In 2018, Storebrand presented an ambition to build a worldclass savings group, supported by insurance. This ambition builds on our position in the corporate market, as the leading supplier of Norwegian occupational pensions and an offensive challenger in the Swedish market. Our goal is to create world-class customer experiences in our core areas of savings and pensions. Our driving force is to give our customers a future to look forward to by helping them secure their current and future finances. People are living longer and can expect smaller government pensions in the future. For our customers, it will therefore be necessary to save more in the years to come.
In Norway, our savings and insurance business delivered strong operational results. In Sweden, our subsidiary, SPP, can also look back on a very good year, with strong premium growth and a positive net flow of funds to the Company. In 2019, SPP aims to deliver double-digit growth and reinforce its digital lead. In Norway, we are busy planning and building on our savings offerings , which will be the main pillar of our growth strategy going forward. We are investing over NOK 400 million in the revitalisation and renewal of several of our digital platforms in 2019. We want to be the preferred customer choice when the “Individual Pension Account” market opens in a year or two. The “Individual Pension Account” is a new financial product spearheaded by the authorities where Norwegians can combine all of their defined contribution pensions from both current and former employers.
The acquisitions of SKAGEN and Silver strengthen our savings strategy. I’m impressed with the work done by the teams when both SKAGEN and the Silver portfolio were integrated into the Storebrand family. SKAGEN complements and broadens Storebrand’s investment offerings and customer base. This work will continue in 2019, including a stronger focus on international distribution of fund solutions. We benefit greatly from SKAGEN’s network and presence in European markets.
The UN Climate Panel’s report in 2018 gave us an unpleasant reminder of the major climate challenges we are facing, which influence the choices we make as investors in the short, medium and long term. The financial industry is an important contributor in the efforts to limit global warming, and we have a clear strategy to invest through our own, targeted funds in companies that provide climate solutions. However, most importantly, we have strict environmental, climate and sustainability criteria for all our investments.
1) We have already excluded any company that has more than 25 per cent of its earnings from coal..
Q2: April to June • Launch of Wave: portfolios in which the customer invests in companies that are working to solve the greatest challenges in gender equality (Sustainability Goal 5), climate (Sustainability Goal 13) and Sustainable Cities (Sustainability Goal 11).
Q3: July to September • Storebrand became a co-owner of the Swedish fintech company Dreams and launched the savings application Dreams on the Norwegian market.
• SKAGEN AS launched Norway’s largest fund platform for Share Savings Accounts (ASK), approximately 600 funds in a single platform.
Q4: October to December • Zero coal by 2026: Storebrand introduced changes to its investment policy for coal and will thus not be invested in the coal industry by 2026.
• “Handshake of the Year” 2018: The food bank Matsentralen received the Storebrand Sustainability Prize during the “Our Planet” conference.
• The marketing campaign featuring the pink pension piggy bank was launched . Encouraging Norwegians to check their pension figures to see how much they have in their piggy bank was well received in the market.
• SPP launched Sweden’s first fully digital occupational pension offering. A new IT platform and new digital tools allow companies to obtain a need-adapted pension plan without any manual work.
14 Storebrand at a glance 15 Organisation 17 Executive mangament 20 A sustainable strategy
Pension & Savings • 40k corporate customers • 2m individual customers • NOK ~440bn of reserves of which 40% Unit Linked
Insurance • Health, P&C and group life insurance • NOK 4.4bn in portfolio premiums
Retail bank • Internet Bank • NOK 47bn of net lending
Reporting structure The Group is divided into the segments Savings, Insurance, Guaranteed Pension and Other.
Insurance is responsible for the Group’s risk products in Norway and Sweden and provides health insurance in the Norwegian and Swedish corporate and retail markets, property and casualty insurance and personal risk products in the Norwegian retail market and employer’s liability insurance and pension-related insurance in the Norwegian and Swedish corporate markets.
Other: The result for Storebrand ASA is reported here, as well as the result for the Company portfolios and small subsidiaries of Storebrand Life Insurance and SPP. In addition, the results associated with lending to commercial enterprises by Storebrand Bank and the activities of BenCo are reported in this segment.
Previous positions 2006–2015: CIO, Storebrand Asset Management 2002-2006: Head of Asset Allocation,
Number of shares as of 31 December 2018: Wenche Annie Martinussen (1968) Executive Vice President, Retail Market Norway
Individual modules in the Master of Management in E-commerce and Master in Business and
Number of shares as of 31 December 2018: Karin Greve-Isdahl (1979) Executive Vice President, Communications,
1995–2001: Senior Vice President Pizza and various marketing positions, Orkla Foods AS
Three strategic focus areas In order to ensure that we have a comprehensive and longterm approach to how we create value for our shareholders, customers, employees and society at large, we conducted a materiality analysis in 2017. Through this, we defined our main focus areas and the associated issues that we are going to solve. It is essential that we manage these issues in a good way.
Storebrand’s ambition is to build a world-class savings group, supported by insurance. We will create first-class customer experiences in the core areas of savings and pensions. We aim to help our customers insure their lives and assets, so that they can build a future that they can look forward to. Our foundation is based on our position in the corporate market as Norway’s leading provider of occupational pensions, and as an offensive challenger in the Swedish market. People are living longer and receiving less from the government, and our customers must save more in the years to come. We offer a broad palette of savings solutions, and through simple and accessible digital advisory services, we will motivate customers to take charge of their own savings and future.
Our strategy is based on a genuine commitment to a sustainable society and strong belief in sustainable investments. Through the management of over NOK 700 billion, we create a long-term return for both our owners and customers, and we make sure that our activities support a more sustainable world.
our capital shall be managed sustainably with a long-term perspective and give competitive return for our customers - Provide competitive returns to our shareholders and customers - A driving force for sustainable investments - An active owner
• Provide a return to the owners and customers • A driving force for sustainable investments • An active owner
The three focus areas are relevant to our three most important strategic goals: a leading position in occupational pensions, unique positioning in the private savings market and asset management with strong competitive advantages and growth opportunities.
Altogether, the focus areas give us a clear prioritisation of the long-term challenges and how we will work with these going forward.
Supporting the UN Sustainable Development Goals A sustainable business model means that we must deliver a return to our owners and customers, while creating positive ripple effects for our society and managing our business activities in a way that does not deprive future generations. At Storebrand we believe that sustainability and profitability go hand in hand. Storebrand, and the business community in general, are dependent on both a well-functioning society and markets in order to succeed.
• We help our customers to live more sustainably. We do this by managing our customers’ money in a sustainable manner, in addition to providing sustainable financing and insurance.
• We collaborate to achieve the UN Sustainable Development Goals with our customers, suppliers, the authorities and partners.
As an asset manager of more than NOK 700 billion on behalf of our customers, Storebrand contributes first and foremost to the realisation of the UN Sustainable Development Goals through defining requirements for the companies we invest in, investing in solution-oriented companies and influencing the companies we are owners in through active ownership.
Storebrand has also identified two sustainability goals in which we can make a difference through our Group business activities. Sustainability Goal 8, decent work and economic growth, shall ensure access to and an understanding of financial services. Storebrand is trying to encourage more people to save for their pensions and secure their own personal finances. Through our business activities, Storebrand will also contribute to achieving Goal 5, gender equality. 5)
Why As a listed company, Storebrand’s most important goal is to generate a return for our shareholders. The return shall be created in a sustainable manner and contribute to positive ripple effects for society.
Goals and ambitions Storebrand’s ambition is to create an attractive and competitive return through dividends and the creation of value. The goal is to pay a dividend of more than 50 per cent of the group profit after tax. The Board’s ambition is to ensure that the ordinary dividend per share shall at least be at the same nominal level as the previous year. Ordinary dividends will be paid with a sustainable solvency margin of more than 150 per cent. If the solvency margin is over 180 per cent, the Board’s intention is to propose an extraordinary dividend or buyback of shares. Furthermore, Storebrand has an ambition to continue profitable growth in priority growth areas. The Group’s goal is to deliver at least a 10 per cent return on equity overall.
Storebrand has the following operational goals: • Maintaining the market leader position in occupational pensions in Norway
Initiatives Storebrand continued its focus on Savings and Insurance throughout 2018. Several initiatives were carried out to increase growth and profitability. The integration with SKAGEN laid the foundation for a common operating platform and best practices with customers. We developed our digital advisory services and savings solutions. In SPP, the new advisory service tools and an improved welcome process for new customers contributed to raising the premium volume by 29 per cent compared with the previous year. Our management solutions are divided into three main categories: affordable index solutions, price-effective factor funds and narrow fund strategies that seek to generate a return greater than the market risk. All our savings solutions contain stringent sustainability requirements.
We believe that companies that take sustainability seriously will become more profitable over time. Such companies see and manage risk better, and they understand new investment opportunities when the trends change. For example, it will be more expensive for carbon intensive companies to raise capital if more investors have stringent carbon footprint requirements. In addition, there are an increasing number of new regulations that reinforce the risk of causing large carbon emissions, such as higher prices for CO2 quotas.
As an investor, we see great potential in future-oriented companies that develop more efficient renewable energy production and new energy consumption and distribution solutions. Such companies are better positioned to meet global challenges, achieve good results and deliver a good return to Storebrand as an investor. The same applies to companies with good anti-corruption systems that respect human and labour rights.
Storebrand aims to reduce greenhouse gas emissions from the companies we invest in and reports on our efforts in “The Portfolio Decarbonisation Coalition”. We also push for portfolio companies to use standardised reporting measures to
STOREBRAND ANNUAL REPORT 2018 disclose climate risk towards investors and other stakeholders. We are a driving force for recommendations to The Task Force on Climate-related Financial Disclosures (TCFD), and our goal is to report comprehensively in accordance with this framework by 2020. Read more about this below.
Initiatives Our entire portfolio is screened for sustainability. Since 2013, we have had a strict policy regarding investments in the coal industry. This policy was further tightened in 2018.
In 2018, we launched Wave, three custom portfolios that invest exclusively in companies that contribute to solving global challenges related to renewable energy, sustainable cities and gender equality. We assess all companies in our investment universe with respect to gender equality. In addition to assessing whether the companies have a policy to prevent gender discrimination, we assess whether they have initiatives to contribute to UN Sustainable Development Goal Number 5 (equality) and 8 (decent work). Only companies with high scores are selected for the Wave portfolios.
Storebrand was also recognised for its focus on sustainability. In 2018, Storebrand came in second in the Ethical Bank Guide’s ranking of sustainable financial institutions. Storebrand’s Swedish subsidiary, SPP, received the top ranking for sustainable investments, by both Max Matthiessen, Söderberg & Partners and the Sustainable Brand Index (best of the pension companies).
For the results from our climate risk work, see the separate section.
8) The definition is based on TCFD. The fund’s total carbon footprint is the sum total of the companies’ carbon emissions relative to the companies’ revenues, weighted for our ownership in the respective companies. The unit of measurement shows thus carbon emissions per million in the fund currency in NOK.
Already in 2013, Storebrand withdrew from companies with more than 30 per cent of their business activities in coal. Up until 2026, the Group, in accordance with the advice of the UN Climate Panel, will gradually take steps to reduce the percentage to five per cent, in practice zero coal.
In connection with the announcement, Storebrand encouraged other investors to tighten their coal criteria and get rid of coal-exposed investments by 2026.
The report from the UN Climate Panel is crystal clear. In order to achieve the goal of limiting global warming to 1.5 degrees above the preindustrial level in 2100, the use of coal must be close to zero in 2050. In advance of the climate summit in December 2018, Storebrand announced its action plan for zero coal by 2026.
Storebrand’s exposure to climate risk shall be reviewed by the Board twice a year, as part of the process for our own risk and solvency assessment (ORSA). So far this has been a qualitative assessment. A process has been initiated to integrate climate risk into our structured risk assessment framework. This work is to be completed in 2019.
The Executive Vice President for Communications, Sustainability and Industrial Policy has overall responsibility for climate risk at the corporate level. Responsibility for risk mapping and management is delegated to the business areas. The most significant risks are related to asset management, the property portfolio, and property and casualty insurance.
• Pilot project under the auspices of UNEP FI: Storebrand’s participation in the TCFD project for investors includes the development of a special risk model for property investments. In 2019, the tool will contribute to the mapping and scenario analysis of physical risk and transitional risk.
10) TCFD stands for Task Force on Climate-related Financial Disclosures and is a recommended reporting framework for climate risk.
Property and casualty insurance The greatest financial climate risk for property and casualty insurance is considered to be physical risk in the form of increased payments related to climate-related damage. In the long term, rising sea levels and long-term changes in the weather patterns also may have an impact. In addition, we believe that transitional risks, such as changing customer behaviour, technological developments and changing regulations, will affect the property and casualty insurance area.
In 2018, the Board and the management of our property and casualty insurance operations have simulated the effects of flood scenarios, assessed how climate conditions should be included in risk assessment and pricing in the underwriting process, as well as how recourse and dialogue can be used to influence municipalities and authorities. In 2019 quantitative mapping of risk exposure will be carried out and transitional risk will be assessed. The following initiatives have been implemented: • Pilot project under the auspices of UNEP FI: Storebrand participates as one of 18 insurance companies to further develop standardised reporting in accordance with the TCFD framework through scenario analysis, financial modelling and key figures for climate-related risk and opportunities.
• Recourse and dialogue with municipalities: employment of own resources to focus on recourse and dialogue with municipalities related to climate-related claims settlement.
• Scenario analyses with climate risk in connection with Storebrand’s process for risk and solvency assessment (ORSA)
Key measurement parameters and initiatives The Group is working to develop a structured framework for assessing and managing climate-related risk. This will specify responsibilities, procedures, key figures and reporting by business area. Today, these climate risk-related indicators are followed up at the corporate level: • Carbon intensity in securities investments and direct property investments
• Share of AUM invested in solution companies, cleantech and renewable energy
• Share of AUM in direct property investments that are environmentally classified in accordance with the BREEAM standard12)
Approach We exercise active ownership by voting at general meetings and through direct dialogue with the companies’ management and boards. We also vote through proxies. In addition, we express our views to relevant authorities. We prioritise direct dialogue with the companies when we believe that this is the most effective way of influencing. Through participation in the UN Principles for Responsible Investments (UN PRI), we work with other investors to put pressure on the companies in the areas of climate and deforestation, among other areas.
Goals and ambitions Our ambition is to be a strong driving force to achieve lasting changes in the way companies are managed. To meet the requirements of the Paris Agreement, in 2018 we prioritised dialogue with companies that are specifically exposed to climate risk or have business activities that contribute to global warming. This way, we contributed to reducing risk and creating value on behalf of our customers. Going forward, we will step up our efforts to prevent deforestation and impose stricter investment criteria for companies that are involved in the production of beef, soy and palm oil, by requiring the implementation of a zero deforestation policy. We have 100 per cent environmentally certified property management,13) and our goal is to ensure that all individual properties are environmentally classified in accordance with the BREEAM standard. 14)
An active owner 13) Our property investments and all management services procured are ISO or Eco-Lighthouse certified.
pating as a lead investor in three different UN PRI initiatives that deal with soy, cattle and palm oil. Last year we also developed a new deforestation policy that will be launched in 2019.
In 2018, we also started to use proxy votes in order to influence international companies.
Results We contacted, on our own and in cooperation with other investors, 314 companies to influence their business activities in a sustainable direction. Our dialogue led to new initiatives for the monitoring of deforestation caused by palm oil suppliers, better follow-up of methane leakage with some oil and gas companies, as well as voluntary pledges related to methane emissions in the oil and gas industry. Our talks also led to several companies engaged in soy and cattle production improving their deforestation policy.
One telecommunications company was included in the portfolio following an extensive dialogue to get the company to withdraw from authoritarian countries that used telecommunications companies to monitor the population as a basis for persecuting the opposition and journalists.
During 2018, Storebrand voted several times against the management’s proposals in companies we had invested in. We also voted in several cases against the management’s recommendation in relation to proposals put forth by shareholders. Examples of such proposals were the study of climate risk and the mapping and exposure of costs related to climate adaptation, the mapping of equality and wage conditions, as well as the public disclosure of costs related to lobbying or political donations.
“Our ambition is to be a strong driving force to achieve lasting changes in the way companies are managed.”
Key performance indicators Key performance indicators Result 2017 Goal 2018 Result 2018 Goal 2020 Goal 2025
Bn NOK invested in fossil free products III) 60 N/A 68 TBA TBA
Total AuM invested in solution companies, cleantech and renewable energy IV) 1.8% 2.0% 1.9% 3.0% 4.0%
Carbon footprint in equity investments: Tonnes CO2e per 1 million of sales income NOK/SEK (vs Index) V) 28/18 N/A 22(32) N/A N/A
Investments in green bonds, bn NOK/share total AuM NEW NEW 8,4/2,9% TBA TBA
Number/share of companies excluded from the investment universe NEW NEW 171/5,9% N/A N/A
Number/share of companies that have been contacted to discuss ESG through active ownership NEW NEW 314/10,8% N/A N/A
Water consumption, property management (Norway) m3/m2 0.35 0.34 0.382 0.34 0.32
38 Lifelong savings 39 IPS 40 Engaging, relevant and responsible advisory services 42 Digital trust 43 Simple and digital customer experiences 44 Gajda 44 Key performance indicators
Individuals have been given greater responsibility for their own pension finances through changes in the Norwegian pension system. Public awareness of individual responsibilities is increasing. Life expectancy is longer, putting the welfare system under pressure, and people understand that they cannot expect as much help from the government as before.
The relationship between employers and employees is an opportunity to reinforce the understanding of pension savings. We therefore actively collaborate with our corporate customers to share knowledge and advice that can help their employees make smarter choices.
Customers shall rest assured that we manage their savings professionally and sustainably, contributing to a good return.
Results Since 2013, about 420,000 people have obtained an overview of their expected pension using My Pension Figure at storebrand.no. In 2018 alone, more than 200,000 customers found their pension figures using the tool.
In 2018, more than 25,000 of our customers established a new savings agreement or expanded their savings scheme with us. Among these, more than 80 per cent had checked their pension figure first. This shows that the overview and advice we provide in connection with the pension figure
The Norwegian pension reform resulted in a financially sustainable and secure pension system. The pension level will be influenced more by events and choices during working life. To ensure a secure financial future, pension planning and savings are more important than ever. In the autumn of 2017, a tax-favoured savings scheme, Individual Pension Savings (IPS), was improved. Storebrand became one of the market leaders during the first year of the regime and grew an additional 30 per cent in 2018. By year-end 2018 we managed nearly 18,000 IPS agreements. A total of 77 per cent of Storebrand’s IPS customers have a monthly savings agreement, which represents average savings of NOK 19,000 annually. Women account for 45 per cent of the agreements and save almost as much as men in this scheme, which is a higher percentage than for other forms of savings.
contributes to increasing numbers of people starting or ramping up their own pension savings.
Our customer centre received close to 80,000 inbound customer inquiries concerning pensions and savings in 2018. Overall, the Storebrand Retail Market reported profitable growth of 40 per cent in 2018 – proof that our commitment to loyalty customers and our shift towards the retail market have been successful.
Why Pensions and insurance are perceived by the general public as complicated. It can be difficult to understand which agreements and rights are collective and which are personal, as well as which conditions apply to the various agreements. If we are to succeed with our strategic goal of creating first-class customer experiences in the area of savings and pensions, we must take this challenge seriously.
Relevant and responsible advisory services are the main prerequisites for customer satisfaction. We must guide our customers to buy products and services that are relevant and appropriate for their particular life situation. If we do this effectively, we contribute to our vision of having “our customers recommend us”.
• Enthusiastic – I radiate positive energy and I exceed expectations
High ethical standards, good advisory services and other customer care practices, as well as relevant and updated expertise, are fundamental whenever we meet our customers. Our advisers are authorised either through a national authorisation scheme for financial advisers (AFR) or the approval scheme for salespersons and advisers in the area of property and casualty insurance (GOS). Both regimes are governed by the Financial Services Industry.
Goals and ambitions We focus on delivering engaging and excellent customer experiences both in our efforts to attract new customers and to ensure customer satisfaction. We aim to be known for having the best sustainable savings and pension solutions. In Norway, our goal is to have the best annual improvement on the Sustainable Brand Index, whereas our goal in Sweden is to be ranked number 1 in the industry (corporate market).
Our ambition is to become the industry leader in experienced customer satisfaction, which is measured through the Net Promoter System (NPS). Our ambition for 2018 was to be in the top three. In addition, we aim to improve customer loyalty by increasing the number of customers buying several products from Storebrand.
GOS authorisation, a corresponding approval scheme for insurance advisers. We have a total of 75 savings advisers and 56 insurance advisers.
An authorisation package for all Storebrand Bank advisers is planned for 2019.
In the retail market, we maintained an NPS score corresponding to fourth place in 2018. Our goal for the year was to make top three. In Sweden, SPP was number seven in the NPS ranking, while our goal was to be number three.
In the market for transferable savings19), Storebrand had a market share of 20.8 per cent in 2018.
19) Free funds (Retail Market), individual pensions, individual capital, Pension Capital Certificates (PKB), and paid-up policies with investment options (FMI).
Approach Storebrand’s guidelines for the processing of personal data contain principles for digital trust, such as lawful and transparent processing, purpose limitation, rights of data subjects, and requirements for built-in privacy protection.
Our employees answer phones and e-mail, process applications and act as representatives of Storebrand. Therefore, training and follow up of employees who receive and process the information, in addition to ensuring good digital security mechanisms, are key elements in building digital trust.
Storebrand assesses the ongoing privacy risk we may expose our customers to. When processing personal data that represent a high level of privacy risk, we consider the privacy consequences.
Initiatives In 2018, we developed and strengthened our work to ensure with privacy protection and digital trust through a groupwide programme aimed at adapting Storebrand’s processing of personal data to the requirements of the new General Data Protection Regulation (GDPR).
We also introduced initiatives to strengthen our expertise in the area of privacy protection for both employees and customers. Examples include digital training for all our employees and managers, an information film about privacy protection for our customers, simplified consent and a new privacy statement. In 2018, 89 per cent of our employees started such training.
Why Of all the changes affecting our industry, technology developments and digitalisation are probably the greatest. Technology affects our entire business: our customers’ behaviour and expectations, opportunities to deliver services to customers, opportunities to automate and transform how our products are delivered and function. Digitalisation enables new business models and partnerships, and it provides new opportunities and threat pictures.
By maintaining a close relationship with our customers, we can understand their behaviour, challenges and problems. Through efficient use of new technology and ways of working (Cloud, Machine Learning, Big Data, Mobile, Flexible, Service Design, etc.), we can solve these problems in a smarter, faster and better way.
Goals and ambitions We have an overall goal to increase digital sales and the use of our digital services, as well as to improve customer satisfaction. For 2018, our goal was 100,000 digital sales. Our digital customer experience is measured through the Net Promotor System (NPS), in which the customer gives a score from 0 to 10, with 10 as the best result. The goal for 2018 was to have as many positive (9–10) feedback responses as negative responses (0–6).
Results As many as 570,000 customers – 47 percent 21) – used our digital solutions in 2018, an increase of 30 per cent compared with 2017. The use of the savings solution My Pension Figure increased the most.
The total volume of digital sales in 2018 reached 118,000, corresponding to 43 per cent of total sales. This was significantly above the targeted level. The result was an increase of more than 65 per cent compared with 2017, and almost triple compared with 2016. Savings reported the highest volume of digital sales.
The partnership with Dreams resulted in one of the market ’s most popular savings services. At the end of the year, Dreams reported more than 100,000 downloads in Norway, and it was the second most popular app in the category “Finance” in the App Store.
Dow Jones Sustainability Index Not included Included Not included Included Included
Net Promoter System Norway Retail Market #4 Top 3 #4 Top 3 Top 3
Market position for Occupational Pensions Corporate Market #1 #1 #1 #1
48 A culture for learning 49 Committed and courageous employees 50 Diversity and equal opportunities 51 Storebrand ranks high on the equality index 52 Good environmental and working conditions throughout the entire value chain 53 Order in our own house 54 Key performance indicators People and Systems
Why Digital transition has enabled the development of products and services at a rate that the finance sector has never previously seen. Our employees are our most important resource for delivering on ambitious business goals. Continuous learning to understand our customers’ needs is required to ensure competitiveness in an industry undergoing rapid change. We therefore recruit and develop committed and courageous employees dedicated to finding the best solutions for our customers.
Approach Storebrand shall facilitate the development of our employees in their daily work. Greater breadth and diversity in the expertise of employees will contribute to growth and the ability to change. Digital skills, knowledge of customer preferences and insight into market developments are important to the success of Storebrand.22) A higher pace in working life requires employees who can exercise self-management and continuously acquire new knowledge through interdisciplinary collaboration in order to create the best customer experiences.
Our summer internship programme Sandbox received in excess of 300 applications in 2018. Ten students were accepted. The students had backgrounds in economics, technology, psychology, communications and design.
Why Storebrand’s employees are our most important source of innovation, development and growth. Employees who dare to innovate and challenge the organisation are essential if we are to realise our goal of becoming a world-class savings group.
Goals and ambitions Our ambition is to strengthen employee satisfaction, job satisfaction and engagement through meaningful work, good management, a motivating working environment, development opportunities and trust in the management. Our managers shall set a clear direction and encourage employees to choose for themselves how to achieve their goals.
In 2019, mandatory ethics training will be offered via our HR system, Workday. All employees must review the pro-
Committed and courageous employees gramme annually and confirm that they have read and understood the content. All new employees receive information about the ethical rules.
Why It is important that Storebrand’s organisation and business activities reflect the customers and market in which we operate. We believe that diversity contributes to an increased rate of innovation and a broader understanding of the breadth of the customer base. Our sustainability analyses also show that companies that focus on diversity are more innovative and profitable. Storebrand works systematically to ensure diversity and equality through clearly defined processes in recruitment, reorganisation, salary adjustments and offers of management training and other development initiatives.
Approach All Storebrand employees are treated equally, regardless of their age, gender, disability, cultural background or sexual orientation. Individual qualities should be respected and valued, and we encourage age diversity among our employees. Age shall not be a decisive criterion, neither in recruitment processes nor later in the employment relationship.
We make a conscious effort to ensure that all employees are satisfied regardless of their cultural backgrounds. No form of discrimination is accepted. There shall be a good balance between women and men at all levels of the Company.
Storebrand has been an inclusive workplace enterprise since 2002, and the Group’s managers have established fixed routines for the inclusive follow-up of employees in the event of illness.
We shall contribute to the UN Sustainable Development Goals of gender equality, especially equality in the workplace. Our goal is a 50/50 distribution of men and women in leading positions, and an equal distribution of men and women in our management development programmes, as well as recruitment processes for management positions. Storebrand has the goal of equal pay for equal work.
In 2018, 56 per cent of Storebrand ASA’s board members were women. Three of the nine members (33 per cent) of the executive management team were women. Among the managers who reported directly to the executive management, 54 per cent were women, while women accounted for 44 per cent of all the managers in the Group.
The same number of women and men participated in the management development offerings of the Storebrand Academy and Storebrand Leadership Weekly, as well as in the Sandbox programme for summer interns.
The Group salary levels were reviewed in cooperation with the elected representatives in connection with the salary adjustment process for 2018. We observed a slightly lower average salary for women than for men.
The average age in the Storebrand Group was 43 at the end of the year. Average seniority was 12 years in Norway and ten years in Sweden. The Storebrand Group had a total of 1,765 employees as at 31 December 2018. 24)
In the spring of 2018, She Community Norway, asked Norway’s 50 largest listed companies to participate in an index showing how they work with equality in management, what the gender balance is on the Board and top management levels and what they do to ensure equal rights for men and women.
Share of female leaders level 1-3: Women’s share of men’s salary, senior management*
The focus on working conditions in the supply chain is important for safeguarding human rights, as well as for climate and environmental considerations.
Our procurement policy is based on the Group’s governing documents.25) The governing documents and associated routines are revised and updated annually. Sustainability is an important part of evaluating new offers and is weighted at least 20 per cent.
The most important and largest purchases we make are for the outsourcing of IT and business processes, health care services, claims settlement and management of direct property investments. We consider the areas with the greatest risk and opportunities for influencing sustainability to be
Initiatives We follow up our requirements for suppliers, both new and existing, as an integral part of our procurement processes. Sustainability is part of our requests for tenders that the supplier must answer. Sustainability is part of our evaluation of offers and negotiations, as well as in the signing of contracts, where all new suppliers must sign “Storebrand’s Standard Annex for Sustainability”.
We continuously follow up strategic suppliers in the largest procurement categories. In addition, ongoing action is taken against suppliers who violate the Storebrand standard for sustainable investments and are excluded from our investment universe. In 2018, one technology provider was excluded on this basis.
Waste sorting, head offices (sorting rate) 82% 78% 72% 79% 80%
Scope 2 per employee (tonnes of CO2 per employee) NEW NEW 0.13 TBD TBD
Scope 3 per employee (tonnes of CO2 per employee) NEW NEW 0.6 TBD TBD
See more detailed definitions in section 9 Sustainability data, page 212.
Senior management, women's share of men’s salary per position category (Hay Grade 21-24) I) 107% 100% 100%
Shareholder matters Foreign ownership As at 31 December 2018, foreign ownership totalled 56.3 per cent, compared with 57.1 per cent at the end of the 2017.
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 2018 was NOK 2,339.1 million. The Company has 467,813,982 shares with a nominal value of NOK 5. As at 31 December 2018, the Company owned 431,140 treasury shares, which corresponds to 0.09 per cent of the total share capital. The Company has not issued any options that can dilute the existing share capital.
Shareholders Storebrand ASA is among the largest companies listed on the Oslo Stock Exchange measured by the number of shareholders. The Company has shareholders from almost all the municipalities in Norway and from 48 countries. In terms of market capitalisation, Storebrand was the 13th-largest company on the Oslo Stock Exchange at the end of 2018.
Average daily turnover (1000s of shares) 3,094 2,450 2,780 2,820 2,185 2,286
Number of ordinary shares 31/12 (1000s of shares) 467,814 467,814 449,910 449,910 449,910 449,910
Capital gains taxation From 2016, new rules came into force in Norway concerning the taxation of dividends and gains on shares held by private individuals. The shareholder model entails that share dividends over the standard dividend tax exemption multiplied up by an adjustment factor (1.33 for the 2018 income year) are taxed as ordinary income for the personal shareholder (the tax rate is 23 per cent for the 2018 income year, which, together with the adjustment factor, gives an actual taxation of 30.59 per cent).
General meeting Storebrand has one class of shares, each share carrying one vote. The Company holds its Annual General Meeting each year by the end of June. Shareholders who wish to attend the General Meeting must notify the Company no later than 4:00 p.m. three business days before the General Meeting. Shareholders who do not give notice of attendance before the deadline expires will be able to attend the General Meeting, but not vote.
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.
Arne Fredrik Håstein (1973) Employee-elected board member Storebrand ASA since 2014
Risk Committee Chairman Martin Skancke Members Didrik Munch Ingvild Pedersen (Employee-elected)
Compensation Committee Chairman Didrik Munch Members Laila S. Dahlen Arne Fredrik Håstein (Employee-elected)
Statement in accordance with the Norwegian Code of Practice for Corporate Governance The statement below describes how Storebrand complies with the 15 sections of the Code of Practice.
2. Business (No deviations from the Code of Practice) Storebrand ASA is the parent company in a financial group, and its statutory object is to manage its equity interests in Storebrand’s subsidiaries in compliance with the current legislation. Storebrand’s main business areas encompass pensions and savings, insurance and banking. The Articles of Association are available in their entirety on the Storebrand ’s website www.storebrand.no.
Storebrand aims to be a world-class savings group that delivers better pensions – simple and sustainable. Storebrand ’s strategy and corporate values are described in the framework “Our driving force” which represents a common policy for how Storebrand will deliver attractive results to customers and owners.
Storebrand’s strategy is to deliver profitable growth within established focus areas through simple and sustainable solutions. The Board conducts ongoing evaluations of the goals, strategy and risk profile. More information about “Our driving force” and focus areas can be found in the section on Storebrand in the annual report.
Storebrand has its own code of ethics. Guidelines for whistle -blowing, social events, combating corruption, etc. have also been established.
3. Equity and dividends (deviations from the Code of Practice) The Board of Storebrand ASA continuously monitors Storebrand ’s capital adequacy in light of its goals, strategy and risk profile. Read more about Storebrand’s capital situation and capital adequacy under the heading “Capital situation, rating and risk” in the Directors’ Report.
Storebrand ASA would like to have various tools available for its efforts to maintain an optimal capital structure for Storebrand to contribute to good shareholder returns and financial resilience. At the 2018 Annual General Meeting, the Board was granted authorisation to increase the share capital through issuing new shares for a total maximum value of NOK 233,906,991. This authorisation may be used for the acquisition of businesses in consideration for new shares or for increasing the share capital by other means. The Board of Directors may decide to waive the shareholders ’ preferential rights to subscribe for new shares in accordance with the authorisation. This authorisation may be used for one or more new issues. This authorisation is valid until the next Annual General Meeting.
At the same General Meeting, the Board of Directors was authorised to buy back shares for a maximum value of NOK 233,906,991. The total holdings of treasury shares must, however, never exceed 10 per cent of the 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, each year Storebrand ASA sells shares to employees from its own holdings in connection with the share purchase scheme and long-term incentive schemes for employees of Storebrand. Accordingly, it is appropriate to authorise the Board of Directors to buy shares in the market to cover the aforementioned needs or any other needs. This authorisation is valid until the next Annual General Meeting. Otherwise, there are no provisions in Storebrand ASA’s Articles of Association that regulate the buyback or issuance of shares.
The general competence rules for board members and executive personnel may be found in the rules of procedure for the Board of Storebrand ASA, rules of procedure for the boards of subsidiaries, instructions for the CEO, guidelines for conflicts of interest and Storebrand’s code of ethics. Board members must inform the company if they have direct or indirect material interests in an agreement concluded by one of the companies in the Storebrand Group. The Board shall ensure that an independent third party assesses the value of transactions that are not insubstantial in nature. Furthermore, the rules of procedure for the Board stipulate that no board member may participate in discussions or a decision concerning matters that are of such material importance to them or a close associate that the member must be regarded as having a conspicuous personal or special financial interest in the matter. Each board member has a responsibility to continuously assess whether or not such a situation exists. Transactions with close associates involving Storebrand’s employees and other officers of the Group are regulated by Storebrand’s code of ethics. Employees shall on their own initiative immediately report conflicts of interest that may arise to their immediate superior as soon as they become aware of such a situation.
In general, an employee is defined as disqualified if circumstances exist that could result in others questioning the person’s impartiality in relation to matters other than Storebrand’s interests.
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.
All shareholders may participate at the General Meeting. Storebrand’s Articles of Association allow shareholders to vote in advance by means of electronic communication, cf. section 5-8b of the Norwegian Public Limited Companies Act. The arrangement therefore gives the shareholders an opportunity to vote without being represented at the General Meeting. As many shareholders as possible are thus allowed to exert an influence on Storebrand by exercising their voting rights.
The Chairman of the Board, at least one representative from the Nomination Committee and the external auditor must attend the General Meeting. The board members of Storebrand ASA are not obligated to attend, but are encouraged to attend. The Group Chief Executive Officer, executive management team and the Group Legal Director participate from the management. The minutes of the General Meeting are available on Storebrand’s website in both Norwegian and English. The General Meeting is opened by the Chairman. The Board of Directors endorses an independent meeting chairman elected by the General Meeting.
The General Meeting shall: • consider the annual accounts, consisting of the income statement, the balance sheet and the annual report, • including the consolidated income statement and bal- ance sheet, and the auditor’s report, • decide upon adoption of the income statement and bal- ance sheet, • decide upon adoption of the consolidated income state- ment and balance sheet, • decide upon the allocation of profit or manner of cover- ing losses in • accordance with the adopted balance sheet, and upon the distribution of dividends, • elect the auditor, • appoint members to the Nomination Committee, and this should include the Chairman of the Nomination Committee, • elect members to the Board of Directors, and this should include the Chairman of the Board Directors, • consider the Board’s statement on the fixing of salaries and other remuneration to executive personnel, • adopt the remuneration of the members of the Board of Directors and board committees, • adopt the remuneration of the members of the Nomi- nation Committee, • adopt the remuneration of the auditor, • and transact any other business listed on the agenda.
Decisions are generally made on the basis of an ordinary majority. Pursuant to Norwegian law, however, a special majority is required for certain decisions, including decisions about setting aside pre-emptive rights in connection with any share issues, mergers, spin-offs, amendments to the Articles of Association or authorisations to increase or reduce the share capital. Such decisions require approval by at least two-thirds of both the votes cast and the share capital represented at the General Meeting.
7. Nomination Committee (No deviations from the Code of Practice) Storebrand ASA’s Articles of Association regulate the Nomination Committee, which consists of four or five members and an observer elected by the employees. For 2018–2019 election period, the Nomination Committee has four members.
The majority of the Nomination Committee is independent of the Board of Directors and the management. The Nomination Committee is composed with a view to safeguarding the interests of the community of shareholders. In the General Meeting’s rules of procedure for the Nomination Committee, there are provisions concerning the rotation of members of the Nomination Committee
The Articles of Association stipulate that the Nomination Committee should work in accordance with the rules of procedure adopted by the General Meeting. The Nomination Committee’s rules of procedure were adopted at the 2018 Annual General Meeting. In accordance with the rules of procedure, the Nomination Committee shall, for example, give attention to the following when preparing nominations for representatives for the companies’ governing and controlling bodies: expertise, experience, capacity, gender distribution, independence and the interests of the community of shareholders. More information about the members has been published on Storebrand’s website. The Nomination Committee annually writes to the Company’s 30 largest shareholders with an invitation to suggest candidates for the Board of Directors and Nomination Committee. A corresponding request to the shareholders is published on the company’s website.
An attempt is made to adapt the remuneration of the members of the Nomination Committee to the nature of the tasks and time spent on committee work. The Nomination Committee held 14 meetings in 2018.
8. The composition and independence of the Board of Directors (No deviations from the Code of Practice) The Articles of Association stipulate that between five and seven Board members shall be elected by the General Meeting based on nominations from the Nomination Committee. The Board Chairman shall be elected by the General Meeting.
Two members, or three members if the General Meeting elects six or seven board members, shall be elected by and from among the employees. The board members are elected for one year at a time. The day-to-day management is not represented on the Board of Directors. At the end of 2018, the Board consisted of nine members (four men and five women).
9. Work of the Board of Directors (no deviations from the Code of Practice) Duties of the Board of Directors In 2018, eleven board meetings were held, of which two meetings were conducted at the subsidiary SPP in Stockholm. Storebrand’s future strategy is discussed at the Board’s annual strategy meeting, which establishes guidelines for the management’s preparation of plans and budgets in connection with the annual financial plan, which must be approved by the Board.
The Board shall stay informed about Storebrand’s financial position and development, and it shall ensure that the Company’s value creation and profitability are safeguarded in the best possible manner on behalf of the owners. The Board shall also ensure that the activities are subjected to adequate control and ensure that Storebrand has adequate capital based on the scope of, and risks associated with, its activities.
The Board has established guidelines that give board members and senior employees a duty to familiarise Storebrand with the essential interests they may have in matters that the Board is to consider. This also applies to interests that do not imply disqualification, but which may be necessary to take into account when matters are considered. Reference is made to Item 4 above.
Board Committees The Board has established three subcommittees in the form of the Compensation Committee, Audit Committee and Risk Committee. The committees consist of three to four board members, two to three shareholder-elected board members and one employee-elected board member. The composition helps ensure a thorough and independent consideration of matters that concern internal control, financial reporting, risk assessment and 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. The committees are able to hold meetings and consider matters at their own initiative and without the participation of company management.
The Compensation Committee assists the Board with all matters concerning the Chief Executive Officer’s remuneration. The Committee monitors the remuneration of Storebrand ’s executive personnel and proposes guidelines for fixing executive personnel remuneration and the Board’s statement on the fixing of executive personnel remuneration, which is presented to the General Meeting annually. In addition, the Committee safeguards the areas required by the Compensation Regulations in Norway and Sweden. The Compensation Committee held three meetings in 2018.
10. Risk management and internal control (No deviations from the Code of Practice) Management and control The Board of Directors has drawn up general policies and guidelines for management and control. These policies deal with the Board’s responsibility for determining Storebrand’s appetite for risk and risk profile, approval of the organisation of the business, assignment of areas of responsibility and authority, requirements concerning reporting lines and information, and risk management and internal control requirements. The Board’s and Chief Executive Officer’s areas of responsibility are defined in the rules of procedure for the Board and the instructions for the Chief Executive Officer, respectively. The Board of Directors has drawn up instructions for Storebrand’s subsidiaries that are to ensure that they implement and comply with Storebrand’s management and control policies and guidelines.
Storebrand’s sustainability principles summarise how the work is an integral part of Storebrand’s overall goals and management and control processes. The principles were updated in 2018 and encompass all parts of Storebrand’s activities, including investments, product development, procurement, employee follow-up and internal operations. The principles are discussed in the Directors’ Report, under the heading Strategic highlights.
The Board adopts Storebrand’s sustainability goals and scorecard, which are followed up three times a year by the executive management. Storebrand also complies with the international reporting standard GRI (Global Reporting Initiative, version G4) and uses integrated reporting. The financial
Storebrand Compass is the company’s monitoring tool. It provides comprehensive reports for management and the Board concerning financial and operational targets. In addition, the Board of Directors receives risk reports from the risk management function, which monitors the development of key figures for risk, solidity, etc.
Risk assessment forms part of the managerial responsibilities in the organisation. Its purpose is to identify, assess and manage risks that can hinder a unit’s ability to achieve its goals. 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. Developments in the financial markets are important risk factors in relation to Storebrand’s earnings and solvency position. In addition to assessing the effects of sudden shifts in the equity markets or interest rate levels (stress tests), scenario analysis is used to estimate the effect of various sequences of events in the financial markets on Storebrand’s financial performance and solvency. This provides important premises for the Board’s general discussion of risk appetite, risk allocation and capital adequacy.
Financial information and Storebrand’s accounting process Storebrand publishes four interim financial statements, in addition to the ordinary annual financial statements. The financial statements must satisfy legal and regulatory requirements and be prepared in accordance with the adopted accounting policies and be published according to the schedule adopted by the Board of Storebrand ASA.
Storebrand’s consolidated financial statements are prepared by the Consolidated Accounts Unit, which reports to the Group Chief Financial Officer. Key managers in the Consolidated Accounts Unit have fixed annual compensation that is not influences by Storebrand’s accounting results. The division of work involved in the preparation of the financial statements is organised in such a way that the Consolidated Accounts Unit does not carry out valuations of investment assets. Instead it exercises a control function in relation to the accounting processes of the group companies.
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 (executive remuneration statement) is presented to the General Meeting. The executive remuneration statement shall clearly specify which guidelines are binding and which are advisory. The General Meeting shall vote separately on the binding and advisory guidelines. The remuneration consists of fixed salaries, variable remuneration, 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 long-term 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.
14. Takeovers (No deviations from the Code of Practice) 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. In addition, the Board of Directors 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.
15. Auditor (No deviations from the Code of Practice) The external auditor is elected by the General Meeting of Storebrand ASA and is responsible for the financial auditing. The external auditor issues an auditor’s report in connection with the annual financial statements and conducts limited audits of the interim financial statements. The external auditor attends board meetings in which interim financial statements are reviewed and all meetings of the Audit Committee, unless the items on the agenda do not require the presence of the auditor. The Board has decided that the external auditor must rotate the partner responsible for the audit assignment every seven years. The external auditor’s work and independence are evaluated annually by the Board’s Audit Committee. The auditor shall also meet with the Board of Directors at least once a year without the management being present. The other companies in Storebrand use the same auditor as Storebrand ASA.
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 that place considerable emphasis on sustainability. 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 Storebrand.
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.
Statement in accordance with Section 3-3b, second paragraph of the Norwegian Accounting Act A summary of the matters that Storebrand is to report on in accordance with Section 3-3b, second paragraph of the Norwegian Accounting Act follows here. The items follow the numbering used in the provision.
The provisions in the Articles of Association that regulate the appointment and replacement of board members are discussed in Item 8 above.
Provisions in the Articles of Association and authorisations granting the Board the authority to buy back or issue the Group’s own shares are discussed in Item 3 above.
78 Strategic Highlights 82 Group financial results for 2018 88 Capital situation, rating and risk 91 Regulatory changes 95 Organisation, working environment and expertise 96 Corporate governance 97 Official financial statment of Storebrand ASA
A world-class savings group supported by insurance Storebrand developed three overall strategic goals in 2018: To have a leading position in occupational pensions, develop a unique positioning in the private savings market and to be an asset manager with strong competitive advantages and good growth opportunities. Broad insurance offerings to both the retail and corporate markets are aimed at supporting our strategic goals.
We will create first-class customer experiences in our core areas of savings and pensions. We aim to help our customers insure their lives and assets so that they can build a future they can look forward to. Our foundation is based on our position in the corporate market as Norway’s leading provider of occupational pensions, and as a proactive challenger in the Swedish market. People live longer and receive less from the government. Therefore, our customers must save more in the years to come.
The Group’s strategy is based on a genuine commitment to a sustainable society and strong faith in sustainable investments. As a major asset manager, we create long-term returns for both our owners and customers, while at the same time ensuring that our activities support a more sustainable world. Storebrand’s and SPP’s sustainability work strengthens the Group’s competitive position, creating value for shareholders and positive ripple effects for society.
Storebrand’s sustainability principles summarise how our work is an integral part of Storebrand’s overarching objectives and management processes. The principles were updated and adopted by the Board in 2018 and encompass all parts of Storebrand’s activities, including investments, product development, procurement, employee and organisational development and internal operations.
• We are open about our work and our sustainability results.
Growth in Savings and Insurance Corporates, and their current and former employees, are the Group’s main target groups. Most defined benefit -based pension schemes in the private sector have been discontinued and new savings occur principally in defined contribution-based schemes. In the corporate market, Storebrand has maintained its position as the market leader in defined contribution pensions in Norway, with a market share of 31 per cent. In Sweden, SPP has a strong challenger role with a market share of 13 per cent for occupational pensions outside of the collective agreements. Our asset management offers a broad range of asset classes through the brands Storebrand, SKAGEN, SPP Fonder and Delphi to the institutional and retail markets. Throughout 2018, Storebrand’s commitment to sustainability was reinforced through a common sustainability policy for investments for all brands in the Group.
Storebrand’s insurance area is responsible for insurance products in Norway and Sweden for businesses and private individuals. Approximately 60 per cent of the premiums come from the corporate market and the remainder come from retail customers. Earnings and profitability improved significantly in 2018. Volume growth was moderate, and initiatives taken increased the growth rate early in 2019.
Dividend for 2018 The Board adopted a new dividend policy with effect starting from the 2018 financial year. The proposed dividend policy should reflect the strong growth in fee-based earnings, more volatile financial market-related earnings and future capital release from business with guarantees. The Board’s ambition is to pay a stable and increasing ordinary dividend in combination with extraordinary dividends. The expected release of capital will result in a higher distribution ratio over time. The Board will adjust the result in the case of non-operating extraordinary effects.
Storebrand’s dividend policy from 2018: Storebrand aims to pay a dividend of more than 50 per cent of Group result after tax. The Board of Directors’ ambition is to pay ordinary dividends per share of at least the same nominal amount as the previous year. Ordinary dividends are subject to a sustainable solvency margin of above 150 per cent. If the solvency margin is above 180 per cent, the Board of Directors intends to propose special dividends or share buy backs.
2018: 2018: 2018: 28) After tax, adjusted for amortisation of intangible assets. This document contains alternative performance measures (APM) as defined by the European Securities and Market Authority (ESMA). There is summary of the APMs used in financial reporting at storebrand.com/ir.
30) The income statement is based on reported IFRS results for the individual companies.
31) Results adjusted for the extraordinary tax effect discussed in Note 26.
Financial performance The market for defined contribution pensions is growing, and Storebrand’s reserves in Unit Linked increased by 7 per cent in 2018. Storebrand has a strong challenger role in the sale of pension solutions to Swedish companies through SPP. Good growth in defined contribution pensions is expected in future. Measures are being implemented to strengthen profitability in Unit Linked pensions.
Asset management is an important business area in the Savings segment. Asset management has underlying growth in reserves from the occupational pension market and good earnings improvement. The asset management platform is competitive and scalable for continued growth. The Guaranteed Pension segment is in long-term decline and the combined reserves for the guaranteed business are dwindling. However, there is still growth in the reserves related to paid-up policies, as a result of companies opting to convert their old defined benefit schemes to defined contribution schemes. It is expected that the growth in paid-up policies will decline in the future and that there will be flat growth in reserves over several years before the reserves start to fall. The paid-up policy portfolio contributes to a limited extent to the Group’s profit at the current interest rate level. Guaranteed reserves account for an increasingly smaller portion of the Group’s total pension reserves and were at 59.2 per cent at the end of the year.
Risk Market risk is the Group’s greatest risk. In connection with the Board’s ORSA process 31) , developments in interest rates, credit spreads, and share and property values are considered to be the greatest risks affecting the Group’s solvency. Storebrand has adapted to low interest rates by building up buffer capital. Over time, the level of the annual interest rate guarantee will be reduced. In the long term, sustained low interest rates would represent a risk of products with high interest rate guarantees incurring losses, and therefore it is important to be able to achieve a return that exceeds the interest rate guarantee of the products. Storebrand has therefore adjusted its assets by building a robust portfolio with bonds at amortised cost to achieve the guaranteed interest rate. For insurance risk, increased life expectancy and the disability rate trends are the factors that have the greatest influence on solvency. Operational risk is closely monitored and may also have a significant effect on solvency.
The insurance result had a combined ratio of 82 per cent (89 per cent). The dissolution of reserves had a positive impact on the result.
Overall, the operating profit for 2018 increased by 13 per cent 34) , driven by income from savings and good insurance results. The financial result is in line with expectations, given the low interest rate level.
Amortisation of intangible assets amounted to NOK 360 million in 2018. Amortisation of NOK 136 million related to the excess value associated with the acquisition of SKAGEN increased the level of amortisation in 2017. Ordinary depreciation of intangible assets is expected to be around NOK 100 million per quarter in 2019.
Events after the balance sheet date On 11 February 2019, Storebrand Asset Management signed an agreement to buy 100 per cent of the shares in the company Cubera Private Equity AS (Cubera). For more information, see Note 46 in the annual financial statements.
33) Adjusted for foreign exchange (NOK/SEK), but exclusive of income from SKAGEN for the comparative figures.
34) Adjusted for foreign exchange (NOK/SEK), but exclusive of income from SKAGEN for the comparative figures.
Insurance reported flat premium income. The insurance result was NOK 748 million for the year (NOK 608 million in 2017), with a total combined ratio of 82 per cent (89 per cent in 2017). The combined risk result gave a claims ratio of 66 per cent (70 per cent in 2017). The financial result reflects the low interest rate level and a conservative investment portfolio with an average rating of AA-.
The Other Segment consists primarily of financing and investment of the Company’s funds. In addition, some minor subsidiaries are reported here.
SAVINGS The Savings Segment encompasses products for pension savings without interest rate guarantees. The area includes defined contribution pensions in Norway and Sweden, asset management and banking products for retail customers.
Results Savings The result was NOK 1,267 million in 2018. SKAGEN was included with a result of NOK 259 million in 2017 and NOK 45 million in 2018. Adjusted for SKAGEN, the operating result for Savings increased by 2 per cent from 2017 to 2018. The earnings improvement is driven by volume and income growth.
The asset management business had NOK 14 billion under management in 2018, down from X in 2017. The decline was attributed primarily to a weaker SEK and volatile financial markets. At the end of 2018, assets under management amounted to NOK 707 billion, divided into securities funds, fund-in-funds and individual portfolios for insurance companies, pension funds, municipalities, institutional investors and investment companies. For assets under management, see the graph below.
INSURANCE Insurance is responsible for the Group’s risk products in Norway and Sweden. The unit provides health insurance in the Norwegian and Swedish corporate and retail markets, property and casualty insurance and personal risk products in the Norwegian retail market, as well as employer’s liability insurance and pension -related insurance in the Norwegian and Swedish corporate markets.
The insurance result was NOK 748 million (608 million), with a total combined ratio of 82 per cent (89 per cent in 2017). Insurance premiums declined by 0.5 per cent in 2018. The premiums declined in the retail market due to increased competition and changes in distribution. The Group increased distribution capacity towards the end of the year. It is expected that this will increase the premium volume. The premium level was stable in the corporate market. The claims ratio was lower, which was mainly explained by a satisfactory risk performance for disability and property and casualty products, as well as dissolution gains and the dissolution of reserves. The underlying profitability and efficiency were good and showed satisfactory performance.
The combined risk result gave a claims ratio of 66 per cent (70 per cent in 2017) and the underlying risk performance was very satisfying. Health insurance delivered good results due to good claims performance, especially in the Swedish portfolio. The result for employer’s liability insurance was good, driven by good risk performance and dissolution of reserves. Property and casualty insurance delivered a good underlying result, which was been further strengthened by the dissolution of reserves. Group disability pensions also reported a good result, which was driven by good disability performance in Norway. In addition, the dissolution of reserves had a positive impact on the result. Personal insurance maintained good profitability with marginal portfolio growth. The result for the Swedish risk products was lower as a result of the decline in premium income.
Balance sheet and market performance The Insurance Segment offers a broad range of products to the retail market in Norway, as well as to the corporate market in both Norway and Sweden. The profitability of the retail and corporate markets is considered to be satisfactory in general. To maintain profitability, Insurance must strive for competitive prices, simple and relevant products, and good coverage. The total premiums written for the segment at the end of 2018 amounted to NOK 4.5 billion, of which NOK 1.7 billion from the retail market and NOK 2.8 billion from the corporate market.
The corporate market is a more mature market with lower margins and a strong focus on price. Profitability in group disability pensions has grown stronger in recent years. However, there is fierce competition, which puts pressure on the margins. Health insurance is a growing market. In terms of premiums written, Storebrand is one of the market leaders in health insurance, where the profitability is also good. Storebrand is a relatively small player in the market for employer’s liability insurance, but the profitability is satisfactory. In Sweden, the disability trend has been declining for a long time, which has resulted in reduced premiums in general.
GUARANTEED PENSION The Guaranteed Pension business area encompasses long-term pension savings products that give customers a guaranteed rate of return. The business area covers defined benefit pensions in Norway and Sweden, paid-up policies and individual capital and pension insurance.
The premium income for Guaranteed Pension (excluding transfers) was NOK 5.3 billion in 2018, on par with the previous year. The majority of the products are closed for new sales and the customers’ choices for transferring from guaranteed to non-guaranteed products are in line with the Group’s strategy.
OTHER RESULTS The result for Storebrand ASA is reported under Other, as well as the result of the company portfolios and small subsidiaries of Storebrand Life Insurance and SPP.
The result before amortisation for the Other Segment was NOK 5 million in 2018, compared with NOK 55 million in 2017. The operating costs for 2018 were impacted by costs related to the sale of business. In 2017, the result was impacted by transaction costs associated with the acquisition of SKAGEN and Silver.
The Storebrand Livsforsikring Group’s solidity capital consists of equity, subordinated loan capital, market value adjustment reserves, additional statutory reserves, conditional bonuses and risk equalisation reserves. The solidity capital was reduced by NOK 5 billion in 2018. The market value adjustment reserve was reduced by NOK 1.5 billion due to the realisation of securities and falling markets. This amounted to NOK 2.2 billion by the end of the year. Conditional bonuses declined by NOK 0.9 billion and amounted to NOK 8.2 billion. The booked return contributed to increasing the additional statutory reserves. The additional statutory reserves amounted to NOK 8.5 billion at the end of the year, an increase of NOK 0.2 billion. The excess value of bonds and loans that are assessed at amortised cost decreased due to increased interest rates by NOK 3.5 billion and amounted to NOK 5 billion as at 31 December 2018. The excess value of bonds and loans at amortised cost is not included in the financial statements.
Rating There are four companies in the Storebrand Group that issue debt securities. Storebrand Livsforsikring AS issues subordinated loans, Storebrand ASA issues senior debt, Storebrand Bank ASA issues senior debt and subordinated loans, while Storebrand Boligkreditt AS issues covered bonds. All four companies are rated by the credit rating agency Standard & Poor’s. In July 2018, Storebrand Livsforsikring AS and Storebrand Bank ASA were upgraded to A-, with a stable outlook.
Risk Storebrand’s risk management framework is designed to help protect customers, owners, employees and other stakeholders from adverse events or losses and covers all risks to which Storebrand is, or may be, exposed. Storebrand has defined a risk universe where the main risks are business risk, financial market risk, insurance risk, counter-
Savings Savings consists of unit linked insurance, the asset management business and the banking business.
For unit linked insurance, the customer bears the financial market risk. The disbursements are generally time limited, and therefore Storebrand bears low risk from increased life expectancy.
Insurance Insurance consists of risk products and property and casualty insurance. The price can normally be changed on an annual basis if there are any changes in the risk situation.
Guaranteed Pension Guaranteed Pension encompasses savings and pension products with guaranteed interest rates in Norway and Sweden. The greatest risks are financial market risk and life expectancy risk.
A common feature of the products is that Storebrand guarantees a minimum return. In Norway, the return must exceed the guarantee in each year, while in Sweden it is sufficient to achieve the guaranteed return as an average. In Sweden, new premiums generally have a guarantee of 1.25 per cent for 85 per cent of the premium, while existing reserves have a guaranteed annual return of up to 5.2 per. In Norway, new premiums are written with a guaranteed return of 2.0 per cent, and the upward adjustment of benefits resulting from a surplus in excess of the interest rate guarantee will be carried out with a 0.5 per cent guarantee. The existing portfolio primarily has guarantee levels ranging from 3 to 4 per cent. Over time, new premiums and possible upward adjustment will contribute to the average guarantee level falling.
To achieve adequate returns from the customer portfolios, it is necessary to take investment risks (market risks). This
STOREBRAND ANNUAL REPORT 2018 is primarily done by investing in equities, property and corporate bonds.
The bulk of guaranteed pension agreements have lifelong disbursements. These give higher disbursements if life span increases more than expected. The risk is reduced by the use of dynamic tariffs that include an increased longevity trend.
Other ther encompasses Storebrand ASA, as well as the company portfolios and smaller subsidiaries of Storebrand Life Insurance and SPP. In addition, this business is included in BenCo. The assets in Storebrand ASA and the company portfolios are invested at low risk, primarily in short-term interest-bearing securities with a high credit rating.
European regulations Solvency II The European Commission distributed changes to the standard model in Solvency II for comments. The consultation round has been based on advice from EIOPA and encompassed questions concerning, inter alia, the loss-absorbing capacity of deferred tax and the risk margin. EIOPA’s proposal to change the interest risk module was not pursued further by the Commission. EIOPA’s proposal had a device that would have had a particularly conservative impact for NOK and SEK. These consequences were not considered in the proposal, but they were pointed out during the consultation period. Although the proposal is not being followed up now, it is expected that changes to the interest risk module will be considered in the planned 2020 revision of the Solvency II Regulations.
The classification system for climate shall be ready by December 2019. Criteria for assessing businesses against other environmental targets will be introduced in 2020 and 2021. The classification system shall be developed over time and updated to take into account political or technological developments.
The classification system does not constitute a product standard or labelling scheme in itself, but the Commission will consider whether a labelling scheme based on this should be developed.
The proposal entails that pension capital certificates from previous employment will be transferred to a single pension account with the current employer’s pension provider. This transfer will occur automatically, unless the employee actively opts out (passive consent).
The costs for administration of the pension scheme shall be paid by the employer. The management costs for contributions during the current employment (active part) shall be covered by the employer, while the management costs for any previously contributed funds (pension capital certificates that are transferred in) shall be covered by the employee. Other cost sharing schemes may be agreed on locally at the individual company.
Employees who transfer to a self-selected provider must cover the administration and management fees, but they will receive compensation from their employer for this.
When pension accounts are introduced, employees will be given a deadline of 3 months to opt out of pension capital certificates being transferred to a separate pension account. The providers will then have a deadline of 1 month to transfer the funds.
It has been proposed that the 12-month rule be repealed. Employees will thus be able to take their accrued pension capital with them when they resign, regardless of the length of their employment.
Individual Pension Accounts are an important reform for the Norwegian Confederation of Trade Unions (LO) and the Confederation of Norwegian Enterprise (NHO). The legislative proposal that has now been put forward follows up previous studies by the parties and a consensus from the annual wage settlement.
A key aim of the reform is to reduce the costs associated with the administration and management of pension contributions from previous employers. This will in turn entail lower income for the providers.
The introduction of the Individual Pension Account scheme is based on passive consent. This is a new principle in the pension area. Along with the individual transfer of current contributions, this gives rise to the need for new solutions for distributing information to customers, handling optouts, and exchanging information and payments between the companies. For Storebrand, it is important to seek solutions that ensure a good implementation of the reform, while at the same time limiting extra administrative costs as much as possible.
Legal considerations suggest that the introduction of a new scheme entails, both in itself and in conjunction with previous changes in 2011, a significant change in the municipalities ’ existing contracts, which triggers an obligation to invite public tenders in accordance with the Procurement Regulations. Storebrand is considering business opportunities linked to the changes in public pensions. Confidence in changed market dynamics will be an important prerequisite for a new investment in the market for insured municipal occupational pension.
LO wants a scheme that will be more predictable for the employees, while one must also qualify for the scheme, i.e. the rights will be linked to employment in an enterprise bound by a collective wage agreement. NHO is concerned about the increasing undercoverage in the current scheme and wants a scheme that will result in predictable costs for the companies.
Regulations for guaranteed products An interdepartmental working group with participants from the Ministry of Finance, Ministry of Labour and Social Affairs and the Financial Supervisory Authority of Norway have studied possible changes to the regulations for guaranteed products, including paid-up policies. The working group report was published in the autumn of 2018.
• Merging the additional statutory reserves and the market value adjustment reserve into a new customer-distributed buffer reserve that could also cover negative returns.
In collaboration with the working group, Storebrand has simulated the effect of the rule changes in question. A memorandum summing up this work has been attached to the study report.
Storebrand’s analysis shows that life insurance companies will benefit from increasing their share of equities in the management of paid-up policies for each of the proposals that are implemented. If all of the initiatives considered are implemented, the share of equities and the expected pensions could be significantly increased.
Storebrand’s simulations showed that a “Swedish solution”, in which the annual interest guarantee can be covered by borrowed equity would facilitate a significant increase in the share of equities. The working group would not recommend such a change, however.
The Ministry of Finance has asked the Financial Supervisory Authority of Norway to prepare proposals for specific statutory and regulatory changes based on all initiatives considered in the working group’s report, not just those recommended by the working group. The Supervisory Authority has also been requested to give its assessment of the proposals. The assessments should be ready by June 2019, and they will be circulated for consultation before the Ministry decides which proposals will be put forward to the parliament.
New tax rules for life insurance companies The Norwegian parliament has adopted new tax rules for life insurance companies. The aim of the new rules is to establish a clear tax distinction between customer funds and company funds. The changes will be effective as of the 2018 tax year.
Swedish regulations EU Occupational Pensions Directive The EU Occupational Pensions Directive (IORP II), which is a minimum directive will be implemented in Swedish law. The government aims to prepare new business regulations
Sustainability in the Storebrand Group Storebrand has worked systematically with sustainability for over 20 years. Sustainability is a cornerstone of Storebrand’s investment strategy. The Group has published environmental reports since 1995 and sustainability reports since 1999. Sustainability reporting has been an integral part of the annual report and certified by an independent party since 2008. Storebrand reports in accordance with the GRI standard.
In 2018, the Board adopted new principles for sustainability that apply to all business activities, including investments, product development, procurement, organisational development and internal operations. The principles summarise how work is an integral part of the Group’s overall objectives and management processes. Read more about the principles in the Directors’ Report under the heading Strategic highlights.
All employees should have an opportunity to develop in line with the Company’s needs. In 2018, the Company focused on strengthening its ability to learn and work more across its organisational units and disciplines.
Absence due to illness Storebrand’s absence due to illness has been at a stable low level for many years. The Group’s absence due to illness in 2018 was 3.0 per cent. Absence due to illness was 2.7 per cent in Norway and 3.3 per cent in the Swedish business. Storebrand has been an “inclusive workplace” (IA) company since 2002, and the Group’s managers have over the years built up routines for the follow-up of employees who are ill. All managers with Norwegian employees must complete a mandatory HSE course, in which following up illness is part of the training.
All Storebrand employees are treated equally, regardless of their age, gender, disability, cultural background or sexual orientation. Individual qualities should be respected and valued, and we encourage age diversity among our employees. Age shall not be a decisive criterion, neither during recruitment processes nor later on in the employment relationship.
We make an active effort to ensure that all employees are satisfied regardless of their cultural background. No discrimination is accepted, neither in recruitment processes nor later on in the employment relationship. There shall be a good balance between women and men at all levels of the Company.
We want to have an inclusive recruitment process that is as transparent as possible and encourages diversity among the candidates applying.
We have a zero-tolerance policy against harassment and discrimination, and we strive for equal treatment and equal opportunities in all our internal and external recruitment and development processes.
37) More information on how Storebrand works with the long-term creation of value, the materiality analysis and the Board’s sustainability reporting can be found in Section 1 of the annual report: About Storebrand, under the heading “A sustainable strategy”. 38) Read more about the results in Section 4 of the annual report, People and systems, under the heading Committed and courageous employees.
Ethics and trust Storebrand works systemically to live up to high ethical standards. The Company sets strict requirements concerning high ethical standards for the Group’s employees. The Group’s common code of ethics is available on our intranet in three languages and is reviewed by the Board of Storebrand ASA once a year. Whistleblowing routines, brochures, an anonymous mail box, dilemma bank, question and answer summaries and presentations are all available to employees on the intranet, so that awareness of and reflection on the subjects can be high on everyone’s agenda. Every year all the managers must confirm in writing that they have discussed ethics and ethical dilemmas, information security, financial crime and HSE in departmental meetings.
The Group also has developed a mandatory ethics course for managers. The course includes information about money laundering and corruption. The Company’s authorised financial advisers complete a tailored training programme.
Storebrand’s executive management and Board of Directors review Storebrand’s corporate governance policies annually. Storebrand established principles for corporate governance in 1998. Storebrand reports on the policies and practice for corporate governance in accordance with Section 3-3b of the Norwegian Accounting Act and the Norwegian Code of Practice for Corporate Governance of 17 October 2018. For further information on Storebrand’s corporate governance, reference is made to a separate article on corporate governance in the annual report. The Board carried out an evaluation in 2018, in which the executive management participated. In 2018, a total of 11 board meetings were held. The work of the Board is regulated by special rules of procedure for the Board. The Board has established three advisory committees: the Compensation Committee, Audit Committee and Risk Committee.
In 2018, the following changes were made to the composition of Storebrand’s corporate bodies: Board of Directors of Storebrand ASA: Directors Håkon R. Fure and Gyrid Skalleberg Ingerø left the Board, and Liv Sandbæk was elected as a new director.
Nomination Committee: Members Odd Ivar Biller, Olaug Svarva and Tor Olav Trøim left the Committee. Leif Askvig, Nils Halvard Bastiansen and Margareth Øvrum were elected as new members.
The Board wishes to thank the retiring members of the Board of Directors and Nomination Committee for their valuable contributions to the Group.
The Board proposes a dividend of NOK 1,402 million to the General Meeting, corresponding to an ordinary dividend of NOK 3.0 per share for 2018 financial year.
Allocation of the profit for the year for Storebrand ASA NOK million 2018 2017
Storebrand ASA 185 Income statement 185 Statement of total comprehensive income 186 Statement of finacial position 187 Statement of changes in equity 188 Statement of cach flow 189 Notes 202 Declaration by member of the Board and the CEO 203 Independent auditor´s report
Profit/loss for the year due to: Share of profit for the period - shareholders 3,684 2,375
Share of profit for the period - hybrid capital investors 9 11
Average number of shares as basis for calculation (million) 467.2 449.8
Total comprehensive attribute to: Share of total comprehensive income - shareholders 3,320 2,675
Financial assets at amortised cost: Reinsurers' share of technical reserves 21 27
Financial assets at amortised cost: - Bonds held-to-maturity 10,30,31 14,403 15,128
Total comprehensive income for the period -317 3,636 3,320 9 2 3 331
2) Includes undistributable funds in the risk equalisation fund amounting to NOK 234 million and security reserves amounting NOK 56 million.
Net cash flow from operations before financial assets and banking customers -5,079 5,392
Net receipts/payments - loans to and claims from other financial institutions -153 -252
NOK million 2018 2017 - of which net cash flow in the period before financial assets and banking customers -6,238 4,471
The cash flow analysis shows the Group’s cash flows for operational, investment and financial activities pursuant to the direct method. The cash flows show the overall change in means of payment over the year.
Note 23: Remuneration to senior employees and elected officers of the company
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 2018 were approved by the Board of Directors of Storebrand ASA on 12 February 2019.
Intangible assets primarily comprise excess value relating to insurance contracts and customer relations acquired in connection with a business combination. This excess value is measured at historical cost less annual amortisation and write-downs.
The recognised liabilities related to the Swedish insurance contracts with guaranteed interest rates in the subsidiary SPP are discounted by an observable market interest rate and by an estimated market interest rate for terms to maturity when no observable interest rate is available and corresponds essentially to the same interest rate that is used in the Solvency calculations.
In the case of unit-linked insurance contracts, reserves for the savings element in the contracts will correspond to the value of related asset portfolios.
Due to the fact that the customers’ assets in the life insurance business (guaranteed pension) have historically yielded a return that has exceeded the increased value in guaranteed insurance liabilities, the excess amount has been set aside as customer buffers (liabilities), including in the form of additional reserves, value adjustment reserve and conditional bonus.
IFRS 9 IFRS 9 Financial Instruments replaces the current IAS 39, and is generally applicable from 1 January 2018. However, for insurance-dominated groups and companies, IFRS 4 allows for either the implementation of IFRS 9 to be deferred (deferral approach) or to enter the differences between IAS 39 and IFRS 9 through Other Comprehensive Income (overlay approach) until implementation of IFRS 17. The Storebrand Group qualifies for temporary deferral of IFRS 9 because over 90 per cent of the Group’s total liabilities as of 31 December 2015 were linked to the insurance businesses. For the Storebrand Group, IFRS 9 will be implemented together with IFRS 17, which is expected to be applicable from 1 January 2022.
Bonds and other fixed-income securities AC AC 102,602 111,151 109,126 114,164
Accounts receivable and other short-term receivables AC AC 5,516 5,516 7,710 7,710
Deposits from banking customers AC AC -14 628 -14 341 -14 419 -14 419
Subordinatd loan capital AC AC 8 314 8 432 7 672 7 663
Other current liabilities AC AC 8 137 8 137 6 810 6 810
Shares and fund units FVP&L (FVO) FVP&L 156,433 156,433 157,361 157,361
Bonds and other fixed-income securities FVP&L (FVO) FVP&L 166,761 166,761 157,586 157,586
During 2018, changes were made to the classification of certain types of transactions in the income statement, and comparable figures have been restated. This has resulted in some minor changes between lines in the income statement, but has no effect on the Group result or the classification in the segment note. Below are the most important result lines subject to the changes: - Other income - Operating costs 5. New IFRS that have not entered into force New standards and changes in standards that have not come into effect
liabilities by approximately NOK 0.9 billion on the transition date. It is expected that operating expenses will be reduced by approximately NOK 15 million, financial expenses will increase by approximately NOK 26 million and the profit before tax will thereby be reduced by approximately NOK 12 million in 2019. Leases with a duration of less than 12 months as at 1 January 2019 and leases that include assets valued at less than NOK 50,000 will not be recognised in the balance sheet, but will be recognised as an operating expense over the lease period.
The implementation date is 1 January 2022, with a requirement that comparable figures are stated.
Storebrand is working on preparing for implementation of IFRS 17, including assessing the effects implementation of IFRS 17 will have for Storebrand’s consolidated financial statements.
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, and investments in joint ventures are recognised in accordance with the equity method. Investments in associated companies and joint ventures are initially recognised at acquisition cost.
Currencies and translation of foreign companies’ accounts The Group’s presentation currency is Norwegian kroner. Foreign companies that are part of the Group and have different functional currencies are converted to Norwegian kroner. Translation differences are included in the total comprehensive income.
There are some differences between the result lines used in the income statement and the segment results. The Group’s income statement includes gross income and costs linked to both the insurance customers and owners (shareholders). The segment results only include result elements relating to owners (shareholders) which are the result elements that the Group has performance measures and follow-up for.
Financial services provided between segments are priced at market terms. Services provided from joint functions and staff are charged to the different segments based on supply agreements and distribution keys.
Income from properties and financial assets Income from properties and financial assets are described in Sections 10 and 11.
Other income Fees are recognised when the income can be measured reliably and is earned. Return-based revenues and performance fees are recognised when the uncertainty associated with the income is no longer present. Fixed fees are recognised as income in line with delivery of the service.
10. Goodwill and intangible assets Added value when acquiring a business that cannot be directly attributable to assets or liabilities on the date of the acquisition is classified as goodwill on the balance sheet. Goodwill is measured at acquisition cost on the date of the acquisition. Goodwill arising from the acquisition of subsidiaries is classified as an intangible asset.
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, is part of a portfolio of identified financial instruments that are managed together and there is 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.
Loans and receivables Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market, with the exception of assets that the company intends to sell immediately or in the near term that are classified as held for trading and those that the company upon initial recognition designates at fair value through profit or loss.
The majority of the derivatives used routinely for asset management fall into this category.
14. Insurance liabilities The accounting standard IFRS 4 Insurance Contracts addresses the accounting treatment of insurance contracts. Storebrand’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 financial statements, the insurance liabilities in the respective subsidiaries are included as these are calculated on the basis of the laws of the individual countries. This also applies to insurance contracts acquired via business combinations. In such cases, positive excess values are capitalised as assets.
The premium reserve is calculated using the same assumptions as those used to calculate premiums for the individual insurance contracts, i.e. assumptions about mortality and disability rates, interest rates and costs. Premium tariffs are based on the observed level of mortality and disability in the population with the addition of security margins that include expected future developments in this respect.
Insurance liabilities, special investments portfolio Insurance liabilities associated with the value of the special investments portfolio must always equal the value of the investments portfolio assigned to the contract. The proportion of profit in the risk result is included. The company is not exposed to investment risk on customer assets, since the customers are not guaranteed a minimum return. The only exception is in the event of death, when the beneficiaries are repaid the amount originally paid in for annuity insurance and for guaranteed account (Garantikonto).
This will result in a reduction in the additional statutory reserves and a corresponding increase in the premium reserve for the contract. For allocated annuities, the additional statutory reserves are paid in instalments over the disbursement period.
Market value adjustment reserve The current year’s net unrealised gains/losses on financial assets at fair value in the group portfolio are allocated to or reversed from the market value adjustment reserve in the balance sheet 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 currencies that can be attributed to fluctuations in exchange rates is not transferred to the market value adjustment reserve. The foreign exchange fluctuations associated with investments denominated in foreign currencies are largely hedged through foreign exchange contracts on a portfolio basis. Similarly, the change in the value of the hedging instrument is not transferred to the market value adjustment reserve, but is charged directly to the income statement. Pursuant to accounting standard for insurance contracts (IFRS 4) the market value adjustment reserve is shown as a liability.
Risk equalisation reserve DUp to 50 per cent of the positive risk result for group pensions and paid-up policies can be allocated to the risk equalisation fund to cover any future negative risk result. The risk equalisation reserve is not considered to be a liability according to IFRS and is included as part of the equity (undistributable equity).
Actuarial gains and losses and the impact of changes in assumptions are recognised in total comprehensive income during the period in which they arise. Employees who resign before reaching retirement age or leave the scheme will be issued ordinary paid-up policies.
The principle applies to both financial assets and other types of assets (such as business assets, etc.) that are owned by customer assets. The technical result that appears in the accounts is used as a basis for the taxation and no permanent or temporary differences for tax purposes will therefore arise.
New tax rules for p&c insurance companies In December 2018, the Norwegian Parliament adopted amendments to the tax rules for P&C insurance companies which also apply for risk products in life insurance companies. The amendments entered into force from and including the 2018 financial year and entail that tax deductions will only be permitted on an ongoing basis for expenses that will most probably arise. This specifically restricts deductions for provisions for probable future expenses linked to insurance liabilities. The deduction rule is based on the following accounting balance sheet figures: • Provisions for unearned gross premium • Provisions for unexpired risk • Gross claims reserve
Therefore, tax deductions are no longer permitted for provisions to the guarantee scheme or National Fund for Natural Disaster Assistance.
Financial tax In connection with the national budget for 2018, it was agreed to continue with a financial tax consisting of two elements: • Financial tax on salaries. This is set at 5 per cent and will follow the rules for employer’s National Insurance contributions. • The tax rate on the ordinary income for companies subject to the financial tax will be continued at the 2016 level (25 per cent), while it will otherwise be reduced from 23 per cent to 22 per cent from 1 January 2019.
20. Statement of cash flows The statement of cash flows is prepared using the direct method and shows cash flows grouped by sources and use. Cash is defined as cash, receivables from central banks and receivables from credit institutions with no agreed period of notice.
In the long term, a low interest rate will represent a challenge for insurance contracts with a guaranteed interest rate and, together with a reduced customer buffer, may have an impact on the amount recorded that is linked to the insurance contracts. The Norwegian insurance contracts with guaranteed interest rates are discounted at the premium calculation rate (around 3.2 per cent on average). The Swedish insurance liabilities with guaranteed interest rates have been discounted by a yield curve that coincides with the Solvency II yield curve.
Financial instruments at fair value There will be some uncertainty associated with the pricing of financial instruments, particularly instruments that are 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
The Group’s business activities may give rise to disputes, etc. related to tax positions with an uncertain outcome. The Group makes provisions for uncertain and disputed tax positions with best estimates of expected amounts, subject to notices or decisions by the tax authorities. The provisions are reversed if the disputed tax position is decided to the benefit of the Group and can no longer be appealed.
Before acquisition as a part of the administration solution, Silver’s portfolio of paid-up policies has been converted to paid-up policies with investment options (FMI) for retirement pension coverage, amounted NOK 8.3 billion. Risk cover (paid-up policies) is continued based on a reduced base rate of 2.75%, amounted NOK 1.4 billion.
Skagen Storebrand acquired 90.95% of the shares in SKAGEN in December 2017. The remaining shares representing 9.05% of the total share capital was B shares owned by the employees.
In the end of April 2018 Skagen AS purchased the B-shares from the employees for a consideration of NOK 120 million, complete with buy back of own shares. The transaction is completed and recorded as equity transaction with deduction from equity, and the shares will be erased.
Insurance The insurance segment provides health insurance in the Norwegian and Swedish corporate and retail markets, P&C insurance and personal risk products in the Norwegian retail market and employer’s liability insurance and pension-related insurance in the Norwegian and Swedish corporate markets.
Other The result for Storebrand ASA is reported under Other, as well as the result for the company portfolios and small subsidiaries of Storebrand Life Insurance and SPP. In addition, the results associated with loans to commercial enterprises by Storebrand Bank and the activities at BenCo are reported in this segment. The elimination of intra-group transactions that have been included in the other segments has also been included.
Financial items and risk result life and pensions include Risk Result Life and Pensions and Financial Result includes net profit sharing and Loan Losses.
In the case of defined-benefit contracts (KF portfolio), the company is entitled to charge an indexing fee if the group profit allows the indexing of the insurance.
Loan losses: Loan losses consist of individual and group write-downs on lending activities that are on the balance sheet of Storebrand Bank Group. In the Group’s income statement, the item is classified under loan losses. With regard to loan losses that are on the balance sheet of the Storebrand Livforsikring Group, these will not be included on this line in either the alternative income statement or in the Group’s income statement, but in the Group’s income statement will be included in the item, net income from financial assets and property for customers.
Amortisation of intangible assets includes depreciation and possible write-downs of intangible assets established through acquisitions of enterprises.
Group pre-tax profit 2,799 2,404 1) Amortisation of intangible assets are included in Storebrand Group
Buffer capital in % of customer reserves SPP 2) 8.7% 9.0%
Continuous monitoring and active risk management are 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 appetite for risk, risk targets and overriding risk limits for the operations. At the Storebrand group, responsibility for risk management and internal control is an integral part of management responsibility
Operational risk is the risk of loss due to inadequate or failing internal processes or systems, human error or external events. The definition includes compliance risk: Compliance risk is the risk of loss or public sanctions as a result of non-compliance with external or internal rules.
In the Guaranteed Pensions segment, the Group has a significant insurance risk relating to long life expectancy for group and individual insurance agreements. In addition, there is an insurance risk associated with disability and pensions left to spouses and/or children. The disability coverage in Guaranteed Pensions is primarily sold together with a retirement pension. The risk of mortality is low in Guaranteed Pensions when viewed in relation to other risks. In SPP it is possible to change the future premiums for the IF portfolio, reducing the risk significantly. In Norway it is also possible to change the future premiums of group policies, but only for new accumulation, entailing reduced risk. Occupational pension agreements (hybrid) are reported in the Guaranteed Pension segment when a customer has an agreement without a choice for investment of the pension assets. This is a small portfolio with limited insurance risk.
In the Savings segment the Group has a low insurance risk. The insurance risk is largely associated with death, with some long-life risk for paid-up policies with investment options.
Management of insurance risk Insurance risk is monitored separately for every line of insurance in the current insurance portfolio. 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 have occurred.
Adequacy test In accordance with the accounting standard IFRS 4 Insurance Contracts, the insurance liabilities that are included shall be adequate and a liability adequacy test shall be performed. Storebrand satisfies the adequacy tests for 2018, and they have thus no impact on the results in the financial statements for 2018.
The market risk in the company portfolios has a direct impact on the profit.
For customer portfolios with a guarantee, the net risk for Storebrand will be lower than the gross market risk. The extent of measures to reduce risk depends on several factors, the most important being the size and flexibility of the customer buffers and level and duration of the return guarantee. If the investment return is not sufficient to meet the guaranteed interest rate, the shortfall may be met by using customer buffers built up from previous years’ surpluses. Customer buffers primarily consist of unrealised gains and additional reserves in Norway (one year’s interest rate guarantee) and conditional bonus in Sweden. Storebrand must cover any deviations between return and interest rate guarantee if the return is lower than the interest rate guarantee and the difference cannot be covered by customer buffers or the return will be negative.
For guaranteed customer portfolios, the risk is affected by changes in interest rates. Falling interest rates are positive for the investment return in the short term due to price appreciation for bonds, but negative in the long term because it reduces the probability of achieving a return higher than the guarantee. Long-term interest rates increased slightly in Norway in 2018, but fell slightly in Sweden. Short-term money market rates increased in both Norway and Sweden, but the interest rate in Sweden remains negative. Paid-up policies have a particularly high risk in a low interest rate scenario, because there are very limited opportunities for changing the price or terms. In Norway, the effect of low interest rates will be dampened in the coming years by a large proportion of amortised cost portfolios that will greatly benefit from securities purchased at interest rate levels higher than the current levels.
The composition of the assets within each sub-portfolio is determined by the company’s investment strategy. The investment strategy also establishes guidelines and limits for the company’s risk management, credit exposure, counterparty exposure, currency risk, use of derivatives, and requirements regarding liquidity.
In the consolidated financial statements, the value of assets and results from the Swedish operations are affected by changes in the value of the Swedish krona. Storebrand Livsforsikring AS has hedged parts of the value of SPP through forward foreign exchange contracts and borrowings in Swedish kroner.
Total net currency positions 2017 9,571 1) Equity and bond funds denominated in NOK with foreign currency exposurein i.a. EUR and USD NOK 22 billion.
Storebrand Livsforsikring The company hedges most of the foreign exchange risk in the customer portfolios on an ongoing basis. Foreign exchange risk exists primarily as a result of investments in international securities, as well as subordinated loans in a foreign currency to a certain extent. Hedging is performed by means of forward foreign exchange contracts at the portfolio level, and the currency positions are monitored continuously against a total limit. Negative currency positions are closed out no later than the day after they arose. In addition, separate limits have been defined so that active currency positions can be taken. Storebrand employs a currency hedging principle called block hedging, which makes the execution of currency hedging more efficient.
SPP SPP uses currency hedging for its investments to a certain degree. Currency exposure may be between 0 and 30 per cent in accordance with the investment strategy.
Interest rate risk is in a special position because changes in interest rates also affect the fair value of the insurance liability for the solvency calculation. Since pension disbursements may be many years in the future, the insurance liability is particularly sensitive to changes in interest rates. In the Norwegian business, greater interest rate sensitivity from the investments will entail increased risk that the return is below the guaranteed level. The risk management must therefore balance the risk of the profit for the year (interest rate increase) with the reinvestment risk if interest rates fall below the guarantee in the future. Bonds at amortised cost are an important risk management tool.
SPP Pension & Insurance The guaranteed interest rate is determined by the insurance company and is used when calculating the premium and the guaranteed benefit. The guaranteed interest rate does not entail that there is an annual minimum guarantee for the return as is the case in Norway.
New premiums in individual defined-contribution pensions (IF) have a guarantee of 1.25% for 85% of the premium. Group defined-benefit pension (KF) is closed to new members.
SPP bears the risk of achieving a return equal to the guaranteed interest on the policyholders’ assets over time and that the level of the contracts’ assets is greater than the present value of the insurance liabilities. For IF, profit sharing becomes relevant in SPP if the return exceeds the guaranteed yield. The contracts’ buffer capital must be intact in order for profit sharing
to represent a net income for SPP. In the case of KF, a certain degree of consolidation, i.e. that the assets are greater than the present value of the liabilities by a certain percentage, is required in order for the owner to receive profit-sharing income (indexing fee).
Storebrand Livsforsikring Based on the stress test, Storebrand Life Insurance has an overall market risk of NOK 5.2 billion, which is equivalent to 2.5 per cent of the investment portfolio.
The buffer situation for the individual contracts will determine if all or portions of the fall in value will affect the financial result. Only the portion of the fall in value that cannot be settled against the customer buffer will be charged to the result. In addition, the reduced profit sharing or loss of the indexing fees may affect the financial result.
Lending commitments 1,672 1,672 1) Liabilities for which repayment may be demanded immediately are included in the 0-6 month column.
Total interest bearing securities stated by rating 43,974 28,548 34,613 26,452 1,434 3,630 138,652
Of which derivatives in bond funds, managed by Storebrand 1,570 513 2,082
Of which bank deposits in bond funds, managed by Storebrand 186 186
Sale and operation of real estate 7,861 1 7,862 22 9 13
In the retail market, most of the loans are secured by means of home mortgages. Customers are evaluated according to their capacity and intent to repay the loan. In addition to their capacity to service debt, customers are checked in relation to policy regulations, and customers are given a credit store using a scoring model. The balance of mortgages sold from Storebrand Bank to sister company Storebrand Livsforsikring is NOK 18.1 billion. The mortgages were sold on commercial terms.
This year’s change in fair value due to change in credit risk 1) -712 1) Figures are excluding interest fund
Unlisted derivatives, such as forward exchange contracts and interest rate and foreign exchange swaps, are also valued theoretically. Money market rates, swap rates and exchange rates that form the basis for valuations are supplied by Reuters and Bloomberg. The valuations of currency options and swaptions are provided by Markit.
Level 1: Financial instruments valued on the basis of quoted prices for identical assets in active markets This category encompasses listed equities that over the previous three months have experienced average daily trading equivalent to approximately NOK 20 million or more. Based on this, the equities are regarded as sufficiently liquid to be included at this level. Bonds, certificates or equivalent instruments issued by national governments are generally classified as level 1. When it comes to derivatives, standardised stock index futures and interest rate futures will also be included at this level.
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, microfinance and infrastructure. Private equity is generally classified as level 3 through direct investments or investments in funds.
Corporate bonds Among the bonds at level 3, we find microfinance investments structured as loans. In addition, there are a small number of private equity investments organised as loans that are valued at the most recent reported value. In addition, non-performing loans will be left for estimated expected payment.
Total bonds and other fixed-income securities 31.12.18 13,839 140,370 3,377 157,586
Total bonds and other fixed-income securities 31.12.17 24,186 142,467 108 166,761
Properties: Properties for own use 1,420 1,420 1,408 1) Includes lending to customers/liabilities to financial institutions classified at fair value through profit and loss
Movements from level 1 to level 2 reflect a reduction in the trading volume of relevant equities and bonds during the most recent measurement period. On the other hand, movements from level 2 to level 1 indicate an increase in the market value of relevant equities and bonds during the most recent measurement period.
Loans to and due from financial institutions 318 318 313 318 313
Bonds classified as loans and receivables 98,485 98,485 94,218 94,723 87,474
Debt raised by issuance of securities 17,565 17,565 16,634 17,529 16,575
Equities It is primarily investments in forests that are classified under equity at level 3. 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.
Fund units Large portions of the portfolio are private equity funds invested in companies priced against comparable listed companies The valuation of the private equity portfolio will thus be sensitive to fluctuations in global equity markets. The private equity portfolio has an estimated Beta relative to the MSCI World (Net – currency hedged to NOK) of around 0.46.
The valuation of indirect property investments will be sensitive to a change in the required rate of return and the expected future cash flow. Remaining indirect property investments are no longer leveraged.
Loans to customers The value of fixed-rate loans is determined by discounting the agreed cash flows over the remaining maturity by the current discount rate adjusted for market spread. The discount rate that is used is based on a swap interest rate (mid swap) with a maturity that corresponds to the remaining lock-in period for the underlying loans. The market spread that is used on the date of the balance sheet is determined by assessing the market conditions, market price and the associated swap interest rate.
Loans from SPP Pension & Försäkring AB are appraised at fair value. The value of these loans is determined by future cash flows being discounted by an associated swap curve adjusted for a customer-specific credit.
Properties The sensitivity assessment for real estate includes both investments properties and owner occupied properties.
Capital management Storebrand places particular emphasis on continually and systematically adapting the levels of equity in the Group. The level is adapted to the financial risk and capital requirements in the business, where growth and the composition of segments are important motivating factors for the need for capital. The purpose of capital management is to ensure an efficient capital structure and provide for an appropriate balance between in-house goals and regulatory and rating company requirements. If there is a need for new capital, this is raised by the holding company Storebrand ASA, which is listed on the stock exchange and is the ultimate parent company.
Subordinated capital for subsidiaries regulated in accordance with CRD IV 3,311 2,929
Capital requirements for subsidiaries regulated in accordance with CRD IV 2,482 2,458
Total gains and losses on financial assets at fair value 4,443 98 -10,695 -6,154 330 -6,484 21,754 - of which FVO (fair value option) 3,173 -10 -5 3,158 27 20,647
Total gains and losses on financial assets at amortised cost 5,254 322 5,576 781 4,795 5,486
Realised losses on loans where provisions have previously been made -25 -2
Total income properties 1,487 2,556 1) Of which real estate for own use 74 184 2) Of which properties for own use -29 -40
Change in premium reserve customer funds without guaranteed return -4,530 69 -806 -5,266 -24,009
Change in insurance liabilities - life insurance -4,620 369 1,208 -3,042 -23,049
Average number of person-years 1,747 1,738 1) Including Storebrand Helseforsikring with 100 per cent.
Storebrand’s employees in Norway have e defined-contribution pension scheme. In a defined-contribution scheme, the company allocates an agreed contribution to a pension account. The future pension depends upon the amount of the contributions and the return on the pension account. When the contributions have been paid, the company has no further payment obligations relating to the defined-contribution pension and the payment to the pension account is charged as an expense on an ongoing basis. For regulatory reasons, there can be no savings in the defined-contribution pension for salaries that exceed 12G (G = National Insurance Scheme basic amount). Storebrand has pension savings in the savings product Extra Pension for employees with salaries exceeding 12G.
Employees who were on sick leave and partiality disabled during the transition to the defined-contribution pension, remain in the defined-benefit pension scheme. There are also pension liabilities for the defined-benefit scheme related to direct pensions for certain former employees and former board members.
The pension in the BTP2 agreement (defined-benefit occupational pension that is a closed scheme) amounts to 10 per cent of the annual salary up to 7.5 times the “basic income amount” (which was SEK 62,500 in 2018 and will be SEK 64.400 in 2019), 65 per cent of 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 component. Here 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 pension for the employees at Nordben Life and Pension Insurance Company LTD and Euroben Life and Pension LTD is covered by a defined-contribution scheme. In addition, the employees of Nordben are covered by a lump sum upon death during their period of service.
NOK million 31.12.18 31.12.17 Pension assets 5 3 Pension liabilities 322 341
NOK million 31.12.18 31.12.17 changes in the net defined benefit pension liabilities in the period 1,260 1,237
PENSION ASSETS ARE BASED ON THE FINANCIAL ASSETS HELD BY STOREBRAND LIFE INSURANCE/SPP COMPOSED AT 31.12.18: Storebrand Life Insurance SPP
Expected annual increase in social security pensions 2,50 % 2,25 % 3,0 % 3,0 %
Expected annual increase in pensions payment 0,0 % 0,0 % 2,0 % 2,0 %
Discount rate Expected earnings growth Expected annual increase in pensions payment Mortality - change in expected life expectancy
Storebrand Asset Management AS’ subsidiary Skagen AS, which was acquired in December 2017, has its own compensation committee and separate guidelines for financial consideration. Storebrand’s compensation committee is kept continually updated. The Group’s guidelines will therefore not directly apply for Skagen AS in 2019.
company before the end of this period. Severance pay The Chief Executive Officer and executive vice presidents are entitled to severance pay if their contracts are terminated by the company. Entitlement to a severance package is also available if the employee decides to leave the company due to substantial changes in the organisation, or equivalent circumstances, which result in the individual being unable to naturally continue in his/her position. If the employment is brought to an end due to a gross breach of duty or other material non-performance of the employment contract, the provisions in this section will not apply.
2. BINDING GUIDELINES FOR SHARES, SUBSCRIPTION RIGHTS, OPTIONS, ETC. FOR THE UPCOMING 2019 FINANCIAL YEAR To ensure that the Group’s executive management team has incentive schemes that accord with the long-term interests of the owners, a proportion of the fixed salary will be linked to the purchase of physical Storebrand shares with a lock-in period of three years. The CEO can decide that a limited group of employees shall be covered by an equivalent scheme. The purchase of shares will take place once a year.
3.STATEMENT ON THE EXECUTIVE EMPLOYEE REMUNERATION POLICY DURING THE PREVIOUS FINANCIAL YEAR The guidelines for executive remuneration policy set for 2018 have been followed. The annual independent assessment of the guidelines and the practising of these guidelines in connection with bonuses to be paid in 2019 will be carried out during the first half of 2019.
In the opinion of the Board of Directors, this has a positive 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.
The Storebrand Group changed external auditor in 2018. Auditing expenses include expenses for both PwC and Deloitte.
Tax effect of realised/unrealised shares -112 112 share dividends received 12 66 associated companies 11 14 other permanent differences 1,680 496 recognition/write-down of tax assets 1 change in tax rate 6 104
1) As a result of new tax rules for pension and life insurance companies, it has been concluded in accordance with IAS 12 that there are no longer grounds for capitalising deferred tax linked to temporary differences in property owned by customer assets. In accordance with the transitional rules, net unrealised gains linked to customer assets must be recognised as income for tax purposes in 2018, when these have previously provided a basis for tax deductions through insurance reserves. The overall transitional effect of the transitional rules results in tax income of approximately NOK 1.6 billion. The effective tax rate is also affected by the fact that the Group has operations in countries with tax rates that are different from Norway. The income tax expense is also influenced by tax effects relating to previous years.
2) In December 2018, the Norwegian Parliament (Storting) agreed to reduce the company tax rate from 23 to 22 per cent with effect from 1 January 2019. It was also agreed to keep the rate at 25 per cent for companies subject to the financial tax. The Storebrand Group includes companies that are both subject to and not subject to the financial tax. Therefore, when capitalising deferred tax/deferred tax assets in the consolidated financial statements, the company tax rate that applies for the individual companies is used (22 or 25 per cent).
B. When calculating net gains according to the transitional rules - see 1) above - a method equivalent to that under (A) was used to calculate the tax values of property shares owned by customer assets. By accepting Storebrand’s interpretation of the Norwegian Tax Administration’s position, as described under (A), it has been taken into account that the tax values were reduced by approximately NOK 3.25 billion. This entails an equivalent reduction in the loss carryforward and an increase in the tax basis for 2018. If Storebrand’s view had been accepted in the annual financial statements and not treated as an uncertain tax position, taxable accounting income would, in isolation, have been approximately NOK 800 million higher for 2018.
Additions in the period - Purchased via acquistion/merger 281 281 1,715
Acc. depreciation and write-downs 31.12.18 -567 -6,717 -909 -305 -8,498 -8,139 1) Value of business-in-force, the difference between market value and book value of the insurance liabilities in SPP.
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.
Calculations related to the future will be uncertain. The value will be affected by various growth parameters, expected return and what required rate of return is assumed, etc. It is pointed out that the aim of the calculations is to ensure adequate reliability that the utility value, cf. IAS 36, is not lower than the recognised value in the accounts. Simulation with reasonable, as well as conservative, assumptions indicates a value for the investment that justifies the book value.
Intangible assets linked to the acquisition of Skagen Storebrand Asset Management AS acquired Skagen AS in 2017. The intangible assets linked to Skagen are customer lists, branded products, technology and goodwill. Budgets and forecasts approved by the Board for the next three years (2019 to 2021) are used as the basis for the valuation. For the period from 2021 to 2023, a growth rate in line with the stock market is expected for revenues and in line with inflation for costs. A growth rate equivalent to Norges Bank’s inflation target of 2.0 per cent is used for calculating the terminal value. The utility value is calculated using a required rate of return after tax of 10 per cent.
The calculations are carried out based on the specific portfolio and are made in Storebrand’s capital model, which is equivalent to that used for Solvency II. The calculations are based on a set of realistic assumptions, including assumptions regarding returns, transfer, costs and income performance. The assumptions are later assessed in relation to actual experiences.
Value of business in force Silver 10 years 10 % Straight line 253
Value of business in force SPP 20 years 5 % Straight line 2 952
Distribution beween company and customers: Bonds held to maturity - customers with guarantees 14,403 15,128
Fordeling på selskap og kunder: Netto utlån til kunder - selskap 28,466 27,259
As of 31.12.18, Storebrand Life Insurance had NOK 4 376 million invested in Storebrand Eiendomsfond Norge KS and Ruseløkkveien 26, Oslo. The investments are classified as “Investment in associated Ccmpanies and joint ventures” in the Consolidated Financial Statements. Storebrand Eiendomsfond Norge KS and Ruseløkkveien 26, Oslo invest exclusively in real estate at fair value.
Sweden At the end of 2018, there was practically no vacancy in the investment properties
Transactions: Purchases: Further NOK 248 millions in property acquisitions in SPP have been agreed on in 4th quarter 2018 in addition to the figures that has been finalised and included in the finacial statements as of 31 December 2018 Sale: No further property sales has been agreed on in Storebrand/SPP in addiition to the figures that has been finalised and included in the finacial statements as of 31 December 2018
Allocation by company and customers: Properties for own use - customers 1,420 1,408
Allocation by company and customers: Accounts receivable and other short-term receivables - company 7,005 4,834
Allocation by company and customers: Bonds and other fixed-income securities - company 24,055 31,718
Bonds and other fixed-income securities - customers with guarantee 91,894 101,897
Bonds and other fixed-income securities - customers without guarantee 41,637 33,146
Gross booked value fin. liabilities Fin. assets Fin. liabilities Net amount
Debt raised through issuance of securities 2,350 2,406 45 2,350 2,459 37 1) Book values as at 31.12.
Currency hedging of net investment in Storebrand HOlding AB In 2018, Storebrand utilised cash flow hedging for the currency risk linked to Storebrand’s net investment in Storebrand Holding AB. 3 month rolling currency derivatives were used in which the spot element in these is used as the hedging instrument. In 2018, a dated subordinated loan of SEK 900 million was taken up. The loan was used as a hedging instrument relating to the hedging of the net investment in Storebrand Holding AB. The effective share of hedging instruments is recognised in the total comprehensive income. The net investment in Storebrand Holding AB is partly hedged and therefore the expectation is that future hedge effectiveness will be around 100 per cent.
Collateral pledged in connection with futures and options are regulated on a daily basis in the daily margin clearing on individual contracts. Collatrals are received and given both as cash and securities. .
Securities pledged as collateral are linked to lending access in Norges Bank for which, pursuant to the regulations, the loans must be fully guaranteed with collateral in interest-bearing securities and/or the bank’s deposits in Norges bank. Storebrand Bank ASA has none F-loan in Norges Bank as per 31.12.2018.
Of total loans of NOK 28.1 billion, NOK 18,5 billion has been mortgaged in connection with the issuing of covered bonds (covered bond rate) in Storebrand Boligkreditt AS.
Loans in Storebrand Boligkreditt AS are security for covered bonds in the company, and these assets have therefore been mortgaged through the bondholders’ pre-emptive rights to the security in the company. Storebrand Boligkreditt AS has overcollateralization (OC) of 29 per cent, but committed OC is 9.5 per cent. Storebrand Boligkreditt AS therefore has security that is NOK 1.2 billion more than was committed in the loan programme. Storebrand Bank ASA considers the risk associated with the transfer rate of mortgages to Storebrand Boligkreditt AS as low
Companies in the Storebrand Group have transactions with related parties who are shareholders in Storebrand ASA and senior employees. These are transactions that are part of the products and services offered by the Group‘s companies to their customers. The transactions are entered into on commercial terms and include occupational pensions, private pensions savings, P&C insurance, leasing of premises, bank deposits, lending, asset management and fund saving. See note 23 for further information about senior employees.
Storebrand Asset Management AS has signed an agreement to acquire Cubera Private Equity AS
Investments in trading portfolio: - equities and other units 9 22 3 - bonds and other fixed-income securities 10, 12 1,820 1,380 - financial derivatives/other financial instruments 11, 12, 15 9 16
Net receipts/payments - sale/purchase of property and fixed assets 2 2
Cash and cash equivalents at start of the period 53 72
Note 6: Remuneration to the CEO and elected officers of the company
Currency Current assets and liabilities are translated at the exchange rate on the balance sheet date. Shares held as fixed assets are translated at the exchange rate on the date of acquisition.
Bond funding 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.
Accounting treatment of derivatives as hedging Fair value hedging Storebrand uses fair value hedging, and the hedged items are fixed rate funding measured at amortised cost. Derivatives that fall within this category 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 recognised through profit or loss.
Net income and gains from financial assets at fair value 42 -10 -12 20 33
CHANGES IN THE FAIR VALUE OF PENSION ASSETS NOK million 2018 2017
Expected premium payments are estimated to be NOK 1 million and the payments from operations are estimated to be NOK 13 million in 2019.
Booked returns on assets managed by Storebrand Life Insurance were: 2,2% 3,8%
Note 6: Remuneration of the CEO and elected officers of the company
Tax base for the year 428 414 - Use of losses carried forward -327 -414
Tax effect of: 'dividends received 10 361 gains on equities 7
Storebrand ASA had as per 31 December 2018 liquid assets of NOK 1.8 billion.
Signed loan agreements and drawing facility have covenant requirements. Storebrand ASA has an unused drawing facility of EUR 200 million, expiration december 2023.
Ingvild Pedersen 1,824 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.
On this date, the Board of Directors and the Chief Executive Officer have considered and approved the annual report and annual financial statements for Storebrand ASA and the Storebrand Group for the 2018 financial year and as at 31 December 2018 (2018 Annual Report).
Lysaker, 12. February 2019 Board of Directors of i Storebrand ASA
We have audited the financial statements of Storebrand ASA, which comprise: • The financial statements of the parent company Storebrand ASA (the Company), which comprise the statement of financial position as at 31 December 2018, the income statement, statement of total comprehensive income, statement of changes in equity and statement of cash flow for the year then ended, and notes to the financial statements, including a summary of significant accounting policies, and
• The consolidated financial statements of Storebrand ASA and its subsidiaries (the Group), which comprise the statement of financial position as at 31 December 2018, the income statement, statement of comprehensive income, statement of changes in equity and statement of cash flow for the year then ended, and notes to the financial statements, including a summary of significant accounting policies.
• The accompanying financial statements give a true and fair view of the financial position of the Company as at 31 December 2018, and 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.
• The accompanying consolidated financial statements give a true and fair view of the financial position of the Group as at 31 December 2018, and its financial performance and its cash flows for the year then ended in accordance with International Financial Reporting Standards as adopted by the EU.
We focused on the valuation of the insurance liabilities because it is significant estimates in the financial statements. The estimates involves complex assessment concerning the probability that insured events occurs, and uncertainty related to whether the provisions are sufficient to cover the total liabilities to the policyholders. Small adjustments of the assumptions may have significant impact on the estimates.
The calculation of the insurance liabilities will to a large extent depend on good quality of data in the insurance system and use of assumptions that are in accordance with regulatory requirements and appropriate industry standards.
In our audit we have considered and tested the design and effectiveness of established controls for review of used assumptions and calculation methods, including the company’s internal recalculations of the insurance liabilities. We also examined whether management had established effective controls that ensured good data quality for the calculation of the insurance liabilities. This included controls related to data collection, data processing and reconciliation of the insurance systems. Those controls we elected to base our audit on, was working efficiently.
We considered and challenged management’s use of key assumptions such as risk of death, risk of disability, long life expectancy, discount rate and other actuarial assumptions that the estimated insurance liabilities are based on. We did the same for the method and the models the management used. We used our own internal actuaries for parts of this work. Our findings is that assumptions, methods and models were in accordance with industry standards, regulatory requirements, and that they were used consistently.
Refer to note 1, 2, 12 and 33 in the financial statements for management’s further description of investment properties, the methods used and the assumptions the valuations are based on.
We also assessed the qualifications, competence and objectivity of the external valuers We reviewed the engagement letters with the valuers to assess whether there were any clauses or fee provisions that may have affected their objectivity or in any other way limited their engagement. We did not find any indications of such circumstances.
and a substantial part of the assets in the Group’s statement of financial position.
Refer to note 2 and 12 in the financial statements for a further description of management’s valuation of financial assets measured at fair value.
We also assessed and found that the information in the notes regarding the Group’s valuation principles and fair value determination were sufficient and adequate.
For financial assets that is measured based on models and certain assumptions that is not observable (level 3 investments), we focused on assessing both the models and the assumptions underlying the valuation.
For financial assets measured through use of models and assumptions that are not observable, we assessed valuation principles, the models and assumptions that were used. We found that the models and assumptions were reasonable and used consistently.
For a sample of investments we also tested that fair value was in accordance with external valuations. We considered the reliability of the sources of information, when relevant. Our tests did not reveal substantial deviations.
As part of an audit in accordance with laws, regulations, and auditing standards and practices generally accepted in Norway, including ISAs, we exercise professional judgment and maintain professional scepticism throughout the audit. We also:
• obtain an understanding of internal control relevant to the audit 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 Company's or the Group's internal control.
Sustainability Data 212 Definitions key performance indicators 214 Materiality analysis and GRI index 222 Auditor’s Report on Sustainability
These definitions refer to the tables of key performance indicators in the sections Finance capital and investment universe, Customer and community relations and People and systems.
Bn NOK invested in fossil free products: NOK billion AuM in fossil free funds. The companies should not have more than 5% revenue from the production or distribution of fossil fuels, and fossil reserves should not exceed 100 million tonnes of CO2.
Total AuM invested in solution companies, cleantech and renewable energy: Investments in sustainable projects and companies through our portfolio of clean tech and renewable energy and green bonds in both equity and interest investments in Storebrand and SPP. Solution companies; companies whose core business is to produce goods or services that contribute to achieving sustainable social development
Percentage of AuM that have been screened for sustainability criteria: All companies in our investment universe is screened for sustainability according to our standards: investments
Energy consumption, property management: Temperature corrected energy consumption per gross square meter of heated property area in direct real estate investments under operational control in Norway and Sweden. Comsumption measured by energy suppliers (electricity, district heating/cooling and other) and registered in the environmental monitoring system.
Certified green property: Share of direct real estate investments under operational control in Norway and Sweden wtih a Green building certification, in percent of Assets under Management.
Tonnes CO2 emissions per m2, property management: GHG emissions from direct real estate investments, per square meter of gross heated area. Includes direct and indirect emissions (scope1-3), including tenants’ energy and water consumption as well as waste production. The carbon footprint is calculated by CemaSys AS according to the GHG protocol. Nordic mix emission factor is the basis for the calculation of emissions from electric power with ”location based” method.
Market share for Savings Norway: Based on Q3 figures from Finance Norway
Market position for Occupational Pensions Corporate Market: Based on Q3 figures from Finance Norway
Financial literacy: Expected pension as a percentage of salary (My Pension Figure): The pension percentage (median) is the customers expected pension from all sources (including private savings, folketrygden, AFP and defined benefit/defined contribution pension, as a percentage of customers existing salary.
Sustainable Brand Index UK: A company with a 200 score is considered by the customers to perform very good in environmental and social responsibility.
Absence due to illness (Norway): Number of sick leave hours divided by number of hours worked Storebrand Norway
Absence due to illness (Sweden): Number of sick leave hours divided by number of hours worked SPP Sweden
Environmental requirements for suppliers: Share of contracts on active suppliers where Storebrand has a spend above 1MNOK in procurement and that are certified or fulfill requirements according to one or several of the following environmental certifications: Miljøbas, Eco-Lighthouse, Svanen, ISO 14001, CO2 neutral ISO 14001
Flights per full-time equivalent: Number of individual flights pr. FTE made by the employees of the Group’s Norwegian and Swedish operations in service purposes.
Tonnes of CO2 emissions per full-time equivalent: GHG emissions pr. FTE from the Group’s Norwegian and Swedish operations. Includes direct and indirect emissions, including airtravel and other transportation, energy consumption and waste (scope1-3). The carbon footprint is calculated by CemaSys AS according to the GHG protocol. Nordic mix emission factor is the basis for the calculation of emissions from electric power with ”location based” method.
Energy consumption, head offices (KWh/m2): Temperature corrected energy consumption per square meter heated area in head offices in Norway and Sweden. Consumption measured by the energy suppliers, electricity and district heating/cooling and registered in the environmental monitoring system
Water consumption, head offices (m3/m2): Water consumption in cubic meters per square meter of heated area in head offices in Norway and Sweden. Consumption measured and registered in the environmental monitoring system.
Waste sorting, head offices (sorting rate): Rate of waste sorted at the source for recycling in head offices in Norway and Sweden. The rest fraction is further sorted mechanically at the waste recycling centre, where non-recyclables goes to incineration with heat recovery. Includes direct real estate investments under operational control in Norway.
Scope 1 per employee: Tonnes CO2-equivalents, measured in accordance to Greenhouse gas protocol, per FTE
Scope 3 per employee: Tonnes CO2-equivalents, measured in accordance to Greenhouse gas protocol, per FTE
About the materiality analysis We report on the challenges and issues that both Storebrand and our stakeholders perceive as most essential, so that the Group can continue to improve our sustainable business model. Shareholders, customers, employees, authorities and public opinion/NGOs are defined as our main stakeholders, key to our offerings and most affected by Storebrand’s business activities. Our stakeholder dialogue has been conducted through interviews, conferences, direct dialogue and surveys. We integrate input from stakeholders into our decision-making processes that concern them. Below is a table of the most important stakeholders who have contributed to the materiality analysis through ongoing dialogue in 2018.
The materiality analysis follows the principles of the Global Reporting Initiative (GRI) with regard to how environmental and social impact, as well as stakeholder expectations, are mapped and integrated into the report. The guidelines of the International Integrated Reporting Council (IIRC) have also been used as a basis for reporting.
An active role in social debate, create an understanding of pensions, improve the framework conditions and sustainable investments
Section 1. This is Storebrand Our vision and driving force Organisation
GRI 102 102-6 Markets served Section 1. This is Storebrand Our vision and driving force
GRI 102 102-12 External initiatives Section 1. This is Storebrand Sustainability initiatives we support
Section 4: Good environmental and working conditions throughout the entire value chain, Directors ’ Report: Organisation, working environment and expertise,
Section 1: A sustainable strategy, Section 9: About the materiality analysis
Section 1: Three strategic focus areas, Section 9: About the materiality analysis
The figures for CO2 emissions in property management for 2017 have been recalculated due to additional properties and improved data access. The key figures for the 2017 will therefore deviate from previously reported emissions
Section 9. Sustainability data GRI Index 102-52 Reporting cycle Annual Section 9. Sustainability data GRI Index 102-53 Contact point no/en/investor-relations
Section 9. Sustainability data GRI Index 102-55 GRI content index Section 9. Sustainability data GRI Index 102-56 External assurance Section 9. Sustainability data Auditor's statement – sustainability
Directors’ Report Financial objectives and Section 2: Provide a return to the owners: Why/approach
Directors’ Report: Group financial results for 2018, Section 2: Provide a return to the owners: Results
Directors’ Report: Ethics and trust, Section 4: Committed and courageous employees
Directors’ Report: Organisation, working environment and expertise, Section 4: Committed and courageous employees and key figures
Section 4: Order in our own house, Section 2: A driving force for sustainable investments: Why/ approach
Section 4: Order in our own house, Section 2: A driving force for sustainable investments: Approach /initiatives/goals and ambitions
Section 4: Diversity and equal opportunities: Approach/initiatives/goals and ambitions, Directors’ Report: Organisation, working environment and expertise
Lifelong savings and Engaging, relevant and responsible advisory services for customers: Approach/initiatives /goals and ambitions
Percentage of assets subject to positive and negative environmental or social screening
The Auditors responsibilities Our responsibility is to express an opinion on the subject matter based on our control. We have performed our work and will issue our statement in accordance with the Standard on Assurance
Key performance indicators for sustainability are the tables containing sustainability indicators that Storebrand ASA measure and control. The tables titled «Key performance indicators» are available and included in Storebrand ASA’s annual report 2018, specifically at the end of the three chapters titled «Financial capital and our investment universe», «Customer and community relations», and «People and systems». Storebrand has defined the key performance indicators and explained how they are measured in the tables (criteria). We have examined the basis for the measurements and checked the calculations of the measurements.
(This translation from Norwegian has been made for information purposes only)