SPP s mission. BONUS RATE Average bonus rate for traditional life insurance before yield tax and deduction for operating expenses

Transcription

1 Annual Report 2001

2 Contents SPP s mission in brief 2 President s comments 4 Strategies 6 Life insurance market 8 The good ellipse 9 Presenting SPP 10 Unit linked insurance 12 Investment management 14 Risk management 16 New Insurance Business Act 18 Client company funds 20 Report of the Board of Directors 23 Five-year summary 24 Analysis of results 25 Profit and loss account 26 Balance sheet 28 Accounting principles 30 Notes SPP s mission is to be the pension partner for the workplace so that we clearly promote the financial security of the individual employers can attract the right employees and obtain effective management of their financial security commitments organisations can give their members added value We will provide security and credibility through competence, simplicity and partnership Our vision is to be a leading player as the pension partner for the workplace in a growing European market. PREMIUMS WRITTEN Unit linked insurance Traditional life insurance SEKbn Proposed disposition of earnings 37 Auditors report 38 Board of Directors and Management BONUS RATE Average bonus rate for traditional life insurance before yield tax and deduction for operating expenses 14 % EXPENSE RATIO Operating expenses in relation to premiums written 12.0 % Glossary Addresses 8 6 MANAGEMENT EXPENSE RATIO Operating expenses including claims management costs in relation to average assets under management %

3 2001 IN BRIEF in brief In 2001, SPP became Sweden s second largest private life insurance company with a market share of 14% (13) measured in value of new business. SPP and its sister company Handelsbanken Liv have a combined market share of 18.6% (21). At year-end 2001 insurance assets under management totalled SEK 87.2bn (87.4), of which traditional life insurance represented SEK 80.7bn (83.5) and unit linked insurance SEK 6.5bn (3.9). Total return on investments in the traditional life insurance business amounted to SEK 2.3bn (3.0). Premiums written amounted to SEK 12.6bn (10.0). New business measured in annual premiums amounted to SEK 7.4bn (6.4) during the year. The balance on the technical account for life insurance business amounted to SEK 5.8bn (0). The net loss for the year was SEK 6.6bn ( 0.5). The expense ratio amounted to 9.7% (9.1). The increase was mainly due to costs incurred from the split from Alecta. SPP s surplus, the collective solvency reserve, amounted to SEK 5.8bn (13.1) at year-end The collective solvency margin decreased to 108% (119). The average bonus rate during the year, before deduction for operating expenses and yield tax, was 5.8% (10.9). On 7 March 2001, SPP became a wholly owned subsidiary of Handelsbanken which provides a broader product range and long-term cost synergies.

4 2 PRESIDENT S COMMENTS Specialist Pension Provider SPP was formed in 1917 to enable employers to give employees in the private sector a better pension. Over time this became a successful concept and SPP was well able to hold its own against the competition, so well that in the 1970s the labour market parties gave the company s pension plan an exclusivity agreement. Since March 2001 the SPP brand has been back in its former role of offering the market secure pensions in the competitive segment. Our task is the same as it was at the start in 1917, except that we now also possess expertise that encompasses everything from collectively agreed solutions to private pensions. Furthermore, we now have insured individuals within all agreement sectors as a result of the deregulation that has occurred in large sections of the occupational pensions market. SPP well positioned. The present SPP has seen very strong growth for eight years and has developed into one of the two largest companies in the life insurance market, with strong relationships with client companies and trade unions. Today, we are the clear market leader in areas where ITP insured can choose an alternative. We have also been successful in the municipal market where our decision to take a strong position was made at an early stage. Among the general public SPP is well positioned and maintains its status as one of the three leading companies for premium pensions and the fourth best known insurance company. The workplace is our marketplace. Our success is a result of consistent application of the strategy developed in The goal was to be a leading, competent pensions partner to industry and organisations. We chose the workplace as our marketplace in order to give employers qualified support and service in the development of company pension solutions. We were convinced that individuals would acquired a greater influence over their choice of pension. As a result, they would also be able to affect the financial risk to a greater extent through choice of funds. At the same time, we wanted to help companies and organisations to give their employees and members better benefits at lower costs than would be possible from individually negotiated insurance. This has proved highly successful. We will now be using the experience we have acquired as the pensions partner to Swedish industry in a wider European base by accompanying Swedish companies abroad. We are pursuing our focus on the workplace market by creating win-win solutions for companies and employees in co-operation with our customers. For example, we can help companies with bonus and salary exchange, where employees can obtain

5 PRESIDENT S COMMENTS 3 higher benefits at no cost to their employer. We also offer a range of services that can be financed with so-called client company funds. Companies which choose our defined benefit pension plan can decide for themselves how any surplus that arises in their own Company Reserve should be used. In addition, employees and members of organisations can be given opportunities to buy private pension insurance at a lower cost through the employer or organisation participating in marketing. We can see a new market logic emerging among large companies. Purchasers will become increasingly professional and place greater demands on insurance companies. A growing number of individuals will choose their pensions from various types of internet portal solutions. Last year, in cooperation with a large Swedish company, SPP developed a competitively neutral internet portal, Benefit World, to handle pensions for large corporate groups. Interactive advice. Employees receive neutral, interactive advice based on their personal situation and risk propensity. Objectives are suggested and finally they can choose between different management alternatives. The company s purchasing agreement means that employees pay lower charges. The company saves the time and expense of advisory and administrative services, which in contracts for high earners can run into millions. This concept has been well received by both companies and insured. Co-operation with Handelsbanken has also started in a number of areas and is functioning very well. Handelsbanken and SPP bring each other a range of competence, services and products which each company on its own was previously unable to offer its customers. This has resulted in a number of deals and joint solutions. Integration with Handelsbanken also gives SPP a number of economies of scale in product development, systems and infrastructure which will have a favourable impact on our cost structure. SPP will secure and develop its position in the workplace market. At year-end 2001 SPP took over all Handelsbanken s occupational pension sales. This co-operation is both central and regional. The aim is that SPP will be a profit-distributing company within a few years and will introduce transfer rights just as Handelsbanken Liv has done starting this year. The companies will then be merged and pensions in the Handelsbanken Group will be marketed under SPP s brand. An eventful year. We have made considerable changes in our systems to meet the information requirements stipulated in the new Insurance Business Act. The work of dissolving the co-operation with Alecta and integration with our new owner Handelsbanken has been extensive. At the same time we have seen sharp price fluctuations on the stock exchange and a strong focus from mass media on bonus and the solvency reserve. It has also been a successful year. Despite the weak stock market trend we were able to provide an average bonus rate of 5.8% in Premium income increased by 26% and has risen by an average of 29% over the past five years. Our operating expenses are among the lowest in the industry. The number of insurance contracts rose by 123,100 and now totals 772,500. SPP has defended its position in the occupational pension market exposed to competition and is the second largest company measured in new business. There are two main reasons for this success, they are the ability and competence of our employees to understand customers needs to create customised solutions. Competence is the decisive factor for our success and it is also very highly valued. Our broad competence gives us a leading edge and means that our client companies today regard us as the Specialist Pension Provider. During the year we will make every effort to consolidate our success by creating simpler and faster processes, enhancing customer care and being more cost effective. We will do all we can to ensure that our customers will continue to perceive SPP as a secure and credible pensions partner. Anders Östryd President Creating win-win solutions for companies and employees.

6 4 STRATEGIES The pensions partner for the workplace The occupational pensions market is becoming increasingly deregulated and exposed to competition. Pensions and other benefits are growing in importance as a competitive tool for the recruitment and retention of competent employees. Individuals are being given more and more opportunities to make a personal choice. Greater demands are being placed on how employers handle an expanding and complicated set of rules. This also applies internationally. Good relations with the trade unions will become more important than ever. Low costs, intelligible communication and electronic marketplaces will be increasingly in demand. That was the future market scenario when SPP chose its business strategy in The driving forces and strategy are essentially the same today. The workplace as marketplace has been chosen by SPP for several reasons. Employers need a partner with a broad and deep competence in all aspects from a legal, financial, insurance technical and international perspective. This applies to both collective agreements and issues connected with or related to collective agreements. A present situation analysis is an instrument which is often used to review a company s situation and provide basic data for a pensions policy. SPP s vision is to be the leading pensions partner for the workplace in a growing European market by accompanying the major Swedish companies outside Sweden. SPP is already a leading player outside Sweden and has two 50%-owned associated companies: Euroben in Ireland and Nordben in Guernsey. We are also represented in London and participate in two international risk management networks, Insurope and IGP. The employer pays for occupational pensions but a growing number of individuals can now choose a manager for their pension assets. This is the market segment with the fastest growth. SPP s task is to help employers to obtain rational handling of the choices which he must administer himself. Major companies usually make these choices with the aid of one of SPP s internet solutions. COMPANY PAYS INDIVIDUAL PAYS COMPANY DECIDES INDIVIDUAL DECIDES SPP reaches individuals through the companies regardless of whether the employer or the individual pays. Good for the company good for the employees. For individuals the workplace is the natural site for information about pensions. Co-operation with SPP means that employees and members can be offered complementary, attractive financial security solutions at lower costs than in the open market. This is positive for companies and organisations and good for employees and members. A growing proportion of these choices are being made with the help of internet solutions. Strong brand position. SPP provides administrative assistance for various components where individuals can choose between several management alternatives. The brand is of central importance in making SPP a competitive alternative in these situations, as well as in the selection of ITPK and premium pension, where employees make their choice at home at the kitchen table. We therefore work actively with brand building where we focus on our core target groups in order to retain the brand s strong position.

7 STRATEGIES 5 ORGANISA- TIONS MUNICIPALITIES KEY ACCOUNTS COMPANIES INDIVIDUALS The company s organisation is structured in business areas based on customers varying competence and service requirements. The largest companies are taken care of by the Key Accounts business area, medium-sized and small companies by the Companies business area, while the Individuals business area handles individuals. Key Accounts and Companies open the marketplace for individual choice, while Individuals conducts marketing directed at individuals. The business areas are supported by specialists in SPP Konsult AB, the Development Unit and central staffs. Brokers and franchise-holders are important sales channels. Simpler with SPP. In principle all an insurance customer receives before an insurance contract is printed is written communication. This is usually complicated and difficult for a layman to understand because of its scope which is necessitated by complicated procedures. Our employer plan is an expression of our ambition, despite existing restrictions, to write increasingly intelligibly and to present insurance in a simpler manner. Despite its considerable flexibility, SPP s Employer Plan only asks customers to make three choices: how much of the premium should go towards Sickness benefit, Pension to survivors and Pension to yourself. And then it is settled. The three components are illustrated in all communication using these three symbols. SPPs offer Collectively agreed and voluntary employer plans with defined benefit and/or defined contribution insurance SPP s employer plan Voluntary ITP/FTP/BTP PFA PA/KL PA/KFS Pension complements Early retirement pension Lump-sum payments Salary and bonus exchange Complementary disability insurance Medical expenses guarantee Executive plans SPP s International Plan Euroben Nordben International risk equalisation Individual choice of complements to collective agreements Alternative ITP ITPK PFA Alternative PFA SN-LO occupational pension Management forms Risk management via Insurope and IGP Unit linked insurance Traditional insurance Endowment insurance Profit sharing systems Foundations Insurance associations Private insurance PLUS pension PLUS group insurance Medical expenses guarantee Continuation insurance ITP Services Investment management Consulting and advisory services, for example tax and legal matters, redundancy issues Administration and payment of pension commitments Capital value calculations Pension procurement Customer accounts Sickness benefit Pension to survivors Pension to yourself Internet services Benefit World Electronic choice of alternative ITP Executive Room Your own marketplace

8 6 LIFE INSURANCE MARKET Life insurance market The Swedish life insurance market can be divided based on who decides and who pays. Segments of the market are protected from competition (exclusivity agreements) but a growing segment is exposed to competition. Strong growth is expected in the market segment exposed to competition and the trend is for individuals to be able to influence the choice of insurance provider to an increasing extent. The competitive segment of the occupational pension market is SPP s key market. THE TOTAL LIFE INSURANCE MARKET Growth in the life insurance market exposed to competition is measured in terms of new insurance, known as value of new business*. The market is divided into occupational pensions, private pension insurance, endowment insurance and private disability insurance. The value of new business in real numbers has trebled over the last five years. The greatest growth in this period has been for endowment insurance, although a sharp decrease was noted in The second largest growth has been in occupational pensions. Although SPP primarily only sells occupational TRENDS COMPANY PAYS INDIVIDUAL PAYS COMPANY DECIDES Protected occupational pension Steady decrease Competitive occupational pension Steady increase Voluntary group insurance Largely unchanged INDIVIDUAL DECIDES Competitive occupational pension Very strong increase Private pension and life insurance Weak increase Since a growing proportion of the occupational pensions market is exposed to competition, the market segment where individuals choose the insurance provider is increasing. pensions and private pension insurance, SPP was the second largest individual company in the total life market in The Handelsbanken Group (SPP and Handelsbanken Liv) was second largest in the market. COMPETITIVE OCCUPATIONAL PENSION The rate of increase in this segment has accelerated in the last two years with an increase of more than 40% in 2001, despite exclusion of the new choices within PFA (municipalities and county councils). SPP was the second largest company in this market with a share of 20%. The proportion of unit linked insurance was just over 40%. Early retirement pensions are one of SPP s strongest areas and new business over the last five years is assessed at between SEK 3bn and SEK 6bn per year including book reserve solutions. SPP is estimated to have captured approximately 60% of this market over the last two years. Competitive collectively agreed plans are an area in which companies themselves can choose their insurance provider. A strong increase is expected, among other things in the municipal and county council sectors where SPP has already established a strong position. Voluntary occupational pensions have seen strong growth in recent years. Such pensions are mainly taken out by small companies which are not covered by a collective agreement. SPP has strengthened its position by setting up franchiseholders. Alternative ITP, for employees with annual salaries in excess of ten base amounts, is growing as a market due to good real salary increases for high-earning salaried employees. Many people in *Calculation of market shares (value of new business): The Swedish Insurance Federation reports market shares within Swedish life insurance exposed to competition. Shares are measured by combining single premiums and regular annual or monthly premiums. The value of new business equals single premiums plus ten times the annual total of regular premiums.

9 LIFE INSURANCE MARKET 7 PRIVATELY PAID LIFE INSURANCE This market comprises pension insurance, endowment insurance and disability insurance. this category have still not been given an opportunity to make an active choice. Of those who have made a choice so far, about 50% chose SPP. The ITPK market comprised 686,000 (659,000) individuals at year-end SPP is the market leader with 27% (27) of the number of insured. The closest competitor is SEB Trygg Liv with 16%. SN-LO labour market pension became open to competition in 1998 and has not been prioritised by SPP which has a market share of approximately 1%. PFA, individual choice, comprises approximately one million municipal and county council employees who were invited to choose their insurance provider in autumn Half of this group has made a choice and SPP s market share amounts to 6%. Premium pension selection in 2000 was a major success for SPP s generation funds. An annual amount of approximately SEK 15bn is placed in the system. New insured, mainly young people, made their first selection in spring Participation in the selection process was low but SPP received the same proportion as in The trend is that once people have made a choice, they only change their minds to a limited extent. Private pension insurance is a significantly smaller market than occupational pension insurance. There was a steady rate of increase at the end of the 1990s, but new business decreased by approximately 20% in Most of this is unit linked insurance which accounted for 60% (70) of new business. SPP is the second largest company after Skandia. Private individuals can also save towards their pensions in individual pension savings in a bank (IPS). This product has increased steadily since the start in Endowment insurance is about the same size as the market for occupational pensions. So far, SPP s share of this market has been insignificant, but the company now sells Handelsbanken Liv s endowment insurance. Handelsbanken Liv s market share amounted to 9% (14). The market has been weak due to the stock market trend. Private disability insurance is a very small market in which SPP has not operated. CUSTOMERS At year-end 2001, the number of premium-paying companies amounted to 23,600 (17,500) and the number of insurance contracts totalled 772,500 (649,400). The number of unit-linked insurance contracts was 261,100 (166,300). LIFE INSURANCE, COMPETITIVE Market shares of value of new business 2001 (2000) AMF Pension 7.3% (1.9%) Robur 6.1% (10.3%) Others 8.9% (8.3) SPP Liv 13.9% (12.6%) Handelsbanken 4.7% (8.4%) 160 LIFE INSURANCE, COMPETITIVE Inflation-adjusted value of new business, SEKbn Folksam KPA 7.0% (5.2%) LF Wasa 7.7% (9.1%) Skandia 31.1% (29.3%) 140 SEB Trygg 13.2% (14.9%) 120 Private disability insurance Source: Swedish Insurance Federation OCCUPATIONAL PENSION, COMPETITIVE Market shares of value of new business 2001 (2000) AMF Pension 11.2% (3.8%) SPP 20.1% (25%) Endowment insurance Private pension Occupational pension Others 3.2% (3.1) Alecta 8.7% (5.7%) Handelsbanken 2.2% (2.3%) 40 Folksam KPA 6.1% (3.1%) LF Wasa 7.6% (9.4%) Skandia 28.6% (34.5%) 20 SEB Trygg 12.4% (13.1%) Source: Swedish Insurance Federation

10 8 THE GOOD ELLIPSE The good ellipse SPP operates within a very broad spectrum which encompasses complicated legal, financial and technical insurance issues both inside and outside Sweden. For many years, we have made every effort to maintain the broadest expertise in the market, including unique competence in some areas, in order to support our customers in their development. Our corporate customers regard competence as the decisive factor in their business relationships and here too SPP is given the highest marks by its customers. In order to maintain this high level, SPP must attract, keep and develop this competence itself, since it cannot be obtained except through knowledge transfer. In order to guarantee this level of competence every employee has a development plan. Internal transfer of competence is carried out in a business school which is mainly responsible for professional competence development. There is also a sales school for new sales employees. The schools are staffed by the best experts in the company. Loyal customers are a decisive factor for succcess. They form the basis for long-term profitability. In 2001, loyalty among ITPK insured was 92% (93). This is the proportion of customers who have not considered an alternative supplier. Effective processes and tools mean that customers are given good service. The focus in 2001 and 2002 is on efficiency enhancement and computerisation of processes. The goal is that most of the administrative flow should be electronic. The SPP brand has strengthened its very strong position among those responsible for pensions at large companies. Among the general public, SPP s position was also strengthened through the premium pension selection process. In 2001 SPP was the fourth best known brand and had the fourth highest positive attitude. High-earners rank SPP after Handelsbanken and Länsförsäkringar as the third most trusted player among banks and insurance companies. Satisfied customers Strong brand More customers Loyal customers Extra sales Higher premium income Larger managed assets Lower operating expenses Profitable growth Dedicated employees Good leadership SPP s leaders the basis for good leadership is willingness to lead, the ability to handle different situations and being able to see the consequences of different decisions. A leader focuses on making his or her employees successful. The role of leader involves delegating and following up on the basis on the individual employee s competence and dedication, with a focus on development. Working through others is fundamental to good leadership. Competent and dedicated employees are responsible for marketing and administration of qualified pension solutions. The human capital index amounted to 633 (647) in 2001, which is 7% higher than the industry average.

11 PRESENTING SPP 9 Presenting SPP SPP offers financial security solutions in the sector of the occupational pensions market that is exposed to competition. The company also offers private complements to employees and members of organisations. SPP conducts insurance business within traditional life insurance and unit linked insurance as well as complementary advisory and consulting services. Mutual funds and investment management services are also marketed. Since 7 March 2001 SPP has been a wholly owned subsidiary of Handelsbanken. When SPP becomes a profit-distributing company, in 2004 at the earliest, SPP will be the brand in Handelsbanken which will market pension insurance. The main focus of operations is unchanged. At the end of the financial year the company had 673 (599) employees and representation at 15 (14) locations in Sweden. The head office is in Stockholm. SPP owns 50% of Nordben Life and Pension Insurance Co Ltd and offers insurance solutions for people employed abroad in multinational Nordic corporations. SPP also owns 50% of Euroben Life and Pension Ltd which provides insurance for Nordic company s local employees outside Sweden. SPP is represented in the UK through a branch office in London. SPP is organised in three business areas: Key Accounts (large companies and municipalities), Companies and Individuals. The business areas are supported by specialists in SPP Konsult AB, the Development Unit and central staffs.

12 10 UNIT LINKED INSURANCE Unit linked insurance Saving in mutual funds is one way of spreading risks with all the advantages that this entails. By electing to save in mutual funds customers can decide the level of risk and investment orientation they wish to take in their savings. Regular savings also limit risk since more units are acquired at lower prices. In times of substantial price fluctuations, long-term pension savings with regular payments into mutual funds are a good alternative. Funds in an insurance perspective. Saving in mutual funds for pension purposes is a sensible alternative to a traditional pension insurance. In recent years sales of unit linked insurance have risen more than sales of traditional life insurance. Although the past year was dominated by falling stock market prices and growing unease in the financial markets, unit linked insurance continues to rise. The unit linked insurance customer chooses both investment direction and level of risk. Naturally risk profile and direction can be changed at any time. Pension insurance savings are usually very long term which means that changes in the development of the mutual funds should always be seen over a long period. Examples of mutual funds which reflect different customers investment horizons are SPP s generation funds where the level of risk is automatically adjusted to the customer s age. In a unit linked insurance company assets are managed in accordance with the policyholders investment choice. This means that the policyholders bear the investment risk. Pension savings in mutual funds can take the form of occupational pension insurance and privately paid pension insurance. Occupational pension insurance includes ITPK, alternative ITP, PFA and SN/LO. SPP Liv Fondförsäkring AB is a wholly owned subsidiary of SPP Livförsäkring AB and operates in the competitive life and occupational pensions market. SPP offers pension savings in mutual funds in combination with insurance. SPP Liv Fondförsäkring continues to grow and is now the largest unit linked insurance company in the ITPK market. Last year, SPP, Handelsbanken Liv and AMF Pension

13 UNIT LINKED INSURANCE 11 FUND ASSETS IN SPP FONDER were the companies which saw the biggest net increase in number of customers. The PFA choice also contributed to higher sales. In the last financial year premium income rose 71% to SEK 3,006m (1,762) and the number of insurance contracts totalled 261,100 (166,300) at year-end. Fund activities. The objective of SPP Fonder and Handelsbanken Fonder is to create a high return for customers in relation to level of risk combined with cost-effective management. The mutual funds are managed by Handelsbanken Asset Management which ensures good control and effective management on behalf of policyholders. At year-end 2001 SPP Fonder s assets under management amounted to SEK 12,560m (9,181) of which new savings totalled a gross amount of SEK 4,533m. In the total Swedish unit linked market, assets under management amounted to SEK 867bn (898) at the end of the year. Range of funds. SPP markets 21 of SPP Fonder s mutual funds, a number of independent managers funds and 15 of Handelsbanken s funds. 14,000 The funds can be divided 12,000 into three categories: equity funds, fixedincome funds and mixed 10,000 funds in Sweden, Europe 8,000 and the rest of the world 6,000 with different profiles in terms of risk and return. 4,000 The dominant type of 2,000 fund is SPP Generation Funds which are highly suitable for pension savings. Investments in the funds are adjusted to the age of the insured and time until retirement. When the insured is young, the risk profile is higher with a relatively large proportion of equities. As the insured approaches retirement, the equities component is reduced and replaced by investments with less risk. This provides convenient and secure pension savings for those who do not wish to actively work with their investments. Additional information about these funds is available in the fund companies annual and sixmonth reports and at and SEKm

14 12 INVESTMENT MANAGEMENT Investment Management Handelsbanken Asset Management was assigned to manage SPP s investment assets on 1 April The management assignment was transferred to Handelsbanken in connection with Handelsbanken s acquisition of SPP. In the first three months of the year, this management assignment was conducted by Alecta Investment Management. THE FIVE LARGEST HOLDINGS IN THE EQUITY PORTFOLIO Share of total SPP Livförsäkring AB, 31 December 2001 SEKm equity portfolio Telecommunications Ericsson B 2, % Retail trading H&M B 1, % Pharmaceuticals AstraZeneca % Banking and insurance Nordea % Telecommunications Telia % PORTFOLIO MANAGEMENT FOCUS Long-term investment strategy. In order to be able to meet the commitments SPP has to its policyholders over the long term, the foundation of asset management is to invest in fixed-income securities with the main focus on government securities. Assets which are invested in equities are fully invested in companies which are listed on a stock exchange or authorised marketplace. In order to achieve good risk diversification among equity investments a large portion of the portfolios reflect the benchmark index which the company has chosen to track. Equity management. The equity portfolio is divided into a number of indexed sub portfolios based on geographic markets. These markets are Sweden, Europe, the US and Japan. There is also an active mandate to invest in other markets where a INVESTMENT INCOME Market value Net invest- Market value 31 Dec ments 2001 Change in value 31 Dec Yield Total return SPP Livförsäkring AB SEKm % SEKm SEKm % SEKm % SEKm % SEKm % Fixed-income, Swedish 34, % 11, % 46, % 1, % 1, % Fixed-income, foreign 13, % 7, % 5, % % % Total fixed-income 48, % 3, % 51, % 2, % 2, % Equities, Swedish 19, % 2,218 3, % 14, % % 2, % Equities, foreign 15, % 964 1, % 14, % % 1, % Total equities 35, % 1,254 5, % 28, % % 4, % Total investments 83, % 2,652-5, % 80, % 3, % 2, % Other Total 83,361 2,751-5,492 80,620 2,960 2,532 Foreign equities 18% INVESTMENTS Traditional life insurance EQUITY INVESTMENTS Traditional life insurance Japan 6% Other foreign issuers 3% FIXED-INCOME INVESTMENTS Traditional life insurance Swedish equities 18% Swedish fixed-income 57% Europe 19% Sweden 49% Other Swedish issuers 8% Mortgage institutions 13% Swedish Government 69% Foreign fixed-income 7% USA 26% Foreign governments 7% Market value 31 December 2001 SEK 80,694m Market value 31 December 2001 SEK 28,998m Market value 31 December 2001 SEK 51,696m

15 INVESTMENT MANAGEMENT 13 world index comprises an investment limitation. The active mandate, however, is tracked against the index portfolios. Fixed-income management. Fixed-income management comprises two portfolios which focus on Sweden and the rest of the world. Investments in fixed-income securities are dictated by managers assessment of interest rate trends in the short and long term. SPP s normal allocation between different asset classes is as follows: 45% equities 55% fixed-income securities. The market value of assets under management amounted to SEK 80.7bn (83.5). The total return was 2.8% (3.3). Return on the equity portfolio amounted to 12.9% ( 3.0) and the return on fixed-income investments was 4.4% (9.1). The main reason for the negative return on investment was the continued fall on the world s stock markets in The Swedish equity portfolio lost 14.9% and the foreign equity portfolio was down 10.3%. In this situation it is good to have a large portion of fixed-income investments which can hold their own against fluctuations on the stock markets. SPP s Swedish fixed-income portfolio had a return of 3.3% during the year and the return on the foreign portfolio was 7.8%. It is very unusual for the investment return to be negative for two consecutive years in a life portfolio. The last time this occurred was at the beginning of the 1970s. MARKET DEVELOPMENT Market conditions was yet another turbulent year in the financial markets. The year began on a positive note following an unexpected reduction in the key lending rate from the US Central Bank on 3 January. This was soon followed, however, by the return of the dismal trend from the previous year when it became clear that the economy had weakened both faster and on a broader front than anticipated. The overall scenario continued to deteriorate in the second and third quarters. Pessimism culminated at the end of September, a few weeks after the terrorist attacks on the World Trade Center and Pentagon. Positive expectations of the effects of moves to strengthen an already expansive American financial and monetary policy were a stabilising factor in the final quarter. Fixed-income and currency markets. Short-term US market interest rates reached their lowest level for four decades in December. This was the result of a number of reductions in the base rate, a total of ten, carried out during the year. Long-term interest rates on the dollar also fell during most of the year and reached their lowest level in October. At the end of the year these rates were at levels close to those prevailing at the beginning of the year. In other markets, with the exception of Japan, the interest rate trend followed a similar pattern: lower short-term rates and small changes in bond rates. In the currency market the dollar remained strong. The Swedish krona weakened against all leading currencies although some recovery occurred in the last days of the year. The reason was an increasingly positive attitude to EMU among Swedish public opinion. Stock markets. For the second consecutive year all leading stock markets noted a negative price trend, something which has not happened since the recession in the 1970s. The World Index (MSCI), translated into Swedish kronor, fell 8.0% while Stockholmsbörsen (SX All Share) fell 14.8%. The trend during the year was irregular. Following a positive start, the first quarter continued with substantial stock market falls, although there was some recovery in the late spring. Pessimism returned in the third quarter bringing substantial falls on the stock exchanges, particularly in the weeks after 11 September. The year ended on a strong note, however, and most stock exchanges were able to show an upturn in the fourth quarter. The trends differed widely between different sectors. As in the previous year technology related shares fell sharply although there was some recovery in the final months of the year. TOTAL RETURN, % YEAR year average Fixed-income Equities Promissory note Total SPP Livförsäkring AB s promissory note receivable from Alecta Pensionsförsäkring, ömsesidigt, was settled in 2000.

16 14 RISK MANAGEMENT Risk Management For every part of its operations SPP has a well developed system of analysis, valuation and control which limits the risks the company takes day by day and in individual deals. and reliable organisation. Development of IT systems also helps to improve efficiency and quality. The solvency reserve functions as a buffer against fluctuations in the company s financial position. This capital includes reserves set aside to be used if, for example, the bonus rate to be paid to policyholders exceeds actual return for a period. In a life insurance company there are risks in both the insurance business and in asset management. In the insurance business these include insurance risks and administrative risks. Asset management operations are exposed to market risks, currency risks and liquidity risks. RISKS IN INSURANCE BUISNESS Traditional life insurance and risk insurance. Collective-agreement based pension plans require inclusive support which eliminates selection risks. Other occupational pension insurance is subject to health checks for morbidity and mortality risks. Furthermore, reinsurance is taken out for large individual risks. Private customers are only offered standardised products with a low risk. Insurance premiums are set based on the assessed insurance risk and the base rate stipulated by the company. Premiums can change during the insurance period which reduces the risk taken by the company. Financial risk in unit linked insurance. In unit linked insurance savings the policyholder accepts all the financial risk involved in the pension savings. Value appreciation is linked entirely to the market value of the fund units at any point in time. There is no guaranteed minimum rate in unit linked insurance. Administrative risk. Administrative risks include inadequacies in the organisation, internal control mechanisms, risk assessment and reporting. In order to limit such risks there are routines for internal control, authorisation requirements and levels in systems and tools which contribute to an effective RISKS WITHIN ASSET MANAGEMENT In organisational terms, responsibility for investment decisions, control of investment decisions, liquidity management, risk assessment and reporting are placed with different functions which enhances the security of investment management. In order to limit risks in security trading, this is controlled by legislation, directives from the Swedish Financial Supervisory Authority and by SPP s board through investment regulations. Diversification between different asset classes leads to risk diversification and investment performance is compared with different benchmarks. Market risk is the risk that the value of the investment portfolio will be negatively affected by changes in interest rates, share prices or exchange rates. In order to limit market risk, SPP works with a normal portfolio where the allocation between different asset classes is defined. Within each asset class there is a deviation mandate within which the portfolio manager must stay. There is also a defined maximum active risk, or tracking error, for each class of asset and for the total investment portfolio. The use of derivative instruments, such as Swedish interest-rate, stock index and currency futures and currency swaps, reduces the risk from major price fluctuations and makes management more effective. Stock lending. SPP started working with stock lending in This means that shares are lent out at a market listed price with the aim of raising the return on existing shareholdings without raising risk.

17 RISK MANAGEMENT 15 Sensitivity analysis. A number of factors affect SPP s operations and assets under management. If only one variable at a time should change, which seldom happens in reality, market value would be affected as follows: Reported value of investment assets 10% decrease in share prices 2,866 10% decrease in exchange rates 1,998 1% increase in interest rates 1,781 The theoretical change pertains to the market value of shares and the change in the general interest rate level in Sweden, the US, the EMU area and the UK with regard to fixed-income investments. Currency risk is controlled by deciding which asset classes should be hedged and the deviation mandate in relation to the currency exposure in the normal portfolio. The total currency exposure for SPP was 24.4% (17.7). Liquidity risk is the risk of loss if a financial asset cannot be sold immediately without a substantial price reduction. SPP limits liquidity risk by mainly investing in Swedish and foreign government securities and in equities with good liquidity. SPP has no single holdings which exceed 5% of total assets. Administrative risk in asset management. Administrative risk is defined as inadequacies in the organisation, internal control, risk assessment and reporting. Handelsbanken Asset Management manages such risks through a strict division of responsibility and effective routines for internal control. A new portfolio management system was introduced in 2001 to provide even greater security in risk assessment and reporting. CURRENCY EXPOSURE Currency Exposure in SEKm USD 8,944.7 GPB 2,143.3 JPY 2,964.5 EUR 4,472.2 CHF Others 451.1

18 16 NEW INSURANCE BUSINESS ACT New Insurance Business Act (FRL) A new Insurance Business Act (FRL) came into effect in 2000 with a requirement for changes in life insurance companies operations starting on 1 January The Insurance Business Act includes a requirement for clarity in information to customers before purchase as regards the terms applying to the insurance and the right to change these terms. Actuarial guidelines and calculation models have replaced actuarial bases. The life insurance companies are also given an opportunity to restructure to profit-distributing companies and to introduce a right of transfer between traditional insurance and unit linked insurance within the same company or to another company. SPP will be restructured to a profit-distributing company within a few years. Handelsbanken Liv was restructured to a profit-distributing company from 1 January 2002 and is introducing right of transfer. When SPP becomes a profit-distributing company, right of transfer will be introduced. Discontinued interim bases and maximum interest rate. The Swedish Financial Supervisory Authority is entitled to prescribe the maximum interest rate assumption that may be used in valuation of insurance companies binding commitments. This highest permitted interest rate assumption has been changed on several occasions in recent years due to the changed interest rate situation for bonds with long durations. Reserved funds together with the anticipated future return must be sufficient to meet the pension commitments. When the interest rate assumption is reduced, the insurance reserves must therefore be increased. According to the former wording of the Insurance Business Act, insurance companies were not forced to book this increase at once but could allocate the cost over a maximum period of ten years. SPP has utilised this possibility, but from the beginning of 2002 this is no longer permitted. In view of the highest interest rate assumption which applied in 2001, three percentage points before deduction for yield tax, an amount of SEK 5,886m should have remained which would have been booked as an expense in The Swedish Financial Supervisory Authority decided, however, with effect from 31 December 2001, to allow reserves to be calculated with an interest rate assumption of three and a half percentage points before tax, which means that the need for reserve strengthening is contained at approximately SEK 1bn, see Note 24. A new form of bonus. The changes in the new Insurance Business Act (FRL) are intended to make insurance operations more transparent for customers. Clarity and intelligibility are also what SPP seeks to achieve in its contact with customers.

19 NEW INSURANCE BUSINESS ACT 17 BONUS AND SOLVENCY RESERVE Concepts. The bonus in SPP is set using different methods depending on the type of commitment. Mainly for collective-agreement related occupational pension insurance a bonus is paid to the insured in the form of a pension supplement. This means that during the payment period the insured receives a bonus payment every time such an allocation is made. For insured who have not yet retired, the earned pension rights are raised. For other pensioners the bonus is calculated by adding a bonus rate to the pension capital. For unit linked insurance there is no guaranteed rate or bonus rate since all risk is borne by the policyholder. Total return is the return on the insurance company s assets related to traditional life insurance. This return can be compared with the change in value in a mutual fund. Total return, however, is not the same thing as the bonus rate. Before the bonus rate can be calculated, the life insurance company must make provisions to a solvency reserve. The solvency reserve is the company s buffer against risk and is capital which is owned jointly by all policyholders. However, it is the company which decides how this capital should be allocated. The total return minus provision to the solvency reserve is what can be used for the bonus rate. The bonus rate includes the base rate which the insurance company always guarantees. The diagram below shows how investment income is allocated in a few different scenarios. Investment income Investment income No investment income Solvency reserve Solvency reserve Solvency reserve Bonus rate Non-guaranteed rate Non-guaranteed rate No interest in addition to the guaranteed rate Guaranteed rate Guaranteed rate Guaranteed rate Guaranteed pension Paid premiums Paid premiums Paid premiums Normal years Investment income is sufficient to strengthen the solvency reserve, and to cover the non-guaranteed and guaranteed rate. Poor years Investment income only covers the guaranteed rate. By taking funds from the solvency reserve a non-guaranteed rate can still be provided, although this may be reduced. Extreme years If investment income is negative over a long period, the solvency reserve decreases. A non-guaranteed rate cannot be provided. Funds to pay the guaranteed rate are taken from the solvency reserve.

20 18 CLIENT COMPANY FUNDS Client company funds In 1998 approximately SEK 9bn of SPP s surplus was allocated for collectiveagreement related insurance in the form of funds which the client companies can use for regular premium payments and early retirement pensions. It was not until 2001 that the funds were used for their main purpose. SEK 3,114m was used during the year, of which SEK 2,504m was paid in cash and SEK 610m was for ITP premiums. The remaining unused amount at year-end was SEK 2,991m. SPP gives companies qualified advice about the use of client company funds in both the short and long term and can offer several company-tailored solutions. Since there was a degree of uncertainty with regard to the rules governing this allocation, the funds could not start to be used until the end of The rules allowed companies to receive an initial cash payment of 20% of the amount allocated to them and then to use the funds to pay 80% of: Regular ITP premiums to Alecta or SPP ITPK premiums to Förenade Liv Premiums for alternative ITP to a freely chosen insurance company Single premiums for PRI redemption in Alecta Premiums to a freely chosen insurance company for pensions not regulated in the ITP Plan. A decision must be made together with representatives for the ITP insured in the company. Transfer of funds to another ITP affiliated company, following review by Alecta. New possibility as from 1 March 2002 Instead of using the funds for pension measures in accordance with the rules applying so far, companies can lift their remaining client company funds in cash through a direct payment. This can be done provided the employer has negotiated with a local union and agreed on use and direct payment of client company funds.

21 19

22 20 REPORT OF THE BOARD OF DIRECTORS Report of the Board of Directors The Board of Directors and the President of SPP Livförsäkring AB hereby submit their Annual Report for SPP Livförsäkring AB, corporate identity number is domiciled in Stockholm. The company is a wholly owned subsidiary of Svenska Handelsbanken AB (publ.), corporate identity number The SPP Group. SPP Livförsäkring AB is the parent company of the SPP Group. SPP Livförsäkring AB is a traditional life insurance company which is operated according to mutual principles, which means that any surplus in operations is returned to policyholders and the insured in the form of bonus. The Group includes SPP Liv Fondförsäkring AB which conducts unit linked insurance operations. This company is able to provide dividends. The insurance operations in the two companies are marketed under the joint name SPP. SPP Kundcenter AB is a wholly owned subsidiary of SPP Livförsäkring AB and earlier in the year was responsible for contacts with insured individuals in SPP. This company s entire operations were transferred to SPP Livförsäkring AB during the year and the company is now dormant. The Group also includes the subsidiary SPP Liv Pensionstjänst AB and its subsidiary SPP Konsult AB. These companies provide consulting and services related to pensions and financial security. The life insurance operations are conducted outside Sweden through the associated companies Nordben Life and Pension Insurance Co Ltd and Euroben Life and Pension Ltd and through SPP s branch office in London. Svenska Handelsbanken AB new owner. On 7 March 2001, SPP Livförsäkring AB acquired a new owner. Svenska Handelsbanken AB acquired SPP Livförsäkring AB, SPP Fonder AB and the SPP name from Alecta pensionsförsäkring, ömsesidigt. During the financial year SPP focused strongly on co-ordinating its systems and organisation in the new ownership structure. SPP continued to grow in the life insurance market. Taken together, these factors involved major efforts to develop improved capacity and quality in the IT systems. SPP and Handelsbanken have a joint approach to customers and offer a broad range of savings in both pension insurance and other forms. Customers can access the entire product range through either company s distribution channels. SPP will be a profit-distributing company within a few years at the earliest when it will merge with Handelsbanken Liv under the SPP brand. At the end of 2001, SPP took over occupational group life insurance (TGL) from Handelsbanken Liv. At the same time preparations were made during the year to transfer Handelsbanken Liv s occupational pension insurance advisers to SPP. These pension advisers will continue to be located at the bank s branch offices. OPERATIONS Market and new business. SPP s main market is occupational pensions exposed to competition. This market continues to grow due to continued deregulation of the collective agreement sector and real wage increases. The use of client company funds which have been repaid by SPP and Alecta is also contributing to growth. SPP has a well established position in this market and is the second largest insurance company. In the total pension market, occupational pensions account for most of new business. Many choose to save in mutual funds. SPP is continuing to increase its share of the ITPK market and is the largest insurance company in this segment. New business measured in annual premiums amounted to SEK 7,360m (6,410), an increase of 15%. Traditional insurance accounted for SEK 5,610m (5,290) of this amount and unit linked

23 REPORT OF THE BOARD OF DIRECTORS 21 insurance for SEK 1,750m (1,120). Deregulation of the municipal collective agreement, PFA, was responsible for the largest increase in sales. The consolidated net loss for the year amounted to SEK 6,599m ( 497). Factors that contributed to this decline in earnings were a lower investment income due to falling stock market prices and interest rate increases. The increased cost for strengthening the premium reserve according to interim bases also contributed to the fall in earnings. The investment return amounted to 2.8% (3.3) and assets under management in the life insurance business amounted to SEK 80.7bn (83.5). Premiums written amounted to SEK 12,627m (10,011) which is an increase of 26%. Premiums written rose for the eighth consecutive year. Regular premiums account for SEK 7,353m (5,827) of premiums written and single premiums for SEK 5,274m (4,184). Investment income including unrealised gains and losses totalled SEK 2,693m (2,785). The downward stock market trend meant that the return on the equities portfolio amounted to 12.9% ( 3.0). The return on fixed-income investments also decreased compared with the previous year to 4.4% (9.1). Some increase in interest levels contributed to this decline. Further details are provided in the section on investment management and in the investment income table on page 12. Comments on other major items. Claims incurred amounted to SEK 3,872m (3,003), an increase of 29%. This change was largely due to increased payments to pensioners with early retirement pension. Reserves for disability insurance rose 31% due to higher morbidity. Change in other technical provisions amounted to SEK 10,734m (8,884), which is an increase of 21%. This cost includes a SEK 2,608m provision due to the reduced interest rate assumption. Operating expenses amounted to SEK 1,223m (911), an increase of 34%. Staff and premises costs rose substantially due to considerable new recruitment, the separation from Alecta and extra costs for the move to the new head office. IT costs also accounted for a very large part of the increase, within both projects and management. Operating expenses in relation to premiums written amounted to 9.7% (9.1). The management expense ratio amounted to 1.4% (1.1). The tax expense for the year, SEK 780m (509), mainly comprised costs for yield tax. The amount also includes a SEK 20m tax expense for an earlier disallowed deduction for loss in the business of SPP Liv Fondförsäkring AB. Client company funds from Alecta pertaining to SPP s own business and employees are included as other technical income. At year-end 2001, unutilised funds remained which are expected to be used in the next year. Organisation and personnel. SPP is organised in three business areas: Key Accounts (large companies and municipalities), Companies and Individuals. The business areas are supported by central staffs, the Development Unit and specialists at SPP Konsult AB. The number of employees at the end of the year was 673 (599), an increase of 12%. Details of salaries and other staff costs are provided in Note 34 on page 35. Parent company. Premiums written amounted to SEK 9,633m (8,262), representing an increase of 17%. This increase was, among other things, due to continued high sales of single premiums for early retirement pensions, increments due to real salary increases and PFA. Net investment income amounted to SEK 2,532m (2,792). The loss for the year was SEK 6,600m ( 408). Lower investment income and higher costs for reserve strengthening for interim bases and safety margins in disability insurance were contributory factors to this lower result. Earnings include SEK 48m pertaining to client company funds related to SPP s own employees. This amount is reported under other technical income. The outstanding amount for utilisation was SEK 45m at year-end. The result from pooling operations, SEK 3m, is reported under bonus and rebates.

24 22 REPORT OF THE BOARD OF DIRECTORS SPP Liv Fondförsäkring AB. Premiums written amounted to SEK 3,006m (1,762), an increase of 71%. This increase was mainly due to a lasting trend towards increased saving in funds instead of traditional life insurance. The company is the largest player in the ITPK market. The net loss for the year was SEK 100m ( 9). The tax expense includes SEK 20m related to the previously appealed decision on the right to utilise loss carry-forwards in the business. The appeal has been withdrawn. These operations are still being built up and as long as the company shows a strong growth in volume, losses will occur. In order to finance future build-up and expansion, a SEK 75m (80) shareholder s contribution has been received from the parent company. The bonus rate was decreased on a number of occasions during the year due to the negative trend of investments. The most recent reduction was made in November when the bonus rate was set at 3.0%. Collective solvency reserve. SPP s surplus funds, the collective solvency capital, amounted to SEK 5,822m (13,124) at year-end The solvency margin on the same date was 108% (119). ASSETS IN RELATION TO INSURANCE COMMITMENTS 100,000 SEKm Insurance commitments Market-valued assets COLLECTIVE SOLVENCY MARGIN 130 % 125 Other companies. SPP Liv Pensionstjänst AB s profit amounted to SEK 0.5m (0.8). The company administers 70 profit-sharing foundations, 23 pension foundations and one insurance association. Pension payments numbered approximately 28,000 (26,000) per month. SPP Konsult s profit amounted to SEK 0.0m (0.6). Completed consulting assignments were on a par with the previous year. SPP Kundcenter AB has been a dormant company since April 2001 and its operations have been transferred to SPP Livförsäkring AB. BONUS AND SOLVENCY Bonus. Bonus funds amounted to SEK 12,841m (23,836) at year-end, of which unrealised gains attributable to changes in the value of investments amounted to SEK 179m (728). Pensions for defined benefit occupational pension insurance were raised 3.02% at the beginning of This corresponds to the price trend according to the consumer price index, September to September. For other pensions the bonus is calculated by adding a bonus rate to the pension capital. The average bonus rate during the year was 5.8% (10.9) before deduction for operating expenses of 0.5 percentage points and yield tax of 0.8 percentage points. For endowment insurance the deduction for yield tax was 1.4 percentage points but otherwise such insurance is treated in the same way as pension insurance contracts. 80,000 60,000 40,000 20, PERSONAL DATA ACT (PUL) The Act applies from 1 October The purpose of this legislation is to protect private individuals from having their personal integrity infringed as a result of use of their personal particulars. A key part of this protection is that the person to whom the particulars apply is informed about any action taken. SPP handles particulars in connection with drawing up agreements, for administration and execution of agreements entered into, and in order to take action requested by the customer before or after an agreement has been signed. This includes details of contacts between the customer and SPP. Some personal particulars provide the basis for marketing activities. A special personal data representative has been appointed who makes sure that data is handled in a correct and legal manner

25 FIVE-YEAR SUMMARY 23 Five-year summary SEKm Group * Result Premiums written 4,591 5,515 7,548 10,011 12,627 Net investment income in insurance business 7,087 8,520 13,185 2,785 2,693 Claims incurred 1,319 1,591 2,249 3,003 3,872 Bonuses and rebates 3 Operating expenses ,223 Balance on the technical account 1,199 4,761 10, ,837 Net profit/loss for the year 586 4,194 10, ,599 Financial position, 31 December Total assets 56,264 66,838 83,463 90,127 89,187 Investment assets 55,266 65,646 82,062 86,254 83,531 Solvency capital 15,925 19,406 28,291 24,036 13,041 of which deferred tax Technical provisions 39,465 46,612 54,075 63,300 74,221 Key ratios Expense ratio, % Management expense ratio, % Portfolio details Number of affiliated companies 12,300 13,500 15,800 17,500 23,600 Number of insurance contracts 459, , , , ,500 Parent Company Result Premiums written 4,332 5,042 6,647 8,262 9,633 Net investment income in insurance business 7,062 8,448 12,511 2,792 2,532 Claims incurred 1,319 1,591 2,249 3,002 3,871 Bonuses and rebates 3 Balance on the technical account 1,221 4,795 10, ,875 Net profit/loss for the year 543 4,175 9, ,600 Financial position, 31 December Investment assets 54,920 64,821 79,746 82,304 76,900 of which equities 4,461 5,790 8,183 35,618 29,309 of which fixed-income securities 8,671 10,029 12,162 46,686 47,591 of which promissory note receivable from Alecta pensionsförsäkring, ömsesidigt 41,788 49,002 59,401 Solvency capital 15,929 19,430 28,272 23,984 12,978 Collective solvency reserve 12,276 6,187 14,512 13,124 5,822 Technical provisions 39,112 45,735 51,756 59,377 67,642 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. ** Comparative year 2000 recalculated, due to changed classification

26 24 ANALYSIS OF RESULTS Analysis of Results PARENT COMPANY Group and occupational Group life and occupational pension insurance group life insurance SEKm Total 2001 with bases with bases Premiums written 9,633 9, Investment income 5,083 5,078 5 Unrealised gains on investments Other technical income Claims paid 3,344 3, Change in provisions for claims outstanding Change in other technical provisions Life insurance provisions 8,078 8,078 Bonuses and rebates 3 3 Operating expenses 1,072 1,064 8 Investment charges 5,375 5,370 5 Unrealised losses on investments 2,360 2,358 2 Balance on the technical account, life insurance business 5,875 5,874 1 Technical provisions Life insurance provisions 65,202 65,202 Provisions for claims outstanding 2,440 2, Total technical provisions 67,642 67, Bonus funds 12,778 12,756 22

27 PROFIT AND LOSS ACCOUNT 25 Profit and Loss Account Group Parent Company SEKm Note TECHNICAL ACCOUNT, LIFE INSURANCE BUSINESS Premiums written (net of reinsurance) 12,627 10,011 9,633 8,262 Premiums written (gross) 1 12,709 10,071 9,715 8,322 Premiums ceded Investment income 2 5,193 7,604 5,083 7,374 Unrealised gains on investments , ,335 Increase in value of investments for which policyholders bear the investment risk Other technical income Claims incurred 3,872 3,003 3,871 3,002 Claims paid 3,344 2,528 3,344 2,528 Gross 5 3,353 2,529 3,353 2,529 Reinsurers share Change in provisions for claims outstanding Gross Reinsurers share Change in other technical provisions 10,734 8,884 8,078 7,281 Life insurance provisions 8,078 7,281 8,078 7,281 Gross 24 8,078 7,282 8,078 7,282 Reinsurers share Other technical provisions 6 2,656 1,603 Bonuses and rebates 3 3 Operating expenses 7 1, , Investment charges 8 5, , Unrealised losses on investments 9 2,285 5,786 2,360 5,786 Decrease in value of investments for which policyholders bear the investment risk Result from participations in associated companies 13 2 Balance on the technical account, life insurance business 5, , NON-TECHNICAL ACCOUNT Balance on the technical account, life insurance business 5, , Investment income Unrealised gains on investments 1 1 Investment charges 3 1 Unrealised losses on investments 0 0 Other income Other expenses Result before appropriations and taxes 5, , Appropriations 168 Result before tax 5, , Tax on profit for the year NET LOSS FOR THE YEAR 6, ,

28 26 BALANCE SHEET Balance Sheet Group Parent Company SEKm Note 31 Dec Dec Dec Dec ASSETS Investments Investments in group companies Shares and participations in group companies Shares and participations in associated companies Other financial investments Shares and participations 14 29,137 35,430 29,002 35,314 Bonds and other fixed-income securities 15 47,657 46,741 47,591 46,686 77,012 82,370 76,900 82,304 Investments for which policyholders bear the investment risk 16 6,519 3,884 Reinsurers share of technical provisions Claims outstanding Receivables Amounts receivable from direct insurance operations Other receivables , , , ,031 Other assets Tangible assets Cash at bank and in hand 3, , , , Prepayments and accrued income Accrued interest income 1,242 1,142 1,242 1,142 Deferred acquisition costs Other prepayments and accrued income ,696 1,432 1,545 1,340 TOTAL ASSETS 89,187 90,127 82,371 86,041

29 BALANCE SHEET 27 Balance Sheet Group Parent Company SEKm Note 31 Dec Dec Dec Dec SHAREHOLDERS EQUITY, PROVISIONS AND LIABILITIES Shareholders equity Share capital, 2,000 shares par value SEK 100, Bonus funds 21, 22 Bonus reserve 18,796 21,155 18,654 20,932 Reserve for unrealised gains Accumulated deficit in operating subsidiaries Other funds ,536 Net loss for the year 6, , ,841 23,836 12,778 23,784 Technical provisions Life insurance provisions 24 65,202 57,516 65,202 57,516 Provisions for claims outstanding 25 2,441 1,862 2,440 1,861 67,643 59,378 67,642 59,377 Provisions for life insurance for which policyholders bear the investment risk 26 6,578 3,922 Provisions for other risks and expenses Provisions for taxes Other provisions Deposits received from reinsurers Liabilities Liabilities related to direct insurance 28 1,078 1,388 1,026 1,335 Liabilities related to reinsurance Derivatives Other liabilities , ,100 1,495 2,487 1,353 2,444 Accruals and deferred income TOTAL SHAREHOLDERS EQUITY, PROVISIONS AND LIABILITIES 89,187 90,127 82,371 86,041 Memorandum Items Guarantees and assets pledged as collateral security for own liabilities and by way of provisions reported commitments 32 74,474 67,688 67,896 63,766 Contingent liabilities 33 5,886 8,493 5,886 8,493

30 28 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 FFFS 2000: 22 and general advice regarding the annual accounts of insurance companies. 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 AB directly or indirectly held more than 50% of the voting rights or in another manner exercised a decisive influence. The consolidated accounts are prepared in accordance with the acquisition accounting method. Associated companies, i.e. companies in which the Group s voting rights amount to a minimum of 20% and a maximum of 50%, are consolidated according to the equity method. This means that the consolidated book value of these shares corresponds to the Group s share of associated companies shareholders equity and any residual values on consolidated surplus or deficit values. In the profit and loss account the Group 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 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 fair value with the exception of shares and participations in Group 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 or 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 used to hedge currency risks are reported together with the underlying asset. All derivatives are valued at fair value. Realised and unrealised changes in value are reported in the profit and loss account and for equities comprise the difference between the acquisition value and fair value. For fixed-income instruments the unrealised result is calculated as the difference between amortised cost and fair 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 fair value for the respective asset item in the original currency translated at the closing exchange rate.

31 ACCOUNTING PRINCIPLES 29 For unit linked insurance activities, fund units for which policyholders bear the investment risk are valued at fair value. When the policyholders units are realised, for example pension payments, payment of charges or similar, the unit is valued at its fair 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. Starting in the previous 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 this insurance. 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 fair 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. Tax is calculated individually for each company in the respective country in accordance with prevailing tax legislation. Tax costs for 2001 include yield tax, income tax and withholding tax on dividends received. Income tax includes deferred tax on the portion of the Group s operations that is liable for income tax. Five-year summary. The figures for 1999 have been recalculated in view of the changed accounting principle in SPP Liv Fondförsäkring AB. Classification of risk and savings products has been changed which affected the key ratios in the five-year summary. Figures for the comparative year 2000 have been recalculated.

32 30 NOTES Notes Amounts in SEKm, unless otherwise stated NOTE 1 PREMIUMS WRITTEN (gross) Group Parent Company Paid-in premium 12,148 9,480 9,154 7,731 Portfolio premiums 7 7 Reversionary bonus for adjustment of paid-up values Reversionary bonus for premium reduction Technical premium supplements Premium tax ,709 10,071 9,715 8,322 Premiums written have been taken out in Sweden Premiums written for direct insurance Regular Single Regular Single Group premiums premiums premiums premiums Group insurance Bonus contracts 4,709 4,994 4,552 3,758 Contracts where policyholders bear the investment risk 2, , ,435 5,274 5,887 4,184 Premiums written attributable to bonus contracts pertain entirely to the Parent Company (reduced by group eliminations, SEK 12m). NOTE 4 INCREASE IN VALUE OF INVESTMENTS FOR WHICH POLICYHOLDERS BEAR THE INVESTMENT RISK Group Parent Company Shares and participations Bonds and other fixed-income securities 7 13 NOTE 5 CLAIMS PAID (gross) Group Parent Company Claims paid 3,322 2,502 3,322 2,502 Operating costs for claims management ,353 2,529 3,353 2,529 NOTE 6 CHANGE IN OTHER TECHNICAL PROVISIONS Group Parent Company Life insurance provisions for which policyholders bear the investment risk 2,656 1,603 2,656 1,603 NOTE 2 INVESTMENT INCOME NOTE 7 OPERATING EXPENSES Group Parent Company Group Parent Company Dividends received associated companies 2 4 Interest receivable, etc. 2,610 1,863 2,616 1,863 bonds and other fixedincome securities 2,481 1,844 2,481 1,843 other interest receivable other interest receivable, group companies Exchange gains, net Capital gains, net 1,920 1,454 1,847 1,261 shares and participations 68 1, fixed-income securities 1, , other investments Return on promissory note 2,976 2,976 5,193 7,604 5,083 7,374 NOTE 3 UNREALISED GAINS ON INVESTMENSTS Group Parent Company Shares and participations 80 Bonds and other fixed-income securities 108 1, ,312 Derivatives , ,335 Acquisition costs Change in deferred acquisition costs Administrative expenses Reinsurers commissions and profit participations Total operating expenses in insurance operations 1, , Claims management Treasury management Share in results of associated companies 13 2 Other 4 6 Total operating expenses 1,413 1,016 1, Specification of total operating expenses: Staff costs Premises Depreciation Other Management fees Net operating expenses 1,413 1,016 1, Consolidated operating expenses include commissions to brokers amounting to SEK 119m (191). The SPP Group s own pension commitments are covered by ongoing insurance.

33 NOTES 31 NOTE 8 INVESTMENT CHARGES NOTE 11 TAX ON PROFIT FOR THE YEAR Group Parent Company Group Parent Company Investment management charges Interest payable, etc other interest payable other interest payable, group companies 4 6 Exchange losses, net 1,675 1,675 Capital losses 3, ,480 shares and participations 3, ,480 fixed-income securities 1 0 NOTE 9 UNREALISED LOSSES ON INVESTMENTS 5, , Group Parent Company Shares and participations 823 5, ,747 Bonds and other fixed-income securities 1,461 1,461 Other investments ,285 5,786 2,360 5,786 NOTE 10 DECREASE IN VALUE OF INVESTMENTS FOR WHICH POLICYHOLDERS BEAR THE INVESTMENT RISK Group Parent Company Shares and participations Bonds and other fixed-income securities Yield tax Income tax Other Of income tax SEK 0m (47) in the Group comprises deferred tax. NOTE 12 SHARES AND PARTICIPATIONS IN GROUP COMPANIES Specification of the Parent Company s and the Group 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. Parent Company Acquisition value Opening balance Shareholders contribution provided 1) Write-downs for the year Closing balance Total shares and participations in group companies ) SPP Liv provided a conditional shareholders contribution to SPP Liv Fondförsäkring AB of SEK 75m. The shareholding was written down by a corresponding amount. NOTE 13 SHARES AND PARTICIPATIONS IN ASSOCIATED COMPANIES Group Parent Company Opening balance Investment Share in profits 13 4 Dividend 2 4 Translation difference 11 2 Goodwill amortisation 6 6 Closing balance Closing balance of shares in associated companies includes goodwill of SEK 44m. Group Parent Company Number Share Foreign companies Domicile of shares of equity Nordben Life and Pension Insurance Co Limited Guernsey % Euroben Life and Pension Limited Ireland % Since all shares are unlisted, no market values are given.

34 32 NOTES NOTE 14 SHARES AND PARTICIPATIONS Listed Swedish shares 13,881 16,849 19,568 21,478 Listed Swedish funds Listed foreign shares 14,365 14,693 15,116 15,740 Listed foreign funds ,137 32,427 35,430 37, Listed Swedish shares 13,881 16,849 19,568 21,478 Listed Swedish funds Listed foreign shares 14,365 14,693 15,116 15,740 Listed foreign funds ,002 32,293 35,314 37,793 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, Finance, SE Stockholm or by fax Accrued acquisition value for fixed-income securities exceeds and falls below respectively the amount to be realised on the due date by SEK 1,482m and SEK 693m respectively. Fixed interest terms 0-1 year 10, years 3, years 15, years 13,234 >10 years 5,575 Total 47,591 NOTE 16 INVESTMENTS FOR WHICH POLICYHOLDERS BEAR THE INVESTMENT RISK Acquisi- Acquisi- Fair tion Fair tion Group value value value value Swedish government 35,530 35,471 22,688 22,156 Swedish mortgage institutions 6,955 6,926 9,681 9,506 Other Swedish issuers ,366 1,349 Foreign governments 3,582 3,419 10,972 11,094 Other foreign issuers 1,284 1,313 1,979 2,006 Participations in Swedish funds ,657 47,430 46,741 46,164 Listed securities 47,657 47,430 46,667 46,095 Unlisted securities ,657 47,430 46,741 46, Acquisi- Acquisi- Fair tion Fair tion Parent Company value value value value Swedish government 35,530 35,471 22,688 22,156 Swedish mortgage institutions 6,955 6,926 9,681 9,506 Other Swedish issuers ,366 1,349 Foreign governments 3,582 3,419 10,972 11,094 Other foreign issuers 1,284 1,313 1,979 2,006 47,591 47,365 46,686 46,111 Listed securities 47,591 47,365 46,612 46,042 Unlisted securities ,591 47,365 46,686 46, Acquisi- Acquisi- Fair tion Fair tion Group value value value value Swedish fund units 6,119 6,134 3,653 3,338 shares and participations 5,086 5,126 3,116 2,837 fixed-income securities 1,033 1, Foreign fund units shares and participations ,519 6,517 3,884 3,568 NOTE 15 BONDS AND OTHER FIXED-INCOME SECURITIES Acquisi- Acquisi- Fair tion Fair tion Group value value value value Swedish shares 13,881 16,849 19,568 21,478 Foreign shares 14,365 14,693 15,116 15,740 Participations in Swedish funds Participations in foreign funds ,137 32,427 35,430 37,909 Acquisi- Acquisi- Fair tion Fair tion Parent Company value value value value Swedish shares 13,881 16,849 19,568 21,478 Foreign shares 14,365 14,693 15,116 15,740 Participations in Swedish funds Participations in foreign funds ,002 32,293 35,314 37,793 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 17 RECEIVABLES RELATED TO DIRECT INSURANCE Group Parent Company Amounts receivable from policyholders Amount receivable from Förenade Liv NOTE 18 OTHER RECEIVABLES Group Parent Company Owed by group companies Tax asset Taxes outside Sweden Other 142 1, , , ,274

35 NOTES 33 NOTE 19 TANGIBLE ASSETS NOTE 20 DEFERRED ACQUISITION COSTS Group Parent Company Group Parent Company Acquisition value Opening balance Purchases during the year Closing balance Capitalisation Opening balance Capitalised during the year Closing balance Accumulated depreciation Opening balance Depreciation during the year Closing balance Book value At the end of 2000, SPP Livförsäkring AB acquired equipment which was previously leased at a value of SEK 54m. In the Group the entire amount was written off in Accumulated depreciation Opening balance Depreciation during the year Closing balance Book value of which, book value with remaining depreciation period > 2 years NOTE 21 SENSITIVITY ANALYSIS, BONUS FUNDS Reported value of Life Insurance Bonus Parent Company investments provisions funds Price fall shares 10% 2,866 2,866 Currency fall 10% 1,998 1,998 Interest rate rise 1% 1,781 1,781 6,645 6,645 NOTE 22 BONUS FUNDS Bonus Reserve for Equity in operating Other Net profit/loss Total Total Group reserve unrealised gains companies funds for the year Opening balance according to adopted balance sheet 21, , ,836 28,044 Disposition of earnings in previous year 2, , Takeover of insurance portfolio Reversionary bonus 1,057 1, Payment of client company funds 3,114 3,114 2,695 Withdrawal from indexation funds Associated companies Other changes in bonus funds Change in reserves Net loss for the year 6,599 6, Closing balance 18, ,599 12,841 23,836 Bonus Reserve for Equity in operating Other Net profit/loss Total Total Parent Company reserve unrealised gains companies funds for the year Opening bonus funds 20, , ,784 27,904 Disposition of earnings in previous year 2,128 2, Takeover of insurance portfolio Reversionary bonus 1,057 1, Payment of client company funds 3,114 3,114 2,695 Withdrawal from indexation funds Other changes in bonus funds Change in reserves Net loss for the year 6,600 6, Closing balance 18, ,600 12,778 23,784 Of insurance portfolio taken over during the year, SEK 30m (-) pertains to transfers from Handelsbanken Liv (occupational group life insurance TGL). Special indexation funds are included in the bonus reserve with SEK 2,261m (2,081) in the Group and in the Parent Company.

36 34 NOTES NOTE 23 RESERVE FOR UNREALISED GAINS Group Parent Company Shares and participations in associated companies 11 2 Shares and participations 1 0 Bonds and other fixedincome securities Deferred tax Unrealised gains are estimated on a portfolio basis for shares and participations and bonds and other fixed-income securities. NOTE 24 LIFE INSURANCE PROVISIONS (gross) Reversionary Other Total Total Group bonus provisions Opening balance 1 57,515 57,516 50,416 Insurance portfolio transferred/taken over Change for the year 8,078 8,078 7,282 of which, attributable to reduced interest rate assumption 2,608 2,608 1,365 of which, other change during the year 5,470 5,470 5, ,201 65,202 57,516 Reversionary Other Total Total Parent Company bonus provisions Opening balance 1 57,515 57,516 50,416 Insurance portfolio transferred/taken over Change for the year 8,078 8,078 7,282 of which, attributable to reduced interest rate assumption 2,608 2,608 1,365 of which, other change during the year 5,470 5,470 5, ,201 65,202 57,516 SEK 261m ( 182) of insurance portfolio transferred during the year comprises transfers to Alecta. The Group 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 2001, approximately SEK 6bn of the effect of the reduced base rate remained to be expensed, see also page 16. 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%. The tax charge is applied through a reduction of the assumed interest by 0.4 percentage points. NOTE 25 PROVISIONS FOR CLAMIS OUTSTANDING (gross) Provision for Non- non-life annu- Notified notified ities and sick- Total Total Group claims claims ness annuities Opening balance ,722 1,862 1,340 Rounding difference 1 1 Change for the year ,240 2,441 1,862 Provision for Non- non-life annu- Notified notified ities and sick- Total Total Parent Company claims claims ness annuities Opening balance ,722 1,861 1,340 Change for the year ,240 2,440 1,861 NOTE 26 PROVISIONS FOR LIFE INSURANCE FOR WHICH POLICY- HOLDERS BEAR THE INVESTMENT RISK Group Parent Company Opening balance 3,922 2,319 Change for the year 2,656 1,603 6,578 3,922 NOTE 27 PROVISIONS FOR TAXES Group Parent Company Yield tax Income tax Of income tax, SEK 1m (0) in the Group consists of deferred tax. NOTE 28 LIABILITIES RELATED TO DIRECT INSURANCE Group Parent Company Owed to policyholders 972 1, ,284 Owed to Förenade Liv ,078 1,388 1,026 1,335 NOTE 29 DERIVATIVE INSTRUMENTS WITH NEGATIVE VALUES Group Book Nominal Book Nominal value value value value Derivative instruments partly posted in the balance sheet Fixed-income securities 1 87 Forward contracts with negative values Parent Company Book Nominal Book Nominal value value value value Derivative instruments partly posted in the balance sheet Fixed-income securities 1 87 Forward contracts with negative values

37 NOTES 35 NOTE 30 OTHER LIABILITIES Group Parent Company Owed to Group companies 12 Other 401 1, , , ,100 All liabilities fall due for payment earlier than five years after the balance sheet date. NOTE 31 ACCRUED EXPENSES AND DEFERRED INCOME Group Parent Company Reserve for employees Other NOTE 32 GUARANTEES AND ASSETS PLEDGED AS COLLATERAL SECU- RITY FOR OWN LIABILITIES AND BY WAY OF PROVISIONS REPORTED COMMITMENTS. Group Parent Company Assets registered on behalf of policyholders 74,474 67,496 67,896 63,574 in addition to requisite pledged assets 254 4, ,324 Other pledged assets ,474 67,688 67,896 63,766 Group Parent Company Shares and participations 22,368 18,535 16,883 15,188 Bonds and other fixedincome securities 49,866 48,119 48,833 47,582 Cash and bank deposits 2,240 1,034 2, ,474 67,688 67,896 63,766 NOTE 33 CONTINGENT LIABILITIES Group Parent Company Amount that would have been expensed if the company had not applied temporary premium reserve bases (interim bases) 5,886 8,493 5,886 8,493 NOTE 34 PERSONNEL Fees paid to external members of the Board, outside the Handelsbanken Group, amounted to SEK 221,250 (442,500). No fee was paid to the Chairman of the Board. Employee representatives and their deputies received no directors fees. In 2001, the President was paid a total salary of SEK 2,632,058 (1,895,618), of which earnings-dependent salary comprised SEK 640,000 (85,833). Also included was a company car benefit (including 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 collective-agreement based occupational pension amounts to approximately 65% 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 in accordance with the collective agreement for insurance employees, which applies until 31 December On 1 January 2002, SPP Livförsäkring AB transfers to the collective agreement for bank employees. Severance pay will be reduced by the full amount of salary/benefit received from 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% 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. In the first quarter of 2001, SPP Kundcenter AB had 57 employees. The company s operations have ceased and most of the employees are now employed at SPP Livförsäkring AB. Average number of employees No. of Of whom No. of Of whom employees men employees men Parent Company Salaried employees % % Total in the Parent Company % % Subsidiaries Salaried employees 0 1) 0% 58 28% Total in subsidiaries 0 0% 58 28% Total in the Group % % 1) The company is dormant and had no employees at 31 December Salaries, other remuneration and payroll overhead Salaries and other Payroll overhead Salaries and other Payroll overhead remuneration (of which remuneration (of which (of which bonus) pension costs) (of which bonus) pension costs) Parent Company Board of Directors and President (0.6) (1.4) (0.1) (1.9) Salaried employees ( ) (51.1) ( ) (32.0) Total in Parent Company Subsidiaries (0.6) (52.5) (0.1) (33.9) Board of Directors and President ( ) ( ) ( ) (0,1) Salaried employees 2.5 2) ( ) (0.4) ( ) (2.4) Total in subsidiaries ( ) (0.4) ( ) (2.5) Total in the Group ( ) (52.9) ( ) (36.4) 2) Pertains to salary costs for the first quarter of Auditors fees Group Parent Company KPMG Deloitte & Touche Öhrlings Pricewaterhouse Coopers No consultancy fees were paid. NOTE 35 DETAILS OF PARENT COMPANY Svenska Handelsbanken AB (publ.), corporate identity number , domiciled in Stockholm.

38 36 PROPOSED DISPOSITION OF EARNINGS Proposed disposition of earnings The Board of Directors and the President propose that the Parent Company s loss for 2001 of SEK 6,600,442,731, with the addition of reversed funds from the reserve for unrealised gains of SEK 557,111,252, a net amount of SEK 6,043,331,479, be transferred to the bonus reserve. The result of operations during the year, and the company s financial position as per 31 December 2001, are presented in the adjoining Parent Company and Consolidated Profit and Loss Accounts and Balance Sheets, as well as the notes to the financial statements. Stockholm, 11 February 2002 Björn C Andersson Rolf Lundquist Barbro Johansson Chairman Vice Chairman Björn Bergman M Johan Widerberg Stefan Nilsson Holger Eriksson Carl-Johan Tibblin Yonnie Bergqvist Åke Danielsson Tommy Forsberg Anders Östryd President Our auditors report was submitted on 5 March 2002 KPMG Bohlins AB Peter Zell Authorised Public Accountant Ulf Davéus Authorised Public Accountant, Appointed by the Swedish Financial Supervisory Authority

39 AUDITORS REPORT 37 Auditors Report To the Annual General Meeting of SPP Livförsäkring AB, corporate identity 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. Handelsbanken's internal audit department has examined the internal controls and accounts on an ongoing basis during the year and submitted their reports to us. 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 Group 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 Group be adopted, that the loss for the Parent Company 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, 5 March 2002 KPMG Bohlins AB Peter Zell Authorised Public Accountant Ulf Davéus Authorised Public Accountant, Appointed by the Swedish Financial Supervisory Authority

40 38 BOARD OF DIRECTORS AND MANAGEMENT Board of Directors Rolf Lundquist born 1940 Vice Chairman Financial Manager, SIF Director since 2000 Anders Östryd born 1953 President. Director since 2000 Holger Eriksson born 1943 Chairman, HTF Director since 1994 Björn Bergman born 1942 Chairman, Ledarna Director since 1994 Björn C Andersson born 1946 Chairman Executive Vice President at Handelsbanken Head of Handelsbanken Asset Management Director since 2001 Barbro Johansson born 1944 Head of Handelsbanken Liv Director since 2001 M Johan Widerberg born 1949 Executive Vice President at Handelsbanken Head of Western Sweden Regional Bank Director since 2001 Stefan Nilsson born 1957 Executive Vice President at Handelsbanken Head of Northern Norrland Regional Bank Director since 2001 Yonnie Bergqvist born 1961 Head of Stadshypotek Bank Director since 2001 Åke Danielsson born 1960 Insurance employee Employee representative Director since 2000 Carl-Johan Tibblin born 1944 Head of Corporate Risk Management, Scania CV AB Director since 1994

41 BOARD OF DIRECTORS AND MANAGEMENT 39 Management Henrik Sandberg born 1957 Vice President Head of Finance Management member since 2000 Anders Östryd born 1953 President & CEO Management member since 1997 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 Ulf Magnusson born 1943 Profile & Communications Management member since 1994 Lennart Zetterfeldt born 1950 Legal Affairs Management member since 1996 Lars Bergquist born 1948 Senior Actuary Management member since 1996 Björn Johansson born 1945 Human Resources Management member since 1996 Margareta Weslien born 1947 Special Assignments Management member since 1997 Solwig Ahlén born 1942 IT Strategy Management member since 2000 Stephan Oxenborg born 1951 Development Unit Management member since 2001

42 40 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 fixed-income 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 Business 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 solvency margin Market value of insurance company s assets in relation to commitments to policyholders. Collective solvency reserve Market value of insurance company s assets, minus 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. ITP A supplementary pension for salaried employees in private industry and commerce. 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. 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).

43 GLOSSARY 41 Normal portfolio The Board of SPP 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 paid-up policy corresponds to premiums paid earlier and states the value of the insured s claim on 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. 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. 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. Solvency capital Consists of untaxed reserves and bonus funds. Provision for deferred tax is reversed in the calculation of policyholders funds. Special indexation funds Funds allocated to guarantee the value of pensions or for another pension-promoting purpose. These funds are placed at SPP s disposal following a decision by the parties to the agreement. The funds are therefore not included in the collective solvency reserve. Surplus reserve The surplus that arises in a defined benefit employer plan can be placed in a company s own surplus reserve. 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, 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. 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.

44 42 ADDRESSES HEAD OFFICE SE Stockholm Visitors address: Hälsingegatan 38 Tel: Fax: CUSTOMER CENTRE Companies: Private: (inside Sweden) REGIONAL OFFICES Stockholm South Visitors address: Medborgarplatsen 1 3 Tel: Fax: Stockholm North Visitors address: Sveavägen 13, 7 tr Tel: Fax: Stockholm Key Account Visitors address: Vasagatan 7 Tel: Fax: Gothenburg Box 3055 SE Göteborg Visitors address: Kungsportsavenyn Tel: Fax: Malmö Box 4159 SE Malmö Visitors address: Djäknegatan 2 Tel: Fax: Linköping Teknikringen 7 SE Linköping Tel: Fax: Sundsvall Box 970 SE Sundsvall Visitors address: Storgatan 11 Tel: Fax: Västerås Box 302 SE Västerås Visitors address: Stora Gatan 16, 3 tr Tel: Fax: LOCAL OFFICES Gävle Box 196 SE Gävle Visitors address: Nygatan 20 Tel: Fax: Hofors Box 79 SE Hofors Visitors address: Björkhagsgatan 10 Tel: Fax: Jönköping Trädgårdsgatan 37 SE Jönköping Tel: Fax: Karlstad Box 51 SE Karlstad Visitors address: Västra Torggatan 11 Tel: Fax: Luleå Varvsgatan 47 SE Luleå Visitors address: Varvsgatan 47 Tel: Fax: Umeå Box 376 SE Umeå Visitors address: Storgatan 38 Tel: eller Fax: Växjö Deltavägen 7 SE Växjö Tel: Fax: Örebro Stortorget 8 SE Örebro Tel: Fax: BRANCH OFFICE London 243 Knightsbridge London SW7 5DH UK Tel: Fax: ASSOCIATED COMPANIES Nordben Life and Pensions Insurance Co Ltd Harbor House, South Esplanade St Peter Port, Guernsey GY1 1AP, C.I. UK Tel: Fax: Euroben Life and Pension Ltd 1 North Wal Quay Dublin 1 Ireland Tel: Fax: FRANCHISE-HOLDERS Your local pensions partner PA Johansson AB Nya Stadens Torg 6 SE Lidköping Tel: Fax: Your local pensions partner i Stockholm Väst AB Pyramidvägen 7 SE Solna Tel: Fax: Your local pensions partner Rikard Fors AB Nora Torg 5 A SE Danderyd Tel: Fax: Your local pensions partner Stockholm City AB Löjtnantsgatan 17 SE Stockholm Tel: Fax: Your local pensions partner i Jönköping AB Bäckvägen 1 SE Vetlanda Tel: Fax: Your local pensions partner Stefan Jonsson AB Stortorget 32 SE Kalmar Tel: Fax: Your local pensions partner Lars Jovér AB Lumavägen 6, 1 tr SE Stockholm Tel: Fax: Your local pensions partner PA Johansson AB Kungsgatan 10 B SE Göteborg Tel: Fax: Your local pensions partner Stefan Jonsson AB Regementsgatan 9 SE Växjö Tel: Fax: Your local pensions partner Södra Skåne AB Kaptensgatan 1, 4 tr, Box 4412 SE Malmö Tel: Fax: Your local pensions partner i Östergötland AB Teknikringen 1 F SE Linköping Tel: Fax:

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46 Annual report The Annual Report may be ordered via SPP s Internet website, or from SPP, Profile & Communications, SE Stockholm. List of equities and investments The staturory list of equity and fixed-income investments is attached to the Annual Report submitted to the Swedish Financial Supervisory Authority. The list may be ordered from SPP, Finance, SE Stockholm. SPP s 2001 Annual report was produced by: SPP Profile & Communications and Finance. Prepress by Valörrepro. Printed by Östertäljetryckeri, on Lessebo Linné white 240 g and 120 g. Photographer: Elisabeth Ohlson.

47 SPP is a specialist in pensions and insurance which provide Sickness benefit, Pension to survivors and Pension to yourself. We offer employers and their employees and organisations and their members secure and convenient pension savings. SPP is a subsidiary of Handelsbanken. SE Stockholm