The Board of Directors Directors report Corporate Governance Members of Storebrand's corporate bodies
STOREBRAND ASA Profit and loss account Statement of financial position Statement of changes in equity Cash flow statement Notes
Decleration of the Board and the CEO Auditor's report Auditor's report on corporate sustainability Audit Committee Statement Terms and expressions Storebrand Group companies
Storebrand’s history can be traced back to 1767. The company has supplied occupational pensions to Norwegian employees since 1917, the same year that Storebrand’s subsidiary SPP was established in Sweden. The Group offers products within saving, insurance, and banking to companies, public sector entities and private individuals. The Group is divided into the segments Savings, Insurance, Guaranteed Pension and Other.
The acquisition of Skagen makes Storebrand the second largest player in the market for transferable savings in Norway, with a market share of 23 per cent.
MAJOR NEW PRODUCTS IN THE SAVINGS MARKET The autumn has otherwise been characterised by the launch of two major new products in the private savings market. The new rules for saving in equity savings accounts entered into force from 1 September. Equity savings account is a scheme whereby private individuals can combine investments in shares and equity funds and switch between different equity funds and shares without being liable for tax. It is not until an amount exceeding the initial investment is withdrawn that tax must be paid. This is an excellent scheme for private individuals who have long-term savings in shares and equity funds and who wish to purchase and sell shares during this process.
WORLD LEADER IN SUSTAINABILITY Sustainability is an integral part of Storebrand ’s business activities and it is pleasing to receive international recognition for our work. During the World Economic Forum in Davos in February 2017, Storebrand was named the world’s most sustainable finance company in Corporate Knights “Global 100”. This is an award that we are incredibly proud of. We shall continue to work hard to create good pensions and a better world to retire in. The sustainability perspective is integrated into everything we do. This is supported by a sustainable business model that creates value for owners, customers and society as a whole.
In 2017, we focussed on ensuring that we have a sustainable strategy, not just a sustainability strategy. We have therefore carried out work to understand what is important for ensuring long-term value creation and have selected three principal areas that provide us with an overall picture in our approach to value creation: • Financial capital and the investment eco- system: Competitive and sustainable returns.
In this way, we focus on managing all of our most important input factors in an effective manner that prepares us for the future.
Letter from the CEO Storebrand celebrated its 250 year anniversary in 2017 by increasing its share of the Norwegian savings market, paying dividends for the first time in five years and being named the world’s most sustainable finance company.
GUARANTEED PENSION Guaranteed pension consists of products that include long-term saving for retirement, where customers have a guaranteed return or performance on savings funds. The area includes defined contribution pensions in Norway and Sweden, paid-up policies and individual capital and pension insurance.
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 lending to commercial enterprises by Storebrand Bank and the activities at BenCo are reported in this segment.
Career 2004–2011: Executive Vice President, Life and Pensions, Norway 2001–2004: Executive Vice President, Finance Director Storebrand ASA 1994–2001: Vice President / Relationship Manager, Citibank International plc 1990–1994: Asst. Treasurer, Scandinavian Airlines Systems
Career 2008–2012: Lindorff Group AB, Executive Vice President Region Scandinavia, CEO Lindorff AS, Norway. 2001–2008: IKANO Finans ASA, CEO 1987–2000: leading positions in Den norske Bank ASA 1986–1987: Financial Services Officer, Bank of America, San Francisco, USA 1981–1983: Nord-Video (Aftenposten, Gyldendal, Mortensen), sales secretary
Education Licentiate of Science (Economics), Åbo Akademi University, Finland Post graduate studies at the Finnish Doctoral Program in Economics (FDPE) and Stockholm School of Economics
Career 2013–: CEO, SPP Life Insurance AB 2011–: CIO, Storebrand Life Group 2008–2011: Investment Director, SPP Life Insurance AB 2006–2008: Head of Strategic Allocation, SPP Life Insurance AB 2003–2006: Head of Government and Covered Bond Trading, Svenska Handelsbanken 1996–2003: Head of Fixed Income, Alfred Berg Finland 1994–1996: Trainee, Pohjola Bank (OKOBANK)
Career 2006–2015 Chief Investment Officer, Storebrand Asset Management 1999–2006 Senior Portfolio Manager, Storebrand Asset Management 1997–1999 Sector Head Equities Energy/ Shipping, Handelsbanken Markets 1995–1997 Partner, Marsoft Capital 1992–1995 Head of Research, Christiania Markets (now: Nordea Markets) 1990–1991 Junior Consultant, McKinsey & Company
Norwegian Trade Council, INDEX Publishing AS: 1996-2001: Sales- Product- and Marketing Manager
Storebrand's purpose is to help create a future to look forward to. This obligates us to create good solutions for our customers that will enable them both now and in the future to be in a financial situation that provides opportunities.
In order to ensure that we have a comprehensive and long-term strategy for how we will create value for shareholders, customers, employees and society in general, a materiality analysis has been conducted to prioritise our most important input factors and most important drivers for creating value from these input factors. The guidelines for International Integrated Reporting Council (IIRC) are used as a starting point for the materiality analysis for long-term value creation. This model is based on identifying input factors for ensuring an overall picture of the value creation. To highlight how we create value, we have identi�ed value drivers linked to each of the input factors. The materiality analysis also follows the principles in the Global Reporting Initiative (GRI) to ensure that the environmental and social impact, as well as stakeholder expectations, are a part of the . The materiality analysis and Storebrand’s most important challenges are managed and decided by executive management and the board and provide the basis for the reporting of Storebrand’s sustainable model for long-term value creation.
The target �gures and key performance indicators that are reported after each input factor in the following are part of the company’s ongoing follow-up and are reported to both executive management and the board.
LONG-TERM VALUE CREATION IS DEPENDENT ON GOOD MANAGEMENT OF THE INPUT FACTORS.
Based on the analysis, three input factors have been identi�ed that are the most important for Storebrand’s business activities. These “input factors” are the resources, or the capital, we use for value creation, and we have to manage them e�ectively to ensure �nancial, environmental and social sustainability.
The most important issues and activities within each input factor are those that our stakeholders and Storebrand consider to be the most important for Storebrand to be able to succeed with a sustainable business model. Dialogue has been conducted with the most important stakeholders to identify important issues and activities. We have dialogue with stakeholders through a number of forums such as one-on-one interviews, conferences, roadshows, opinion polls and feedback from customers.
SDGs that are most �nancially relevant to the companies we invest in, measured in terms of materiality and potential impact.
well as in the society around us. Some of the indicators we use to measure our e�orts in relation to the sustainable development goals are listed in the table with input factors below. During 2018, Storebrand will work to further establish the company’s in�uence on achieving the UN
There are direct references to GRI standards in the sections under each input factor.[1]
In addition, two sustainable development goals have been identi�ed where Storebrand can make a di�erence through the business model and community involvement. Sustainable development goal 8, decent work and economic growth, sets the focus on ensuring access to and an understanding of �nancial services. Storebrand wishes to contribute to this goal in the countries where Storebrand operates and will develop several methods of measuring the ability to include vulnerable groups and also to ensure that more people save for pensions and secure their own personal �nances. Storebrand shall also contribute to achieving goal 5, gender equality because this is a success factor for the future, as
enable the standardisation of important information that tells us how well-positioned the companies are in terms of managing climate risk. We as investors can thereby obtain access to better information, thus improving the prerequisites for making well-informed decisions. We are working for a future where both countries and companies make investment decisions in line with the Paris
The results are discussed in more detail in the Directors’ Report. Storebrand achieved a return on equity of 11 per cent and the Board has proposed an ordinary dividend to the General Meeting of NOK 1,168 million, equivalent to an ordinary dividend of NOK 2.1 per share, and an extraordinary dividend of NOK 0.4 per share for 2017. The extraordinary dividend is linked to the strong �nancial result and strong after tax pro�t. The dividend, together with a 46% increase in the share price, gave shareholders a very competitive return in 2017.
In 2017, we started work on reporting in accordance with the so-called Task Force on Climate-related Financial Disclosures (TCFD), cf.
Storebrand’s ambition is to create attractive and competitive returns through dividends and value creation in the business activities.
Storebrand supports and participates in a number of global sustainable energy initiatives. Among other things, we have signed the
Our approach g dialogue in which we can join together with other investors in order to have greater in�uence.
GRI FS10 Percentage and number of companies held in the institutions portfolio with which the reporting organization has interacted on environmental or social issues
Active ownership is an important part of Storebrand’s approach to sustainable investments. Through dialogue with the companies in which we invest, it is our goal to retain and create value for the shareholders. This includes awareness about environmental and social issues and questions relating to Environmental, Social and Governance (ESG) criteria. As a long-term owner, we have a particular interest in raising questions relating to the adaptability and sustainability of the companies’ business models. In this way, active ownership is also a means of reducing risk and creating opportunities.
Dialogue with companies is prioritised with regard to ownership, risk and/or relevance to value creation, including positive ESG e�ect.
dialogue in which we can join together with other investors in order to have greater in�uence.
The Storebrand Group invests more than NOK 720 billion on behalf of our customers. We are responsible for creating the best possible return in a sustainable manner. Part of what drives Storebrand is the desire to be a “brave pioneer” that dares to test out new solutions. This is one of the reasons that we actively work towards investing more in the winners of tomorrow. By winners of tomorrow, we mean companies that contribute to solving major societal challenges while also making good money in the process.
“The Storebrand Standard” describes the companies that we do not want to invest in. The requirements apply to all of Storebrand’s own investments, and include both shares and bonds. “The Storebrand Standard” includes the criteria of international law and human rights, corruption and economic crime, serious environmental damage, controversial weapons, tobacco and low sustainability rating.
The process of exclusion includes both internal and external data and assessments which are carried out by experts in these �elds.
3. Event-based exclusions: We assess companies on the basis of di�erent events associated with the violation of international laws and conventions. The companies in our investment ecosystem are continuously monitored. If we observe any events that indicate that a company is in violation of the “Storebrand Standard”, the company may be excluded. Exclusions are e�ectuated after a process of anonymized assessment of the issue by Storebrand’s Investment Committee. The committee is comprised of several representatives of executive management and other managers, who meet on a quarterly basis and process the cases anonymously.
3. Financially robust companies. We invest in companies that can demonstrate solid �nancial results. Since we have commitments to our customers for many decades to come, we need to think long term.
In Storebrand, sustainability analysis is a key part of how we �nd companies for our funds.
1. We exclude around 180 companies and have higher minimum requirements than anyone else in the industry. In this way we reduce risk. But we will not stop there 2. We analyze companies’ ability to see opportunities and adapt to three sustainability trends. Based on this analysis, companies get a score from 0-100, which tells us how sustainable companies appear.
Storebrand Pluss standard, which is a fossil fuel free fund, and a new ESG fund that replaces companies with a poor environmental record with more sustainable companies. During 2017, Storebrand published reports for reporting to Portfolio Decarbonisation
Ambition g 3. Event-based exclusions: We assess companies on the basis of di�erent events associated with the violation of international laws and conventions. The companies in our investment ecosystem are continuously monitored. If we observe any events that indicate that a company is in violation of the “Storebrand Standard”, the company may be excluded. Exclusions are e�ectuated after a process of anonymized assessment of the issue by Storebrand’s Investment Committee. The committee is comprised of several representatives of executive management and other managers, who meet on a quarterly basis and process the cases anonymously.
If the excluded companies demonstrate changes to or improvements in their policies or business operations, they may potentially be re-included in Storebrand’s investment ecosystem.
2. Sustainable business practices. Companies that proactively manage environmental challenges, human rights issues and corruption, will be better prepared to meet future demands from consumers and authorities in a changing world.
solution companies from di�erent sectors, small amounts can thereby be invested in a long line of companies that work with di�erent methods of achieving a low emission society. Collectively, capital can then be invested in work for �nancing solutions that are bene�cial to society. Our ambition is that 2% of assets under management shall be invested in solution companies in 2018, 3% in 2020 and 4% in 2025. Storebrand reported indirect carbon emissions in the portfolio for the �rst time in 2017 as part of the reporting for the Portfolio Decarbonisation Coalition. We will work towards further developing our reporting and ambitions in 2018.
Indirect cliamte emission -> carbon intensity in: Tonn CO2e per 1 MNOK sales income
New de�nition. Number for 2016 is updated in accordance with new de�nition[4]
Storebrand’s Sustainability Prize, and was awarded at Aftenposten’s climate conference ‘Our World’.
By conducting analyses we �nd the companies that are best equipped for the future. Future-oriented companies are better positioned for global challenges, which is re�ected by lower risk and higher expected returns. Storebrand considers companies to be sustainable when: 1. Company position on global trends. The world is changing and we believe those companies that manage to adapt their business models to increase production for more people, using fewer resources, will be the winners of tomorrow.
Increased focus on companies that address the challenges of the future
Fair Finance Guide ser nærmere på hvor bærekraftig retningslinjene til de norske banker er. Analysen dekker både egen virksomhet, investeringer og utlån i bedrifts- og privatmarkedet.
The solar power company Otovo won the sustainability award, which was awarded by climate minister Vidar Helgesen. The jury justify’s the award to Otovo for its e�orts to remove barriers to small-scale solar energy in the Norwegian and Scandinavian markets.
The company represents a new way of thinking within its �eld, and through an innovative mindset, built on existing solutions. The solution is aimed at the general population, has already begun well and has a great potential beyond Norway’s borders.
communicate that Storebrand is a world leader in this �eld (Corporate Knight 2017). We have therefore introduced a new performance indicator in the table at the end of the chapter that measures the degree to which customers associate Storebrand with sustainability in comparison with other companies in the industry.
As part of Storebrand’s assessment of operational risk, risks associated with the processing of personal data are identi�ed and assessed. Storebrand has initiated a process for assessing the consequences for privacy when processing personal data that represents a high privacy risk. In 2017, we reported 10 privacy enquiries to the Norwegian Data Protection Authority in accordance with the requirements in Section 2-6 of the Personal Data Regulations. In all of these instances, the customers were informed about the incident that had occurred. In one of the instances we received a serious complaint from the customer as a result of the incident.
Storebrand is by far the best player in the survey. It is only the challenger Cultura who gets a higher score than Storebrand. A bank specializing in ethical banking.
Storebrand focusses on providing appealing and simple customer experiences – both to attract new customers and to ensure that our existing customers are as satis�ed and loyal as possible.
Storebrand indicator: Results of surveys measuring customer satisfaction NPS Norway and Sweden
Storebrand indicator: Ranking in terms of customer satisfaction in Norway and Sweden
Assisting customers in making the correct �nancial choices is important for them being able to have a secure pension and to maintain their lifestyle and purchasing power when retirement commences.
Ambitions g communicate that Storebrand is a world leader in this �eld (Corporate Knight 2017). We have therefore introduced a new performance indicator in the table at the end of the chapter that measures the degree to which customers associate Storebrand with sustainability in comparison with other companies in the industry.
When Storebrand enters into agreements for products and services, we always inform our customers about what personal data is necessary to process and the purpose of this. In addition, our privacy statement is always available at storebrand.no.
Intelligent use of information, and especially personal data, is vital in a digital world where the branches and traditional physical customer meetings are disappearing. This increases the need to invest in digital trust such that Storebrand’s customers experience that sharing information with us creates value for each individual, while at the same time we respect their privacy. Intelligent and reliable use of customer data will create signi�cant opportunities for customers and Storebrand in the future. Creating digital trust with our customers will be what guides Storebrand’s continued customer development work.
At the end of the year, we had two major new products in the Norwegian savings market: Equity savings account and individual pension savings (IPS). More than 7,000 of our customers have opened an equity savings account at Storebrand, while 13,000 have started IPS.
The Pension Reform from 2011 has made pensions an individual responsibility. The interest in pensions and savings has increased in line with the population having begun to understand the importance of pension saving. In 2017 we saw several examples of major interest being shown by our customers in their own pensions and savings. Pensions are at the heart of Storebrand’s work.
My Pension Figure (Mitt pensjonstall) is a tool that assists customers in calculating their total expected pension, with �gures obtained from the National Insurance Scheme, private savings and employer. During 2017, almost 70,000 people accessed storebrand.no and found their pension �gure. A total of 335,000 pension �gures have been established since the launch in 2013. Our customer service centre received over 90,000 inquiries about pensions and savings in 2017. My pension �gure has increased from 55% in 2016 to 58% in 2017. The �gure shows how much of your future income you will receive when you retire.
Relevant and responsible customer advice is the cornerstone of customer satisfaction. The customer shall end up with products and services that are relevant and correct for them in the circumstances in which they are in. If we succeed with this, we are well on the way to achieving our vision of “our customers recommending us”.
Products and services linked to pensions and insurance are considered complicated. We take this seriously and work with making them easier to understand. Finance Norway has the project “Out of the language fog” (Ut av språktåka). We are actively involved with this and the goal is to establish language that is good and understandable.
Our advisors undergo an authorisation process and meet di�erent quality requirements each year. This shall also be re�ected in the digital platforms on which customers meet with us. We therefore support the Finance Industry Authorisation Schemes in their work on developing a quality standard for digital advice and look forward to being able to declare a robot as being “AFR” in the same way as an Authorised Financial Advisor (Autorisert Finansiell Rådgiver).
417- 1: Requirements for products and service information labelling 417-2: Incidents of non-compliance concerning product and service information and labeling 417-3: Incidents of non-compliance concerning marketing communications
NPS Swedish corporate marked Top 3 #8 Top 3 Top 3 Top 3
My pension �gure is the most important gateway we have for encouraging our customers to take responsibility for their own pensions. It will continue to serve this purpose into the future. We have the goal of 100,000 customers making a pension-related transaction after having checked the pension �gure. My pension �gure will be vital to this work, and a great deal will be invested in getting our customers to set up the pension �gure, improving the customer experience and following up our customers. In 2018, the work will be expanded by increasing interest in �nances among young people by participating in “Young Entrepreneurship”(ungt entreprenørskap).
Sharity – > Handshake of the year N/A N/A N/A N/A N/A N/A
All input factors relate to The Storebrand Group including subsidiaries unless otherwise spesi�ed in the de�nition. De�nitions can be found on www.storebrand.no/en/sustainability/reports
GOOD ENVIRONMENTAL STANDARDS AND WORKING CONDITIONS THROUGHOUT THE ENTIRE VALUE CHAIN
An increase in the outsourcing of work tasks sets stricter requirements for following up suppliers. The focus on working conditions, particularly in the supplier chain, is important for ensuring good working conditions and protecting human rights.
In 2017, purchase contracts with suppliers of more than NOK 1 million amounted to NOK 2 billion in purchase volume, of which NOK
GRI 414-1 Percentage of new suppliers that were screened using environmental criteria
Storebrand has the objective of ensuring optimal purchases in terms of costs, quality and user experience, and that this takes place in accordance with laws, regulations and internal rules. Purchases shall take place in accordance with Storebrand’s core values and comply with the requirements and expectations that are set for our business activities by our customers, suppliers, government authorities, employees and partners. The Group shall not select suppliers or products that violate international agreements, national laws or internal guidelines. Furthermore, Storebrand shall contribute to sustainable development and that human rights and labour laws are not violated. Our ambition is to increase the proportion of certi�ed purchases to 40% in 2018 and up to 50% in 2025.
The digital transition has also meant major changes in how Storebrand meets customers and places an increased focus on digital customers.
This also requires a high level of digital expertise internally, i.e. knowledge of the solutions our customers prefer to use and where the market is moving at any given time.
(mobile, tablet, PC) for learning, sharing and cooperation across the organisation and when meeting with customers.
A new future-oriented and creative o�ce landscape with choice, variation and no �xed sitting areas was introduced in the Norwegian part of the Group at the end of 2017 with the ambition of facilitating greater �exibility, sharing and learning in the organisation. For many employees this is a new and di�erent way of working, while for others it is familiar. Storebrand has made just over 20 major digital deliveries in 2017, which have improved the customer and sales experience and have helped support our vision of our customers recommending us. In addition, about 10 production deployments are delivered every working day, which makes a di�erence to the customer’s digital experience of Storebrand.
Storebrand’s employees, their knowledge and expertise in the interaction with the systems and structures. Storebrand’s digital strategy differs from others in that it, first and foremost, places a focus on people and their ability to use digital tools. People and systems and therefore proposed as being a combined input factor in line with Storebrand’s approach.
Focus on teams and networks will be important for Storebrand going forward in order to ensure that we utilise our full potential. Our managers will lead learning, lead networks and lead values and result. Teamwork across departments, units and the organisation will therefore also be important in 2018.
At the start of 2018 we will introduce a new HR system known as “Workday” in the entire Group. With Workday, information about the organisation will be re�ected in realtime and all HR processes will be digitalised. This means that we can equip our organisation for speed, while also contributing to achieving our goal of “Paper-free Storebrand 2018” and will enable us to comply with the new GDPR
In 2017, Storebrand received 85 (83) out of a possible 100 points in the internal employee satisfaction survey that was conducted by
GRI 412-3 Significant investment agreements and contracts that include human rights clauses or that underwent human rights screening
In 2017, 50 per cent of the board members at Storebrand ASA were women and the �gure for the subsidiaries was 43 per cent. The
�gure for executive management is 33 per cent. 37 per cent of the members of the executive management’s leadership teams are women and the �gure is 29 per cent at the next level (3).
Through the programme, the participants established goals and measures for how the enterprises shall succeed in recruiting more female managers to the top levels of the organisations. The debate on this often centres around whether the low percentage of women at the top levels is the fault of the companies or the women themselves. In this programme we created an arena for continuing the debate and focusing on speci�c measures that the participating enterprises pledge to implement in their own operations. This has been collated in a report which also contains recommended measures at community level. This shall be presented at a concluding arrangement in April 2018.
Storebrand took the initiative for FiftyFifty in connection with our 250 year anniversary in 2017 and has implemented the programme in cooperation with the participating enterprises, AFF and the recruitment agency Flensby & Partners.
During 2017, twelve employees were given the opportunity to provide students from minority language backgrounds with a head start as a discussion partner and advisor. Through workshops in diversity management and appreciative enquiry, the participants helped the students and gave them an insight into working life, assistance in self-development and support in making sound choices in relation to school and working life.
�nances. Together with Young Entrepreneurship, Storebrand has created a website that provides guidance to students and teachers about how sustainable youth businesses can be established.
Storebrand shall continue the development of own employees and promote individual development of management skills among women. Storebrand shall endeavour to maintain the gender balance among key personnel who act on behalf of the company both externally and internally. During the recruitment process, discrimination on the basis of, for example, gender, ethnic background and disability must be avoided. We also wish to formulate new methods for measuring how we can contribute to sustainable development goal number 5.
In order to achieve our objective of “A future to look forward to” we see that it is important to build a company culture in which people are the most important element and the ingenious digital solutions are a given. Storebrand’s employees are our greatest source of innovation, development and growth. Use of the right technology is something that we continually strive to develop and utilise in the best interests of the customer. Our organisational structure is continually changing in the direction of a more value-based, agile and smart, customer centric work culture, that focuses on the employee and that enables a higher pace and continual learning in teams and networks. Storebrand’s head o�ce shall be a high-quality building with an indoor environment that promotes good health, recycling and adaptations that make it an enjoyable workplace for employees and is a part of the sustainable Storebrand.
The Group has established systems for both internal and external whistleblowing. The external channel has been established through an external law �rm. There are also extensive routines for handling harassment and improper behaviour.
Storebrand places considerable emphasis on creating and encouraging a feedback culture in order to continually develop the organisation in the right direction. Therefore, up until now we have had annual employee surveys and in 2017 also conducted a pilot programme that involved testing digital pulse readings (Pulsmålinger) every second week.
The Group’s absence due to illness has been at a stable low level for many years. Absence due to illness for the Group in 2017 was 3.5 per cent. That means the Group achieved its objective. This �gure was 3.5 per cent for the Norwegian part and 3.4 per cent for the
Continual focus on ethics and anti-corruption in the follow-up of employees 136 courses in ethics and 148 courses in anti-corruption were conducted during 2017, and all employees must complete the course every 3 years. In addition, a minimum of one review with ethical dilemma training is conducted per department per year.
Storebrand indicator: Percentage of employees that view the sustainability focus as positive.
Storebrand was ahead of its time in setting high environmental standards for the renovation project at the head o�ce ten years ago and has contributed to the development of BREEAM NOR, the Norwegian version of the certi�cation standard for renovations and new builds. Storebrand is among the country’s leading property managers and uses BREEAM as an important tool for systematic improvement of the environmental quality of our properties and management practices. The goal is therefore to have the entire property portfolio environmentally certi�ed.
A high level of skill is one of Storebrand’s most important factors for success, and it forms the foundation for renewed growth. At Storebrand, skills are de�ned as the ability that each individual employee has to perform and manage certain tasks and situations. This ability is based on knowledge and experience, skills, motivation and personality.
At Storebrand, all of the employees should have an opportunity to develop in line with the company’s needs and the most important part of skills development takes place through facilitating development as part of the everyday work at the workplace. Skills development should take place by assigning challenging tasks to employees in their positions, and that they are allowed to develop themselves for new requirements and tasks. The professional competence of employees must always be expanded, so that it can in turn contribute to growth, greater adaptability and a greater restructuring capacity for the Group. Storebrand shall be an attractive workplace for skilled and competent employees and will strive to accommodate the needs of all employees for continual learning in everyday work. We know this creates a sense of achievement and job satisfaction.
The result for job satisfaction in this year’s employee survey, which is the sum total of satisfaction and motivation, increased by four points from 2016 to 2017. The company also measures employee loyalty. The score for this area increased by three points from 2016 to 2017.
With regard to the question of whether employees think that it is valuable that the Storebrand Group desires to have a leading position within sustainability, the point score increased from 87 to 89 and there is also a very high level of knowledge about the
Method) for buildings in ordinary operation evaluates the quality of the building in terms of energy, water, use of materials, pollution, transport, green areas and ecology, in addition to health/indoor environment and waste. Excellent is equivalent to a grade of 4 out of 5.
GRI 403-2 Types of injury and rates of injury, occupational diseases, lost days, and absenteeism, and number of work-related fatalities.
The learning pathway “Our driving force in the head and heart” was launched for 1,773 employees in March 2017. 85% accessed the solution either via mobile, tablet or PC during the �rst three months after its launch and 96% of those who accessed the solution said they liked it and noted that it is very �exible and easily available.
FACTS – OTHER PROGRAMMES AND INITIATIVES THAT PROMOTE LEARNING AND CULTURE BUILDING
The Storebrand Academy (Storebrand Akademiet). The Group’s management development programme. A new group of 20 managers started the programme in 2017. The programme had four meetings during the year.
Storebrand Sandbox. The Group’s �ntech programme for students. 10 students were accepted from 300 applicants in 2017. The students use Storebrand’s work methods to arrive at proposed solutions that are ready for the market. The students also take courses in Lean Startup, presentation techniques and teambuilding.
Our industry is in a continual state of change. Storebrand therefore considers it to be of great bene�t to enter into partnerships in order to promote personal development and continual improvement of our products. Being able to derive bene�ts from the experiences, technology, customer insights and routines of others ensures �exibility, agility and prompt delivery when dealing with customers. The Storebrand Academy shall be further developed and adapted to an agile organisation. The Group is focussed on building relationships and employer branding in relation to existing and potential employees. Company presentations are held regularly at universities and university colleges and the Group’s career pages at Storebrand.no, LinkedIn and Instagram are updated to ensure that we are seen as an attractive employer for the employees of the future.
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 2017 was NOK 2,339,070 million. The company has 467,813,982 shares with a par value of NOK 5. As at 31 December 2017, the company owned 973,672 of its own shares, which corresponds to 0.21 per cent of the total share capital. The company has not issued any options that can dilute the existing share capital.
Storebrand generated a total return (including dividends) of 49,08 per cent in 2017. During the corresponding period, the Oslo Børs OSEBX index rose 19,1 per cent, while the European insurance index Beinsur showed a return of 6,2 per cent for the corresponding period.
Storebrand aims to pay a dividend of more than 50% 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%.
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 exceeding a shielding deduction multiplied by an upward adjustment factor (1.33 for the 2018
As at 31 December 2017, total foreign ownership amounted to 57.1 per cent, compared with 55.6 per cent at the end of 2016.
A total of 614 million shares in Storebrand were traded in 2017, compared with 703 million in 2016. The trading volume in monetary terms totalled NOK 25,359 million in 2017, an increase from NOK 21,248 million in 2016. In monetary terms, Storebrand was the 10th most traded share on Oslo Børs in 2017. In relation to the average total number of shares, the turnover rate for shares in Storebrand was 95 per cent.
�nancial year) is taxed as general income for the personal shareholder (the tax rate is 23% for the 2018 �nancial year, which together with the adjustment factor gives an actual tax rate of 30.59%).
Average daily turnover (1000s of shares) 2,450 2,780 2,820 2,185 2,286 3 511
Number of ordinary shares 31/12 (1000s of shares) 467,814 449,910 449,910 449,910 449,910 449 910
2012: OUR CUSTOMERS RECOMMEND US Storebrand launches a new vision: “Our customers recommend us”, six customer promises, a new position and adjusted core values.
New regulatory framework for private occupational pensions in Norway is introduced on 1 January. New maximum rates for defined contribution pensions are significantly higher.
Storebrand celebrates its 250 year anniversary and takes over Silver's pension customers and acquires Skagen.
Previous positions CEO, Bergens Tidende 1997-2008 Division Director, DnB 1994-1997 Bank Director, DnB 1990-1994 Lawyer, Nevi/Bergen Bank 1987-1990 Company Secretary, Kyrre AS 1986-1987 Police Intendant I/II 1984-1986 Police Inspector 1979-1984
Positions of trust Lerøy Seafood Group Grieg Star Shipping Nye Wermlands Tidningen AB
Education State Authorised Accountant (NHH) MSc in Economics and Business Administration (siviløkonom) (BI Norwegian Business School) Master of Science in Finance (University of Wisconsin)
Previous positions CFO Telenor Digital Businesses (2016-2019) CFO Telenor Norge AS (2012-2016) Restructuring of Expertkjeden (2011-2012) CFO Opplysningen 1881 AS (2008-2010) CFO/IR Head at Komplett ASA (2003-2008) CFO at Reiten & Co. ASA (2000-2003) Senior Manager at KPMG (1992-2000) Corporate audit unit at Nordea (1990-1993)
Education Authorised Financial Analyst (Norwegian School of Economics) MSc Econ (London School of Economics and Political Science) Intermediate level Russian (University of Oslo) International Finance Programme (Handelshögskolan Stockholm) MSc in Economics and Business Administration (siviløkonom) (Norwegian School of Economics)
Positions of trust Chairman of the Board of Principles of Responsible Investments (PRI) Board member in Kommunalbanken AS, Norfund and beCuriou Private Travel
Education Masters Degree in International Finance and Accounting (University of Newcastle upon Tyne) Bachelor of Business Administration (BI Norwegian Business School/University of Texas at Austin) Authorised Portfolio Manager (Norwegian School of Economics/Norwegian Society of Financial Analysts) Specialization in valuation (Norwegian School of Economics/Norwegian Society of Financial Analysts)
Previous positions Product Specialist, Savings and Pension, Storebrand Livsforsikring AS (2014-2017) Sales Manager and Product Manager at Delphi Fondene (2009-2014) Sales Manager and Key Account Manager at Storebrand Kapitalforvaltning AS (2005-2009) Senior Financial Advisor at Focus Bank AS (2003-2005 Senior Financial Advisor at Storebrand Livsforsikring AS (1999-2003)
Previous positions Senior Employee Representative, Storebrand Livsforsikring AS (2013-2017) Project Manager at Storebrand Bank ASA (2011-2013) Project Owner at Storebrand Bank ASA (2008-2011) Senior Consultant, Retail Market Credit at Storebrand Bank ASA (1998-2008) Financial Consultant, Retail Market Credit at Gjensidige Bank AS (1996-1998) Customer Consultant at Sparebankenes Kreditt- selskap AS (1987-1996)
Storebrand provides better pensions – simple and sustainable. Total savings and pension are the sum total of many minor and major �nancial decisions and the Group o�ers products within savings, insurance and banking to private individuals, companies and public sector entities. The
Storebrand’s strategy is to provide pro�table growth within focus areas through simple and sustainable solutions, while we also manage our guaranteed portfolios in a capital-e�cient manner. Occupational pension is a core product in both Norway and Sweden. In Norway, employees and former employees of companies that have a pension agreement with Storebrand are also o�ered attractive retail market solutions. Our vision is simple: We are successful when recommended by our customers. Therefore, the follow-up of feedback from customers is a priority.
Storebrand’s goal is to create, through our business activities, a future to look forward to. Our sustainable solutions not only contribute to better pensions, but also to a better world in which to retire. For several decades, it has been our ambition to be bold trailblazers within sustainable investments. We take an active position on the companies in which we invest both our own capital and that of our customers. We believe that companies that integrate environmental, social and good corporate governance considerations in their business activities will be part of creating better returns over time, both through reducing risk and creating new opportunities. This focus is further reinforced by more thorough reporting and the integration of sustainability into all parts of the value chain.
The Guaranteed Pensions area is in long-term decline. Companies are requesting products with guaranteed interest rates to a lesser extent, and these products are capital-intensive for the life insurance companies during periods of low interest rates. The customers’ accrued pension rights are secured through a solid solvency position and robust systems for risk-taking in the business.
Storebrand has maintained its position as the market leader for de�ned contribution pensions in Norway with a market share of 32%. In
During 2017, Storebrand took important steps in its work on highlighting long-term value creation as part of the continued development of the sustainability work. This involves a broader view of sustainability by linking the �nancial and non-�nancial objectives to long-term sustainable value creation. Storebrand and SPP’s sustainability work strengthens the Group’s competitive position and constructs a business model that creates value for shareholders and has positive repercussions for the society we operate and invest in.
In the 4th quarter of 2015, Storebrand decided to charge the remaining estimated direct contribution to strengthen reserves for expected increased longevity. At the end of 2016, NOK 0.4 billion of the reserve strengthening remained. The remaining strengthening of reserves is expected to be covered by the surplus return and loss of pro�t sharing. The strengthening of reserves for increased longevity was concluded in 2017.
Storebrand has the goal of paying a dividend of more than 35% of the Group pro�t after tax, but before amortisation costs. The dividend policy is conditional upon a sustainable solvency margin of more than 150%, including a minimum solvency margin of 110% without the use of transitional rules. The Board has proposed an ordinary dividend to the General Meeting of NOK 1,168 million, equivalent to an ordinary dividend of NOK 2.1 per share, and an extraordinary dividend of NOK 0.4 per share for 2017. The extraordinary dividend is linked to the strong �nancial result and strong after tax pro�t.
The Board proposes a new dividend policy that will be applicable from and including the 2018 �nancial year. The purpose of the proposed dividend policy is to re�ect the strong growth in fee-based earnings, more volatile �nancial market related earnings and future release of capital from business operations with guarantees. To re�ect this, the Board’s ambition is to pay a stable and increasing ordinary dividend, combined with extraordinary dividends to re�ect the volatility in the �nancial markets and release of capital. The expected release of capital will result in an increased pay- out ratio over time.
Storebrand has the following �nancial targets: Targets Status 2017 >10% 11.0%
The Storebrand Group prepares its consolidated �nancial statements in accordance with the International Financial Reporting Standards (IFRS).
Storebrand acquired Skagen and Silver in 2017. Storebrand is Norway’s largest private asset manager and a leading provider of occupational pensions. Skagen has a strong position in the Norwegian savings market, with a clear management philosophy and a strong brand. Skagen has approximately NOK 80 billion under management and is one of Norway’s leading active asset managers with an international presence. The market for long term savings is growing and is becoming increasingly more individualised. It is also becoming more important for customers to have an overview of their overall savings for both pensions and other purposes.
Storebrand Livsforsikring AS has entered into an agreement with the administration board of Silver to take over the company’s insurance portfolios and, as Norway’s leading Group within savings, o�er a good solution for Silver’s pension customers. Silver’s 21,000 agreements and
increased 5% in 2017. The underlying income performance is marked by higher income from products without guaranteed interest rates and a decline in income from products with guaranteed interest rates. The insurance result had a combined ratio of 89% (91%).
Adjusted for increased �nancial tax, special items and consolidation of Skagen, the Group’s operating costs increased 3% compared to the previous year. The �nancial tax on work increased costs by NOK 60 million, compared with the previous year. This has resulted in a nominal increase of 1.9% compared to the same . The goal of reduced costs in 2018 compared to 2015 remains in place, adjusted for costs from Skagen.
On the whole, the operating result for 2017 increased by 22%, and this was driven by revenues from the consolidation of Skagen and growth in actively sold products. The �nancial result has decreased, and this was primarily due to a provision of NOK 200 million in anticipation of a regulatory reduction in the ultimate forward rate at SPP.
Storebrand Livsforsikring AS has received notice of an adjustment to the 2015 tax assessment. Based on the notice, a provision was made in the annual �nancial statements for 2017 for an uncertain tax position. Storebrand disagrees with the arguments that were put forward and will submit its reply to the tax authorities by the deadline that has been set. For more information about the size of the amount and related uncertainty see Note 27.
The Savings segment experienced growth in fee and administration income of 22% from 2016 to 2017. The result was NOK 1,511 million in 2017
Fee and administration income in the Guaranteed Pension segment has developed in line with the fact that a large part of the portfolio is mature and in long-term decline. Administration income fell 5.3%. Operating costs are being reduced over time as a result of the area being in long-term decline. The result was NOK 766 million in 2017 (NOK 870 million in 2016). The fall in earnings was due to reduced pro�t sharing and includes the strengthening of reserves in the Swedish business by approximately NOK 200 million as a result of the transition to a new UFR (Ultimate
Skagen, there was earnings growth of 18% from 2016 to 2017. The earnings improvement is driven by volume and income growth. Skagen was acquired on 7 December 2017. Most of the result performance at Skagen was achieved before the Group’s ownership period. NOK 136 million is amortised in the consolidated �nancial statements in 2017 to re�ect allocated excess value associated with the acquisition and Skagen’s expected variable income on the acquisition date.
last year. For the Norwegian Unit Linked products, increased competition contributes to pressure on margins, while there are relatively stable margins in the Swedish business and Asset Management.
Insurance reported 1% growth in premium income. The insurance result was NOK 608 million for the year (NOK 575 million in 2016) with a total combined ratio of 89% (91% in 2016). The combined risk result gave a claims ratio of 70% (75% in 2016). Increased volumes, increased allocated costs and ambitions of growth explain the higher costs in the insurance segment. The �nancial result was negatively in�uenced by a weak booked return in the 4th quarter, with an equivalent increase in bu�ers for future returns.
De�ned contribution pensions continue to show strong growth due to most companies now having chosen to convert from de�ned bene�t schemes to de�ned contribution-based schemes. This increases both the number of members and the current premium payments and management volume in the de�ned contribution-based pension schemes in both Norway and Sweden, in addition to growth through the return on premium reserves. Growth in customer assets was 23% in Norway and 17% in Sweden compared with the previous year.
The asset management business increased assets under management by NOK 53 billion in 2016 (excluding Skagen). This growth is primarily attributed to good new business and good returns on the customer assets. At year end, assets under management (excluding Skagen)
Extra Offensive PensionLow Risk Pension Balanced Pension Offensive Pension 2017 3 years From startup*
The Insurance result was NOK 608 million (NOK 575 million) for the full year with an overall combined ratio of 89% (91% in 2016). The insurance premiums increased by 1% in 2017. Growth in premiums decreased in comparison with the previous year due to greater competition in the market. The claims ratio has decreased and this is principally due to satisfactory risk development and gains from dissolution for P&C and personal insurance. As planned, increased volumes, increased allocations and ambitions of growth have resulted in higher costs for the insurance area. The underlying pro�tability and e�ciency are good and show a satisfactory development.
The cost percentage was 18% (16%) for the year. As planned, increased volumes and ambitions of growth have resulted in higher allocated costs for the insurance area. Work is being carried out with cost e�ciency measures in order to reduce the cost percentage. In addition, a general increase in costs and increased allocated costs have resulted in a higher cost percentage.
The investment portfolio of Insurance in Norway amounts to NOK 8.3 billion, which is primarily invested in �xed income securities with a short or medium duration. The return was good, but lower than the previous year due to lower booked return.
Sweden. Pro�tability in the retail market is generally considered to be good, while the margins in the corporate market are consistently low. We see this in connection with both personal insurance and risk cover related to de�ned contribution pensions in Norway, where the competition is strong and price is an important competition parameter. Total annual premiums at the end of 2017 amounted to NOK 4.5 million, NOK 1.7 million of which is from the retail market and NOK 2.8 million of which is from the corporate market.
The Storebrand Life Insurance Group is funded by a combination of equity and subordinated loans. With the interest rate levels at the end of 2017, quarterly interest expenses of approximately NOK 80 million are expected.
Storebrand pays particular attention to the levels of equity and loans in the Group, which are continually and systematically optimised. The level is adjusted for the �nancial risk and capital requirements. The growth and composition of business segments will be important driving forces behind the need for capital. The purpose of capital management is to ensure an e�cient capital structure and ensure an appropriate balance between internal goals and regulatory requirements. The Group’s target is to achieve a solvency margin ratio in accordance with Solvency II of at least 150%. Storebrand Livsforsikring AS also aims to achieve an A level rating. The Group’s parent company has established a goal to achieve a net debt-equity ratio of zero over time. Storebrand ASA has only one class of share. All shares have equal rights and are freely negotiable. The company is not aware of the existence of agreements between shareholders that limit rights to sell shares or to exercise related voting rights.
The Storebrand Livsforsikring Group’s solvency capital consists of equity, subordinated loan capital, market value adjustment reserves, additional statutory reserves, conditional bonus and risk equalisation reserves. Solvency capital totalled NOK 64.5 billion at the end of the year, an increase of NOK 7.4 billion in 2017. The market value adjustment reserve increased by NOK 1.0 million and amounted to NOK 3.7 million at the end of the year. Conditional bonus increased by NOK 1.9 million and amounted to NOK 9.2 million. A good booked return has contributed to increasing the additional statutory reserves. The additional statutory reserves totalled NOK 8.3 million at the end of the year, an increase of NOK
However, earnings were reduced by the strengthening of reserves in the Swedish business of approximately NOK 200 million due to the transition to a new UFR.
Bu�er capital as a % of customer assets SPP 9.0 % 6.7 %
At the end of 2017, the Storebrand Bank Group had pure core capital adequacy of 14.8% and a capital adequacy of 18.9%. The bank group has adapted to the new capital requirements. The company has satisfactory �nancial strength and liquidity based on its operations. The lending portfolio consists primarily of low-risk home mortgages.
There are four companies in the Storebrand Group that issue debt securities. Storebrand Livsforsikring AS issues subordinated loans,
Storebrand is dependent on large amounts of customer data for managing business operations and creating value. The management of information shall entail that there is a low risk of customer data or other sensitive information being abused or misplaced.
Risk management is about looking at both the positive and negative aspects of risk. Risk-taking should contribute to Storebrand achieving its strategic and commercial targets, including customers receiving a competitive return on their pension assets and that Storebrand receives adequate payment for assuming risk in relation to de�ned rates of return.
Savings consists of unit linked insurance, asset management business and the retail market part of the banking business.
The asset management business o�ers active and passive management and the management of fund-in-fund structures for the customer‘s account and risk. Operational risks, including compliance with regulations, are regarded as the greatest risks.
Storebrand’s disability risk. Storebrand also provides cover with death bene�ts, but Storebrand’s risk from this is very limited.
Guaranteed Pension comprises savings and pension products with guaranteed interest rates in Norway and Sweden. The greatest risks are
guarantee. The existing portfolio primarily has guarantee levels ranging from 3 to 4%. Over time, new premiums and possible upward adjustment will contribute to the average guarantee level falling.
Due to pension customers living longer on average, a new mortality tari� was introduced in Norway for de�ned bene�t pensions and paid-up policies from 2014. For the existing reserves, the Financial Supervisory Authority of Norway has approved a seven-year escalation plan, and customer returns exceeding the guarantee can contribute to reserve strengthening. Storebrand’s contribution must be at least 20% of the overall reserve strengthening. Storebrand completed the entire strengthening of reserves by the end of 2017.
Norway, but accounting at amortised cost reduces the solvency risk without increasing the risk from the annual guarantee. In Sweden, there is good correlation between the interest rate sensitivity of assets and liabilities.
Interest rates at the end of 2017 were at approximately the same level now as at the start of the year in both Norway and Sweden. In Sweden, the money market rate is negative. Low interest rates increase Storebrand’s risk, because this reduces the probability of achieving a return higher than the guarantee. In Norway, the e�ect will be dampened in the coming years by a large proportion of the investments being bonds held at amortised cost that will greatly bene�t from securities purchased at interest rate levels higher than the current levels.
Changes in occupational pension schemes in Norway will reduce the risk of low interest rates over time, since de�ned bene�t-based schemes are replaced by de�ned contribution pensions or hybrid schemes without a guaranteed return over zero per cent. The change has the greatest e�ect on new premiums, while existing reserves will continue as paid-up policies.
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 tari�s that include an increased longevity trend.
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. Lending to commercial enterprises in Storebrand Bank will be discontinued and the remaining exposure in the bank’s balance sheet is low.
The regulations that are adopted by the authorities are of great importance to Storebrand. The Board considers the company to be fully in compliance with the applicable regulations and well-prepared for impending changes.
There are several processes taking place that may be of major importance to the occupational pension market in the future. The Ministry has sent draft legislation for a separate pension account for consultation. The AFP scheme was evaluated in 2017, and work is being carried out on a new public service occupational pension scheme.
A number of EU regulations linked to customer protection will be introduced in 2018.
PRIIPS sets requirements for customers to receive standardised product information (key information document) when purchasing complex and insurance-based investment products. The requirements for the document are fully harmonised, but the regulation permits national choice concerning the products that should be included. In its proposal for implementation into Norwegian law, the Financial Supervisory Authority of
Norway has proposed that the rules should apply to multiple products (paid-up policies with choice of investment, pension capital certi�cates and individual pension savings) in Norway. This has been sent for consultation, but the Ministry of Finance has yet to submit draft legislation to the Norwegian Parliament.
Norwegian law on 1 January and Swedish law on 3 January 2018. Sweden has also introduced a ban on broker commissions.
The Commission has decided to postpone the introduction of IDD until 1 October 2018.
New rules for privacy and money laundering will also be introduced from 2018.
The General Data Protection Regulation (GDPR) sets stricter requirements for the business when concerning the use and reuse of personal data and grants customers the right to data portability (being able to take their data to another provider) and to object to some types of pro�ling, when their personal data is used to analyse and predict their behaviour.
The Norwegian Ministry of Finance proposal for legislation regarding pension accounts is subject to consultation until 21 February 2018. It is expected that the Ministry will promptly follow this up with proposed legislation to the Norwegian Parliament.
The Ministry now proposes a scheme for a separate pension account that is based on existing pension accounts in active de�ned contribution schemes. De�ned contribution plan statements issued by previous employers would be transferred into the active scheme based on a principle of “negative acceptance”.
All employees should be members of the company’s scheme, but it should be possible to opt to transfer retirement pension capital to be managed by other providers. An individual right to transfer of this kind that also applies to the active part of the pension account will be administratively demanding, and the ministry is asking as part of its consultation whether the individual right to transfer should only apply to previous earnings until further notice.
The proposal for a separate pension account aims to ensure easier and more e�cient management of the pension schemes. For Storebrand it is expected that the revenues from pension capital certi�cates will decrease considerably when these are transferred to active schemes in the companies. If introduced, the individual transfer rights for the active part of the pension account will entail greater complexity and costs relating to system solutions required for managing this. The market for occupational pensions will become more individualised. Based on the manner in which the transition to a separate pension account has been proposed, the market position in the corporate market will be decisive for the net transfer balance when the transfer of pension capital certi�cates based on negative acceptance shall be implemented.
The �nancial services industry has noted that a transition to de�ned contribution based AFP could solve many of the challenges associated with the scheme: There will be greater predictability for employees while the company will also have predictable costs and not run the risk of not recognising the liabilities. Time-limited bene�ts can provide a better distribution pro�le. A transition from “pay as you go” with partial funding to a fully funded scheme will be demanding. At the same time, liabilities are currently being postponed and, according to NHO, the scheme will not be sustainable in the long-term.
Longevity adjustments and lower regulation of pensions being paid out have already been introduced for public service occupational pensions.
However, the scheme is still based on the �nal salary and is not adapted to the new National Insurance all year principle. Public AFP is still an early retirement scheme that cannot be combined with work without reducing the pension.
The Ministry of Finance has provided an interdepartmental working group with participants from the Ministry of Finance, Labour and Social
Among other things, the mandate states that: “The working group shall assess whether it is possible to make amendments to the business regulations that are clearly to the customer’s benefit. An important part of the report will be whether there are rule changes that give customers significantly increased opportunities for returns within a moderate increase in risk.” The Working Group will be assessing the regulations for pro�t sharing, foreign exchange adjustment funds and additional provisions, as well as the transfer of pension assets. Also under consideration is whether companies ought to have the opportunity to add customer funds from equity as a concession for opting out of the interest rate guarantee.
The ministry is emphasizing that changes in the contracts between customers and companies must be made through increased choices on o�er to customers. This is in line with the ministry’s earlier stance on changes to these rules. However, it is considered positive that a study is now being initiated that will illuminate possible changes.
The Ministry of Finance has proposed removing the ownership restriction of 15% for companies that manage non-insurance operations. The background to the proposal is the introduction of Solvency II which does not permit national restrictions on companies’ investment opportunities. Reference is also made to the rule having restricted the ability of companies to invest in infrastructure. The consultation memorandum emphasises that the companies must exhibit care when investing in non-insurance operations and that risk and that capital requirements associated with such investments are assessed in the ORSA (self-assessment of risk and solvency).
The limit for pension savings of people who are self-employed has increased from 4 to 6%.
The Norwegian Parliament has approved new rules for fund accounts which will be introduced from 2019. Pro�ts will then be taxed in the same manner as for equity funds and equity savings accounts. The favourable tax rules for endowment insurance will be continued for agreements in which, upon the death or disability of the investor, an insurance supplement is paid out that is more than 50% of the savings balance.
In December 2017 the bipartisan Pension Group presented an agreement with guidelines for the continued work with changes to the premium pension system. The present fund market for premium pensions is, in principle, open. The Pension Group will replace this with a fund market emphasising the principles of freedom of choice, sustainability and controllability. The objective is to remove disreputable operators and ensure a service that is characterised by cost-e�ective and sustainable funds.
standards and according to the principles of the International Integrated Reporting Council.
In 2017, Storebrand conducted an extensive materiality analysis covering �nancial, social, and environmental factors, as well as corporate governance, to identify drivers of long-term value creation in all parts of the Group. This will guide the work on creating value for customers and owners while we also work towards a sustainable future. More information regarding this and reporting that applies to sustainability provided by the company’s Board can be found in the annual report’s chapter pertaining to long-term value creation.
A high level of skill is one of Storebrand’s most important factors for success, and it forms the foundation for renewed growth. At Storebrand, skills are synonymous with the ability that each individual employee has to perform and manage certain tasks and situations. This ability is based on knowledge and experience, skills, motivation and personality.
At Storebrand, all of the employees should have an opportunity to develop in step with the company’s needs. In 2016, the company focused on the fact that the greatest and most important part of skills development takes place through facilitating development as part of the everyday work at the workplace. Skills development should take place be assigning challenging tasks to employees in their positions, and that they are allowed to develop themselves for new requirements and tasks. The professional competence of employees must always be expanded, so that it can in turn contribute to growth, greater adaptability and a greater restructuring capacity for the Group.
In 2017, 50% of Storebrand ASA’s board members were women. The proportion of women on the boards of the subsidiaries is 43%. The proportion of women in executive management is 33%. 37% of the members of the executive management’s leadership teams are women and the �gure is 29% at the next level (4).
company since 2002, and the Group’s managers have over the years built up inclusive routines for following up sick employees. All managers with Norwegian employees must complete a mandatory HSE course, in which part of the training involves following up illnesses.
Norway are members of Storebrand Sport. All employees in Sweden are members of SPP Leisure, where they have access to subsidised exercise and wellness services. Like in the head o�ce in Norway, employees have access to a training facility with a variety of activities and organised training.
Storebrand’s low rate of absence due to illness. At the end of 2016, Storebrand agreed to o�er employees “Raskt tilbake” (Back Quickly). This is a preventive service that provides assistance to employees who are at risk of becoming sick.
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 30 October 2014. For further information on Storebrand’s corporate governance, reference is made to the separate article on corporate governance in the annual report.
The Board wishes to thank the retiring members of the Board of Directors and Nomination Committee for their valuable contributions to the
Unit Linked increased by 23.4% from the previous year. Storebrand also has a strong challenger role for the sale of pension solutions to Swedish businesses and the growth in Unit Linked reserves at SPP was 17.1% compared with the previous year. Good sales growth for de�nedcontribution pensions is expected in the future. Work is being carried out to improve pro�tability within this area.
The short-term interest rate remains low in the Eurozone and this is in�uenced by the European Central Bank’s expansive monetary policy. The
Pursuant to Norwegian accounting legislation, the Board of Storebrand ASA con�rms that the company meets the conditions for preparing the
�nancial statements on the basis of a going concern assumption. The Board is not aware of any events of material importance to the annual and consolidated �nancial statements that have occurred since the balance sheet date.
[1] After tax, adjusted for amortisation of intangible assets. The document contains alternative performance measures (APM) as defined by the European Securities and Market Authority (ESMA). Storebrand.com/ir provides an overview of APMs used in financial reporting.
[5] A change to coordinate the Group’s elimination principles has resulted in revenues and costs having increased by NOK 14 million (NOK 7 million) during the quarter and NOK 58 million (NOK 59 million) for the year. For more information see www.storebrand.no/ir.
Other income statement elements that cannot subsequently be reclassified through the income statement
“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 pro�table growth within established focus areas through simple and sustainable solutions. More information about “Our driving force” and focus areas can be found in the annual report under chapter for Our Driving Force.
For more than 20 years, Storebrand has been among the best within sustainable investments and has taken an active approach to how we invest both our own capital and that of our customers. Storebrand believes that companies that integrate environmental, social and governance considerations in their business activities reduce risk and create new opportunities for the business activities and capital owners. Storebrand has the ambition of maintaining a position among the best companies by integrating this perspective in other business areas. Storebrand believes that this will create increased value for customers, owners, society and other stakeholders. See the separate article in the annual report on
Storebrand shall provide 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. More information about
The Board of Storebrand ASA continually monitors Storebrand’s capital solidity in light of its goals, strategy and risk pro�le. You can read more about Storebrand’s capital situation and solvency in the Board of Directors’ Report. The Board has adopted a dividend policy that states that the dividend paid to shareholders shall normally amount to at least 35 per cent of the pro�t for the year after tax, but before amortisation costs. The dividend shall be adjusted such that Storebrand is assured the right capital structure. The dividend is set by the Annual General Meeting (AGM), based on a proposal put forward by the Board. Pursuant to Section 8-1, paragraph two of the Norwegian Public Limited Liability Companies Act, the General Meeting may, by simple majority, authorise the Board of Directors to distribute a dividend. This shall be based on the annual
Storebrand ASA would like to have various tools available for its e�orts to maintain an optimal capital structure for Storebrand to contribute to good shareholder returns and �nancial resilience. At the 2017 Annual General Meeting, the Board was granted authorisation to increase the share capital through issuing new shares for a total maximum value of NOK 224,954,945. This authorisation may be used for the acquisition of businesses in consideration for new shares or 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. The authorisation is valid until the next Annual General Meeting.
Pursuant to the authorization, the Board of Directors decided on 6 December 2017 to increase the share capital of Storebrand ASA by NOK 89 520 455, from NOK 2 249 549 455 to NOK 2 339 069 910, by issuing 17 904 091 new shares each with a nominal value of NOK 5, whereby the number Issued shares in the company increase from 449 909 891 shares to 467 813 982 shares. The decision was taken in connection with the completion of the acquisition of 91 per cent of the shares in Skagen AS, where parts of the purchase price are settled through the transfer of
Otherwise, there are no provisions in Storebrand ASA’s Articles of Association that regulate the buyback or issuance of shares.
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 �nancial 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 o�cers of the Group are regulated by Storebrand’s code of ethics. Employees shall
5. FREELY NEGOTIABLE SHARES (NO DEVIATIONS FROM THE CODE OF PRACTICE)
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 Liability 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 in�uence on Storebrand by exercising their voting rights.
It is also possible to vote by proxy. Provisions have been made so that the proxy form is linked to each individual item to be considered. We will seek whenever possible to design the form so that it allows voting for candidates who are to be elected. The voting rules for the General Meeting allow separate votes for each member of the various bodies. Further information about voting in advance, use of proxies and shareholders’
Storebrand’s website. The General Meeting is opened by the Chairman. The Board organises an independent chairperson who is elected by the
The General Meeting shall: consider the annual accounts, consisting of the pro�t and loss statement, the balance sheet and the annual report, including the consolidated pro�t and loss statement and balance sheet, and the auditor’s report, decide upon adoption of the pro�t and loss statement and balance sheet,decide upon adoption of the consolidated pro�t and loss statement and balance sheet, decide upon the allocation of pro�t or manner of covering loss in accordance with the adopted balance sheet, and on 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 of Directors,
consider the Board of Directors’ statement on the �xing of salaries and other remuneration to executive personnel,
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, demergers, 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.
Storebrand ASA’s Articles of Association regulate the Nomination Committee, which consists of four or �ve members and an observer elected by the employees. For the election period 2017-2018 the Nomination Committee has proposed four members.
The chairman of the Nomination Committee and the other members are elected by the General Meeting once a year. The representative for the employees shall participate as a permanent member of the committee in discussions and nominations concerning the election of the Chairman of the Board, as well as in other contexts where it is deemed natural, upon receiving notice from the Chairman of the Committee (with status as an observer in the latter case).
General Meeting. The Nomination Committee’s rules of procedure were adopted at the 2017 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: competence, 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 contacts the company’s 30 largest shareholders annually and requests that they propose candidates for the company’s
The Nomination Committee is tasked with proposing candidates and remuneration for the Board of Directors and Nomination Committee, through recommendations to the General Meeting.
Board of Directors. At the end of 2017, the Board of Directors consisted of ten members (six men and four women).
�nancial statements for Storebrand ASA (Information on related parties) see note 16. None of the board members elected by shareholders have held o�ce for more than ten years.
In 2017, a total of eleven board meetings were held, two of which were held at the subsidiary SPP in Stockholm. The Board discusses
The Remuneration Committee assists the Board with all matters concerning the CEO’s remuneration. The committee monitors the remuneration of Storebrand’s executive personnel, and proposes guidelines for the �xing of the executive personnel’s remuneration and the Board’s statement on the �xing of the executive personnel’s remuneration, which is presented to the General Meeting each year. In addition, the committee safeguards the areas required by the Compensation Regulations in Norway and Sweden. The Compensation Committee held two meetings in 2017.
The Audit Committee assists the Board by reviewing, evaluating and, where necessary, proposing appropriate measures with respect to the
Group’s overall controls, �nancial and operational reporting, risk management/control, and internal and external auditing. The Audit Committee held seven meetings in 2017, including a joint Meeting With the Risk Committee. The external and internal auditors attend the meetings. The majority of the Committee’s members are independent of the company. The Board of Directors has found that it is appropriate to have a combined Remuneration Committee for all of Storebrand.
Storebrand’s earnings and solvency position. In addition to assessing the e�ects of sudden shifts in the equity markets or interest rate levels
Storebrand has a common internal audit function, which conducts an independent review of the robustness of the management model. The internal audit function’s instructions and annual plan are determined by the Board pursuant to the current legislation, regulations and international standards. The internal audit function produces quarterly reports for the boards of the respective Storebrand companies.
The appraisal of all Storebrand employees is integrated into the business management and is designed to ensure that the Group’s strategies are implemented. The policies for earning and paying any variable remuneration to Storebrand’s risk managers comply with the regulations relating to remuneration in �nancial institutions, cf. Section 12 below. The CRO and employees with control functions related to risk management, internal control and compliance only have �xed salaries.
(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 �xed salaries, variable remuneration, pension schemes and other fringe bene�ts deemed to be natural in a �nancial group. The aim of the remuneration is to motivate greater e�orts 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.
Storebrand shall have an incentive model that supports the Group’s strategy, with emphasis on the customer’s interests and long-term perspective, an ambitious model of cooperation, as well as transparency that enhances the Storebrand’s reputation. Storebrand will therefore largely emphasise �xed salaries as an instrument of �nancial compensation, and make use of variable remuneration only to a limited extent. The
Group’s executive management team receives only �xed Income and use a percentage of their �xed salaries to purchase shares in Storebrand with a lock-in period of three years. This is to clarify that Storebrand’s top management act in accordance with the long-term interests of the owners.
3. INFORMATION AND COMMUNICATIONS (NO DEVIATIONS FROM THE CODE OF PRACTICE)
Storebrand’s sustainability guidelines summarise how the work is an integral part of Storebrand’s overarching objectives and management and control processes. The guidelines encompass all parts of Storebrand’s business activities, including investing, product development, purchasing, follow-up of employees and internal operations. Storebrand’s sustainability goals are adopted by the Board of Directors, and the sustainability scorecard is followed up by the Group’s executive management team semi-annually. Storebrand also complies with the international reporting standard GRI (Global Reporting Initiative, version G4) and uses integrated reporting. The results are audited by Storebrand’s external auditor, see the auditor’s report.
Storebrand Compass is the company’s monitoring tool, and it provides comprehensive reports for management and the Board concerning
(stress tests), scenario analysis is used to estimate the e�ect of various sequences of events in the �nancial markets on Storebrand’s �nancial performance and solvency. This provides important premises for the Board’s general discussion of risk appetite, risk allocation and capital adequacy.
The General Meeting fixes the Board’s remuneration annually on the basis of the recommendations of the Nomination Committee. The fees paid to the members of the Board are not linked to earnings, option schemes or similar arrangements. Members of the Board and Board
A series of risk assessment and control measures have been established in connection with the preparation of the �nancial statements.
More detailed information on the compensation, loans and shareholdings may be found in notes 25 (Group) and 6 and 16 (ASA). Board members are encouraged to hold shares in the company.
2. REMUNERATION OF EXECUTIVE PERSONNEL (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. Moreover, the Board will in the event of any takeover bid seek whenever possible to maximise the shareholders’ assets. The guidelines cover the situation before and after a bid is made.
The external auditor is elected by the General Meeting and is responsible for the �nancial auditing. The external auditor issues an auditor’s report in connection with the annual �nancial statements and conducts limited audits of the interim �nancial statements. The external auditor attends Board meetings in which interim �nancial 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 every year by the Board’s Audit
Net income from financial assets and properties for the company: – equities and other units at fair value 16 31 38
– bonds and other xed-income securities at fair value 16 503 598
Net income from financial assets and properties for the customers: – equities and other units at fair value 16 16,943 11,609
Profit/loss for the year due to: Share of prot for the period – shareholders 2,375 2,118
Share of prot for the period – hybrid capital investors 11 11
Average number of shares as basis for calculation (million) 449.8 448.2
Total other result elements not to be classi�ed to pro�t/loss -92 -166
Total comprehensive attribute to: Share of total comprehensive income – shareholders 2,675 1,163
Share of total comprehensive income – hybrid capital investors 11 11
Financial assets at amortised cost: Reinsurers’ share of technical reserves 63 106
Investment properties at fair value 8, 34 27 403 24 110
Financial assets at fair value: – Bonds and other xed-income securities 8, 10, 12, 31, 37 135 042 141 334
467 813 982 shares with a nominal value of NOK 5. A capital increase was carried out in 2017 by issuing 17,904,091 shares with a subscription price of NOK 62.90. The shares have been used as consideration for the purchase of shares in Skagen.
Includes undistributable funds in the risk equalisation fund amounting to NOK 142 million and security reserves amounting NOK 53 million.[3]
Net receipts/payments – loans to and claims from other �nancial institutions -252 -9
– of which net cash �ow in the period before �nancial assets and banking customers 4,471 -358
Cash and cash equivalents at start of the period 3-965 3,132
Cash and cash equivalents at the end of the period 3,780 3,966
Million NOK 2017 2016 * Consist of: Loans to �nancial institutions 313 272
�ows show the overall change in means of payment over the year.
A substantial part of the activities in a �nancial group will be classi�ed as operational. All receipts and payments from insurance activities are included from the insurance companies, and these cash �ows are invested in �nancial assets that are also de�ned as operational activities. One subtotal is generated in the statement that shows the net cash �ow from operations before �nancial assets and banking customers, and one subtotal that shows the cash �ows from �nancial assets and banking customers. This shows that the composition of net cash �ows from operational activities for a �nancial group includes cash �ows from both operations and investments in �nancial assets. The life insurance companies’ balance sheets include substantial items linked to the insurance customers that are included on the individual lines in the cash �ow analysis. Since the cash �ow analysis is intended to show the change in cash �ow for the company, the change in bank deposits for insurance customers is included on its own line in operating activities to neutralise the cash �ows associated with the customer portfolio in life insurance.
Includes cash �ows for holdings in group companies and tangible �xed assets.
The cash �ow analysis shows the Group’s cash �ows for operational, investment and �nancial activities pursuant to the direct method. The cash
Storebrand ASA is a Norwegian public limited company that is listed on the Oslo Stock Exchange. The consolidated �nancial statements for 2017 were approved by the Board of Directors of Storebrand ASA on 6 February 2018.
The Storebrand Group o�ers a comprehensive range of insurance and asset management services, as well as securities, banking and investment services, to private individuals, companies, municipalities, and the public sector. The Storebrand Group consists of the business areas
Guaranteed Pensions, Savings, Insurance and Other. The Group’s head o�ce is located at Professor Kohts vei 9, in Lysaker, Norway.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES FOR MATERIAL ITEMS ON THE STATEMENT OF FINANCIAL POSITION
Sweden that are measured at fair value, the majority of the �nancial liabilities are measured at amortised cost.
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.
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 bu�ers (liabilities), including in the form of additional reserves, value adjustment reserve and conditional bonus.
The accounting policies applied in the group accounts are described below. The policies are applied consistently to similar transactions and to other events involving similar circumstances. There is no required use of uniform accounting policies for insurance contracts.
The preparation of the consolidated �nancial statements in accordance with IFRS requires the management to make judgements, estimates and assumptions that a�ect assets, liabilities, revenue, expenses, the notes to the �nancial statements and information on potential liabilities. Actual amounts may di�er from these estimates. See Note 2 for further information.
Changes were made to the classi�cation of certain types of transactions in the income statement, and comparable �gures have been restated.
This has resulted in some minor changes between lines in the income statement, but has no e�ect on the Group result or the classi�cation in the segment note. Below are the most important result lines subject to the changes: Net interest income from Bank (this line has been removed from the statement)
IFRS 9 Financial Instruments will replace the current IAS39. IFRS 9 is applicable from 1 January 2018. 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 di�erences between IAS39 and IFRS 9 through Other Comprehensive Income (overlay approach) until implementation of IFRS 17 on 1 January 2021. The Storebrand Group quali�es for temporary deferral of IFRS 9 because over 90 per cent of the Group’s total liabilities as at 31 December 2015 were linked to the insurance business. For the Storebrand Group, IFRS 9 will be implemented together with IFRS 17, applicable from 1 January 2021.
IFRS 9 simpli�es the requirements for hedge accounting by the hedge e�ectiveness being more closely linked to the executive management’s risk management practices.
In principle, IFRS17 shall be applied using a full retrospective approach. This means that all applicable insurance contracts shall be recalculated according to IFRS 17 as if IFRS 17 had been applicable from the date the contracts were entered into. However, if full retrospective application is close to impossible, the standard permits modi�cation of the requirement and a modi�ed retrospective approach or fair value approach may then be used.
The new standard for recognising revenue from contracts with customers enters into force on 1 January 2018. IFRS 15 introduces a �ve-step model for recognising revenues from contracts with customers. Under IFRS 15, revenues are recognised in an amount that re�ects the consideration to which an entity expects to be entitled in exchange for goods or services to a customer.
The new revenue recognition standard will replace all revenue recognition requirements in accordance with IFRS.
Income is assessed in relation to IFRS 15. The implementation of IFRS15 will not have any signi�cant impact on the Group result in Storebrand’s consolidation �nancial statements.
The interest expense on the lease commitment is recognised as a �nancial expense.
controlling interest in Skagen AS was acquired in 2017 and is owned by Storebrand Asset Management AS. The Norwegian authorities have granted Storebrand an exemption from the requirement to organise equivalent businesses in the same company. This exemption expires in 2022.
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 signi�cant in�uence are consolidated in accordance with the equity method. Investments in joint ventures are recognised in accordance with the equity method.
Storebrand consolidates certain funds in the Group’s statement of �nancial position when the requirement for control pursuant to IFRS10 has been met. This encompasses funds in which Storebrand has an ownership interest of approximately 40 per cent or more, which are managed by companies in the Storebrand Group. In the Group’s accounts, such funds are consolidated fully in the statement of �nancial position, and the minority ownership interests are shown on a line for assets and on a corresponding line for liabilities. Other investors in the relevant funds are considered to be minority interests, since they can demand redemption of their ownership interests and, as a result of this, the minority stake is classi�ed as liabilities in the consolidated �nancial statements of Storebrand.
For �nancial liabilities, the rules are principally the same as for the current IAS39.
A key standard for the Storebrand consolidated �nancial statements will be IFRS17 Insurance Contracts, which shall replace the current IFRS4.
The standard was published by IASB on 18 May 2017 and will apply from 1 January 2021.
IFRS 17 will entail signi�cant changes to the method used for measuring insurance contracts and how earnings and �nancial position are presented.
The cash �ows are discounted by an interest rate that re�ects the risk of the cash �ows.
Grouping of contracts will be important for recognition and measurement of insurance contracts. Grouping will take place based on contracts with equal risk and that are managed together creating a portfolio. Portfolios will then be divided into groups according to years, with a maximum of a one year spread for contract duration per group. There should also be a di�erentiation made between unpro�table, pro�table without risk of becoming unpro�table and other contracts.
General approach: The expected contractual service margin (CSM) of premiums is recognised as a liability at the entering into of the contract and recognised in the income statement in line with the provision of the insurance services.
When making investments, including purchasing investment properties, a decision is made as to whether the purchase constitutes acquisition of a business pursuant to IFRS 3. When such acquisitions are not regarded as an acquisition of a business, the acquisition method pursuant to IFRS
If the discounted present value of the pertinent future cash �ows is less than the carrying value, goodwill will be written down to its fair value.
Reversal of an impairment loss for goodwill is prohibited even if information later comes to light showing that there is no longer a need for the write-down or the impairment loss has been reduced. Goodwill is allocated to the relevant cash �ow generating units that are expected to bene�t from the acquisition so that it can subsequently be tested for impairment.
A liability adequacy test must be conducted of the insurance liability pursuant to IFRS 4 each time the �nancial statements are presented. The test conducted in Storebrand’s consolidated �nancial statements is based on the Group’s calculation of capital. The liability adequacy test was carried out prior to the implementation of IFRS. Intangible assets with unlimited useful economic lives are not amortised, but are tested for impairment annually or whenever there are indications that the value has been impaired.
Investment properties are measured at fair value. Fair value is the amount for which an asset could be exchanged between well-informed, willing parties in an arm’s length transaction. Income from investment properties consists of both changes in fair value and rental income.
Financial assets are derecognised when the contractual right to the cash �ow from the �nancial asset expires, or when the company transfers the �nancial asset to another party in a transaction by which all, or virtually all, the risk and reward associated with ownership of the asset is transferred.
Financial liabilities are derecognised in the statement of �nancial position when they cease to exist, i.e. once the contractual liability has been ful�lled, cancelled or has expired.
�ows and all of the contractual terms of the �nancial instruments (for example early repayment, call options and equivalent options). The calculation includes all fees and margins paid or received between the parties to the contract that are an integral part of the e�ective interest rate, transaction costs and all other premiums or discounts.
If a market for a �nancial instrument is not active, fair value is determined by using valuation techniques. Such valuation techniques make use of recent arm’s length market transactions between independent, unrelated, and well informed parties where available, reference to the current fair value of another instrument that is substantially the same, discounted cash �ow analysis, and options pricing models. If a valuation technique is in common use by participants in the market and this method has proved to provide reliable estimates of prices actually achieved in market transactions, this method is used.
If there is objective evidence that impairment has occurred, the amount of the loss is measured as the di�erence between the asset’s carrying amount and the present value of the estimated future cash �ows (excluding future credit losses that have not occurred) discounted at the
Net premium income includes the year’s premiums written (including savings elements, administration premium, fees for issuing Norwegian interest rate guarantees and pro�t element risk), premium reserves transferred and ceded reinsurance. Annual premiums are generally accrued on a straight-line basis over the coverage period.
Intangible assets with limited useful economic lives are measured at acquisition cost less accumulated amortisation and any write downs. The useful life and amortisation method are measured each year. With initial recognition of intangible assets in the statement of �nancial position, it must be demonstrated that probable future economic bene�ts attributable to the asset will �ow to the Group. The cost of the asset must also be measured reliably. The value of an intangible asset is tested for impairment when there are indications that its value has been impaired. In other respects intangible assets are subject to write-downs and reversals of write-downs in the same manner as described for tangible �xed assets.
Financial assets at fair value through pro�t or loss in accordance with the fair value option (FVO).
A �nancial 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 identi�ed �nancial instruments that are managed together and there is evidence of a recent actual pattern of short-term pro�t-taking, or it is a derivative that is not designated and e�ective as a hedging instrument.
Financial assets held for trading are measured at fair value at the reporting date, with all changes in their fair value recognised in pro�t or loss.
At fair value through pro�t or loss in accordance with the fair value option (FVO)
Assets held to maturity are recognised at amortised costs using the e�ective interest method. The category is used in the Norwegian life insurance business for assets linked to insurance contracts with interest rate guarantees.
Loans and receivables are non-derivative �nancial assets with �xed 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 classi�ed as held for trading and those that the company upon initial recognition designates at fair value through pro�t or loss.
Loans and receivables are recognised at amortised cost using the e�ective interest method. The category is used in the Norwegian life insurance business linked to insurance contracts with a guaranteed interest rate, and in the banking business.
A derivative is a �nancial instrument or other contract within the scope of IAS39, and which has all three of the following characteristics:
Some of the Group’s insurance contracts contain embedded derivatives such as interest rate guarantees. These insurance contracts do not follow the accounting standard IAS 39 Financial Instruments, but follow the accounting standard IFRS 4 Insurance Contracts, and the embedded derivatives are not continually measured at fair value.
Hedging of net investments in foreign businesses is recognised in the accounts in the same way as cash �ow hedging. Gains and losses on the hedging instrument that relate to the e�ective part of the hedging are recognised through total comprehensive income, while gains and losses that relate to the ine�ective part are recognised immediately in the accounts in the pro�t and loss account. The total loss or gain in equity is recognised in the pro�t and loss account when the foreign business is sold or wound up.
Some borrowing in foreign currency is hedged by means of hedging instruments (derivatives). The cash �ows in the hedged item coincide with the cash �ows of the hedging instruments. Derivatives are recognised at fair value. Hedge accounting is carried out by dividing the hedge into fair value hedging of the interest and a cash �ow hedging of the margin. Net changes in the value of the cash �ow hedge are recognised in the
Pursuant to IFRS 4, the technical insurance reserves must be adequate. When assessing the adequacy associated with recognised acquired insurance contracts, reference must also be made to IAS37 Provisions, Contingent Liabilities and Contingent Assets, and Solvency II calculations.
Claims for own account comprise claims settlements paid out, less reinsurance received, premium reserves transferred to other companies, reinsurance ceded and changes in claims reserves. Claims not settled or paid out are provided for by allocation to the claims reserve under the item, changes in insurance liabilities.
If additional reserves allocated to a contract entail that the total additional statutory reserves exceed 12 per cent of the premium reserve linked to the contract, the excess amount is assigned to the contract as surplus.
The premium fund contains premiums prepaid by policyholders as a result of taxation regulations for individual and group pension insurance and allocated pro�t shares. Credits and withdrawals are not recognised through the pro�t and loss account but are taken directly to the statement of �nancial position.
The pensioners’ surplus fund comprises surplus assigned to the premium reserve in respect of pensions in group payments. The fund is applied each year as a single premium payment to secure additional bene�ts for pensioners.
Up to 50 per cent of the risk result for group pensions and paid/up policies can be allocated in the risk equalisation fund to cover any future negative risk result. The risk equalisation reserve is not considered to be a liability according to IFRS and is included as part of the equity
(undistributable equity). See Note 2 for further information on the use of the risk equalisation reserve to strengthen the longevity reserves.
For other risk insurance, a risk-free real interest rate, or nominal risk-free interest rate, is used in combination with the assumed in�ation.
assumptions about mortality and disability rates, interest rates and costs. In addition, the provisions are increased due to expected increased life expectancy. Premium tari�s 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.
A substantial proportion of the Norwegian insurance contracts have a one-year interest guarantee, meaning that the guaranteed return must be achieved every year. A substantial proportion of the Swedish insurance contracts have a guaranteed return up to the time of the pension payments.
Included in the premium reserve for insurance risk are provisions for claims either occurred but not yet reported or reported but not yet settled.
Transfers of premium reserves resulting from transfers of policies between insurance companies are recorded in the pro�t and loss account as net premiums for own account in the case of reserves received and claims for own account in the case of reserves paid out. The recognition of costs and income takes place on the date the insured risk is ceded. The premium reserve in the insurance liabilities is reduced / increased on the same date. The premium reserve transferred includes the policy’s share of additional statutory reserves, the market value adjustment reserve, conditional bonus and the pro�t for the year. Transferred additional reserves are not shown as part of premium income, but are reported separately as changes in insurance liabilities. Transferred amounts are classi�ed as current receivables or liabilities until the transfer takes place.
The claims reserve is a reserve for expected claims that have been reported, but not settled. The reserve also covers expected claims for losses that have been incurred, but have not been reported at the expiry of the accounting period. The reserve includes the full amount of claims reported, but not settled. A calculated provision is made in the reserve for claims incurred but not reported (IBNR) and claims reported but not settled (RBNS). In addition, claims reserves shall include a separate provision for future claims on losses that have not been settled.
Norway, the pension scheme from 1 January 2015 changed from a de�ned bene�t to a de�ned contribution scheme. The e�ect of this change was recognised in the accounts as at 31 December 2014. Storebrand is a member of the Norwegian contractual early retirement (AFP) pension scheme. The Norwegian AFP scheme is regarded as a de�ned-bene�t scheme, but there is insu�cient quantitative information to be able to estimate reliable accounting obligations and costs.
Actuarial gains and losses and the e�ects of changes in assumptions are recognised in total comprehensive income in the income statement for the period in which they occur. The Group has insured and uninsured pension schemes. The insured scheme in Norway is managed by the
The Group’s tangible �xed assets comprise equipment, �xtures and �ttings, IT systems and properties used by the Group for its own activities.
Properties used for the Group’s own activities are measured at appreciated value less accumulated depreciation and write-downs. The fair value of these properties is tested annually in the same way as described for investment properties. The increase in value for buildings used by the
Group for its own activities is recognised through total comprehensive income. Any write-down of the value of such a property is recognised �rst
in the revaluation reserve for increases in the value of the property in question. If the write-down exceeds the revaluation reserve for the property in question, the excess is expensed over the pro�t and loss account.
The write-down period and method are reviewed annually to ensure that the method and period being used both correspond to the useful economic life of the asset. The disposal value is similarly reviewed. Properties are split into components if di�erent parts have di�erent useful economic lives. The depreciation period and method of depreciation are measured then separately for each component.
The value of a tangible �xed asset is tested when there are indications that its value has been impaired. Any impairment losses are charged to the income statement as the di�erence between the carrying value and the recoverable amount. The recoverable amount is the greater of the fair value less costs of sale and the value in use. On each reporting date it is determined as to whether there is the option to reverse previous impairment losses on non-�nancial assets.
Deferred tax and deferred tax assets are calculated on the di�erences between accounting and tax values of assets and liabilities.
Deferred tax is calculated on the basis of the Group’s tax loss carryforwards, deductible temporary di�erences and taxable temporary di�erences. The Group’s tax-increasing temporary di�erences also include temporary di�erences linked to the Group’s investment properties.
These properties are primarily found in the Norwegian life company’s customer portfolio and in companies that are owned by holding companies, which in turn is directly owned by Storebrand Livsforsikring AS. Even though these property companies are included in the customer portfolio and can be sold virtually free of tax, the tax-increasing temporary di�erences linked to the underlying properties which are also included in the Norwegian tax group, are included in the Group’s temporary di�erences where provisions have been made for deferred tax. See also Section 6 above, which concerns business combinations.
In connection with the national budget for 2017, it was agreed to introduce a �nancial tax consisting of two elements: Financial tax on salaries. This is set at 5 per cent and follows the rules for employer’s National Insurance contributions.
The �nancial tax applies from and including the 2017 �nancial year.
The Storebrand Group includes companies that are both subject to and not subject to the �nancial tax. Therefore, when capitalising deferred tax/deferred tax assets in the consolidated �nancial statements, the company tax rate that applies for the individual companies is used (23 or 25 per cent).
Pursuant to IAS10, which deals with events after the balance sheet date, proposed dividends and/or group contributions are classi�ed as equity until approved by the general meeting.
The statement of cash �ows is prepared using the direct method and shows cash �ows grouped by sources and use. Cash is de�ned as cash, receivables from central banks and receivables from credit institutions with no agreed period of notice. The statement of cash �ows is classi�ed according to operating, investing and �nancing activities.
Annual income and expenses are calculated for forestry and outlying �elds.
In preparing the Group’s �nancial statements the management are required to make judgements, estimates and assumptions of uncertain amounts. The estimates and underlying assumptions are reviewed on an ongoing basis and are based on historical experience and expectations of future events and represent the management’s best judgement at the time the �nancial statements were prepared.
Insurance risk is the risk of higher than expected payments and/or unfavourable changes in the value of an insurance liability due to the actual development di�ering from what was expected when premiums or provisions were calculated.
In the consolidated accounts, insurance liabilities with a guaranteed interest rate are included, but using di�erent principles in the Norwegian and the Swedish activities. An intangible asset (value of business in-force – VIF) linked to the insurance contracts in the Swedish activities is also included. This asset relates to Storebrand’s purchase of SPP (acquisition of a business). There are several factors that may have an impact on the size of the insurance liabilities including VIF, such as biometric factors relating to longevity, future returns and invalidity, as well as the development of future costs and legal aspects, such as amendments to legislation and judgments handed down in court cases, etc. 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 bu�er, 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.
Norway and the Insurance Business Act in Sweden. For the life insurance liabilities a test is performed at an overall, total level by conducting an analysis based on the Norwegian premium reserve principles. The established analysis is based on the assumptions that apply correspondingly to the calculation of the Solvency II liability, in which the company uses the best estimates for the future basic elements based on the current experience. The test entails then that the company analyses the current margins between the assumptions used as a basis for reserves and the assumptions based on the Solvency II calculations. This test was also performed for the introduction of IFRS.
Upon the acquisition of the Swedish insurance group SPP, excess values and goodwill related to the value of the SPP Group’s insurance contracts were capitalised, while the SPP Group’s recognised insurance reserves were maintained in Storebrand’s consolidated �nancial statements. These excess values (Value of business in-force) are tested for their adequacy together with the associated capitalised selling costs and insurance liabilities. The test is satis�ed if the recognised liabilities in the �nancial statements are greater than or equal to the net liabilities valued at an estimated market value, including the expected owner’s pro�t. In this test, the Solvency II calculations and IAS37 are taken into account. A key element of this assessment involves calculating future pro�t margins using Solvency II calculations. The Solvency II calculations will be a�ected
In 2015, Storebrand received approval for the plan to strengthen longevity reserves linked to group pensions and paid-up policies from in the
Norwegian business. The maximum reserve strengthening period was from 1 January 2014 to 1 January 2021, but during 2017 Storebrand completed reserve strengthening pursuant to K2013. Of the �nancial and risk pro�t for group pensions for the year, NOK 710 million has been used to strengthen the longevity reserves. Final settlement of the reserve requirement will occur per contract in connection with account management as of year-end 2017, but that is completed in the �rst half of 2018. Until then, there will be some uncertainty associated with the
In Storebrand’s life insurance activities, a change in the estimates related to technical insurance reserves, �nancial instruments or investment properties allocated to life insurance customers will not necessarily a�ect the owner’s result, but a change in the estimates and valuations may a�ect the owner’s result. A key factor will be whether the assets of the life insurance customers, including the realised return for the year, exceed the guaranteed liabilities.
In the Swedish business, there are no contracts with an annual interest rate guarantee. However, there are insurance contracts with a terminal value guarantee. These contracts are discounted by a market-based calculated interest rate where parts of the yield curve used are not liquid.
For terms to maturity in excess of 20 years, an equilibrium interest rate is determined based on the sum of the long-term expectations for in�ation and real growth.
There are also insurance contracts without an interest guarantee in the life insurance activities in which customers bear the return guarantee.
Changes in estimates and valuations may entail a change in the return on the associated customer portfolios. The recognition of such value changes does not directly a�ect the owner’s result. However, a change in the estimates related to risk cover (disability and death) will a�ect the owner’s result. This uncertainty relates to the frequency and amounts of the claims. Changes in estimates and valuations may entail a reduction or increase in the reserves.
Investment properties are measured at fair value. The commercial real estate market in Norway and Sweden is not particularly liquid, nor is it transparent. Uncertainty will be linked to the valuations, and they require exercise of professional judgement, especially in periods with turbulent �nance markets.
Discount rates for both certain and uncertain cash �ows, as well as residual value
�nancial instruments where theoretical models are used in pricing. Any changes to the assumptions could a�ect recognised amounts. The majority of such �nancial instruments are included in the customer portfolio.
There is uncertainty linked to �xed-rate loans recorded at fair value, due to variation in the interest rate terms o�ered by banks and since individual borrowers have di�erent credit risk.
Reference is also made to Note 13 in which the valuation of �nancial instruments at fair value is described in more detail.
Discretion must be used in assessing whether impairment has occurred and the amount of the impairment loss. Uncertainty grows when there is turmoil in �nancial markets. The assessments include credit, market and liquidity risk. Changes in assumptions for these factors will a�ect an assessment of whether impairment is indicated. There will thus be uncertainty concerning the recognised amounts of individual and group write-downs. This will apply to provisions relating to loans in the private and the corporate markets and to bonds that are measured at amortised cost.
The Group has both insured and uninsured pension schemes (direct pensions). There will be uncertainty associated with these estimates.
The consolidated accounts contain signi�cant temporary di�erences between the values of assets for accounting purposes and for tax purposes.
The current Norwegian tax regulations have been applied when calculating deferred tax in the Norwegian business. This will apply, for example, in particular to investments in foreign companies assessed as partnerships and investments in property. The actual income tax expense will also
depend on the form in which the underlying assets will be realised, including whether there will be future input and share transactions. There are also di�erent tax rules between the companies that are part of the Norwegian business, whereby the Norwegian tax exemption method does not apply to customer portfolios in life insurance companies. Calculation of deferred tax assets, deferred tax liabilities and the income tax expense is based on the interpretation of rules and estimates.
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 bene�t of the Group and can no longer be appealed.
Storebrand has acquired 90.95% of the shares in Skagen, which has a strong position in the Norwegian fund and savings market. It also has signi�cant capital under management from institutional clients and distributors in Sweden and internationally. Skagen has a clear management philosophy and a strong brand. The transaction was completed on 7 December 2017.
All shares in Skagen that were acquired by Storebrand ASA were transferred to Storebrand Asset Management AS as of 8 December 2017 as a contribution in kind.
Skagen has 134 employees, and the company will be a part of the Savings segment.
Storebrand ASA as of 6 December, which was NOK 62.90 per share. In addition there may be additional consideration based on developments in results and income in Skagen, and the sharing of fees triggered by Skagen delivering excess returns compared to its relevant reference indexes.
Business combinations are recognised in accordance with the acquisition method. Upon acquisition of a subsidiary, a fair value analysis is performed, and assets and liabilities are assessed at fair value at the time of purchase. The residual value in the acquisition will constitute goodwill.
On 24 October 2017 Storebrand Livsforsikring AS entered into an agreement to acquire Silver’s insurance portfolios. Silver was put under administration on 17 February 2017. The acquisition also includes the company Silver AS after the company is released from administration
The transaction was completed in January 2018. The transaction was completed in two parts, with one part as an acquisition of the portfolio, and the other part as an acquisition of Silver AS with its remaining operations.
Storebrand’s business is divided into the following segments: Savings, Insurance, Guaranteed Pension and Other.
The guaranteed Pension segment includes long-term pension savings products that give customers a guaranteed rate of return. The area includes de�ned bene�t pensions in Norway and Sweden, paid-up policies and individual capital and pension insurances.
The result for Storebrand ASA is reported under Other, as well as the result for the company portfolios and small subsidiaries of Storebrand Life
The results in the segments are reconciled against the Group result before amortisation and write-downs of intangible assets. The corporate pro�t and loss account includes gross income and costs linked to both the insurance customers and owners (shareholders). The alternative statement of the result only includes result elements relating to owners (shareholders) which are the result elements that the Group has performance measures and follow-up for. The result lines that are used in segment reporting will therefore not be identical with the result lines in the corporate pro�t and loss account. Below is an overall description of the most important di�erences.
Insurance premiums consist of premium income relating to risk products (insurance segment) that are classi�ed as premium income in the
Administration costs consist of the Group’s operating costs in the Group’s income statement minus operating costs allocated to traditional individual products with pro�t sharing.
A modi�ed pro�t-sharing regime was introduced for old and new individual contracts that have left group pension insurance policies (paid-up policies), which allows the company to retain up to 20 per cent of the pro�t from returns after any allocations to additional statutory reserves.
Any negative returns on customer portfolios and returns lower than the interest guarantee that cannot be covered by additional statutory reserves must be covered by the company’s equity and will be included in the net pro�t-sharing and losses line.
In the case of de�ned-bene�t contracts (KF portfolio), the company is entitled to charge an indexing fee if the group pro�t allows the indexing of the insurance. Indexing is allowed up to a maximum equalling the change in the consumer price index (CPI) between the previous two
Septembers. Pensions that are paid out are indexed if the consolidated �gures on 30 September exceed 107 per cent, and half of the fee is charged. The whole fee is charged if the consolidated �gures on 30 September exceed 120 per cent, in which case paid-up policies can also be included. The total fee equals 0.8 per cent of the insurance capital.
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 �nancial result also includes returns on customer assets relating to products within the insurance segment, and in the Group’s income statement this item will be entered under net income from �nancial assets and property for customers. In the alternative income statement, the result before tax of certain unimportant subsidiaries is included in the �nancial result, while in the Group’s income statement, this is shown as other income, operating costs and other costs.
The modi�ed pro�t-sharing model means that any negative risk result can be deducted from the customers’ interest pro�t before sharing, if it is not covered by the risk equalisation fund.
Individual endowment insurance and pensions written by the Group prior to 1 January 2008 will continue to apply the pro�t rules e�ective prior to 2008. New contracts may not be established in this portfolio. The Group can retain up to 35 per cent of the total result after allocations to additional statutory reserves.
For contributions agreed to prior to 2016, the pro�t sharing is maintained, i.e. that if the total return on assets in one calendar year for a premium-determined insurance (IF portfolio) exceeds the guaranteed interest, pro�t sharing will be triggered. When pro�t sharing is triggered, 90 per cent of the total return on assets passes to the policyholder and 10 per cent to the company. The company’s share of the total return on assets is included in the �nancial result.
The guaranteed liability is continuously monitored. If the guaranteed liability is higher than the value of the assets, a provision must be made in the form of a deferred capital contribution. If the assets are lower than the guaranteed liability when the insurance payments start, the company supplies capital up to the guaranteed liability in the form of a realised capital contribution. Changes in the deferred capital contribution are included in the �nancial result.
The Storebrand Group are represented in the following countries: Segment/Country Norway Sweden Latvia UK Guernsey Netherlands Denmark
Capital bu�er in % of customer reserves Storebrand Life Group [4]
Managers at all levels in the company are responsible for risk management within their own area of responsibility. Good risk management requires targeted work on objectives, strategies and action plans, identi�cation and assessment of risks, documentation of processes and routines, prioritisation and implementation of improvement measures, and good communication, information and reporting.
The internal audit function is organised directly under the Board and shall provide the boards of the relevant consolidated companies with con�rmation concerning the appropriateness and e�ectiveness of the company’s risk management, including how well the various lines of defence are working.
Contingency plans have been prepared to deal with serious incidents in business-critical processes and recovery plans.
Storebrand’s IT systems are vital for operations and reliable �nancial reporting. Errors and disruptions may have consequences for operations and can impact on the trust the Group has from both customers and shareholders. In the worst case, abnormal situations can result in penalties from the supervisory authorities. Storebrand’s IT platform is characterised by complexity and integration between di�erent specialist systems and joint systems. The operation of the IT systems has largely been outsourced to di�erent service providers. A management model has been established with close follow-up of providers and internal control activities in order to reduce the risk associated with the development, administration and operation of the IT systems, as well as information security. The bank platform and insurance platform are based on purchased standard systems that are operated and monitored through outsourcing agreements. There is a greater degree of own development for the life insurance activities, but parts of the operation of this have also been outsourced. The individual portfolio is handled in a purchased standard system.
Storebrand o�ers traditional life and pension insurance as both group and individual contracts. Contracts are also o�ered in which the customer has the choice of investment.
The insurance risk in Norway is largely standardised between the contracts in the same industry as a result of detailed regulation from the authorities. In Sweden, the framework conditions for insurance contracts entail major di�erences between the contracts within the same industry.
The risk of long life expectancy is the greatest insurance risk in the Group. Other risks include the risk of disability and risk of mortality. The life insurance risks are: 1. Long life expectancy – The risk of erroneously estimating life expectancy and future pension payments. Historical developments have shown that an increasing number of people attain retirement age and live longer as pensioners than was previously the case. There is a great deal of uncertainty surrounding future mortality development. In the event of longer life expectancy beyond that assumed in the premium tari�s, the owner could risk higher charges on the owner’s result in order to cover necessary statutory provisions.
In the Guaranteed Pensions segment, the Group has a signi�cant 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 signi�cantly. In Norway it is also possible to change the future premiums of group policies, but only for new accumulation, entailing reduced risk.
Euroben. The insurance risk at BenCo primarily relates to group life insurance, early retirement pensions and pensions for expatriate employees.
7. A hybrid pension (occupational pension scheme) is where the premium is stated as a percentage of salary, while the payments depend on the contributions and adjustment/return. The pension assets are managed collectively. The product is only o�ered in Norway.
0. Health and P&C insurance contracts are group contracts with lump-sum payments for occupational injury insurance, critical illness, child insurance or accident insurance.
There was a need to strengthen the premium reserves as they relate to long life expectancy for Norwegian group de�ned-bene�t pensions, including paid-up policies. The need for reserves applies in general to products that involve a guaranteed bene�t, but the impact varies depending on the product composition and characteristics, as well as amendments to regulations, as a result of the pension reform, for example.
Starting from 2014 group pension insurance schemes in Norway follow the premiums for traditional retirement and survivor coverage in the industry tari� K2013. The premiums for disability pensions are based on the company’s own experience. Expense premiums are determined annually with a view to securing full cover for the next year’s expected costs.
In 2016, SPP revised the mortality assumptions it uses to calculate insurance technical reserves. The company’s assumptions are based on the general mortality tari� DUS 14, adjusted for the company’s own observations.
For P&C insurance (occupational injury, property and motor vehicle) the tari�s are based on the company’s own experiences.
When writing individual risk cover, the customer is subject to a health check. The result of the health check is re�ected in the level of premium quoted. When arranging group policies with risk cover, all employees of small companies are subject to a health check, while for companies with many employees a declaration of �tness for work is required. In the assessment of risk (underwriting), the company’s industrial category, sector and sickness record are also taken into account.
In the Savings segment the Group has a low insurance risk. Insurance risk is associated with death
The risk within critical illness, cancer, accident and health insurance is considered to be limited based on the volume and underlying volatility of the products. Within P&C insurance, the risk of house �re and personal injury for motor vehicle insurance constitute the main risks.
The Other segment includes the insurance risk at BenCo. BenCo o�ers pension products to multinational companies through Nordben and
3. A hybrid pension (occupational pension scheme) is where the premium is stated as a percentage of salary, while the payments depend on the contributions and adjustment/return. The insured person selects the investment pro�le him/herself. The product is only o�ered in Norway.
6. Paid-up policies (Norway only) are individual contracts with accrued rights that are issued upon withdrawal from or termination of group de�ned-bene�t pension agreements. Holders of a paid-up policy can choose to convert their paid-up policy to a paid-up policy with investment options.
Guaranteed Pension 2. Individual allocated annuity or pension insurance provides guaranteed payments for as long as the insured person lives. Alternatively, it can be agreed that the pension will end at a speci�ed age. Premiums or payments may be waived in the event of disability. The product can be linked to disability pensions.
3. Individual endowment insurance provides lump sum payments in the event of attaining a speci�ed age, death or disability.
The company also manages its insurance risk through international pooling. This implies that multinational corporate customers can equalise the results between the various units internationally. Pooling is o�ered for group life and risk cover within group de�ned-bene�t and de�nedcontribution pensions.
The most signi�cant market risks for Storebrand are equity market risk, credit risk, property price risk, interest rate risk and exchange rate risk.
For the life insurance companies, the �nancial assets are invested in a variety of sub-portfolios. Market risk a�ects Storebrand’s income and pro�t di�erently in the di�erent portfolios. There are three main types of sub-portfolio: company portfolios, customer portfolios without a guarantee (unit linked insurance) and customer portfolios with a guarantee.
The market risk in the company portfolios has a direct impact on the pro�t.
The market risk in unit linked insurance is at the customers’ risk and expense, meaning Storebrand is not directly a�ected by changes in value.
For customer portfolios with a guarantee, the net risk for Storebrand will be lower than the gross market risk. The measures to reduce risk depends on several factors, the most important being the size and �exibility of the customer bu�ers and level and duration of the return guarantee. If the investment return is not su�cient to meet the guaranteed interest rate, the shortfall may be met by using customer bu�ers built up from previous years’ surpluses. Customer bu�ers primarily consist of unrealised gains and additional statutory 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 di�erence cannot be covered by customer bu�ers or the return will be negative.
For guaranteed customer portfolios, the risk is a�ected by changes in the interest rate level. 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. Interest rates at the end of 2017 were at approximately the same level now as at the start of the year in both
Norway and Sweden. In Sweden, the money market rate is negative. Sveriges RIksbank (Swedish National Bank) and Norges Bank have indicated that interest rates will be kept low for several years to come. 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 e�ect of low interest rates will be dampened in the coming years by a large proportion of amortised cost portfolios that will greatly bene�t from securities purchased at interest rate levels higher than the current levels.
The most signi�cant market risks facing guaranteed customer portfolios are linked to equity risk, interest rate risk, credit risk and property price risk. There were no major changes in the investment allocation during 2017. In Norway most of the credit risk is linked to securities, which are carried at amortised cost. This reduces the risk to the company’s pro�t signi�cantly.
Foreign exchange risk primarily arises as a result of investments in international securities, including as a result of ownership in SPP. 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.
The table above shows the currency positions as at 31 December 2017. The currency exposure is primarily related to investments in the
A new mortality tari� (K2013) has been introduced for group pensions and paid-up policies from 2014. For the existing reserves, the Financial
There is a 0 per cent interest rate guarantee for premium funds, de�ned-contribution funds, pensioners’ surplus funds and additional statutory reserves.
Supervisory Authority of Norway has approved a seven-year escalation plan, and customer returns exceeding the guarantee can contribute to reserve strengthening. At least 20 per cent of the individual customer’s increase in reserves must be covered by Storebrand. The strengthening of reserves was completed during 2017.
The guaranteed interest rate is determined by the insurance company and is used when calculating the premium and the guaranteed bene�t.
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, pro�t sharing becomes relevant in SPP if the return exceeds the guaranteed yield. The contracts’ bu�er capital must be intact in order for pro�t 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 pro�t-sharing income (indexing fee).
If the assets in an insurance contract in the company are smaller than the market value of the liability, an equity contribution is allocated that re�ects this shortfall. This is termed a deferred capital contribution (DCC), and changes in DCC are recognised in the pro�t and loss account as they occur. When the contracts’ assets exceed the present value of the liabilities, a bu�er, which is termed the conditional bonus, is established.
The tables show the fall in value for Storebrand Life Insurance and SPP’s investment portfolios as a result of immediate value changes related to
The amount of stress is the same that is used for the company’s risk management. The stresses include a 12 per cent fall in equities, 7 per cent fall in property, and an increase in credit spreads of 60 basis points. For interest rates, the stresses include both an increase and fall of 50 basis points, where the most negative is used. The increase in interest rates is negative for the result, while the solvency position is negatively a�ected by a fall in interest rates.
The stresses are applied individually, but the overall market risk is less than the sum of the individual stresses, because diversi�cation is assumed. The correlation between the stresses is the same that is used for Solvency II.
Other negative e�ects on the result are a lower return from the company portfolio and that there is no pro�t sharing from paid-up policies and individual contracts.
The other companies in the Storebrand Group are not included in the sensitivity analysis, as there is little market risk in these areas. The equity of these companies is invested with little or no allocation to high-risk assets, and the products do not entail a direct risk for the company as a result of price �uctuations in the �nancial market.
Liquidity risk is the risk that the company is unable to ful�l its obligations without incurring substantial additional expenses in the form of reduced prices for assets that must be realised, or in the form of especially expensive �nancing.
Separate liquidity strategies have also been drawn up for other subsidiaries in accordance with the statutory requirements. These strategies specify limits and measures for ensuring good liquidity and a minimum allocation to assets that can be sold at short notice. The strategies de�ne limits for allocations to various asset types and mean the companies have money market investments, bonds, equities and other liquid investments that can be disposed of as required.
In addition to clear strategies and the risk management of liquidity reserves in each subsidiary, the Group’s holding company has established a liquidity bu�er. The development of the liquid holdings is continuously monitored at the Group level in relation to internal limits. A particular risk is the fact that during certain periods the �nancial markets can be closed for new borrowing. Measures for minimising the liquidity risk are to maintain a regular maturity structure for the loans, low costs, an adequate liquidity bu�er and credit agreements with banks which the company can draw on if necessary.
NOK million months months 1-3 years 3-5 years > 5 years Total cashflows Total booked value
Government and government guaranteed bonds 20,052 7,681 10,542 5,164 985 44,424
Of which bank deposits in bond funds, managed by Storebrand 50 50
Storebrand ASA has an unused credit facility of EUR 240 million, expiration December 2019.
Storebrand Bank has issued two credit facilities to Storebrand Boligkreditt AS. One of these is an ordinary overdraft facility, with a ceiling of NOK
Storebrand is exposed to risk of losses as a result of counterparties not ful�lling their debt obligations. This risk also includes losses on lending and losses related to the failure of counterparties to ful�l their �nancial derivative contracts.
The maximum limits for credit exposure to individual counterparties and for overall credit exposure to rating categories are set by the boards of the individual companies in the Group. Particular attention is paid to ensuring diversi�cation of credit exposure in order to avoid concentrating credit exposure on any particular debtors or sectors. Changes in the credit standing of debtors are monitored and followed up. Thus far, the
Total loans to and receivables from customers 2017: – Of which Storebrand Livsforsikring 2016: The division into customer groups is based on Statistics Norway’s standard for sector and business grouping. The placement of the individual customer is determined by the customer’s primary business
The majority of the loans at Storebrand consist of home loans to retail market customers. The home loans are approved and administered by
Storebrand Bank, but an increasing share of the loans has been transferred to Storebrand Livsforsikring as a part of the investment portfolio.
NOK 12 billion was to the corporate market and NOK 42 billion to the retail market.
The corporate market portfolio consists of income generating properties and development properties with few customers and low level of default that are primarily secured by mortgage in commercial property. Corporate market loans at Storebrand Bank are being discontinued and therefore everything other than NOK 0.3 billion of the loans has been provided by Storebrand Livsforsikring and SPP
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 home loans sold from Storebrand Bank to sister company Storebrand Livsforsikring is NOK
Commitments are regarded as non-performing and loss exposed when a credit facility has been overdrawn for more than 90 days and when an instalment loxan has arrears older than 90 days and the amount is at least NOK 2000.
Most of the risk for the Storebrand Group relates to the guaranteed pension products in the life insurance companies. These risks are consolidated in the Storebrand Life Insurance Group, which includes the Storebrand Livsforsikring AS, SPP Livförsäkring AB and the business in
Ireland and Guernsey (BenCo). Other companies directly owned by Storebrand ASA that are exposed to signi�cant risks are Storebrand
Fund units are generally valued at the updated o�cial NAV prices when such prices exist. Bonds are generally valued based on prices obtained from Reuters and Bloomberg. Bonds that are not regularly quoted will normally be valued using recognised theoretical models. The latter is particularly applicable to bonds denominated in Norwegian kroner. Discount rates composed of the swap rates plus a credit premium are used as a basis for these types of valuations. The credit premium will often be speci�c to the issuer, and will normally be based on a consensus of credit spreads quoted by a selected brokerage �rm.
Equities classi�ed as level 3 encompass investments in primarily unlisted/private companies. These include investments in forestry, real estate, micro�nance and infrastructure. Private equity is generally classi�ed as level 3 through direct investments or investments in funds.
Forestry represents a large portion of the shares at level 3. External valuations were carried out as at 31 December which form the basis for the valuation of the company’s investments. These valuations are based on models that include non-observable assumptions.
The value of �xed-rate loans is determined by discounting the agreed cash �ows 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. However, the fair value of loans to corporate customers with margin loans is lower than the amortised cost because certain loans run with lower margins that they would have done if they had been taken up as of the end of 2017. The value shortfall is calculated by discounting the di�erence between the agreed margin and the current market price over the remaining duration.
Among the bonds at level 3, we �nd micro�nance 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.
External valuation: For properties in Norwegian activities, a methodical approach is taken to a selection of properties that are to be externally valued each quarter such that all properties have had an external valuation at least every three years. In 2017, external valuations were obtained for properties worth NOK 14 billion (72 per cent of the portfolio’s value as at 31 December 2017).
– of which derivatives with a negative market value -2,065 -2,065 -2,194
FINANCIAL INSTRUMENTS AND REAL ESTATE AT FAIR VALUE – LEVEL 3
It is primarily investments in forestry that are classi�ed as equities at level 3. Forestry investments are characterised by, among other things, very long cash �ow periods. There can be some uncertainty associated with future cash �ows due to future income and costs growth, even though these assumptions are based on recognised sources. Nonetheless, valuations of forestry investments will be particularly sensitive to the
discount rate used in the estimate. The company bases its valuation on external valuations. These utilise an estimated market-related required rate of return. As a reasonable alternative assumption with regard to the required rate of return used, a change in the discount rate of 0.25 per cent would result in an estimated change of around 5.7 per cent in value, depending on the maturity of the forest and other factors.
Change in fair value per 31.12.17 19 -19 Change in fair value per 31.12.16 35 -35
The value of �xed-rate loans is determined by discounting the agreed cash �ows 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 �ows being discounted by an associated swap curve adjusted for a customer-speci�c credit spread.
Level 3 corporate bonds include micro�nance funds, private equity debt funds and convertible bonds. They are not priced by a discount rate as bonds normally are, and therefore these investments are included in the same sensitivity test as private equity.
Change in fair value per 31.12.17 -1,324 1,466 Change in fair value per 31.12.16 -1,231 1,344
The Storebrand Group is an insurance-dominated, cross-sectoral �nancial group with capital requirements in accordance with Solvency II.
Storebrand calculates Solvency II according to the standard method as de�ned in the Solvency II Regulations.
Solvency II Regulations using the standard method and include the e�ect of the transitional arrangement for shares pursuant to Section 58 of the Solvency II Regulations.
The solvency capital is divided into three capital groups in accordance with Section 6 of the Solvency II Regulations. Group 1 capital consists of paid-in capital and reconciliation . It also includes perpetual subordinated loans (perpetual hybrid Tier 1 capital) with up to 20 per cent of Group 1 capital.
Other subordinated loans (time limited) and risk equalisation reserve are categorised as Group 2 capital. Group 2 capital can cover up to 50 per cent of the solvency capital requirement and up to 20 per cent of the minimum capital requirement.
Subordinated loans issued prior to 17 January 2015 are covered by a transitional arrangement that will continue until 2026 and during this period these loans will qualify as Group 1 capital despite them not fully satisfying the requirements for viable capital in the Solvency II
Total Group 1 unlimited Group 1 limited Group 2 Group 3 Total
Unavailable minority interests -33 -33 -30 Deductions for CRD IV subsidiaries -2,929 -2,429 -225 -275 -2,690 Expected paid out dividend -1,168 -1,168 -695
Subordinated capital for subsidiaries regulated in accordance with CRD IV 2,929 2,690 Total solvency capital 46,164 42,020 Total solvency capital available to cover the minimum capital requirement 39,294 34,958 2,417 1,920 36,726
Capital requirements for subsidiaries regulated in accordance with CRD IV 2,458 2,537
NOK million Dividend/ Net gains and losses on Net revaluation on Total Of which 2016
Realised losses on loans where provisions have previously been made -2 -35
Realised losses on loans where no provisions have previously been made -5 -7
Guaranteed pension: De�ned Bene�t (fee based) Storebrand Life Insurance 3,142 4,035
Development in exected insurance claim payments – life insurance NOK billion Storebrand Life Insurance SPP BenCo
Change in insurance liabilities – life insurance -16,647 1,009 -7,463 52 -23,049 -23,748
The premiums and content of the de�ned-contribution pension scheme are as follows: Saving starts from the �rst krone of salary.
Savings rate of 7 per cent of salary from 0 to 12 G (the National Insurance basic amount “G” was NOK 93,634 at 31 December 2017)
Savings rate for salary over 12 G is 20 per cent.
Employees and former employees who had salaries in excess of 12G until 31 December 2014 were o�ered a cash redemption option for their accrued rights with payment at the start of 2015. For employees who were a part of the executive management team, these payments were distributed over 5 years.
pension and children’s pension. The premium is calculated independently of age and is calculated primarily based on the monthly salary. The premium is paid monthly in two parts, a �xed part that is 2.5 per cent of the pensionable salary up to and including 7.5 times the “basic income amount”. The optional part of the premium is 2 per cent of salary up to and including 7.5 times the “basic income amount” and 30 per cent of salary between 7.5 and 30 times the “basic income amount”.
“basic income amount”. Full pension entitlement is reached after 30 years of membership in the pension scheme. In addition to the de�nedbene �t part, the BTP plan has a smaller de�ned-contribution component. Here the employees can decide themselves how assets are to be invested (traditional insurance or unit-linked insurance). The de�ned-contribution part is 2 per cent of the annual salary.
Other Comprehensive Income (OCI) in the period NOK million 2017 2016
Expected annual increase in social security pensions 2.25% 2.00% 3.0% 3.0%
reduction of the discount rate will in isolation entail an increase in pension liabilities. For the Norwegian companies that have converted to de�ned contribution pensions as of 1 January 2015, the sensitivity has not been calculated, and the �gures below illustrate the sensitivity for the
The following estimates are based on facts and circumstances as of 31 December 2017 and are calculated for each individual when all other assumptions are kept constant.
Net pension cost recognised in profit and loss account in the period 207 22
STOREBRAND ASA – THE BOARD OF DIRECTORS’ STATEMENT ON THE FIXING OF SALARIES AND OTHER REMUNERATION TO EXECUTIVE
Ordinary salary [26] Other benefits [27] Loan [28] No. of shares owned [29]
Storebrand Asset Management AS’ subsidiary Skagen AS, which was acquired in December 2017, has separate guidelines for �nancial consideration which will be examined at in more detail during 2018 and the Group’s guidelines will therefore not apply directly to Skagen AS in 2018.
Storebrand shall have an incentive model that supports the strategy, with emphasis on the customers’ interests and long-term perspective, an ambitious model of cooperation, as well as transparency that enhances the Group’s reputation. Therefore, the Company will primarily stress a
�xed salary as a means of overall �nancial compensation, and utilise variable remuneration to a limited extent.
The Company shall arrange and pay for ordinary group pension insurance common to all employees, from the moment employment commences, and in accordance with the pension rules in force at any given time. With e�ect from 2015, the Company has de�ned contribution pension schemes for all employees. This applies to pay both above and below
For group management, the calculated cash value of pension rights for pay above 12 G that was already earned before the change will be paid out over a �ve-year period. The payment period is �xed regardless of whether the employee leaves the Company before the end of this period.
The Chief Executive O�cer and the executive vice presidents are entitled to termination pay if their contracts are terminated by the Company.
In 2018, a limited group of a few employees may be encompassed by a scheme similar to that of the executive management team with the mandatory purchase of the Company’s shares.
The guidelines for executive remuneration policy set for 2017 have been followed. The annual independent assessment of the guidelines and the practising of these guidelines in connection with bonuses to be paid in 2018 will be carried out during the �rst half of 2018.
4. STATEMENT ON THE EFFECTS OF SHARE-BASED REMUNERATION AGREEMENTS ON THE COMPANY AND THE SHAREHOLDERS
A proportion of the �xed salary of the executive management and a limited group of employees will be linked to the purchase of physical STB
shares with a lock-in period of three years. The purchase of shares will take place once per year.
The remuneration paid to Deloitte AS amounts to: NOK million 2017 2016
* During the year, property shares were sold (covered by the exemption method) which resulted in a reduction in tax-increasing temporary di�erences and related allocations for deferred tax being reversed.
Net deferred tax assets/liabilities in balance sheet *) **) ***) -399 -420
**) In December 2017, the Norwegian Parliament (Storting) agreed to reduce the company tax rate from 24 to 23 per cent with e�ect from 1
I In 2015, Storebrand Livsforsikring AS discontinued a wholly-owned Norwegian subsidiary, Storebrand Eiendom Holding AS, with a tax loss of approximately NOK 6.5 billion and with a corresponding increase in the loss carryforward. In January 2018, Storebrand Livsforsikring received notice of an adjustment to the tax assessment for 2015 (dated 21 December 2017) which claimed that the calculated loss was excessive, but provided no further quanti�cation. Storebrand Livsforsikring AS disagrees with the arguments that were put forward and will submit its reply to the tax authorities by the deadline that has been set.
The notice is unclear. Based on the notice, a provision was made for an uncertain tax position in the annual �nancial statements for 2017. The best estimate of the reduction in the loss, where Storebrand’s interpretation of the Norwegian Tax Administration’s notice is used as a basis, is approximately NOK 1.6 billion (appears as a reduction in the loss carryforward and, in isolation, gives an associated increased tax expense for 2017 of approximately NOK 400 million).
Accumulated depreciation and write-downs 01.01 -410 -5,880 -597 -304 -7,190 -7,543
Acc. depreciation and write-downs 31.12 -460 -6,535 -841 -304 -8,139 -7,190
The value of Skagen AS is calculated based on expected cash �ows from Skagen’s business activities. As of 31 December 2017, no separate calculations have been made of the utility value because it has been found that the valuation from early December has not been subject to signi�cant changes or impairment. Based on this, the utility value of the company is deemed to justify the book value of Skagen.
Specification of intagible assets NOK million Useful economic life Depr. rate Depr. method Book value 2017
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 su�ered an impairment in value, estimates are made of the recoverable amount for the relevant cash-�ow generating units. Recoverable amounts are established by calculating the enterprise’s utility value. SPP is regarded as a single cash �ow generating unit, and the development of future administration results, risk results and �nancial results for SPP will a�ect its utility value.
The required rate of return is calculated based on the risk-free interest rate and added to a premium that re�ects the risk of the business.
Value adjustment recognised through the balance sheet 1 22 23 13
IFRS 10 establishes a model for evaluating control that will apply to all companies, and the content of the control concept has changed in IFRS 10 in relation to IAS 27 and will entail an increased degree of assessment of units that are controlled by the company. Control exists when the investor has power over the investment object and possesses the right to variable yields from the investment object and simultaneously possesses the power and possibility to steer activities in the investment object that a�ect the yield.
RECEIVABLES FOR ASSOCIATED COMPANIES AND JOINT VENTURES NOK million 2017 2016
NOK million Loans and receivables Investments, held to maturity Fair value, held for sale
Total financial liabilities 2017 139 1,876 48,326 50,341NOK million Loans and receivables Investments, held to maturity Fair value, held for sale
Distribution beween company and customers: Bonds held to maturity – customers with guarantees 15,128 15,644
As of 31.12.16, Storebrand Life Insurance had NOK 3 069 million invested in Storebrand Eiendomsfond Norge KS and Ruseløkkveien 26.
At the end of 2017, a total of 13.3 per cent (15.9 per cent) of the �oor space in the investment properties was vacant.
At the end of 2017, there was practically no vacancy in the investment properties.
�nalized and included in the �nancial statements as of 31 December 2017.
Bonds and other �xed-income securities – customers with guarantee 101,897 114,680
The e�ective yield for each security is calculated using the observed market price. Calculated e�ective yields are weighted to give an average e�ective yield on the basis of each security’s share of the total interest rate sensitivity. Interest derivatives are included in the calculation of modi�ed duration and average e�ective interest rate.
However , nominal volume is not a measure which necessarily provides a comparison of the risk represented by di�erent types of derivatives.
The e�ectiveness of hedging is monitored at the individual security level.
Booked value of securities pledged as collateral in other �nancial institutions 302 151
In 2017, Storebrand utilised cash �ow hedging for the currency risk linked to Storebrand’s net investment in SPP. 3 month rolling currency derivatives were used in which the spot element in these is used as the hedging instrument. In 2016 and 2017, a time-limited subordinated loan of SEK 1.750 million was taken up. The loan was used as a hedging instrument relating to the hedging of the net investment in SPP. The e�ective share of hedging instruments is recognised in total pro�t. The net investment in SPP is partly hedged and therefore the expectation is that future hedge e�ectiveness 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 each contract.
Book value of bonds pledged as collateral for the bank’s lending from Norges Bank 888 880
The loans in Storebrand Boligkreditt have been mortgaged in connection with the issuing of covered bonds (covered bond rate) in Storebrand
Boligkreditt AS. Storebrand Boligkreditt AS has over-collateralisation (OC) of 29 per cent. The company must maintain the applicable OC that the rating agency requires if the company wishes to retain the current AAA rating. This requirement was 18.86 per cent at the end of 2017. The statutory OC is 2 per cent. Through commitments from previous prospectuses for covered bond issues, the company is obligated to maintain OC
Transferred bonds that are included in buyback agreements (repos) are not derecognised, since all risk and return on the securities are retained by Storebrand Bank ASA.
Debt instrument to Silver Pensjonsforsikring in connection with the acquisition [56]
Internal transactions between group companies are eliminated in the consolidated �nancial statements, with the exception of transactions between the customer portfolio in Storebrand Livsforsikring AS and other units in the Group. See note 1 Accounting Policies for further information.
For further information about related parties, see notes 30 and 41.
The term solidity capital encompasses equity, subordinated loan capital, the risk equalisation fund, the market value adjustment reserve, additional statutory reserves, conditional bonuses, excess value/de�cit related to bonds at amortised cost and accrued pro�t.
Includes lending to customers/liabilities to �nancial institutions classi�ed at fair value through pro�t and loss[16]
The summary shows the number of shares owned by the individual, as well as his or her close family and companies where the individual exercises signi�cant in�uence, cf. the Accounting Act, Section 7-26.
“G” is the basic amount in the Norwegian National Insurance Scheme.[38]
The properties are valued on the basis of the following e�ective required rate of return (included 2.5 per cent in�ation)[41]
The average duration of the leases has been calculated proportionately based on the value of the individulal properties.[42]
All of the proporties in Sweden are appraised externally. The appraisal is based on the required rates of return in the market[47]
The debt instrument is conditional upon the company being released from administration[56]
Net income and gains from financial instruments: – bonds and other xed-income securities 3 36 48
Investments in trading portfolio: – equities and other fund units 9 3
In 2017, 657 715 shares were sold to our own employees. Holding of own shares 31.December 2017 was 973 672.[2]
In 2017, 657 715 shares were sold to our own employees. Holding of own shares 31.December 2017 was 973 672.[3]
Cash and cash equivalents at the end of the period 53 72
In preparing the annual �nancial statements, Storebrand has made assumptions and used estimates that a�ect the reported value of assets, liabilities, revenues, costs, as well as the information provided on contingent liabilities. Future events may cause these estimates to change. Such changes will be recognised in the �nancial statements when there is a su�cient basis for using new estimates. The most important estimates and assessments are related to the valuation of the company’s subsidiaries and the assumptions used for pension calculations.
Regulations relating to annual �nancial statements for nonlife insurance companies has not been used, a custom layout plan has been used.
Proposed and approved dividends and group contributions from subsidiaries at the end of the year are recognised in the �nancial statements of
Pension costs and pension obligations for de�ned-bene�t pension schemes are determined using a linear accrual formula and expected �nal salary as the basis for the entitlements, based on assumptions about the discount rate, future salary increases, pensions and National Insurance bene�ts, future returns on pension plan assets as well as actuarial estimates of mortality, disability and voluntary early leavers.
The net pension cost for the period comprises the total of the accrued future pension entitlements during the period, the interest cost on the calculated pension liability and the expected return on pension plan assets.
Actuarial gains or losses and the e�ect of changes in assumptions are recognised in other comprehensive income. The e�ects of changes in the pension scheme are recognised on an ongoing basis, unless the changes are conditional upon accrued future pension entitlements, The e�ects are apportioned on a straight line basis until the entitlement has been fully earned. The employer’s National Insurance contributions are included as part of the pension liability and are included in the actuarial gains/losses shown in total comprehensive income.
Equities and units are valued at fair value. For securities listed on an exchange or other regulated market, fair value is determined as the bid price on the last trading day immediately prior to or on the balance sheet date.
Bonds and other �xed income securities are included in the statement of �nancial position from such time the company becomes party to the instrument’s contractual terms and conditions. Ordinary purchases and sales of �nancial instruments are recognised on the transaction date.
Bonds and other �xed income securities are recognised at fair value.
Bond loans are recorded at amortised cost using the e�ective interest rate method. The amortised cost includes the transaction costs on the date of issue.
– of which FVO (Fair Value Option) 7 -8 2 1 48
Financial assets are derecognised when the contractual right to the cash �ows from the �nancial asset expires, or when the company transfers the �nancial asset to another party in a transaction by which all, or virtually all, the risk and reward associated with ownership of the asset is transferred.
Financial derivatives are recognised at fair value. The fair value of such derivatives is classi�ed as either an asset or a liability with changes in fair value through pro�t or loss.
The premiums and content of the de�ned-contribution pension scheme are as follows: Saving starts from the �rst krone of salary
Savings rate of 7 per cent of salary from 0 to 12 G (the National Insurance basic amount “G” was NOK 93,634 as at 31 December 2017)
In addition, 13 per cent of salary between 7.1 and 12 G is saved
Net pension liabilities in the statement of financial position 176 159
Storebrand uses fair value hedging, and the hedged items are �xed rate funding measured at amortised cost. Derivatives that fall within this category are recognised at fair value through pro�t 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 pro�t or loss.
Net income from bonds and other �xed income securities 42 -8 2 36 48
Net income and gains from financial assets at fair value 42 -8 -1 33 41
For further information on senior employees, the Board of Directors, the Control Committee and the Board’s statement on �xing the salary and other remuneration of senior employees, see note 24 in the Storebrand Group.
Expected premium payments are estimated to be NOK 1 million and the payments from operations are estimated to be NOK 14 million in 2018.
Speci�c company conditions including expected direct wage growth are taken into account when determining the �nancial assumptions.
Undiscounted cash flows for financial liabilities NOK million 0-6 months 6-12 months 1-3 years 3-5 years Total value
Storebrand ASA had as per 31 December 2017 liquid assets of NOK 1.4 billion.
STRAIGHT LINE DEPRECIATION PERIODS FOR TANGIBLE FIXED ASSETS ARE AS FOLLOWS Equipment. �xtures and �ttings 4-8 years
Profit and loss account items: Group contributions and dividends from subsidiaries 2,154 899
A proportion of the executive management's �xed salary will be linked to the purchase of physical STB shares with a lock-in period of three years. The purchase of shares will take place once a year.
Group contribution received of NOK 100 million, capitalised as repayment of capital.[5]
Loans are booked at amortised cost and include earned not due interest.[10]
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 signi�cant in�uence, confer the Accounting Act, Section 7-26.
From: Audit Committee To: Board of Directors - Storebrand ASA (the "Board") Regarding: The Audit Committee's statement concerning election of new external
Based on an assessment in accordance with the above mentioned criterias and overall considerations, the Audit Committee has concluded to recommend the Board of Directors to recommend to the General Meeting 11 April 2018 to elect PwC as the new external auditor for the Storebrand Group.
PwC offers an auditing team and partners enabling good cross border and intra group cooperation. Through the resources made available by PwC, use of digital tools and a good auditing standard, it may be expected that PwC will audit effectively audit the Storebrand Group with a high standard. PwC has presented Magne Sem as the responsible partner for the Norwegian Group companies and Morgan Sandström in the same role for the Swedish Group companies. Beyond this the PwC team will be comprised by auditors, actuaries, sustainability experts, ITexperts and other relevant subject matter expertise.
Subordinated loan capital is loan capital that ranks after all other debt. Subordinated loan capital forms part of the tier 2 capital for capital adequacy calculations.
Average remaining term to maturity of the cash �ow from interest-bearing securities. The modi�ed duration is calculated based on the duration and expresses the sensitivity to the underlying interest rate changes.
Primary capital is capital eligible to satisfy the capital requirements under the authorities’ regulations. Primary capital may consist of core (tier 1)
Allocations to premium reserves for contractual liabilities shall, as a minimum, equal the di�erence between the capital value of the company’s future liabilities and the capital value of future net premiums (prospective calculation method). Additional bene�ts due to an added surplus are included.
The administration result is the di�erence between the premiums paid by customers pursuant to the tari� and the company’s actual operating costs.
An expression of the risk associated with the insurance-related liabilities. Calculated on the basis of the insurance fund and the risk insurance sum for each insurance sector.
The true interest rate calculated when all borrowing costs are expressed as an annual payment of interest in arrears. In calculating the APR, allowance must be made for whether interest is paid in advance or arrears, the number of interest periods per annum, and all the fees and commissions.
The term “�nancial derivatives” embraces a wide range of �nancial instruments for which the current value and future price movements are determined by equities, bonds, foreign currencies or other traditional �nancial instruments.
FRAs are agreements to pay or receive the di�erence between an agreed �xed rate of interest and the actual rate for a �xed amount and period of time. This di�erence is settled at the start of the future interest period. FRA contracts are particularly appropriate for the management of short-term interest rate exposure.
Forward foreign exchange contracts/ swaps relate to the purchase or sale of a currency for an agreed price at a future date. These contracts are principally used to hedge the currency exposure arising from securities, bank deposits, subordinated loans and insurance reserves. These contracts also include spot foreign exchange transactions.
The return produced after allowing for actual or expected in�ation. Preferably expressed as a nominal rate less the rate of in�ation.
Main office: Professor Kohts vei 9 Postboks 500, 1327 Lysaker, Norway Phone: +47 08880 storebrand.no