Ved å sette kunden først og investere bærekraftig skal Storebrand være best på sparing til pensjonpå sparing til pensjon
Storebrand provides security today and a future to look forward to
On 4 May 1847, the P&C insurance company ”Christiania Almindelige Brand- forsikrings-Selskab for Varer og Effecter” is incorporated by private subscription. The company is referred to as Storebrand.
The P&C insurance company Norden is established as a competitor to Storebrand.
Storebrand changes its name from ”Christiania Almindelige Forsikrings-Aksjeselskap” (renamed in 1915) to ”Christiania Almindelige Forsikrings-Aksjeselskap Storebrand”. This name is kept until 1971.
Storebrand acquires Norske Fortuna. Brage and Fram merge to become the country’s largest life insurance company. Storebrand and Idun move into their own new premises in the restored Vest-Vika area of Oslo. BrageFram and Norske Folk follow their lead.
Norske Folk and Norges Brannkasse market themselves as a single entity under the name UNI Forsikring.
Storebrand and UNI Forsikring agree to merge, and the merger receives official permission in January 1991.
Storebrand’s new energy efficient head office gains a lot of attention. The building is awarded the acclaimed 2010 City Prize by the real estate industry. The head office receives eco-lighthouse certification.
Storebrand’s history can be traced back to 1767. The company has supplied occupational pension to Norwegian employees since 1917, the same year that Storebrand ’s fully-owned subsidiary SPP was established in Sweden. Storebrand Bank ASA was established in 1996. In 2006, P&C insurance was relaunched as an offering to the retail market customers and selected parts of the corporate market.
At the end of 2016, there were 1,745 employees in the Group, compared with 1,887 at the start of the year. 48 per cent of these are women. The average age of our employees is 43. The average term of service is 10 years. All employees of Storebrand are treated equally, regardless of age, gender, disability, religious beliefs, cultural background or sexual orientation.
40,000 corporate customers and 1.9 million individuals have a customer relationship with Storebrand. Our vision is to serve them so well that we are “Recommended by our customers”.
Storebrand’s ambition is to be the best provider of pension savings. The Group offers products within life insurance, property and casualty insurance, asset management and banking to companies, public sector entities and private individuals. The Group is divided into the segments Savings, Insurance, Guaranteed Pension and Other.
Score 81 of 100 Ranked 11 world wide within insurance Disclosure Score B
The collaboration with Akademikerne (Federation of Norwegian Professional Associations) is expanded to also include pension. We signed a framework agreement for hybrid pensions for all secretariats under the Akademiker umbrella.
In the first half of the year, sales of loans increased by 24 per cent compared with the first half of 2015. The increase in the age limit for mortgages for young people is a major reason for this. The age group of between 34 and 41 now represents about half of all new borrowers in the bank.
We have been successful with the sale of retail market products to employees with an occupational pension from Storebrand. Figures from Barcode/Norsk Kundebarometer (Norwegian Customer Barometer) show that Storebrand has the highest level of customer satisfaction of all pension providers in the corporate market and particularly distinguishes itself in the follow-up of employees category.
Storebrand Bank uses robots for parts of the lending process through so-called Robotic process automation to perform standardised and repetitive work tasks with high volumes. During autumn we tested several robots on processes that were transferred to Cognizant.
In October, customer number 250,000 found his/her pension figure. This means that we have provided 250,000 people with an overview of their pensions since we launched Your Pension Figure in late autumn 2013.
At Norwegian newspaper Aftenposten’s climate conference #klodenvår, more than 1,000 participants were informed that their greatest C02 emissions were not from cars, rubbish or plane trips, but from pension saving. Therefore, customers have major power in influencing the climate by saving for their pensions in a sustainable manner.
"We have a long and great history to be proud of" Odd Arild Grefstad CEO
INDIVIDUAL PENSION ACCOUNTS REPRESENT MAJOR OPPORTUNITIES The pension sector has been through many new legal regulations in recent years. Thankfully most of the issues have now been clarified – I allude in particular to the Solvency II regulations. At the same time, there are exciting developments occurring in connection with Norwegian occupational pensions. This could provide new opportunities for Storebrand: The government has studied a scheme involving an individual pension account in which the employee can combine earnings from current and previous employers. We are positive about this and believe it is possible to find solutions that will simplify the everyday pension situation of our customers. Optional additional savings in the employer’s pension scheme is also being discussed. If we achieve basic solutions and favourable tax rules, this may very well accelerate private pension savings.
Our asset managers are working a great deal on optimising investment portfolios for climate and sustainability. This means that we provide the best long-term returns to our customers. In 2016, we launched some of the world’s first fossil fuel free near-index-linked equity funds in Sweden, and sales have been excellent. The funds will be launched in Norway during the first quarter 2017. Our unique method means that we not only exclude a number of companies associated with high risk, but that we also systematically invest more in the most sustainable companies. It is these companies that actually create value for our customers.
WE ARE CELEBRATING 250 YEARS Storebrand is turning 250 in 2017. We have a long and great history to be proud of. During a quarter of a millennium, we have assisted our customers in creating a safer and more predictable future – a future to look forward to. These are fundamental customer requirements, that are as relevant today as they were 250 years ago, and provide us with a way forward long the future.
Storebrand has witnessed massive societal changes during its history. Perhaps the most influential change has been the technological development which has led to fantastic improvements in prosperity, quality of life and life expectancy. When we established life insurance in 1861, the average life expectancy of a Norwegian was 46 years of age. Today, this has increased to over 80. Storebrand has been a pioneer in creating a pension system that has made it possible to finance an increasingly longer period of old age through efforts in the workforce. The increase in life expectancy will continue and there is little doubt that, as a pension company, Storebrand will play an important role long into the future. We shall continue to work hard to create good pensions and a better world to retire in.
Storebrand’s objective is to provide our customers with a secure and sustainable future with the �nancial freedom to be able to experience everything that you want to experience. We shall ensure that our customers have a future they can look forward to. We shall do this by thinking long-term, putting the needs of customers �rst and integrating sustainability into everything we do.
Our sustainable solutions not only contribute to better pensions, but also a better world in which to retire. For several decades, we have been brave trailblazers within sustainable investments and have actively determined the companies in which we invest both our own capital and that of our customers. We believe that companies that integrate environmental, social and governance considerations in their business activities will be part of creating better returns over time, both through reducing risk and creating new opportunities. In the time ahead, the goal is that sustainability shall be the foundation of everything we do across all of our business areas.
There are many factors that have to fall into place if we are to make the adjustments that are required in the future. The �nancial sector has a particularly important role in the transition to a green economy. Driving the development towards a sustainable world means supporting the
One opportunity is the investment required for the green transition. The International Energy Agency estimates that investments of close to 437,000 billion in both energy supply and improved e�ciency will be required for the world to achieve the two degree target.
Storebrand has developed internationally recognised methods within sustainable investments. The most common strategy has been to not invest in companies based on speci�c events or activities, such as the decision to withdraw our investments from companies that are heavily involved in coal. However, it is much more important to carry out systematic sustainability analyses, such that we can invest more in the companies that contribute to solving climate challenges and that are best positioned for the green economy. Storebrand integrates sustainability and climate issues into all product development and services. During 2016, we set new ambitious goals for future social, environmental and �nancial value creation and social in uence.
The carbon footprints of companies and portfolios can be a useful means of understanding and communicating the exposure to climate risk. By signing the Montreal Carbon Pledge we are obligated each year to measure and publish the carbon footprint of our investment portfolios. As members of the Portfolio Decarbonization Coalition, we pledge to go one step further and not just measure and publish, but also reduce the carbon footprint in our investment portfolios.
�nancial sector based on trust. Sustainability is an integrated part of Storebrand’s core business and therefore vital to our asset management, our product development within banking and insurance activities and also acts as a guide for our own operations.
Storebrand acknowledges and pledges to comply with a number of international standards for sustainability. Storebrand has signed the UN
In 2016, we further increased our involvement in sustainability through a Group-wide process in which we de�ned our objective: “A future to look forward to”. Storebrand launched a new plan for sustainability, with goals for the Group that are well-integrated with the business strategy.
The executive management and Board shall follow-up these goals four times a year.
Storebrand has published environmental and corporate social responsibility reports since 1995, and these reports have been integrated into the Group’s annual report since 2008. Storebrand uses the guidelines Global Reporting Initiative (GRI) G4 as a tool for sustainability reporting.
Our reporting practice is largely in accordance with GRI’s principles for reporting and satis�es the CORE level. More information on GRI
The materiality analysis is based on ongoing dialogue, both formal and informal, with our stakeholders, during the year. The result of the materiality analysis describes the most important areas that are identi�ed and the methods Storebrand uses to address these important areas.
Financial value creation: Financial risk – Storebrand is exposed to several types of risk through its business areas. Trends associated with the interest rate, property and equity markets are deemed to be the most important risk factors that can impact on the Group’s result. Over time, it is important to be able to deliver a result that exceeds the interest rate guarantees of the products. Risk management is therefore a prioritised core area for the
Digital restructuring – The digitalisation of society creates new opportunities and new business areas. Customer demand for simple accessible purchase options for insurance and pension products is increasing.
Companies approach to climate change is therefore an important part of our investment strategy. This is a well-integrated part of
Natural resources – Population Growth within ecosystems under pressure. Overexploitation of natural resources is one of the three fundamental areas of analysis which Storebrand uses in the assessment of all the companies in its investment universe (approximately 2,500 companies at present). Overexploitation of natural resources fall under this category, thus we collect data to analyse the di erent investment objects approach to the use of natural resources as one of several foundations in our investment decisions.
Social value creation: Mistrust of the nancial sector – The �nancial sector has been subjected to strict regulations that have resulted in major changes in the form of pension savings for customers.
CO2 footprint 5.4 CO2e /1MNOK invested capital better than relevant index
Storebrand is actively working with stakeholders. By using certain instruments we identify areas within economic-, environmental-, and social value creation as leading focus areas Storebrand is working on.
Financial value creation: Financial risk – Storebrand is exposed to several types of risk through its business areas. Trends associated with the interest rate, property and equity markets are deemed to be the most important risk factors that can impact on the Group’s result. Over time, it is important to be
Good reporting about the impact on society assists both stakeholders and the business in determining and understanding the impact of the commercial operations on society. By following principles for creating value for investors, owners, customers and society as a whole, Storebrand can achieve its objective of contributing to a future we can look forward to. Storebrand works towards creating a sustainable future for future generations by providing �nancial security to individuals and families in their everyday lives and the freedom and opportunity of experiencing what you want with who you want. Storebrand plays an important role in society by simply o�ering sustainable products and solutions. By explaining what has changed, we let our stakeholders know how we in uence and create long-term value.
As a pension company, we look after the pensions of about 1.9 million Norwegians and Swedes and ensure that hundreds of thousands of pensioners receive their occupational pensions. In 2016, we paid retirement, disability and survivor pensions to 300,000 people. The digital tool
Reduced carbon footprint by 5.4 co2e/1MNOK on invested Capital less than relevant index
Employee job satisfaction 70 av 100 poeng 71 av 100 poeng
Waste rate of recycling main o�ce Norway and Sweden 76% 81%
Storebrand ASA is among the largest companies listed on Oslo Børs measured by the number of shareholders. The company has shareholders from almost all the municipalities in Norway and from 52 countries In terms of market capitalisation, Storebrand was the 13 largest company on Oslo Børs at the end of 2016.
Every year since 1996 Storebrand ASA has given its employees an opportunity to purchase shares in the company through a share purchase scheme. The purpose of the scheme is to involve the employees more closely in the company’s value creation. In March 2016 each employee was given the opportunity to buy between 250 and 1,666 shares in Storebrand at a price of NOK 32.62 per share. Around 19 per cent of the employees participated and subscribed for a total of 431,334 shares.
A total of 703 million shares in Storebrand were traded in 2016, compared with 707 million in 2015. The trading volume in monetary terms totalled NOK 21,249 million in 2016, an increase from NOK 20,907 million in 2015. In monetary terms Storebrand was the 10 most traded share on Oslo Børs in 2016. In relation to the average total number of shares, the turnover rate for shares in Storebrand was 131 per cent.
Storebrand generated a total return (including dividends) of 31.4 per cent in 2016. During the corresponding period, the Oslo Børs OSEBX index rose 12 per cent, while the European insurance index Beinsur showed a negative return of -5 per cent for the corresponding period.
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 (1.24 for the 2017
�nancial year) is taxed as general income for the personal shareholder (the tax rate is 24% for the 2017 �nancial year, which together with the adjustment factor gives an actual tax rate of 29.76%).
Share dividends within the shielding deduction are tax free. The shielding deduction is calculated by multiplying the share’s shielding basis by a shielding interest. The shielding interest is set by the Norwegian Directorate of Taxes in January the year following the �nancial year and is based on the average 3 month interest rate on treasury bills (with an addition of 0.5 percentage points from the 2017 �nancial year) reduced by tax.
Average daily turnover (1000s of shares) 2780 2820 2,185 2,286 3,511 2,481
Number of ordinary shares 31/12 (1000s of shares) 449,910 449,910 449,910 449,910 449,910 449,910
Earnings per ordinary share (NOK) 4.73 2.63 4.61 4.41 2.25 1.51
We are looking forward to the road ahead with you and all our customers.
The Group’s strategy is to provide pro�table growth within our 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, and 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 of the Group.
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, we have been trailblazers within sustainable investments and have actively determined 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. In January 2017, Storebrand was named the world’s most sustainable company within �nance and the world’s second most sustainable company overall in Corporate Knights’ ranking of the world’s 100 most sustainable companies. This focus is further reinforced by more thorough reporting and the integration of sustainability into all parts of the value chain. Storebrand aims at the same time to manage the part of the business that consists of pension savings with guaranteed interest rates in the Guaranteed Pension segment. This area is in a 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
Group’s �rst priority in this area is to ensure the accrual of pensions for our customers by means of robust systems for risk-taking in the business. In parallel with this, the Group adapts to the new European solvency regulations, Solvency II, and strengthens the reserves due to the increased longevity of the population.
Solvency II. Storebrand’s response has been to continue to work at being the best provider of pension savings, in combination with further capital e�ciency improvements and cost reductions.
Companies and their current and former employees are the Group’s main target group. A growing number of companies are choosing to convert from de�ned bene�t to de�ned contribution pensions due to a desire for predictable costs and higher expected pensions for employees. In the corporate market, the Group has maintained its position as the market leader for de�ned contribution pensions in Norway with a market share of 34%. In Sweden, SPP has a strong challenger role with a market share of 9.3% within occupational pension outside the large collective agreements. During 2016, the company took important steps to make its work with sustainability more visible as a factor that distinguishes SPP from its competitors. The SPP brand has grown stronger, and the sales of unit linked pension savings to companies are increasing. The underlying variable premium grew in 2016 compared with the previous year and the new savings o�er with guarantee has resulted in a change in trends. For the �rst time in several years, the premium income from this type of saving has increased.
Storebrand reported a need to strengthen its reserves by a total of NOK 12.4bn based on the decision by the Financial Supervisory Authority of
Norway in March 2013 to introduce a new mortality basis. The reason for the need to strengthen the reserves is the fact that Norwegians are expected to live longer than previously assumed, in combination with the fact that Storebrand has insurance liabilities with lifelong disbursements. This requires increased premiums and higher insurance technical reserves to cover future liabilities. Storebrand has received approval for a seven-year escalation plan, applicable from 2014. At the end of 2016, NOK 0.4bn of the reserve strengthening remained.
Board is maintaining a distribution target in a normal situation of more than 35% of the result after tax, but before amortisation costs. The dividend policy states that dividends shall be adjusted such that the Group is assured the right capital structure. Storebrand has established a framework for capital management that links dividends to the solvency ratio. The goal is a solvency ratio of over 150%, including transitional rules. The solvency ratio at the end of the fourth quarter was 157% after the proposed dividend. A minimum level for dividends is a solvency ratio without transitional rules of 110%. The solvency ratio without transitional rules at the end of the fourth quarter was 144% after a proposed dividend. The solvency level shows that the Group is robust for the risks the business faces. A gradual improvement is expected in the underlying solvency margin in the coming years. This is primarily due to the discontinuation of the strengthening of reserves for increased life expectancy, expected result achievement in the Group, and reduced capital requirements from guaranteed business.
The Board has proposed a dividend to the General Meeting of NOK 695m, equivalent to NOK 1.55 per share, for the 2016 �nancial year. A
Operating costs were reduced by 0.4%, adjusted for foreign currency e�ects, compared with the previous year. Cost e�ectiveness is achieved through workforce reductions, increased outsourcing and automation. The operating costs were in uenced by several special items for the year: Restructuring of the pension scheme for own employees has given a positive cost e�ect of NOK 179m NOK 72m has been allocated for restructuring costs in connection with increased outsourcing of tasks, which has given a negative cost e�ect. The scrapping of IT systems in the fourth quarter of the year gave a negative cost e�ect of NOK 87m Collectively, these special items have a positive e�ect of NOK 20m on the operating costs for the year.
The Group had a tax expense of NOK 364m for 2016. The e�ective tax rate is in uenced by the fact that the Group has operations in countries with tax rates that are di�erent from Norway (25%), and it varies from quarter to quarter depending on each legal entity’s contribution to the
In December 2016, the Norwegian Parliament (Storting) agreed to reduce the company tax rate from 25 to 24% with e�ect from 1 January 2017.
It was also agreed to introduce a �nancial tax that would enter into force from the same date. Therefore, for companies subject to the �nancial tax, the company tax rate will be continued at the 2016 level (25%). 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 Group companies is used.
The Group’s investment properties are owned by companies that receive a reduced tax rate from 2017. In isolation, this means lower deferred tax on temporary di�erences relating to the investment properties, something that reduces the tax expense in 2016 by NOK 111m in addition, sales of properties have resulted in the reversal of associated taxable temporary di�erences, which gives a reduction in the tax expense for the year of NOK 179m.
Insurance reported 5% growth in premium income. The result improved due to growth and lower insurance payments as a % of premiums
The increase in the result of the Other segment for the year is primarily due to good returns in the company portfolios in addition to the sale of
Savings consists of products that encompass savings for pensions, without interest rate guarantees. The business area consists of de�ned contribution pensions in Norway and Sweden, asset management and retail banking products.
Adjusted for special items in 2015 and 2016, the nominal cost level increased in accordance with the volume growth, which is attributed to higher distribution costs and other volume-related costs.
In the Norwegian market, Storebrand maintained its position as the market leader for de�ned contribution schemes, with around 34% of the market. Premium growth for de�ned contribution occupational pensions was 15% in 2016. The growth is driven by good sales to new customers and sales of higher savings rates, in addition to growth from wage adjustments. There is strong competition in the market for de�ned contribution pensions, and Storebrand expects that this will continue as a result of the signi�cant dynamics in the market.
In the Swedish market, SPP is the �fth largest player measured by premium income from unit linked insurance and safe custody insurance in the Other Occupational Pension Insurance segment, with a market share of 9.3%. Premium income was 10% higher than in 2015. New sales remain at approximately the same level as the previous year.
The asset management business increased assets under management by NOK 5.2bn in 2016, taking into account a foreign currency e�ect of approximately NOK 24bn. This growth is primarily attributed to good new business and good returns on the customer assets. At year end, assets under management amounted to NOK 577bn, comprising mutual funds and funds-in-funds, as well as individual portfolios for insurance companies, pension funds, municipalities, institutional investors and investment companies. For assets under management, see the graph below.
The underlying pro�tability and e�ciency are good and show a satisfactory development.
The cost percentage is on par with the previous year. [9]
The combined risk result gives a claims ratio of 75% (77% in 2015) and the underlying risk development is satisfactory. Group disability pension delivered a satisfactory result for the period, while the reserves were strengthened by NOK 100m in the corresponding period last year. The product is still characterised by low premium income. The market for de�ned contribution pensions is very competitive and the price for disability pension is a key competition parameter. E�orts are still being made to strengthen the pro�tability, including repricing for unpro�table customers. A good disability result means a good result for insurance in Sweden.
The investment portfolio of Insurance in Norway amounts to NOK 6.8bn, which is primarily invested in �xed income securities with a short or medium duration. The return on the portfolio has been good.
Storebrand Insurance o�ers a broad range of products to the retail market in Norway, as well as the corporate market in both Norway and
Sweden. Pro�tability in the market is still considered good in general, but competition is increasing. We see this in connection with both employee 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 2016 amounted to NOK 4.5bn, NOK 1.7bn of which is from the retail market and NOK 2.8bn of which is from the corporate market.
Storebrand enjoys a well-established position in the retail market for personal insurance and is in a challenger position within P&C insurance.
The corporate market is generally a more mature market. Health insurance, which is still a growth market, is an exception. Measured by premiums written, Storebrand is one of the market leaders in health insurance. With regard to other employee insurance segments, Storebrand is one of several large companies. For risk cover in connection with de�ned contribution pensions in Norway, future growth is expected that is driven by conversions from de�ned bene�t to de�ned contribution pensions. The new regulations, which entered into force on 1 January 2016, have resulted in a lower premium volume. In Sweden, the disability trend has been downward for a long period of time, which has led to reduced premiums in general.
The risk result was minus NOK 3m in 2016, compared with NOK 89m in the previous year. The risk result was primarily generated in the Swedish business and was weak due to the weakened long life results. Changes were made to the reserves at the end of 2016 to strengthen the future result.
NOK 322m in 2016, compared with minus NOK 382m in the previous year. There were good pro�t sharing results in both the Norwegian and
Swedish businesses in 2016. This was driven by good returns and a good bu�er capital situation.
Transfers from guaranteed pensions amounted to NOK 3.3bn in 2016, compared with NOK 7.7bn in the previous year. From the end of 2014, the customers were given an o�er to convert from traditional paid-up policies to paid-up policies with investment choice, and insurance reserves for paid-up policies with investment choice amounted to NOK 5.5bn at the end of 2016 and are included in the Savings segment. Paidup policies are the only guaranteed portfolio that is growing, and it totalled NOK 115bn at the end of 2016, which corresponds to an increase of
Bu�er capital in % of customer reserves Sweden 6.7 % 7.6 %
The result before amortisation for the Other segment activities was NOK 405m for 2016, compared with NOK -91m for 2015. The pro�t increase is due to the positive �nancial market e�ects, in addition to the sale of STB Baltic. Fee and administration income increased 12.5% for the year.
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 are 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%. The Group’s parent company has established a target 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 Life Insurance Group’s solvency capital, which consists of equity, subordinated loan capital, market value adjustment reserves, additional statutory reserves, conditional bonus and risk equalisation reserves, amounted to NOK 57.3bn at year end, compared with NOK 61.0bn at the previous year end. The market value adjustment reserve decreased by NOK 1.8bn as a result of realisation of securities and amounted to NOK
At the end of 2016, the Storebrand Bank Group had pure core capital adequacy of 14%, and a capital adequacy of 17.7%. The bank group has adapted to the new capital requirements. The company has satisfactory �nancial strength and liquidity based on its operations.
Storebrand ASA issues senior debt, Storebrand Bank ASA issues senior debt and subordinated loans, while Storebrand Boligkreditt AS issues covered bonds. All four companies are also rated by the credit rating agency Standard & Poor’s. There was only one change to the credit rating during the year, and this was the future outlook of Storebrand Bank ASA being changed from negative to stable. Storebrand ended its involvement with credit rating agency Moody’s at the end of the year. This decision was made as part of the cost rationalisation in the Group. In connection with the conclusion of the partnership with Moody’s, Storebrand Boligkreditt received its �rst credit rating from S&P, which was AAA
As a business requiring a licence, the Storebrand Group and the individual companies are subject to supervision by the Financial Supervisory
Authority of Norway. Risk management must satisfy the formal requirements pursuant to legislation and other regulations. The level of risktaking shall be in accordance with the regulatory requirements and other needs of customers, shareholders, lenders, rating companies, etc.
The greatest risks for the banking business are credit risk and liquidity risk. Practically the entire lending portfolio to private individuals is secured by a mortgage on real property.
A common feature of the products is that Storebrand guarantees a minimum return. In Norway, the return must exceed the guarantee in each year, while in Sweden it is su�cient to achieve the guaranteed return as an average. In Sweden, new premiums have a lower than 0%
guarantee, whereas existing reserves have up to a 5.2% guarantee. In Norway, new premiums are included with a 2% guarantee, and pensions are adjusted upwards with a 0.5% guarantee. The existing portfolio has primarily guarantee levels ranging from 3 to 4%. Over time, new premiums and possible upward adjustment will contribute to the average guarantee level falling.
A new mortality tari� was introduced for de�ned bene�t pensions and paid-up policies from 2014. For the existing reserves, the Financial
To achieve adequate returns from the customer portfolios, it is necessary to take investment risks (market risks). This is primarily done by investing in equities, property and corporate bonds.
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 in the market has the greatest e�ect on new contributions, while existing reserves will continue as paid-up policies.
There are several processes taking place that may be of major importance to the occupational pension market in the future. The government is investigating the issue of transferring to a system with individual pension accounts after this was raised by the various parties in business and industry. The AFP scheme shall be evaluated in 2017, and work is being carried out on a new public occupational pension scheme. New EU rules regarding customer information and advisory services will also characterise the regulatory agenda in the coming years.
The European Insurance and Occupational Pensions Authority (EIPOA) has conducted a consultation process regarding the methodology for determining the Ultimate Forward Rate (UFR) which, together with market interest rates, is used to determine the discount rates in Solvency II.
It is expected that EIOPA will reach a conclusion on this matter in March 2017.
Occupational Pensions Directive (IORP) that is still based on Solvency I requirements. However, the authorities want to also introduce risk-based capital requirements into national regulations for the pension funds, based on the consideration of having the same competitive conditions and the same security for future pensions. A proposal for capital requirements for pension funds that are similar to those in Solvency II was circulated for consultation in January 2017 and is expected to be introduced from 2018.
Distribution Directive) will be introduced from 2018. These are EU rules intended to strengthen consumer protection by harmonising requirements for information and advisory services. 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. The Financial Supervisory Authority of
New rules for privacy and money laundering will also be introduced from 2018. The privacy regulation sets stricter requirements for the business 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.
Common for all of these directives and regulations is that these allow for greater use of administrative penalties (�nes etc.) for violations.
In connection with the 2017 national budget, the Norwegian Parliament (Storting) has agreed to introduce a �nancial tax. The objective of this tax is to compensate for the �nance sector being exempt from VAT. The government has examined the introduction of VAT for �nancial services, but is of the view that it would be overly complicated and has therefore instead proposed and received the Storting’s support to introduce a �nancial tax consisting of two components: Financial tax on salaries. This is set at 5 per cent and will follow the rules for employer’s National Insurance contributions.
The �nancial tax will enter into force from 2017. The estimated annual e�ect on the Group’s operating costs will be approximately NOK 55m.
In connection with the main bargaining period in the private sector in spring 2016, the government has committed to conducting a report on occupational pensions in cooperation with the parties in business and industry.
Storebrand has noted that an arrangement with individual pension accounts can be introduced based on existing pension accounts in de�ned contribution pension schemes.
The AFP scheme shall be evaluated by the parties in business and industry during 2017. The AFP scheme is contractual and provides a life-long additional pension to employees in companies that are part of the scheme. However, it is a prerequisite that the employee satis�es certain criteria on the withdrawal date (must work for an AFP company when the pension is withdrawn and have worked for an AFP company for at least 7 of the past 9 years). This means that employees cannot always count on AFP to be a certain part of their pensionable basis. Potential changes to the AFP scheme which make this more predictable for employees may in uence the companies’ assessments when concerning the level of occupational pension coverage.
Ministry of Labour and Social A�airs published a report that proposed possible models for a new occupational pension in the public sector. The goal was to establish a transition for occupational pension schemes in the public sector that is based on the principles of the pension reform, such as all-years accrual, exible pensions and longevity adjustments. The new scheme shall be a net scheme such as in the private sector, without coordination with the National Insurance Scheme’s retirement pension. A hybrid product has been proposed, but with considerably greater complexity when compared with existing hybrid products in the private sector. A new public service pension will be a topic at the coming collective wage negotiations in the public sector, but probably not until 2018.
The authorities have been working on changes to the tax rules for private savings. From 2017, a new scheme will be introduced in which private taxpayers can establish an equity savings account. Deposits into the account can be used to invest in listed shares and units in equity funds comprising of more than 80 per cent shares on the date of purchase. Pro�ts from the realisation of shares or fund units in the account shall not
The Ministry of Finance has also proposed to give fund accounts and securities funds equal tax status when concerning the taxation of the equity portion if the insurance element is less than 150 per cent.
The Storebrand Group has worked systematically and purposefully on sustainability for almost 20 years. The sustainability work originated from managing our own assets and sustainability is an important fundamental pillar of Storebrand’s investment strategy. The Group has published environmental reports since 1995, and sustainability reports based on the triple bottom line (�nances, corporate social responsibility and the environment) since 1999. The sustainability reporting has been an integrated part of the annual report and certi�ed by an independent party since 2008. Storebrand reports in accordance with the GRI G4 standard and satis�es the Core level. More information and reporting that apply to sustainability are provided by company management at
Disclosure Project, Dow Jones Sustainability Index (DJSI), Corporate Knights, Vigeo and Sustainalytics. Storebrand is one of only a few companies that have been on the Dow Jones Sustainability Index for every one of the past 17 years, and was ranked number 11 globally within the insurance sector in 2016.
UN’s principles for responsible business operation, the Global Compact. These principles form the basis for Storebrand’s sustainability guidelines. Storebrand supports UN human rights conventions, UN environmental conventions, ILO Core Conventions, UN Convention against
Corruption and the UN Guiding Principles on Business and Human Rights. Storebrand has also signed the UN principles for responsible investment and sustainable insurance.
Storebrand’s goal is to be a leader in sustainability in the Nordic region and one of the foremost companies in the world in the area of sustainable investments.
Storebrand shall ensure a continuously lower environmental impact from our operations.
Storebrand shall have a transparent management structure in accordance with national and international corporate governance standards.
The new plan will make it easier for Storebrand to further develop the measurement and to better understand and prepare the Group’s social impact. This is a natural continuation of Storebrand’s sustainability work. With the new plan, social impact reporting will be expanded in 2017.
The sustainability work requires close dialogue with key societal players. Each year we arrange a dialogue with stakeholders in which we answer questions and receive feedback about what is expected of us and our work on sustainability. The talks include sectoral cooperation on national and international sustainability issues, individual dialogue with relevant NGOs, cooperation with academia on sustainability research, and participation in important national and international forums and conferences. Storebrand is active in key sustainability organisations such as
SLSD, and its aim is to develop speci�c projects and models for work on sustainable development.
In 2016, Storebrand participated in stakeholder dialogue concerning climate risk and reporting as a follow up of climate year 2015. Storebrand has been part of the Swedish Ministry of Finance’s talks regarding national reporting of the carbon productivity in investment funds in Sweden and was a member of the two working groups for the sector that prepared a standard for carbon productivity (Svensk Försäkring og
Fondbolagens Förening). Storebrand has joined two international initiatives focussing on reporting and reducing the carbon footprint of own equity investments, the Montreal Pledge ( and Portfolio De-carbonisation Coalition (
Storebrand conducted a materiality analysis in 2014. The objective was to obtain an overview of the areas in which it was most important for
Storebrand to work on. The analysis identi�ed the following materialities: industry distrust, climate adaptation, corruption and �nancial crime, as well as overexploitation of natural resources. The stakeholder dialogues in 2015 and 2016 con�rm these key areas. In addition, Storebrand has increased its focus on climate and climate risk and introduced a new area: Impact. This involves understanding, increasing, quantifying and reporting the Group’s social impact. Additional information can be found under Sustainability at www.storebrand.no
Storebrand has increased its focus on the climate risk in society through: 1. Climate reporting 2. Reducing the climate risk in own investments 3. Introducing products with low climate risk to the consumer markets
Since 2015, Storebrand has presented external reports about the carbon productivity of equity investments and linked these to relevant indexes. The impact on the climate is also an integrated and decisive part of the sustainability analysis of all ownership interests and can result in companies with poor climate strategies being excluded . During 2016, Storebrand developed and introduced 6 fossil fuel free funds as part of the sustainability standard.
The following areas are covered by the Storebrand standard: Human rights and international law.
Exclusion of companies that are the worst performers in relation to sustainability and climate measures in high-risk industries.
As of the 4th quarter of 2016, 178 Companies were excluded from investment.
Storebrand Insurance contributes to creating a sustainable society by giving customers �nancial security in the event of an accident. Storebrand
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. Storebrand is involved in creating a future to look forward to. Our customers shall, in a simple and sustainable manner, receive a good pension and have a good world to retire in. This is done by being a trailblazer and entering the breach for sustainable development. Skills development shall support this.
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. 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 should be made broader, so that it can in turn contribute to greater adaptability and a greater restructuring capacity for the Group.
The Storebrand Academy is the Group’s initiative for custom management development programmes. A new group started in 2016 with 20 capable managers. The course lasts for one year.
We are focussed on the organisation re ecting our customers and the market we operate in. Diversity contributes to increased innovation and learning in the organisation. In 2016, Storebrand received a score of 83 out of 100 in a questionnaire regarding the work with diversity. Our ambitions include systematic work and an employee composition that re ect society as a whole. The average age at Storebrand is 43, and the average seniority is 10 years. Storebrand had 1,745 employees in the Group at year end.
Some results from the employee survey are given below because the Group sees a clear connection between the employees’ commitment and high job satisfaction, which results in better customer experiences and satisfaction. The results from the survey show consistently good results and that Storebrand scores well above the average for the industry.
The Group’s absence due to illness has been at a stable low level for many years. The Group’s result for absence due to illness in 2016 was 3.7 per cent. This �gure was 3.9 per cent for the Norwegian part and 3.1 per cent for the Swedish part. Storebrand has been an “inclusive workplace” (IA) company since 2002, and the Group’s managers have over the years built up good 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.
Storebrand’s health clinics at the head o�ce in Norway, as well as good health insurance for all employees, are positive contributors to
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. Employees at the head o�ce in Norway can work out in a spinning room, weights room and in a separate sports hall. 65 per cent of the employees in 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 training facilities with a variety of activities and organised training.
No injuries to people, property damage, or accidents were reported in the Storebrand Group in 2016.
Trust is the lifeblood of Storebrand, and we work systemically to live up to good ethical standards. The company sets strict requirements concerning high ethical standards for the Group’s employees. The Group has a common code of ethics that is available on our intranet in three languages. Noti�cation routines, brochures, anonymous postbox, dilemma bank, question and answer summaries and presentations are all available to employees on the intranet, so that awareness of and re ection on the subject can be high on everyone’s agenda. Every year all the managers must con�rm in writing that they have discussed ethics and ethical dilemmas, information security, �nancial crime and HSE in departmental meetings.
Employees take the company’s e-learning course on ethics. In 2016, 136 employees took the course, and 148 took the anti-corruption course.
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, see chapter for Corporate Governance.
The Board wishes to thank the retiring members of the Board of Directors and Board of Representatives for their valuable contributions to the
The loyalty programme for employees with companies that have a pension scheme at Storebrand will be an important area of focus in the future. The sale of banking products and P&C insurance contributes to expected growth within the Savings and Insurance segment. The competition in the market has resulted in pressure on margins within these segments that in turn sets requirements for cost reductions and adaptations in distribution and product solutions to achieve continued pro�table growth. In order to realise the ambitions in the retail market, sales must continue to increase.
Asset management is an important business area within the Savings segment. Asset management has had stable growth in reserves and good earnings development.
The Guaranteed Pension segment is in long-term decline and the combined reserves for the Guaranteed business are decreasing. However, there is continued growth in the reserves linked to paid-up policies due to companies choosing to convert existing de�ned bene�t schemes to de�ned contribution schemes. It is expected that the growth in paid-up policies will decline in the future and that there will be at growth in reserves over several years before the reserves start to fall. The portfolio of free policies does not contribute to the Group’s results with the present interest rates. Guaranteed reserves represent an increasingly smaller share of the Group’s total reserves and were 65% at the end of the quarter.
In 2016, a new business area for digital development was established. Storebrand has combined the resources in the Group that work with digital business development and will, in future, make great e�orts to succeed in the digitalisation of sales and earnings driven by customer insight and which also contributes to improving the e�ciency of operations.
The Norwegian ten-year interest rate on government bonds increased by approximately 0.6 percentage points in the fourth quarter and is above the level at the start of the year. The Swedish ten-year interest rate on government bonds also increased by approximately 0.4 percentage points in the fourth quarter, but is still under the level at the start of the year. Swedish interest rates are in uenced by very expansive monetary policy. The worldwide interest rate rise has largely been driven by the USA where the interest rate on ten-year government bonds has increased by more than one percentage point since it reached its lowest point in July 2016. The increase in interest rates has continued in 2017.
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
The �nance sector is also characterised by the weak capitalisation of some European banks in combination with weakened credit portfolios. The authorities have implemented measures in several countries to alleviate the situation in certain exposed banks. We are seeing a consolidation of insurance companies in Europe.
The European Insurance and Occupational Pensions Authority (EIPOA) is considering changes to the methodology for determining the Ultimate
The EU Commission has asked EIOPA to assess changes in the Solvency II regulations, primarily in connection with the standard model for calculating capital requirements. EIPOA has prepared a consultation memo and a consultation process is now underway with a deadline of 3
March 2017. The purpose is to review the regulations to (1) ensure that the capital requirements are in proportion to the actual risk, (2) ensure consistent treatment between countries, and (3) simpli�cation. The consultation memo assesses di�erent alternatives relating to 21 topics.
Among other things, these include exposure to regional and local authorities, calibrating the risk of mortality, the possibility of using companyspeci �c parameters for life insurance, exchange rate risk at group level, interest rate risk and risk margin. No speci�c recommendations are proposed. Following the consultation process, it is expected that EIPOA will provide its recommendations to the EU Commission.
senior government o�cials in December 2016. The assessment follows up the Prime Minister’s letter to the parties in connection with the main bargaining period for 2016 (hovedoppgjøret 2016), whereby the government pledged to review a number of issues relating to occupational pensions in the private sector.
The assessment has three main topics: Possible solutions for a scheme involving a separate pension account, whereby pension earnings from multiple employers can be combined.
Employee and employer organisations, the �nancial services industry and the Consumer Council of Norway have participated in a reference group for the work. The report does not present any speci�c proposals, but discusses alternative models. It will be up to the parties (Norwegian
In connection with the Storting’s preparation of the 2017 national budget, it was agreed to introduce a �nancial tax with two elements.
Storebrand ASA is the holding company in the Storebrand Group, and the accounts have been prepared in accordance with the Norwegian
After tax, adjusted for amortisation of intangible assets. The document contains alternative performance measures (APM) as de�ned by the European Securities and Market Authority (ESMA).
The income statement is based on reported IFRS results for the individual group companies. The statement di�ers from the o�cial accounts layout. The documents contains alternative performance measures(APM) as de�ned by the European Securities and Market Authority (ESMA). Storebrand, com/Ir provides an overview of APM's used in �nancial reporting.
The cost line was negatively a�ected by NOK 30m in restructuring costs in 2015. The same line was positively a�ected by NOK 19m in 2016 as a net e�ect of restructuring costs, changed pension scheme for own employees, and extraordinary write-downs in 2016.
Adjusted for net negative non-recurring e�ects relating to restructuring, pension and write-downs of NOK 1m in 2016 and negative non-recurring e�ects relating to restructuring of NOK
STATEMENT IN ACCORDANCE WITH THE NORWEGIAN CODE OF PRACTICE FOR CORPORATE GOVERNANCE
The Board has decided that the company will comply with the Norwegian Code of Practice and discusses compliance with the Code of Practice in the Board of Directors’ Report. Storebrand complies with the Code of Practice without any signi�cant exceptions. One minor deviation has been accounted for below under section 3.
Storebrand ASA is the parent company in a �nancial group, and its statutory object is to manage its equity interests in Storebrand’s subsidiaries in compliance with the current legislation. Storebrand’s main business areas comprise savings, insurance and banking. The full text of the
You can read more about the company’s goals and main strategies in the Directors Report.
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
Group (hereafter referred to as Storebrand) works continuously on improving both the overall decision-making processes and the day-to-day management of the company.
Storebrand's corporate governance principles have been laid down in accordance with the
Norwegian Code of Practice for Corporate Governance. The management and the Board of
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 2016 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.
At the same Annual General Meeting, the Board was authorised to buy back shares for a maximum value of NOK 224,954,945. The total holdings of treasury shares must, however, never exceed 10 per cent of the Group’s share capital. The buyback of treasury shares may be a tool for the distribution of surplus capital to shareholders in addition to dividends. In addition, each year Storebrand ASA sells shares to employees from its own holdings in connection with the share purchase scheme and long-term incentive schemes for employees of Storebrand.
Deviation from the Code of Practice: The Board’s authorisations to increase the share capital and buy back shares are not completely limited to de ned purposes. No provisions have been made for the General Meeting to vote on each individual purpose to be covered by the authorisations.
The general competence rules for Board members and executive personnel may be found in the rules of procedure for the Board of Storebrand
ASA, rules of procedure for the boards of subsidiaries, instructions for the CEO and Storebrand’s code of ethics. Board members must inform the company if they have direct or indirect material interests in an agreement concluded by one of the companies in the Storebrand Group. The
Board of Directors may decide to waive the shareholders’ preferential rights in connection with share capital increases.
Shares in Storebrand ASA are listed on Oslo Børs (Oslo Stock Exchange). The shares are freely negotiable, and the Articles of Association do thus not contain any restrictions with regard to the negotiability of the shares. All the shares carry equal rights, cf. section 4 above.
The Chairman of the Board, at least one representative from the Nomination Committee and the external auditor must attend the General
Storebrand ASA’s Articles of Association regulate the Nomination Committee, which consists of �ve members and an observer elected by the employees.
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).
Committee have been replaced as a matter of course due to changes in the shareholder composition.
The Articles of Association stipulate that the Nomination Committee should work in accordance with the rules of procedure adopted by the
General Meeting. The Nomination Committee’s rules of procedure were adopted at the 2016 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
8. COMPOSITION AND INDEPENDENCE OF THE BOARD OF DIRECTORS (NO DEVIATIONS FROM THE CODE OF PRACTICE)
Board of Directors. At the end of 2016, the Board of Directors consisted of ten members (six men and four women).
The Act on Financial Undertakings and Financial Groups, which entered into force on 1 January 2016, revoked the requirement of having a board of representatives. At the same time, the establishment of a so-called corporate assembly was made optional. On 13 April 2016, the General
In 2015, a total of twelve board meetings were held, two of which were held at the subsidiary SPP in Stockholm. Storebrand’s future strategy is discussed at the Board’s annual strategy meeting, which establishes guidelines for the management’s preparation of plans and budgets in connection with the annual �nancial plan, which must be approved by the Board. The Board shall stay informed about Storebrand’s �nancial position and development, and it shall ensure that the company’s value creation and pro�tability are safeguarded in the best possible manner on behalf of the owners. The Board shall also ensure that the activities are subjected to adequate control and ensure that Storebrand has adequate capital based on the scope of, and risks associated with, its activities. The attendance records of individual board members are provided in the overview of the Board of Directors . The work of the Board is regulated by special rules of procedure for the Board, which are reviewed annually. In order to ensure sound and well-considered decisions, importance is attached to ensuring that meetings of the Board are well prepared so that all the members can participate in the decision-making process. The Board prepares an annual schedule for its meetings and the topics it will consider. The agenda for the next board meeting is normally presented to the Board based on the approved schedule for the year and a list of matters carried forward from previous meetings. The �nal agenda is �xed in consultation with the Chairman of the Board.
The committees consist of three to four board members, two to three shareholder-elected board members and one-employee elected board member. This helps ensure thorough and independent consideration of matters that concern internal control, �nancial reporting and the remuneration of executive personnel. The committees are preparatory and advisory working committees and assist the Board with the preparation of items for consideration. Decisions are made, however, by the full Board. The committees are able to hold meetings and consider matters on their own initiative without the involvement of the company’s management.
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 nine meetings in 2016.
Storebrand, in addition to corporate rules for areas such as risk management, internal control, �nancial reporting, handling inside information and share trading by primary insiders. Guidelines and information about information security, contingency plans, measures against money laundering and other �nancial criminality have also been drawn up. Storebrand is subject to statutory supervision in the countries where it has operations that require a licence, including the Financial Supervisory Authority of Norway, as well as its own supervisory bodies and external auditor.
The assessment and management of risk are integrated into Storebrand’s corporate governance. This management system shall ensure that there is a correlation between goals and actions at all levels of Storebrand and the overall policy of creating value for Storebrand’s shareholders.
Storebrand’s �nancial and operational goals are de�ned annually in a board-approved business plan. The business plan builds on separate decisions on risk strategy and investment strategies, and includes three-year �nancial forecasts, budgets and action plans. The Board of
Risk assessment forms part of the managerial responsibilities in the organisation. The purpose of this is to identify, assess and manage risks that can hamper a unit’s ability to achieve its goals. The process covers both the risk of incurring losses and failing pro�tability linked to economic downturns, changes in the general conditions, changed customer behaviour, etc., and the risk of incurring losses due to inadequate or failing internal processes, systems, human error or external events. Developments in the �nancial markets are important risk factors in relation to Storebrand’s earnings and solvency position. In addition to assessing the e�ects of sudden shifts in the equity markets or interest rate levels (stress tests), scenario analysis is used to estimate the e�ect of various sequences of events in the �nancial markets on Storebrand’s
The responsibility for Storebrand’s control functions for risk management and internal control lies in the CRO function under the management of the Group CRO. The Group CRO reports directly to the CEO. The CRO function is responsible for supporting the Board and group management team with respect to the establishment of a risk strategy and operationalisation of the setting of limits and monitoring of risk raking across Storebrand’s business areas.
Key executives in the Consolidated Financial Statements unit receive a �xed annual remuneration that is not a�ected by Storebrand’s �nancial earnings. The work involved in the preparation of the �nancial statements is organised in such a way that the Consolidated Financial Statements unit does not carry out valuations of investment assets. Instead it exercises a control function in relation to the accounting processes of the group companies.
11. REMUNERATION OF THE BOARD OF DIRECTORS (NO DEVIATIONS FROM THE CODE OF PRACTICE)
Committees do not receive incentive-based remuneration; instead they receive a �xed annual compensation, either per year or per meeting the member attends, or a combination of such remuneration. The shareholder-elected members of the Board do not participate in Storebrand’s pension schemes. None of the shareholder-elected members of the Board carry out any duties for Storebrand beyond their appointment to the
The Board determines the structure of the remuneration of executive personnel at Storebrand, and a statement on the �xing of remuneration
More detailed information about the remuneration of executive personnel may be found in notes 25 (Group) and 6, 16 (ASA) and in the Board’s statement on the �xing of salaries and other remuneration to executive personnel, which is included in the notice of the General Meeting and available at www.storebrand.no. Executive personnel are encouraged to hold shares in Storebrand ASA, even beyond the lock-in period.
13. INFORMATION AND COMMUNICATIONS (NO DEVIATIONS FROM THE CODE OF PRACTICE)
Storebrand’s �nancial calendar is published on the Internet and in the company’s annual report. Financial information is published in the
quarterly and annual reports, as described above under Section 10 – Financial information and Storebrand’s accounting process. Documentation that is published is available on Storebrand’s website. All reporting is based on the principle of transparency and takes into account the need for the equal treatment of all participants in the securities markets and the rules concerning good stock exchange practice. Further information may be found in the chapter for Shareholder matters. Storebrand has its own guidelines for handling insider information, see also section 10 –
As one of the largest investors in the Norwegian stock market, Storebrand has considerable potential in uence over the development of listed companies. Storebrand attaches importance to exercising its ownership in listed companies on the basis of straightforward and consistent ownership principles that place considerable emphasis on sustainability. Storebrand applies the Norwegian Code of Practice for Corporate
Governance in this role. Storebrand has had an administrative Corporate Governance Committee since 2006. The Committee is responsible for ensuring good corporate governance across Storebrand.
1. The principles for Storebrand’s corporate governance have been prepared in accordance with Norwegian law, and they are based on the
2. The Norwegian Corporate Governance Board’s Code of Practice is available at nues.no.
3. Any deviations from the Code of Practice are commented on under each section in the statement above, see the deviations discussed in section 3.
4. A description of the main elements of Storebrand’s systems for internal control and risk management related to the �nancial reporting process is discussed in section 10 above.
7. The provisions in the Articles of Association that regulate the appointment and replacement of board members are discussed in section 8 above.
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 2011–2012: Head of Product, Claims and Service, Storebrand Life Insurance 2003–2011: Head of Product, Storebrand Life Insurance 2002–2003: Head of UL and DC business, Storebrand Life Insurance 2000–2002: Head of DC business, Storebrand Life Insurance 1998–2000: International Sales, Storebrand Life Insurance 1997–1998: Actuary trainee , Storebrand Life Insurance 1995–1997: Teacher, Oslo University
Post graduate studies at the Finnish Doctoral Program in Economics (FDPE) and Stockholm School of Economics
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 2015–2016: Senior Vice President Customer and Business Development, Storebrand 2011–2015: Chief Marketing O�cer/SVP Marketing, Storebrand 2009–2011: CEO, Inven2 AS
Head of Asset Management Department of the Ministry of Finance (1994–2001, 2006–2011)
Net income from financial assets and real estate for the company: Net income from financial assets and real estate for the customers: Total income 54,772 41,945
Tax on other result elements that may be classified to profit/loss 2
Total other result elements that may be classified to profit/loss -796 771
Intangible assets and excess value on purchased insurance contracts 29 4,858 5,810
Financial assets at amortised cost: – Lending to customers 11,32,34 25,310 28,049
Financial assets at amortised cost: – Bonds held-to-maturity 11,32,33 15,644 15,648
– of which net cash ow in the period before �nancial assets and banking customers -358 -3,218
Cash and cash equivalents at start of the period for new/sold out companies -13 4
The cash ow analysis shows the Group’s cash ows for operational, investment and �nancial activities pursuant to the direct method. The cash ows show the overall change in means of payment over the year.
Includes cash ows for holdings in group companies and tangible �xed assets.
Cash/cash equivalents are de�ned as claims on central banks and claims on �nancial institutions without notice periods for the company portfolio. The amount does not include claims on �nancial institutions linked to the insurance customers portfolio, since these are liquid assets that not available for use by the Group.
Sweden that are measured at fair value, the majority of the financial liabilities are measured at amortised cost.
The preparation of the consolidated financial statements in accordance with IFRS requires the management to make judgements, estimates and assumptions that affect assets, liabilities, revenue, expenses, the notes to the financial statements and information on potential liabilities. Actual amounts may differ from these estimates. See Note 2 for further information.
IFRS9 involves rules for classification based on the business model, altered hedge accounting requirements and rules for write-downs of financial assets that result in losses being recorded earlier than under IAS39. Under IAS39, impairment losses will be entered when there are objective criteria for an actual loss having taken place, while under IFRS9, the probability of loss (expected loss) must be calculated based on the elements relating to the financial instrument and elements relating to more general macroeconomic factors
The cash flows are discounted by an interest rate that reflects the risk of the cash flows
(provided that the contract is not considered to be a loss contract on the issuing date).
The standard for revenue from contracts with customers enters into force on 1 January 2018. Storebrand does not expect this standard to have any major effect on the consolidated financial statements.
Storebrand Livsforsikring AS, Storebrand Asset Management AS, Storebrand Bank ASA and Storebrand Forsikring AS are significant subsidiaries owned directly by Storebrand ASA. Storebrand Livsforsikring AS also owns the Swedish holding company Storebrand Holding AB, which in turn owns SPP Pension & Försäkring AB (publ). In connection with the acquisition of the Swedish business in 2007, the authorities instructed
Group exercises significant influence are consolidated in accordance with the equity method. Investments in joint ventures are recognised in accordance with the equity method.
IFRS 3 Business Combinations is not applied, which in turn means that provisions are not made for deferred tax as would have occurred in a business combination.
Interest income relating to loans and bonds is recognised in the income statement using the effective interest method.
Income from properties and financial assets is described in Sections 10 and 11.
Added value when acquiring a business that cannot be directly attributed to assets or liabilities on the date of the acquisition is classified as goodwill on the statement of financial position. Goodwill is measured at acquisition cost on the date of the acquisition. Goodwill arising from the acquisition of subsidiaries is classified as an intangible asset.
If the discounted present value of the pertinent future cash flows 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 flow generating units that are expected to benefit from the acquisition so that it can subsequently be tested for impairment. Cash flow generating units are identified in accordance with the legal entity.
In accordance with IFRS4, a liability adequacy test must be conducted of the insurance liability every time the financial statements are presented. The test conducted in Storebrand’s consolidated financial 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.
Investment properties primarily consist of centrally located office buildings, shopping centres and logistics buildings. Properties leased to tenants outside the Group are classified as investment properties. In the case of properties partly occupied by the Group for its own use and partly let to tenants, the identifiable tenanted portion is treated as an investment property. All properties that are owned by the customer portfolios are measured at fair value and the changes in value are allocated to the customer portfolios.
The fair value of financial assets listed on a stock exchange or on another regulated market in which regular trading takes place is determined as the bid price on the last trading day up to and including the reporting date.
For financial assets carried at amortised cost, an assessment is made on each reporting date whether there is any objective evidence that a financial asset or group of financial assets is impaired.
Held to maturity investments are non-derivative financial assets with fixed or determinable payments and fixed maturity and that a company has the intention and ability to hold to maturity, with the exclusion of: assets that are designated in initial recognition as assets at fair value through profit or loss, and assets that are defined as loans and receivables.
Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market, with the exception of assets that the company intends to sell immediately or in the near term that are classified as held for trading and those that the company upon initial recognition designates at fair value through profit or loss.
Loans and receivables are recognised at amortised cost using the effective 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.
it requires no initial net investment or an initial net investment that is smaller than would be required for other types of contracts that would be expected to have a similar response to changes in market factors it is settled at a future date.
Derivatives that do not meet the criteria for hedge accounting are recognised as financial instruments held for trading. The fair value of such derivatives is classified as either an asset or a liability with changes in fair value through profit or loss.
Hedging of net investments in foreign businesses is recognised in the accounts in the same way as cash flow hedging. Gains and losses on the hedging instrument that relate to the effective part of the hedging are recognised through total comprehensive income, while gains and losses that relate to the ineffective part are recognised immediately in the accounts in the profit and loss account. The total loss or gain in equity is recognised in the profit and loss account when the foreign business is sold or wound up.
The accounting standard IFRS4 Insurance Contracts addresses the accounting treatment of insurance contracts. Storebrand’s insurance contracts fall within the scope of this standard. IFRS4 is meant to be a temporary standard and it allows the use of non-uniform principles for the treatment of insurance contracts in consolidated financial statements. In the consolidated financial statements, the technical insurance reserves in the respective subsidiaries are included, as calculated on the basis of the laws of the individual countries. This also applies to insurance contracts acquired via business combinations. In such cases, positive excess values, cf. IFRS4 no. 31b), are capitalised as assets.
Pursuant to IFRS4, 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.
The premium reserve is calculated using the same assumptions as those used to calculate premiums for the individual insurance contracts, i.e.
assumptions about mortality and disability rates, interest rates and costs. In addition, the provisions are increased due to expected increased life expectancy. Premium tariffs are based on the observed level of mortality and disability in the population with the addition of security margins that include expected future developments in this respect.
Included in the premium reserve and claims reserve for insurance risk are provisions for claims either occurred but not yet reported or reported but not yet settled. IBNR are reserves for potential future payments when Storebrand has yet to be informed about whether an instance of disability, death or other instance entailing compensation has occurred. Since Storebrand is neither aware of the frequency nor the amount payable, IBNR is estimated using mathematical models based on historical information about the portfolio. Correspondingly, RBNS is a provision for potential future payments when Storebrand has knowledge of the incident, but has not settled the claim. Mathematical models based on historical information are also used to estimate the reserves.
Selling costs in the Norwegian life insurance business are expensed, whilst in the Swedish subsidiaries selling costs are recorded in the statement of financial position and amortised over the expected duration of the product.
The premium fund contains premiums prepaid by policyholders as a result of taxation regulations for individual and group pension insurance and allocated profit shares. Credits and withdrawals are not recognised through the profit and loss account but are taken directly to the statement of financial position.
The current year’s net unrealised gains / losses on financial assets at fair value in the group portfolio in Storebrand Livsforsikring AS are allocated to or reversed from the market value adjustment reserve in the statement of financial position assuming the portfolio has a net unrealised excess value. The portion of the current year’s net unrealised gains/losses on financial current assets denominated in foreign currencies that can be attributed to fluctuations in exchange rates is not transferred to the market value adjustment reserve. The foreign exchange fluctuations associated with investments denominated in foreign currencies are largely hedged through foreign exchange contracts on a portfolio basis. Similarly, the change in the value of the hedging instrument is not transferred to the market value adjustment reserve, but is charged directly to the profit and loss account. Pursuant to the accounting standard for insurance contracts (IFRS4), the market value adjustment reserve is shown as a liability.
The reserves for incurred insurance events consist of reserves for disability pensions, established claims, unestablished claims and claims processing reserves. When assessing the reserves for disability pensions, a risk-free market interest rate is used, which takes into account future index adjustment of the payments. In addition, provisions are made for calculated claims that have been incurred but not reported
Costs related to insurance claims are recognised when the claims occur. The following allocations have been made: Reserve for unearned premium for own account concerns on-going policies that are in force at the time the financial statements were closed and is intended to cover the contracts’ remaining risk period.
Storebrand has country-specific pension schemes for its employees. The schemes are recognised in the accounts in accordance with IAS 19. In
Norway, the pension scheme from 1 January 2015 changed from a defined benefit to a defined contribution scheme. The effect 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 defined-benefit scheme, but there is insufficient quantitative information to be able to estimate reliable accounting obligations and costs. In connection with new rules for disability pensions in the Norwegian Occupational Pensions
Act, Storebrand altered the disability pension scheme for own employees in Norway in 2016.
In Sweden, SPP has agreed, in accordance with the Finance Companies’ Service Pension Plan (BTP Plan), to collective, defined-benefit pension plans for its employees. A group defined-benefit pension implies that an employee is guaranteed a certain pension based on the pay scale at the time of retirement on termination of the employment.
Insurance benefits, 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 and losses and the effects 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 defined contribution pension scheme involves the Group in paying an annual contribution to the employees’ collective pension savings. The future pension will depend upon the size of the contribution and the annual return on the pension savings. The Group does not have any further work-related obligations after the annual contribution has been paid. No provisions are made for ongoing pension liabilities for these types of schemes. Defined-contribution pension schemes are recognised directly in the financial statements.
The tax expense in the income statement comprises current tax and changes to deferred tax and is based on the accounting standard IAS12
Income Taxes. Tax is recognised in the income statement, except to the extent that it relates to items recognised in total comprehensive income. Deferred tax and deferred tax assets are calculated on the differences 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 differences and taxable temporary differences. The Group’s tax-increasing temporary differences also include temporary differences 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
The Storebrand Group includes companies that are both subject to and not subject to the financial tax. Therefore, when capitalising deferred tax/deferred tax assets in the consolidated financial statements, the company tax rate that applies for the individual companies is used (24 or 25 per cent).
A lease is classified as a finance lease if it essentially transfers the risk and rewards incident to ownership. Other leases are classified as operating leases. Storebrand has no financial lease agreements.
Pursuant to IAS41, investments in forestry are measures as biological assets. Biological assets are measured at fair value, which is defined based on alternative fair value estimates, or the present value of expected net cash flows. Changes in the value of biological assets are recognised in the profit and loss account. Ownership rights to biological assets are recognised at the point in time when the purchase agreement is signed.
Annual income and expenses are calculated for forestry and outlying fields.
A description of the most important elements and assessments in which discretion is used and which may influence recognised amounts or key figures is provided below and in Note 47 Solvency II.
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 differing 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 different 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 higher life expectancy, 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 buffer, may have an impact on the amount recorded that is linked to the insurance contracts. The Norwegian insurance contracts with guaranteed interest rates are discounted at the premium calculation rate (around 3.3 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.
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 financial 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 satisfied if the recognised liabilities in the financial statements are greater than or equal to the net liabilities valued at an estimated market value, including the expected owner’s profit. In this test, the Solvency II calculations and IAS37 are taken into account. A key element of this assessment involves calculating future profit margins using Solvency II calculations. The Solvency II calculations will be affected by, among other things, volatility in the financial markets, interest rate expectations and the amount of buffer capital.
Changes in estimates and valuations may entail a change in the return on the associated customer portfolios. The recognition of such value changes does not directly affect the owner’s result. However, a change in the estimates related to risk cover (disability and death) will affect the owner’s result.
Further information about insurance liabilities is provided in Note 8, 40 and 41.
Reference is also made to Note 13 in which the valuation of investment properties at fair value is described in more detail.
Reference is also made to Note 13 in which the valuation of financial instruments at fair value is described in more detail.
Uncertainty grows when there is turmoil in financial markets. The assessments include credit, market and liquidity risk. Changes in assumptions for these factors will affect an assessment of whether impairment is indicated. There will thus be uncertainty concerning the recognised amounts of individual and group write-downs. This will apply to provisions relating to loans in the private and the corporate markets and to bonds that are measured at amortised cost.
Group’s cash generating units. The test’s valuation method involves estimating cash flows arising in the relevant cash flow generating unit, as well as applying the relevant discount rate. Tangible fixed assets and other intangible assets are measured annually to ensure that the method and time period used correspond with economic realities.
The present value of pension obligations depends upon the financial and demographic assumptions used in the calculation. The assumptions must be realistic, mutually consistent and up to date as they should be based on a cohesive set of estimates about future financial performance.
The consolidated accounts contain significant temporary differences between the values of assets for accounting purposes and for tax purposes. The current Norwegian tax regulations have been applied when calculating deferred tax in the Norwegian business. 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 different 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.
Note 3 – Strengthening of longevity reserves for Storebrand Life Insurance AS
K2013, including use of the risk equalisation reserve and equity. In general, approval has been granted to use up to seven years to complete the strengthening of reserves through the application of profit and direct equity contributions. The maximum reserve strengthening period is from 1 January 2014 to 1 January 2021. For contracts that are or will be fully reserved during the escalation period, the remaining equity contributions must be paid within three years and not later than 1 January 2021. The risk result will be used in its entirety for strengthening the longevity reserves for contracts that are not fully reserved.
In 2015, Storebrand decided to charge the remaining estimated direct contribution to expected increased longevity. The remaining reserve strengthening is expected to be covered by the surplus return and loss of profit sharing. As at 31 December 2016, the estimated remaining required reserve strengthening was NOK 352 million, of which the risk equalisation fund was NOK 140 million.
Paid-up policies: Provisions set aside for the estimated future direct use of equity during the reserve strengthening period totalled NOK 84 million for the full year.
Estimated use of equity is based on an average annual return of 4 per cent for the period 2017-2020. A higher return has a limited effect on direct use of equity. Maximum use of equity is limited to remaining required reserve strengthening of NOK 352 million.
The return guarantees in group pension insurance with a return guarantee must be priced upfront. The level of the return guarantee, the size of the buffer capital (additional statutory reserves and unrealised gains), and the investment risk of the portfolio in which the pensions assets are invested determine the price that the customer pays for his or her return guarantee. Return guarantees are priced on the basis of the risk to which the equity is exposed. The insurance company bears all the downside risk and must carry reserves against the policy if the buffer reserves are insufficient or unavailable.
A modified profit-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 profit from returns after any allocations to additional statutory reserves.
In the case of defined-benefit contracts (KF portfolio), the company is entitled to charge an indexing fee if the group profit allows the indexing of the insurance. 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 figures on 30 September exceed 107 per cent, and half of the fee is charged. The whole fee is charged if the consolidated figures 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.
Consists of products that include long-term saving for retirement with no interest rate guarantees. The area includes de�ned contribution pensions in Norway and Sweden, asset management and bank products for private individuals. In addition, certain other subsidiaries are part of
The Guaranteed Pension business area includes long-term pension savings products that give customers a guaranteed rate of return. The area includes de�ned contribution pensions in Norway and Sweden, paid-up policies and individual capital and pension insurances.
The results in the segments are reconciled against the Group result before amortisation and write-downs of intangible assets. The corporate income statement 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 reporting segment 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.
Operating costs consist of the Group’s operating costs in the Group’s income statement minus operating costs allocated to products with pro�t sharing.
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.
Loan losses: Loan losses consist of individual and group write-downs on lending activities that are on the balance sheet of Storebrand Bank Group. In the
Strengthening of longevity reserves consists of the owner’s equity contributions in connection with the conversion to a new mortality tari� in 2013, K2013. In the Group’s income statement, the item is classi�ed under changes in insurance liabilities.
Group pro t before amortisation and longevity 405 -91 2,913 1,722
Bu�er capital in % of customer reserves Storebrand Life Group [6]
Amortisation and write-downs of IT-systems are included in operational cost from 2016. Comparative �gures for 2015 are changed, se also note 23 and 29[1]
Amortisation and write-downs of IT-systems are included in operational cost from 2016. Comparative �gures for 2015 are changed, see also note 23 and 29[4]
Continuous monitoring and active risk management are core areas of the Group’s activities and organisation. The basis for risk management is laid down in the Board’s annual review of the strategy and planning process, which sets the appetite for risk, risk targets and overriding risk limits for the operations. In Storebrand Group, responsibility for risk management and internal control is an integral part of management responsibility.
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, identification and assessment of risks, documentation of processes and routines, prioritisation and implementation of improvement measures, and good communication, information and reporting.
The assessment of operational risks is linked to the ability to achieve targets and to implement plans. Operational risk is defined as the risk of financial losses or reduced reputation due to inadequate or the failure of internal processes, control routines, systems, human error or external incidents.
Contingency plans have been prepared to deal with serious incidents in business-critical processes. Storebrand’s control functions also involve people with particular responsibility for controlling operational risk.
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 tariffs, the owner could risk higher charges on the owner’s result in order to cover necessary statutory provisions.
2. Disability – The risk of erroneous estimation of future illness and disability. There will be uncertainty associated with the future development of disability, including disability pensioners who are returned to the workforce.
Pensions when viewed in relation to other risks. In SPP it is possible to change the future premiums for the IF portfolio, reducing the risk significantly. In Norway it is also possible to change the future premiums of group policies, but only for new accumulation, entailing reduced risk.
The Other segment includes the insurance risk at BenCo. BenCo offers pension products to multinational companies through Nordben and
Euroben. The insurance risk at BenCo primarily relates to group life insurance, early retirement pensions and pensions for expatriate employees. These are defined-benefit pensions that can be time-limited or lifelong. Many of the agreements have short durations, typically 5 year early retirement pensions, and the insurance risk is therefore limited.
Savings 1. Group defined-contribution pensions are pensions where the premium is stated as a percentage of pay, while the payments depend on the actual added return. Customers have the option of choosing a guaranteed annual return.
4. Pension certificates are individual contracts with accrued rights that are issued upon withdrawal from or termination of hybrid pension agreements.
6. Paid-up policies (Norway only) are individual contracts with accrued rights that are issued upon withdrawal from or termination of group defined-benefit pension agreements. Holders of a paid-up policy can choose to convert their paid-up policy to a paid-up policy with investment options.
8. Pension certificates are individual contracts with accrued rights that are issued upon withdrawal from or termination of hybrid pension agreements.
10. Health and P&C insurance contracts are group contracts with lump-sum payments for occupational injury insurance, critical illness, child insurance or accident insurance.
Savings 1. Individual unit-linked insurance is endowment insurance or allocated annuity in which the customer bears the financial risk. Related cover can be linked in the event of death.
Insurance 4. Individual P&C insurance contracts are individual contracts with lump-sum payments in the event of critical illness, child insurance, damage to motor vehicle or injury to passengers, combined fire insurance, travel insurance or accident insurance.
A new mortality tariff for group insurance (K2013) was developed in 2014. The tariff is based on three elements: Initial mortality, safety margin and future increase in life expectancy. Initial mortality is determined on the basis of actual mortality in the insurance portfolio in the period 2005–2009. The safety margin will take into account the difference in mortality based on income, random variation in mortality and the company’s margins. The future increase in life expectancy entails that the projected life expectancy is also dependent on the year of birth.
Starting from 2014 group pension insurance schemes in Norway follow the premiums for traditional retirement and survivor coverage in the industry tariff 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.
For individual insurance, the premiums for death risk and long life expectancy risk are based on tariffs produced by insurance companies on the basis of their shared experience. This applies to both endowment and pension insurance. Disability premiums are based on the company’s own experience.
The risk premium for group insurance in Sweden is calculated as an equalised premium within the insurance group, based on the group distribution of age and gender, as well as the requirement for coverage of next of kin. The risk premium for individual insurance is determined individually and is based on age and gender.
In 2016, SPP revised the mortality assumptionsit uses tocalculateinsurance technical reserves. The company’sassumptions arebased on the general mortality tariff DUS 14, adjusted for the company’s own observations.
Tariffs for group life insurance and certain risk insurances within group pensions also depend on the industry or occupation, in addition to age and gender. Group life insurance also applies tariffs based on claims experience. The company’s standard tariff for group life insurance, both for life and disability cover, is based on the company’s own experience.
Insurance risk is monitored separately for every line of insurance in the current insurance portfolio. The development of the risk results is followed throughout the year. For each type of risk, the ordinary risk result for a period represents the difference between the risk premiums the company has collected for the period and the sum of provisions and payments that must be made for insured events that occur in the period. The risk result takes into account insured events that have not yet been reported, but which the company, on the basis of experience, assumes have occurred.
Large claims or special events constitute a major risk for all products. The largest claims will typically be in the group life, occupational injury and personal injury (motor vehicle accidents) segments.
The table below specifies the risk result for the largest entities in the Group and also states the effect of reinsurance and pooling on the result.
The risk result for Storebrand Livsforsikring AS in the table above shows the total risk result before distribution to customers and the owner.
For customer portfolios with a guarantee, the net risk for Storebrand will be lower than the gross market risk. The extent of measures to reduce risk depends on several factors, the most important being the size and flexibility of the customer buffers and level and duration of the return guarantee. If the investment return is not sufficient to meet the guaranteed interest rate, the shortfall may be met by using customer buffers built up from previous years’ surpluses. Customer buffers primarily consist of unrealised gains and additional reserves in Norway (one year’s interest rate guarantee) and conditional bonus in Sweden. Storebrand is responsible for meeting any shortfall that cannot be covered under the interest rate guarantee.
For guaranteed customer portfolios, the risk is affected 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. During 2016, interest rates fell in Sweden, while interest rates ranged from unchanged to slightly higher in
The composition of the financial assets within each sub-portfolio is determined by the company’s investment strategy. The investment strategy also establishes guidelines and limits for the company’s risk management, credit exposure, counterparty exposure, currency risk, use of derivatives, and requirements regarding liquidity.
The market risk is managed by segmenting the portfolios in relation to risk-bearing capacity. For customers who have large customer buffers, investments are made with higher market risk that give increased expected returns. Equity risk is also managed by means of dynamic risk management, the objectives of which are to maintain good risk-bearing capacity and to adjust the financial risk to the buffer situation and the company’s financial strength. By exercising this type of risk management, Storebrand expects to create good returns both for individual years and over time.
The table above shows the currency positions as at 31 December 2016. The currency exposure is primarily related to investments in the
The company hedges most of the foreign exchange risk in the customer portfolios on an ongoing basis. Foreign exchange risk exists primarily as a result of investments in international securities, as well as subordinated loans in a foreign currency to a certain extent. Hedging is performed by means of forward foreign exchange contracts at the portfolio level, and the currency positions are monitored continuously against a total limit. Negative currency positions are closed out no later than the day after they arose. In addition, separate limits have been defined so that active currency positions can be taken. Storebrand employs a currency hedging principle called block hedging, which makes the execution of currency hedging more efficient.
The permitted limit for the bank’s foreign exchange position is 0.50 per cent of primary capital, which is presently approximately NOK 13 million.
There is no interest rate guarantee for premium funds, defined-contribution funds, pensioners’ surplus funds and additional statutory reserves.
The guaranteed interest rate is determined by the insurance company and is used when calculating the premium and the guaranteed benefit.
The guaranteed interest rate does not entail that there is an annual minimum guarantee for the return as is the case in Norway.
If the assets in an insurance contract in the company are smaller than the market value of the liability, an equity contribution is allocated that reflects this shortfall. This is termed a deferred capital contribution (DCC), and changes in DCC are recognised in the profit and loss account as they occur. When the contracts’ assets exceed the present value of the liabilities, a buffer, which is termed the conditional bonus, is established.
Changes in this customer buffer are not recognised in the profit and loss account.
Resultrisk NOK million Share of portfolio SEK million Share of portfolio
As a result of customer buffers, the effect of the stresses on the result will be lower than the combined change in value in the table. As at 31
Based on the stress test, Storebrand Life Insurance has an overall market risk of NOK 4.1 billion, which is equivalent to 2.1 per cent of the investment portfolio.
If the stress causes the return to fall below the guarantee, it will have a negative impact on the result if the customer buffer is not adequate.
Other negative effects on the result are a lower return from the company portfolio and that there is no profit sharing from paid-up policies and individual contracts.
Based on the stress test, SPP has an overall market risk of SEK 2.0 billion, which is equivalent to 2.2 per cent of the investment portfolio.
Equity and bond funds denominated in NOK with foreign currency exposurein i.a. EUR and USD NOK 10.6 billion.[1]
Note 10 – Liquidity risk fi fi fi fi fi cashflows
For covered bonds issued by Storebrand Boligkreditt AS ascribed to the company’s cover pool, an overcollateralization requirement of 109,5 per cent applies.
Sale and operation of real estate 9,067 21 9,089 47 10 37
As a result of group priorities regarding use of capital at Storebrand and a strategic assessment of the future direction of the Group, the
Corporate Market segment at Storebrand Bank is no longer prioritised as a core activity, and will be run down and eventually wound up.
Lending is an asset class that will increase in the coming years for the Storebrand Life Insurance Group to ensure a guaranteed return. In future, fi
The lending portfolio consists of income-generating properties and development properties with few customers and few defaults, and there is comprehensive and complex risk assessment of debtors.
In the retail market, most of the loans are secured by means of home mortgages. There are housing loans amounting to about NOK 26.6 billion with an additional NOK 2.6 billion in unused credit facilities. Total loans and credit facilities in housing are therefore about NOK 29.2 billion.
Customers are evaluated according to their capacity and intent to repay the loan. In addition to their capacity to service debt, customers are checked regarding policy regulations, and customers are scored using a scoring model.
checked regarding policy regulations, and customers are scored using a scoring model.
Ireland and Guernsey (BenCo). Other companies directly owned by Storebrand ASA that are exposed to significant risks are Storebrand
Forsikring AS, Storebrand Helseforsikring AS, Storebrand Asset Management Group and Storebrand Bank Group.
Publicly listed �nancial instruments are valued on the basis of the o�cial closing price on stock exchanges, supplied by Reuters and Bloomberg.
The Group categorises �nancial instruments valued at fair value on three di�erent levels, which are described in more detail below. The levels express the di�ering degrees of liquidity and di�erent measurement methods used. The company has established valuation models to gather information from a wide range of well-informed sources with a view to minimising the uncertainty of valuations.
Level 2: Financial instruments valued on the basis of observable market information not covered by level 1
Level 3: Financial instruments valued on the basis of information that is not observable in accordance with level 2
The types of mutual funds classi�ed as level 3 are discussed in more detail below with a reference to the type of mutual fund and the valuation method. Storebrand is of the opinion that the valuation method used represents a best estimate of the mutual fund’s market value.
Of the fund units, its is primarily private equity investments and property funds that represent the majority at level 3. Moreover, there are also some other types of funds, such as infrastructure funds and micro�nance funds here. The majority of Storebrand’s private equity investments are investments in private equity funds. These fund investments are valued based on the value reported by the funds. Most of the funds report on a quarterly basis, while a few report less often. Reporting typically takes place with a few months’ delay. The most recently received valuations are used as a basis, adjusted for cash ows and possible market e�ects in the period from the most recent valuation until the reporting date. For private equity, the market e�ect is calculated based on the development in value in the relevant index, multiplied by the estimated beta in relation to the relevant index.
Indirect real estate investments are primarily investments in funds with underlying real estate investments where Storebrand’s intention is to own the investments throughout the fund’s lifetime. The valuation of the property funds is carried out based on information received from each fund manager, adjusted for cash ows in the period from the most recent valuation until the reporting date. Estimated values prepared by the fund companies will be used if these are available.
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 2016. The value shortfall is calculated by discounting the di�erence between the agreed margin and the current market price over the remaining duration.
�nal value has been calculated for the end of the 10th year based on market rent and normal operating costs for the property. In the net income stream, consideration has been made to existing and future loss of income due to vacancy, necessary investments and an assessment of the future development in the market rent. The majority of contracts have a duration of �ve or ten years. The cash ows from these lease agreements (contractual rent) are included in the valuations. To estimate the long-term, future non-contractual rental incomes, a forecasting model has been developed. The model is based on historical observations in Dagens Næringsliv’s property index (adjusted by CPI) and market estimates. A long-term, time-weighted average of the annual observations is calculated in which the oldest observations are weighted with the lowest importance. For non-contractual rent in the short-term, the current rental prices and market situation are used.
Total bonds and other xed-income securities 31.12.16 23,337 148,251 249 171,837
– of which derivatives with a negative market value -2,194 -2,194 -3,351
Movements from level 1 to level 2 re ect reduced sales value in the relevant equities and bonds in the last measuring period.
On the other hand, movements from level 2 to level 1 indicate increased sales value in the relevant equities and bonds in the last measuring period.
The valuation of indirect property investments will be sensitive to a change in the required rate of return and the expected future cash ow. The indirect property investments are leveraged structures. The portfolio is leveraged 58 per cent on average.
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.
Securities registered as corporate bonds at level 3 are typical micro�nance funds, private equity debt funds and convertible bonds.
The sensitivity assessment for real estate includes both investments properties and owner occupied properties.
The valuation of property is particularly sensitive to a change in the required rate of return and the expected future cash ow. A change of 0.25 per cent in the required rate of return when everything else remains unchanged will result in a change in the value of Storebrand’s property portfolio of approximately 4.5 per cent. About 25 per cent of the property’s cash ow is linked to lease contracts that have been entered into.
Includes lending to customers/liabilities to �nancial institutions classi�ed at fair value through pro�t and loss[1]
Includes lending to customers/liabilities to �nancial institutions classi�ed at fair value through pro�t and loss[2]
Interest costs for other companies are included in the line «Interest expenses» in the Profit and Loss[1]
Note 16 – Net income analysed by class of financial instrument
Profit on equities and units 1,014 2,690 7,942 11,647 38 11,609 7,076
Operating costs (including maintenance and repairs) relating to real estate that have provided rent income during the period ** -292 -240
Total income real estate 2,304 2,701 * Of which real estate for own use 181 174 ** Of which real estate for own use -42 37
Allocation by company and customers: Total income from real estate 2,304 2,701
Including an income of NOK 189 million related to change in pension scheme for disability- and survivors' pension in 2016[1]
The premiums and content of the defined-contribution pension scheme are as follows: – Saving starts from the first krone of salary.
– Savings rate of 7 per cent of salary from 0 to 12 G (the National Insurance basic amount “G” was NOK 92,576 as at 31 December 2016)
– In addition, 13 per cent of salary between 7.1 and 12 G is saved.
– Savings rate for salary over 12 G is 20 per cent.
In connection with new rules for disability pensions in the Norwegian Occupational Pensions Act, Storebrand altered the disability pension scheme for own employees in Norway effective from 1 June 2016. The survivor coverage associated with the pension scheme came to an end from the same date. These schemes are capitalised as defined-benefit schemes in the accounts. The winding up of this scheme resulted in a reduction in recognised liabilities that has given a profit of NOK 188 million upon derecognition and which reduces the pension costs in the profit and loss account.
“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”.
The pension in the BTP2 agreement (defined-benefit occupational pension that is a closed scheme) amounts to 10 per cent of the annual salary up to 7.5 times the “basic income amount” (which was SEK 59,300 in 2016 and will be SEK 61,500 in 2017), 65 per cent of salary in the interval from 7.5 to 20, and 32.5 per cent in the interval from 20 to 30. No retirement pension is paid for the portion of salary in excess of 30 times the
“basic income amount”. Full pension entitlement is reached after 30 years of membership in the pension scheme. In addition to the definedbenefit part, the BTP plan has a smaller defined-contribution component. Here the employees can decide themselves how assets are to be invested (traditional insurance or unit-linked insurance). The defined-contribution part is 2 per cent of the annual salary.
Institutions (BAO) and the trade unions that are part of BTP.
RECONCILIATION OF PENSION ASSETS AND LIABILITIES IN THE STATEMENT OF FINANCIAL POSITION
PENSION ASSETS ARE BASED ON THE FINANCIAL ASSETS HELD BY STOREBRAND LIFE INSURANCE/SPP COMPOSED AT 31.12: Storebrand Life Insurance SPP
Net pension cost recognised in profit and loss account in the period 22 315
Expected annual increase in social security pensions 2.0 % 2.3 % 3.0 % 3.0 %
ACTUARIAL ASSUMPTIONS: In Norway standardised assumptions on rates of mortality and disability as well as other demographic factors are prepared by Finance Norway.
With effect from 2014 a new mortality basis, K2013, has been introduced for group pension insurance in life insurance companies and pension funds. Storebrand has used the mortality table K2013BE (best estimate) in the actuarial calculations at 31 December 2016.
reduction of the discount rate will in isolation entail an increase in pension liabilities.
– The period’s net pension costs -26% 25% 4% -14% 10% -2% -9%
The Board of Directors of Storebrand ASA has had a special Compensation Committee since 2000. The Compensation Committee is tasked with fi in the Group. The Committee is also an advisory body to the CEO with respect to remuneration arrangements that cover all employees in the fi requirements set forth in the remuneration schemes.
The executive employee remuneration policy established for 2016 has been observed. The annual independent assessment of the guidelines fi 4. STATEMENT CONCERNING THE EFFECTS OF SHARE-BASED REMUNERATION AGREEMENTS ON THE COMPANY AND THE SHAREHOLDERS
The company shall arrange and pay for ordinary group pension insurance common to all employees, from the moment employment fi contribution pension schemes for all employees. This applies both to salaries above and below 12 G (G = the National Insurance base amount).
For the Group’s executive management team, the estimated cash value of the pension rights for salaries in excess of 12G that had already been fi fi the company before the end of this period.
severance package corresponds to the pensionable salary at the end of employment, excluding any bonus schemes. The CEO is entitled to 24 months of severance pay. Other executive vice presidents are entitled to 18 months of severance pay.
In 2017, a limited group with a small number of employees may be covered by an equivalent scheme to the executive management with the compulsory purchase of the company’s shares.
The Group's tax-increasing temporary differences also include temporary differences linked to the Group's investment properties. These properties are primarily found in the
Norwegian life insurance company's customer portfolio and in companies that are owned by holding companies, which in turn are owned by Storebrand Livsforsikring AS. If these limited companies that own the properties were to be sold, they could be disposed of practically tax-free. The tax-increasing temporary differences related to the difference between the fair value and taxable value of investment properties that have arisen during the period of ownership (around NOK 11.1 billion), are included in the Group's temporary differences, on which deferred tax is calculated at a nominal tax rate of 24 per cent. In accordance with IAS 12, no provisions have been set aside for deferred tax related to temporary differences that existed when companies were acquired and the transaction was not defined as a business transfer (basis of around NOK 0.8 billion).
Norwegian life insurance company's customer portfolio and in companies that are owned by holding companies, which in turn are owned by Storebrand Livsforsikring AS. If these limited companies that own the properties were to be sold, they could be disposed of practically tax-free. The tax-increasing temporary differences related to the difference between the fair value and taxable value of investment properties that have arisen during the period of ownership (around NOK 11.1 billion), are included in the Group's temporary differences, on which deferred tax is calculated at a nominal tax rate of 24 per cent. In accordance with IAS 12, no provisions have been set aside for deferred tax related to temporary differences that existed when companies were acquired and the transaction was not defined as a business transfer (basis of around NOK 0.8 billion). 2. In December 2016, the Norwegian Parliament (Storting) agreed to reduce the company tax rate from 25 to 24 per cent with effect from 1 January 2017. It was also agreed to introduce a financial tax that would enter into force from the same date. Therefore, for companies subject to the financial tax, the company tax rate will be continued at the 2016 level (25 per cent). The
Storebrand Group includes companies that are both subject to and not subject to the financial tax. Therefore, when capitalising deferred tax/deferred tax assets in the consolidated financial statements, the company tax rate that applies for the individual Group companies is used (24 or 25 per cent).
Note 29 – Intangible assets and excess value on purchased insurance contracts
rate of return is assumed, etc. It is pointed out that the aim of the calculations is to ensure adequate reliability that the utility value, cf. IAS 36, is not lower than the recognised value in the accounts. Simulation with reasonable, as well as conservative, assumptions indicates a value for the fi
Value of business in force SPP 20 years 5% Straight line 3,501
Applies to subsidiaries with a significant minority, associated companies and joint ventures.
A yield is calculated for each bond, based on both the paper’s book value and the observed market price (fair value). For fixed income securities with no observed market prices the effective interest rate is calculated on the basis of of the fixed interest rate period and classification of the individual security with respect to liquidity and credit risk. Calculated effective yields are weighted to give an average effective yield on the basis of each security’s share of the total interest rate sensitivity.
Real estate for own use 2,863 2,887 4.1 and 7.7 3,1-5,0 59,806
Sale: No further property sales has been agreed on in addiition to the figures that has been finalised and included in the finacial statements as of 31 December 2016.
Required rate of return % [1] Average duration of lease (years) [2]
The average duration of the leases has been calculated proportionately based on the value of the individulal properties.[2]
All of the proporties in Sweden are appraised externally. The appraisal is based on the required rates of return in the market (including 2 per cent inflation)[6]
All of the proporties in Sweden are appraised externally. The appraisal is based on the required rates of return in the market (including 2 per cent inflation)[8]
Allocation by company and customers: Equities and units – company 121 114
Bonds and other fixed-income securities – customers with guarantee 114,680 131,506
Unlike gross nominal volume, the calculation of net nominal volume also takes into account which direction of market risk exposure the instrument represents by di�erentiating between long (asset) positions and short (liability) positions.
NOK million Guaranteed pension Savings BenCo Total Storebrand Group 2016 Total Storebrand Group 2015
FAIR VALUE HEDGING OF THE INTEREST RATE RISK AND CASH FLOW HEDGING OF THE CREDIT MARGIN
Storebrand uses fair value hedging for interest risk. The hedged items are financial assets and financial liabilities measured at amortised cost.
Book value of bonds pledged as collateral for the bank’s lending from Norges Bank 880 651
Securities pledged as collateral are linked to lending access in Norges Bank for which, pursuant to the regulations, the loans must be fully guaranteed with collateral in interest-bearing securities and/or the bank’s deposits in Norges bank. Storebrand Bank ASA has none F-loan in
Of total loans of NOK 27.3 billion , NOK 13.4 billion has been mortgaged in connection with the issuing of covered bonds (covered bond rate) in
therefore has security that is NOK 583 million more than what is committed in the loan programme.
Transferred bonds still recognised on the statement of financial position 402 403
Storebrand calculates Solvency II according to the standard method as defined in the Solvency II Regulations.
Solvency II Regulations using the standard method and include the effect of the transitional arrangement for shares pursuant to Section 58 of the Solvency II Regulations.
The solvency capital largely appears as net assets in the Solvency II balance sheet with the addition of eligible subordinated loans and deducted for own shares and ineligible minority interests. The solvency capital is therefore significantly different to book equity in the financial statements. Technical insurance reserves are calculated in accordance with the standard method and include the effect of the transitional arrangement pursuant to Section 56 (1) – (6) of the Solvency II Regulations. The transitional arrangement entails that the increase in the value of the technical insurance reserves is phased in gradually over a period of 16 years. The composition of solvency capital appears in the table below.
Other subordinated loans (time limited) and risk equalisation reserve are categorised as Tier 2 capital. Tier 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. Eligible minority interests and deferred tax assets are categorised as Tier 3 capital. Tier 3 capital can cover up to 15 per cent of the solvency capital requirement. Tier 3 capital cannot be used to cover the minimum capital requirement.
NOK million Total Tier 1 unlimited Tier 1 limited Tier 2 Tier 3
Subordinated capital for subsidiaries regulated in accordance with CRD IV 2,690
The capital requirement in Solvency II appears as the total of changes in solvency capital calculated under different types of stress, less diversification. The largest part of the capital requirement appears from financial market stress and particularly relates to changes in interest rates and falls in the equity markets, as well as increased credit spreads. There is also the insurance risk, for which the most important capital requirement comes from stress relating to the transfer of existing customers within defined contribution pensions. The solvency capital requirement appears in the table below.
Net primary capital for companies included in the CRD IV report 2,690
Under Solvency II, the capital requirement from the CRD IV companies in the Group is included in accordance with their respective capital requirements. In a multi-sectoral financial group, all the capital requirements of the CRD IV companies are calculated based on their respective applicable requirements, including buffer requirement for the largest company in the Group (Storebrand Bank). This increases the total requirement from the CRD IV companies in relation to what is included in the Solvency II calculation. As at 31 December 2016, the difference amounted to NOK 164 million.
These are transactions that are part of the products and services offered by the Group‘s companies to their customers. The transactions are entered into on commercial terms and include occupational pensions, private pensions savings, P&C insurance, leasing of premises, bank deposits, lending, asset management and fund saving. See note 25 for further information about senior employees.
Net income and gains from financial instruments: – bonds and other fixed-income securities 3 48 33
Statement of changes in equity 1) 449 909 891 shares with a nominal value of NOK 5.[1]
In 2016, 431 334 shares were sold to our own employees. Holding of own shares 31. December 2016 was 1 631 387[3]
Cash and cash equivalents at start of the period 161 82
Insurance benefits, future returns on pension plan assets as well as actuarial estimates of mortality, disability and voluntary early leavers.
Actuarial gains or losses and the effect of changes in assumptions are recognised in other comprehensive income. The effects of changes in the pension scheme are recognised on an ongoing basis, unless the changes are conditional upon accrued future pension entitlements, The effects 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.
Bonds and other fixed income securities are included i the statement of financial position from such time the company becomes party to the instrument’s contractual terms and conditions. Ordinary purchases and sales of financial instruments are recognised on the transaction date.
Storebrand uses fair value hedging, and the hedged items are fixed rate funding measured at amortised cost. Derivatives that fall within this category are recognised at fair value through profit or loss. Changes in the value of the hedged item that relate to the hedged risk are applied to the book value of the item and recognised through profit or loss.
Net income from bonds and other fixed income securities 49 -14 14 48 33
Net income and gains from financial assets at fair value 49 -14 7 41 29
– of which FVO (Fair Value Option) 49 -14 14 48 33
Savings rate of 7 per cent of salary from 0 to 12 G (the National Insurance basic amount “G” was NOK 92,576 as at 31 December 2016)
In connection with new rules for disability pensions in the Norwegian Occupational Pensions Act, Storebrand altered the disability pension scheme for own employees in Norway effective from 1 June 2016. The survivor coverage associated with the pension scheme came to an end from the same date. These schemes are capitalised as defined-benefit schemes in the accounts. The winding up of this scheme resulted in a reduction in recognised liabilities that has given a profit of NOK 9 million upon derecognition and which reduces the pension costs in the profit and loss account.
Employees and former employees who had salaries in excess of 12G until 31 December 2014 were offered 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.
RECONSILIATION OF PENSION ASSETS AND LIABILITIES IN THE STATEMENT OF FINANCIAL POSITION
Including remuneration to the Nomination Committee. The Board of Representatives was disbanded at the Ordinary General Meeting in 2016.[4]
Net deferred tax asset/liability in the statement of nancial position 236 317
In December 2016, the Norwegian Parliament (Storting) agreed to reduce the company tax rate from 25 to 24 per cent with e�ect from 1
January 2017. It was also agreed to introduce a �nancial tax that would enter into force from the same date. Therefore, for companies subject to the �nancial tax, the company tax rate will be continued at the 2016 level (25 per cent).
Since Storebrand ASA has activities within Section K – Financial and insurance activities (as de�ned in the Norwegian Standard Industrial
Note 8 – Parent company’s shares in subsidiaries and associated companies
NOK million 0-6 months 6-12 months 1-3 years 3-5 years Total value
Storebrand ASA had as per 31 December 2016 liquid assets of NOK 2.2 billion.
Storebrand ASA has an unused drawing facility of EUR 240 million.
Statement of financial position items: Due from group companies 891 511
The summary shows the number of shares owned by the individual, as well as his or her immediate family and companies where the individual exercises significant influence, confer the Accounting Act, Section 7-26.
The consolidated �nancial statements have been prepared in accordance with the EU-approved International Financial Reporting Standards
(IFRS) and the associated interpretations, as well as the other disclosure obligations stipulated in the Norwegian Accounting Act that must be applied as at 31 December 2016. The annual �nancial statements for the parent company have been prepared in accordance with the
In the best judgment of the Board and the CEO, the annual �nancial statements for 2016 have been prepared in accordance with applicable accounting standards, and the information in the �nancial statements provides a fair and true picture of the parent company’s and Group’s assets, liabilities, �nancial standing and results as a whole as at 31 December 2016. In the best judgment of the Board and the CEO, the annual report provides a fair and true overview of important events during the accounting period and their e�ects on the annual �nancial statements for Storebrand ASA and the Storebrand Group. In the best judgement of the Board and the CEO, the descriptions of the most important elements of risk and uncertainty that the group faces in the next accounting period, and a description of related parties’ material transactions, also provide a true and fair view.
A capital requirement is calculated for credit risk, market risk and operational risk. The individual asset items and o�-balance-sheet items are a assigned a risk weight based on the estimated risk they represent. The capital requirement is 8 per cent of the calculation basis for credit risk, market risk and operational risk.
�nancial institutions. In order to be eligible as primary capital, tier 2 capital cannot exceed core (tier 1) capital. Perpetual subordinated loan capital, together with other tier 2 capital, cannot exceed 100 per cent of core (tier 1) capital, while dated subordinated loan capital cannot exceed 50 per cent of core (tier 1) capital. To be fully eligible as primary capital, the remaining term must be at least �ve years. If the remaining term is less, the eligible portion is reduced by 20 per cent per annum.
In group de�ned contribution pensions the premium is stated as a percentage of pay, while the payments are unknown. The customer bears all the �nancial risk during the saving period.
Life insurance o�ering an investment choice, whereby the customer can in uence the level of risk and return by selecting in which funds assets are to be invested. Applies to both individual policies and group de�ned contribution pensions.
Contracts involving a single payment in the event of attaining a speci�ed age, death or disability.
The �nancial result consists of the net �nancial income from �nancial assets or the group portfolio (group and individual products without investment choice) less the guaranteed return. In addition, there is the net return on the company capital, which consists of equity and subordinated loans. Any returns-based fees for asset management are included in the �nancial result.
An instalment loan is a loan on which the borrower makes regular partial repayments of principal in equal amounts throughout the repayment period. The borrower pays the sum of a �xed instalment amount and a reducing interest amount at each instalment date. Payments accordingly reduce over the life of the loan assuming a �xed interest rate.
Interest rate swaps/asset swaps are agreements between two-parties to exchange interest rate terms for a speci�ed period. This is normally an agreement to exchange �xed rate payments for oating rate. This instrument is used to manage or change the interest rate risk.
Interest rate options can be related to either bond yields or money market rates. The purchase of interest rate options related to bonds (also known as bond options) confers a right (but not an obligation) to buy or sell bonds at a pre-determined price. Interest rate options can be used as a exible instrument for the management of both long and short-term interest rate exposure.
Storebrand ASA eier 25,1 prosent og total eierandel for Storebrand er 100 prosent av AS Værdalsbruket.[2]