September: SPP and Storebrand employees gather for the announcement of the acquisition.
More legs to stand on with SPP Insurance reserves by product (%)
(based on premium income in the competitive market and excluding capital insurance solutions6). The tick-the-box occupational pension market consists of all companies which have a collective agreement with the trade unions. The trade unions enter into frame contracts with selected life insurance companies. These frame contracts restrict the number of products that are available for each employee to choose from. Each employee selects the desired level of life insurance coverage by ticking appropriate boxes on a form that is received either by mail or online. The conventional occupational pensions market consists of companies that are not part of collective agreements with the trade unions. In this market, each company selects their own life insurance providers (life insurance companies or brokers ), from which its employees select life insurance products. The private life insurance market is made up of individuals that invest in life insurance products above the levels provided by their employers.
Diversification benefits: • the acquisition is also expected to provide capital synergies through diversification benefits. The importance of diversification benefits is further increased by the Solvency II regulatory requirements, which are currently being prepared by the European Union and
has a 3.5 per cent market share in the private pension segment. Based on new sales of occupational pensions, the SPP Business had a market share in the Swedish occupational pensions market of 12.7 per cent for 2007.
SPP also provides advanced consulting services covering occupational pensions, as well as insurance and administrative solutions for municipalities and organisations. Sales mainly occur via SPP’s internal sales team, insurance agents and direct marketing.
Fund. The fund meets strict ethical criteria and our hope is that it will place corporate responsibility even higher up on the agenda within the area of hedge funds.
Storebrand Life Insurance’s position within responsible investments Among the global leaders
SPP Fonder. The acquisition was approved by an extraordinary general meeting on 24 October 2007. The transaction was completed on 21 December 2007, once all the proper approvals from the authorities were in place. In the opinion of the Board the acquisition will result in significant future synergies. The trends within the Nordic and European markets for life and pension insurance reinforce the basis for the establishment of cross-boarder activities. The harmonisation of general conditions and products make the cross-boarder synergies clearer and easier to realise.
Despite the turbulent markets, the return on Storebrand’s assets was satisfactory: the management of Storebrand Life Insurance’s assets in 2007 resulted in a value-adjusted return of 7.3% and a booked investment return of 8.9%.
BIRGITTE NIELSEN (44), partner, JMI Invest II AS. General Management Programme, CEDEP/Insead. 1986 Bachelor of Commerce, international relations. 1993 Bachelor of Commerce, economics and finance. 2003­2006 advisor, Nielsen + Axelsson Asp. 1992­2003 latest as CP/CFO, FLS Industries AS. 1983­1992 Danske Bank, 1990­1992 as VP. 2006­ board member, JMI Invest II AS. 2006­ board member, Netconcept AS. 2006­ board member, Novenco AS. 2006­ board member, Arkil AS. 2005­ board member, Buy­Aid. 2005­ board member, IDEAS AS. 2005­ board member, Storebrand ASA. 2005­ board member, Faber AS. 2005­ board member, Energinet.dk. 2004­ board member, Team Denmark. 2004­ board member, Royal Greenland.
business amounting to NOK 18 million was expected and was due to start-up costs associated with the new business in Storebrand Skade.
IT investments and marketing costs from achieving the desired growth in sales particularly contributed to the deficit. Despite the deficit the company has maintained good control over costs and the result is in line with expectations.
With effect from 2006, Storebrand has included the following statement in all its recruitment advertising: “We are committed to diversity, and encourage applications from all qualified candidates regardless of age, gender, disability or cultural background”.
Gender equality/diversity: Storebrand is fully committed to increasing the number of women in senior management. In 2007, 44% of the members of the Board of Storebrand ASA were women. 37% of the group’s managers are female. Women made up 11% of the group’s executive management in 2007. This proportion has increased to 20% following changes to the group management model made in January 2008.
Governance Committee was established in 2006. The Norwegian Code of Practice for Corporate Governance was first published in December 2004, and was most recently revised on 4 December 2007. Storebrand meets the recommendations set out in the Code in all major respects.
The Board carried out an evaluation of its work in 2007 in which the executive management team also participated. The Board held 21 meetings and one Board conference in 2007. The work of the Board is subject to a specific mandate. The Board has established advisory committees on remuneration and internal audit.
During 2007, the following changes in the membership of Storebrand’s corporate bodies took place: Board of Directors: Camilla M. Grieg was elected as a new board member to replace Mette K. Johnsen, who had been a member since 2003. Sigurdur
Application of the profit for the year Storebrand ASA recorded a profit of NOK 696 million for 2007. During its discussion of the profit for the year in 2007, the Board of Storebrand ASA
Foreign ownership As of 31 December 2007, total foreign ownership amounted to 75.7%.
Dresdner Kleinwort S. Principal Acc. ORD 4 939 815 1.10 GBR
OSEBX index showed a return of 107% for the same period.
Compliance As one of the country’s leading financial institutions, Storebrand is dependent on maintaining an orderly relationship with the financial markets and supervisory authorities. The company therefore places
STOREBRAND’S CORPORATE BODIES Annual General Meeting (CoP section 6) Storebrand ASA holds its AGM no later than the end of June each year. The 2007 AGM was held on 25 April. In addition, an extraordinary general meeting was held on 24 October 2007 in connection with the acquisition of SPP. All shareholders with known address receive written notice of the AGM by post, sent out no later than 14 days before the AGM. The notice calling the meeting includes supporting papers for all resolutions that will be considered by the meeting, including the candidates nominated by the Election Committee.
Storebrand relaunched its P&C insurance business in 2006, and the group’s Chief Financial Officer is the Chairman of the Board of the P&C
Pensions reform in Norway: In the spring of 2007, the Norwegian parliament adopted new principles for earning and drawing a state retirement pension. The settlement agreed in the spring of 2007 clarifies how pension rights will be earned and how the new state pension can be drawn. The government has also announced that it intends to conduct an overall assessment of the need for changes in the laws governing occupational pensions in the private sector. The pension reform comes into force in 2010, and the occupational pensions legislation must be amended to take account of the changes to the national insurance pension scheme. Storebrand’s goal is to increase its competitiveness as a consequence of this by developing new customer solutions and good customer communication. As far as expectations are concerned, the sector will in general have a short space of time in which to adapt between the stipulation of the regulations and their implementation.
FTSE4Good, Global 100 and Global Challenges Index confirms. Storebrand has also ensured that the group is among the world’s leaders within socially responsible investments. In its future work, Storebrand will prioritise maintaining its leading position, and profiting further from this in its sales work. This work includes clear goals and followup, improved customer communication and product development.
SPP. The loan will be repaid when Storebrand Livsforsikring AS takes up a new subordinated loan in the market. The solvency margin in the
The life insurance company’s risk bearing capacity was satisfactory at the close of 2007. The solvency margin was 136.1 per cent compared with 174.6 per cent at the close of 2006. Capital adequacy in 2007 was 10.0 per cent while the minimum required is 8 per cent. Primary capital in the capital adequacy and solvency margin capital increased due to the share issue and subordinated loan, but was reduced by intangible assets from the SPP transaction.
Storebrand Life Insurance incurred operating costs of NOK 1,927 million in 2007 compared with NOK 1,755 million in 2006. The difference of
The corporate customer pays for the interest rate guarantee in advance each year. This means that the profit in the company cannot be obtained in arrears by retaining parts of the interest profit from the group pension policies. It will still be possible to make statutory provisions that in years with low rates of return can be used to offset a shortfall in return between zero per cent and the guaranteed return. The statutory reserves must be distributed across the individual policies. The insurance act stipulates the maximum size of additional statutory reserves. The owner carries all the downside risk, and must carry reserves against the policy if the buffer is not sufficient or not available. The price charged for the guaranteed interest rate will depend on factors such as the level of buffer capital associated with the policy, the level of exposure to equities in the portfolio, the level of the guaranteed interest rate and the current market situation, including the level of interest rates. Before 2008, there was no specific premium for the interest rate guarantee and it was paid for through the allocation of profit between the company and its policyholders.
Institutional customers: In 2007, Storebrand Investments gained 44 new institutional customers. A special key customer unit containing highly qualified investment advisers serves institutional customers.
This focus has improved both the cost effectiveness and scalability of its activities, and ensured a robust and flexible asset management platform that can produce stand-alone asset management products as well as manage the complex and flexible investment profiles offered through defined contribution pension schemes. Throughout 2007, the company focused strongly on limiting the complexity and ensuring the scalability of operations. This has been especially important with respect to the successful implementation of the new insurance act.
Storebrand Investments’ performance in 2007 was lower than the results for 2006. Storebrand Investments manages NOK 145 billion for Storebrand Life Insurance. The return on this portfolio was weak in 2007. This was principally due to the relatively weak return in the fixed income and money market portfolios and the weak results in portfolios exposed to the North American equity market. However, the relative return on Norwegian equities has been strong.
Margin development Storebrand Investments 6 bp 8 bp 10 bp 12 bp 14 bp 16 bp 18 bp
Through this Storebrand assumes risk in the ordinary course of its business activities. Risk management is practised in order to achieve
Note 6: Holding company’s shares in subsidiaries and associated companies 118
Provision for dividend Pursuant to IAS 10, which deals with events after the balance sheet date, the proposed dividend shall be classified as equity until such time as it is approved by the general meeting.
Life insurance Premium income Net premium income comprises premium amounts that fall due during the year, transfers of premium reserve and premiums on reinsurance ceded. Accrual of premiums earned is made through allocations to the premium reserve in the insurance fund.
The guaranteed interest rate and the other assumptions are agreed when the policy is signed. In its insurance portfolio the company has interest guarantees that vary between 2.25 per cent and 5.2 per cent. The dominant interest guarantees in the portfolio are those with 3.5 per cent, 3.0 per cent and 5.2 per cent guarantees. These are responsible for 47 per cent, 23 per cent and 19 per cent respectively of the total portfolio.
Changes to value in the balance sheet 21.5 21.5 48.1 24.5
The Board's declaration The Board of Storebrand ASA will submit a statement to the annual general meeting on the salary and other remuneration of senior employees, cf. Section 6-16a of the Public Limited Liabilities Companies Act, based on the group's previously adopted guidelines concerning remuneration for senior employees in Storebrand.
The bonus system The Storebrand group's bonus scheme, which is offered in addition to basic pay, is a performance-related bonus scheme linked to the group’s value-based management system. The value creation of the group finances the overall amount of the bonus, but the employees’ performance determines how large a proportion of the financed bonus is awarded. The bonus entitlement is credited to a bonus account. The amount credited to the bonus bank is exposed 50 per cent to Storebrand’s share price and 50 per cent to the bank interest rate paid. 1/3 of the balance on the bonus account is paid each year.
Income from financial assets with investment choice FVO 353.4 685.4 721.3
Change in individual loan write-downs for the period 113.0 29.6 107.5
Interest accrued but not due 1 102.6 1 216.0 1 115.0
Other short term liabilities of NOK 21.2 billion have fixed interest rates that expire within one year.
In Autumn 2006, Storebrand relaunched sales of P&C insurance products to the Norwegian retail market. Premium and claims reserves for own account for the newly established P&C business amounted to NOK 82 million at the close of 2007.
Storebrand Life Insurance The following table shows the net annual risk premium for the most common types of cover. The premiums apply to persons of normal health and risk.
Basic interest rate Kredittilsynet sets the highest basic interest rate permitted for new policies and for new members/new accrual of benefits in group pension insurance. The highest basic interest rate for new policies was set at 3 per cent in 1993 and subsequently reduced in 2005 to 2.75 per cent for policies entered into after 1 January 2006. The highest basic interest rate for new members/new accrual of benefits in group pension insurance was reduced from 4 per cent to 3 per cent with effect from renewals in 2004.
Pooling is a form of reinsurance at a global level. In the case of larger groups with activities in multiple 1 countries there is a possibility that the group will balance its risk result via pooling by offsetting losses in one country against gains in another country.
The run-off result consists of the allocated reserves for disability claims and the dissolution of the reserves in the event of reactivation. If greater reactivation takes place and thus more of the reserve is released then expected, then the run-off result will be positive. If the opposite occurs, it will be negative.
Cash and cash equivalent assets at start of the period 90.9 92.9 119.4
Bonds and other fixed income securities Financial assets and liabilities are included in the balance sheet from such time as Storebrand becomes party to the instrument’s contractual terms and conditions. Normal purchases and sales of financial instruments are booked on the transaction date. When a financial asset or a financial liability is first recognised in the accounts, it is valued at fair value plus, in the case of a financial asset or a financial liability that is not a financial asset or a financial liability at fair value in the profit and loss account, transaction costs directly related to the acquisition or issue of the financial asset or the financial liability.
Counter indemnity of Oslo Reinsurance Company ASA, which is 100% owned by Storebrand Skadeforsikring AS.1
We have audited the annual financial statements of Storebrand ASA as of 31 December 2007, showing a profit of MNOK 696,2 for the parent company and a profit of MNOK 2.008,8 for the group. We have also audited the information in the Board of Directors’ report concerning the financial statements, the going concern assumption and the proposal in the financial statements for the allocation of the profit. The annual financial statements comprise the parent company’s financial statements and the group accounts. The parent company’s financial statements comprise the balance sheet, the statements of income and cash flows and the accompanying notes. The rules of the Norwegian Accounting
• the group accounts are prepared in accordance with law and regulations and give a true and fair view of the financial position of the Group as of 31 December 2007, and the results of its operations and its cash flows and the changes in equity for the year then ended, in accordance with International Financial Reporting Standards as adopted by the EU
Solvency margin requirement: An expression of the risk associated with the insurance-related liabilities. Calculated on the basis of the insurance fund and the risk policies total for each insurance sector.
Unit-Linked: Life insurance offering investment choice whereby the customer can influence the level of risk and return by selecting in which funds assets are to be invested.