22 REPORT OF THE BOARD OF DIRECTORS

Transcription

1

2 22 REPORT OF THE BOARD OF DIRECTORS OPERATIONS Market and new business In the total new business market SPP Liv is one of the three largest life insurance companies in Sweden. Measured in value of new business* the company s share is 13 per cent (11). The market for occupational pensions exposed to competition, which is SPP Liv s main market, continues to show strong growth. SPP Liv s share of the occupational pension market amounts to 25 per cent (24) of new business value. This makes SPP Liv one of the two leading players in the main market. New business measured in annual premiums and single premiums amounted to SEK 6,579 m (4,399), an increase of 50 per cent. This increase was largely due to continued rising sales of single premiums for early retirement pension, which amounted to a total of SEK 3,300 m. Current premiums account for just over 20 per cent of total new business. New traditional life insurance business amounted to SEK 5,336 m (3,759) and SEK 1,243 m (640) for unit linked insurance. Results The net loss for the amounted to SEK 497 m (profit 10,043). This decline in earnings was mainly due to a substantial reduction in investment income compared with the previous year. Falling stock market prices are the main reason for this decline. However, new investment regulations, with a lower proportion of equities, and a good return on investment in the first five months of the year contributed to a total return on investment of 3.3 per cent (19.1). The investment portfolio is the sixth largest in the Swedish life insurance market. Costs for strengthening premium reserves, among other things for interim bases, also contributed to the decline in earnings. Premiums written and insurance portfolio Premiums written amounted to SEK 10,011 m (7,548), which is an increase of 33 per cent. This increase was due to higher sales of single premiums in conjunction with early retirement and increased sales of unit linked insurance. Single premiums vary substantially depending on the economic climate and the situation in the labour market. Client company funds, which were repaid by Alecta pensionsförsäkring, ömsesidigt and SPP Liv, also contributed to increased sales in the final months of the year of both single premiums for early retirement pensions and current premiums. Premiums written for traditional insurance amounted to SEK 8,262 m (6,647) and SEK 1,762 m (902) for unit linked insurance. The number of insurance contracts was 649,400 (549,900). * Value of new business is calculated as single premiums plus current annual premium x 10. SEK bn PREMIUMS WRITTEN Unit linked insurance Traditional life insurance Premiums written show the actual income from new and old business. SEK m 7,000 6,000 5,000 4,000 3,000 2,000 1,000 0 NEW BUSINESS Unit linked insurance Traditional life insurance New business is calculated as the sum of single and annual premiums.

3 REPORT OF THE BOARD OF DIRECTORS 23 Investment income Investment income, including unrealised gains and losses, totalled SEK 2,785 m (13,185). The interest rate trend made a positive contribution to this result while falling and strongly fluctuating stock exchange prices led to a decline. The return on the promissory note receivable from Alecta pensionsförsäkring, ömsesidigt, was not equally affected by the stock market decline. This promissory note receivable was settled in full in August The market value of investments amounted to SEK 83.5 bn (80.1) according to the investment income table. Further details are provided in the section on investment management and in the investment income table on page 16. Comments on other major items Claims incurred amounted to SEK 3,003 m (2,249), an increase of 33 per cent. SEK 380 m of this change was due to increased payments to pensioners with early retirement pension. In addition, reserves for sickness insurance were increased by SEK 200 m due to more cases of sickness and higher safety margins. Change in other technical provisions amounted to SEK 8,884 m (7,202), which is an increase of 23 per cent. This cost includes a SEK 1,365 m provision due to reduced interest rate assumption. Operating expenses amounted to SEK 911 m (729). The main reason for this increase was higher costs for sales and marketing, development and maintenance costs in computer systems, and increased personnel costs, due among other things to new recruitment. Accounting for deferred acquisition costs in SPP Liv Fondförsäkring has been adapted to the parent company s principles. This means that acquisition costs are spread over five years in accordance with the Swedish Financial Supervisory Authority s directives. The positive impact on the result amounted to SEK 82 m. The result for the comparative year was positively affected by SEK 42 m. Operating expenses in relation to premiums written amounted to 9.1 per cent (9.7). The management expense ratio amounted to 1.1 per cent (1.0). The tax expense for the year, SEK 509 m (512) mainly comprises costs for yield tax. % 12.0 EXPENSE RATIO Operating expenses in relation to premiums written SEK m 100,000 80,000 60,000 ASSETS IN RELATION TO INSURANCE COMMITMENTS Insurance commitments Market-valued assets COLLECTIVE SOLVENCY MARGIN % , ,

4 24 REPORT OF THE BOARD OF DIRECTORS Personnel The number of employees during the period amounted to 599 (468) which is an increase of 28 per cent. Details of salaries and other staff costs are provided in Note 34 on page 37. Parent company Premiums written for the period amounted to SEK 8,262 m (6,647), which is an increase of 24 per cent. This increase was mainly due to higher sales of single premiums for early retirement pensions. The return on investment amounted to 3.3 per cent (19.1) and the substantial decrease was largely due to falling stock-exchange prices. The net loss for the year was SEK 408 m (profit 9,932). Lower investment income and increased costs for strengthening reserves for interim bases and safety margins in sickness insurance, were contributory factors to this lower result. SPP Liv Fondförsäkring AB Premiums written for SPP Liv Fondförsäkring AB amounted to SEK 1,762 m (902). This represents an increase of 95 per cent compared with the previous year. The increase was mainly due to growing new business in unit linked insurance. The net loss for the year was SEK 9 m (loss 18). The result was favourable affected, however, by a changed accounting principle for capitalisation of acquisition costs. The company s operations are still being built up and are expected to provide a loss for the next few years. During the year, the company received a shareholders contribution of SEK 80 m from the parent company for its future operations. Other companies SPP Pensionstjänst AB s net profit for the year was SEK 0.8 m. The company administers 70 profit-sharing foundations, 23 pension foundations and one insurance association. Pension payments numbered 26,000 per month. SPP Konsult s net profit amounted to SEK 0.6 m. Completed consulting assignments were on a par with the previous year. SPP Kundcenter reported a breakeven result. The company provides the SPP s customers with information and service, primarily via the telephone and Internet. Bonus Bonus funds amounted to SEK 23,836 m (28,044), of which unrealised gains attributable to changes in the value of investments amounted to SEK 728 m (3,266). SPP Liv s bonus rate is set using different methods within the two insurance portfolios. The bonus within collective-agreement related occupational pension insurance is calculated according to the same methods as those applied for ITP insured in Alecta pensionsförsäkring, ömsesidigt, in the form of pension supplements, adjustment of paid-up values and premium reductions. Pension supplements may normally amount to a maximum of the price trend according to the Consumer Price Index (CPI), which means that pensions were raised by 1.0 per cent at the beginning of For SPP Liv s traditional life insurance, bonus is calculated by adding a bonus rate to the insured s capital. The average bonus rate during the year was 10.9 per cent (7.5) before deduction for operating expenses of 0.5 percentage points and yield tax of 0.7 percentage points. The average bonus rate for endowment insurance was 1.3 per cent. On 1 February 2002, the bonus rate was reduced to 7.0 per cent. Collective reserve SPP Liv s surplus, the collective reserve, amounted to SEK 13,124 m (14,512) at year-end The solvency margin on the same date amounted to 119 per cent (123). See also page 20.

5 FIVE-YEAR SUMMARY 25 Five-year summary SEK m * 2000 Result Premiums written 1,912 4,591 5,515 7,548 10,011 Net investment income in insurance business 1,487 7,087 8,520 13,185 2,785 Claims incurred 211 1,319 1,591 2,249 3,003 Operating expenses Balance on the technical account 976 1,199 4,761 10,553 4 Net profit/loss for the year ,194 10, Financial position, 31 December Total assets 11,357 56,264 66,838 83,463 90,127 Investment assets 10,520 55,266 65,646 82,062 86,254 Policyholders funds 2,318 15,925 19,406 28,291 24,036 of which deferred tax Technical provisions 8,560 39,465 46,612 54,075 63,300 Key ratios Expense ratio, % Management expense ratio, % Portfolio details Number of affiliated companies 3,100 12,300 13,500 15,800 17,500 Number of insurance contracts 298, , , , ,400 Result Premiums written 1,849 4,332 5,042 6,647 8,262 Net investment income in insurance business 1,481 7,062 8,448 12,511 2,792 Claims incurred 211 1,319 1,591 2,249 3,002 Balance on the technical account 996 1,221 4,795 10, Net profit/loss for the year ,175 9, Financial position, 31 December Investment assets 10,448 54,920 64,821 79,746 82,304 of which equities 3,195 4,461 5,790 8,183 35,618 of which fixed-income securities 7,253 8,671 10,029 12,162 46,686 of which promissory note receivable from Alecta pensionsförsäkring, ömsesidigt 41,788 49,002 59,401 Policyholders funds 2,315 15,929 19,430 28,272 23,984 Collective reserve 1,658 12,276 6,187 14,512 13,124 Technical provisions 8,481 39,112 45,735 51,756 59,377 Key ratios Management expense ratio, % Administrative expense ratio, savings products**, % Administrative expense ratio, risk products**, % Acquisition cost ratio**, % Collective solvency margin, % Average bonus rate for traditional life insurance before yield tax and deduction for operating expenses, % Investment management Yield on investments, % Total return on investments, % * Adjusted for changed accounting principle. ** New key ratios as recommended by the Swedish Insurance Federation. These are also calculated for the years

6 26 ANALYSIS OF RESULTS Analysis of Results PARENT COMPANY, SPP LIVFÖRSÄKRING AB and life occupational and occupational pension insurance group life insurance SEK m Total with bases with bases Premiums written 8,262 8, Investment income 7,374 7,374 0 Unrealised gains on investments 1,335 1,333 2 Claims paid 2,528 2, Change in provisions for claims outstanding Change in other technical provisions Life insurance provisions 7,281 7,281 Operating expenses Investment charges Unrealised losses on investments 5,786 5,786 0 Balance on the technical account, life insurance business Technical provisions Life insurance provisions 57,516 57,516 Provisions for claims outstanding 1,861 1, Total technical provisions 59,377 59, Bonus funds 23,784 23,780 4

7 PROFIT AND LOSS ACCOUNT 27 Profit and Loss Account SEK m Note TECHNICAL ACCOUNT, LIFE INSURANCE BUSINESS Premiums written (net of reinsurance) 10,011 7,548 8,262 6,647 Premiums written (gross) 1 10,071 7,579 8,322 6,678 Premiums ceded Investment income 2 7,604 11,245 7,374 11,208 Unrealised gains on investments 3 1,415 2,154 1,335 2,053 Increase in value of investments for which policyholders bear the investment risk Claims incurred 3,003 2,249 3,002 2,249 Claims paid 2,528 1,978 2,528 1,978 Gross 5 2,529 1,979 2,529 1,979 Reinsurers share Change in provisions for claims outstanding Gross Reinsurers share Change in other technical provisions 8,884 7,202 7,281 5,760 Life insurance provisions 7,281 5,760 7,281 5,760 Gross 25 7,282 5,760 7,282 5,760 Reinsurers share 1 1 Other technical provisions 6 1,603 1,442 Operating expenses Investment charges Unrealised losses on investments 9 5, , Decrease in value of investments for which policyholders bear the investment risk Result from participations in associated companies 2 Balance on the technical account, life insurance business 4 10, ,463 Non-Technical Account Balance on the technical account, life insurance business 4 10, ,463 Investment income 22 9 Unrealised gains on investments 1 0 Investment charges 1 8 Unrealised losses on investments 0 0 Other income Other expenses Result before appropriations and taxes 12 10, ,463 Appropriations Result before taxes 12 10, ,427 Tax on profit for the year NET PROFIT/LOSS FOR THE YEAR , ,932

8 28 BALANCE SHEET Balance Sheet SEK m Note 31 Dec Dec Dec Dec Assets Investments Investments in companies Shares and participations in companies Shares and participations in associated companies Promissory note, companies 14 59,401 59,401 Other financial investments Shares and participations 15 35,430 8,149 35,314 8,082 Bonds and other fixed-income securities 16 46,741 12,223 46,686 12,162 82,370 79,773 82,304 79,746 Investments for which policyholders bear the investment risk 17 3,884 2,289 Reinsurers share of technical provisions Claims outstanding Receivables Amounts receivable from direct insurance operations Other receivables 19 1, , , , Other assets Tangible assets Cash at bank and in hand Prepayments and accrued income Accrued interest income 1, , Deferred acquisition costs Other prepayments and accrued income , , TOTAL ASSETS 90,127 83,463 86,041 81,046

9 BALANCE SHEET 29 Balance Sheet SEK m Note 31 Dec Dec Dec Dec SHAREHOLDERS EQUITY, PROVISIONS AND LIABILITIES Shareholders equity Share capital, 2,000 shares par value SEK 100, Untaxed reserves Bonus funds 23 Bonus reserve 21,155 16,619 20,932 16,524 Reserve for unrealised gains , ,262 Accumulated deficit in operating subsidiaries Other funds 2,537 1,814 2,536 1,814 Net profit/loss for the year , ,932 23,836 28,044 23,784 27,904 Technical provisions Life insurance provisions 25 57,516 50,416 57,516 50,416 Provisions for claims outstanding 26 1,862 1,340 1,861 1,340 59,378 51,756 59,377 51,756 Provisions for life insurance for which policyholders bear the investment risk 27 3,922 2,319 Provisions for other risks and expenses Provisions for taxes Other provisions Deposits received from reinsurers Liabilities Liabilities related to direct insurance 29 1, , Liabilities related to reinsurance Derivatives Other liabilities 30 1, , , , Accruals and deferred income TOTAL SHAREHOLDERS EQUITY, PROVISIONS AND LIABILITIES 90,127 83,463 86,041 81,046 Memorandum Items Guarantees and assets pledged as collateral security for own liabilities and by way of provisions reported commitments 32 67,688 59,404 63,766 57,085 Contingent liabilities 33 8,493 9,858 8,493 9,858

10 30 ACCOUNTING PRINCIPLES Accounting Principles The annual accounts have been prepared in accordance with the Annual Accounts Acts for Insurance Companies and the Swedish Financial Supervisory Authority s instructions and general advice regarding the annual accounts of insurance companies. Consolidated Accounts The consolidated accounts are prepared in accordance with the recommendations of the Swedish Financial Accounting Standards Council regarding consolidated accounts. The consolidated accounts include the parent company SPP Livförsäkring AB, and the companies in which on the closing date SPP Livförsäkring directly or indirectly held more than 50 per cent of the voting rights or in another manner exercised a decisive instrument. The consolidated accounts are prepared in accordance with the purchase method. Associated companies, i.e. companies in which the s voting rights amount to a minimum of 20 per cent and a maximum of 50 per cent, are consolidated according to the equity method. This means that the book value in the of these shares corresponds to the s share of associated companies shareholders equity and any residual values on consolidated surplus or deficit values. In the profit and loss account the s share of the associated company s profit after tax, adjusted for depreciation of acquired surplus values, is reported as Result from participations in associated companies. Translation of the balance sheets of foreign associated companies is effected at the exchange rate on the closing date while profit and loss accounts are translated at the average exchange rate for the year. Any translation differences are stated directly in consolidated shareholders equity. Goodwill attributable to acquisition of associated companies is amortised according to plan by 10 per cent per year. The amortisation period is based on the value of the associated company s business, contracts and customer base. Accounting and valuation of investments Investments are reported at current value with the exception of shares and participations in companies and associated companies. Purchases and sales of investments are reported in the balance sheet as per transaction date. Unsettled transactions as per the closing date are reported as a receivable from or liability to the counterparty under other receivables and other liabilities. Assets and liabilities in foreign currency are translated into SEK at the closing rate with the exception of shares in foreign associated companies. The result of trading in equity and interest rate futures is reported as a capital gain, net. In the specification of investment income, Note 2, this item is included under other investments. Derivatives that are used to hedge currency risks are reported together with the underlying asset. All derivatives are valued at current value. Realised and unrealised changes in value are reported over the profit and loss account and for equities and real estate comprise the difference between the acquisition value and current value. For fixed-income instruments the unrealised result is calculated as the difference between amortised cost and current value. Amortised cost is the present value of future payments discounted by the effective rate of interest at acquisition. This takes into account any premiums or discounts at acquisition which are spread over the remaining maturity period of the instrument. Unrealised gains on investments, after deduction of deferred tax, are reported in a reserve for unrealised gains under bonus funds in the balance sheet. The reserve for unrealised gains consists of the difference between the total acquisition value (for fixed-income investments amortised cost) and total current value for the respective asset item in the original currency translated at the closing exchange rate. For unit linked insurance activities, fund units for which policyholders bear the investment risk are

11 ACCOUNTING PRINCIPLES 31 valued at current value. When the policyholders units are realised, for example pension payments, payment of charges or similar, the unit is valued at its current value at the date of transfer. Valuation of other assets Machinery and equipment is valued at acquisition values after deduction for accumulated depreciation. Depreciation according to plan is based on the acquisition values of fixed assets and their estimated economic life. Acquisition costs that vary with and which are directly or indirectly related to acquisition or renewal of insurance contracts are capitalised in the balance sheet. The depreciation period for capitalised acquisition costs is five years. Changed accounting principle Staring in the current financial year, SPP Liv Fondförsäkring applies the same valuation rules and depreciation periods for capitalisation of acquisition costs as the parent company. This adjustment has been made in order to comply with the directives of the Swedish Financial Supervisory Authority. Valuation of technical provisions In the life insurance business, long-term contracts motivate consideration to both the length of the contract and the return on the assets that correspond to the insurance undertaking. For this reason, present value computations of reserves are always made. These are computed according to generally accepted actuarial principles and assumptions adopted by SPP Livförsäkring AB s Board of Directors. These principles are based on assumptions with regard to interest rates, mortality, morbidity and operating expenses. Technical provisions consist of life insurance provisions and provisions for claims outstanding and other technical provisions. Life insurance provisions are the capital value of benefits undertaken according to contracts entered into including anticipated payment costs reduced by the capital value of future premiums for such benefits. The provision for claims outstanding mainly comprises the estimated capital value of the company s responsibility for disability pensions and premium waivers for disabilities that have already occurred. A small portion relates to insurance amounts due for payment, but for which payment has not yet been made, as well as an amount for anticipated but not yet known sickness cases. Provisions for which policyholders bear the investment risk in unit linked insurance operations correspond to the undertakings according to insurance contracts. These provisions comprise at all times the sum of the current value of the fund units attributable to the insurance in question, and funds that have been paid in but have not yet been invested in fund units. Tax Taxes are calculated individually for each company in the respective country in accordance with prevailing tax legislation. Tax costs for 2000 include yield tax, income tax and withholding tax on dividends received. Income tax includes deferred tax on the portion of the s operations that is liable for income tax.

12

13 NOTES 33 NOTE 8 INVESTMENT CHARGES NOTE 11 TAX ON PROFIT FOR THE YEAR Investment management charges Interest payable, etc other interest payable other interest payable, companies Capital losses NOTE 9 UNREALISED LOSSES ON INVESTMENTS Shares and participations 5,747 5,747 Bonds and other fixed-income securities Other investments , , NOTE 10 DECREASE IN VALUE OF INVESTMENTS FOR WHICH POLICYHOLDERS BEAR THE INVESTMENT RISK Shares and participations 95 2 Bonds and other fixed-income securities Yield tax Income tax Other Of income tax SEK 47 m ( 10) in the comprises deferred tax, due to utilisation of tax allocation reserves in the. NOTE 12 SHARES AND PARTICIPATIONS IN GROUP COMPANIES Specification of the s and the s holdings of shares and participations in group companies: Book Book Share of value value Swedish companies Corp.ID.No. Domicile Number equity SPP Kundcenter AB Stockholm 1, % 0 0 SPP Liv Pensionstjänst AB Stockholm 8, % 1 1 SPP Konsult AB 1) Stockholm % SPP Liv Fondförsäkring AB Stockholm % Since all shares are unlisted, no market values are given. 1) Book values are not stated for sub-subsidiaries. Acquisition value Opening balance Shareholders contribution provided 1) Write-downs for the year Closing balance Total shares and participations in companies ) SPP Liv provided a conditional shareholders contribution to SPP Fondförsäkring AB of SEK 80 m. The shareholding was written down by a corresponding amount. NOTE 13 SHARES AND PARTICIPATIONS IN ASSOCIATED COMPANIES Investment Share in profits 4 Dividend 4 Translation difference 2 Goodwill amortisation 6 Closing balance Closing balance of shares in associated companies includes goodwill of SEK 50 m. Number of Foreign companies Domicile shares Share of equity Nordben Life and Pension Insurance Co Limited Guernsey 3,000,000 50% Euroben Life and Pension Limited Ireland 317,435 50% Since all shares are unlisted, no market values are given. NOTE 14 PROMISSORY NOTE, GROUP COMPANIES The promissory note, which amounted to SEK 59,401 m at year-end 1999, was attributable to the portfolio transfer carried out between Alecta and SPP Liv, relating to collective-agreement related occupational pension. Most of the promissory note was settled in the first half of Final settlement was made in August 2000.

14 34 NOTES NOTE 15 SHARES AND PARTICIPATIONS Current Acquisition Current Acquisition value value value value Swedish shares 19,568 21,478 4,712 2,489 Foreign shares 15,116 15,740 2,892 1,978 Participations in Swedish funds Participations in foreign funds ,430 37,909 8,149 4,915 Listed Swedish shares 19,568 21,478 4,698 2,477 Listed Swedish funds Unlisted Swedish shares Listed foreign shares 15,116 15,740 2,892 1,978 Listed foreign funds ,430 37,909 8,149 4,915 Swedish shares 19,568 21,478 4,712 2,489 Foreign shares 15,116 15,740 2,892 1,978 Participations in Swedish funds Participations in foreign funds ,314 37,793 8,082 4,852 Listed Swedish shares 19,568 21,478 4,698 2,477 Listed Swedish funds Unlisted Swedish shares Listed foreign shares 15,116 15,740 2,892 1,978 Listed foreign funds ,314 37,793 8,082 4,852 The statutory list of shares and participations is attached to the annual report submitted to the Swedish Financial Supervisory Authority. The list may be ordered from SPP Liv, Finance, SE Stockholm or by fax NOTE 16 BONDS AND OTHER FIXED-INCOME SECURITIES Current Acquisition Current Acquisition value value value value Swedish government 22,688 22,156 8,002 8,221 Swedish mortgage institutions 9,681 9,506 3,730 3,809 Other Swedish issuers 1,366 1, Foreign governments 10,972 11,094 Other foreign issuers 1,979 2,006 Participations in Swedish funds ,741 46,164 12,223 12,516 Listed securities 46,667 46,095 11,957 12,258 Unlisted securities ,741 46,164 12,223 12,516 Swedish government 22,688 22,156 8,002 8,221 Swedish mortgage institutions 9,681 9,506 3,730 3,809 Other Swedish issuers 1,366 1, Foreign governments 10,972 11,094 Other foreign issuers 1,979 2,006 46,686 46,111 12,162 12,454 Listed securities 46,612 46,042 11,896 12,196 Unlisted securities ,686 46, ,162 12,454 Accrued acquisition value for fixed-income securities exceeds and falls below respectively the amount to be realised on the due date by SEK 2,316 m and SEK 589 m respectively. Fixed interest terms 0 1 year 7, years 6, years 17, years 12,067 >10 years 2,902 Total 46,686 NOTE 17 INVESTMENTS FOR WHICH POLICYHOLDERS BEAR THE INVESTMENT RISK Current Acquisition Current Acquisition value value value value Swedish fund units 3,653 3,338 2,160 1,562 shares and participations ,837 1,834 1,289 fixed-income securities Foreign fund units shares and participations ,884 3,568 2,289 1,661 A specification of the holding of investments for which policyholders bear the investment risk is attached to the annual report submitted to the Swedish Financial Supervisory Authority. The list may be ordered from SPP Liv, Finance, SE Stockholm or by fax NOTE 18 RECEIVABLES RELATED TO DIRECT INSURANCE Amounts receivable from policyholders Amount receivable from Förenade Liv NOTE 19 OTHER RECEIVABLES Owed by companies Tax receivable Taxes outside Sweden Other 1, , , , NOTE 20 TANGIBLE ASSETS Acquisition value Opening balance Purchases for the year Closing balance Accumulated depreciation Opening balance Depreciation for the year Closing balance Book value At the end of the year, SPP Livförsäkring AB acquired equipment which was previously leased at a value of SEK 54 m. In the the entire amount has been written off against the background of the fact that the company will soon be taking over new premises which entails acquisition of new equipment.

15 NOTES 35 NOTE 21 DEFERRED ACQUISITION COSTS NOTE 24 RESERVE FOR UNREALISED GAINS Capitalisation Opening balance Capitalised during the year Closing balance Accumulated depreciation Opening balance Depreciation for the year Closing balance Book value of which, book value with remaining depreciation period > 2 years Shares and participations in associated companies 2 Shares and participations 0 3,236 3,231 Bonds and other fixed-income securities Other investments 1) Deferred tax 728 3, ,262 Unrealised gains are estimated on a portfolio basis for shares and participations and bonds and other fixed-income securities. 1) Pertains to assets managed by Förenade Liv, which are reported among Receivables relating to direct insurance in SPP Liv s balance sheet. NOTE 22 UNTAXED RESERVES Provisions were previously made to a tax allocation reserve within the part of SPP Liv s operations that is liable for income tax. The opening provision, amounting to SEK 168 m, was utilised in its entirety during the financial year. NOTE 23 BONUS FUNDS Reserve for Equity in Net profit Bonus unrealised operating Other for the Total Total reserve gains companies funds year Opening balance according to adopted balance sheet 16,619 3, ,814 10,001 28,044 19,169 Changed accounting principle Adjusted opening balance 16,619 3, ,814 10,043 28,044 19,169 Disposition of earnings in previous year ,814 10,043 Takeover/transfer of insurance portfolio 110 Reversionary bonus Payment of client company funds 2,695 2,695 Withdrawal from indexation funds Associated companies 2 2 Other changes in bonus funds Change in reserves 2,539 2,539 Net profit/loss for the year ,001 Closing balance 21, , ,836 28,044 Reserve for Equity in Net profit Bonus unrealised operating Other for the Total Total reserve gains companies funds year Opening bonus funds 16,524 3,262 1,814 9,932 27,904 19,098 Disposition of earnings in previous year 8,118 1,814 9,932 Takeover/transfer of insurance portfolio 110 Reversionary bonus Payment of client company funds 2,695 2,695 Withdrawal from indexation funds Other changes in bonus funds 2 2 Change in reserves 2,538 2,538 Net profit/loss for the year ,932 Closing balance 20, , ,784 27,904 Of insurance portfolio taken over/transferred during the year, SEK ( 110) pertains to transfers to/from Alecta. Special indexation funds are included in the bonus reserve with SEK 2,081 m (2,021) in the and in the.

16 36 NOTES NOTE 25 LIFE INSURANCE PROVISIONS (gross) Reversionary Other Total Total bonus provisions Opening balance 1 50,415 50,416 43,186 Insurance portfolio transferred/taken over Transfer from other technical provisions Change for the year 7,282 7,282 5,760 of which, attributable to reduced interest rate assumption 1,365 1, of which, other change during the year 5,917 5,917 5, ,515 57,516 50,416 Reversionary Other Total Total bonus provisions Opening balance 1 50,415 50,416 43,186 Insurance portfolio transferred/taken over Transfer from other technical provisions 1,500 Change for the year 7,282 7,282 5,760 of which, attributable to reduced interest rate assumption 1,365 1, of which, other change during the year 5,917 5,917 5, ,515 57,516 50,416 SEK 182 m ( 30) of insurance portfolio taken over during the year comprises transfers from Alecta. The applies the Swedish Financial Supervisory Authority s alternative for interim bases when calculating life insurance provisions, which means that the earnings effect of reduced interest rates can be spread over several years. Since a new Insurance Business Act applies with effect from 1 January 2002, the remaining amount will be expensed on that date. At 31 December 2000, approximately SEK 8.5 bn of the effect of the reduced base rate remained to be expensed. The following calculation assumptions were used in the calculation of insurance provisions: Mortality assumption: Mortality assumptions based on the company s actual experience are applied to collective occupational pension insurance. The mortality assumptions developed by the industry in 1990 are applied to other traditional life insurance. Operating expenses assumption: The company applies a cost that is proportional to technical provisions and a cost that is proportional to paid-in premium. The operating expenses assumption is based on the company s actual costs incurred. The interest-rate assumption is 3.0 per cent. The effective tax rate is applied through a reduction of the assumed interest by 0.4 percentage points. NOTE 27 PROVISIONS FOR LIFE INSURANCE FOR WHICH POLICYHOLDERS BEAR THE INVESTMENT RISK Opening balance 2, Change for the year 1,603 1,442 3,922 2,319 NOTE 28 PROVISIONS FOR TAXES Yield tax Income tax Of income tax, SEK 0 m (47) in the consists of deferred tax since the tax allocation reserve was utilised in the. SPP Liv reports a tax receivable. NOTE 29 LIABILITIES RELATED TO DIRECT INSURANCE Owed to policyholders 1, , Owed to Förenade Liv , , NOTE 30 OTHER LIABILITIES Owed to companies Other 1, , , , All liabilities fall due for payment earlier than five years after the balance sheet date. NOTE 31 ACCRUED EXPENSES AND DEFERRED INCOME Reserve for employees Other NOTE 26 PROVISIONS FOR CLAIMS OUTSTANDING (gross) Provision for Non- non-life annu- Notified notified ities and sick- Total Total claims claims ness annuities Opening balance ,262 1,340 1,049 Change for the year ,722 1,862 1,340 Provision for Non- non-life annu- Notified notified ities and sick- Total Total claims claims ness annuities Opening balance ,262 1,340 1,049 Change for the year ,722 1,861 1,340

17 NOTES 37 NOTE 32 GUARANTEES AND ASSETS PLEDGED AS COLLATERAL SECURITY FOR OWN LIABILITIES AND BY WAY OF PROVISIONS REPORTED COMMITMENTS Assets registered on behalf of policyholders 67,496 59,320 63,574 57,001 in addition to requisite pledged assets 4,324 5,701 4,324 5,701 Other pledged assets ,688 59,404 63,766 57,085 Shares and participations 18,535 9,749 15,188 7,786 Bonds and other fixed-income securities 48,119 12,911 47,582 12,585 Cash and bank deposits 1, Promissory note receivable, Alecta 36,499 36,499 67,688 59,404 63,766 57,085 NOTE 33 CONTINGENT LIABILITIES Amount that would have been expensed if the company had not applied temporary premium reserve bases (interim bases) 8,493 9,858 8,493 9,858 NOTE 34 PERSONNEL In 2000, the twelve ordinary members of the Board, with the exception of the President and one deputy Board member, were paid fees totalling SEK 442,500 (470,000). No fee was paid to the Chairman. Employee representatives and their deputies received no directors fees. A new President took office on 1 January In 2000, the President was paid a total salary of SEK 1,895,618 (2,114,666), of which earningsrelated salary comprised SEK 85,833 (244,250). Also included was a company car benefit (excluding fuel) and meals benefit. Termination of employment by the company is subject to a 24-month term of notice. Retirement age is 60. Retirement pension including national pension and collectiveagreement based occupational pension amounts to approximately 65 per cent of salary. Other people in senior management are entitled to a notice period of months in the event of termination of employment by the company. Severance pay will be reduced by the full amount of salary/benefit received form other employment during the term of notice. Retirement age is Retirement pension including national pension and occupational pension under collective agreements amounts to approximately 65 per cent of salary. The following companies employees are employed by SPP Livförsäkring AB: SPP Liv Pensionstjänst AB, SPP Liv Fondförsäkring AB and SPP Konsult AB. These companies purchase corresponding services from SPP Livförsäkring AB. Note 34, cont. Average number of employees No. of Of whom No. of Of whom employees men employees men Salaried employees % % Total in the % % Subsidiaries Salaried employees 58 28% 41 35% Total in subsidiaries 58 28% 41 35% Total in the % % Salaries, other remuneration and payroll overhead Salaries Payroll Salaries Payroll and other overhead and other overhead remuneration (of which remuneration (of which (of which pension (of which pension bonus) costs) bonus) costs) Board of Directors and President ( ) (1.9) ( ) (1.0) Salaried employees ( ) (32.0) ( ) (24.4) Total in ( ) (33.9) ( ) (25.4) Subsidiaries Board of Directors and President ( ) (0.1) ( ) (0) Salaried employees ( ) (2.4) ( ) (1.5) Total in subsidiaries ( ) (2.5) ( ) (1.5) Total in the ( ) (36.4) ( ) (26.9) Fees and expenses KPMG audit assignment Auditor appointed by the Swedish Financial Supervisory Authority Öhrlings PricewaterhouseCoopers audit assignment NOTE 35 DETAILS OF PARENT COMPANY Alecta pensionsförsäkring, ömsesidigt, with corporate identity number has its domicile in Stockholm. With effect from 7 March 2001, the new parent company is Svenska Handelsbanken AB (publ.), corporate identity number , domiciled in Stockholm.

18 38 PROPOSED DISPOSITION OF EARNINGS Proposed disposition of earnings The Board of Directors and the President propose that the s loss for 2000 of SEK 407,667,134, with the addition of reversed funds from the reserve for unrealised gains of SEK 2,537,920,165, a net amount of SEK 2,130,253,031, be transferred to the bonus reserve. The result of operations during the year, and the company s financial position as per 31 December 2000, are presented in the adjoining and Consolidated Profit and Loss Accounts and Balance Sheets, as well as the notes to the financial statements. Stockholm, 23 February 2001 Lars Otterbeck Rolf Lundquist Gunnar Reitan Chairman Vice Chairman Vice Chairman Björn Bergman Gunnar Björklund Bertil Blomqvist Holger Eriksson Carl Johan Tibblin Åke Danielsson Tommy Forsberg Birgit Sandberg Anders Östryd President Our auditors report was submitted on 27 February 2001 Per Bergman Carl Lindgren Göran Raspe Authorised Public Accountant Authorised Public Accountant Authorised Public Accountant Appointed by the Swedish Financial Supervisory Authority

19 AUDITORS REPORT 39 Auditors Report To the Annual General Meeting of SPP Livförsäkring AB, registered number We have audited the annual accounts, the consolidated accounts, the accounting records and the administration of the Board of Directors and the President of SPP Livförsäkring AB for the year These accounts and the administration of the company are the responsibility of the Board of Directors and the President. Our responsibility is to express an opinion on the annual accounts, the consolidated accounts and the administration based on our audit. We conducted our audit in accordance with generally accepted auditing standards in Sweden. Those standards require that we plan and perform the audit to obtain reasonable assurance that the annual accounts and the consolidated accounts are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the accounts. An audit also includes assessing the accounting principles used and their application by the Board of Directors and the President, as well as evaluating the overall presentation of information in the annual accounts and the consolidated accounts. As a basis for our opinion concerning discharge from liability, we examined significant decisions, actions taken and the circumstances of the company in order to be able to determine the liability, if any, to the company of any board member or the President. We also examined whether any board member or the President has, in any other way, acted in contravention of the Swedish Insurance Companies Act, the Swedish Annual Accounts Act for Insurance Companies or the Articles of Association. We believe that our audit provides a reasonable basis for our opinion set out below. The annual accounts and the consolidated accounts have been prepared in accordance with the Swedish Annual Accounts Act for Insurance Companies and, thereby, give a true and fair view of the company s and the s financial position and results of operations in accordance with generally accepted accounting principles in Sweden. We recommend to the Annual General Meeting that the profit and loss accounts and balance sheets of the Parent Company and the be adopted, that the loss for the be dealt with in accordance with the proposal in the administration report and that the members of the Board of Directors and the President be discharged from liability for the financial year. Stockholm, 27 February 2001 Per Bergman Carl Lindgren Göran Raspe Authorised Public Accountant Authorised Public Accountant Authorised Public Accountant Appointed by the Swedish Financial Supervisory Authority

20 40 BOARD OF DIRECTORS AND MANAGEMENT Board of Directors Lars Otterbeck, born 1942 Chairman, President & CEO, Alecta pensionsförsäkring, ömsesidigt Director since 2000 Anders Östryd, born 1953 President Director since 2000 Rolf Lundqvist, born 1940 Vice Chairman Financial Manager, SIF Director since 2000 Gunnar Reitan, born 1954 Vice Chairman Executive Vice President, SAS Director since 1998 Holger Eriksson, born 1943 Chairman, HTF Director since 1994 Carl Johan Tibblin, born 1944 Head of Corporate Risk Management, Scania CV AB Director since 1994 Björn Bergman, born 1942 Chairman, Ledarna Director since 1994 Bertil Blomqvist, born 1939 First Shop Steward, SIF Director since 1994 Appointed by the Swedish Financial Supervisory Authority Gunnar Björklund, born 1935 Director Director since 2000 Tommy Forsberg, born 1959 Insurance employee Employee representative Deputy director since 1997 Birgit Sandberg, born 1945 Insurance employee Employee representative Director since 1999 Åke Danielsson, born 1960 Insurance employee Employee representative Director since 2000

21 BOARD OF DIRECTORS AND MANAGEMENT 41 Management Anders Östryd, born 1953 President & CEO Management member since 1997 Henrik Sandberg, born 1957 Vice President Head of Finance Management member since 2000 Lars Bergquist, born 1948 Senior Actuary Management member since 1997 Björn Johansson, born 1945 Human Resources Management member since 1996 Lennart Zetterfeldt, born 1950 Legal Affairs Management member since 1998 Ulf Magnusson, born 1943 Profile & Communications Management member since 1994 Jan Ahlström, born 1956 Key Accounts business area Management member since 2000 Jonas Derninger, born 1962 Individuals business area Management member since 2000 Lars Fitger, born 1955 Companies business area Management member since 2000 Margareta Weslien, born 1947 Production Support Management member since 1997 Björn Selander, born 1950 Process/Product Development Management member since 2000 Solwig Ahlén, born 1942 IS/IT Development Management member since 2000

22 42 GLOSSARY Glossary Acquisition cost ratio Deferred acquisition costs in relation to premiums written. Actuarial bases for calculation These bases contain rules for the calculation of premiums, life insurance provisions and bonuses. Adjustment of paid-up values Bonus allocation to raise earned pension entitlement prior to retirement age. This adjustment is made to compensate for inflation, etc. Administrative expense ratio for risk products Administrative expenses and claims management costs for risk insurance products in relation to premiums written for these products. Administrative expense ratio for savings products Administrative expenses and claims management costs for savings insurance products in relation to average total managed assets. Allocated bonus Bonus set aside for policyholders and the insured. Allocated bonus is not formally guaranteed. The size of the allocated bonus is decided by the insurance company. See Bonus. Amortised cost Amortised cost is the present value of future payments discounted by the interest rate at acquisition. Amortised cost is used to define the acquisition value of fixedincome investments. Annual premium Single premiums and current insurance annual premiums for new business (monthly premium multiplied by twelve). Bonus Surplus assigned or allocated to policyholders in the form of immediate or later payments, premium reductions, or increase of insurance benefits. Bonus funds The bonus reserve, reserve for unrealised gains, equity in operating companies, other funds and net profit for the year. Bonus reserve Liability item in the balance sheet to which insurance companies must allocate the annual profit from life insurance business according to the Swedish Insurance Companies Act. The bonus reserve may only be used for bonuses and to cover a loss. Bonus rate The rate at which the insured s savings earn interest. The bonus rate includes guaranteed interest and interest (bonus) that is not guarantee. Collective reserve Market value of insurance company s assets, minus commitments to policyholders. Collective solvency margin Market value of insurance company s assets in relation to commitments to policyholders. Expense ratio Operating expenses in relation to premiums written. Insurance commitments Insurance commitments comprise the sum of technical provisions, calculated as technical repurchase value, and allocated bonus. Insured The person covered by the insurance. Interim bases Special premium reserve bases that may be used over a maximum interim period of ten years if, due to changed circumstances, a significant increase in life insurance provisions is required. Investment assets Assets which have the character of a capital investment, i.e. fixed-income securities and equities. Investment income Yield, capital gains/losses and unrealised changes in value. Investments Market valued investment assets plus portion of receivables and liabilities handled by Investment Management. ITP a supplementary pension for salaried employees in private industry and commerce, regulated by agreements between SAF and PTK. ITPK Supplementary retirement pension the design of which can be influenced by the employee. Life insurance provisions Value of future guaranteed insurance benefits (pension amount) less the value of future premium payments. Management expense ratio Operating expenses in the insurance business and claims management costs in relation to average managed assets.

23 GLOSSARY 43 Market value The value assets are estimated to have in the market. New business value Estimated value of new business (single premiums + current annual premiums x 10). Normal portfolio The Board of SPP Liv has established a normal portfolio for management of investments. The portfolio is divided into fixed-income investments and equities. The internal distribution between the different asset classes depends, among other things, on the structure of the companies commitments and level of risk they have chosen. Operating expenses Comprehensive name for costs of administration and sales. Paid-up policy A paid-up policy comprises earned pension rights when premium payments have ceased prematurely. The paidup policy corresponds to premiums paid earlier and states the value of the insured s claim on the insurance company, which will be paid upon retirement. This designation is also used for the earned part of current insurance. Pension commitments Pension commitments are the sum of technical provisions, calculated as technical repurchase value, and allocated bonus. Pension supplement Bonus allocated to the insured in addition to guaranteed pension. According to actuarial bases may not exceed the increase in the Consumer Price Index for the year in question, calculated from the date when pension payments start. The pension supplement is decided by the Board each year. Policyholder The party who by taking out insurance has entered into an agreement with the insurance company. Policyholders funds Consist of untaxed reserves and bonus funds. Provision for deferred tax is reversed in the calculation of policyholders funds. Premium reduction The bonus method used to reduce premiums paid by policyholders. This method is used for risk insurance, such as occupational group life insurance (TGL) and collective risk insurance. Premium reserve Value of future guaranteed insurance benefits (pension amounts) less the value of future premium payments. The premium reserve is part of life insurance provisions. Premiums written Premiums paid and taken up as a receivable, in addition to bonus in the form of adjustment of paid-up values and premium reductions. Reductions are made for special premium tax. Provision for claims outstanding Estimated value of claims incurred but not yet paid for. Reversionary bonus Surplus funds allocated to insurance. The reversionary bonus is formally guaranteed. Risk insurance Insurance where the entire premium is used to protect against risk. It therefore carries no rights to a paid-up policy if the premium payments cease. Special indexation funds Funds allocated to guarantee the value of pensions or for another pension-promoting purpose. These funds are placed at SPP Liv s disposal following a decision by the parties to the agreement. The funds are therefore not included in the collective reserve. Surplus fund The surplus that arises in a defined benefit employer plan can be placed in a company s own surplus fund. The money in this reserve can be used to pay future premiums. Tax Mainly yield tax calculated on the market value of the company s assets at the end of the financial year. Technical provisions Value of insurance company s guaranteed commitments: life insurance provisions, provision for claims outstanding and other technical provisions. Total return The sum of changes in value and return on investment assets. Tracking error Shows how much a portfolio s return can be expected to deviate from the benchmark chosen. In the case of SPP Liv, tracking error is measured in relation to return on the normal portfolio. Yield Balance of interest receivable, interest payable and dividends on shares and participations after deduction for investment management costs.