Introduction 4 Facts and figures 2019 6 Letter from the Group Chief Executive Officer 1. This is Storebrand 10 Storebrand at a glance 11 Organisation 12 Executive mangament 13 Board of Directors 14 Strategic highlights 2. Climate Risk and Opportunity 3. Financial Capital and Investment Universe 26 Provide a return to the owners and customers 27 A driving force for sustainable investments 33 Key performance indicators 4. Customer and Community Relations 36 Financial freedom in all stages of life 38 Engaging, relevant and responsible advice 40 Engaging our customers through digital experiences 41 Digital trust 42 Key performance indicators 5. People 46 A culture for learning 47 Committed and courageous employees 48 Diversity and equal opportunities 50 Key performance indicators 6. Keeping Our House in Order 54 Anti-corruption 54 Anti-money laundering, financial crime and terror financing 57 Reducing our internal carbon footprint 58 Sustainable practices throughout our value chain 60 Corporate citizenship 61 Key performance indicators 7. Shareholder matters 8. Directors´ report 68 Strategy 72 Capital situation, rating & risk 74 Regulatory changes 77 Working environment and HSE 78 Group financial results 83 Official financial statements 9. Annual Accounts and Notes Storebrand Group 86 Income statement 87 Statement of total comprehensive income 88 Statement of finacial position 90 Statement of changes in equity 91 Statement of cash flow 93 Notes
Storebrand ASA 171 Income statement 171 Statement of total comprehensive income 172 Statement of finacial position 173 Statement of changes in equity 174 Statement of cash flow 175 Notes 188 Declaration by member of the Board and the CEO 189 Independent auditor´s report 10. Governance 198 Corporate Governance 207 Companies in the Storebrand Group 11. Sustainability assurance 210 TCFD index 212 GRI index 218 Auditor’s statement on sustainability 12. Appendix 222 Definitions key performance indicators 224 Executive management CVs 228 Group board of directors CVs
Facts and figures 2019 *) Profit before amortisation **) After tax, adjusted for amortisation of intangible assets ***) Including transitional rules
Climate change adaptation and the transition to a low carbon economy provide both risks and opportunities for Storebrand. Sustainability is integrated into all investment decisions we make, and in 2019 we further strengthened climate risk analyses and disclosure through adopting the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD).
We have set our course. In 2020 we will continue to deliver new and innovative services to our customers, helping them to achieve financial freedom to realise their goals and fulfil their dreams.
10 Storebrand at a glance 11 Organisation 12 Executive management 13 Board of directors 14 Strategic highlights
This is Storebrand We create a future to look forward to by delivering simple and sustainable pensions and savings.
We have been a part of people’s lives for more than 250 years. Today, we are Norway’s largest private asset manager – with NOK 831 billion invested in more than 3000 companies worldwide. More than two million Norwegians and Swedes place their savings with us. This comes with clear obligations. We are committed to managing our customers’ money effectively and responsibly, helping them to fulfil their dream of increased financial freedom and financial security for the future. Assets under management shall be invested according to best sustainable practices, ensuring good financial returns and a positive impact on society.
Consists of products that include long-term pension savings, where customers have a guaranteed return. This area includes occupat ional pension schemes in Norway and Sweden, independent personal pensions and pension insurance.
Back left to right: Heidi Skaaret (Executive Vice President Retail Market), Geir Holmgren (Executive Vice President Corporate Market), Terje Løken (Executive Vice President Digital and Innovation), Jan Erik Saugestad (Executive Vice President Asset Management), Trygve Håkedal (Executive Vice President Technology), Lars Løddesøl (Group Chief Financial Officer). Front left to right: Tove Selnes (Executive Vice President People), Odd Arild Grefstad (Group Chief Executive Officer), Staffan Hansén (Executive Vice President SPP), Karin Greve-Isdahl (Executive Vice President Sustainability, Communications and Industry Policy).
See appendix on page 224 for complete CVs for the Executive Management Team.
See appendix on page 228 for complete CVs for Board and committee members.
BOARD OF DIRECTORS The board is ultimately accountable for management of the Storebrand Group. This means, amongst other things, that the board will ensure responsible organisation of the business and establish plans, budgets and procedures. The board oversees the administrative management of the Group, maintaining insight into the Storebrand Group’s financial position. In addition, the board shall ensure that business activities, accounting and asset management are subject to proper scrutiny. All directors are independent and do not have significant business relations with Storebrand. All shareholder-elected directors are non-managerial staff.
COMMITTEES The board has appointed three committees to support its role: the Audit Committee, the Compensation Committee and the Risk Committee. More information on the role of each committee can be found on page 202.
The financial sector has a key role to play in achieving the UN Sustainable Development Goals (SDGs). Our pensions, savings and investments are powerful tools to address key challenges needed to realise the SDGs. As a significant asset owner, insurer and asset manager, we also see great economic opportunities in the alignment of investment portfolios to a sustainable agenda.
Our main objective is to leverage sustainability as a competitive advantage. Members of the executive management group are responsible for achieving our main strategic goals on sustainability within their respective business areas. Business unit goals and targets are reviewed three times a year by the executive management group and semi-annually by the Board of Directors.
The strategy is strongly affected by several regulatory changes, such as the introduction of Share Savings Accounts (ASK) and Individual Pension Savings Accounts (IPS). Due to a restructuring of pension payments from the state, future pensioners will have to take greater responsibility for their financial future. We expect that the changing regulatory framework will result in people saving more privately.
In 2019, we reviewed our business strategy and the executive management group, following several developments in the market: • Our customers increasingly expect seamless user experiences and personalised services and products.
The sustainability principles that guide our work are: • We base our business activities on the UN Sustainable Development Goals, and collaborate with customers, suppliers, partners and the authorities to meet these goals.
We strengthen resilience and adaptive capacity to climate- related hazards and natural disasters in our operations and in our investments (target 13.1).
We form strong partnerships to realise our sustainability objectives. This illustrates our firm commitment to SDG 17: partnering for the goals. In addition, stakeholder engagement and communication aim to impact on SDG 12 and 13.
We encourage companies to adopt sustainable practices and to integrate sustainability information into their reporting cycle (target 12.6).
In flu en ce o n st ak eh ol de r as se ss m en ts a nd d ec is io ns
Our materiality analysis defines the challenges and issues that Storebrand and our stakeholders perceive as most essential, and where we have the most significant impact on society and the environment. The stakeholders we have discussed materiality with are shareholders, customers, employees, authorities and NGOs. These are defined as our main stakeholders, and dialogue has taken the form of AGMs, polls and surveys, interviews and meetings, as well as participation in committees and initiatives aimed at addressing a wide range of sustainability issues. Following an analysis based on dialogue with key stakeholders, we have identified four focus areas and associated issues that give a clear prioritisation of long-term challenges, and how we should approach these. These focus areas are relevant to our most important strategic goals: maintain a leading position in occupational pensions, have a unique position in the private savings market and build asset management with strong competitive advantages and good growth opportunities.
This report has been prepared in accordance with the GRI Standards: Core option. Our GRI Index can be viewed on page 212. The guidelines of the International Integrated Reporting Council (IIRC) have also been used as a basis for reporting.
We have used the Task force on Climate-Related Financial Disclosures (TCFD) recommendations as our framework for disclosing climate-related financial risks. Climate-related disclosures are integrated throughout this annual report4), and a TCFD index can be found in appendix on page 210.
4) Further details regarding climate risks and opportunities can be found in Storebrand’s climate reports at and
Reputational risk from Storebrand being unable to meet increasing customer demands for green investments may affect our market position.
Low absolute returns and financial instability due to climate related issues.
Solution companies and projects are priced too high in the short term, creating a valuation bubble that may burst in the medium to long term.
ASSET MANAGEMENT Our asset management’s largest climate-related financial risks and opportunities are believed to lie in the transition to a low-emission society. Climate policy and regulations, more rigorous emission requirements, a changed cost structure and market preferences may affect our investments. Our most important initiatives to mitigate these risks and capitalise on potential opportunities are listed below in sections 3 and 6.
We were also one of twenty leading investors in the UNEP FI investor group on TCFD. The group developed models to enable scenario-based assessment and disclosure of climate -related risks and opportunities. The group worked on methods to determine the value at risk for equity, bond and real estate portfolios.
TARGETS AND METRICS • Carbon footprint in equity investments: 17.4 Tonnes
• Number of excluded companies due to serious climate and environmental damage: 94.
In addition, our deforestation policy states that we shall have completely divested from companies that contribute to illegal deforestation by 2025. We are currently mapping all companies with a high risk of contributing to deforestation and will report annually on this process starting in 2020.
Additional metrics and targets can be found in section 3 below on page 33.
REAL ESTATE INVESTMENTS Storebrand had direct real estate investments valued at NOK 42 billion at the end of 2019. Physical risk results largely from extreme weather impacts on real estate assets.
Transitional risk is associated primarily with medium-long term uncertainty. We anticipate that the real estate sector will be subject to new requirements for energy and climate efficiency, and our ability to adapt to these requirements is crucial to managing risk as well as realising market opportunities.
Mitigation measures that we have already implemented include real estate certification and Global Real Estate Sustainability Benchmark (GRESB) rating10) .
In 2019, we participated in the TCFD project for developing a risk model for real estate investments. The model needs to be further developed. In addition, we have started developing a tool for climate accounting and forecasting for real estate. This should be completed in 2020.
• Sustainability rating of all real estate: Our direct real estate investments are rated by GRESB in four different portfolios, with rankings among the best of peers in Europe. The score increased nearly 7% from last year, to an average of 82 out of 100, corresponding to a four star rating out of five on a global basis.
• Commitment to energy efficiency: Continuous improvements in energy efficiency are achieved through several operational optimisation initiatives. Total carbon emissions in direct real estate investments continued to decrease and was 10,228 tCO2e, equal to 9.12 tCO2e per m2 in 2019. Our target for 2025 is to reduce this to 6.5tCO2e/m2.
Additional metrics and targets that are relevant for climate- related risks associated with real estate investments can be found on pages 33 and 61.
TARGETS AND METRICS Insurance accounts for around 5% of our revenue and, as such, we do not have quantitative targets relating to climate risk. We do, however, have a focus on the mitigating initiatives mentioned above.
Financial Capital and Investment Universe We have two core objectives: to generate a return to our shareholders and to provide the best possible return for our customers on their savings so they can be financially secure during their retirement. We aim to be a leading player in the field of sustainable investments.
WHY We are a publicly listed company and one of the largest providers of pensions in Norway and Sweden. We therefore have two core objectives: to generate a return to our shareholders and to provide the best possible return for our customers on their savings so they can be financially secure during their retirement.
APPROACH Our core product is occupational pension plans, offered both to companies and directly to individuals. Legacy products that carry an interest rate guarantee shall be managed in a capital -efficient manner to free up capital for shareholders over time. Non-guaranteed savings products are experiencing high growth at a low capital cost – a growth Storebrand is capturing together with our insurance offering.
GOALS AND AMBITIONS We have the following operational goals: • Maintain our leading position within the occupational pensions market in Norway • Continue our challenger role in Sweden with double -digit annual growth within occupational pensions • Strengthen our Norwegian retail savings position through double-digit annual growth • Maintain our leading market position within asset management in Norway, while strengthening our international presence
RESULTS Storebrand delivered a return on equity of 8.0%, and the board proposed to the General Meeting an ordinary dividend of NOK 1,517 million, corresponding to NOK 3.25 per share for 2019. Fee and administration income grew 6% to NOK 5,308 million, but lower insurance results in 2019 lead to profit before amortisation of NOK 3,037 million, a reduction by 4% compared to last year. In Sweden, SPP gained market share through growth in new sales, premiums and transfers.
WHY We manage customers’ pension savings over the span of decades so a long-term perspective to investing is key. International studies support our own observations that the most sustainable companies on the world’s stock exchanges tend to outperform their peers financially over time. They have a better understanding of the global development and how to manage risks and opportunities. The customers are also increasingly demanding sustainable investment products and solutions and 36% of the Norwegian population say they have stopped buying a product or service due to unsustainable practices in the company.11)
Investing in Solutions Our investment strategy includes allocating capital towards more sustainable companies. To accelerate sustainable development over the next decade, we will be scaling up our investments in solution-oriented companies. We define solution -oriented companies as firms that contribute to the UN Sustainable Development Goals (SDGs), without significantly hindering other SDGs or the Paris Agreement. Our solution company whitelist was updated in 2019 and is used in investment decisions. It is part of the Storebrand sustainability score, which is based on a wide range of sustainability indicators and uses both internal analyses and data from third-party vendors. The score is comprised of both ESG risks and opportunities linked to the SDGs (see below). The score assesses companies ’ exposure to and management of financially material sustainability risks. This approach means we effectively identify companies that offer both long-term financial returns and contribute to solving sustainability challenges. We invest more in these companies, and less in companies with a low score.
A driving force for sustainable investments 11) Results from a nationwide study in 2019 conducted by Norstat om behalf of Storebrand
Promote economic productivity through diversification, technological upgrading and innovation. Increase access to financial institutions, banking, insurance and financial services for all.
Promote companies that support productive employment and decent work for all women and men. Increase exposure to companies that work against discrimination, that provide equal pay for equal value work, and for equal opportunities in leadership at all levels of decision-making.
Engage with the world’s largest corporate greenhouse gas emitters to curb emissions, strengthen climate-related financial disclosures and improve governance on climate change.
Raise awareness of international labour rights, particularly in high-risk sectors. Improve policies and performance regarding management-worker relations. Increase awareness of social issues in the palm oil industry and raising social standards.
Government bonds issued by countries that are systematically corrupt, systematically suppress basic social and political rights, or that are subject to UN Security Council sanctions.
Companies with more than 5% revenue from production or distribution of controversial weapons, hereunder nuclear, land mines, cluster munitions, biological and chemical weapons.
Companies with major stakes in coal and coal utilities and in oil sands.
Companies that cause or contribute to serious and systematic breaches of international law and human rights.
Companies that derive more than 5% of their revenue from the production or distribution of weapons (small arms, military contracting and defence).
Companies that derive more than 5% of their revenue from the production or distribution of gambling or adult entertainment.
Companies that derive more than 5% of their revenue from the production or distribution of alcohol.
Storebrand manages direct property investments in Norway and Sweden totalling NOK 42 billion, accounting for 5% of our investment portfolio. We place stringent ESG requirements on how the properties we manage perform, and report on progress through GRESB .
GOALS AND AMBITIONS We aim to be a strong agent for achieving lasting change in the way companies are managed – and at the same time provide good returns to our owners and customers. We put capital to work to finance socially beneficial, sustainable solutions and to reduce exposure to activities that impact society negatively. We aim to reduce greenhouse gas emissions from the companies we invest in, and Storebrand as an asset owner is committed to having a net-zero carbon portfolio by 2050.
We joined the UN backed Net-Zero Asset Owner Alliance in 2019, as one of 12 founding members. The aim is to leverage the role of active owners in order to reduce emissions in investment portfolios, whilst holding members publicly accountable for progress towards intermediate targets in line with Article 4.9 of the Paris Agreement12). Members commit to working with their portfolio companies to transition their production methods and energy sources to low carbon alternatives. In 2019, our CEO was invited to speak at a high level event at COP 25, representing the alliance and describing Storebrand’s measures to reduce the carbon footprint in our portfolios.
Our coal exit strategy implies a 5% reduction in revenue from coal production in the companies we invest in every other year, meaning we will be effectively divested from coal by 2026. In 2019, we further strengthened our coal exit strategy by introducing an absolute threshold of 20 million tonnes for coal mining and 10,000 MW coal power capacity, meaning that large companies with significant yet relatively small shares of revenues from coal are also excluded.
We also demanded climate action from the International Energy Agency (IEA), along with over 60 other international companies, organisations and academics, asking IEA to provide better tools for governments, investors and companies to align policies, investments and business strategies with the Paris Agreement.
We have reported on our efforts to reduce greenhouse gas emissions from the companies we invest in, in line with The Portfolio Decarbonisation Coalition and Montréal Protocol since 2015. We have continued our dialogue with portfolio companies to use standardised reporting measures for climate-related disclosures.
We are a driving force for recommendations to The Task Force on Climate-related Financial Disclosures (TCFD). In 2019, we changed our methodology to report on carbon footprint metrics according to the TCFD recommendation using weighted average carbon intensity15). To advance our approach to climate-related reporting, both Storebrand Asset Management and Storebrand Life Insurance participated in the UNEP FI TCFD project for investors and insurers in 2019.
Our CEO also engaged in several initiatives in 2019, in order to promote climate friendly business practices and share knowledge and experience with other companies. The Norwegian business initiative Skift and the Nordic initiative Nordic CEOs for a Sustainable Future, are two examples. Our engagement in such initiatives will continue.
“To accelerate sustainable development over the next decade, we will be scaling up our investments in solution-oriented companies.”
12) 13) For more information, see 14) 15) Read our carbon footprint reports at
Social and Governance Issues We continued our focus on deforestation in 2019 by acting as a lead investor in three different UN PRI initiatives that deal with soy, cattle and palm oil. Along with 250 investors with more than 16 trillion USD in assets under management, we demanded corporate action on deforestation in 2019.
The call to action was heard both by companies and the Brazilian government. We co-hosted an event on deforestation, together with Norsif, to create better awareness about the topic and encourage Norwegian investors to join collaborative engagements with companies to tackle this issue.
We are a signatory of an Investor letter asking companies to sign and implement the UN Women Empowerment Principles. The statement asks that companies strengthen their commitments and take decisive and concrete action towards gender equality. We cooperated with the Norwegian NGO Care and the consulting firm PwC in 2019, writing a report on the correlation between gender balance and corporate performance – and different ways of implementing these results when investing in companies.
Storebrand is a signatory of the PRI Investor Commitment to Support a Just Transition on Climate Change launched in May 2019. The initiative intends to engage investors already active in climate change initiatives to make them aware of the social dimension linked to the transition to a low-carbon economy. In 2019, Storebrand launched its formal proxy voting policy16), which focuses on sustainability issues in shareholder resolutions.
RESULTS We were recognised for excellent leadership in sustainable investments by PRI, and were appointed as the only Norwegian asset owner among the PRI Leaders Group17) in 2019. Storebrand was included based on our management of external private equity investments. We also came second in the Ethical Bank Guide’s ranking of sustainable financial institutions18). SPP received the top ranking for sustainable investments by both Max Matthiessen19) and Söderberg & Partners20) in 2019. SPP Fonder made all their funds fossil free in 2019. As a result, one third of all AuM, NOK 277 billion, in the Storebrand Group was fossil free at year end.
Storebrand was one of three lead investors engaging with Equinor as part of PRI’s Climate Action 100+. The engagement led to Equinor committing to take significant additional action on climate change.
The share of environmentally certified real estate investments increased from 30% of real estate investment in 2018 to 41% in 2019. We work continuously with environmental management and investment in initiatives to optimise the environmental performance of the properties we manage, and have reduced energy and water consumption in Norwegian real estate investments by around 30 % since 2011.
Certified green property, Billion NOK/Percentage total real estate investments23) New New 17 / 41% - -
Number/percentage companies excluded from investment universe in Storebrand Group New 171 / 5.9% 182 / 4.3% N/A N/A
Number / percentage company engagements to discuss ESG issues24) New 314 / 10.8% 408 / 9.7% N/A N/A
Percentage of real estate investments with green certificate 26% 30% 41% 48% 74%
21) Fossil-free products are one of several ways to reach our overall goal of becoming net zero and we have therefore not set a specific goal for the amount invested in fossil-free products 22) We have decided to set an overall goal for 2020 and 2025, and not for each asset class 23) We have discontinued reporting total solutions as a percentage of AuM and replaced this with a more granular level of reporting, where the previous figure is divided into solution companies, green bonds and green certified real estate investments.
Customer and Community Relations We offer customers a range of services designed to meet the breadth of their financial needs at all stages of their lives.
APPROACH We aim to increase awareness about personal finance by providing simplified information and making good advice easily available for our customers. Developing digital tools and improving digital communication are central.
GOALS AND AMBITIONS My Pension is a digital tool that helps customers calculate expected pension entitlement, bringing together data from the State Pension Fund, private pension savings and employers’ pension contributions. The app, together with services such as our Guide to Financial Security, Smart Pension and Employee Overview are key to engaging employees, encouraging them to become private customers at Storebrand.
INITIATIVES In 2019 we launched the “Good Money” campaign, aimed at positioning us more clearly in the market as an investor with a unique competence in sustainable investments. Our brand should be recognised for excellence in combining good financial performance with sustainable investments.
“Customers shall be secure in the knowledge that we manage savings in a highly professional manner, contributing to at good return on investment”
WHY Pensions and insurance are perceived by the general public as complicated. It can be difficult to understand which agreements and rights are collective and which are personal, as well as which conditions apply to the various agreements. If we are to succeed with our strategic goal of creating first-class customer experiences in the area of savings and pensions, we must take this challenge seriously.
Throughout the various phases of working life, to the point of retirement, we work to provide our customers with an overview, necessary insight and understanding of their own pension and insurance agreements.
Relevant and responsible advisory services are the main prerequisites for customer satisfaction. Our aim is to consistently guide our customers to buy products and services that are relevant and appropriate for their particular life situation. If we do this effectively, we contribute to our vision of being customer centric.
GOALS AND AMBITIONS We aim to be known for having the best sustainable savings and pension solutions.
Storebrand’s advice shall be based on the customer’s needs, and our ambition is for 75% of our savings advisors to be authorised at any given time28).
INITIATIVES The interaction between digital and physical customer service is becoming increasingly important. Teams dedicated to digital and physical customer service work together to prioritise and develop initiatives.
RESULTS We were again ranked first in the Norwegian Customer Barometer ’s annual survey of customer satisfaction in the corporate market.
In the retail market, we maintained an NPS score29) corresponding to fourth place in Norway and fifth place in Sweden.
In the market for transferable savings30), we had a market share of 19.9% in 2019.
In the area of pension and savings, 22 new advisors were authorised according to the Authorised Financial Advisor program, bringing the total percentage of authorised advisors to 81% of all advisors at Storebrand.
29) The Net Promotor System (NPS) is a measurement tool for customer satisfaction, in which the customer gives a score from 0 to 10, with 10 as the best result.
30) Free funds (Retail Market), individual pensions, individual capital, Pension Capital Certificates (PKB), and paid-up policies with investment options (FMI).
Digital Business Development is an interdisciplinary team, where product managers, business developers, IT architects, developers and interaction designers work together to improve customer experiences and solve customer problems through digital services.
GOALS AND AMBITIONS Our overarching ambition is to increase customer satisfaction and reduce costs through the use of our digital services. We aim to achieve this by enhancing the user experience, with more digital sales and self-service.
In 2020 we shall further develop our pension app including all savings, not limited to pensions. Our goal is to have 130,000 app installations by the end of 2020.
Digital sales processes were improved across all business areas. We developed a fully digital mortgage application and approval process, automated health declarations for life insurance, and implemented a more intelligent process for helping customers initiate a savings plan.
Get well reached 30% of the individuals with health insurance at Storebrand in 2019, and was used monthly by over 15,000 customers, who book more than 1100 physiotherapy sessions per month through this digital end-to-end process.
The number of downloads of the Dreams app doubled, from 100,000 to over 200,000 in 2019, making it one of the most popular savings services on the market.
WHY We live in a digital world, where our personal data is increasingly at risk of being misplaced, stolen or shared without our consent. In our efforts to create industry-leading customer experiences, it is critical that our customers are confident that their personal data is managed responsibly.
APPROACH Our guidelines for the processing of personal data contain principles for digital trust, such as lawful and transparent processing, purpose limitation, rights of data subjects, and requirements for built-in privacy protection. We have implemented an internal control system throughout the entire data value chain. Through this system, we stipulate requirements, verify and continuously improve data security throughout the Group, internally, with our partners and in our customer solutions.
We have been dedicated to implementing the new General Data Protection Regulation (GDPR). Data protection and information security are well-integrated into our internal control systems and risk management processes. We continuously assess the privacy risk that we may expose our customers to.
All registered cases from 2019 were dealt with and are closed. No fines, warnings or mandatory improvements were issued to Storebrand by the Norwegian Data Protection Authority 31) Please visit our website: for more information about digital security and privacy.
32) A customer and process-related incident is defined as an undesired situation that has occurred as a result of a failure of internal processes, operational disruptions, human error, violation of internal/external regulations or external matters. The consequences may be financial loss or gain, extra work, loss of reputation and/or sanctions related to the violation of internal/external regulations.
Market Position: Pension, Corporate Market Norway #1 #1 #1 #1 #1
People We recruit and develop people who are dedicated to finding the best solutions for our customers.
STOREBRAND ANNUAL REPORT 2019 35) Turnover and role relevance explains why it was not 100%.
INITIATIVES In 2019, we increased the reach of our digital learning platform, Campus Storebrand. Mandatory training in ethics, anti-corruption and anti-money laundering is facilitated via this platform. The platform is widely used by employees for training courses in sales and customer service, to access pre-reading resources to a range of courses, and to facilitate our employee training days under the theme “World-Class Together”.
We launched our graduate program, Storebrand Future Impact in 2019. New and current employees with limited work experience can apply to learn how to hone their skills and meet the global challenges of our time, responsibly, ethically and sustainably. The program focuses mainly on developing three skills; self-leadership, relations and collaboration and complex problem-solving.
All participants in Storebrand Leadership Weekly participated in the research project “Technology-based Management Development ”. A 360-degree evaluation of managers before and after the programme documented a positive development in twelve parameters for “management” and “management performance ”, relating to productivity, efficiency and satisfaction of employees.
Our summer internship programme Sandbox received almost 1000 applications from Norway and Sweden in 2019. Ten students were accepted in Norway and six students in Sweden.
The two first gatherings of Storebrand Future Impact were held in 2019. We received close to 200 applications in June, and five candidates were selected externally and paired up with 18 internal candidates. The participants represent the whole breadth of the company and with diverse backgrounds and skills ranging from IT to sales. During the program, the participants will develop and present group case studies focusing on sustainability and organisational impact.
WHY Our employees are our most important source of innovation, development and growth. Employees who dare to innovate and challenge prevailing norms are essential to realising our goal of becoming a world-class savings group.
APPROACH Our business relies on the trust of customers, partners, governments, shareholders and society at large. To gain trust, our organisation must be professional, capable and marked by high ethical standards. All employees shall act with due care, integrity and objectivity.
Employee engagement surveys are conducted on a monthly or bi-weekly basis to measure well-being, commitment to work tasks, perception of sustainability and the experience of self-determination, amongst others. The results are followed up by the group management regularly.
We offer permanent employees paid maternity and paternity leave equalling 100% of their salary, which is above the statutory requirements in Norway and Sweden.
INITIATIVES In 2019 we strengthened our ways of working through continuously using insight about the state of the organisation from bi-weekly/monthly pulse surveys. These surveys measure employee engagement across the entire group.
WHY Storebrand’s organisation and business activities should reflect the customers and market in which we operate. We believe that diversity contributes to an increased rate of innovation and a broader understanding across the breadth of our customer base. This appears to be supported by a number of International studies showing that companies performing well on diversity also tend to be more innovative and profitable36).
APPROACH All Storebrand employees shall be treated equally, regardless of age, gender, disability, cultural background, religious beliefs or sexual orientation in recruitment processes and throughout the employment relationship.
We make a conscious effort to ensure that all employees, regardless of cultural and religious backgrounds, experience a high level of workplace and job satisfaction.
We work actively to achieve a gender balance through targeted recruitment measures as well as by nominating an equal number of women and men to executive positions and management development programmes.
We aim to offer potential employees a transparent and inclusive recruitment process. We have a zero-tolerance policy against harassment and discrimination, and we strive towards equal treatment and equal opportunities in our recruitment and development processes.
We work actively towards equal opportunities and gender balance in work and economic life (target 5.5). Our goal is a 50/50 distribution of men and women in leading positions, and an equal distribution of men and women in our management development programmes, as well as recruitment processes for management positions.
36) This was documented in our report Investing in Gender Equality from 2019, made in collaboration with PwC and CARE Norway.
"All Storebrand employees shall be treated equally, regardless of age, gender, disability, cultural background, religious beliefs or sexual orientation"
INITIATIVES Our main work on diversity includes measures to promote gender equality. However, at the end of 2019 we established a diversity and inclusion committee, consisting of six employees nominated by the business. The committee shall raise awareness and increase the understanding of the importance of a diverse and inclusive working environment where people feel they belong. Additional initiatives are planned and will be implemented throughout 2020.
Absence due to illness has been low and stable for several years. Absence due to illness in our Norwegian operations was 3.1%, and 2.5% in our Swedish operations. No property damage was reported in the Storebrand Group in 2019. We had one reported accident, resulting in a light injury.
Percentage women at management level 1-338) New 44% 39% 50% 50%
Percentage men at management level 1-3 New 56% 61% 50% 50%
Percentage women at management level 3 New 46% 41% 50% 50%
Percentage men at management level 3 New 54% 59% 50% 50%
Turnover rate for men for group New 3.9 % 5.5 % - -
Number men hired during the year New 116 126 - -
Female in Group Executive Management Team New 3 out of 9 3 of 10 50% 50%
Average salary female employees39), Norway (NOK) New 699,228 743 684 - -
Average salary male employees, Norway (NOK) New 871,146 914 107 - -
Average salary female employees, Sweden (SEK) New 608,551 644 484 - -
Average salary male employees, Sweden (SEK) New 762,151 811 717 - -
All employees excluded for senior level staff, women's share of salary per position category (haygrade 13-20) New 99.2 % 99.1 % 100% 100%
Keeping Our House in Order Storebrand work actively to fight corruption and all types of financial crime throughout our business operations, with suppliers and other business partners. We aim to be energy efficient, reduce waste production, increase the proportion of waste sorted and reduce our carbon footprint.
WHY The nature of Storebrand’s business dictates that we are dependent upon unwavering trust from customers, authorities, shareholders and society at large. Trust is dependent upon our continued professionalism, competence and integrity.
Our expectations for employees, temporary staff and consultants are stipulated in our ethical guidelines, approved by the board of Storebrand ASA and the boards of all subsidiaries. We have additional guidelines specifically addressing anti-corruption, reviewed annually by the compliance team. The group’s compliance function is responsible for updating and disseminating material aimed at increasing anti-corruption competence and awareness.
As a general rule, no-one shall accept any form of benefits, including services, gifts and invitations, from Storebrand’s business relations. In situations where gifts may be accepted, our anti-corruption guidelines specify threshold values in NOK for all gifts.
All employees and board members shall complete our anti-corruption program. The aim of this program is to ensure that employees are capable of making the right decision to avoid potential cases of corruption.
16.5 We are committed to fighting corruption and bribery in all their forms.
Storebrand’s compliance team is also available to discuss issues relating to corruption with employees, for example concerns about receiving gifts, invitations to events or other benefits from business partners that may be in breach of our ethical and anti-corruption guidelines.
RESULTS Four issues were received through our third-party managed whistle-blowing system in 2019. None of these related to corruption and all four issues were satisfactorily closed during the year.
In 2019, 87% of our employees and all board members completed mandatory anti-corruption training.
Each company in the Group shall conduct a risk assessment for financial crime and terror financing, and implement routines for identifying and establishing new customers. We conduct internal audits and regular spot checks to identify and report suspicious transactions or behavior.
We are an active member of Finance Norway’s Committee on Financial Crime. The Committee works closely with the authorities in Norway and provides guidance to all member companies.
Our facility management team monitor energy and water usage, waste production and waste sorting rate to ensure that we reach our goal of minimising our footprint. We purchase electricity generated by renewable energy with a guarantee of origin.
In order to cut down on business travel, we encourage employees to use technological solutions such as video conferencing. Over half of all meeting rooms are equipped with video-conferencing facilities. We encourage travelling by train when travel is necessary.
GOALS AND AMBITIONS We aim to set science-based targets by the end of 2020, aligned with the 1.5oC scenario41) covering the whole business, including own operations.
We aim to be more energy efficient, reduce waste production, increase the proportion of waste sorted and reduce our carbon footprint arising from air travel and commuting.
INITIATIVES In 2019, Storebrand committed to setting Science Based Targets in line with the Paris Agreement. This will include external verification of our targets once this is available for the finance industry42).
Residual CO2 emissions from own operations are compensated for by purchasing emission quotas and investing in carbon positive projects.
WHY Procurement is a key area in our sustainability performance. To enhance efficiency and cost-effectiveness, we have increased the use of outsourcing. This demands more rigorous procedures for following up working conditions, safeguarding human rights and managing environmental impacts in our value chain.
The most important and largest purchases we make are for outsourcing of IT and business processes, health care services, claims settlement and management of direct property investments. We consider the areas with the greatest risk and opportunities for influencing sustainability to be outsourcing (including offshoring), claims settlement (cars and property), as well as property management in general.
For larger and longer-term contracts, sustainability criteria are used for allocation of contracts and form part of our follow-up during the contract phase.
GOALS AND AMBITIONS A key objective is to ensure that the Group does not enter into agreements with suppliers whose production processes or products violate international agreements, national legislation or internal policies. We shall contribute to sustainable development and to ensuring that human rights and labour laws are not violated.
Our ambition is to increase the share of environmentally certified procurement44) . We exceeded our 2025 goal already in 2019, with 57% environmentally certified procurement. We have therefore revised our goal for 2025 providing us with an incentive to further drive environmental stewardship in our supply chain.
8.7 We implement measures to end modern slavery and eliminate child labour in our value chain.
8.8 We aim to protect labour rights and promote safe and secure working environments for all our workers, contractors and suppliers.
Authorisations”, “Code of Ethics”, “Guidelines for Combating Corruption”, “Guidelines for Combating
Money Laundering, Terrorist Financing and Economic Crime”, “Guidelines for Dealing with Conflicts of Interest ”, ”Event Guidelines”, “Governing Document for Information Security” and the “Governing Document for the Processing of Personal Data”.
GOALS AND AMBITIONS We aim to combine financial contributions and knowledge to give back to society on topics related to sustainability. We also want to enable more employees to use their skills and time on corporate citizenship related activities.
500,000 NOK was awarded to 17 “We cheer for” initiatives around Norway and 250,000 SEK was awarded to similar initiatives in Sweden.
Total GHG emissions46) (Scope 1-3) tCO2e / tCO2e per FTE 1484 / 0.9 1444 / 0.9 1519 / 0.92 0.8 0.6
Scope 1 emissions tCO2 / tCO2 per FTE 1.9 / 0 1.4 / 0 1.1 / 0 - -
Scope 3 emissions tCO2 / tCO2 per FTE 1162 / 0.71 1241 / 0.77 1339 / 0.81 - tCO2e emissions per FTE from air travel47) 0.64 0.69 0.74 - -
Energy use, main offices (kWh per m2) 151 147 150 150 145
Amount of waste sorted for recycling, main offices (percentage total waste) 82% 72% 72% 79% 82%
Paper use, main offices (total kg / kg per FTE) 58952 / 50 41138 / 37 59199 / 36 35 30
E-learning completed: anti-money laundering and financial crime (total / percentage of FTE) New New 1523 / 89.2 % 100% 100%
Number of complaints handled by the Norwegian Financial Services Complaints Board New 135 192 N/A N/A
45) New goals have been set for 2020 and 2025 on the basis of exceeding performance expectations for 2019.
emissions include all greenhouse gases and are therefore expressed as CO2e. We have set a goal for our total GHG emissions not for each scope.
48) Our paper consumption goal has been revised to further drive performance 49) From 2019 we start reporting for each course separately. Historical data for 2017 and 2018 refers to all courses at an aggregate level, for new employees only. Data for 2019 refers to the percentage of all permanent employees employed throughout the year. Turnover and new recruits explains the deviation from our goal of 100%.
TRADING VOLUME FOR SHARES IN STOREBRAND In 2019, 335 million shares were traded, compared with 445 million in 2018. The trading volume in monetary terms was NOK 21,348 million in 2019, down from NOK 30,447 million in 2018. Storebrand was the 14th most traded stock on the Oslo Stock Exchange in 2019, measured in terms of NOK. In relation to the average number of shares, the turnover rate for shares in Storebrand was 72%.
DIVIDEND POLICY Storebrand’s dividend policy sates that the aim is to pay an ordinary dividend of more than 50% of the group result after tax and at least the same nominal amount as the previous year. Ordinary dividends will be paid at a solvency margin of more than 150%. If the solvency margin is above 180%, the board intends to propose special dividends or share buy backs.
SHAREHOLDERS Storebrand ASA is among the largest companies listed on the Oslo Stock Exchange measured by the number of shareholders. The Company has shareholders from almost all the municipalities in Norway and from 51 countries. In terms of market capitalisation, Storebrand was the 16th largest company on the Oslo Stock Exchange at the end of 2019.
Average daily turnover (1000s of shares) 1,346 3,094 2,450 2,780 2,820 2,185
Earnings per ordinary share (NOK) 4.43 7.89 5.28 4.73 2.63 4.61
CAPITAL GAINS TAXATION From 2016, new rules came into force in Norway concerning the taxation of dividends and gains on shares held by private individuals. The shareholder model entails that share dividends over the standard dividend tax exemption multiplied up by an adjustment factor (1.44 for the 2019 tax year) are taxed as ordinary income for the private shareholder (the tax rate is 22%for the 2019 tax year, which, together with the adjustment factor, gives an actual taxation of 31.68%).
Share dividends within the standard dividend tax exemption are tax free. Tax exemption is calculated by multiplying the amount eligible for a dividend tax exemption by a dividend exemption interest rate. The dividend exemption interest rate is determined by the Directorate of Taxes in January following the previous tax year. It is based on the average three-month interest rate on treasury bills with an additional 0.5 percentage points added to it and then reduced by the rate for general income tax.
INSIDER TRADING As one of the country’s leading financial institutions, Storebrand is dependent on maintaining an orderly relationship with financial markets and supervisory authorities. The Company therefore places particular emphasis on ensuring that its routines and guidelines satisfy the formal requirements imposed by the authorities on securities trading. In this context, the Company has prepared internal guidelines for insider trading and own account trading based on the current legislation and regulations. The Company has its own compliance system to ensure that the guidelines are observed.
INVESTOR RELATIONS Storebrand has a focus on comprehensive and effective communication with financial markets. Maintaining a continuous dialogue with shareholders, investors and analysts both in Norway and abroad is a high priority. The Group has a special Investor Relations unit. This unit is responsible for establishing and coordinating contact between the Company and external parties such as the stock exchange, analysts, shareholders and other investors. All quarterly reports, press releases and presentations of interim reports are published on Storebrand’s website: www.storebrand.com/ir.
A WORLD CLASS SAVINGS BUSINESS, SUPPORTED BY INSURANCE The core of the strategy is to gather savings from Norwegian and Swedish pension customers, institutional customers and retail customers. The assets we manage are the most important revenue drivers. In addition, we aim to capitalise on the savings and pension relationship by offering complementary products and solutions within insurance and banking.
Storebrand’s core product, Defined Contribution pension, is expected to continue its strong growth. In Norway, this is still a relatively young product where the average policyholder’s age is about 50 years. This means that premium payments received exceed pension payments made. In Sweden, the market is more mature, but SPP’s position as a challenger, with growth exceeding market growth in 2019, has enabled us to increase our market share in 2019. Increased competition in the market has resulted in gradual margin decline, which is expected to continue. This requires cost reductions and efficiency improvements to achieve profitable growth.
A genuine commitment to a sustainable society and a strong belief in sustainable investments form the basis of the Group’s strategy. As a sizeable asset manager, we create long-term returns for both shareholders and customers, while ensuring that our business contributes to a more sustainable world. Storebrand and SPP’s work with sustainability strengthens the Group’s competitive position, creates value for shareholders and positive effects on society. Read more about our sustainability work in parts 1 to 6 of this report.
Due to Norwegian pension reforms over the last decade, future pensioners are expected to receive less pension income from the state and will have to take greater responsibility for their financial future. We expect that the changing regulatory framework will result in people saving more privately. Storebrand’s mission in society is help our customers achieve economic freedom and financial security. Against, this backdrop, we have defined the strategic focus areas outlined in the figure above.
A LEADING POSITION IN OCCUPATIONAL PENSIONS – KEY RESULTS In 2019, we maintained our leading market position in Norwegian private sector Defined Contribution pensions with a market share of 29%. The market is experiencing increased competition in anticipation of new Individual Savings Accounts.
In Sweden, we continued to grow our market share from 13% to 14% through strong sales performance. New digital sales tools and successful efforts to activate individuals to transfer previously earned pensions rights to SPP were some key contributors to the growth.
Altogether, Storebrand’s Unit Linked reserves increased by 23% in 2019 and are expected to continue to grow by 12-15% annually under normal market conditions.
STRENGTHEN POSITION IN THE RETAIL SAVINGS MARKET – KEY RESULTS Within retail savings, the new sustainability concept “Bølge” gained traction. Our investment solution, focusing on Social Development Goal 7: Affordable and clean energy, had a return of 63.7% in 2019. Our partnership with the savings app Dreams continued to prove popular. The app had 150,000 downloads in Norway in 2019.
The growth in the bank’s mortgage lending stabilised from previous high growth levels. The bank’s profitability increased and ended the year with a return on equity of 10%.
APMs used in financial reporting at storebrand.com/ir. **) After tax. The profit is based on reported IFRS results for the individual companies. ***) Including transitional rules.
OUTLOOK The coming years will see important developments in the market for pensions, especially with the opportunity to enter the market for public sector pensions in 2020 and with Individual Pension Accounts being introduced in Norway in 2021. An overwhelming trend towards sustainable finance is an opportunity for Storebrand to capitalise on its long history of sustainable investments. Specific developments in the regulatory landscape and risks are described in separate chapters below.
Market Performance Financial market developments impact Storebrand’s solvency margin. Higher interest rates increase the solvency ratio and makes it easier to achieve returns above the guaranteed rate. Defined Contribution pension savings have large exposures to stocks meaning market movements will impact the fee income earned on assets under management. Currency movements between the Norwegian and Swedish krone affect the reported balance and results in SPP on a consolidated level.
Our loyalty programme for employees of companies with an occupational pension plan with Storebrand is important to succeed in the retail market. Our efforts, enabled by new digital solutions for our customers, are expected to foster loyalty to Storebrand and contribute to further growth in both retail savings and bank lending as well as growth in the Insurance business.
In the insurance business, we aim at 5% annual growth in portfolio premiums with a combined ratio of 90-92%. Efforts to increase the sale of P&C and other individual risk products have been successful. The profitability of the retail and corporate markets is considered to be satisfactory in general.
The Guaranteed Pension segment has been in long-term decline and flat growth in reserves is expected over several years before the reserves start to fall. Pensions are largely under payment, but the guaranteed return on reserves and continued build-up of buffers contribute to the flat development. Paid-up policies are still increasing as companies convert their old Defined Benefit plans to Defined Contribution plans and policyholders are entering retirement.
The Guaranteed segment remains a significant result contributor, albeit with declining importance and limited potential in the prevailing low-rate environment. Success in the public sector pension market will enable new profitable business within the segment.
The Group’s target is to have a solvency margin in accordance with Solvency II of at least 150%, including use of the transitional rules. The solvency margin for the Storebrand Group was estimated at 176% at the end of 2019, including transitional rules. Without the transitional rules, the solvency margin was 174%. Storebrand uses the standard model for the calculation of Solvency II.
The Storebrand Bank Group had pure core capital adequacy of 17.5% and capital adequacy of 19.6% at the end of 2019. The Bank Group has adapted to the new capital requirements. The company has satisfactory capital adequacy and liquidity based on its business activities. The lending portfolio consists primarily of low-risk home mortgages with an average LTV (loan-to-value) of 57%.
RATING Four companies in the Storebrand Group issue debt securities. All four companies are rated by the credit rating agency S&P Global. Storebrand Livsforsikring AS, the main operating entity, aims for at least an A- rating. In July 2019, the A- rating of Storebrand Livsforsikring AS and Storebrand Bank ASA was affirmed with a stable outlook. Storebrand Boligkreditt AS is rated AAA and the holding company Storebrand ASA is rated BBB.
50) For detailed information about our work on climate risk, please see pages 19-23.
Overall, 2019 saw a positive development in reported incidents. The number of reported incidents were 6% fewer compared to 2018 and the number of “high” risk incidents decreased by 8%. The risk picture differs between business units. The main risks are described per business unit below.
The greatest risk is disability risk. More persons than expected may be disabled and/or fewer disabled persons will be able to work again. Some policies provide a pay-out in the event of death, but Storebrand’s risk from this is limited.
For unit-linked insurance, the customer bears the financial market risk. The disbursements are generally time limited, and Storebrand bears low risk from increased life expectancy. For Storebrand, the risk from unit-linked insurance is primarily changes in future income or cost.
The traditional guaranteed products are closed for new business, but there is a large back-book of reserves. New premiums are mainly in Defined Contribution pensions (unit linked) or hybrid schemes with zero percent guarantee.
Other The Other unit encompasses the holding company Storebrand ASA, as well as the company portfolios and smaller subsidiaries of Storebrand Life Insurance and SPP. The assets in Storebrand ASA and the company portfolios are invested at low risk, primarily in investment grade short-term interest-bearing securities. Below are the most significant regulatory changes and their possible effect on Storebrand.
Sustainable finance The European Commission is working on regulations for sustainable finance. This is in line with the action plan for the financing of sustainable growth and aims to contribute to more investments in sustainable businesses, as well as increasing the robustness of the financial system with respect to climate- related risk.
Regulations will be introduced in three main areas: 1. A uniform taxonomy defining sustainable economic activities. 2. Requirements for disclosure on sustainable investments and sustainability risk.
NORWEGIAN REGULATIONS Individual Pension Accounts In April 2019 the Norwegian parliament passed legislation that will introduce individual pension accounts in the private sector Direct Contributions (DC) market. This is expected to come into force in 2021. Individual pension accounts will consolidate the DC market by transferring pension capital certificates from previous employers to a single pension account with the current employer’s pension provider. This transfer will occur automatically, unless the employee chooses to opt out. Employees can choose to transfer their pension earnings to a provider of own choice.
Transfers require new digital infrastructure for handling optouts and exchanging information and payments between companies. It is important for Storebrand to seek solutions that ensure a good implementation of the reform, while at the same time limiting additional administrative costs.
We are part of a multi-stakeholder Implementation Committee established by the Ministry of Finance.
Public service pensions New public sector occupational pensions will be introduced from 2020. We provide administration and asset management services for municipal pension funds and decided to enter the insured municipal pension market in 2019.
Contractual pensions (AFP) The Confederation of Trade Unions (LO) and Confederation of Norwegian Enterprise (NHO) are working on changes to the AFP scheme, as a basis for the negotiations during the annual wage settlement in the spring of 2020. Changes in the collectively agreed AFP scheme, making this a more predictable benefit for employees, could have an impact on demand for regular occupational pension.
Regulations for guaranteed products The Ministry of Finance is considering proposals from the Financial Supervisory Authority (FSA) regarding changes in guaranteed pension regulations. The FSA proposals follow up from a Working Group report on guaranteed pensions published in September 2018. The Working Group assessed the regulations for profit sharing and buffer building, as well as rules regulating the transfer of pension assets between providers: • The opportunity for companies to build up additional statutory provisions separately for individual contracts. • Merging the additional statutory reserves and the market value adjustment reserve into a new customer-distributed buffer reserve that could also cover negative returns.
• The opportunity for customers to choose faster disbursements for small paid-up policies.
The FSA also proposed removing the ability to book fixed income investments at amortised cost. Storebrand, alongside other pension providers, has advocated against this proposal. In the consultation paper, the Ministry of Finance points to the arguments against this and emphasises that such a change only will be considered should it prove to be significantly favorable to the customers.
The Ministry of Finance will decide on which proposals to put forward to parliament after a public consultation which ends in April 2020.
The Storebrand Group’s annual financial statements have been prepared in accordance with the International Financial Reporting Standards (IFRS). We the Board of Storebrand ASA confirm that we meet the conditions for preparing financial statements on the basis of a going concern, pursuant to Norwegian accounting legislation.
Our financial result is reported by business segment: Savings, Insurance, Guaranteed Pension and Other as well as on a consolidated Group level.
Storebrand achieved a group profit before amortisation of NOK 3,037 million (3,158 million). Group profit after tax was NOK 2,082 million (3,697 million). The figures in brackets show the comparative figures for the same period last year.
Fee and administration income increased by 6%. The underlying income performance is marked by growth in Defined Contribution occupational pensions. Improved relative performance in funds with performance fees contributes as well.
The insurance result had a combined ratio of 91% (82%), in line with target. Higher disability claims in 2019 and the dissolution of reserves in a 2018 explain the development in the result.
Overall, the operating profit amounted to NOK 2,298 million (NOK 2,516 million). The financial items and risk result increased 15% due to positive developments in financial markets compared to 2018.
Amortisation of intangible assets amounted to NOK 444 million (NOK 360 million). The increase stems partly from the acquisition of Cubera. Ordinary depreciation of intangible assets is expected to be around NOK 110 million per quarter in 2020.
The Group profit before tax was NOK 2,593 million (2,799 million ) resulting in a tax of NOK 511 million (NOK -898 million). In 2018, the booked tax income was a result of transitional effects related to new tax legislation in Norway. The effective tax rate is influenced by the different tax rates in the countries Storebrand has operations in. The tax rate is estimated to be between 21-23% for 2020. For more information on tax and uncertain tax positions, see Note 26. Storebrand has a policy for responsible taxation and publishes a separate tax transparency report52).
51) Profit before amortisation and taxes 52) See separate report on our website for more information
Financial Performance Total fee and administration income increased by 8% to NOK 3,996 million (NOK 3,709 million). The increase is attributed to underlying growth from volume growth, new business and higher savings rates as well as improved relative fund performance in funds with performance fees. Increased competition contributes to moderate margin pressure both for the Norwegian and the Swedish Unit Linked products. The bank achieved a higher net interest margins of 1.26% (1.22%) for mortgage lending to the retail market compared to the previous year. In Asset Management, growth in index-based products slowly leads to lower gross margins.
Profit before amortisation grew by 9% and amounted to NOK 1,364 million (1,257 million). Operational costs increased slightly in 2019 – partly explained by higher performance related costs but also by underlying growth in the business. The recent acquisition of Cubera is included with a profit of NOK 37 million.
Balance sheet and market performance Unit Linked premiums grew by 7% and amounted to NOK 17.2 billion. The total reserves (assets under management) in Unit Linked increased by 41 billion (23%) compared to the previous year and amounted to NOK 220 billion at the end of the 2019. Growth was driven by new sales, higher savings rates, growth from wage adjustments and good market returns. See the graph above.
In Norway, Storebrand retained its position as the market leader in Defined Contribution schemes, with a 29% market share. SPP is the fourth largest provider of non-unionised occupational pensions with a market share of 14%.
Assets under management in Storebrand Asset Management increased by NOK 124 billion or 18% compared to the previous year. This includes the consolidation of Cubera with NOK 20 billion. The increase was attributed to positive inflows and financial markets in 2019. At the end of year, assets under management amounted to NOK 831 billion divided into portfolios for Storebrand Life Insurance and SPP, institutional mandates and distributors, as well as retail savings.
*)Company capital of NOK 31 billion is not allocated to any of the customer segments but included in the sum
Financial performance The Insurance profit was NOK 439 million (748 million), with a total combined ratio of 91% (82%) in line with our profitability target. Insurance premiums for own account increased by 1.4% as a result of new growth initiatives in the retail market. The premium level was stable in the corporate market. The lower result and higher combined ratio is due to higher disability claims in 2019, as opposed to 2018 which was positively affected by dissolution of reserves. The underlying profitability and efficiency were good and showed satisfactory performance.
The cost percentage was 17% (16%). The increase is mainly explained by increased commission fees to the sales agents. The investment portfolio of Insurance in Norway amounted to NOK 8.3 billion (NOK 8.1 billion), which is primarily invested in fixed income securities with a short or medium duration. Financial returns increased in 2019 due to higher short-term rates.
The corporate market is competitive and more mature with a strong focus on price. In Sweden, the disability trend has been declining for a long time, which has resulted in better results. Health insurance is a growing market with good profitability and where Storebrand is one of the market leaders. Storebrand is a relatively small provider in the market for Group life insurance. The claims ratio has been high, but price increases are implemented as of January 2020 in order to improve the result.
Fee and administration income in 2019 was in line with the previous year and amounted to NOK 1,475 million (NOK 1,440 million). This is consistent with the fact that the products are in long-term decline. Norwegian Paid-up policies had a 12% increase in income in 2019, while SPP and Norwegian Defined Benefit experienced 2% and -3% growth, respectively. Operating costs remained flat compared to 2018 and have declined over time, as a result of the area being in long-term decline.
OTHER Satisfactory returns in company portfolios contributed to a positive financial result in the Other segment.
Allocation of the profit for the year for Storebrand ASA NOK million 2019 2018
Net income from financial assets and properties for the company: - equities and other units at fair value 15 40 -10 - bonds and other fixed-income securities at fair value 15 600 286 - financial derivatives at fair value 15 7 50 - loans at fair value 15 14 4 - bonds at amortised cost 15 214 116 - loans at amortised cost 15 802 665 - profit from investments in associated companies/joint controlled operation 29 39 46
Net income from financial assets and properties for the customers: - equities and other units at fair value 15 37,318 -5,249 - bonds and other fixed-income securities at fair value 15 4,167 737 - financial derivatives at fair value 15 1,424 -2,111 - loans at fair value 15 11 136 - bonds at amortised cost 15 3,912 4,254 - loans at amortised cost 15 546 544 - profit from investments in associated companies 29 341 303
Profit/loss for the year due to: Share of profit for the period - shareholders 2,067 3,684
Share of profit for the period - hybrid capital investors 12 9
Average number of shares as basis for calculation (million) 466.8 467.2
Tax on other comprehensive income elements not to be classified to profit/loss 12 1
Total other comprehensive income elements not to be classified to profit/loss 15 -25
Share of total comprehensive income - hybrid capital investors 12 9
Financial assets at amortised cost: - Loans to financial institutions 10,30 41 318
Financial assets at fair value: - Equities and other units 8,12,30,35 323 295 - Bonds and other fixed-income securities 8,10,12,30,36 28,512 24,055
Total comprehensive income for the period -350 3,636 3,286 9 2 3,297
2) Includes undistributable funds in the risk equalisation fund amounting to NOK 466 million and security reserves amounting NOK 62 million.
Net cash flow from operations before financial assets and banking customers 6,589 -3,735
Net cash flow from financial assets and banking customers -7,329 5,045
Cash and cash equivalents at start of the period 3,951 3,780
Operational activities A substantial part of the activities in a financial group will be classified as operational. All receipts and payments from insurance activities are included from the insurance companies, and these cash flows are invested in financial assets that are also defined as operational activities. One subtotal is generated in the statement that shows the net cash flow from operations before financial assets and banking customers, and one subtotal that shows the cash flows from financial assets and banking customers. This shows that the composition of net cash flows from operational activities for a financial group includes cash flows from both operations and investments in financial assets. The life insurance companies’ balance sheets include substantial items linked to the insurance customers that are included on the individual lines in the cash flow analysis. Since the cash flow analysis is intended to show the change in cash flow for the company, the change in bank deposits for insurance customers is included on its own line in operating activities to neutralise the cash flows associated with the customer portfolio in life insurance.
Note 1: Company information and accounting policies 1. Company information Storebrand ASA is a Norwegian public limited company that is listed on the Oslo Stock Exchange. The consolidated financial statements for 2019 were approved by the Board of Directors of Storebrand ASA on 11 February 2020.
The Storebrand Group offers a comprehensive range of insurance and asset management services, as well as securities, banking and investment services, to private individuals, companies, municipalities, and the public sector. The Storebrand Group consists of the business areas Savings, Insurance, Guaranteed Pensions and Other. The Group’s head office is located at Professor Kohts vei 9, in Lysaker, Norway.
The Storebrand Group has conducted a provisional analysis of the classification and measurement of financial instruments in accordance with the present IAS 39 for the transition to IFRS 9, based on the current business model for the individual instruments. For financial instruments that are expected to be classified and measured at amortised cost or fair value through total comprehensive income upon transition to IFRS 9, a SPPI (“Solely payment of principal and interest”) test is carried out. This is a provisional categorisation under IFRS 9, based on the present asset allocation. No assessments have been made of any changes in classification and measurement of financial assets under IFRS 9 in connection with the transition to IFRS 17.
Bonds and other fixed-income securities AC AC 109,126 114,164 111,424 116,161
Accounts receivable and other short-term receivables AC AC 8,018 8,018 5,273 5,273
Shares and fund units FVP&L (FVO) FVP&L 157,361 157,361 194,343 194,343
Bonds and other fixed-income securities FVP&L (FVO) FVP&L 157,586 157,586 156,639 156,639
4. Changes in accounting policies Anew accounting standard was implemented in 2019 - IFRS 16 Leases. For changes in estimates, see Note 2 for further information.
5. New IFRS that have not entered into force New standards and changes in standards that have not come into effect
IFRS 17 is a comprehensive and complex standard, with fundamental differences to the present standard for measuring liabilities and recognising earnings. Insurance contracts must be recognised at the risk-adjusted present value of future cash flows, with the addition of unearned profit in a group of contracts (Contractual Service Margin = CSM). Loss-making contracts must be recognised immediately.
Storebrand Livsforsikring AS, Storebrand Asset Management AS, Storebrand Bank ASA and Storebrand Forsikring AS are significant subsidiaries owned directly by Storebrand ASA. Storebrand Livsforsikring AS also owns the Swedish holding company Storebrand Holding AB, which in turn owns SPP Pension & Försäkring AB (publ). On acquiring the Swedish operations in 2007, the authorities instructed Storebrand to make an application to maintain a group structure by the end of 2009. Storebrand has filed an application to maintain the existing group structure. A controlling interest in Skagen AS was acquired in 2017 and is owned by Storebrand Asset Management AS. The Norwegian authorities have granted Storebrand an exemption from the requirement to organise equivalent businesses in the same company. This exemption expires in 2022.
7. Business combinations The acquisition method is applied when accounting for acquisition of businesses. The consideration is measured at fair value. The direct acquisition expenses are expensed when they arise, with the exception of expenses related to raising debt or equity (new issues).
Intangible assets with limited useful economic lives are measured at acquisition cost less accumulated amortisation and any write downs. The useful life and amortisation method are measured each year. With initial recognition of intangible assets in the balance sheet, it must be demonstrated that probable future economic benefits attributable to the asset will flow to the Group. The cost of the asset must also be measured reliably. The value of an intangible asset is tested for impairment when there are indications that its value has been impaired. In other respects intangible assets are subject to write-downs and reversals of write-downs in the same manner as described for tangible fixed assets.
If there is objective evidence that impairment has occurred, the amount of the loss is measured as the difference between the asset’s carrying amount and the present value of the estimated future cash flows (excluding future credit losses that have not occurred),
discounted at the financial asset’s original effective interest rate (i.e. the effective interest rate calculated at initial recognition). The amount of the loss is recognised in the income statement.
Cash flow hedging Some borrowing in foreign currency is hedged by means of hedging instruments (derivatives). Storebrand uses cash flow hedging of the foreign exchange risk on the principal amount and foreign exchange risk for the credit margin. The net ongoing changes in value in the hedging instrument that is considered effective hedging are recognised in total comprehensive income and the non-effective share must be recognised through profit or loss.
13-5. Financial liabilities Subsequent to initial recognition, all financial liabilities are primarily measured at amortised cost using an effective interest method.
Pursuant to IFRS 4, provisions for insurance liabilities must be adequate. When assessing the adequacy associated with recognised acquired insurance contracts, reference must also be made to IAS 37 Provisions, Contingent Liabilities and Contingent Assets, and Solvency II calculations.
A substantial proportion of the Norwegian insurance contracts have a one-year interest rate guarantee, meaning that the guaranteed return must be achieved every year. In the Swedish business, there are no contracts with an annual interest rate guarantee, but there are insurance contracts with a terminal value guarantee.
Selling costs Selling costs in the Norwegian life insurance business are expensed, whilst in the Swedish subsidiaries, selling costs are recorded in the balance sheet and amortised over the expected duration of the contract.
14-2. Life insurance – Norway Additional statutory reserves The company is allowed to make allocations to the additional statutory reserves to ensure the solvency of its life insurance business. These additional reserves are divided among the contracts and can be used to cover a negative interest result up to the interest rate guarantee. In the event that the company does not achieve a return that equals the interest rate guarantee in any given year, the allocation can be reversed from the contract to enable the company to meet the interest rate guarantee. This will result in a reduction in the additional statutory reserves and a corresponding increase in the premium reserve for the contract. For allocated annuities, the additional statutory reserves are paid in instalments over the disbursement period.
Risk equalisation reserve Up to 50 per cent of the positive risk result for group pensions and paid-up policies can be allocated to the risk equalisation fund to cover any future negative risk result. The risk equalisation reserve is not considered to be a liability according to IFRS and is included as part of the equity (undistributable equity).
14-3. Life insurance Sweden Life insurance liabilities The life insurance liabilities are estimated as the present value of the expected future guaranteed payments, administrative expenses and taxes, discounted by the current risk-free interest rate. Insurance reserves with guaranteed interest rates in SPP use a markedbased yield curve. A real discount curve is used for risk insurance within the defined-contribution portfolio. For endowment insurance within the defined-benefit and defined-contribution portfolios, as well as sickness insurance in the defined-benefit portfolio, the provisions are discounted using the nominal yield curve. As a starting point, the applicable discount rate is determined based on the methods used for the discount rate in Solvency II.
15-1. Defined-benefit scheme Pension costs and pension obligations for defined-benefit pension schemes are determined using a linear accrual formula and expected final salary as the basis for the entitlements, based on assumptions about the discount rate, future salary increases, pensions and National Insurance benefits, future returns on pension plan assets as well as actuarial estimates of mortality, disability and voluntary early leavers. The net pension cost for the period comprises the total of the accrued future pension entitlements during the period, the interest cost on the calculated pension liability and the calculated return on pension plan assets.
Properties used for the Group’s own activities are measured at appreciated value less accumulated depreciation and write-downs. The fair value of these properties is tested annually in the same way as described for investment properties. The increase in value for buildings used by the Group for its own activities is recognised through total comprehensive income. Any write-down of the value of such a property is recognised first in the revaluation reserve for increases in the value of the property in question. If the write-down exceeds the revaluation reserve for the property in question, the excess is expensed over the income statement.
The value of a tangible fixed asset is tested when there are indications that its value has been impaired. Any impairment losses are charged to the income statement as the difference between the carrying value and the recoverable amount. The recoverable amount is the greater of the fair value less costs of sale and the value in use. On each reporting date it is determined as to whether there is a basis for reversing previous impairment losses on non-financial assets.
19. Leases Leases are recognised in the balance sheet. The present value of the combined lease payments shall be recognised on the balance sheet as debt and an asset that reflects the right of use of the asset during the lease period. Storebrand has chosen to classify the right to use the asset as tangible fixed assets and the lease liability as other debt. The recognised asset is amortised over the lease period and the depreciation expense is recognised as an operating expense on an ongoing basis. The interest expense on the lease liability is recognised as a financial expense. Leases with a duration of less than 12 months and leases that include assets valued at less than approximately NOK 50,000 will not be recognised in the balance sheet, but will be recognised as an operating expense over the lease period.
A description of the most important elements and assessments in which discretion is used and which may influence recognised amounts or key figures is provided below and in Note 13 for Solvency II and in Note 26 for Tax.
Insurance contracts Insurance risk is the risk of higher than expected payments and/or unfavourable changes in the value of an insurance liability due to the actual development differing from what was expected when premiums or provisions were calculated.
In the long term, a low interest rate will represent a challenge for insurance contracts with a guaranteed interest rate and, together with a reduced customer buffer, may have an impact on the amount recorded that is linked to the insurance contracts. The Norwegian insurance contracts with guaranteed interest rates are discounted at the premium calculation rate (around 3.2 per cent). The Swedish insurance liabilities with guaranteed interest rates have been discounted by a yield curve that coincides with the Solvency II yield curve.
Financial instruments at fair value There will be some uncertainty associated with the pricing of financial instruments, particularly instruments that are not priced in an active market. This is particularly true for the types of securities priced on the basis of non-observable assumptions, and for these investments various valuation techniques are applied in order to fix fair value. These include private equity investments, investments
in foreign properties, and other financial instruments where theoretical models are used in pricing. Any changes to the assumptions could affect recognised amounts. The majority of such financial instruments are included in the customer portfolio.
Cubera On 11 February, Storebrand Asset Management AS entered into an agreement to acquire Cubera Private Equity AS [Cubera]. Cubera is a Nordic firm offering investors exposure to Nordic private equity primarily through the secondary market. The firm is a leading player within Nordic private equity and has around NOK 9 billion under management, mainly from international investors.
The purchase price of the acquisition was NOK 329 million and was settled with cash only. The purchase price may increase with up to NOK 225 million related to fundraising to new funds managed by Cubera.
NOK million Book values in the company Excess value upon acquistion Book values
Cash payment 329 1) Estimated present value earnout at acquisition date
Guaranteed pension The guaranteed Pension segment includes long-term pension savings products that give customers a guaranteed rate of return. The area includes defined benefit pensions in Norway and Sweden, paid-up policies and individual capital and pension insurances.
Claims consist of paid-out claims and changes in provisions for claims incurred but not reported (IBNR) and claims reported but not settled (RBNS) relating to risk products that are classified as claims in the Group’s income statement.
The financial result consists of the return for the company portfolios of Storebrand ASA, Storebrand Livsforsikring AS and SPP Pension & Försäkring AB (Other segment), while returns for the other company portfolios in the Group are a financial result within the segment which the business is associated with. Returns on company portfolios are classified as net income from financial assets and property for companies in the Group’s income statement. The financial result also includes returns on customer assets relating to products within the insurance segment, and in the Group’s income statement this item will be entered under net income from financial assets and property for customers. In the alternative income statement, the result before tax of certain unimportant subsidiaries is included in the financial result, while in the Group’s income statement, this is shown as other income, operating costs and other costs.
Individual endowment insurance and pensions written by the Group prior to 1 January 2008 will continue to apply the profit rules effective prior to 2008. New contracts may not be established in this portfolio. The Group can retain up to 35 per cent of the total result after allocations to additional statutory reserves.
In the case of defined-benefit contracts (KF portfolio), the company is entitled to charge an indexing fee if the group profit allows the indexing of the insurance. Indexing is allowed up to a maximum equalling the change in the consumer price index (CPI) between the previous two Septembers. Pensions that are paid out are indexed if the consolidated figures on 30 September exceed 107 per cent, and half of the fee is charged. The whole fee is charged if the consolidated figures on 30 September exceed 120 per cent, in which case paid-up policies can also be included. The total fee equals 0.8 per cent of the insurance capital.
Loan losses: balance sheet of Storebrand Bank Group. In the Group’s income statement, the item is classified under loan losses. With regard to loan losses that are on the balance sheet of the Storebrand Livforsikring Group, these will not be included on this line in either the alternative income statement or in the Group’s income statement, but in the Group’s income statement will be included in the item, net income from financial assets and property for customers.
Financial items and risk result life & pension 296 93 739 642
Continuous monitoring and active risk management are core areas of the Group’s activities and organisation. The basis for risk management is laid down in the Board’s annual review of the strategy and planning process, which sets the appetite for risk, risk targets and overriding risk limits for the operations. At the Storebrand Group, responsibility for risk management and internal control is an integral part of management responsibility.
The internal audit function is organised directly under the Board and shall provide the boards of the relevant consolidated companies with confirmation concerning the appropriateness and effectiveness of the company’s risk management, including how well the various lines of defence are working.
Storebrand’s IT systems are vital for operations and reliable financial reporting. Errors and disruptions may have consequences for commercial operations and can impact on the trust the Group has from both customers and shareholders. In the worst case, abnormal situations can result in penalties from the supervisory authorities. Storebrand’s IT platform is characterised by complexity and integration between different specialist systems and joint systems. The operation of the IT systems has largely been outsourced to different service providers. A management model has been established with close follow-up of providers and internal control activities in order to reduce the risk associated with the development, administration and operation of the IT systems, as well as information security. The bank platform and insurance platform are based on purchased standard systems that are operated and monitored through outsourcing agreements. There is a greater degree of own development for the life insurance activities, while parts of the operation of this have also been outsourced. The unit administration linked to the savings part of the group defined -contributed based occupational pension and unit linked products is managed in a purchased system solution.
2. Disability – The risk of erroneous estimation of future illness and disability. There will be uncertainty associated with the future development of disability, including disability pensioners who are returned to the workforce. 3. Death – The risk of erroneous estimation of mortality or erroneous estimation of payment to surviving relatives.
The Other segment also includes the insurance risk at Euroben, which offers pension products to multinational companies. The insurance risk primarily relates to group life insurance, early retirement pensions and pensions for expatriate employees. These are defined-benefit pensions that can be time-limited or lifelong and the insurance risk is limited.
The new public sector occupational pension enters into force from 2020 and includes retirement pensions in the public sector. The new scheme is a premium pension and is a net pension recognisable from the private sector. Premium pension means that the pension is accrued each year based on the employee’s salary. This is as opposed to the previous schemes whereby the pension was calculated based on the final salary. The premium pension ensures a life-long retirement pension, and the retirement pension can be fully or partly withdrawn from and including the age of 62 until and including the age of 75. Payment of the pension will start at the age of 75 regardless. Members who are not entitled to an AFP are given a conditional occupational pension as a supplement to the retirement pension.
Management of insurance risk Insurance risk is monitored separately for every line of insurance in the current insurance portfolio. The development of the risk results is followed throughout the year. For each type of risk, the ordinary risk result for a period represents the difference between the risk premiums the company has collected for the period and the sum of provisions and payments that must be made for insured
The market risk in unit linked insurance is at the customers’ risk and expense, meaning Storebrand is not directly affected by changes in value. Nevertheless, changes in value do affect Storebrand’s profit indirectly. Income is based largely on the size of the reserves, while the costs tend to be fixed. Lower than expected returns on the financial market will therefore have a negative effect on Storebrand’s future income and profit.
The most significant market risks facing guaranteed customer portfolios are linked to equity risk, interest rate risk, credit risk and property price risk. There were no major changes in the investment allocation during 2019. In Norway, most of the credit risk is linked to securities, which are carried at amortised cost. This reduces the risk to the company’s profit significantly.
In the consolidated financial statements, the value of assets and results from the Swedish operations are affected by changes in the value of the Swedish krone. Storebrand Livsforsikring AS has hedged parts of the value of SPP through forward foreign exchange contracts and borrowings in Swedish kroner..
Total net currency positions 2018 5,152 1) Equity and bond funds denominated in NOK with foreign currency exposure in i.a. EUR and USD NOK 28 billion.
The percentage distribution of the insurance reserves by the various basic annual interest rates as at 31 December is as follows: Interest rate 2019 2018
There is a 0 per cent interest rate guarantee for premium funds, defined-contribution funds, pensioners’ surplus funds and additional statutory reserves.
Interest rate risk is in a special position because changes in interest rates also affect the fair value of the insurance liability for the solvency calculation. Since pension disbursements may be many years in the future, the insurance liability is particularly sensitive to changes in interest rates. In the Norwegian business, greater interest rate sensitivity from the investments will entail increased risk
SPP bears the risk of achieving a return equal to the guaranteed interest on the policyholders’ assets over time and that the level of the contracts’ assets is greater than the present value of the insurance liabilities. For IF, profit sharing becomes relevant in SPP if the return exceeds the guaranteed yield. The contracts’ buffer capital must be intact in order for profit sharing to represent a net income for SPP. In the case of KF, a certain degree of consolidation, i.e. that the assets are greater than the present value of the liabilities by a certain percentage, is required in order for the owner to receive profit-sharing income (indexing fee).
If the assets in an insurance contract in the company are less than the market value of the liability, an equity contribution is allocated that reflects this shortfall. This is termed a deferred capital contribution (DCC), and changes in DCC are recognised in the income statement as they occur. When the contracts’ assets exceed the present value of the liabilities, a buffer, which is termed the conditional bonus, is established. Changes in this customer buffer are not recognised in the income statement.
Unit linked insurance without a guaranteed annual return is not included in the analysis. For these products, the customers bear the market risk and the effect of a falling market will not directly affect the result or buffer capital.
For the insurance companies, the life insurance companies in particular, the insurance liabilities are long-term and the cash flows are generally known long before they fall due. In addition, liquidity is required to handle payments related to operations, and there are liquidity needs related to derivative contracts. The liquidity risk is handled by liquidity forecasts and the fact that portions of the investments are in very liquid securities, such as government bonds. The liquidity risk is considered low based on these measures.
NOK million 0-6 months 7-12 months 2-3 years 4-5 years > 5 years Total cashflows Total booked value
Debt raised from issuance of securities 4,115 497 11,381 4,037 -8 20,022 18,729
Lending commitments 1,466 1,466 1) Liabilities for which repayment may be demanded immediately are included in the 0-6 month column.
The maximum limits for credit exposure to individual counterparties and for overall credit exposure to rating categories are set by the boards of the individual companies in the Group. Particular attention is paid to ensuring diversification of credit exposure in order to avoid concentrating credit exposure on any particular debtors or sectors. Changes in the credit standing of debtors are monitored and followed up. Thus far, the Group has used published credit ratings wherever possible, supplemented by the company’s own credit evaluation.
Total interest bearing securities stated by rating 47,403 22,073 25,805 27,505 734 12,569 136,089
Of which derivatives in bond funds, managed by Storebrand 167 109 18 294
Total bank deposits excluding bank deposits in bond funds 2018 376 6,303 2,218 15 159 19 9,090
NOK million Booked value fin. assets Booked value fin. liabilites Net booked fin.
Sale and operation of real estate 10,597 1 10,598 22 -9 13
The majority of the loans at Storebrand consist of home loans to retail market customers. The home loans are approved and administered by Storebrand Bank, but a significant share of the loans have been transferred to Storebrand Livsforsikring as a part of the investment portfolio. Storebrand Livsforsikring and SPP also have loans to companies as part of the investment portfolio. Storebrand Bank’s corporate market segment has largely been discontinued.
The corporate market portfolio consists of income generating properties and development properties with few customers and low level of default that are primarily secured by mortgages in commercial property. Storebrand Bank’s corporate market loans segment has largely been discontinued.
In the case of default, Storebrand Bank ASA will sell the securities or repossess the properties if this is most suitable.
Most of the risk for the Storebrand Group relates to the guaranteed pension products in the life insurance companies. These risks are consolidated in the Storebrand Life Insurance Group, which includes Storebrand Livsforsikring AS, SPP Livförsäkring AB and the business in Ireland (BenCo). Other companies directly owned by Storebrand ASA that are exposed to significant risks are Storebrand Forsikring AS, Storebrand Helseforsikring AS, Storebrand Asset Management Group and Storebrand Bank Group.
For the life insurance businesses, the greatest risks are largely the same in Norway and Sweden. The financial market risk will depend significantly on global circumstances that influence the investment portfolios in all businesses. The insurance risk may be different for the various companies, and long life in particular can be influenced by universal trends.
Level 1: Financial instruments valued on the basis of quoted prices for identical assets in active markets This category encompasses listed equities that over the previous three months have experienced average daily trading equivalent to approximately NOK 20 million or more. Based on this, the equities are regarded as sufficiently liquid to be included at this level.
Level 2: Financial instruments valued on the basis of observable market information not covered by level 1 This category encompasses financial instruments that are valued on the basis of market information that can be directly observable or indirectly observable. Market information that is indirectly observable means that the prices can be derived from observable related markets. Level 2 includes shares or equivalent equity instruments for which market prices are available, but where the volume of transactions is too limited to fulfil the criteria in level 1. Shares in this level will normally have been traded during the last month. Bonds and equivalent instruments are generally classified in this level. Moreover, interest rate and foreign exchange swaps, as well as non-standardised interest rate and foreign exchange derivatives are classified as level 2. Fund investments, with the exception of private equity funds, are generally classified as level 2, and encompass equity, interest rate, and hedge funds.
Fund units Of the fund units, it is primarily private equity investments and property funds that represent the majority at level 3. Moreover, there are also some other types of funds, such as infrastructure funds and microfinance, loan funds and property funds here. The majority of Storebrand’s private equity investments are investments in private equity funds. These fund investments are valued based on the value reported by the funds. Most of the funds report on a quarterly basis, while a few report less often. Reporting typically takes place with a few months’ delay. The most recently received valuations are used as a basis, adjusted for cash flows and market effects in the period from the most recent valuation until the reporting date. For private equity, the market effect is calculated based on the development in value in the relevant index, multiplied by the estimated beta in relation to this index.
Investment properties The investment properties primarily consist of office buildings located in Oslo and Stockholm and shopping centres in Southern Norway.
Office properties and shopping centres in Norway: When calculating fair value, Storebrand uses an internal cash flow model. The required rate of return is of greatest importance when calculating the fair value for investment properties. Net cash flows for the individual property are discounted by an individual required rate of return. A future income and expense picture for the first 10 years has been estimated for the office properties and a final value has been calculated for the end of the 10th year based on market rent and normal operating costs for the property. In the net income stream, consideration has been made to existing and future loss of income due to vacancy, necessary investments and an assessment of the future development in the market rent. The majority of new contracts that are entered into have a duration of five or ten years. The cash flows from these lease agreements (contractual rent) are included in the valuations. To estimate the long-term, future non-contractual rental incomes, a forecasting model has been developed. The model is based on historical observations in Dagens Næringsliv’s property index (adjusted by CPI) and market estimates. A long-term, time-weighted average of the annual observations is calculated in which the oldest observations are weighted with the lowest importance. For non-contractual rent in the short-term, the current rental prices and market situation are used.
External valuation: For properties in the Norwegian business, a methodical approach is taken to a selection of properties that are to be externally valued each quarter so that all properties have had an external valuation at least every three years. In 2019, external valuations were obtained for properties worth NOK 16 billion (77 per cent of the portfolio’s value as of 31 December 2019).
As of 31.12.19, Storebrand Livsforisikring had NOK 4.044 million invested in Storebrand Eiendomsfond Norge KS and Ruseløkkveien 26, Oslo. The investments are classified as “Investment in associated Ccmpanies and joint ventures” in the Consolidated Financial Statements.
Loans to and due from financial institutions 41 41 41 318 318
Fund units Large portions of the portfolio are private equity funds invested in companies priced against comparable listed companies The valuation of the private equity portfolio will thus be sensitive to fluctuations in global equity markets. The private equity portfolio has an estimated Beta relative to the MSCI World (Net – currency hedged to NOK) of around 0.46
Consolidation is carried out in accordance with Section 18-2 of the Norwegian Act relating to Financial Undertakings and Financial Groups. The solvency capital requirement and minimum capital requirement for the group are calculated in accordance with Section 46 (1)-(3) of the Solvency II Regulations using the standard method and include the effect of the transitional arrangement for shares pursuant to Section 58 of the Solvency II Regulations.
Subordinated capital for subsidiaries regulated in accordance with CRD IV 2,970 3,311
Total solvency capital available to cover the minimum capital requirement 38,614 35,542 1,114 1,958 34,623
Capital requirements for subsidiaries regulated in accordance with CRD IV 2,683 2,482
Total gains and losses on financial assets at fair value 4,720 4,554 34,307 43,581 661 42,920 -6,155 - of which FVO (fair value option) 3,781 10 -16 3,775 138 3,158
Total gains and losses on financial assets at amortised cost 5,463 11 5,474 1,016 4,457 5,579
Realised losses on loans where provisions have previously been made -21 -25
Write-downs/income recognition for loans and guarantees for the period -3 -23
Operating expenses (including maintenance and repairs) relating to properties that have provided rent income during the period 2) -346 -327
Allocation by company and customers: Total income from properties 1,864 1,487
Guaranteed pension: Defined Benefit (fee based) Storebrand Life Insurance -1,218 -1,219
At end of the policy year 513 685 793 797 760 825 - four years later 478 641 - five years later 472
Average number of person-years 1,753 1,747 1) Including Storebrand Helseforsikring with 100 per cent.
The premiums and content of the defined-contribution pension scheme are as follows: • Saving starts from the first krone of salary. • Savings rate of 7 per cent of salary from 0 to 12 G (the National Insurance basic amount ”G” was NOK 99,858 at 31 December 2019) • In addition, 13 per cent of salary between 7.1 and 12 G is saved. • Savings rate for salary over 12 G is 20 per cent.
The Norwegian companies participate in the Joint Scheme for Collective Agreement Pensions (AFP). The private AFP scheme provides a lifelong supplement to an ordinary pension and is a multi-employer pension scheme, but there is no reliable information available for inclusion of this liability on the statement of financial position. The scheme is financed by means of an annual premium that is defined as a percentage of salaries from 1 G to 7.1 G, and the premium rate was 2.5 % in 2019. Storebrand employees in Norway who were born before 1 January 1956 can choose between drawing an AFP scheme pension or retiring at the age of 65 and receiving a direct pension from the company until they reach the age of 67. Employees can choose to receive benefits from the AFP scheme from the age of 62 and still continue to work.
NOK million 2019 2018 Present value of insured pension liabilities 1,062 1,018 Fair value of pension assets -994 -913 Net pension liabilities/assets insured scheme 68 105 Present value of unsecured liabilities 196 213 Net pension liabilities recognised in statement of financial position 264 317
NOK million 2019 2018 Pension assets 2 5 Pension liabilities 266 322
For the Norwegian companies that have converted to defined contribution pensions as of 1 January 2015, the sensitivity has not been calculated, and the figures below illustrate the sensitivity for the Swedish companies.
The following estimates are based on facts and circumstances as of 31 December 2019 and are calculated for each individual when all other assumptions are kept constant: SWEDEN
Percentage change in pension: - The period's net pension costs -12% 15% 7% -6% -1% -1%
3) Employees can borrow up to NOK 7.0 million at a subsidised interest rate, which is set at 42 bp below the best current market interest rate. Excess loan amounts will be subject to market terms.
5) Senior employee only part of the year 6) Senior employee from August. Reported remuneration is for the total year
Arne Fredrik Håstein 366 3,135 5,404 1) 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. the Accounting Act, Section 7-26.
The statement is worded as follows: The Board of Directors of Storebrand ASA has had a dedicated Compensation Committee since 2000. The Compensation Committee is tasked with making a recommendation to the Board of Directors concerning all matters regarding the Company’s remuneration of its Chief Executive Officer. The Committee is responsible for keeping itself informed and proposing guidelines for the determination of remuneration of executive employees in the Group. The Committee also acts as an advisory body to the Chief Executive Officer with regard to remuneration schemes that encompass all employees of the Storebrand Group, including Storebrand’s bonus and pension schemes. The Compensation Committee satisfies the follow-up requirements set forth in the remuneration schemes.
Storebrand Asset Management AS has two subsidiaries, Skagen AS and Cubera Private Equity AS, each of which has its own board-appointed compensation committee and separate guidelines for financial remuneration. The Group’s guidelines will therefore not directly apply for these two subsidiaries in 2020.
The salaries of executive employees are determined based on the position’s responsibilities and level of complexity. Comparisons with equivalent external positions are regularly made in order to adjust the salary level to the market rates. Storebrand does not wish to be a pay leader in relation to the industry.
Bonus scheme and other benefits The Group’s executive management team and executive personnel who have a significant influence on the Company’s risk receive only fixed salaries. Some members of the executive management have fringe benefits in the form of a car allowance and fixed amounts for coverage of expenses for newspaper, telephone and electronic communication. These are arrangements linked to employment contracts entered into in the past and are not included in new contracts.
2. BINDING GUIDELINES FOR SHARES, SUBSCRIPTION RIGHTS, OPTIONS, ETC. FOR THE UPCOMING 2020 FINANCIAL YEAR To ensure that the Group’s executive management team has incentive schemes that accord with the long-term interests of the owners, a proportion of the fixed salary will be linked to the purchase of physical Storebrand shares with a lock-in period of three years. The Chief Executive Officer may decide that a limited group of employees shall be covered by an equivalent scheme. The purchase of shares will take place once a year.
In the opinion of the Board of Directors, this has a positive effect on the Company and the shareholders, given the structure of the scheme and the size of each executive vice president’s portfolio of shares in Storebrand ASA.
Tax effect of realised/unrealised shares -64 -112 share dividends received 32 12 associated companies 3 11 permanent differences 52 1,681 deferred tax on the increase in value of properties for customer assets 1) -451 deferred tax on the increase in value of properties for customer assets covered by customer returns 1) 451 change in tax rate 16 6
1) Provisions are made for deferred tax on the increase in value during the ownership of real estate in SPP Fastigheter AB in accordance with IAS 12 and guiding principles for consolidation. The real estate investments are made on behalf of the customer assets. Each real estate is owned by a separate investment company, and a sale of real estate itself would entail a tax expense that will reduce the return on the customer assets and will not affect the income tax for SPP / Storebrand. The deferred tax is in the consolidated financial reporting recognised as a claim on the customer funds and will not affect the income tax expense for SPP / Storebrand. Deferred tax relating to real estate investments in the customer assets is not netted against other temporary differences in the balance sheet.
A. In 2015, Storebrand Livsforsikring AS discontinued the Norwegian subsidiary, Storebrand Eiendom Holding AS, with a tax loss of approximately NOK 6.5 billion and a corresponding increase in the tax loss carryforward. In January 2018, Storebrand Livsforsikring AS received notice of an adjustment to the tax returns for 2015 which claimed that the calculated loss was excessive, but provided no further quantification. Storebrand Livsforsikring AS disagrees with the arguments that were put forward and submitted its response to the Norwegian Tax Administration on 2 March 2018. The notice was unclear, but based on the notice, a provision was made in the 2017 annual financial statements for an uncertain tax position of approximately NOK 1.6 billion related to the former booked tax loss (appears as a reduction in the loss carryforward and, in isolation, gave an associated increased tax expense for 2017 of approximately NOK 0.4 billion). In May 2019, Storebrand Livsforsikring AS received a draft decision from the Norwegian Tax Administration claiming changes in the tax return from 2015. Storebrand disagrees with the notice from the Norwegian Tax Administration and submitted its response in October 2019. The company considers it to be preponderance that Storebrand’s understanding of the tax legislation will be accepted by a court of law and thus, no uncertain tax position has been recognised in the financial statements based on the recieved draft decision. If the Norwegian Tax Administration’s position is accepted, Storebrand estimates that a tax expense for the company of approximately NOK 1.2 billion will arise. There will also be negative effects for returns on customer assets after tax. The effects are based on best estimates and following a review with external expertise. B. New tax rules for life insurance and pension companies were introduced for the 2018 financial year. These rules contained transitional rules for how the companies should revalue/ write-down the tax values as at 31 December 2018. In December 2018, the Norwegian Directorate of Taxes published an interpretive statement that Storebrand does not consider to be in accordance with the wording of the relevant act. When presenting the national budget for 2020 in October 2019, the Ministry of Finance proposed a clarification of the wording of the transitional rules in line with the interpretive statement from the Norwegian Directorate of Taxes. The clarification was approved by the Norwegian Parliament in December 2019. Storebrand considers there to be uncertainty regarding the value such subsequent work on a legal rule has as a source of law, and which in this instance only applies for a previous financial year. In the tax return for 2018, Storebrand Livsforsikring AS applied the wording in the original transitional rule, but in October 2019 received a notice of adjustment of tax assessment in line with the interpretive statement from the Norwegian Directorate of Taxes and the clarification from the Ministry of Finance. Storebrand Livsforsikring AS disagrees with the Norwegian Tax Administration’s interpretation, but considers it uncertain as to whether the company’s interpretation will be accepted if the case is decided by a court of law. The uncertain tax position has therefore been recognised in the financial statements. Based on our best estimate, the difference between Storebrand’s interpretation and the Norwegian Tax Administration’s interpretation is approximately NOK 4.2 billion in an uncertain tax position. If Storebrand’s interpretation is accepted, a deferred tax expense of approximately NOK 1 billion will be derecognised from the financial statements.
Accumulated depreciation and write-downs 01.01 -567 -6,745 -880 -305 -8,498 -8,139
NOK million Useful economic life Depr. rate Depr. method Book value 2019
In calculating the entity specific value, the management have made use of budgets and forecasts approved by the Board of Directors for the next three years (2020-2022). The management has made assessments for the period from 2023 to 2029, and the annual growth rate for the elements in the income statement have been estimated. When calculating the terminal value, a growth rate equivalent to Sveriges Riksbank’s inflation target of 2.0 per cent is used. The primary drivers of improved long-term results will be the return on total assets, underlying inflation and salary increase in the market (which drives premium growth). The entity specific value is calculated using discount rate after tax of 5.2 per cent. The discount rate is calculated as the risk-free interest rate included a premium that reflects the risk of the business.
The cash flow is based on two elements, profit/loss after tax to equity and the expected change in regulatory capital. It is also assumed that all capital in addition to regulatory tied-up capital, can be distributed to the owner at the end of each period. For the period after 2022, a growth rate of 2.0 percent has been used. The same growth rate is used in the calculation of the terminal value. The entity specific value is calculated using a discount rate after tax of 5.1 per cent. The discount rate is calculated as the risk-free interest rate included a premium that reflects the risk of the business.
Intangible assets linked to the acquisition of Skagen Storebrand Asset Management AS acquired Skagen AS in 2017. The intangible assets linked to Skagen are customer lists, the Skagen brand and goodwill. Budgets and forecasts approved by the Board of Directors for the next three years (2020 to 2022) are used as the basis for the valuation. For the period from 2023 to 2025, a growth rate in line with the expected return from the stock market is used for the revenue and the expected inflation rate for the costs. A growth rate equivalent to Norges Bank’s inflation target of 2.0 per cent is used for calculating the terminal value. The entity specific value is calculated using a discount return after tax of 10 per cent.
Intangible assets linked to the acquisition of Cubera Private Equity Storebrand Asset Management AS acquired Cubera Private Equity AS in 2019. The intangible assets linked to Cubera are customer lists, customer relations and information regarding the private equity market. Budgets and forecasts approved by the Board of Directors for the next three years (2020 to 2022) are used as the basis for the valuation. For the period from 2023 to 2025, a growth rate in line with the private equity market has been used as a basis for revenues and a fixed relationship between revenues and costs has been used to estimate the costs. A growth rate equivalent to Norges Bank’s inflation target of 2.0 per cent is used for calculating the terminal value. The entity specific value is calculated using a discount return after tax of 10 per cent.
There is uncertainty related to the assumptions that have been made in the valuation. The value will be influenced by changes in the assumptions regarding expected returns of the financial markets, costs, management fees, growth parameters, and the required rate of return that is used as the discount rate. The aim of the calculations is to achieve a satisfactory level of certainty that the entity specific value, cf. IAS 36, is not lower than the value recognised in the accounts.
There is uncertainty related to the assumptions that have been made in the valuation. The value will be influenced by the assumptions regarding expected returns in the financial markets, costs, transfers, income development and the discount rate. The aim of the estimation is to achieve a satisfactory level of certainty that the entity specific value, cf. IAS 36, is not lower than the value recognised in the accounts.
The Group’s leased assets include offices and other real estate, IT equipment and other equipment. The Group’s right-of-use assets are categorised and presented in the table below: NOK million Buildings IT-equipment Other equipment Total
Voting rights as a percentage of the total number of shares 10 10
Investments in associated companies - customers 341 4,045 1) Handelsbodarna in Sverige Fastighets AB is sold during 2019
Distribution beween company and customers: Bonds held to maturity - customers with guarantees 13,377 14,403
Write-downs of loans losses -53 -63 1) Of which Storebrand Bank 13 33 2) Of which Storebrand Bank 30,187 28,456
Properties - customers without guarantee 3,839 3,303 1) The properties are valued on the basis of the following effective required rate of return (included 2.0 per cent inflation)
As of 31.12.19, Storebrand Life Insurance had NOK 4.044 million invested in Storebrand Eiendomsfond Norge KS and Ruseløkkveien 26, Oslo.
Vacancy Norway The vacancy rate for lettable areas was 6.3 per cent (6.1 per cent) at the end of 2019. The vacancy rate for areas with ongoing development projects is 57.2 per cent (76.9 per cent). At the end of 2019, a total of 12.1 per cent (12.7 per cent) of the floor space in the investment properties was vacant.
Sweden At the end of 2019, there was practically no vacancy in the investment properties
Transactions: Purchases: Further NOK 193 millions in property acquisitions in SPP have been agreed on in 4th quarter 2019 in addition to the figures that has been finalised and included in the finacial statements as of 31 December 2019
Bonds and other fixed-income securities - customers with guarantee 83,881 91,894
Total insurance liabilities - life insurance 242,388 219,803 5,502 8,346 476,040 443,290 1) Including personal risk and employee insurance of the Insurance segment.
Total insurance liabilities - life insurance 01.01 244,890 179,300 5,298 13,802 443,290
Total insurance liabiliteis - life insurance 31.12. 242,388 219,803 5,502 8,346 476,040 1) Including sale of Nordben
Claims reserve 594 581 - of which IBNS 566 553 - of which administration reserve 28 28
Fair value hedging of interest rate risk and cash flow hedging of foreign exchange risk Storebrand uses fair value hedging for the interest rate risk. The hedged items are financial liabilities measured at amortised cost. Derivatives are recognised at fair value through profit or loss. Changes in the value of the hedged item that are attributable to the hedged risk adjust the carrying amount of the hedged item and are recognised through profit or loss. Hedge effectiveness is monitored at an individual security level.
Storebrand hedges an exposure in the reference interest rate EURIBOR 3M.
LIBOR for different currencies will be available until the end of 2021, but the transition to new “overnight interest rates” appears to be progressing faster than first assumed. This may result in some of the “Panel banks” not providing data to maintain the LIBOR interest rates until the end of 2021. This could make the LIBOR interest rates less attractive to use and the transition to new “overnight ” reference interest rates” before the end of 2021 may be in all of the parties’ interests. The transition to new reference interest rates and specification of “fallbacks” will be calculated by ISDA and published by Bloomberg. To ensure the wording of the agreements between the market players, ISDA will release a “Protocol” at the end of Q1 2020 and it is expected that most market players will accede to the “Protocol”. Storebrand Asset Management has the ambition of acceding to the “Protocol” on behalf of the life insurance companies in the Group. NIBOR and STIBOR will not be immediately affected, and the administrator of these reference interest rates has an ambition of also continuing these beyond 2021. GBP LIBOR is expected to be replaced by SONIA (Sterling Overnight Index Average). USD LIBOR is expected to be replaced by SOFR (Secured Overnight Financing Rate), and EUR LIBOR will be replaced by EUR ESTER. The transfer to “overnight interest rates” for the major currencies may also influence the continuation of NIBOR. NIBOR will then be able to be replaced with NOWA (Norwegian Overnight Weighted Average).
Of total loans of NOK 30.1 billion, NOK 20,4 billion has been mortgaged in connection with the issuing of covered bonds (covered bond rate) in Storebrand Boligkreditt AS.
Total contingent liabilities 11,837 10,853 1) The debt instrument is conditional upon the company being released from administration
Companies in the Storebrand Group have transactions with related parties who are shareholders in Storebrand ASA and senior employees. These are transactions that are part of the products and services offered by the Group‘s companies to their customers. The transactions are entered into on commercial terms and include occupational pensions, private pensions savings, P&C insurance, leasing of premises, bank deposits, lending, asset management and fund saving. See note 22 for further information about senior employees.
Net income and gains from financial instruments: - equities and other units 3 2 1 - bonds and other fixed-income securities 3 50 26 - financial derivatives/other financial instruments 3 -6 -7
NOK million Share capital 1) Own shares Share premium Other equity Total equity
Use of estimates and discretionary assumptions In preparing the annual financial statements, Storebrand has made assumptions and used estimates that affect the reported value of assets, liabilities, revenues, costs, as well as the information provided on contingent liabilities. Future events may cause these estimates to change. Such changes will be recognised in the financial statements when there is a sufficient basis for using new estimates. The most important estimates and assessments are related to the valuation of the company’s subsidiaries and the assumptions used for pension calculations.
Investments in subsidiaries, dividends and group contributions In the company’s accounts, investments in subsidiaries and associated companies are valued at the acquisition cost less any write-downs. The need to write down is assessed at the end of each accounting period. Storebrand ASA’s primary income is the return on capital invested in subsidiaries. Group contributions and dividends received in respect of these investments are therefore recorded as ordinary operating income. Proposed and approved dividends and group contributions from subsidiaries at the end of the year are recognised in the financial statements of Storebrand ASA as income in that financial year.
Pension liabilities for company’s own employees Storebrand ASA have defined-contribution pension, but have some pension obligation that are recorded as defined-benefit pension.
Financial derivatives Financial derivatives are recognised at fair value. The fair value of such derivatives is classified as either an asset or a liability with changes in fair value through profit or loss.
NOK million Dividend/interest income Net gain/loss on realisation Net unrealised gain/loss 2019 2018
– of which FVO (Fair Value Option) 54 -3 1 52 27
Other benefits -6 -6 1) See the spesification in note 5
The premiums and content of the defined-contribution pension scheme are as follows: – Saving starts from the first krone of salary – Savings rate of 7 per cent of salary from 0 to 12 G (the National Insurance basic amount “G” was NOK 99,858 as at 31 December 2019) – In addition, 13 per cent of salary between 7.1 and 12 G is saved – Savings rate for salary over 12 G is 20 per cent
Employees and former employees who had salaries in excess of 12G until 31 December 2014 were offered a cash redemption option for their accrued rights with payment at the start of 2015. For employees who were a part of the executive management team, these payments were distributed over 5 years and the last payment in 2019.
from the company until they reach the age of 67. Employees can choose to receive benefits from the AFP scheme from the age of 62 and still continue to work.
CHANGES IN THE NET DEFINED BENEFITS PENSION LIABILITIES IN THE PERIOD: NOK million 2019 2018
In Norway, a discount rate based on covered bonds is used. Based on the market and volume trends observed, the Norwegian covered bond market must be perceived as a deep market.
3) Pension costs include accrual for the year. See also the description of the pension scheme in Note 5.
Net deferred tax asset/liability in the statement of financial position 41 47
Tax effect of: dividends received 55 10 gains on equities 7 permanent differences 551 890 changes from previous year 3
Storebrand Helseforsikring AS Oslo 50% 78 78 1) Group contribution in 2019 of NOK 512 million as capital contribution.
2) Group contribution in 2019 of NOK 184 million as capital contribution.
Gross booked fin. liabilities Net amount 1) Used for hedge accounting, also see note 15
Interest rate risk Storebrand ASA has both interest-bearing securities and interest-bearing debt. A change in interest rates will have a limited effect on the company’s equity.
Straight line depreciation periods for tangible fixed assets are as follows Equipment. fixtures and fittings 4-8 years IT systems 3 years
Magnus Gard 613 1) The summary shows the number of shares owned by the individual, as well as his or her immediate family and companies where the individual exercises significant influence, confer the Accounting Act, Section 7-26.
The consolidated financial statements have been prepared in accordance with the EU-approved International Financial Reporting Standards (IFRS) and the associated interpretations, as well as the other disclosure obligations stipulated in the Norwegian Accounting Act that must be applied as at 31 December 2019. The annual financial statements for the parent company have been prepared in accordance with the Norwegian Accounting Act, Norwegian Regulations relating to annual accounts, etc. for insurance companies and the additional requirements in the Norwegian Securities Trading Act. The annual report for the Group and parent company complies with the requirements of the Norwegian Accounting Act and Norwegian Accounting Standard no. 16 as at 31 December 2019.
In the best judgment of the Board and the CEO, the annual financial statements for 2019 have been prepared in accordance with applicable accounting standards, and the information in the financial statements provides a fair and true picture of the parent company’s and Group’s assets, liabilities, financial standing and results as a whole as at 31 December 2019. In the best judgment of the Board and the CEO, the annual report provides a fair and true overview of important events during the accounting period and their effects on the annual financial statements for Storebrand ASA and the Storebrand Group. In the best judgement of the Board and the CEO, the descriptions of the most important elements of risk and uncertainty that the group faces in the next accounting period, and a description of related parties’ material transactions, also provide a true and fair view.
• The consolidated financial statements of Storebrand ASA and its subsidiaries (the Group), which comprise the statement of financial position as at 31 December 2019, the income statement, statement of comprehensive income, statement of changes in equity and statement of cash flow for the year then ended, and notes to the financial statements, including a summary of significant accounting policies.
• The accompanying financial statements give a true and fair view of the financial position of the Company as at 31 December 2019, and its financial performance and its cash flows for the year then ended in accordance with the Norwegian Accounting Act and accounting standards and practices generally accepted in Norway.
We conducted our audit in accordance with laws, regulations, and auditing standards and practices generally accepted in Norway, including International Standards on Auditing (ISAs). Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial Statements section of our report. We are independent of the Company and the Group as required by laws and regulations, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
We have not identified regulatory changes, transactions or other material events that qualified as new key audit matters for our audit of the 2019 financial statements. Our areas of focus related to “Valuation of life insurance liabilities”, “Valuation of investment property” and “Valuation of financial instruments measured at fair value” have been the same in 2019 as the previous year. Due to new tax regulations among other things we have focused on “New tax regulations and uncertain tax positions”. Our focus on the groups IT-systems relevant for financial reporting have also been maintained, and the description of our audit approach is integrated in how we have addressed the other key audit matters.
Refer to note 1, 2, 7 and 38 in the financial statements where management further describes the insurance liabilities, assumptions and uncertainty of the estimates.
In our audit we have considered and tested the design and effectiveness of established controls for review of used assumptions and calculation methods, including the company’s internal recalculations of the insurance liabilities. We also examined whether management had established effective controls that ensured good data quality for the calculation of the insurance liabilities. This included controls related to data collection, data processing, reconciliation of the insurance systems and IT General Controls relevant for financial reporting. Those controls we elected to base our audit on, was working efficiently.
We also performed independent calculations for a selection of insurance obligations using our internal actuarial models and compared these with the company’s calculations. We used our internal actuaries for this work. The comparison did not indicate any deviations of significance.
properties. We have focused on investment property because it represents an estimate and a substantial part of the assets in the Group’s statement of financial position.
These properties are measured at fair value and classified in level 3 according to IFRS 13. Valuation of the properties involves use of assumptions which are subject to management judgement. Important assumptions for the value of individual properties are primarily expected future cash flows and discount rate.
In our assessment of the valuation, we challenged the assumptions for expected future cash flows and discount rate by comparing a sample of properties against information from relevant external sources. Substantial changes in value from previous periods was subject to discussions with management. We concluded that assumptions were consistent with information from relevant sources and that explanations regarding substantial changes in value were based on changes in the information from relevant sources. We also assessed the qualifications, competence and objectivity of the external valuers We reviewed the engagement letters with the valuers to assess whether there were any clauses or fee provisions that may have affected their objectivity or in any other way limited their engagement. We did not find any indications of such circumstances. We compared the internal valuations against the valuers estimates on values for a sample of properties. We challenged management on substantial deviations and obtained explanations on deviations. We assessed management’s explanations as reasonable.
We also assessed and came to the conclusion that the information about investment properties in the notes to the financial statements were in accordance with the accounting principles and provides an adequate description of the method and the underlying assumptions that is used for the valuation.
The basis for management’s estimate is an internal valuation model and external valuations. Management obtain observations of market data from various market participants. Management considers reasonableness of their own estimates through obtaining valuations from external valuers for a sample of properties on a continuing basis. The valuers were engaged by management.
In our audit we considered design and tested effectiveness of Storebrand’s established controls over valuation of financial assets measured at fair value. Particularly we focused on those controls that ensured complete and accurate use of quoted market prices and other observable masterdata, return on investments controls and IT General Controls relevant for financial reporting. In our opinion, the controls that we have chosen to base our audit on are working effectively.
We also assessed the information regarding the uncertain tax positions in the financial statements. We found that the information meets the requirements in the accounting standards.
Management is responsible for the other information. The other information comprises information in the annual report, except the financial statements and our auditor's report thereon.
• evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation.
Based on our audit of the financial statements as described above, it is our opinion that the information presented in the Board of Directors’ report and in the statements on Corporate Governance and Corporate Social Responsibility concerning the financial statements, the going concern assumption and the proposed allocation of the result is consistent with the financial statements and complies with the law and regulations.
Storebrand publishes an integrated report annually presenting financial, social, environmental and governance issues that are material for Storebrand. The materiality analysis is discussed on pages 16-17 above).
The statement below describes how Storebrand complies with the 15 sections of the NUES Code of Practice.
1. IMPLEMENTATION AND REPORTING ON CORPORATE GOVERNANCE (NO DEVIATIONS FROM THE CODE OF PRACTICE) The Board has decided that the Norwegian Code of Practice for Corporate Governance shall be followed. Compliance with the Code of Practice is discussed in the Directors’ Report. Storebrand complies with the Code of Practice without any significant exceptions. One minor deviation has been accounted for below under section 3.
Storebrand has its own code of ethics. Guidelines for whistle -blowing, social events, combating corruption, etc. have also been established. See section 6 Keeping Our House in Order for more information.
Storebrand ASA would like to have various tools available for its efforts to maintain an optimal capital structure for Storebrand to contribute to good shareholder returns and financial resilience. At the 2019 Annual General Meeting, the Board was granted authorisation to increase the share capital through issuing new shares for a total maximum value of NOK 233,906,991. This authorisation may be used for the acquisition of businesses in consideration for new shares or for increasing the share capital by other means. The Board of Directors may decide to waive the shareholders’ preferential rights to subscribe for new shares in accordance with the authorisation. This authorisation may be used for one or more new issues. This authorisation is valid until the next Annual General Meeting.
Deviation from the Code of Practice: The Board’s authorisations to increase the share capital and buy back shares are limited to defined purposes. However, no provision was made for the General Meeting to vote on each individual purpose to be covered by the authorisations.
4. EQUAL TREATMENT OF SHAREHOLDERS AND TRANSACTIONS WITH CLOSE ASSOCIATES (NO DEVIATIONS FROM THE CODE OF PRACTICE) Storebrand ASA has only one class of share. There are no specific restrictions on the ownership of shares or voting rights beyond the restrictions imposed by the Act on Financial Undertakings and Financial Groups. Through their work, the management and Board of Directors of Storebrand focus strongly on the equal treatment of shareholders.
The general competence rules for board members and executive personnel may be found in the rules of procedure for the Board of Storebrand ASA, rules of procedure for the boards of subsidiaries, instructions for the CEO, guidelines for conflicts of interest and Storebrand’s code of ethics. Board members must inform the company if they have direct or indirect material interests in an agreement concluded by one of the companies in the Storebrand Group. The Board shall ensure that an independent third party assesses the value of transactions that are not insubstantial in nature. Furthermore, the rules of procedure for the Board stipulate that no board member may
STOREBRAND ANNUAL REPORT 2019 participate in discussions or a decision concerning matters that are of such material importance to them or a close associate that the member must be regarded as having a conspicuous personal or special financial interest in the matter. Each board member has a responsibility to continuously assess whether or not such a situation exists. Transactions with close associates involving Storebrand’s employees and other officers of the Group are regulated by Storebrand’s code of ethics. Employees shall on their own initiative immediately report conflicts of interest that may arise to their immediate superior as soon as they become aware of such a situation. In general, an employee is defined as disqualified if circumstances exist that could result in others questioning the person’s impartiality in relation to matters other than Storebrand’s interests.
6. GENERAL MEETING (NO DEVIATIONS FROM THE CODE OF PRACTICE) General Meeting Pursuant to the Articles of Association, Storebrand ASA’s General Meeting shall be held by the end of June each year. The General Meeting was held on 10th April 2019. All shareholders with a known address will receive notice of the General Meeting, which will be sent out no later than 21 days prior to the General Meeting. Pursuant to the Articles of Association, the deadline for giving notice of attendance shall be set at no later than five calendar days prior to the General Meeting. In accordance with Storebrand’s Articles of Association, the opportunity to make other agenda papers available on the Storebrand website is exercised, cf. Section 5-11a of the Norwegian Public Limited Companies Act. A shareholder may nevertheless demand to receive agenda papers by post.
All shareholders may participate at the General Meeting. Storebrand ’s Articles of Association allow shareholders to vote in advance by means of electronic communication, cf. section 5-8b of the Norwegian Public Limited Companies Act.
The General Meeting shall: • consider the annual accounts, consisting of the income statement, the balance sheet and the annual report,
• decide upon the allocation of profit or manner of covering losses in accordance with the adopted balance sheet, and upon the distribution of dividends,
tee, elect members to the Board of Directors, and this should include the Chairman of the Board Directors,
None of the members elected by the General Meeting have any employment, professional or consultancy relationship with
Storebrand beyond their appointment to the Board of Directors. The backgrounds of the individual board members are described in the annual report and on Storebrand’s website. The composition of the Board of Directors satisfies the independence requirements set forth in the Code of Practice. There are few instances of disqualification during the consideration of matters by the Board (none in 2019). An assessment of the individual board members’ independence is noted in the list of governing and controlling bodies under the heading “Members of Storebrand ASA’s Board of Directors and Committees ”. An overview of the number of shares in Storebrand ASA owned by members of governing bodies as at 31 December 2019 is included in the notes to the financial statements for Storebrand ASA (Information on related parties). None of the board members have held office for more than ten years.
9. WORK OF THE BOARD OF DIRECTORS (NO DEVIATIONS FROM THE CODE OF PRACTICE) Duties of the Board of Directors In 2019, eleven board meetings were held, of which two meetings were conducted at the subsidiary SPP in Stockholm. The aggregate rate of Board member participation in 2019 was 99%.
Storebrand’s future strategy is discussed at the Board’s annual strategy meeting, which establishes guidelines for the management ’s preparation of plans and budgets in connection with the annual financial plan, which must be approved by the Board.
The Board conducts an annual evaluation of its work and methods, which provides a basis for changes and measures. The report from the Board’s evaluation, or relevant excerpts, will be made available to the Nomination Committee, which will use the evaluation in its work.
executive personnel at Storebrand, and a statement on the fixing of remuneration (executive remuneration statement) is presented to the General Meeting. The executive remuneration statement shall clearly specify which guidelines are binding and which are advisory. The General Meeting shall vote separately on the binding and advisory guidelines. The remuneration consists of fixed salaries, variable remuneration, pension schemes and other fringe benefits deemed to be natural in a financial group. The aim of the remuneration is to motivate greater efforts to ensure long-term value creation and resource utilisation in the company. In the opinion of the Board, the overall remuneration shall be competitive, but not leading. An annual assessment is carried out based on external market data to ensure remuneration is adequate in relation to equivalent positions in the market.
The employees’ performance and achievements are regularly followed up against the operational goals of the individual business areas, directly related to Storebrand’s strategy. This helps to further strengthen agreement between the owners and the management.
13. INFORMATION AND COMMUNICATION (NO DEVIATIONS FROM THE CODE OF PRACTICE) The Board has issued guidelines for the company’s reporting of financial and other information and for contact with shareholders other than through the General Meeting. Storebrand’s reporting with regard to sustainable investments goes beyond the statutory requirements. Storebrand’s financial calendar is published on the Internet and in the company’s annual report. Financial information is published in the quarterly and annual reports, as described under Item 10 above – Financial information and Storebrand’s accounting process. Documentation that is published is available on Storebrand’s website. All reporting is based on the principle of transparency and takes into account the need for the equal treatment of all participants in the securities markets and the rules concerning good stock exchange practices. Storebrand has its own guidelines for handling insider information, see also Item 10 – Management and control, above.
OTHER As one of the largest investors in the Norwegian stock market, Storebrand has considerable potential influence over the development of listed companies. Storebrand attaches importance to exercising its ownership in listed companies based on straightforward and consistent ownership principles that place considerable emphasis on sustainability. Storebrand applies the Norwegian Code of Practice for Corporate Governance in this role. Storebrand has had an administrative Corporate Governance Committee since 2006. The Committee is responsible for ensuring good corporate governance across Storebrand. Storebrand Asset Management AS has had a Corporate Governance Committee for several years. The Committee has a mandate to set the level of ambition and establish frameworks for corporate governance. The Committee shall coordinate Storebrand’s use of voting rights, including prioritising matters and ensuring consistency in the work. The Committee shall meet every quarter. Storebrand has issued guidelines with respect to employees holding positions of trust in external companies, which regulate, for example, the number of external board positions. Further information on Storebrand’s corporate governance may be found at www.storebrand.no > About Storebrand > Facts on Storebrand, where we have also published an overview of the members of Storebrand’s governing and controlling bodies, CVs for the members of Storebrand ASA’s Board of Directors, the Articles of Association, and ownership policies.
A summary of the matters that Storebrand is to report on in accordance with Section 3-3b, second paragraph of the Norwegian Accounting Act follows below. The items follow the numbering used in the provision.
3. Any deviations from the Code of Practice are commented on under each section in the statement above, see the deviations discussed in Item 3.
6. The composition of the governing bodies and a description of the main elements in the current rules of procedure and guidelines can be found in Items 6, 7, 8 and 9 above.
Disclose the actual and potential impacts of climate-related risks and opportunities on Storebrand ’s businesses, strategy, and financial planning where such information is material.
Full 102-6 Markets served This is Storebrand Our purpose and vision Full 102-7 Scale of organisation This is Storebrand Our purpose and vision Full
An index of the GRI indicators we are reporting on and where the report contains information about the indicators follows below.
Organisation Executive Management Board of Directors & Committees Risk Corporate Governance
Collective bargaining agreements 100% in Norway and 100% in Sweden GRI Index GRI Index Full
This is Storebrand Material Issues Full 102-47 List of material topics This is Storebrand Material Issues Full
Full 102-49 Changes in reporting No significant changes GRI Index GRI Index Full 102-50 Reporting period 1st January 2019 - 31st December 2019 GRI Index GRI Index Full
This is Storebrand Material Issues Full 102-55 GRI content index This table is the GRI Index GRI Index GRI Index Full 102-56 External assurance Auditor's statement Auditor's statement Full
Risk; Corporate Governance Climate Risk and Opportunity; Scenario Analysis Providing a return to our owners and customers
Director's Report Directors’ Report, Section 2 Financial capital and our investment universe
Providing a return to our owners and customers Group Financial Results for 2019
Financial Capital and our Investment Universe Keep Own House in Order
Providing a return to our owners and customers; A Driving Force for Sustainable Investments
We have examined whether Storebrand ASA has developed GRI Index for 2019 and measurements and reporting of key performance indicators for sustainability (sustainability reporting) per 06.02.2020.
Storebrand’s GRI Index for 2019 is an overview of which principles, aspects and indicators from the The Global Reporting Initiative guidelines that Storebrand ASA use to measure and report on sustainability; together with a reference to where material sustainability information is reported. Storebrand’s GRI Index 2019 is available on Storebrand’s website (www.Storebrand.no/sustainability/reports). We have examined whether Storebrand has developed a GRI Index for 2019 and whether mandatory disclosures are presented according the Standards published by The Global Reporting Initiative (www.globalreporting.org/standards) (criteria).
Tasks and responsibilities of management Management is responsible for GRI Index 2019 and that the Index is developed in accordance with the Standards published by The Global Reporting Initiative. Management is also responsible for key performance indicators for sustainability and that these are developed in accordance with the definitions given in the tables at the end of the chapters «Financial capital and our investment universe», «Customer and community relations», «People» and «Keeping our house in order». Their responsibility includes developing, implementing and maintaining internal controls that ensure the development and reporting of the GRI Index and key performance indicators for sustainability.
Our work involves performing procedures to obtain evidence that Storebrand’s GRI Index 2019 and key performance indicators for sustainability are developed in accordance with the Standards published by The Global Reporting Initiative and the criteria for reporting and measurement that are given in relation to each table containing key performance indicators. The procedures selected depend on our judgement, including assessments of the risks that the sustainability reporting as a whole are free from material misstatement, whether due to fraud or error. In making those risk assessments, we consider internal control relevant to the preparation of the subject matter. Therefore, we design procedures that are appropriate to the circumstances, but not for the purpose of expressing an opinion on the effectiveness of internal control. Our control also includes an assessment of whether the applied criteria are appropriate and an assessment of the overall presentation of the subject matter.
Appendix 222 Definitions key performance indicators 224 Executive management CVs 228 Group board of directors CVs
These definitions refer to the tables of key performance indicators in sections 3-6 of this report.
Carbon footprint from investments: Results per Q3 2018 based on TCFD’s definition. Total carbon footprint is the sum of the companies’ carbon emissions over the companies’ revenues, weighted for our ownership in the respective companies. The measurement unit shows carbon emissions per million fund currency in NOK. The method is the same for equities and bonds.
Investment in green bonds: Green Bonds enable capital-raising and investment for new and existing projects with environmental benefits.
Investment in solution companies: Investments in sustainable companies through our portfolio of clean tech and renewable energy investments in Storebrand and SPP.
Energy intensity, real estate investments: Temperature corrected energy consumption per gross square meter of heated property area in direct real estate investments under operational control in Norway and Sweden. Consumption measured by energy suppliers (electricity, district heating/cooling and other) and registered in the environmental monitoring system.
Water intensity, real estate investments: Water consumption in cubic meters per square meter of heated property area in direct real estate investments under operational control in Norway and Sweden. Consumption measured and registered in the environmental monitoring system.
CO2 emissions real estate investments: GHG emissions from direct real estate investments, per square meter of gross heated area. Includes direct and indirect emissions (scope1-3), including tenants’ energy and water consumption as well as waste production. The carbon footprint is calculated by CemaSys AS according to the GHG protocol. Nordic mix emission factor is the basis for the calculation of emissions from electric power with ”location based” method.
4. CUSTOMER AND COMMUNITY RELATIONS Net Promoter System: Net Promoter System (NPS) is a measurement tool for customer satisfaction where the customer gives a score from 0 to 10 with 10 as the best result.
Market Position: Pension, Corporate Market Norway: Based on Q3 figures from Finance Norway.
Percentage female: pension savings: Share of female customers who are saving for pension.
5. PEOPLE Sick leave: Number of sick leave hours divided by number of hours worked Storebrand/SPP.
Number of employees: Number of employees working at Storebrand Norway + SPP Sweden as of 31.12.19.
January to 31st December / average number of employees during the same period.
GHG emissions (tonnes CO2e / tonnes CO2e per FTE): GHG emissions pr. FTE from the Group’s Norwegian and Swedish operations. Includes direct and indirect emissions, including airtravel and other transportation, energy consumption and waste (scope1-3). The carbon footprint is calculated by CemaSys AS according to the GHG protocol. Nordic mix emission factor is the basis for the calculation of emissions from electric power with ”location based” method.
Scope 1 emissions: Ton CO2-equivalents, measured in accordance to Greenhouse gas protocol, per FTE.
Energy use: Temperature corrected energy consumption per square meter heated area in head offices in Norway and Sweden. Consumption measured by the energy suppliers, electricity and district heating/cooling and registered in the environmental monitoring system.
Amount of waste sorted for recycling: Rate of waste sorted at the source for recycling in head offices in Norway and Sweden. Non-sorted waste is further sorted mechanically at the waste recycling centre, where non-recyclables go to incineration with heat recovery. Includes direct real estate investments under operational control in Norway.
E-learning completed: Employees who are registered as having completed the e-learning course in our learning management system.
Number of shares as of 31 December 2019: Executive management CVs
Number of shares as at 31 December 2019: STOREBRAND ANNUAL REPORT 2019
Opera Software 2009–2014: Communications Director, SN Power 2008–2009: Business Reporter, TV 2 2005–2008: TV Reporter, CNBC/FBC Media 2004–2005: Researcher, CNBC Europe
Previous positions 2015- 2019: HR Director, Storebrand Livsforsikring 2007-2015: Group Driector HR, Opera Software 2004-2007: HR Director, Eltel Networks 1997-2004: HR Manager East Norway Region, Avinor 1995-1997: Legal Advisor, Aetat
Board Director and Chairman of Audit Committee , Grieg Seafood ASA
MAGNUS GARD (1978) Employee Representative of the Board at Storebrand ASA since 2019