Message from the CEO 2 Pension reform 4 Retail market strategy 6 Corporate market strategy 14 Corporate social responsibility in Storebrand 22
Storebrand Helseforsikring AS Swedish branch office Rålambsvägen 17 S-100 26 Stockholm Sweden www.storebrandhalsa.com
4) Group life insurance policies providing a single payment in the event of death or invalidity.
Storebrand is well positioned for growth in the long-term savings market. Inflows to long-term savings are growing in pace with an ageing population. Pensions reform and the trend towards defined contribution employers' pensions serve to underline the increasing need for people to provide for their own retirement. Increased sales of life insurance savings products in 2004 show that this is indeed happening. Storebrand launched two new simplified personal pension products in 2004, and is well placed to take advantage of the expected growth. Storebrand also offers a continually updated range of competitive structured products, and expects to see increasing demand for this type of guaranteed savings product.
Storebrand will meet these challenges with the breadth of its product range, its technical insight and sound advice. Lars Aa. Løddesøl: Executive Vice President, Head of Corporate Life
Long-term customer satisfaction is highly dependent on the quality of day-to-day customer service. Storebrand has commissioned external surveys of customer satisfaction, and the results have confirmed that Storebrand’s corporate customers are more satisfied and more loyal to the company than customers of its competitors. Storebrand has established specific programs to identify and improve the areas that customers find most problematic in their relationship with the company. This is an area of continous progress.
Corporate customers’ funds under management Total life insurance and pension funds (NOK bn.)
Storebrand's commitment to corporate social responsibility (CSR) continues a long-standing tradition that is firmly anchored in the company's corporate vision and values. Training and personal development for employees, environmental responsibility, supporting charitable organisations, socially responsible investments and developing products and services to give people security in old age and ill health are different aspects of the ethos that runs through all our activities. Storebrand is committed to taking a leading role in CSR in the finance industry.
In a company such as Storebrand, employees are central to achieving our objectives. An internal survey carried out in 2004 found that 96% of Storebrand's employees believe that Storebrand should take a leading role in recognising its corporate social responsibility. Our employees also recognise that they are the most important driver for CSR in the company's day-to-day activities. A number of external surveys have also confirmed the importance of CSR. For example a market profile survey by MMI in 2004 found that CSR and business ethics were the major factors in people’s choice of employers and in their preferences as consumers.
The AGM held on 28 April 2004 granted a mandate for the company to buy back up to 10% of its own shares. Storebrand has used this mandate, and at 31 December 2004 the company held 15,265,000 of its own shares, equivalent to 5.49% of total share capital. The company has not issued any options that could dilute share capital.
Dividend for the accounting year (proposed for 2004) 7.0 0.8 - - 1.1
This article provides information on major features of the group's structure and its management.
(page 49), shareholder matters (page 26) and corporate social responsibility (pages 24–25). Additional information on corporate governance at Storebrand can be found at www.storebrand.no/ir.
(the “Board”) has nine members, each elected for a two-year term of office so that half the members retire each year. Six members are elected by the Board of Representatives after considering recommendations made by the Election Committee. Three members are elected by and from among the employees. The Managing
The Board carries out an annual appraisal of its work. Members of the executive management team also participate in this process.
The executive management team is made up of the managing directors of Storebrand ASA, Storebrand Investments and
The system is based on a balanced scorecard where the four dimensions of finance, customers, processes and skills/growth reflect both short-term and long-term value creation in the group.
Other. As one of the largest investors in the Norwegian stock market, Storebrand has considerable potential influence over listed companies in which it is a shareholder. Storebrand pays great attention to exercising its ownership in listed companies on the basis of straightforward and consistent ownership principles.
Skadeförsäkring, the three main business areas all achieved a sound increase in profit. Earnings per share improved from NOK
RISK MANAGEMENT. Storebrand is exposed to various categories of risk through its business areas: insurance risk in respect of its insurance activities, investment risk in respect of its financial assets and credit risk in respect of its banking activities as well as liquidity risk and operational risk. Continuous monitoring and active management of risk is therefore a central and integrated feature of the group’s activities and organisation.
Grace Reksten Skaugen (51) Consultant, MBA and Ph.D., member of the Board’s Audit Committee
Storebrand has participated in the National Insurance Administration ’s ‘More inclusive working life’ scheme since 2002. This scheme aims to reduce absence due to illness, reduce the incidence of disability and long-term illness and increase the average age of retirement. The collaboration has been successful, and absence due to illness has shown a steady decline. Storebrand decided in 2004 to become a 'no smoking' company.
Work on improving environmental standards in the management of the group's properties has been intensified. Storebrand
Storebrand's ambition in the retail market is to achieve further growth and increase its market share. In order to achieve this
Storebrand is able to pay even greater attention to the development of its core activities. Storebrand is the only financial institution in the Norwegian market that specialises in long-term savings and life insurance as its major area of activity, and the
company intends to make the best possible use of this unique position.
Productivity. Storebrand’s growth objectives, combined with improved operational efficiency, will create the basis for more cost-effective operations. In September 2004, Storebrand announced efficiency targets for the group’s business areas that are to be achieved by 2007.
C h an g e in o th e r as su m p it o n s
Storebrand Bank supports Storebrand’s overall strategy of being a leading financial institution for savings and insurance by building good customer relationships with a broad range of attractive customers. The bank’s products play a central role in developing customer relationships through regular contacts and a good understanding of individual customers’ personal finances.
NOK 128 million or 18% from 2003. The bank has made considerable progress in realising synergies from the merger of Finansbanken
The bank held repossessed assets at year-end of NOK 88 million.
Life insurance companies’ liabilities are to remain fully funded. As at present, all policyholders (except holders of policies offering investment choice) will be guaranteed a minimum annual return, known as the basic rate. The Financial Supervisory Authority of
The risk classification system estimates the likelihood of a borrower defaulting (ability to pay/financial condition) and the likely loss given default (collateral). All loans on the bank’s watch list are reviewed at least quarterly in respect of the condition of the borrower and collateral, and of the steps being taken to protect the bank’s position. Most of the loans in default or classified as loss-exposed are among the older exposures in the portfolio.
Repayment of long term lending -1 039.7 -1 063.1 -1 432.9 -1 039.7 -1 063.4 -1 432.9
Cash and cash equivalent assets at start of the period 109.1 92.6 121.8 5 762.9 7 976.6 4 069.0
Elimination of internal transactions. Internal receivables and payables, internal profits and losses, interest and dividends, etc. between group companies are eliminated in the consolidated accounts. Gains and losses on internal sales to/from Storebrand Livsforsikring AS are in principle not eliminated. This is because the profit of the life company is to be divided between policyholders and the owner.
Equity linked bonds. The issue of equity linked bonds comprises three elements: the issue of a bond loan, the issue of a call option related to a stock exchange index and the purchase of an option to fully hedge the option element of the bond. The bond loan and the option agreements are entered into simultaneously. The discount on the bond element is amortised up to nominal value in the period to maturity as an interest expense. Options bought/issued are valued at the lower of acquisition cost and market vale and are booked as ‘other assets’ and ‘other liabilities’ in the balance sheet without netting. Commissions and other margins are recognised to profit and loss in part at the date of issue, with the balance amortised over the life of the bonds issued.
The various categories of financial derivatives are described in ‘Terms and Expressions’ on page 86.
Subordinated loans which have interest rates fixed for long periods are hedged against interest rate movements through interest rate swaps. Any market value in excess of the interest accrued on interest rate swaps used to hedge a subordinated loan is not capitalised in the accounts.
Effect of changed assumptions not booked to P&L 245.6 -29.7 215.9 264.3 Change in deviation caused by changed assumptions at 31.12. 210.9 20.1 231.0 5.9 221.6 Net liability in the balance sheet 589.4 -200.7 388.7 300.8 222.0 Provision for employer's social security contributions -26.8 -26.8 -31.4 -38.0 Net pension liability/employer's contribs. in the balance sheet 589.4 -227.5 361.9 269.4 184.0 04 Remuneration of the Chief Executive Officer and elected officers of the company
DnB NOR Bank ASA 1.90 Ferd Invest 1.85 Skandinaviska Enskilda Banken 1.82 Citibank, N.A. (NOM) 1.67 The Northern Trust Co (NOM *)) 1.40 Vital Forsikring ASA 1.37 Bank of New York, Brussels 1.08 UBS AG, London Branch 1.05 State Street Bank & Trust Co (NOM *)) 1.02
Profit and loss account items: Group contribution from subsidiaries 8.8 220.1 Dividends from subsidiaries 634.7 316.7 267.8 Purchase and sale of services (net) 4.6 13.4 5.9
NOK MILLION < 1 MONTH < 3 MONTHS < 1 YEAR < 5 YEARS > 5 YEARS EXPOSURE TOTAL RISK P.A.
Total Storebrand Life Insurance 2 966.8 2004–Perpetual, NIBOR +1.5%, call 2014, Tier 1 hybrid capital 168.0 2004–Perpetual, 5.9 %, call 2014, Tier 1 hybrid capital 107.0
Net interest income – banking 427 427 Interest income – other activities 147 147 Net commission income 105 105 Net income and gains – trading portfolio 6 920 7 043 123 Net income – bonds held to maturity 2 492 2 492 Change in actual value of real estate investments 169 164 -5 Real estate rental income and gains on sales of real estate 773 769 -4 Other income 543 543
To/from additional statutory reserves – life insurance -500 -500 Funds allocated to policyholders – life insurance -1 519 -1 496 23
Forward foreign exchange contracts/ foreign exchange swaps: Forward foreign exchange contracts/foreign exchange swaps relate to the purchase or sale of a currency for an agreed price at a future date. These contracts are principally used to hedge the currency exposure arising from currency denominated securities, bank deposits, subordinated loans and insurance reserves. These contracts also include spot foreign exchange transactions. Forward Rate Agreements (FRA): FRAs are agreements to pay or receive the difference between an agreed fixed rate of interest and the actual rate for a fixed amount and period of time. This difference is settled at the start of the future interest period. FRA contracts are particularly appropriate to the management of short-term interest rate exposure. Interest rate futures: Interest rate futures contracts are related to government bond rates or short-term reference interest rates. Interest rate futures are standardised contracts which are exchange traded and are subject to established clearing arrangements. Profits and losses on futures contracts are recognised daily, and are settled on the following day. Interest rate options: Interest rate options can be related to either bond yields or money market rates. The purchase of interest rate options related to bonds (also known as bond options) confers a right (but not an obligation) to buy or sell bonds at a pre-determined price. Interest rate options can be used as a flexible instrument for the management of both long and short-term interest rate exposure. Interest rate swaps/Asset swaps: Interest rate swaps/asset swaps are agreements between two parties to exchange interest rate terms for a specified period. This is normally an agreement to exchange floating rate payments for fixed rate payments, and this instrument is used in the management of long term interest rate risk. Share options: The purchase of share options confers a right (but not an obligation) to buy or sell shares at a pre-determined price. Share options may be related to stock market indices as well as to specific individual stocks. The sale of share options implies the equivalent one-sided obligation. In the main, exchange traded and cleared options are used. Stock futures (stock index futures): Stock futures contracts can be related to individual shares, but are normally related to stock market indices. Stock futures contracts are standardised futures contracts which are exchange traded and are subject to established clearing arrangements. Profits and losses on futures contracts are recognised daily, and are settled on the following day.
Storebrand is a leading player in the markets for long-term savings and life insurance. The group consists of three business areas: life insurance, asset management and banking, representing a comprehensive product range for private individuals, companies, municipalities and independent public sector entities.
At the close of 2004 Storebrand Investments had a 10.9% share of the Norwegian mutual funds market and a 12.8% market share for equity funds. Net inflows from new and existing customers in 2004 amounted to NOK 3.8 billion. At 31 December 2004, Storebrand Investments managed assets of NOK 19.8 billion in Norwegian registered mutual funds.
> Storebrand expanded its focus on environmental and socially responsible investment. All funds managed by Storebrand Investments will apply corporate social responsibility criteria.