and survivor pensions. 2. Group defined contribution pensions are pensions where the premium is stated as a percentage of pay, while the payments are unknown. the customer bears all the financial risk during the saving period. 3. Group one-year risk covers are guaranteed payments upon death or disability, and a waiver of premiums in the event of disability.
4. Paid-up policies (defined benefit) and pension capital policies (defined contribution) are contracts with earned rights that are issued upon withdrawal from or the termination of pension contracts.
INDIvIDUAL CONTRACTS 1. Individual allocated annuity or pension insurance provides guaranteed payments for as long as the insured person lives. alternatively, it can be agreed that the pension will end at a specified age. 2. Individual endowment insurance provides single payments in the event of attaining a specified age, death or disability. 3. Individual Unit Linked insurance is endowment insurance or allocated annuity in which the customer bears the financial risk.
SPECIAL CONDITIONS Follow-up of the results in recent years has shown a need for further strengthening of the premium reserves as they relate to longevity for norwegian group pensions, including paid-up policies. the need for reserves applies in general to products that involve a guaranteed benefit, but the impact varies depending on the product composition and characteristics, as well as amendments to regulations, as a result of the pension reform, for example. the industry has submitted a mortality tariff proposal to the Financial Supervisory authority of norway through Finance norway. the mortality tariff is under consideration at the Financial Supervisory authority of norway, and it is expected that the authority will set the minimum level for a new mortality tariff (K2013) for group pensions early in 2013 and that it will take effect from 1 January 2014.
the tariff from Finance norway (Fno) is based on three elements that are subject to discussion. these are the initial mortality, safety margin and future mortality reduction. the initial mortality is the best estimate of mortality in 2013. the safety margin will take into account the difference in mortality based on income, random variation in mortality and the company's margins. the future mortality reduction entails that the projected life expectancy is also dependent on the year of birth. today's 50-year-olds are not expected to live as long as 50-year-olds in 20 years' time. this factor is referred to as dynamic mortality. K2013 will thus be a dynamic tariff when it is introduced.
For individual insurance, the premiums for life and long life cover are based on tariffs produced by insurance companies on the basis of their shared experience. this applies to both endowment and pension insurance. disability premiums are based on the company’s own experience.
In the case of group pension insurance, the premiums for traditional retirement and survivor cover follow the industry tariff K2005. 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.
Ideally, individual contracts have individual risk premiums based on age and gender.
the companies' tariffs do not involve any assumptions about inflation or voluntary termination/transfers.
2) CONTROL AND MONITORING OF INSURANCE RISK Insurance risk is monitored separately 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 the risk results 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 experience, assumes has occurred.
3) DISAbILITy PENSION the future is not equally predictable as far as disability insurance in SPP is concerned. Changes in new incidences of disability are taking place much faster than changes in mortality/life expectancy. one of the reasons for this is the problems involved with determining the causes of and the degree of disability. the rapidly increasing level of disability in the first few years of the 21st century resulted in significant premium increases within the sector. Many insurance companies were doubtful about offering voluntary disability cover in the future. However, since 2005 the number of disability incidences has fallen in a more balanced trend and resulted in SPP reducing the risk premiums for disability cover. nonetheless, disability has been significantly lower than assumed in the tariff.
In norway new regulations for disability benefits will enter into force in 2015. It has been announced that the banking Law Commission will also evaluate the regulations for disability cover in the private sector in connection with adaptation of the occupational pension regulations to the pension reform.
5) POOLING the company also manages its insurance risk through international pooling. this implies that multinational corporate customers can equalise the results between the various units internationally. Pooling may be offered for group life and risk cover within group defined benefit and defined contribution pensions.
RISK RESULT the table below specifies the risk result in the various risk areas and also state the effect of reinsurance and pooling on the result.
the percentage distribution of the insurance reserves by the various basic annual interest rates as at 31 december 2012 is: Interest rate guarantee in per cent 2012 2011
In the table above, the premium fund, contribution fund and pensioners’ surplus fund have been included at 3 per cent and the additional statutory reserves at 0 per cent.
SPP the percentage distribution of the insurance liabilities by the various terminal value guarantee rates as at 31 december 2012 is: Interest rate guarantee in per cent 2012 2011
the risk inherent in occupational injury insurance is also covered by a separate excess of loss reinsurance, with a deductible of noK 10 million.
SPP SPP is largely exposed to the same market risk factors as Storebrand Life Insurance, but differences in product design, general framework 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 corporate 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. Persistent low interest rates also represent a substantial risk for SPP as well, both for the financial result and for the solvency margin percentage.
Storebrand Life Insurance has used risk-based Supervision (rbS), the Financial Supervisory authority of norway's official reporting document. the stresses were as follows: shares +/- 20 per cent, interest rates +/- 150 basis points, property +/- 12 per cent, foreign currency +/- 12 per cent, spread based on rating and duration. the buffer capital for market risk consists of, additional statutory reserves that can be recognised as income in 2012, market value adjustment reserve and the unrealised gain reserve. SPP has used the traffic light, the official reporting document of Finansinspectionen.
Changes in market risk that arise during the course of 1 year and the buffer capital's coverage of the market risks will be as presented below, based on the statement of financial position as at 31 december 2012: STOREbRAND LIFE INSURANCE
the effect on the result of products without a guaranteed return, primarily defined-contribution pensions and Unit Linked, are not included in the analysis. For these products, the customers bear the market risk and the effect of a falling market on the owner's result will be very limited.
Separate liquidity strategies have been drawn up for several of the subsidiaries, in line with statutory requirements. these strategies specify limits and measures for ensuring good liquidity and a minimum allocation to assets that can be sold at short notice. the strategies define limits for allocations to various asset types and mean the companies have money market investments, bonds, equities and other liquid investments that can be disposed of as required.
Liquidity risk is one of the most important risk factors in banking 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 specifying principles for liquidity management, 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 liquid holdings is continuously monitored at the Group level in relation to internal limits. Committed credit lines from banks have also been established that the companies can draw on if necessary.
Total financial liabilities 2011 the agreed maturity provides limited information on the company's liquidity risk, since the vast majority of the investment assets can be realised faster in the secondary market than the agreed maturity indicates. In the case of perpetual subordinated loans the cash flow is calculated through to the first call date.
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 in order 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 when there are no published ratings. the Group has entered into framework agreements with all counterparties to reduce the risk inherent in outstanding derivative transactions. these regulate, inter alia, how collateral is to be pledged against changes in market values which are calculated on a daily basis.
The years change in fair value due to credit risk 11 -1
Fair value is fixed on the basis of a theoretical estimation where the cash flow is discontinued at the rate offered for new loans with a corresponding duration and credit risk.
lines. the maximum exposure was marginally reduced from the end of 2011 as a result of lower commitments, counteracted by an increase in interest rate swaps.
NOK million Fair value Fair value Fair value Fair value Fair value Fair value Fair value
Mortgage and asset backed securities 35,822 8,107 520 916 489 45,855
NOK million Fair value Fair value Fair value Fair value Fair value Fair value
the purpose of the use of financial derivatives is to identify and reduce currency and interest rate risk. Counterparty risk in connection with the trading of financial derivatives is included in credit risk.
Sale and operation of real estate - Individual write-downs -105 -105
CREDIT ExPOSuRE, lENDING Loans to the corporate market amount to over noK 15 billion. Furthermore, we have approximately noK 1.8 billion in undrawn credit lines and almost noK 280 million in guarantees. the portfolios' collateral is for the most part in commercial properties.
In the retail market, most of the loans are secured by means of home mortgages. approximately noK 23 billion has been lent in home loans, with additionally almost noK 2 billion in undrawn credit facilities. the total exposure to the housing sector is therefore approximately noK 26 billion. Customers are checked in accordance with policies, and their ability and willingness to service the loan is evaluated using a liquidity calculation and a risk classification model.
Commitments are regarded as non-performing and loss exposed when a credit facility has been overdrawn for more than 90 days and when an instalment loan has arrears older than 90 days and the amount is at least noK 500. the same definition as that used in the Capital requirements regulations is used for overdue commitments, but the number of days in the definition is equal to the age distribution.
the Group seeks to reduce operational risk through effective internal control with 1) unambiguous descriptions of responsibilities 2) clear routines and 3) documented powers of attorney/authority. risks are followed up through the management's quarterly risk reviews, with documentation of risks, measures and the follow-up of incidents. In addition, the internal auditing unit carries out an independent control in accordance with audit projects adopted by the board.
Contingency plans have been prepared to deal with serious incidents in business-critical processes. Storebrand's control functions also involve people with particular responsibility for controlling operational risk.
NOTE 11 | Valuation of financial instruments at fair value the Group conducts a comprehensive process to ensure that financial instruments are valued as closely as possible to their market value. Publicly listed financial instruments are valued on the basis of the official closing price on stock exchanges, supplied by reuters and bloomberg. Fund units are generally valued at the updated official naV prices when such prices exist. bonds are generally valued based on prices obtained from reuters and bloomberg. bonds that are not regularly quoted will normally be valued using recognised theoretical models. the latter is particularly applicable to bonds denominated in norwegian kroner. discount rates composed of the swap rates plus a credit premium are used as a basis for these types of valuations. the credit premium will often be specific to the issuer, and will normally be based on a consensus of credit spreads quoted by a selected brokerage firm.
Unlisted derivatives, including primarily interest rate and foreign exchange instruments, are also valued theoretically. Money market rates, swap rates, exchange rates and volatilities that form the basis for valuations are supplied by reuters, bloomberg.
the Group carries out continual checks to safeguard the quality of market data that has been collected from external sources. these types of checks will generally involve comparing multiple sources as well as controlling and assessing the likelihood of unusual changes.
LEvEL 2: FINANCIAL INSTRUMENTS vALUED ON THE bASIS OF ObSERvAbLE MARKET INFORMATION NOT COvERED by LEvEL 1 this category encompasses financial instruments that are valued on the basis of market information that can be directly observable or indirectly observable. Market information that is indirectly observable means that the prices can be derived from observable related markets. Level 2 includes shares or equivalent equity instruments for which market prices are available, but where the volume of transactions is too limited to fulfil the criteria in level 1. Shares in this level will normally have been traded during the last month. bonds and equivalent instruments are generally classified in this level. Moreover, interest rate and foreign exchange swaps, non-standardised interest rate and foreign exchange derivatives are classified as level 2. Fund investments, with the exception of private equity funds, are generally classified as level 2, and encompass equity, interest rate, and hedge funds.
LEvEL 3: FINANCIAL INSTRUMENTS vALUED ON THE bASIS OF INFORMATION THAT IS NOT ObSERvAbLE IN ACCORDANCE WITH LEvEL 2 equities classified as level 3 encompass investments in primarily unlisted/private companies. these include investments in forestry, real estate and infrastructure. Private equity is generally classified as level 3 through direct investments or investments in funds.
UNLISTED EqUITIES – INCLUDING FORESTRy the external valuations are based on models that include non-observable assumptions. besides the external valuations that have been conducted as at 31 december 2011, the equity investments are stated on the basis of value adjusted equity reported by external sources. Comprehensive external valuations were carried out for the largest forestry investments as at 31 december 2011 and these form the basis for the valuation of the company's investments.
PRIvATE EqUITy the majority of Storebrand’s private equity investments are investments in private equity funds. the Group also has a number of direct investments. Private equity investments are considered long-term investments where Storebrand expects to benefit by its involvement through the duration of the projects.
the investments in private equity funds are stated on the basis of the values reported by the funds. Most private equity funds report on a quarterly basis, while a few report less often. For investments where Storebrand has not received an updated valuation by the time the annual financial statements are closed, the last valuation received will be used and adjusted for cash flows and any significant market effects during the period from the last valuation up to the reporting date. these market effects are estimated on the basis of the type of valuations made of the companies in the underlying funds; the financial performance of relevant indexes, adjusted for estimated correlation between the relevant company and the relevant index.
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 cost or estimated value.
In the case of investments in which Storebrand participates as a co-investor together with a leading investor that conducts a valuation, and no recent transactions exist, Storebrand will use this value after it has been quality assured. In the case of investments for which Storebrand has not received an up-to-date valuation as at 31 december from a leading investor by the time the annual financial statements are closed, the previous valuation is used and adjusted for any market effects during the period from the last valuation up to the reporting date. In those cases where no valuation is available from a leading investor in the syndicate, a separate valuation will be made, as described above.
INDIRECT REAL ESTATE INvESTMENTS Indirect real estate investments are primarily investments in funds with underlying real estate investments where Storebrand's intention is to own the investments throughout the fund's lifetime. real estate funds are valued on the basis of information received from the individual fund manager.
Most managers’ report on a quarterly basis and the most common method used by the individual fund managers is an external quarterly valuation of the fund’s assets. this involves the manager calculating a net asset value (naV). Funds often report naV with a quarter’s delay in relation to the preparation of Storebrand’s financial statements. In order to take account of the changes in value in the last quarter, internal estimates are made of the changes in value based on developments in the market and by conferring with the respective managers.
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 discount 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 with regard to the required rate of return used, a change in the discount rate of 0.25 per cent would result in an estimated change of around 6 per cent in value, depending on the maturity of the forest and other factors.
Storebrand’s private equity investments are for the most part made through unlisted companies, meaning no observable market prices are available. Large portions of the portfolio are priced using comparable listed companies, while smaller portions of the portfolio are listed. the valuation of the private equity portfolio will thus be sensitive to fluctuations in global equity markets. For the period from 1997 to 2012, Storebrand’s private equity portfolio has had a beta relative to the MSCI World (net – currency hedged to noK) of around 0.4. the annualised alpha for the same period has been around 7.9 per cent.
Total equities and units 9,305 51,325 11,589 72,220 lending to customers 1,241 1,241
NOK million From quoted prices to observable assumptions From observable assumptions to quoted prices
Level 1 encompasses listed equities that over the previous six months have experienced a daily average turnover equivalent to approx. MnoK 20 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.
OThER other activities consist of activities in the Group that are not included in the five listed business areas above. Consists of the holding company Storebrand aSa, which invests in and manages subsidiaries and Storebrand baltic Uab. It also includes eliminations from intragroup transactions, which are included in the other segments.
Revenue from other group companies 2 1 32 -27 204 3 3
The Storebrand Group are represented in the following countries: Segment Norway Sweden lithuania Ireland Guernsey latvia
Insurance liabilities 221,785 206,339 - of which products with guaranteed return 180,310 172,656
Policyholders' fund incl. accrued profit (excl. conditional bonus) 108,747 105,857 - of which products with guaranteed return 72,191 73,880
Net interest income as a percentage of average total assets 1.25% 1.13%
Gross defaulted and loss-exposed loans as percentage of gross lending 0.8% 1.0%
1) in previous quarters, Storebrand has included accounting equity for the Swedish activity as a basis for calculating solvency and capital adequacy. as of the second quarter of 2012, Storebrand has changed the method by including solvency capital, which is calculated pursuant to Swedish capital adequacy rules, in the calculation of the consolidated solvency margin and consolidated capital adequacy. the Swedish subsidiary Spp aB has previously used a 10-year interest rate curve (government interest rate and housing interest rate) for the discounting of insurance obligations. Spp has used a 30-year yield curve as a basis from the second quarter of 2012.
the key figures for capital adequacy and solvency for previous periods have not been restated. they are shown in the tables above such as they were originally calculated. 2) 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. 3) Consists of the company Spp livförsäkring aB due to changes in the company structure of Spp livförsäkring Group. previous quarters are accordingly revised. 4) Costs and aum are 12 month rolling figures. previous quarters are revised. aum = assets under management (total assets under management), bp = basis points.
5) Consists of the companies Storebrand Bank aSa and Storebrand Boligkreditt aS.
Fixed income and similar income from lending to and receivables from customers 1,436 1,394
Fixed income and similar income from commercial paper, bonds, and other interest-bearing paper 97 115
Interest and similar costs from deposits from and liabilities to customers -520 -475
Total net interest income 490 443 1) The total interest income for lending, etc, that is not stated at fair value. 1,300 1,151 2) The total interest costs for deposits, etc, that are not stated at fair value. -995 -923
NOTE 15 | Net income analysed by class of financial instrument
Total gains and losses on financial assets at fair value - of which FVO (fair value option) 7,904 3,101 5,306 16,312 617 15,694 1,972 - of which available-for-sale 144 125 -125 144 144 452
Operating costs (including maintenance and repairs) relating to real estate that have provided rent income during the period2 -386 -408
Total income real estate 712 1,652 1) Of which real estate for own use 74 73 2) Of which real estate for own use -4 -6
Other revenue from companies other than banking and insurance 452 557
Of which premium reserve transferred from company -4,366 -8,172 the table below shows the anticipated compensation payments (excluding repurchase and payment). the residual balance after 3 years is equal to the obligations carried on the statement of financial position in the financial statements.
Total operating costs -4,003 -3,392 1) including restructuring costs, see note 49. 2) Figures for 2011 include noK 291 million in cost reductions related to reinsurance commissions.
the pension for employees aged between 65 and 67 years old and pensions linked to salaries over 12 G are paid out directly from the companies and apply to both members of the defined contribution scheme and the defined benefit scheme. a guarantee has been granted for earned pensions on salaries over 12 G for employees retiring before the age of 65. the pension conditions are determined by the pension regulations. Storebrand 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.
the pension plan for employees in SPP follows the plan for bank employees in Sweden. the ordinary retirement age is 65 in accordance with the pension agreement between the employer’s association of the Swedish banking Institutions (bao) and the trade unions that are part of btP. the amount is 10 per cent of the annual salary up to 7.5 times the basic income amount, which was SeK 54,600 in 2012 and will be SeK 56,600 in 2013, 65 per cent of the annual salary in the interval from 7.5 to 20, and 32.5 per cent in the interval from 20 to 30. no retirement pension is paid for the portion of salary in excess of 30 times the "basic income amount". Full pension entitlement is reached after 30 years of membership in the pension scheme. In addition to the defined benefit part, the btP plan has a smaller defined contribution part. as to this part, the employees can decide themselves how assets are to be invested (traditional insurance or Unit Linked insurance). the defined contribution part is 2 per cent of the annual salary.
the retirement age for SPP's Ceo is 62 years. the Ceo is also covered by a defined contribution pension plan, which implies that the company pays 35 per cent of the Ceo's fixed salary in pension premiums. In addition, he has a predefined pension plan that implies a lifetime pension of 16.25 per cent of the fixed salary in the interval from 30 to 50 times the "basic income amount". the retirement pension from age 62 to 65 amounts to 65 per cent of the fixed salary, limited to a maximum of SeK 4,045,000. the pension terms comply otherwise with the pension agreement between bao and Union of Financial Sector employees or SaCo, respectively (btP plan). the company secures its pension liabilities through the payment of insurance premiums during the employment period.
RECONCIlIATION OF PENSION ASSETS AND lIABIlITIES IN ThE STATEMENT OF FINANCIAl POSITION
Net pension liabilities recognised in statement of financial position 1,087 1,583
ChANGES IN ThE NET DEFINED BENEFIT PENSION lIABIlITIES IN ThE PERIOD
NET PENSION COST BOOKED TO PROFIT AND lOSS ACCOuNT, SPECIFIED AS FOllOwS
Net pension cost recognised in profit and loss account in the period 284 268
Expected return on pension fund assets in the period 4,0% 4,6% 3,5% 5,0%
Expected annual increase in social security pensions 3.3% 3.75% 3,0% 3,0%
IaS 19.78 states that high quality corporate bond rates shall be used as the discount rate. In countries where there is no deep market for such bonds, the government bond rates shall be used. as at 31 december 2011 Storebrand used government bond rates as the discount rate. recently evaluations of whether there is a deep market for covered bonds in norway have been made, and whether such securities satisfy the definition of corporate bond in accordance with IaS 19.78.
Discounted present value of defined benefit pension liabilities1 4,312 4,770 4,493 4,108 4,296
the pension liabilities are particularly sensitive to changes in the discount rate. a reduction in the discount rate will in isolation entail an increase in the pension liabilities.
1) the pension liabilities at the end of 2012 have declined compared with the corresponding liabilities as at 2011. as is evident from the table above, this is attributed primarily to a change in actuarial gains or losses. the change in actuarial gains or losses is attributed primarily to the higher discount rate, since a high quality corporate bond rate (covered bond rate) has been used at the end of 2012, while the discount rate was based on the government rate in norway in 2011. this has also resulted in a positive effect on the statement of total comprehensive income (oCi).
STOREBRAND ASA - ThE BOARD OF DIRECTOR'S STATEMENT ON ThE FIxING OF ThE SAlARy AND OThER REMuNERATION FOR SENIOR EMPlOyEES the board of directors of Storebrand aSa has had a special Compensation Committee since 2000. the Compensation Committee is tasked with providing a recommendation to the board of directors concerning all matters to do with the company's remuneration of its Chief executive officer. the Committee is responsible for keeping itself informed and proposing guidelines for the fixing of remuneration for senior employees in the Group. In addition, the Committee is an advisory body for the Ceo with respect to remuneration regimes that cover all employees in the Storebrand Group, including Storebrand’s bonus system and pension scheme. The Compensation Committee satisfies the follow-up requirements set forth in the Compensation Regulations.
2. bINDING GUIDELINES FOR SHARES, SUbSCRIPTION RIGHTS, OPTIONS, ETC. FOR THE COMING 2013 FINANCIAL yEAR
the Storebrand Group‘s bonus scheme for the 2013 financial year complies with the regulations laid down by the Ministry of Finance on 1 december 2010 relating to remuneration schemes in financial institutions. the bonus scheme is robust with regard to ensuring the overall goals of increasing the correspondence between the owners' and executives' incentives, and helping to ensure that management does not take inappropriately large risks.
Main structure of the bonus scheme the main structure of the bonus scheme consists of the following elements: Funding Allocation Payment bonuses are financed through value creation in the Group, but allocation is dependent on the unit's value creation and the employees' own performances.
a unit‘s value creation is measured using a scorecard that is based on the unit‘s strategic, financial and operational targets. the scorecard incorporates both quantitative and qualitative targets. Specific targets are also set each year with respect to the senior employees’ performance, which is documented using a special monitoring system. the unit's result and individual target attainment are weighted equally.
Payment of the bonus of the variable remuneration of the Ceo and senior employees, 50 per cent of the allocated bonus will be paid in cash, and 50 per cent will be converted to a number of synthetic shares. the number of shares will be registered in a share bank and will remain there for three years. at the end of the three-year period, an amount corresponding to the market price of the allotted shares will be paid.
In special circumstances, the board of directors may decide to completely eliminate or partially reduce the number of shares in the share bank. Such circumstances may include when it is subsequently proven that the employee or entity did not fulfil the result criteria, or when the entity's or Group's financial position has drastically weakened.
1.2. PENSION SCHEME the company shall arrange and pay for an ordinary group pension insurance common to all employees, from the moment employment commences, and in accordance with the pension rules in force at any given time.
deductions are made to the severance pay for all work-related income, including fees from the provision of services, offices held, etc. the severance pay corresponds to the pensionable salary at the end of the employment, excluding any bonus schemes. the Ceo is entitled to 24 months of severance pay. other executive vice presidents are entitled to 18 months of severance pay.
1.4. EMPLOyEE SHARE PURCHASE PROGRAMME Senior employees are given, as are other Storebrand employees, an opportunity to purchase a limited number of shares in Storebrand aSa at a discount under an employee share purchase programme.
3. STATEMENT ON THE SENIOR EMPLOyEE REMUNERATION POLICy IN THE PREvIOUS FINANCIAL yEAR the senior employee remuneration policy established for 2012 has been observed.
Senior employees will therefore have bonuses withheld for up to 6 years and substantial exposure to the company's share price. In the opinion of the board, this does not have any negative effect on the company and the shareholders, given the structure of the scheme and the size of each executive vice president's portfolio of shares in Storebrand aSa.
Total remuneration to auditors 16.0 17.4 1) the fee is mainly due to assistance in connection with inquirys from public authorities. the amounts are excluding Vat.
Total interest expenses1 -680 -681 1) interest expenses for Storebrand Bank are included in net interest income for banking enterprises.
Expected income tax at nominal rate (28 per cent) -437 -248
Tax effect of: realised/unrealised shares -38 -782 share dividends received 164 associated companies 21 permanent differences -6 -309 recognition/write-down of tax assets -224 949
1) the effective tax rate for 2012 is affected by certain factors that are not related to the results for 2012. the Group has a tax credit carryforward of noK 758 million from 2003, and this must be used within 10 years. Since it is not considered probable that this can be used in 2013, the tax credit carryforward has been written down and recognised as an expense in the accounts. this has resulted in an additional income tax expense of noK 213 million. the income tax expense has also been affected by the elimination of the exemption method for the customer portfolio, which is described below, as well as the tax effects associated with prior years.
Capital gains or losses realised on equities are thus taxable or deductible, respectively, for equities that are owned by customer portfolios in life insurance companies. over time this change will entail a normalised income tax expense for the Group. life insurance companies will still receive a tax allowance for allocations to insurance reserves.
the adopted changes to the tax regulations will also have a transitional effect, in which unrealised capital gains and losses on equities etc. that were encompassed by the exemption method as at 31 December 2011 are included now in the basis for deferred tax / tax assets on the balance sheet. at the end of 2011, permanent differences linked to realised and unrealised gains from directly owned shares within the tax exemption method amounted to around noK 0.4 billion. the income tax expense associated with reclassification from permanent differences will therefore amount to approximately noK 0.1 billion.
the Group's tax-increasing temporary differences also include temporary differences linked to the Group's investment properties. these properties are for the most part recorded in the norwegian life insurance company's customer portfolios and recorded in the accounts of Storebrand eiendom Holding aS (SeH), which is owned by Storebrand livsforsikring aS. if these companies were to be disposed of, they could be disposed of practically tax-free. the tax-increasing temporary differences related to the difference between the fair value and taxable value of investment properties that have arisen during the period of ownership (around noK 7.9 billion), are included in the Group's temporary differences, on which deferred tax is calculated at a nominal tax rate of 28 per cent. in accordance with iaS 12, no provisions have been set aside for deferred tax related to temporary differences that existed when companies were acquired and the transaction was not defined as a business transfer (basis of around noK 2.7 billion).
INTANGIbLE ASSETS LINKED TO ACqUISITION OF SPP Storebrand Livsforsikring AS acquired SPP Livförsäkring AB and its subsidiaries in 2007. The majority of the intangible assets associated with SPP comprise the value of in-force business (VIF), for which a separate liability adequacy test has been performed in accordance with the requirements of IFRS 4. In order to determine whether goodwill and other intangible assets associated with SPP have suffered an impairment in value, estimates are made of the recoverable amount for the relevant cash-flow generating units. Recoverable amounts are established by calculating the enterprise’s utility value. SPP is regarded as a single cash flow generating unit, and the development of future administration results, risk results and financial results for SPP will affect its utility value. In calculating the utility value, the management have made use of budgets and forecasts approved by the Board for the next three years.
The executive management has assessed the recoverable amount of goodwill as at 31 December 2012 and concluded that no writedown is necessary. Sensitivity analyses have been conducted with respect to the assumptions regarding the development of results and required rate of return. The management is of the opinion that it is improbable that possible reasonable changes in the key assumptions would entail a need for a write-down.
Rights to withdraw fees from SPP Fonder 10 years 10% Straight line 2
NOTE 35 | Fair value of financial assets and liabilities at amortised cost
LENDING TO CUSTOMERS/LIAbILITIES TO FINANCIAL INSTITUTIONS/DEbT RAISED by ISSUANCE OF SECURITIES the fair value of lending to customers subject to variable interest rates is recognised 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 had, had they been taken upat year end 2012. the shortfall is calculated using a discounted difference between the agreed margin and the current market price over the remaining term to maturity. Fair value is also adjusted for individual write-downs.
NOK million Nominal value Acquisition cost Book value Fair value Book value Fair value
Total investment properties 28,723 28,796 1,381,727 1) the leased amount is calculated in relation to floor space.
There have not been made any further agreements with regards to buying or selling of real estate in 2012. NOK 227 million in Storebrand and SEK 72 million in SPP have been committed but not drawn on in international real estate funds.
CALCULATION OF FAIR vALUE FOR REAL ESTATE 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. Investment properties consists mainly of office buildings and shopping centres.
REqUIRED RATE OF RETURN An individual required rate of return is set for each property. The required rate of return should be viewed in relation to the property's cash flow. Cash flows are determined on the basis of data about the market's required rate of return, including transactions and valuations. The required rate of return is divided into the following components: Composition of the required rate of return: 1. Risk free interest rate 2. Risk markup, adjusted for: • Type of property. • Location. • Structual standard. • Environmental standard. • Contract duration. • Quality of tenant.
• All other information about property values, the market and the individual property.
SENSITIvITIES Valuations are particularly sensitive to changes in the required rate of return and assumed future cash flows. a change of 0.25 per cent in the required rate of return, where everything else remains the same, would result in a change in value in the real estate portfolio in norway of approximately 1 billion. around 25 per cent of a real estate's cash flow is linked to signed leases. this means that changes in the uncertain components of the cash flow of 1 per cent result in a change in value of 0.75 per cent.
the effective yield for each security is calculated using the observed market price. Calculated effective yields are weighted to give an average effective yield on the basis of each security's share of the total interest rate sensitivity.
NOMINAL vOLUME Financial derivatives are related to underlying amounts which are not recognised in the statement of financial position. In order to quantify the scope of the derivatives, reference is made to amounts described as the underlying nominal principal, nominal volume, etc. nominal volume is arrived at differently for different classes of derivatives, and provides some indication of the size of the position and risk the derivative presents.
Total buffer capital the excess value of bonds valued at amortised cost totalled noK 5,225 million at the end of the 4th quarter, an increase of noK 3,468 million since the turn of the year.
Book value 31.12 1) including personal risk and employee insurance of the insurance segment.
Claims reserve 339 282 - fo which RBNS 122 128 - of which IBNR 201 143
Other current liabilities 962 1,040 1) as of January 2014 the partisipants are able to claim redemption on a yearly basis. the redemption are conditioned to a total demand of noK 100 million. the redemption amounts to 98,75 per cent of VeK. See note 8.
Amount recognised against reserves in the period -34 -8 -42 -19
HEDGING INSTRUMENT/HEDGED ITEM – FAIR vALUE HEDGING 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 profit or loss . Changes in the value of the hedged item that can be attributed to the hedged risk are adjusted in the book value of the hedged item and reconised in the income statement.
Collateral pledged in connection with futures and options are regulated on a daily basis in the daily margin clearing on individual contracts.
Book value of bonds pledged as collateral for the bank's lending from Norges Bank 1,854 2,159
Guarantees principally concern payment guarantees and contract guarantees. Unused credit facilities concern granted and unused overdrafts and credit cards, as well as unused facility for credit loans secured by property.
SvENSKT NäRINGSLIv SPP Livförsäkring ab (SPP), a wholly owned subsidiary of Storebrand Holding ab, which in turn is 100% owned by Storebrand Livsforsikring aS, is being sued under a writ of summons dated 16 June 2010, by Svenskt näringsliv (Confederation of Swedish enterprise) et al. with a demand for compensation in the amount of approximately SeK 3.7 million plus interest and costs. the allegation is that SPP is obliged to pay supplementary pensions (värde-säkringsbelopp) pursuant to the provisions in the so-called "ItP Plan", and "associated agreements", as well as the alecta Pension Insurance board resolution on such index regulation. the plaintiffs also allege that SPP is obliged to index-regulate paid-up policies (fribrevsuppräkna) for the period 2003 – 2006 in accordance with what alecta has done (but which SPP has not done).
the Stockholm district Court passed its judgement on 9 March 2012. the Court found for SPP, and awarded it costs of SeK 10.4 million plus interest from the time of the judgement and until payment is made. the judgement is unanimous. on 29 March 2012, Svenskt näringsliv et.al. appealed the judgement to the Svea Court of appeal, with a concurrent application for a permit to have the case be fully tested by the appeals court. on 24 april 2012, the appeals Court notified the appellants that the case has been granted a hearing. the appeal is expected to be heard during May 2013.
NOTE 54 | Capital adequacy and solvency requirements the Storebrand Group is a cross-sectoral financial group subject to capital requirements pursuant to basel I/II (capital adequacy) and the solvency rules on a consolidated basis. Pursuant to the solvency rules, solvency margin requirements are calculated for the insurance companies in the Group, while for the other companies a capital requirement pursuant the capital adequacy regulations is calculated. the calculations in the tables below conform to the regulations relating to the application of the solvency rules on a consolidated basis, etc., Paragraph 7.
In the solvency margin requirement that is used for the insurance companies, this requirement is calculated as 4 per cent of the gross insurance fund. this applies in both norway and Sweden. In Sweden, the requirement also covers 1 per cent of Conditional bonus and 0.1 - 0.3 per cent of the death risk in Unit Linked insurance. the solvency margin capital in insurance differs slightly from primary capital which is used in capital adequacy. Primary capital includes a proportion of conditional bonuses, but this capital cannot be included in the solvency margin capital. a proportion of additional statutory reserves and the risk equalisation fund are also included in the solvency margin capital.
Capital requirements Storebrand Group from capital adequacy statement 12,137 12,401 -capital requirements insurance companies -10,218 -10,653
Surplus solvency capital 7,410 8,270 1) in previous quarters, Storebrand has included accounting equity for the Swedish activity as a basis for calculating solvency and capital adequacy. as of the second quarter of 2012, Storebrand has changed the method by including solvency capital, which is calculated pursuant to Swedish capital adequacy rules, in the calculation of the consolidated solvency margin and consolidated capital adequacy. the Swedish subsidiary Spp aB has previously used a 10-year interest rate (government interest rate and housing interest rate) for the calculation of solvency capital. Spp has used a 30-year interest rate as a basis as of the second quarter of 2012.
in connection with Storebrand life insurance’s 2007 acquisition of Spp, the Financial Supervisory authority of norway placed a condition on its approval by giving a time limited approval to include parts of the conditional bonus as primary capital. this approval ended on 1 april 2012.
Internal transactions between group companies are eliminated in the consolidated financial statements, with the exception of transactions between the customer portfolio in Storebrand Livsforsikring aS and other units in the Group. See note 1 accounting Policies for further information.
For further information about close associates, see notes 32, 33 and 49.
Storebrand bank aSa have decided to exit estate agency business and the ring eiendomsmegling aS Group will be liquidated or sold. as a consequence the annual result, assets and liabilities are classified as hold for sale in the Group accounting.
Net receipts/payments - sale/purchase of property and fixed assets 0 11
Cash and cash equivalents at start of the period 126 74
CLASSIFICATION AND vALUATION POLICIES assets and liabilities have been valued in accordance with the general valuation rules of the norwegian accounting act. assets intended for permanent ownership and use are classified as fixed assets, and assets and receivables due for payment within one year are classified as current assets. equivalent policies have been applied to liability items.
PROFIT AND LOSS ACCOUNT AND STATEMENT OF FINANCIAL POSITION Storebrand aSa is a holding company with subsidiaries in the fields of insurance, banking and asset management. the layout plan in the regulations relating to annual financial statements etc. for insurance companies has not been used. a layout plan that complies with the norwegian accounting act has been used.
PENSION LIAbILITIES FOR COMPANy'S OWN EMPLOyEES the company uses the norwegian standard for pensions accounting nrS 6, which permits the use of IaS 19 employee benefits. Storebrand provides defined contribution schemes for its employees as of 1 January 2011. Up until 31 december 2010, Storebrand had a defined benefit scheme for its norwegian employees. the norwegian defined benefit scheme was closed to new members with effect from 1 January 2011, and existing members could elect to transfer to the defined contribution scheme.
the net pension cost for the period comprises the total of the accrued future pension entitlements during the period, the interest cost on the calculated pension liability and the expected return on pension plan assets.
actuarial gains or losses and the effect of changes in assumptions are recognised directly against equity. the effect of changes in the pension plan is recognised on an ongoing basis, unless the changes are conditional upon the future accrual of pension entitlements. the effect is distributed on a straight-line basis over the period until the benefit is fully accrued. the employer's national Insurance contributions are included as part of the pension liability and as part of the actuarial gains/losses shown in the total comprehensive income.
EqUITIES AND UNITS Investments in subsidiaries and associated companies are valued at cost less any write-down of value. the need to write down is assessed at the end of each accounting period.
bONDS AND OTHER FIxED INCOME SECURITIES Financial assets and liabilities are included in the statement of financial position from such time Storebrand becomes party to the instrument’s contractual terms and conditions. ordinary purchases and sales of financial instruments are recognised on the transaction date. When a financial asset or a financial liability is initially recognised in the accounts, it is valued at fair value plus, in the case of a financial asset or a financial liability that is not at fair value through profit or loss, transaction costs directly related to the acquisition or issue of the financial asset or financial liability.
bOND LOANS bond loans are recorded at amortised cost using the effective interest rate method. the amortised cost includes the transaction costs on the date of issue.
NOTE 3 | Net income for various classes of financial instruments
Other benefits -7 -7 1) See the spesification in note 5.
Storebrand's employees in norway have both a defined contribution pension scheme and a defined benefit pension scheme that have been established in Storebrand Livsforsikring aS, but the Group will not participate in the aFP early retirement scheme until 1 January 2013. From 1 January 2011 the defined benefit scheme was closed to new members. at the same date a defined contribution pension scheme was established. the contribution based scheme applies to all new employees from 1 January 2011 and to those who chose to transfer from a defined benefit to a defined contribution pension arrangement. For the contribution based scheme, the cost is equal to the employee's pension savings contribution during the period, which totals 5 per cent annually of the contribution basis between 1 and 6 G (G = the national Insurance scheme's basic amount which was noK 82,122 as of 31 december 2012), and 8 per cent of the contribution basis between 6 and 12 G, as well as a defined-contribution scheme that is funded from operations that annually comprises 20 per cent of the contribution basis for salaries over 12G. the contributions are deposited in the employees' pension accounts each month. the future pension depends upon the amount of the contributions and the return on pension savings. the employees who are members of the defined benefit pension scheme are secured a pension of about 70 per cent of pensionable salary at the time of retirement. Full pension entitlement is reached after 30 years of membership in the pension scheme. the cost for the period shows the employees' accrued future pension entitlements during the financial year. From 1 July 2011 the retirement age is 67 years old. nonetheless employees are given the right to retire at 65 years old and receive a pension directly until they reach 67 years old. In the case of underwriters, the retirement age is 65 years.
ChANGES IN ThE NET DEFINED BENEFITS PENSION lIABIlITIES IN ThE PERIOD
MAIN ASSuMPTIONS uSED whEN CAlCulATING NET PENSION lIABIlITy AS PER 31.12
With a few exceptions involving unrated securities, all of the rated covered bonds in Norway have a rating of AA- or higher. The Norwegian covered bond market is quite young, but the market has undergone major development in recent years. The outstanding covered bond volume was more than NOK 530 billion as at the fourth quarter of 2012. The bid/ask spreads do not normally exceed more than a 23 basis point yield in this market. Average daily trading in 2012 has been around NOK 650 million, and the average new issue volume was approximately 7.5 billion per month in 2012. Around 20 per cent of the market consists of fixed income securities, while around 80 per cent of the market consists of securities with adjustable interest rates. As is the case for the rest of the Norwegian corporate bond market, the Norwegian swap interest rates are used as a basis for calculation of the price/yield. The Norwegian swap interest rates are considered very liquid. Based on the market and volume development observed, the Norwegian covered bond market must be perceived as a deep market in relation to the provisions in IAS 19 in the opinion of Storebrand. This conclusion is based on the regular activity that takes place in both the primary and secondary markets, as well as the transparency that exists due to the fact that the trades observed on the exchange are close to the indicative levels quoted by the banks. Broad participation by all of the largest bond brokers in the reporting system of the Norwegian Mutual Fund Association (VFF) supports the reliability of the available data. Reference is made to the statement of 13 December 2012 from the Norwegian Accounting Standards Board related to the use of covered bonds as the discount rate. As of the fourth quarter of 2012 Storebrand has used a discount rate based on the covered bond rate in Norway. This change is considered to be a change in the estimate. The corresponding interest rate in Sweden is also used for the Swedish operations.
ACTuARIAl ASSuMPTIONS In Norway standardised assumptions on rates of mortality and disability as well as other demographic factors are prepared by Finance Norway. The mortality table K2005 is being used until new common mortality rates for the industry are adopted and can provide a basis for more accurate calculations. The average employee turnover rate is 2-3 per cent for the entire work force as a whole, and falling turnover with increasing age is assumed.
The actuarial assumptions in Sweden follow the industry's common mortality table DUS06 adjusted for corporate differences. The average employee turnover rate is estimated to be 4 per cent p.a.
2) Senior executives are contractually entitled to performance related bonuses. 50 per cent of the awarded bonus is paid in cash. the remaining amount is converted to synthetic shares based on the market price. these are registered in a share bank with a lock-in period of three years. at the expiration of the three-year period the value of the synthetic shares is calculated with a new market price. Half of the amount paid from the share bank, after tax, shall be used to purchase shares in Storebrand aSa at the market price, with a new three-year lock-in period. 3) pension costs include accrual for the year. 4) the Control Committee covers all the norwegian companies in the Group which are required to have a control committee.
CALCULATION OF DEFERRED TAx ASSETS AND DEFERRED TAx ON TEMPORARy DIFFERENCES AND LOSSES CARRIED FORWARD
Net deferred tax asset/liability in the statement of financial position 472 632 - of which changes in deferred tax assets recognised in the balance sheet -25 128 1) tax credit carryforward from 2003 must be used in 2013. Since it is not considered probable that this can be used, the associated deferred tax assets have been written down.
Tax effect of permanent differences -25 82 capitalisation/write-down of deferred tax assets -128 477
NOTE 8 | Parent company’s shares in subsidiaries and associated companies
Assets liabilities 1) Used for hedge accounting, also see note 16.
Storebrand ASA had as per 31 December 2012 liquid assets of NOK 1.8 billion.
Own shares bought back2 2 22 24 21 1) 449 909 891 shares with a nominal value of noK 5,2 ) 380 172 shares were in 2012 sold to own employees. Holding of own shares 31 December 2012 was 3 124 482.
Total bond and bank loans2 3,492 3,544 1) Loans with fixed rates are hedged by interest swaps, which are booked at fair value through profit and loss. Changes in values of loans that can be related to the hedged risk are included in the carrying amount and included in the result. 2) Loans are booked at amortised cost and include earned not due interest. Signed loan agreements have standard covenant requirements. The terms and conditions have been redeemed persuant to signed loan agreements. Storebrand ASA has an unused drawing facility of EUR 240 million.
Nina Hjellup 3,119 1) The summary shows the number of shares owned by the individual, as well as his or her immediate family and companies where the individual exercises significant influence, confer the Accounting Act, Section 7-26.
In the best judgment of the board and the Ceo, the annual financial statements for 2012 have been prepared in accordance with applicable accounting standards, and the information in the financial statements provides a fair and true picture of the parent company’s and Group’s assets, liabilities, financial standing and results as a whole as at 31 december 2012. In the best judgment of the board and the Ceo, the annual report provides a fair and true overview of important events during the accounting period and their effects on the annual financial statements for Storebrand aSa and the Storebrand Group. In the best judgement of the board and the Ceo, the descriptions of the most important elements of risk and uncertainty that the group faces in the next accounting period, and a description of related parties' material transactions, also provide a true and fair view.
birger Magnus Chairman of the board birgitte nielsen Jon arnt Jacobsen Halvor Stenstadvold
Registrert i Foretaksregisteret Medlemmer av Den Norske Revisorforening org.nr: 980 211 282
Report on the Financial Statements We have audited the accompanying financial statements of Storebrand ASA, which comprise the financial statements of the parent company and the financial statements of the group. The financial statements of the parent company comprise the balance sheet as at December 31, 2012, and the income statement and cash flow statement for the year then ended, and a summary of significant accounting policies and other explanatory information. The financial statements of the group comprise the statement of financial position as at December 31, 2012, and the statement of total comprehensive income, statement of changes in equity and cash flow statement for the year then ended, and a summary of significant accounting policies and other explanatory information.
The Board of Directors and the Managing Director’s Responsibility for the Financial Statements The Board of Directors and the Managing Director are responsible for the preparation and fair presentation of these financial statements in accordance with the Norwegian accounting act and accounting standards and practices generally accepted in Norway for the company accounts and in accordance with International Financial Reporting Standards as adopted by EU for the group accounts, and for such internal control as The Board of Directors and the Managing Director determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.
Page 2 Independent Auditor’s Report to the Annual Shareholders' Meeting of Storebrand ASA
Opinion on the financial statements for the parent company In our opinion, the financial statements of the parent company are prepared in accordance with the law and regulations and give a true and fair view of the financial position of Storebrand ASA as at December 31, 2012, and of its financial performance and its cash flows for the year then ended in accordance with the Norwegian accounting act and accounting standards and practices generally accepted in Norway.
Opinion on the financial statements for the group In our opinion, the financial statements of the group are prepared in accordance with the law and regulations and give a true and fair view of the financial position of the group Storebrand ASA as at December 31, 2012, and of its financial performance and its cash flows for the year then ended in accordance with International Financial Reporting Standards as adopted by EU.
Report on Other Legal and Regulatory Requirements Opinion on the Board of Directors’ report and the allocation of the profit Based on our audit of the financial statements as described above, it is our opinion that the information presented in the Board of Directors report and in the statement of corporate governance principles and practices concerning the financial statements and the going concern assumption, and that the proposal for the allocation of the profit, complies with the law and regulations and that the information is consistent with the financial statements.
STOREbRAND ASA – STATEMENT OF THE CONTROL COMMITTEE FOR 2012 at its meeting on 26 February 2013, the Control Committee of Storebrand aSa examined the annual accounts as proposed by the board (consisting of the parent and consolidated financial statements) and the 2012 annual report for Storebrand aSa.
With reference to the auditor's report of 12 February 2013, the Control Committee finds that the proposed annual report and accounts can be adopted as Storebrand aSa's annual report and accounts for 2012.
THE bOARD OF REPRESENTATIvES' STATEMENT FOR 2012 the annual financial statements as proposed by the board, the board's report, the auditor’s report and the Control Committee's statement have been submitted to the board of representatives, in the manner prescribed by the law.
the board of representatives has no further comments to the board's proposal regarding the allocation of the profit for the year of Storebrand aSa.
Dow Jones Sustainability Index 74 points 78 points 79 points ≥ 75 points
279.8 NOK million committed 190.7 NOK million invested 4 new investments decided, 3 committed.
No. 3 in the industry for companies > 20 employees No. 2 in the industry for companies < 20 employees
No. 1 in the industry 3rd Customer promise – All our relationships, solutions and measures are sustainable2 -
Investments in microfinance – social impact Replaces previous indicator: Investments in microfinance and alternative asset classes
Employees' work satisfaction Score 69 of 100 points Score 71 of 100 points
1) the 2012 result applies to the period from the fund was launched 1 october 2012 to 31 December 2012. 2) Baseline assessment for 2012 applies to norway retail only. implemented during 2013; corporate customers in norway, retail and corporate customers in Sweden. 3) measures employee awareness, proportion of employees who complete e-learning course (every 3rd year), proportion who participate in dilemma training and proportion of managers who have reported on compliance with the code of ethics.
TARGETS 2013-2017 Sustainability is a long term issue. therefore we have this year, for the first time, supported our two-year goal with long-term five-year goals. the following targets have been set for the main areas within the Group's long-term commitments to sustainability: Target 2013-2017
Score 58 of 100 points 3rd Customer promise – All our relationships, solutions and measures are sustainable
Net Promoter Score (NPS) Top 3 in the industry, retail and corporate, Norway and Sweden
Employee job satisfaction Score 73 of 100 points 1) Corresponding figures for prior years are not available. 2) Some companies are excluded for more than one criterion.