Storebrand Filipstad Brygge 1 P O Box 1380 Vika No-0114 Oslo Norway
Storebrand Helseforsikring AS, Swedish branch office Rålambsvägen 17 P O Box 34242 S-100 26 Stockholm Sweden www.storebrandhalsa.com
HEAD OFFICE: OTHER GROUP COMPANIES: FINANCIAL CALENDAR FOR STOREBRAND 2006 15 February: 4th quarter results 2005 3 May: AGM 4 May: Ex dividend 10 May: 1st quarter results 2006 10 August: 2nd quarter results 2006 1 November: 3rd quarter results 2006
Storebrand Life Insurance’s objective is to be the most respected and customer focused life insurance company in
C o n ce p t an d d e sig n : C o b ra.
– including young people. If today's 20-year-old retires at age 67, his or her pension will be almost 20% lower than for someone retiring today.
2 Message from the CEO 3 Key figures 4 Corporate market strategy 12 Retail market strategy 20 Corporate social responsibility 26 Report of the Board of Directors 34 Shareholder matters 36 Corporate governance 40 Financial performance and business development 40 – Highlights 43 – Life insurance 48 – Asset management 50 – Banking 52 – Other activities 53 – Value drivers 53 – Financial risk management
100 Auditor’s report for 2005 101 Storebrand Group companies 102 Terms and expressions 104 Storebrand’s management
Our objective is to be the leading and most respected institution in the Norwegian market for long-term savings and life insurance. 2005 demonstrated Storebrand’s ability to deliver this objective. We demonstrated our competitiveness by winning a number of major and important contracts. At the same time, we received awards for our reporting on corporate social responsibility and our work on policies for older employees.
The market research surveys we carry out every year show that many people are not fully aware of the financial consequences of changes in their life situation. Major changes in the pension system with the introduction of mandatory employers’ occupational pensions will help to ensure that more people have some savings for the future. There is, however, still an important need to improve the general level of awareness of the financial implications of retirement, illness and disability. We expect to see significant growth in the Norwegian savings and insurance market as people move towards making better arrangements in this respect.
• Productivity for core processes: High quality must be combined with low error rates and short processing times. Experience from other sectors shows that there is still considerable room for improvement.
• Effective distribution: We aim to make our own distribution channels more effective and develop more productive interaction between all the distribution channels we use, as well as building value-added partnerships with external distributors.
Storebrand’s competitiveness. We look forward to a new and important year during which our market will undergo the most extensive changes since the launch of the
I had a lot of questions about mandatory employers’ occupational pensions. Do seasonal workers have to be included? How long have we got to set something up? The best thing for employers would be an ‘out of the box’ standard product – something we could buy without having to get involved in too much paperwork.
product. The concept behind Folkepensjon is to make a complicated product as simple as possible, without compromising on quality. Company owners who do not want to get involved in understanding all the new rules for mandatory employers’ pensions simply need to tell us how many employees their company has, their national insurance number and current salaries – and we can give them a complete solution. An employers’ pension scheme that is simple to set up and manage is precisely what companies are looking for.
Storebrand won a number of major mandates in 2005. ISS, with 10,000 employees, chose
Kommunal Landspensjonskasse (KLP). Storebrand enjoyed its best year ever in 2005 for transfers of group pension business, with a net inflow (sales notified) of over NOK 4 billion. The main part of these reserves will be included in Storebrand’s accounts from 2006.
A winner on quality. Customer-adapted solutions, good customer service and a commitment to the quality of its products and asset management are important reasons for Storebrand’s success in 2005. For the second year in a row, Storebrand received the highest score in the
Life Insurance. The strength of Storebrand as an asset manager was confirmed in 2005 when
Storebrand Investments won one of the largest mandates ever put out to open competition in the
Gjensidige Forsikring chose Storebrand to manage the main part of its investment portfolio of around
pensions will increase annual premiums in the pensions market by at least NOK 3 billion. In Autumn 2005 Storebrand adapted its organisation to meet the requirements of the new market for mandatory
occupational pensions. Storebrand has developed a new standardised product, Storebrand Folkepensjon, that is specifically designed for small companies facing the new mandatory pension requirements in 2006.
Storebrand customer centre or over the Internet, and is very easy for companies to manage.
Storebrand’s financial advisers for the corporate and retail markets form the basis for marketing the
COMPANIES WITH 440,000 EMPLOYEES ARE NOW COVERED BY TRADE ASSOCIATION AGREEMENTS WITH STOREBRAND
At the same time, an increase in the number of corporate customers will bring significant growth in assets under management.
Insurance Activities Act and related regulations are due to come into force on 1 January 2008. The new legislation will cause extensive changes, but
Storebrand’s preparations are well underway. The objective of the new Act is to create greater pricing predictability and transparency, as well as making a clearer division between policyholders’ funds and the insurance company’s own funds.
In future, pricing will be final and premiums will be paid in advance. This means that the current profit sharing between policyholders and the insurance company will largely come to an end. The various aspects of pensions must be priced separately, and the insurance company’s charges must be included in the premiums quoted.
There are, at the moment, no requirements for municipalities or other members of the Association of
Around 30 municipalities invited tenders, and eight of these decided to transfer away from KLP. Øvre
Eiker, Sola, Frogn, Lier and Skodje, representing almost 80% of the pension assets to be transferred, chose Storebrand. In addition, Fjell municipality has appointed Storebrand to manage its pension scheme. Storebrand now provides occupational pension products for 35 municipalities.
100 municipalities have now chosen a pension supplier other than KLP. The differences in market share between the various pension suppliers in this market are expected to even out over time. The public sector pension market looks likely to increase in future years as a number of public sector entities that currently arrange pensions through the Public
Storebrand Life Insurance’s portfolio of public sector pension customers grew by
the private and public sectors to place greater emphasis on health and safety in the working environment
Norwegian insurer to launch a new product in 2005 offering lower disability premiums for businesses that focus on HSE. The new product has two elements – enhanced health insurance from Storebrand
Health insurance secures access to treatment and can reduce the period of absence considerably. The product is available to companies that have entered into a
measures, as well as training and education. In addition, Storebrand offers health insurance and HSE advice for municipalities and other public sector entities.
Storebrand’s products are marketed through Swedish brokers and financial advisers who account for more than 50% of sales of such products in the Swedish market. Storebrand’s Swedish distributors also contributed their knowledge of the Swedish market to the development of the products now offered. The branch has already attracted its first customers, and has been well received as an exciting newcomer. The products are based on Norwegian rules, which offer greater security for the customer and better transfer rights.
The Swedish occupational pensions market saw a resumption in growth in 2005. Sales of traditional life insurance products were 17% higher in Q3 2005 than in the same period of 2004, and sales of funds products were 3% higher. The downward trend in traditional life insurance now seems to have reversed thanks to more favourable conditions in the financial markets, allowing traditional life insurance companies to improve their solidity and report good investment returns.
of new insurance policies from 2007. Storebrand’s products for the Swedish market already offer unrestricted transfers. The Swedish government also introduced a “traffic light system” for Swedish life insurance companies to encourage companies to be more aware of the financial risks associated with pension portfolios. The new rules will force companies with low solidity to reduce their exposure to equities. This will impose significant restrictions on companies with mutual ownership unable to raise new capital. Given its capital base, Storebrand Life Insurance will be seen as a strong alternative in this competitive area of the
New special purpose company in Sweden for personal injury insurance. Storebrand launched a new special purpose company in Sweden in 2006 for personal risk products such as industrial injury and sickness insurance. The company targets large
The decision to incorporate this company in Sweden rather than Norway reflects the more suitable legislation and operating requirements for these types of insurance in Sweden. Policyholders will be part-owners of the new company, and will share in profits if claims are lower than expected. This means that the company ’s customers will have largely the same commercial interest as Storebrand in producing a satisfactory profit. The launch of this new insurance company is a good example of Storebrand’s commitment to listening to its customers and finding innovative solutions to their requirements.
Growing markets. Following a decline from 2000 to 2002 as a result of turbulent stock markets, the market for long-term savings is growing again. The individualisation of this market as a result of the shift to defined contribution pension schemes and the modernisation of social security have both contributed. Mandatory employers’ pensions will increase awareness of the need for personal savings, further creating growth going forward.
Retail customers preferred savings products with protection against loss of capital, in 2005 end sales of structured and guaranteed savings products were strong. Savings invested in equity funds reduced in 2005, and many people have failed to benefit from the strong increase in share prices, particularly in the Norwegian market, over recent years. Sales of equity funds showed an upturn in the last quarter of 2005, pointing to stronger sales in the future.
The market for life insurance and health insurance has grown over recent years, but at a more moderate pace than expected. We are still in a relatively immature market, where many people’s priority is to insure their house, car, boat and other valuables rather than themselves and their family.
The need for greater take-up of life and health insurance gives good reason to expect growth going forward. Charts on the following page show the performance of important elements of the market for long-term savings and life insurance.
Stronger position. Storebrand has offered lifeinsurance products to help people build their savings and protect their income since 1861. With its 144 years of experience, the company has developed expertise, systems and procedures that make Storebrand one of the bestknown brands in the Norwegian financial sector and a specialist in the long-term management of financial wealth. However, the fact that only a relatively small proportion of the population associate Storebrand with long-term savings and life insurance represents a challenge for the company. Storebrand has therefore committed considerable resources to promoting its brand, improving customer awareness and improving
The commitment to developing brand awareness has been successful. The choice of media, the message, the format, and the presentation has brought Storebrand closer to being seen as the leading and most respected institution in the
Growth in customer numbers. Storebrand’s strong position in the corporate market and its success in attracting new customers through banking products helped to increase the customer base in 2005. By the close of 2005,
Storebrand’s focus on the retail market, combined with the introduction of mandatory employers ’ pensions, will lead to further growth in the group’s customer base. This makes it important for
Storebrand to improve its understanding of its customers in order to build loyalty and increase the average number of Storebrand products each customer buys. This involves using analytical tools for cross-selling and customer retention activities, and will help to ensure both greater customer satisfaction and higher per customer revenue.
Financial advisers offering a complete personal advisory service, numbered almost 120 in
2005 saw continuing focus on developing their expertise, with particular emphasis on mutual funds products and investment advice. Specialist training in this area was arranged for many of the funds products advisers so that they can give better advice. In addition, specialist banking and insurance advisers were appointed in 2005 to meet the need for advice to customers and employees of companies where Storebrand manages the occupational pension scheme. The experience to date has been so encouraging that Storebrand intends to make further appointments both centrally and regionally in 2006.
to Storebrand’s marketing campaign. The combination of easy access and a high standard of service and advice is reflected in improving customer satisfaction levels. Storebrand sees this as clear evidence that skilled and customer-oriented staff generate good customer relations, satisfied customers and higher sales. Sales through the direct channel in 2005 were higher for all product areas.
Storebrand’s commitment to the retail market. The objective has been to increase the scale of external distribution through higher sales by existing distributors as well as attracting new distributors.
Storebrand increased the number of external customer advisers selling its products by approximately 500 in 2005, due in part to a new distribution agreement with Fokus Bank which now offers annuity and individual pension savings products solely from Storebrand. Through extensive training and follow up of Fokus Bank’s employees,
Storebrand offers lending and other banking services through this real estate broker’s chain of offices.
Storebrand has expanded its agreements with a number of existing distributors, and built up its own organisation to service growth in sales through external channels. This will ensure Storebrand’s continuing competitive strength in external distribution. 2005 was the best year ever for sales through external distributors for all product areas, and represents a very strong starting point for 2006.
Storebrand. This channel was expanded in 2005, and now has 21 agencies with 34 financial
The fund attracted NOK 275 million of capital in Q4 2005, giving it total assets approaching NOK 900 million. The fund, known as Storebrand
Storebrand also launched a new money market fund in mid-September 2005 known as Storebrand
IN 2005 WE APPOINTED SPECIALISED BANKING AND INSURANCE ADVISERS. EXPERIENCE FROM USING
Ring eiendomsmegling collaborates with Storebrand to offer mortgage financing and other banking services on competitive terms. Ring operates 30 real estate offices throughout Norway.
Improved efficiency delivers results. The retail market unit put particular emphasis on customer focus and cost efficient operations in 2005.
Banking operations focused on realising gains from work on the credit approval process for retail customers, resulting in 25% improvement in efficiency so far, and shorter processing times.
Storebrand’s commitment to SRI resulted in the company being nominated for the Brooklyn Bridge’s
We shall create and secure value, but are not indifferent to how this is achieved. In order to realise our vision, it is important to consider those affected by our activities. We therefore apply principles of corporate responsibility to all our activities.
WE MEASURE OUR PERFORMANCE BY Status 2004 Status 2005 Targets 2006
Customers Percentage of problem-free customer enquiries via internet 97.8% 98.2% 98%
Answer 80% of all telephone calls within 20 seconds 80% 85.9% 80%
Customer satisfaction – retail market (scale 0-100) 62 (all customers) 61 68
Better complaints procedures across the entire group Work started In progress Completed
Customers Storebrand Life Insurance maintains its position as one of the global Among the Among the Among the leaders on SRI in the insurance industry global leaders global leaders global leaders
Investment return from Storebrand Global SRI relative to benchmark index +1.49% – 0.61% Better than benchmark
Environmental and social responsible criteria included in Further credit approval processes Target established In progress development
Launch a new HSE product New target In progress Launch 2005
Absence due to illness as an average annual percentage 4.1% 4.8% Max. 4%
Society as Financial support for charities and other social measures NOK 3.5 mill. NOK 3.2 mill. No target set a whole Employee satisfaction with choice of charity partners 77% (2003) 88% 80%
Use Max Havelaar coffee at the head office New target Introduced Introduce in 2005
Suppliers Environmental and social responsibility standards for suppliers Work started In progress Standards introduced
Society as Energy consumption at head office 331 kwh/m2 278 kwh/m2 Reduce by 7%
a whole Energy consumption at managed properties 266 kwh/m2*** 248 kwh/m2 Reduce by 5%
Waste sorted by type – tenants of managed properties 37% 37.7% 50%
Monitor and quantify internal paper consumption, set targets for reduced use (head office) 56 251 kg In progress Reduction targeted
Microfinance is a natural extension of our involvement in SRI. 2005 was the UN International
Consortium works to make financing available for local business development in poor countries. The
Storebrand launched a module based management development program in 2005 for all the group’s managers.
Storebrand shall have a good balance between men and women at all levels of the organisation.
Storebrand also participates in an external mentor program, and runs a board director training program for female employees. Storebrand’s target is 40%
female representation in management, as well as on internal and external boards of directors. Women now make up 50% of the members of the board of directors elected by shareholders, and 37.3% of
Storebrand also insists that external recruitment consultants put forward both male and female candidates on shortlists for management recruiting. In addition, Storebrand introduced in 2005 the following text in all external recruitment advertising: “We are committed to diversity, and encourage applications from all qualified candidates regardless of age, gender, disability or cultural background”.
Employees over 60 years are able to reduce their working hours to 80% on 90% of salary, and employees are encouraged to work beyond the normal retirement age. Storebrand received the “Senior
Policy, which works to promote the role of seniors in working life and society.
Storebrand will hold a stakeholder conference in 2006. This is held every second year to get feedback and ideas on our work on a new CR action plan. Representatives from our most important stakeholder groups are invited; customers, employees, shareholders, suppliers and other representatives of society at large.
MAIN FEATURES The Storebrand group is made up of three business areas: Life Insurance, Asset Management and Banking. The group offers a comprehensive range of products for long-term savings and life insurance. Storebrand carries out the major part of its business activities in Norway, and its head office is in Oslo. It has in addition established life insurance, asset management and health insurance activities in Sweden.
Storebrand Life Insurance opened a branch office in Sweden in September 2005.
A revised version of the Norwegian Code of Practice for Corporate Governance was published on 8 December 2005. Storebrand will review the revised Code in 2006.
The Board looks back on 2005 as a year of sound growth in business volume and strong sales performance. In the retail market, this related principally to individual endowment products. In the corporate market, 2005 was a good year for business in both the private and public sectors. The company’s long-term focus on the public sector occupational pensions market led to a strong inflow of new customers and sizeable growth in assets under management. With the help of competitive terms on its lending products and the introduction of free banking, Storebrand Bank successfully created a more prominent position in the market and attracted an increasing number of customers. At year-end, Storebrand took over management of the major part of Gjensidige Forsikring’s investment portfolio. This is the largest asset management mandate ever made available for open competition in the Norwegian market.
EARNINGS PERFORMANCE With effect from 2005, the Storebrand group prepares its consolidated accounts in accordance with the EU-approved International Financial Reporting Standards (IFRS). The accounts of the holding company, Storebrand ASA, continue to apply Norwegian generally accepted accounting principles (NGAAP). The Storebrand group reports an operating profit of NOK 4,728 million for 2005 as compared to NOK 4,541 million for 2004. Group profit before tax and changes to security reserves was NOK 1,442 million as compared to NOK 2,545 million in 2004. Excluding the contribution to group profit from If Skadeförsäkring in 2004, the comparable group profit for 2004 was NOK 974 million. Earnings per share, based on the average number of shares outstanding, amounted to NOK 5.41 in 2005 and NOK 8.53 in 2004.
The holding company Storebrand ASA reports a pre-tax profit of NOK 1,009 million as compared to NOK 2,360 million in 2004 which included a gain on the sale of shares in If Skadeförsäkring of NOK 1,925 million.
The Storebrand Life Insurance group reported operating profit for 2005 of NOK 4,382 million as compared to NOK 2,985 million in 2004. Of the profit for the year, NOK 3,215 million was allocated to policyholders and NOK 1,167 million to the owner. The owner’s profit for the year includes NOK 168 million from products not subject to profit sharing with policyholders. Additional statutory reserves were strengthened by NOK 950 million in 2005 to stand at NOK 4,538 million at the start of 2006. The level of additional statutory reserves is equivalent to the guaranteed return for approximately one year. These reserves allow the company greater flexibility in managing its investment portfolio, and strengthen its ability to weather turbulent conditions in the financial markets.
Storebrand Life Insurance achieved a satisfactory investment return in 2005. The booked investment return was 6.9% and the value-adjusted return including current financial assets was 7.5%. Unrealised gains on current financial assets amounted to NOK 3,683 million at the close of 2005, representing an increase in unrealised gains for the year of NOK 1,150 million. The equivalent gains on bonds held to maturity totalled NOK 3,573 million, representing a reduction of NOK 640 million. The capital ratio at 31 December 2005 was 10.9%.
Storebrand’s 50% interest in Storebrand Helseforsikring generated group profit of NOK 5 million in 2005 as compared to NOK 4 million for 2004. Storebrand Helseforsikring reported higher sales in 2005.
The insurance companies have prepared their accounts in accordance with the Norwegian accounting regulations for the annual accounts of insurance companies. The business area reports a consolidated profit on this basis of NOK 1,163 million for 2005 as compared to NOK 946 million for 2004. The equivalent profits restated in accordance with IFRS would be NOK 1,217 million for 2005 and NOK
Asset management activities. Storebrand Investments implemented measures in 2005 to strengthen its range of mutual funds and fixed-income products. To emphasise
Leiv L. Nergaard (61), senior adviser, Norsk Hydro ASA, MBA, member of the Board’s Remuneration Committee
Mette K. Johnsen (61), Assistant Vice President Finance, Wallenius Wilhelmsen Lines, MBA
quality and make the product range as simple and straightforward as possible, Storebrand Investments is working to reduce the number of funds that it offers. 2005 was a very successful year for new institutional business. At the close of the year, Storebrand took over responsibility for managing the major part of Gjensidige Forsikring’s investment portfolio, around NOK 23 billion. In addition to the assets managed directly by Storebrand, the asset management area also took over operational responsibility for customer-managed funds totalling NOK 8 billion, bringing the total mandate to over NOK 30 billion.
Asset management reported an overall pre-tax profit of NOK 24 million for 2005 as compared to NOK 47 million for 2004. Weaker investment returns from international equities caused a reduction in performance-based fee income in 2005. Continuing close attention to costs and lower performance -based salary payments as a result of weaker investment performance explain the 16% fall in total costs
Banking activities. 2005 was a satisfactory year for Storebrand Bank in terms of both its competitive position and its financial results. Work continued in 2005 to rationalise the bank’s operations, reduce its cost base, builddown the non-strategic part of the loan book, and secure and reduce loss-exposed lending. Measures were also introduced to help realise the bank’s growth targets. Free retail banking and significantly more competitive terms on mortgage lending are important factors in the business growth now being generated. The lending portfolio increased by NOK 2.6 billion in 2005 to NOK 26.8 billion.
The bank has experienced weaker lending margins. This reflects increasing competition on margins for mortgage lending and the bank’s general refocus towards the retail market. This makes continued growth whilst achieving further reductions in the relative cost level essential. Net interest income as a percentage of average total assets fell from 1.69% to 1.60% in 2005, while the ratio of costs to total income fell from 83% to 63% in 2005.
Non-performing and loss-exposed lending fell by NOK 236 million from 1 January 2005 (following the introduction of IFRS) and totalled NOK 754 million at year-end.
Storebrand ASA reported pre-tax profit of NOK 1,009 million for 2005 as compared to NOK 2,360 million in 2004. The profit reported for 2004 included a gain of NOK 1,925 million on the sale of shares in If Skadeförsäkring. Income from investments in subsidiaries amounted to NOK 1,027 million, an increase of NOK 383 million from 2004.
Storebrand ASA has applied the same accounting principles (NGAAP) as in previous years. The proposed dividend of NOK 1,011 million therefore reduces equity capital at 31 December 2005. In the consolidated accounts, which are prepared in accordance with IFRS, the proposed dividend for 2005 will not reduce equity capital until it has been approved by the 2006 AGM.
run-off activities recognised NOK 7 million to profit from statutory security reserves.
Insurance policies are long-term agreements, and involve uncertainty in respect of assumptions about future rates of mortality and invalidity. The life insurance company uses tariffs based on historical statistical data notified to the authorities. The company follows developments in mortality and invalidity rates very closely, and adjusts its reserves in accordance with these trends.
Grace Reksten Skaugen (52) Consultant, MBA and Ph.D., member of the Board’s Audit Committee
The group’s equity fell by NOK 1,034 million in 2005 to stand at NOK 9,278 million at year-end. The minimum capital requirement imposed by the authorities is 8%. The group’s capital ratio was 11.2% at 31 December 2005, with a core capital ratio of 7.8%.
The group’s capital base, which consists of equity, subordinated loan capital, the market value adjustment reserve and additional statutory reserves, amounted to NOK 21.2 billion at 31 December 2005 as compared to NOK 20.4 billion at the end of 2004.
A number of measures were introduced in 2005 that were not included at the outset of the two-year action plan. This included a group-wide policy for all investments, investment in a microfinance initiative, and entering into a collaboration agreement with the Centre for Corporate Citizenship at the Norwegian School of Management.
Storebrand was awarded a prize in 2005 for the best company report on CSR. Storebrand continued to qualify for inclusion in the sustainability indices FTSE4GOOD and Dow Jones Sustainability Index in 2005.
Environment: Storebrand is committed to reducing its impact on the environment. This includes measuring the group’s consumption of water, reducing energy consumption and paper usage, sorting waste and recycling all electronic equipment. In addition, Storebrand sets environmental standards for the management of its properties, and is in the process of including environmental and social responsibility requirements in contracts with suppliers.
Storebrand’s holding of forest land at Værdalsbruket is certified in accordance with the Living Forest standard.
Human recources and organisation: Employment in the group totalled 1,295 full time equivalent positions at the year end as compared to 1,224 at the start of 2005. Employment is virtually equally split between male and female employees. The average age of the group’s employees is 44 years, with an average length of service of 13 years. All Storebrand employees are treated equally, regardless of gender, age, disability, faith, cultural differences or sexual orientation.
Skills and training: It is crucial for Storebrand’s future success that it retains and develops the expertise and skills of its employees. Training requirements are agreed and documented through the performance appraisal process, and managers are committed to actively monitoring the development of their employees. Storebrand launched a modular-based management development program in 2005 for all the group’s managers.
Gender equality/diversity: Storebrand has implemented targeted measures over many years to increase the number of women in senior management, producing improvements in many areas. Storebrand has set an ambitious target for 40% female representation among its management staff and on its internal and external boards of directors. Following the election of a new member to the Board of Directors of Storebrand ASA in 2005, 50% of the members of the Board elected by shareholders are female. 37.3% of Storebrand’s managers are female.
Storebrand insists that external recruitment consultants put forward both male and female candidates when shortlists are prepared for the recruitment of managers. Storebrand produces salary statistics at specified management levels to facilitate the comparison of salaries between male and female employees.
Absence due to illness: As a participant in the “More inclusive working life” scheme, Storebrand has worked systematically since 2002 to reduce absence due to illness, which was 4.8% in 2005. Figures for short-term absence and long-term sickness are stable, but the incidence of absence due to illness for periods between 16 days and 8 weeks showed some increase in 2005.
Storebrand did not incur any reported personal injury, property damage or accidents of significance in 2005.
CORPORATE GOVERNANCE Storebrand established its policy on corporate governance in 1998. The Board reviews and revises this policy annually. A Norwegian Code of Practice for Corporate Governance
was published in December 2004. Storebrand meets the recommendations set out in the Code in all major respects.
Changes in the membership of Storebrand’s corporate bodies in 2005 were as follows: Board of Directors: Birgitte Nielsen was elected as a new member of the Board to replace John Giverholt who had been a member since 2003.
Election Committee: Finn Jebsen and Stein Erik Hagen retired from the Election Committee. Dag J. Opedal and Johan H. Andresen jr. were elected as new members.
Control Committee: There were no changes to the membership of the Control Committee in 2005.
Given this attractive growth Storebrand expects increasing competition with the risk of downward pressure on pricing. The group is well prepared for such a challenge. In the corporate market, Storebrand combines maintaining and strengthening its existing customer relationships with effective sales activity in new segments of the market. In the retail market, Storebrand will continue to strengthen its brand image as well as increasing the effectiveness of its distribution and sales.
Increasing competition means that Storebrand’s focus on productivity and operational efficiency will continue with undiminished vigour. Greater efficiency will improve competitiveness and the cost/income ratio. Storebrand will also continue its work on adapting and optimising the
group’s capital structure. Efficient use of capital allows the group to maintain a capital structure that ensures it can take advantage of growth in business volumes.
APPLICATION OF STOREBRAND ASA’S PROFIT FOR THE YEAR Storebrand ASA recorded a profit for 2005 of NOK 1,008.7 million. The company’s dividend policy aims for stable year-on-year growth in dividend per share. The policy is also intended to contribute towards giving shareholders a competitive return and optimising the company’s capital structure.
Share capital and shares. Shares in Storebrand ASA are quoted on the Oslo Stock Exchange (Oslo Børs). Share capital at the start of 2005 was NOK 1,390.9 million. Following a resolution passed by the extraordinary general meeting held on 14 September 2005, the share capital was reduced in November 2005 by cancelling 19,655,637 own shares. Following this, share capital at 31
The annual general meeting held on 20 April 2005 granted a mandate for the company to buy back up to 10% of its own shares. Storebrand has used this mandate, and at 31 December 2005 the company held 5,878,000 of its own shares, equivalent to 2.27% of total share capital. The company has not issued any options that could dilute share capital.
Shareholders. With 27,730 shareholders from almost all the municipalities in Norway and from 40 countries, Storebrand ASA is the seventh largest company listed on the OSE by this measure. Storebrand has traditionally had many shareholders who hold fewer than one round lot of shares (200 shares). In order to offer an additional service to this shareholder group, combined with the company's wish to reduce the number of shareholders with fewer than 200 shares,
Storebrand ASA has given its employees the opportunity to participate in a share purchase scheme. The object of the scheme is to involve employees more closely in the company's value creation. Employees were again offered this opportunity in March 2005, when each employee was offered the opportunity to buy 118 ordinary shares at NOK 50.59 per share. 51% of employees participated, purchasing 74,812 shares. Note 9 provides information on shares held by senior management.
No. Of ordinary shares at 31.12 (1,000) 258 526 278 181 278 070 277 715 277 554
State Street Bank & Trust NOM*) 10 647 280 4.12 USA
On a sale of shares, the opening value/purchase price of the shares will be adjusted by the total of the RISK amounts during the period of ownership. The RISK amount as at 1 January 2006 is estimated at NOK –4.30 per share. New Norwegian tax rules on dividends will first apply to dividends received in the 2006 tax year.
Investor Relations. Storebrand places great importance on comprehensive and efficient communication with financial markets. Maintaining a continuous dialogue with shareholders, investors and analysts both in Norway and internationally is a high priority. The group has a separate investor relations unit responsible for establishing and co-ordinating contact with analysts, the stock exchange, shareholders, investors and others.
Some of the most important elements of corporate governance for Storebrand are illustrated as follows: This article provides information on major features of the group's structure and its management. Certain aspects of corporate governance are dealt with elsewhere, including financial risk management (page 53-55), shareholder matters (page 34) and corporate social responsibility (page 20–25).
Storebrand launched its principles for corporate governance in 1998. In December 2004, a broadly based working group published a Norwegian Code of Practice for Corporate Governance. As a natural consequence of its own corporate governance principles
The Code of Practice takes into account international developments and other national codes, but is built upon national considerations such as Norwegian legislation and practice. The rules of Oslo Børs make it compulsory for listed companies to issue an annual statement of practice in accordance with the Norwegian Code of Practice for Corporate Governance.
Directors of Storebrand ASA and the Election Committee. Further information can be found in the final section of this article.
Meeting (AGM) no later than the end of June each year. The 2005 AGM was held on 20 April. All shareholders of known address receive written notice of the AGM by post, sent out no later than 14 days before the AGM. The notice calling the meeting includes supporting papers for all resolutions to be considered by the meeting.
(the “Board”) has nine members, each elected for a two-year term of office so that half the members retire each year. Six members are elected by the Board of Representatives after considering recommendations made by the Election Committee.
The CEO of Storebrand ASA (the “Group CEO”) is not a member of the Board. None of the members elected by the Board of
Representatives have any employment, professional or consultancy relationship with the group other than their appointment to the Board. CVs for the members of the Board are provided on pages 27–29 and on our website. The Board of Storebrand ASA
The Board carries out an annual appraisal of its work, which is made available to the Election Committee for consideration in their work. The members of the Board and Board committees do not receive incentive-based consideration, but do receive a fixed annual fee plus additional payments if more than 11 board meetings are held in a year. The shareholder-elected members of the Board are not members of the company's pension scheme. Further information on fees, shareholdings and loans to members of the Board can be found in notes 4 and 14 to the accounts.
Committee and an Audit Committee. Each comprises two shareholder elected and one employee elected board member. This helps to ensure thorough and independent attention to matters such as financial reporting and the remuneration of senior employees.
The Remuneration Committee monitors the remuneration of the group’s senior managers, and assists the Board in setting terms and conditions for the Group CEO. The Remuneration
The Audit Committee held five meetings in 2005, where the external and internal auditors participated. The Group CFO
AGM. The committee is independent of the company's Board and management. Members are elected for a two-year term of office. The Control Committee is responsible for ensuring that the entire group conducts its activities in a prudent and proper manner, and this includes collaborating with the control committees of the group companies. The committee ensures that the group adheres to all relevant legislation and regulations, and that it operates in accordance with the Articles of
The company’s employees elect an observer to the committee, who participates as a full member in making recommendations for the election of the Chairman of the Board of Directors. The
Annual programs for internal audit work are determined by the boards of the group companies, based on the auditor’s recommendations and a risk evaluation carried out by the group’s senior management. Internal audit produces quarterly reports for the boards. Reports from special investigations initiated by internal audit or management in respect of possible breaches of ethical rules are immediately reported to the chairman of the
Deloitte has been elected by Storebrand ASA’s general meeting as the company's external auditor. The Board of Storebrand
ASA has appointed KPMG as the company's internal auditor. The other companies in the group used the same external and internal auditors as Storebrand ASA.
Internal management bodies. Storebrand operates a management structure with particular emphasis on life insurance.
This means that the Chairman of the Board and Group CEO are respectively the Chairman and Managing Director of Storebrand
The Board has issued a written mandate setting out the management responsibilities of the CEO of Storebrand ASA. The
CEO’s role does not give rise to any conflicts of interest.
The group’s management and monitoring of the business areas takes place largely through the subsidiaries’ board meetings.
Storebrand’s value-based management system. The management system is central to the internal audit function and is intended to ensure a relationship between targets and actions at all levels of the group and the overall objective of value creation. The system is based on a balanced scorecard where the four dimensions of finance, customers, processes and skills/growth reflect both short-term and long-term value creation in the group.
Each business area carries out an annual strategy and planning process used to produce a rolling three-year plan for the group, including detailed targets, strategies and budgets. The Board of
Risk evaluation and internal control reporting form an integrated part of the strategy and planning process. The management teams work actively to identify areas of risk and measures
to promote the company's strategy and objectives. This work is summarised in an internal control report submitted to the
Compass, provides management and the Board with monthly reports on financial and operational performance relative to approved targets. The system highlights parameters that fall short of targets so that appropriate measures can be implemented.
Management through group-wide policies and internal guidelines. Group-wide policies have been approved for the following functions in the Storebrand Group: accounting, finance and risk management, investor relations, corporate communications, branding, IT, human resources and legal services.
Further information on Storebrand's Corporate Governance can be found at www.storebrand.no/ir, including information on members of Storebrand's corporate bodies, the company's
THE GROUP’S STRATEGIC DEVELOPMENT Strong growth for the Norwegian economy. Norges Bank reported on the performance of the Norwegian economy in 2005 in its Financial Stability Report1. The central bank concluded that the economy is enjoying an upturn, driven by low interest rates, high oil prices and high prices for Norwegian exports.
This report should be read in conjunction with the information provided in the Directors’ Report, the consolidated accounts and notes to the accounts. Further information on the accounts and notes to the accounts for subsidiaries can be found in the subsidiaries’ annual reports.
Average number of shares (in million) 258.6 272.9 277.9 277.7 277.6
Operating costs as % of policyholders' funds **) 1.06% 0.90% 0.96% 0.92% 0.88%
Value-adjusted investment return (excl. unrealised gains on hold to maturity bonds) 7.52% 7.17% 8.82% 1.91% 1.51%
Volume of non-performing and loss-exposed loans 754 909 1 717 2 362
Loan loss provisions as % of non-performing and loss-exposed loans 64% 62% 49% 35%
Ratio of retail/institutional clients by external funds under mgmt. (%) 20 / 80 26 / 74 17 / 83 16 / 84 17 / 83
Key themes for Storebrand’s strategic development over the next few years will be growth, productivity and capital efficiency.
Holding AS og Norden Personförsäkring AB in December 2005, a new special purpose company in Sweden for personal risk products such as industrial injury and sickness insurance. Operations started in 2006, and the target customer group is large companies.
Storebrand has a strong position in asset management for institutional customers, particularly for long-term insurance and pension fund assets. Focus in this area produced good growth in 2005, including a successful bid to manage around NOK 23 billion of Gjensidige Forsikring’s investment portfolio.
Storebrand brand in the retail market and promoting sales-generating dialogue. The main objective was to improve the visibility of the Storebrand brand and encourage greater public interest in savings and life insurance. Further information on the marketing campaign can be found on page 15.
Productivity. Storebrand’s growth objectives, combined with improved operational efficiency, will create the basis for more cost-effective operations. Storebrand is experiencing intense competition and downward pressure on margins in a number of its business areas. This is expected to continue, and the company is continually taking steps to improve efficiency. In 2004
The target for the bank was to achieve a cost/income (C/I) ratio of 55%. The bank's C/I ratio for 2005 was 63%, down from 84% in 2004. The target for the asset management activities is to achieve a C/I ratio of under 75%. This area reported a C/I ratio of 96% in 2005, up from 88% in 2004, due to amongst others weak investment performance from the international share portfolio which caused a significant reduction in performance-related fees.
The target announced for Storebrand ASA (the holding company ) was a reduction in annual operating costs of NOK 50 million from the level at the start of 2004. Operating costs for 2005 were NOK 113 million, in line with costs at the start of 2004.
The target announced for Storebrand Life Insurance was for costs expressed as a percentage of policyholders' funds to be 0.7% by the close of 2007. A project to identify and implement measures to meet this target was launched in 2005. At the same time the company took steps to expand its business, of which products for mandatory occupational pensions, increased sales to the retail market, greater focus on promoting the Storebrand brand and a new business focus on Sweden were the most important areas. In addition, Storebrand expects more customers to consider changing from defined benefit to defined contribution pensions in the future. These factors have caused Storebrand to recognise the need for a more relevant and better target than the efficiency target published in 2004. Work was carried out in autumn 2005 to analyse the main challenges in the life company's value chain and to produce an overall plan to prioritise measures to tackle the main challenges identified.
FINANCIAL OBJECTIVES FOR THE GROUP Storebrand has published financial objectives for the group and for each business area. This provides the basis for setting targets for each department and employee. Storebrand has communicated its financial objectives to the market. The objectives represent a sound and efficient use of capital with growth in profitability and dividends. All the group's financial objectives were achieved in 2005, well ahead of the original schedule (close of 2007).
GROUP STRUCTURE AND MANAGEMENT REPORTING The chart below shows the legal structure of the group’s main subsidiaries, which is also the basis for the group’s accounting structure: In addition to the presentation of consolidated profit and loss on page 56, the group result can be analysed by business area as shown in the above table.
Skadeförsäkring in 2004, the comparable group profit for 2004 was NOK 974 million. Earnings per share, based on the average number of shares outstanding, amounted to NOK 5.41 in 2005 and NOK 8.53 in 2004. Life insurance and banking both reported improved profits in 2005. Further information on the business areas can be found on pages 43–52.
(RoE) of 17.1% in 2005. Storebrand has made plans for the next few years to continue to achieve the profitability target of 15%
ROE going foward. Achieving the expected levels of sales and portfolio growth are important elements in this respect, together with the successful implementation of measures to create a more effective capital structure and to achieve the efficiency targets described above.
Figures for 2004 are based on IFRS. Figures for 2001–2003 are based on NGAAP. *) Includes NOK 1,571 million of profit contribution from If Skadeförsäkring in 2004.
The above table shows key figures for the group’s capital situation. The reduction in capital adequacy reflects the implementation of planned and previously announced measures to improve the group's capital efficiency, together with increased investments in the life insurance company in higher capital weighted assets.
has recommended that the 2006 AGM should approve a dividend payment for 2005 of NOK 4 per share, representing a total distribution of NOK 1.0 billion, of which the dividend from the year's ordinary operations accounts for NOK 1.50 per share.
The 2005 AGM authorised the Board to buy back up to 10% of the company’s own shares in the period up to the 2006 AGM.
TAXATION The Storebrand group’s effective tax charge for 2005 was 3%.
Storebrand’s tax charge is affected by a number of factors that cause the tax rate to differ from the normal rate of 28% for
In view of the group’s sizeable tax losses carried forward and the low tax rate expected for the life insurance activities in normal financial market conditions, it is unlikely that Storebrand will pay any tax for several years. For further information, see note 05 to the annual accounts on page 69. The group has net negative timing differences between accounting and tax values of around NOK
NOK 0.4 billion. The book value of deferred tax is therefore NOK
LIFE INSURANCE ACTIVITIES MARKETS AND STRATEGY Building on a strong position. The Norwegian pensions market is changing rapidly. The reform of state national insurance pensions, deregulation of public sector pensions and the introduction of compulsory employers’ pension schemes will create new market opportunities and challenges. Storebrand Life
Insurance’s core business. Storebrand Life Insurance’s objective is to be recognised by customers as the most respected and customer focused life insurance company in Norway.
Storebrand’s competitive position was confirmed by the number of major new customers that it won in 2005, as well as the high level of customer satisfaction reported by the Norsk
Storebrand Bank ASA: **) Capital ratio 10.4% 13.8% 12.3% 11.4% na
Core capital ratio 8.2% 11.6% 9.8% 8.8% na *) Net debt ratio is debt minus liquid assets divided by assets minus liquid assets **) Storebrand Bank AS and Finansbanken ASA were merged in 2003. Comparable historic figures for the new bank have only been produced for 2002.
ance accounted for 70% of Storebrand's policyholders’ funds at 31 December 2005, while individual pensions and life insurance products represented 30% of total policyholders’ funds. In terms of profit to the owner, group pension insurance contributed 59%, personal life insurance products contributed 32%
Folkepensjon policy is very easy to set up and manage, either through a Storebrand customer centre or over the Internet.
In addition, Storebrand has significantly strengthened its competitive position through agreements with trade associations and a number of external distributors. The company has also signed a distribution agreement for occupational pension products with a number of savings banks and commercial banks. Storebrand's financial advisers in the Retail Market unit will also work on sales of the Folkepensjon product.
Norwegian insurance companies are not currently able to prepare their accounts in accordance with IFRS. Except as otherwise stated, the following comments apply to accounting figures prepared in accordance with Norwegian accounting legislation and accounting regulations for insurance companies.
NOK 1,166 million, including NOK 168 million from products not subject to profit sharing. The good result to policyholders means that pensions currently in payment and fully paid-up pension policies will increase. After IFRS effects of NOK 54 million, Storebrand Life Insurance produced a pre-tax profit of NOK
1,221 million equivalent to 25% return on equity in 2005, in line with 2004 and 2003.
(including interest costs on subordinated loan capital) and the guaranteed return on policies. Average guaranteed return on insurance policies in 2005 was 3.6%. Risk result arises as a consequence of the incidence of mortality and disability during the period differing from that assumed for the premium tariffs.
Administration result shows the difference between the administration premium charged and actual operating costs.
Growth in premium income. Storebrand Life Insurance’s total premium income for 2005, excluding policy transfers, was NOK
15,293 million in 2004. The lines of business showing the largest percentage growth were non-life insurance (for example critical illness and child insurance), individual annuity/pension insurance and individual endowment insurance with increases from 2004 of 43%, 19% and 8% respectively. Group pension insurance premium income was in line with 2004, while group life insurance showed a decline of 4%.
Storebrand Life Insurance produced a satisfactory investment return in 2005. The booked investment return for 2005 was 6.9%, as compared to 6.4% for 2004. The value-adjusted return on current asset investments was 7.5% as compared to 7.2% in 2004. The value adjusted return including bonds held to maturity was 6.9% in 2005 as compared to 7.6% in 2004. At the close of 2005 unrealised gains on current asset investments totalled NOK 3,884 million, while unrealised gains on bonds held to maturity totalled NOK 3,573 million. The overall increase in unrealised gains in 2005 was NOK 511 million.
Risk result. The risk result for 2005 was NOK 363 million as compared to NOK 206 million in 2004. The increase of NOK 157 million reflects increases of NOK 192 million for group pension insurance, NOK 32 million for group life insurance and NOK 19
funds that act as risk capital to absorb price fluctuations in the investment portfolio. These strengthened by NOK 950 million in 2005 to stand at NOK 4,358 million at the start of 2006. This combined with the strength of risk management systems ensures that Storebrand Life Insurance is again well equipped to generate a good expected investment return in 2006.
Insurance’s policy to make efficient use of risk capital in order to increase the expected investment return for its policyholders. The company accordingly increased its equity exposure over the course
ANALYSIS OF RESULTS BY CLASS OF INSURANCE STOREBRAND LIVSFORSIKRING AS (NGAAP)
Group Group Group Individual Individual Non-life pension pension life endowment pension insurance Total Total Total
Net reinsurance etc. –56 0 –18 –4 1 –7 –84 –104 –69
Operating expenses –608 –70 –66 –376 –187 –48 –1 354 –1 039 –995
Administration result –126 –1 –12 –108 –55 –29 –330 –137 –149
Transferred to policyholders' funds –3 215 –2 019 –1 839 -net return on share capital** 491 409 334 -risk margin earned by owner's equity 47 46 46
Profit/loss for the year 1 167 963 835 *) Adjusted to show analysis of results as if subsidiaries were recognised in the accounts by the gross method rather than the equity method. **) Includes: Security reserve, subordinated loan capital, book equity and liability items.
of 2005 from 21% to 23%. Hedging programs were again used for the equity portfolio in 2005 to limit the effect on risk capital in the event of a sudden sharp fall in equity markets.
A large proportion of the company’s unrealised gains on bonds arises from the portfolio of government and government guaranteed bonds held to maturity. The hold to maturity portfolio represented 28% of total investment assets at the close of 2005, with an average duration of around 5 years and an average effective yield of 5.5% on book value. The high stable return the portfolio generates for policyholders helps to ensure that the yield
Storebrand Life Insurance can be expected to produce is relatively robust to continuing low interest rates levels.
FINANCIAL RESULTS FOR OTHER LIFE INSURANCE ACTIVITIES Storebrand Fondsforsikring AS. Storebrand Fondsforsikring AS
Storebrand Helseforsikring reported an operating profit of NOK 10.4 million for 2005 and a pre-tax profit of NOK 0.6 million as compared to NOK 7.0 million and NOK 0.2 million respectively in 2004.
RISK CAPITAL* AS % OF POLICY- HOLDERS' FUNDS EXCLUDING ADDITI- ONAL STATUTORY RESERVES
from 2004 to 2005, and totalled NOK 138 million for 2005. Of the growth in premiums earned for own account, growth in Norway was 21% and growth in Sweden was 29%.
EUROPEAN EMBEDDED VALUE Embedded Value (EV) is defined as the net present value of future profits to the owner from existing business, including the value of shareholder surplus. Embedded Value does not include the net present value of future new business. The method used is based on accepted actuarial principles, and follows the new standard for
Forum. This standard imposes requirements for more consistent and transparent reporting by the insurance industry, in particular the valuation of financial options and guarantees associated with insurance products, and a more realistic cost of capital.
Storebrand has issued a separate document on the company’s results for European Embedded Value. This document can be downloaded from www.storebrand.no/ir.
640 million. Lower long-term interest rates in 2005 and the resulting downward revision of the assumption for long-term yield increased the cost of financial options and guarantees to a total of NOK
1,158 million. However a good investment return in 2005, economic variances and assumption changes have an overall positive effect and increased Embedded Value by NOK 236 million.
7. Equity and property 8. Equity and property *) Change in market value of Storebrand Fondsforsikring's underlying customer funds not considered
Tax** –112 –130 –232 *) Relates to Storebrand Livsforsikring **) Relates to Storebrand Fondsforsikring
Sensitivity analysis: The sensitivity analysis shows the effect of changes in assumptions on the Embedded Value of
Storebrand Life Insurance and Storebrand Fondsforsikring so that defined contribution and defined benefit pensions can be offered from the same company. It seems likely that this change will come into effect sometime in 2006.
As an overall rule, the new legislation requires that premiums must be fixed and paid in advance. This will largely put an end to the allocation of profit between the life insurance company and its policyholders for important product areas. Various elements of pension products must be priced separately, and pricing must include the insurance company's remuneration.
Currently there is no specific premium for the interest rate guarantee and it is paid for through the allocation of profit between the life insurance company and its policyholders.
• Risk premium: The customer will receive any surplus from the risk result achieved on insurance cover for death, disability and dependants in the pension policy, but the insurance company will, in principle, be responsible for meeting any deficit on risk result. There is, however, provision for up to half of any surplus to be held on a risk equalisation fund. Subsequent deficits can then be met out of the equalisation fund before the insurance company is required to contribute from its own equity.
For individual policies in place prior to the new legislation, as well as existing paid-up policies and policies that become paid-up, the new legislation will cause a transition to a modified profit-sharing model. The maximum percentage of profits that can be allocated to the owner will be reduced from 35% to 20%, but the owner will receive all the return on the proportion of balance sheet capital that does not belong to policyholders. The same rules described above will apply to risk result and administration result.
New opportunities: investment choice, separating collective portfolios and long-term contracts. At present,
The new legislation will also make it possible for group pension policies to be divided into sub-portfolios with different management criteria. Policies with a low interest rate guarantee and high risk capital (additional statutory reserves and unrealised gains) may therefore be managed with a higher equity component, and so achieve a higher expected return or a lower premium for the interest rate guarantee.
The legislation also permits a longer-term policy. The interest rate guarantee has so far been linked to a single financial year, but it will now be possible to agree a guaranteed return for a longer period. The premium for a guaranteed return over a number of years will be lower than for annual guarantees over the same period. The employer's liabilities must still be supported by sufficient insurance reserves, and any shortfalls in premium reserves due to a low return in a particular year will have to be met by transfers from the customer's premium fund or risk capital reserve, or alternatively by the insurance company.
ASSET MANAGEMENT ACTIVITIES MARKETS AND STRATEGY Internationally recognised asset manager. Storebrand
offering products that are competitive in both the domestic and international markets.
Strong sales to institutional customers. A separate unit of investment advisers works closely with major institutional customers to develop customised investment strategies that meet the customers’ financial objectives, investment time horizon and risk profile. 2005 was a very good year for Storebrand
At the close of 2005, Storebrand took over management of the major part of Gjensidige Forsikring’s investment portfolio, around NOK 23 billion of investments. The company also took over operational responsibility for customer-managed funds totalling
Storebrand takes a clear stand on how it invests, and the group has a firm commitment to socially responsible investment (SRI). On 18
October 2005, Storebrand celebrated the 10th anniversary of its involvement in this area. At the same time the company expanded its SRI policy to include four new investment criteria, excluding 70 companies from its investment portfolios from 31 December 2005.
FINANCIAL RESULTS FOR 2005 Storebrand’s asset management activities produced an overall pretax profit of NOK 24 million in 2005 as compared to NOK 47 million in 2004. The year-on-year reduction of NOK 23 million reflects weaker investment returns on funds and portfolios with performance -based fees and lower volume-based fees as a result of If taking its assets back into its own management in 2004.
Decline in revenue. Total revenue fell by 23% in 2005. Fixed volume-based revenue showed little change. Rising prices in the
Lower costs. Total costs fell by 17% in 2005. The decline in costs mainly reflects lower performance-based salary payments as a result of weaker investment performance. Continuing focus on costs led to a reduction of NOK 16 million in operating costs, representing a cost saving of 8%. Despite this, the overall cost/income ratio increased from 88% in 2004 to 95% in 2005 against the background of lower revenue. The company’s objective is to reduce its cost/income ratio to under 75% by 2007. Total operating costs were equivalent to 0.13% of average assets under management in 2005 as compared to 0.17% in 2004.
the total Norwegian market for personal investment in equity funds (including unit linked) showed a net withdrawal in 2005 of
BANKING MARKETS AND STRATEGY A modern bank. Storebrand Bank is a modern and ambitious commercial bank for private individuals and selected segments of the corporate banking market. The bank aims to be seen as a bank that is easy to relate to, with competitive products and prices. Storebrand Bank had total assets of NOK 29 billion at the close of 2005. The bank’s objective is to build a stronger and more visible presence in the Norwegian banking market through closer collaboration with Storebrand’s other business areas.
Storebrand Bank supports Storebrand’s overall strategy of being a leading financial institution for savings and insurance by building good customer relationships with a broad range of attractive customers. The bank’s products play a central role in developing customer relationships through regular contacts and a good understanding of individual customers’ personal finances. Competitively priced banking products help to increase customer interest in Storebrand and create opportunities for cross selling.
Bank operates in the corporate market as a niche bank for real estate investors and developers in Oslo and the surrounding area, with total corporate banking assets of around NOK 9.5 billion. The bank offers financial products and services only to companies in its defined geographic area. The focus on real estate financing is based on the bank’s particular expertise in this area and the earnings potential it represents for the bank as a whole.
Storebrand Bank reported a profit for 2005, with clear improvements in important areas. The bank has increased its lending portfolio in strategic areas, costs continue to fall, and non-performing and loss-exposed loans have been reduced further. The bank has good capital adequacy and liquidity.
NOK 450.6 million. This represents a net interest margin calculated on average total assets of 1.60%. Net interest income improved in 2005, mainly as a result of increased lending.
Other income. Other income totalled NOK 102.4 million. This represents a natural decline from 2004 due to the sale to Storebrand
LOAN PORTFOLIO AND PROVISIONS. Gross customer lending increased by NOK 2.7 billion in 2005, equivalent to 11.3%. If the figures are corrected for the sale of Finansbanken AS (Denmark), growth in lending was NOK 3.6 billion. Growth in lending was principally to the retail market and was largely the result of the introduction of free banking for routine banking services and better interest rates on large loans with good security. The bank further reduced its portfolio of non-performing and loss exposed loans, while strategic corporate lending showed sound growth.
SESSED. The volume of non-performing loans on which impairment has been identified reduced in 2005. The value of nonperforming and loss exposed loans on which impairment has been identified was NOK 641.1 million at year end, an overall reduction of NOK 301.8 million since 1 January 2005 (following the introduction of IAS 39). The net value of non-performing and loss exposed loans on which impairment has been identified after individual write-downs was NOK 251.5 million at the close of 2005, equivalent to 1% of gross lending. Under the previous accounting regulations, non-performing and loss exposed loans on which impairment had been identified totalled NOK 853.8 million at 31 December 2004.
CAPITAL ADEQUACY. Storebrand Bank group’s primary capital amounted to NOK 1,958 million at the close of 2005, and the parent bank had primary capital of NOK 1,951 million. This represents a capital ratio of 10.4% (10.4% for the parent bank) and a core capital ratio of 8.2% (8.2% for the parent bank). The bank reduced its primary capital by NOK 399 million in 2005. A
more efficient capital base combined with improving earnings will help the bank to generate a significantly stronger return on equity in future periods.
OTHER ACTIVITIES Other activities principally comprise Storebrand ASA, Fair Forsikring and the run-off activities of Storebrand Skadeforsikring.
STOREBRAND ASA (HOLDING COMPANY). The following table shows the profit before tax of Storebrand ASA in accordance with IFRS. The statutory accounts of Storebrand ASA
are prepared in accordance with Norwegian accounting legislation and NGAAP and can be found on page 88. Storebrand ASA
70 million due to the reversal of previous write-downs. Secondly, interest expenses was considerably lower following repayment of the exchangeable bond. Finally, Storebrand ASA has significant unrealised gains on its shares in Steen & Strøm.
FAIR FORSIKRING AND THE RUN-OFF ACTIVITIES OF STOREBRAND SKADEFORSIKRING. Following the sale of
Fair Forsikring, established in 1998, sells non-life insurance in the Danish market. Storebrand ASA announced on 19 December 2005 that it had reached agreement to sell its 50% interest in Fair
Forsikring at DKK 425 million, and will give Storebrand a pre-tax gain in its consolidated accounts of around NOK 40 million.
Storebrand’s share of the profits of Fair amounted to NOK 22 million for 2005 as compared to NOK 14 million for 2004.
Skadeförsäkring. Storebrand Skadeforsikring and Oslo Re generated an operating profit of NOK 19 million in 2005 as compared to a loss of NOK 16 million in 2004.
**) Including elimination of dividends/group contributions from subsidiaries and gains from sale of If Skadeförsäkring
MONITORING VALUE DRIVERS – STOREBRAND’S VALUE-BASED MANAGEMENT SYSTEM Storebrand’s strategic planning process brings together targets, action plans, reporting and employee remuneration, as described in the article on corporate governance on pages 36–39.
Storebrand also monitors the group’s performance in relation to defined value drivers. This lets the Board and management identify trends at an early stage, implement measures and focus on long-term value creation.
The expected return on the investment portfolio is calculated on the basis of asset allocation and the expected return on each 2005 Performance
Profit from products not subject to profit-sharing (NOK million) 168 Very good
Growth in investment management fees from external clients last year (Storebrand Investments) (NOK million) (28) Room for improvement
6) Both retail and corporate customers. Measured in terms of new customer numbers. 7) From brand position market research in November 2005.
asset class based on historic return, expected risk premium and forward prices. Expected return for the next few years is between
The company’s risk capital is the total of the market value adjustment reserve, statutory additional reserves, core capital in excess of the regulatory minimum and accrued earnings. Risk exposure is monitored using stress tests that estimate potential loss in the event of extreme market movements. Storebrand ensures that it meets all regulatory requirements such as capital ratio and solvency capital ratio by a comfortable margin. The
This combination allows a good control of the life insurance company 's total exposure to financial risk.
Life insurance policies are long-term commitments, and there are risks associated with the assumptions made about life expectancy and disability. Premiums paid by policyholders and the investment returns achieved may therefore not be sufficient to meet the payments guaranteed in the future. Mortality, disability and other insurance risks are monitored by using actuarial analyses, including stress testing the existing portfolio of policies. The company has arranged reinsurance cover for death and disability risk in the event of unexpectedly large losses or a large number of losses caused by a single event.
Where investment returns are higher, the proportion of surplus allocated to the owner is limited by the profit-sharing model already communicated to the market.
Following the introduction of the new Insurance Activities Act, expected in 2008, part of the portfolio will be subject to a modified profit-sharing model. For other parts of the portfolio, the profit-sharing model will in principle cease to apply.
published a report dated 9 December 2005 on transitional capital adequacy requirements for Norwegian insurance companies in the period 2007-2009. The report considers alternatives to the capital adequacy regime known as Basle I currently in force (due to be replaced by Basle II for banks from 1 January 2007) for the period leading up to the introduction of the harmonised
This requires insurers’ liabilities to be discounted using the risk-free interest rate and assets to be subject to a stress test.
Introducing such a regime in Norway involves challenges related to the size of the Norwegian government bond market, integration with other financial markets, interaction with the new
Real estate is an asset class with higher return than current interest rates, but where the risk of loss or depreciation is higher than for government bonds. Other alternative investment classes include infrastructure and natural resources (forestry, commodities etc.). Storebrand currently has small investments in such assets, but is looking at possibilities for increasing alternative investments with higher long-term return.
The group’s asset management activities are structured into a number of specialist teams so that each team concentrates solely on taking advantage of investment opportunities in a specific area, subject to clearly defined investment criteria and risk limits.
Performance, risk exposure and investment profile are continuously monitored. In addition, the co-variance of the teams’
A separate team is responsible for managing market risk. This team’s duties include currency hedging, program trading, hedging transactions, SRI criteria and liquidity transactions. The structure permits more efficient use of resources and greater control over active risk positions in the group’s investment portfolio.
Credit risk in banking. Storebrand places great importance on maintaining close relationships with its corporate customers and monitoring credit risk, and has credit review policies in place. A
The Basle Committee has proposed changes to the regulations for calculating minimum capital requirements for banks from 2007. Storebrand has initiated a project to evaluate the changes required, and is preparing changes to internal systems for calculating and monitoring credit risk and operational risk.
*) RCU describes the effect of the stresstest on risk capital
Net income and gains from financial assets at fair value: – shares, equity derivatives and other equity investments 17 6 016.5 5 645.7
– bonds, interest rate derivatives and other fixed-income securities 17 1 512.8 1 154.6
Net income from bonds at amortised cost 17 2 409.9 2 492.0
Changes in security reserves etc. – non life insurance 3.2 11.7
Reinsurers' share of technical insurance reserves 33 2 395.5 2 804.8
Due from customers and other current receivables 6 306.6 4 117.0
Financial assets at fair value: – Shares and other equity investments 19,23 39 589.1 28 311.3
– Life insurance assets with investment choice 19,25 5 719.4 4 476.4
Premium and claims reserves – non life insurance 33 2 992.1 3 396.9
Net receipts/payments – loans to and claims on other financial institutions 153.7 –921.5
Net receipts/payments – deposits from Norges Bank and other financial institutions –687.2 2.4
Net receipts/payments – securities in the trading portfolio: Shares and other equity investments –7 447.6 –6 606.6
Receipts from issue of bond loans and other long-term funding 3 007.6 3 612.5
Net movement in cash and cash equivalent assets –1 189.1 1 194.9
Cash and cash equivalent assets at start of the period 6 957.8 5 762.9
Cash and cash equivalent assets at the end of the period 5 768.7 6 957.8
Note 2: Profit and loss account Storebrand group 2004 and 2003 in accordance with NGAAP page 67
Note 24: Bonds, bond funds and other fixed-income securities page 78
Note 25: Assets in life insurance with investment choice page 78
The consolidated accounts of Storebrand ASA are prepared in accordance with the EU-approved International Financial
and companies where Storebrand ASA has the power to exercise a controlling influence. A controlling influence is normally achieved where the group owns, directly or indirectly, more than 50% of the shares in a company and the group has the power to exercise control over the company. Minority interests are included in the group’s equity capital.
The acquisition method of accounting is used to account for the purchase of subsidiaries. No acquisitions were made in the period. Investments in associated companies (normally investments of between 20% and 50% of the associated companies’
Straight-line depreciation is applied over the following periods: Properties 15-50 years
Investment properties are valued at fair value. Fair value is assessed at each reporting date. Changes in value are recognised to profit and loss. Each investment property is valued separately by discounting the future net income stream by the appropriate yield requirement for the investment in question.
Excess value arising from the acquisition of business activities that cannot be allocated to specific asset or liability items at the date of acquisition is classified as goodwill in the balance sheet.
Goodwill is not appreciated, but is tested annually for impairment. If the discounted cash flow in respect of future earnings from the unit to which goodwill is allocated is lower than the book value of the unit, goodwill is written down to fair value.
Storebrand has both insured and uninsured pension arrangements. The insured scheme is insured with Storebrand
Livsforsikring AS (Storebrand Life Insurance), which is a company in the Storebrand group. Premiums paid in respect of Storebrand employees are therefore eliminated from consolidated premium income.
Deferred tax and deferred tax assets are calculated on the basis of differences between accounting and tax values of assets and liabilities. Deferred tax assets are recorded in the balance sheet to the extent it is considered likely that the group will have sufficient taxable profit in the future to make use of the tax asset.
In accordance with IAS 10 that addresses events after the balance sheet date, proposed dividend is classified as equity until such time as the general meeting approves the dividend payment.
The accounting standard IFRS 4 addresses the accounting treatment of insurance policies. The Storebrand group’s insurance policies fall within the scope of the standard. The accounting reserves required in respect of insurance policies are the subject of specific Norwegian legislation and are in accordance with IFRS 4.
Premium income. Net premium income comprises premium amounts that fall due during the year, transfers of premium reserves and premiums on reinsurance ceded. Accrual of premiums earned is made through allocations to the premium reserve in the insurance fund.
The premium reserve in the insurance fund is reduced/increased at the same date. The premium reserve transferred includes the policy ’s share in additional statutory reserves, the market value adjustment reserve and the year’s profit. Transferred additional statutory reserves are not shown as part of premium income but are reported separately as changes in insurance reserves. Transfer amounts are classified as current assets/liabilities until such time as the transfer takes place. Interest arising in the time taken to complete transfers is recognised as part of the item ‘other insurance related income and expenses’.
Technical insurance reserves – life insurance. The accounting standard for insurance policies (IFRS 4) requires the use of a so-called sufficiency test to determine whether insurance reserves are sufficient. This test has not caused any changes to the size of the technical insurance reserves.
In the case of individual account policies with flexible premium payments, the total policy value is included in the premium reserve. The premium reserve is equivalent to 100% of the guaranteed surrender/transfer value of insurance policies prior to any charges for early surrender/transfer and the policies’ share of the market value adjustment reserve.
Premium fund/deposit fund. The premium fund contains premiums prepaid by policyholders as a result of taxation regulations for individual and group pension insurance and allocated profit share. Credits and withdrawals are not booked through the profit and loss account but are taken directly to the balance sheet.
Security reserve. The security reserve is a statutory reserve to cover unexpected insurance risks. The calculations are made by an actuary in accordance with regulations published by
Premium reserve and claims reserve. The premium reserve is a reserve for unearned premiums in respect of the unexpired risk period, and is a reserve against claims not yet incurred. The claims reserve is a reserve for expected claims that have been notified but not settled. The reserve also covers expected claims for losses that have been incurred, but have not been reported at the expiry of the accounting period. The reserve includes the full amount of claims reported but not paid. A calculated provision is made in the reserve for claims incurred but not reported
Recognition and derecognition. Financial assets and liabilities are included in the balance sheet from such time as Storebrand becomes party to the instrument’s contractual terms and conditions. Normal purchases and sales of financial instruments are booked on the transaction date. When a financial asset or a financial liability is first recognised in the accounts, it is valued at fair value plus, in the case of a financial asset or a financial liability that is not a financial asset or a financial liability at fair value through profit and loss, transaction costs directly related to the acquisition or issue of the financial asset or the financial liability.
If a market for a financial instrument is not active, fair value is determined by using valuation techniques. Such valuation techniques make use of recent arm’s length market transactions between knowledgeable and willing parties where available, reference to the current fair value of another instrument that is substantially the same, discounted cash flow analysis, and options pricing models. If a valuation technique is in common use by participants in the market and this technique has proved to provide reliable estimates of prices actually achieved in market transactions, this technique is used.
Impairment of financial assets. In the case of financial assets that are not recognised at fair value, consideration is given on each balance sheet date to whether there are objective signs that the value of a financial asset or a group of financial assets is impaired.
If there is objective evidence that impairment has occurred, the amount of the loss is measured as the difference between the asset’s book value and the present value of estimated cash flows
• at fair value through profit or loss in accordance with the fair value option (FVO),
– the financial assets form part of a portfolio that is managed and evaluated on a fair value basis.
A significant proportion of Storebrand’s holdings of financial instruments are classified in this group.
The accounting treatment is equivalent to that for hold to maturity instruments.
Hold to maturity investments. “Hold to maturity investments ” are non-derivative financial assets with fixed or determinable payments and fixed maturity that the company has the intention and ability to hold to maturity, with the exclusion of: - assets that are designated at inception as assets at fair value through profit and loss - assets that are defined as loans and receivables.
Loans and receivables. “Loans and receivables” are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market, with the exception of such assets that the company intends to sell immediately or in the short term that are classified as available for sale and such assets that the company designates at inception as assets at fair value through profit and loss.
Loans and receivables are valued at amortised cost using the effective interest method. Assets in this group relate principally to loans made by Storebrand Bank and unlisted securities held by Storebrand Life Insurance.
Hedge accounting is principally relevant to the interest rate hedging of fixed rate funding and lending carried out by
Storebrand Bank. In view of the unified principles for measuring hedged items and hedging instruments in the other parts of the group, this hedging reflects the group’s ordinary valuation rules.
Market value adjustment reserve. Net unrealised gains/losses for the current year on financial assets at fair value are applied to the market value adjustment reserve in the balance sheet and are therefore not included in the profit for the year.
If the total portfolio of financial current assets shows a cumulative unrealised loss, this loss is charged to the profit and loss account. If specific financial current assets are considered to have suffered a permanent loss in value, the change in value of the financial asset in question is charged to profit and loss. The market value adjusted reserve applies only to Storebrand Life
Insurance. In accordance with the accounting standard for insurance policies (IFRS 4) the market value adjustment reserve is shown as a liability.
Structured products. Storebrand Bank has issued equity index linked bonds. These products principally comprise the issue of a bond and the sale of an equity index option. At the time of issue, the equity index option is measured at fair value since the option is a derivative that is not closely related to the bond issue. The bonds issued are simultaneously measured at amortised cost. No gain is recognised in respect of structured gains at the time of issue (“day 1 gains”).
IAS 39 effects Financial assets and liabilities –1.6 Equity at 01.01.05 (IFRS) 10 310.3
Profit and loss 2004 (NGAAP) 2 358.1 Pensions –10.5 Bonus scheme for senior executives –1.9 Depreciation of properties for own use –10.9 Goodwill 30.1 Gains/losses 123.3 Tax –105.0 Security reserves –46.0 Profit and loss 2004 (IFRS) 2 337.2
NGAAP refers to Norwegian generally accepted accounting principles excluding IFRS. The transition to IFRS had little effect on the cash flow analysis for 2004.
Changes in security reserve etc. – non life insurance 57.2 66.1 Profit/loss before tax 2 472.4 959.7
See the 2004 Annual Report for information on the accounting principles used in 2004.
Investment yield II: As Investment yield I but including change in unrealised gains on financial current assets.
Tax payable for the period –2.9 –1.2 Change in deferred tax –38.2 –216.6 Total tax charge –41.1 –217.8
Calculation of deferred tax assets and deferred tax on timing differences and losses carried forward: NOK MILLION 2005 2004
Tax reducing timing differences Securities –1 635.4 –866.6 Real estate –100.6 –126.4 Operating assets –157.7 –215.1 Provisions –75.9 –95.4 Accrued pension liabilities –621.0 –633.8 Profit and loss account –61.1 –76.3 Other –12.6 –22.0 Total tax reducing timing differences –2 664.3 –2 035.6
Accumulated depreciation and write-downs 01.01 –104.9 –157.5 –262.4 –220.7 Depreciation in the period –34.3 –34.3 –26.8 Disposals in the period 4.9 4.9 Accumulated depreciation and write-downs 31.12 –134.3 –157.5 –291.8 –247.5
Analysis of goodwill by business acquisition ACQUISITION ACC. DE- BALANCE SHEET ADDITIONS/ BALANCE SHEET
NOK MILLION COST 01.01 PRECIATION 01.01 VALUE 01.01 DISPOSALS DEPRECIATION VALUE 31.12
Goodwill Storebrand Bank ASA 563.2 –140.8 422.4 422.4 Delphi Fondsforvaltning AS 48.3 –16.7 31.6 31.6
Disposals –2.4 –0.2 –0.2 –2.9 –10.4 Changes to value over the balance sheet 24.5 24.5 28.9 Depreciation –15.2 –1.0 –4.6 –31.2 –52.0 –75.6
Employees are assured a retirement pension equivalent to 70% of pensionable salary at the time of retirement. The ordinary retirement age is 65. Staff pensions are provided by a group pension scheme. primarily with Storebrand Livsforsikring AS, in accordance with the rules on private occupational pension schemes. Pension payments from the scheme come into effect from the pension age, which is 67 for executives and 65 for underwriters. Pension payments to executives between 65 and 67 and pension payments in respect of salary amount over 12 times the social security pension scheme base amount (G) are paid directly by the company.
Present value of insured pension benefit obligations incl. employment taxes 2 762.3 2 820.6 Pension assets at fair value –2 599.4 –2 626.9 Net pension liability/surplus for the insured schemes 162.9 193.8 Present value of uninsured pension benefit obligations incl. employment taxes 495.6 462.6 Experience adjustments and difference between actual and expected investment return not applied to profit and loss –216.8 –170.0
Net pension cost in the profit and loss account, specified as follows: NOK MILLION 2005 2004
Current service cost 94.2 88.9 Interest on pension liabilities 143.6 153.6 Expected return on pension assets –152.1 –164.7 Experience adjustments 1.2 Changes to the pension scheme –9.8 Net pension cost booked to profit and loss in the period 77.0 77.9
Net pension liability at 01.01 including provision for employment taxes 486.2 559.1 Net pension cost recognised in the period 77.0 77.9 Premiums paid –83.4 –87.0 Pensions paid –38.1 –63.7 Net pension liability at 31.12 441.7 486.3
Erik Haug Hansen 1 653 Birgitte Nielsen *) The summary shows the number of shares owned by the individual, as well as his or her close family and companies where the individual exercises significant influence (cf. Accounting Act 7-26).
No loans have been made to any member of the Control Committee, and loans to members of the Board of Representatives total NOK 1.8 million.
Control Committee Sverre Bjørnstad 2 816 Hanne Harlem 0 Harald Moen 322 Carl Graff-Wang 0 Jon Ansteinsson 0
Board of Representatives Sven Ullring 385 Merete Egelund Valderhaug 0 Inger-Johanne Strand 3 Stein Erik Hagen 0 Terje R. Venold 0 Eli Sætersmoen 0 Ole Enger 0 Rune Selmar 0 Kjell Jostein Sæther 200
Remuneration paid to Deloitte Statsautoriserte Revisorer AS and related companies: NOK MILLION 2005
Statutory audit 6.0 Other reporting duties 0.7 Taxation advice 1.2 Other non-audit services *) 6.1 *) On which agreed control tasks NOK 2.5 million, assistance with evaluating processes and procedures at Storebrand Life Insurance NOK 3.4 million.
Group profit Nordben Life and Pension Insurance Co. Ltd. 31.0 25.9
OWNERSHIP ACQUISITION BALANCE SHEET ADDITIONS/ SHARE IN BALANCE SHEET NOK MILLION INTEREST COST VALUE 1.1 DISPOSALS PROFIT VALUE 31.12
Other income relates to interest income from bank deposits. management fees and operating income for companies other than those involved in banking and insurance.
The following amounts are included in the profit and loss account: NOK MILLION 2005 2004
Change in fair value of investment properties 36.6 164.0 Total income from investment properties 885.7 878.7
The group entered into commitments in 2005 to purchase properties for a further NOK 2.2 billion, but transfer of risk will not take place until 2006.
Interest income 1 036.4 Interest expense –585.8 Net interest income from banking activities 450.6
Grouped write-downs of loans, guarantees etc. at 01.01 115.7 Grouped write-downs in the period –26.5 Grouped write-downs of loans, guarantees etc. at 31.12 89.2
Since investments in funds represent an increasing proportion of the group's balance sheet, investments in funds that are subject to operational and risk management by Storebrand Investments are reported in all the relevant notes to the accounts for 2005
Shares and other equity investments Financial assets at fair value, FVO* 37 279.0 37 279.0 Financial assets at fair value, Trading 2 310.1 2 310.1
Total shares and other equity investments 39 589.1 39 589.1 Bonds and other fixed-income securities
Assets for life insurance with investment choice, FVO* 5 719.4 5 719.4 Total assets for life insurance with investment choice 5 719.4 5 719.4
Financial assets at fair value, FVO* 90 016.4 90 016.4 Financial assets at fair value, Trading 14 565.3 14 565.3 Financial assets Hold to maturity 31 412.1 34 346.1 Financial assets Loans and Receivables 35 983.2 36 622.7
Deposits from banking customers, amortised cost 11 187.0 11 187.0 Liabilities to credit institutions, amortised cost 1 464.6 1 464.4 Securities issued, amortised cost 15 653.8 15 647.9
Analysis by sector and industry: Commercial services and real estate operations 9 121.3 Private individuals 17 529.3 Other 326.0 *) Fair Value Option
Hedging effectiveness – prospective 81% 91% Hedging effectiveness – retrospective 87% 95%
On hedging instruments –57.9 On items hedged 61.1 22 Bonds at amortised cost
Other bonds at amortised cost 9 220.9 9 269.3 9 259.5 9 898.9
The effective yield for each security is calculated using the booked value and the observed market price. Calculated effective yields are weighted to give an average effective yield on the basis of each security's share of the total interest rate sensitivity.
Public sector 5 631.4 11 689.1 17 320.5 Financial institutions 4 002.7 25 417.1 29 419.7 Other issuers 1 372.8 7 917.8 9 290.6 Total 11 006.8 45 024.0 56 030.8
NOK 8 017.3 24 107.3 32 124.5 EUR 2 345.6 13 308.1 15 653.7 USD 644.0 4 653.5 5 297.5 DKK – 385.7 385.7 GBP – 1 346.8 1 346.8 CAD – 297.8 297.8 SEK – 104.6 104.6 JPY – 630.7 630.7 CHF – 145.1 145.1 AUD – 44.4 44.4 Total 11 006.8 45 024.0 56 030.8
Nominal volume Financial derivative contracts are related to underlying amounts which are not capitalised in the balance sheet. In order to quantify a derivative position, reference is made to underlying concepts such as nominal principal, nominal volume, etc. Nominal volume is arrived at differently for different classes of derivatives, and gives an indication of the size of the position and risk the derivative creates. Gross nominal volume principally indicates the size of the exposure, whilst net nominal volume gives an indication of the risk exposure. However nominal volume is not a measure which necessarily provides a comparison of the risk represented by different types of derivative. Unlike gross nominal volume, the calculation of net nominal volume also takes into account which direction of market risk exposure the instrument represents by differentiating between long (asset) positions and short (liability) positions. A long position in an equity derivative produces a gain in value if the share price increases. For interest rate derivatives, a long position produces a gain if interest rates fall, as is the case for bonds. A long position in a currency derivative produces a gain if the currency strengthens against the NOK .
Interest accrued but not due on interest-rate swaps –19.7 7.4 Short position equities 2 307.8 Short position bonds 1 213.3
Interest rate swaps include interest accrued but not due. Investments in credit derivatives and short positions in equities and bonds relates only to indirect investments in securities funds managed by Storebrand Investments. The above table includes net positions in indirect investments.
Loans and deposits from credit institutions without notice or fixed term 76.5 Loans and deposits from credit institutions with notice or fixed term 1 388.1
Liquidity risk Storebrand has established good liquidity buffers in the group companies, and continuously monitors liquidity reserves against internal limits. Committed credit lines from banks have also been established that the companies can draw on if necessary. Storebrand Bank manages its liquidity position on the basis of a rolling liquidity gap that shows the mismatch between expected future inward and outward cash flows. Storebrand Life Insurance has NOK 22 billion invested in the money market and can therefore meet claims of an equivalent amount at short notice. In addition, the company has sizeable investments in bonds that can be liquidated if required.
Under current legislation and regulations, the technical insurance reserves that Storebrand Life Insurance is required to hold are not affected by changes in market interest rates. Storebrand Bank manages its interest rate risk through swap agreements to minimise the effect of a change in interest rates on its deposits and lending.
Category of issue or guarantor Fair value Fair value Fair value Fair value Fair value Fair value NOK million
Loans in default and loss-exposed lending 751.2 3.0 8.3 762.4 393.6 11.8 357.1
Grouped write-downs 89.2 Specific write-downs 389.6 Book value of lending 31.12.05 26 976.6
Bonds and other fixed-income securities **) 2 070.3 3 380.7 10 600.0 23 458.3 16 841.2 56 350.5
Bonds issued by Fair Financial Ireland Limited, fair value NOK 246.3 million, are not included in the table since the sale of the company has been agreed.
PERIOD TO NEXT INTEREST RATE FIXING FOR FINANCIAL ASSETS 3 MONTHS TOTAL NOK MILLION UP TO 1 MONTH 1-3 MONTHS – 1 YEAR 1-5 YEARS OVER 5 YEARS VALUE
Bonds and other fixed-income securities **) 8 169.7 18 213.8 10 894.7 8 747.1 10 325.3 56 350.5
Bonds issued by Fair Financial Ireland Limited, fair value NOK 246.3 million, are not included in the table since the sale of the company has been agreed .
PERIOD TO NEXT INTEREST RATE FIXING FOR FINANCIAL LIABILITIES 3 MONTHS TOTAL NOK MILLION UP TO 1 MONTH 1-3 MONTHS – 1 YEAR 1-5 YEARS OVER 5 YEARS VALUE
Total short-term holdings of financial assets –10.9 –27.4 –225.4 –94.1 –972.2 –1 329.9
Total long-term holdings of financial assets 6.4 –18.7 –286.1 –1 842.2 –2 140.6
Total quantified interest rate sensitivity –10.9 –21.0 –244.1 –380.2 –2 814.4 –3 470.5
NET BALANCE NET NOK MILLION SHEET VALUE SALES IN CURRENCY IN NOK
The group actively hedges the major part of its foreign currency risk. Currency risk arises from investments in international securities, and to a lesser extent from subordinated loans denominated in foreign currencies. Currency risk is hedged through forward foreign exchange contracts at the portfolio level, and currency positions are regularly monitored within specified total limits. Short positions are closed no later than the business day following the date on which they arise. In addition, there are separate limits for creating active currency positions. These positions are included in the note relating to short-term debt instruments and bonds. The currency positions outstanding at 31 December 2005 are typical of the group's small limits for currency positions.
Specification of balance sheet items in respect of life insurance and non-life insurance: GROUP GROUP INDIVIDUAL PENSION PENSION GROUP INDIVIDUAL ANNUITY/
INSURANCE INSURANCE LIFE ENDOWMENT PENSION NON-LIFE TOTAL TOTAL NOK MILLION PRIVATE SECTOR PUBLIC SECTOR INSURANCE INSURANCE INSURANCE INSURANCE 2005 2004
Reinsurers' share of technical insurance reserves 2 395,5 2 395.5 2 804.8 Receivables in respect of insurance policies 2.0 2.0 0.3 59.6 63.9 14.1
Premium and claims reserves – non-life 2 992.1 2 992.1 3 396.9 Security reserve etc. – non-life 97.3 97.3 89.6 Total reserves – non-life 3 089.4 3 089.4
PREMIUM RESERVE FOR PREMIUM RESERVE STATUTORY SECURITY 2004 NOK MILLION RESERVE UNIT LINKED DEPOSIT RESERVE RESERVES RESERVE TOTAL TOTAL
Change in claims reserve –434.5 –645.8 Currency movements 24.9 –27.0 Other changes 0.3 0.3
Non-life insurance liabilities relate mainly to Storebrand Skadeforsikring and Oslo Reinsurance Company. These companies are in run-off.
An agreement was entered into on 19 December 2005 for the sale of Fair Ireland Ltd. to Gjensidige Nor. The sale will complete and settlement will take place once the necessary approvals from the authorities in Ireland and Denmark are received. Storebrand ASA owned 50% of Fair Ireland Ltd. This company in turn owns 100% of the Danish insurance company Fair Forsikring AS. Premium and claims reserves from Fair (50% interest) amounted to 168.9 million for 2005 and NOK 166.9 million in 2004. Fair’s profit for 2005 (50% interest) of NOK 22.4 million is included in profit for the year.
Profit and loss items: Analysis of net premium income NOK MILLION 2005 2004
Group pension insurance – private sector 6 929 7 340 Group pension insurance – public sector 1 867 1 454 Group life insurance 467 490
Individual annuity and pension insurance 1 309 1 255 Non-life insurance 347 287
In the short-term the company aims to build up the level of additional statutory reserves to an amount equivalent to the guaranteed return for one year. The allocation to additional statutory reserves from the profit for 2005 represents a balance between this objective, the desire to produce a reasonable return on equity, including building up solvency capital, and the desire for the unconditional profit allocation to customers to be of a reasonable size.
Risk exposure/sensitivity Life insurance Mortality and disability The following table shows the net annual risk premium for the most common types of cover. The premiums apply to persons of normal health and risk.
Life cover, individual endowment insurance 122 325 1 416 61 163 711 Disability lump sum, individual 273 590 352 1 368 Disability pension, individual 248 639 1 975 371 1 577 2 490 Critical illness, non-smoker, individual 226 573 1 602 203 433 1 059 Life cover, group life insurance 55 146 821 33 88 493 Life cover, group pension insurance 48 238 1 174 34 124 625 Disability pension, group pension 285 621 1 717 470 1 097 1 685
Tariffs for group life insurance and individual risk insurance within group pensions also depend on industry/occupation in addition to age and gender. Group life insurance also applies tariffs based on claims experience.
The company’s tariffs do not involve any assumptions on inflation or voluntary termination/transfers. No changes were made to premium tariffs in 2005 that caused any additions to or withdrawals from the premium reserve. The disability tariff for the public sector was increased in 2004, leading to an equivalent increase of NOK 84 million in the premium reserve.
The following table shows the proportions of insurance fund reserves at 31 December relating to policies with various basic annual interest rates: GUARANTEED INTEREST RATE 2005 2004
Individual endowment policies 3.2% 3.4% Individual endowment policies 3.7% 3.7% Group pension insurance 3.7% 3.8% Group life insurance 0.9% 0.9% Non-life insurance 0.0% 0.0%
Risk management – life insurance: Evaluation of insurance risk (underwriting) When writing individual risk cover, the customer is subject to a health check. The result of the health check is reflected in the level of premium quoted. When arranging group policies with risk cover, all employees of small companies are subject to a health check, while for companies with many employees the company requires declarations of fitness for work. Underwriting also takes into account the company’s industrial category, sector and sickness record.
Control and monitoring of insurance risk Insurance risk is separately monitored for every line of insurance in the current insurance portfolio. The risk result for each product group is broken down into the elements of death, accident and disability. The development of risk result is followed throughout the year. For each type of risk, the ordinary risk result for a period represents the difference between the risk premiums the company has collected for the period and the sum of provisions and payments that must be made for insured events that occur in the period. The risk result takes into account insured events that have not yet been notified but which the company, on the basis of its experience, assumes will have occurred.
Reinsurance The company also manages its insurance risk through a variety of reinsurance programs. Through catastrophe reinsurance (excess of loss) the company covers losses (single claims and reserves provision) where a single event causes more than 3 deaths or disability. This cover is also subject to an upper limit. Surplus reinsurance on life policies covers death and disability risk that exceeds the maximum risk amount for own account the company is permitted to carry by its articles of association. The company’s maximum risk amount for own account is relatively high, and the risk reassured is therefore relatively modest. Quota reinsurance covers part of the company’s risk for workmen’s compensation insurance.
The portfolios with the largest remaining risk exposure are liability insurance and cover for large market losses in the 1980s. In addition, certain types of claim have shown an adverse development over the last 10 years, principally claims related to asbestos and environmental damage, but also other types of health-related claims. For these types of cover, the company estimates its liabilities by evaluating each cedent’s exposure for the types of claim mentioned and evaluating the claims history.
Oslo Re’s claims experience over recent years has largely been dependent on the extent to which the company has succeeded in commuting its incoming reinsurance contracts, i.e. reaching agreement on early settlement of its liability to policyholders (cedents). The company has been particularly active in commuting policies in liability-related lines, and this has caused a reduction in exposure and IBNR requirements.
Net income and gains from financial assets at fair value: -shares and other equity investments 199.9 2 076.5 85.6 -bonds and other fixed-income securities 62.2 73.9 64.5 -financial derivatives/other financial instruments 10.9 –83.1 19.0
Trading portfolio investments: -shares and other equity investments 7 119.3 492.6 380.7 -bonds and other fixed-income securities 8 2 394.6 3 300.7 479.9 -financial derivatives/other financial instruments 9 1.3 248.5 161.2
Total long-term liabilities and commitments 2 208.5 2 035.7 3 114.6
Total equity capital and liabilities 9 900.4 11 441.0 11 599.9
Comparable figures for 2004 are amended to reflect the new pension accounting standard.
Cash and cash equivalent assets at the end of the period 92.9 119.4
Note 4: Remuneration of the Chief Executive Officer and elected officers of the company page 95
Group contributions and dividends received in respect of these investments are therefore recorded as operating income.
Storebrand ASA as income in the accounting year. This treatment can only be applied to income earned by subsidiaries during Storebrand’s ownership. Otherwise, receipts are recognised as equity transactions, and the value of the investment in the subsidiary is reduced by the amount of group contribution or dividend received.
With effect from the 2005 financial year, the company has used the Norwegian standard for pensions accounting NRS 6A, which permits the use of IAS 19 (International Financial Reporting
Costs’. This has caused the pension liabilities arising in respect of own employees to be calculated using new parameters. The difference between the book value of pension liabilities at 1
January 2004 and the new actuarial calculation of liabilities on 1 January 2004 has been applied directly to equity.
The net pension cost for the period consists of the sum of pension liabilities accrued in the period (current service cost), the interest charge on the calculated liability and the expected return on pension fund assets. Pension costs and pension liabilities for defined benefit schemes are calculated using a linear profile for the accrual of pension entitlement and expected final salary as the basis for calculating the benefit obligation, based on assumptions on discount rate, future increases in salary, pensions and social security pension benefits, the future return on pension assets and actuarial assumptions on mortality, staff turnover etc. The discount rate used is the risk-free interest rate appropriate for the remaining maturity. Where a scheme is funded, the pension assets are valued at fair value and deducted to show the net liability in the balance sheet.
The effect of changes to the pension scheme is charged to the profit and loss account as incurred, unless the change is conditional on future accrual of pension entitlement. If this is the case, the effect is allocated on a linear basis of the period until the entitlement is fully earned. Employment taxes payable by the employer are included as part of the pension liability, and are included both in the balance sheet value of pension liabilities and in experience adjustments.
The comparable figures shown for 2004 in the accounts and the notes to the accounts in respect of pensions have been restated to reflect the application of NRS 6A in 2004, as well as the reversal of experience adjustments as at 1 January 2004.
Financial assets and liabilities are included in the balance sheet from such time as Storebrand becomes party to the instrument ’s contractual terms and conditions. Normal purchases and sales of financial instruments are booked on the transaction date. When a financial asset or a financial liability is first recognised in the accounts, it is valued at fair value plus, in the case of a financial asset or a financial liability that is not a financial asset or a financial liability at fair value through profit and loss, transaction costs directly related to the acquisition or issue of the financial asset or the financial liability.
Financial derivatives. Financial derivatives are valued at fair value. Financial derivatives are designated as financial assets or financial liabilities at fair value through profit and loss.
Storebrand Livsforsikring AS 775.4 538.7 430.0 Storebrand Kapitalforvaltning AS 26.6 8.8 20.1 Storebrand Skadeforsikring AS *) 83.8 Storebrand Bank ASA 222.4 61.6 Adviso AS 33.2 Storebrand Alternative Investment ASA 2.1 1.2 2.9 *) Dividend from Storebrand Skadeforsikring AS booked directly against equity 112.0 250.0 02 Personnel expenses
Employees are assured a retirement pension equivalent to 70% of pensionable salary at the time of retirement. The ordinary retirement age is 65. Staff pensions are provided by a group pension scheme, primarily with Storebrand Livsforsikring AS, in accordance with the rules on private occupational pension schemes. Pension payments from the funded scheme come into effect from the pension age, which is 67 for executives and 65 for underwriters. Pension payments to executives between 65 and 67 and pension payments in respect of salary amount over 12 times the social security pension scheme base amount (G) are paid directly by the company.
Main assumptions used when calculating net pension liability at 31.12: Discount rate 4.7% 4.7% Expected return on pension fund assets in the period 6.0% 6.0% Expected earnings growth 3.0% 3.0% Expected annual increase in social security pensions 3.0% 3.0% Expected annual increase in pensions in payment 2.0% 2.0%
Actuarial: Standardised assumptions on mortality/disability and other demographic factors as produced by the Norwegian Financial Services Association. Average employee turnover rate of 2-3% of entire workforce. Comparable figures for 2004 have been restated in accordance with NRS 6A.
Present value of insured pension benefit obligations 1 904.9 1 978.3 Pension assets at fair value –1 962.0 –2 033.3 Net pension liability/surplus for the insured schemes –57.1 –55.0 Present value of uninsured pension benefit obligations including employment taxes 223.7 227.2 Experience adjustments and difference between actual and expected investment return not applied to profit and loss –137.8 –84.1
Pension fund assets are based on the financial investments held by Storebrand Livsforsikring, which had the following composition at 31.12: Properties and real estate 10% 9% Bonds held to maturity 28% 37% Secured and other lending 1% 1% Shares and other equity participations 27% 17%
Reconciliation to show the change in net pension liability or net pension assets in the period: NOK MILLION 2005 2004
Current service cost 6.2 16.4 Interest on pension liabilities 97.8 110.7 Expected return on pension scheme assets –117.4 –130.3 Net pension cost in the profit and loss account –13.4 –3.2
**) The Control Committee covers all the Norwegian companies in the group which are required to have a control committee, except for Storebrand Bank ASA and Oslo Reinsurance Company ASA which have their own control committees. ***) Of which agreed control tasks NOK 2.5 million
+ Prior year dividend from subsidiaries 267.8 -Dividend –1 012.5 –695.2 –313.8 +/– Shares realised –470.4 –1 593.2 –63.0
+/– Changes in temporary timing differences –201.3 –61.6 37.5 Tax base for the year –633.1 40.7 294.8 – Tax losses carried forward 633.1 –40.7 –294.8 Tax base for calculation of tax payable
REGISTERED SHARE NO. OF SHARES PAR VALUE INTEREST/ BOOK NOK MILLION OFFICE CAPITAL (1.000) NOK VOTING IN % VALUE
Fair Financial Ireland plc. *) Denmark 50.0% 244.4 *) Book value includes a subordinated loan of NOK 141.7 million. A contract was signed in December 2005 to sell the shares.
Listed Norwegian shares 56.0 112.3 Unlisted Norwegian shares 0.1 Unlisted shares within the EEA 7.5 1.5 Unlisted shares outside the EEA 0.9 0.3 Other fund units 39.1 5.1 Total shares 103.5 119.3 08 Commercial paper and bonds
Commercial paper, bonds, bond funds and related forward foreign exchange contracts 1 346.1 1 048.5 2 394.6 Of which listed 903.5 479.7 1 383.2 Acquisition cost 1 342.8 1 048.1 2 390.9 Nominal value 1 358.3 1 037.2 2 395.5
Public sector 928.5 2.1 930.6 Financial institutions 229.8 912.4 1 142.2 Other issuers 187.8 134.0 321.8 Total 1 346.1 1 048.5 2 394.6
SHARE OWN SHARE OTHER EQUITY CAPITAL NOK MILLION CAPITAL *) SHARES PREMIUM EQUITY 2005 2004 2003
Cancellation of own shares –98.3 98.3 Own shares bought back **) –51.3 –567.2 –618.5 –744.4 Pensions applied to equity ***) –452.5 Tax on equity transaction 70.0 Over-provision for dividend 2004 17.0 17.0 Allocated to dividend ****) –1 010.6 –1 010.6 –1 840.4 –222.5 *) 258.526.245 shares of nominal value NOK 5.
Bond loan 2005/2009 3 m. NIBOR+0.20 NOK 829.2 830 Bond loan 2005/2011 3 m. NIBOR+0.30 NOK 748.9 750 Bond loan 2002/2007 7.18% NOK 209.7 211 Bond loan 2002/2007 3 m. NIBOR+0.80 NOK 208.8 210 Total *) 1 996.5 *) Loan is booked at amortised cost.
14 Holdings of shares in Storebrand ASA by executive management and members of corporate bodies *) The summary shows the number of shares owned by the individual, as well as his or her close family and companies where the individual exercises significant influence (cf. Accounting Act 7-26).
Profit and loss account items: Group contribution and dividends from subsidiaries 1 026.5 643.5 536.8 Purchase and sale of services (net) –50.1 4.6 13.4
No. of employees at 31.12 10 No. of full time equivalent positions at 31.12 10 Average number of employees 10 16 Guarantees issued
Idar Kreutzer 28 878 Hans Henrik Klouman 1 566 Odd Arild Grefstad 3 668 Maalfrid Brath 1 703 Egil Thompson 1 103 Erik Råd Herlofsen 2 303 Lars Aa. Løddesøl 1 803 Per Kumle 628 Roar Thoresen 628 Hans Aasnæs 1 672 Rolf Corneliussen 115
Board of Directors Leiv L. Nergaard 20 000 Halvor Stenstadvold 3 593 Knut G. Heje 8 500 Mette K. Johnsen 997 John Giverholt Grace Reksten Skaugen 13 000 Rune Eikeland Erik Haug Hansen 1 653 Birgitte Nielsen Nina Elisabeth Smeby 568
Control committee Sverre Bjørnstad 2 816 Hanne Harlem Harald Moen 322
Board of Representatives Sven Ullring 385 Merete Egelund Valderhaug Inger-Johanne Strand 3 Stein Erik Hagen Terje R. Venold Eli Sætersmoen Ole Enger Rune Selmar Kjell Jostein Sæther 200 Ann Jeanette Magnussen 1 132 Lars Tronsgaard Johan H. Andresen jr. **) 2 020 800 Roar Engeland Arvid Grundekjøn Per Alm Knudsen Paul Eggen jr. 1 653 Inger Lise Gjørv Margrethe Øvrum Marius Steen Vibeke Hammer Madsen Barbara Rose Milian Thoralfsson Astrid Olive Aanerud 625 Ann-Mari Gjøstein 140 Rune Pedersen Anders Berggren
The Control Committee of Storebrand ASA has reviewed the Board of
Annual General Meeting approve the Board of Directors proposal for the
The Board of Representatives raises no objections to the Board’s proposal regarding the allocation of the result for the year of Storebrand ASA.
We conducted our audit in accordance with the Norwegian Act on Auditing and Auditors and good auditing practice in Norway, including standards on auditing adopted by Den norske Revisorforening. These auditing standard require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall content and presentation of the financial statements. To the extent required by law and good auditing practice an audit also comprises a review of the management of the Company’s financial affairs and its accounting and internal control systems. We believe that our audit provides a reasonable basis for our opinion.
• the parent company’s financial statements are prepared in accordance with the law and regulations and give a true and fair view of the financial position of the Company as of 31 December 2005, and the results of its operations and its cash flows for the year then ended, in accordance with good accounting practice in Norway
Tier 2 capital: Tier 2 capital is part of primary capital and consists of subordinated loan capital. In order to be eligible as primary capital, Tier 2 capital cannot exceed Tier 1 capital. Perpetual subordinated loan capital, together with other Tier 2 capital, cannot exceed 100% of Tier 1 capital, whilst dated subordinated loan capital cannot exceed 50% of Tier 1 capital. To be fully eligible as primary capital, the remaining term must be at least five years. If the remaining term is less, the eligible portion is reduced by 20% for each year.
Endowment insurance: Individual life insurance where the insured amount is payable on either the expiry of the insurance period or the death of the insured if earlier. Such insurance can be extended to provide disability pensions or disability insurance.
Annual percentage rate (APR): The true interest rate calculated when all borrowing costs are expressed as an annual payment of
interest in arrears. In calculating the APR allowance must be made for whether interest is paid in advance or arrears, the number of interest periods during the year and all fees and commissions.
Net interest income: Total interest income less total interest expense. Often expressed as a percentage of average total assets (net interest margin).
Forward foreign exchange contracts/ foreign exchange swaps: Forward foreign exchange contracts/foreign exchange swaps relate to the purchase or sale of a currency for an agreed price at a future date. These contracts are principally used to hedge the currency exposure arising from currency denominated securities, bank deposits, subordinated loans and insurance reserves. These contracts also include spot foreign exchange transactions.
1> HANS AASNÆS (42), Managing Director, Storebrand investments Agronomist, Agricultural University of Norway, advanced studies business analysis, Norwegian School of Economics and Business Administration, Authorised Financial Analyst, program for Executive Development (IMD) 2001-2005 Investment Director, Storebrand Investments 1994-2001 Portfolio Manager, Norwegian and International equities, Storebrand Investments 1990-1994 Derivatives Specialist, Orkla Finans 2> HANS HENRIK KLOUMAN (44), General Counsel, Executive Vice President Graduate in Law, University of Oslo, 1987 1993–1994 Oslo Stock Exchange, 1990–1993 Lawyer – Thommessen, Krefting, Greve & Lund, 1989–1990 Assistant Judge, 1987–1989 First consultant – Kredittilsynet 3> LARS AA. LØDDESØL (41), Executive Vice President, Corporate Life Insurance Master of General Business, Norwegian School of Management and MBA, Thunderbird (AGSIM), USA
Storebrand’s management model and executive management group were reorganised with effect from 1 March 2006. Roar Thoresen has joined the executive management group as Executive Vice President, Operations. Areas of responsibility include human resources, IT and project support. Following the reorganisation, Erik Råd Herlofsen and Rolf Corneliussen have left the executive management group.
Oslo Reinsurance Company ASA Ruseløkkveien 14 P O Box 1753 Vika No-0122 Oslo Norway Tel: +47 22 31 28 28 www.oslore.no
• Storebrand Bank sells its subsidiary Finansbanken A/S (Denmark). The sale generates a profit contribution of NOK 40 million before tax.
September • Storebrand once again qualifies for the two renowned socially responsible investments indices FTSE4Good and The Dow Jones Sustainability World Index.
November • Storebrand participates in the global initiative on microfinancing as the only Norwegian company.
• Storebrand is mandated by Gjensidige Forsikring to manage the main part, NOK 23 billion, of their investment portfolio, starting in 2006.
• Storebrand receives the “Senior Initiative” award from the Centre for Senior Policy for its attitudes towards senior employees as valuable resources with important competencies and its active use of senior policy to build trust in the market.
• For the second time in a row Storebrand is awarded the Grip prize for the best report on corporate social responsibility. Storebrand wins the class for large corporates ahead of 17 other Norwegian companies.
Market capitalisation NOK 15,059 million * Includes all employees in the Storebrand group
Norway by offering its customers the best advice, the most attractive products and superior customer service.
Storebrand Bank offers traditional banking services such as accounts and lending to the retail market, as well as project financing for selected corporate customers.
Asset management products include discretionary management, specialist products and mutual funds.
The new pension reform will dramatically change the market for long-term savings and pensions. Most people will become more dependent on a pension from their employer, while long-term savings will become a theme for the entire population