Storebrand Life Insurance’s pension assets in accordance with the guidelines set by Storebrand
NOK 200 billion of accumulated pension reserves, with the municipality sector accounting for the larger part.
The provisions of the Public Procurement Act were extended in 2005 to cover the selection of pension providers by municipalities. This helped to ensure more orderly tendering arrangements, although the minimum threshold for open competition was raised.
Storebrand has established an HSE and senior policy fund for 2006. The fund can be used for various HSE
Pensions were something my father used to talk about. I wasn’t a bit interested. Then I found an article on the Internet about the pension reform. It didn’t take me long to understand that decisions about savings today are not just about having some money in the bank.
Norwegian market for long-term savings and life insurance. The marketing campaign has also fostered employee pride and positive customers.
Life insurance saving ** *) Assets under management (NOK bn.) **) Provisional figures for 2005
Percentage of employees with an understanding of Storebrand’s corporate social responsibility 78.5% 77% 80%
Year of Microcredit. In November, Storebrand signed an agreement to contribute USD 4 million to
The Storebrand Bank Group reported profit before loan losses and losses on securities of NOK 207 million for 2005 as compared to NOK 114 million for 2004. Impairment losses on loans and guarantees represented a net write-back of NOK 34 million for 2005 as compared to a write-back of NOK 7 million in 2004. Pre-tax profit for 2005 was NOK 241 million, an improvement of NOK 120 million from 2004.
Birgitte Nielsen (42), consultant, Nielsen & Axelsson Aps Bachelor of Commerce – accounting and finance, member of the Board’s Audit Committee
CORPORATE SOCIAL RESPONSIBILITY Storebrand’s commitment to corporate social responsibility (CSR) is an integrated part of the group’s activities. The group’s current two-year action plan for CSR runs to the end of the 2006. Performance is reported annually. A detailed report on the current status of the targets can be found in the section on CSR (see page 23).
Foreign ownership. As at 31 December 2005 total foreign ownership amounted to 66.1%, as compared to 51.6% at the end of 2004.
Members are each elected for a two-year term of office so that half the members retire each year. It is a statutory requirement that the members elected by the general meeting shall reflect the company 's interest groups, customer structure and its function in society. A broad cross-section of shareholders are represented.
The duties of the Board of Representatives include making recommendations to the AGM on the Board’s proposal for the annual report and accounts, electing the six shareholder nominated directors, including the Chairman, to the Board of
Board held 11 meetings and one Board conference. Attendance records of individual Board members can be found on our website. The work of the Board is subject to a specific mandate. In order to ensure sound and well-considered decisions, meetings of the Board are well prepared so that all members can participate in the decision-making process. The Board prepares an annual schedule for its meetings and the issues to be considered. The agenda is set by the Chairman based on the approved schedule for the year and a list of matters carried forward from previous meetings. Time is made available at every second board meeting to discuss matters without the management present. The Board is entitled to appoint external advisers whenever it considers this necessary.
Committee. The Election Committee applies specific criteria, and works in accordance with a formal mandate. The members of the Storebrand ASA Control Committee are also elected to the election committees for Storebrand Life Insurance and
reported a pre-tax operating loss and loss for the year of NOK 9 million for 2005 as compared to a loss of NOK 24 million for 2004.
Fondsforsikring for 2004 by 6.7% to NOK 10,898 million. Embedded value at the close of 2005 was NOK 12,025 million. Dividend paid in 2005 was NOK 775 million, giving a total Embedded Value result
• Premium for the interest rate guarantee: The customer must pay for the interest guarantee in advance. The entire investment return will accrue to the pension policy. The premium charged may depend on factors such as the policy's level of risk capital, the percentage of the policy assets invested in equities and the level of the interest rate guarantee.
Customers that select specific investment portfolios for their pension policies will enjoy greater flexibility, with a choice of standardised risk profiles or their own investment profile (within the limits set by legislation and regulations). This will allow companies to choose their own investment policy almost as though they were running their own pension fund. Storebrand assumes that the regulations for investment choice products will be changed in due course so that the assets permitted are as far as possible the same as for the group pension.
Storebrand Rente+ and Storebrand Obligasjon+, which give customers better access to Storebrand's expertise in managing fixed-income investments. In order to emphasise the quality of its products and make the product range as simple and straightforward as possible, Storebrand Investment is working to reduce the number of funds that it offers. Fund products are distributed through Storebrand’s network of financial advisers, external distributors and direct sales channels such as the Internet and customer call centres. Storebrand Investments also offers its products through defined contribution pension products and savings-related life insurance products, areas in which
NOK 3.5 billion. Storebrand recorded a net withdrawal of NOK 0.8 billion. Storebrand Investments had a 10.8% share of the market for Norwegian registered securities funds at the close of 2005, in line with 2004. The proportion of assets under management invested in equities increased from 21% to 23% in 2005. Specialist products represented a modest proportion of total assets under management, but larger discretionary risk limits combined with higher fixed and performance-based fees mean that the potential income from these products is considerable.
DEVELOPMENT IN NONPERFORMING AND LOSS EXPOSED LOANS AND PROVISIONING RATIO (NOK million)
Forsikring to Gjensidige Forsikring. The transaction is conditional on approval by the relevant authorities, and is expected to complete in the first half of 2006. The transaction values Fair
The aim of risk management is to achieve the highest possible return for customers and the owner over the long term at an acceptable risk level. Investment risk is continuously monitored using a range of statistical tools and tests. For instance,
Active risk management and hedging transactions reduce the likelihood of a low investment return. If investment return is not sufficient to meet the guaranteed interest rate on policyholders’
funds, currently 3.6% on average, the shortfall will be met by using risk capital built up from previous surpluses. The owner is responsible for meeting any remaining shortfall. The average guaranteed interest rate is expected to fall in future years. New contracts include a guaranteed interest rate of 2.75%.
Liquidity risk. Storebrand Bank maintains sufficient liquidity to support balance sheet growth and to repay funding and deposits as they mature. The bank manages its liquidity position on the basis of a rolling liquidity gap that shows the mismatch between expected inward and outward cash flows.
Storebrand maintains relationships with a number of international banks, ensuring access to international capital market and providing greater diversity in the group’s funding.
Reserve for life insurance with investment choice 33 5 719.4 4 476.4
Payments to employees, pensioners, employment taxes etc. –1 078.9 –1 286.6
The net income stream takes into account current and future loss of income due to vacancy, essential investment and an estimate of future changes in market rent. The yield requirement is determined on the basis of the expected future risk-free interest rate plus an individually determined risk premium dependent on the rental situation and the location and standard of the property. Valuation is also compared against observed market prices
Other than goodwill, the group’s intangible assets largely relate to customised software developed in-house. Such intangible assets are valued at acquisition cost reduced by accumulated depreciation and any write-downs. The depreciation period and the method of depreciation are reviewed annually. New intangible assets are only capitalised if it can be demonstrated that it is likely that the group will gain future commercial benefit that is directly applicable to the asset in question. In addition, it must be possible to estimate the cost price of the asset reliably.
Profit allocated to insurance policyholders. The guaranteed yield on the premium reserve and on the premium fund is recognised to profit and loss as part of the item ‘changes in insurance reserves’. Other profit allocated to customers is shown under the item ‘funds transferred to policyholders’.
Additional statutory reserves. The company is permitted to make additional statutory allocations to the insurance fund in order to ensure the solidity of its life insurance business. The maximum additional statutory reserve is set at the difference between the premium reserve calculated on the basis of a 3.5% guaranteed return on policies outstanding, and the premium reserve calculated on the basis of the actual guaranteed return in the policies.
Definition of amortised cost. Subsequent to inception, hold to maturity financial assets, loans and receivables as well as financial liabilities not at fair value through profit and loss, are valued at amortised cost using the effective interest method.
(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 the time of inception). The book value of the asset is reduced either directly or by using a provision account. The amount of the loss is recognised to profit and loss.
Hold to maturity investments are valued at amortised cost, using the effective interest method. All investments in this category are owned by Storebrand Life Insurance.
Goodwill 30.1 Deferred tax/deferred tax assets 18.3 127.3 Security reserves 111.0 156.5 Provision for dividend 1 840.4 221.4
Capital ratio 10.5% 13.8% Storebrand Investments (Asset management) Total funds under management 204 825 165 009 Funds under management for external clients 49 716 25 389 *) Including inward transfers of premium reserves **) Investment yield I: Realised financial income including revaluations (positive or negative) of real estate.
Reconciliation to show the change in net pension liability in the period: NOK MILLION 2005 2004
Classification of financial assets 2005 NOK MILLION BOOK VALUE FAIR VALUE
Analysis by sector: Modified duration 4.74 Average effective yield 5.50 3.72
Unlisted shares Norway 362.9 278.9 314.9 Unlisted shares within EEA 310.4 274.2 274.6 Unlisted shares outside EEA 104.6 80.5 116.7 Fund units managed by SBK 9 686.0 8 440.4 1 439.9
INTEREST SENSITIVITY (EXCLUDING STOREBRAND BANK) 3 MONTHS TOTAL NOK MILLION UP TO 1 MONTH 1-3 MONTHS – 1 YEAR 1-5 YEARS OVER 5 YEARS FAIR VALUE
3 MONTHS TOTAL CONT. UP TO 1 MONTH 1-3 MONTHS – 1 YEAR 1-5 YEARS OVER 5 YEARS FAIR VALUE
Premiums and reserves for pension entitlements earned in 2004 and 2005 in group pension insurance are calculated on the basis of a 3% basic interest rate.
Tangible fixed assets for own use are valued at acquisition cost reduced by accumulated depreciation. Fixed assets are written down if the value in the balance sheet exceeds the recoverable value of the asset.
Chief Executive Officer Salary 3 404 3 293 3 335 Bonus (performance-based) 1 489 754 Extraordinary bonus 2 528
Shares and other equity investments NOK MILLION ACQUISITION COST FAIR VALUE
GROSS AVERAGE NET NOM. FAIR VALUE NOK MILLION NOM. VOLUME NOM. VOLUME VOLUME ASSET LIABILITY
***) Effect of implementing NRS 6A as at 01.01.04. ****) No dividend is provided for on own shares bought back.
Storebrand ASA has an undrawn committed credit facility of EUR 200 million.
Annual Report and Accounts of Storebrand ASA and the Storebrand Group.
Duration: The average remaining term of cash flow on interest bearing securities. Modified duration is calculated on the basis of duration and is an expression of sensitivity to changes in underlying interest rates.
Average yield: Average yield is an expression for the average return the company has obtained on the policyholders' fund during the year. Average yield should be seen as a gross yield before deducting costs, and is accordingly not comparable with the interest return reported by other financial institutions. Average yield is calculated in accordance with rules set by the Financial Supervisory Authority of Norway.