Storebrand 1Q Apr Odd Arild Grefstad CEO Lars Aa. Løddesøl CFO. Storebrand celebrates 250 years in 2017

Transcription

1 Storebrand Q 207 Storebrand celebrates 250 years in Apr 207 Odd Arild Grefstad CEO Lars Aa. Løddesøl CFO

2 Highlights Q 207 Group result 7% Unit Linked AuM growth 3 67 MNOK % Retail Bank lending growth 3 Q 207 Financial items and risk result life Operating profit 59% Solvency II ratio NOK pr. share in economic capital 2 Result before amortisation and write-downs. 2 Change from Q 206 to Q Growth figures are from YTD 206 to YTD Including transitional rules.

3 Our strategy Manage the guaranteed 2 Continued growth in Savings balance sheet and Insurance >50% SII margin Capital-light and profitable growth Cost reductions through automation and outsourcing Market leading asset gatherer with strong Insurance offering Manage for future capital release and increased dividend capacity Continued retail growth with low capital requirements From high to low capital requirements and higher quality of earnings 3 We work hard to reach our vision: Recommended by our customers

4 2 Manage guaranteed balance sheet Growth in Savings and Insurance Solvency position Storebrand Group Solvency position(%) Estimated sensitivities Target SII margin 50% Estimated economic 47 2 SII-margin Q Interest rates -50bp 63 Q4 206 Q 207 Interest 57 5 rates +50 bp 62 Transitional rules SII standard model Equity -25% Key takeaways Strong asset return allow for longevity reserve strengthening and increased buffer capital levels Investment portfolios further adopted to Solvency II Spread +50 bp, VA +5bp UFR = 4.05% Small changes in value of transitional measures UFR = 3.65% The solvency position of Storebrand Group is calculated using the current Storebrand implementation of the Solvency II Standard model with the company's interpretation of the transition rules from the NFSA. Output is sensitive to changes in financial markets, development of reserves, changes in assumptions and improvements of the calculation framework in the economic capital model as well as changes in the Solvency II legislation and national interpretation of transition rules. 4

5 2 Manage guaranteed balance sheet Growth in Savings and Insurance Solvency movement from Q4 206 to Q % 44% -3% +3% +3% +47% +2% Q4 206 ex. transitionals Model and assumptions changes Operating earnings 2 Economic variance 3 Q 207 ex. transitionals Transitional rules Q 207 Solvency ratio 5 Improved modelling of investments (+), reduced lapse fees Sweden (-), Increased equity stress (-), Reduced Volatility Adjustment (-) 2 Operating earnings refers to increased own funds from operations and expected normalised return, and implementation of investment strategy (+) 3 Investments return above normal risk premiums and changes in liabilities (+)

6 2 Manage guaranteed balance sheet Growth in Savings and Insurance Balance Sheet Shifts to capital efficient products Forecast assets under management (NOKbn) Implications for capital : 54% of AuM non guaranteed ILLUSTRATION 2027e: >80% of AuM non guaranteed Guaranteed portfolio has reached peak capital consumption 2. New growth in Savings and Insurance need little new capital 3. Will increase free cash flow and dividend capacity Company capital and Other External AuM Non-guaranteed Life Low capital consumptive Guarantees Medium capital consumptive Guarantees High capital consumptive Guarantees 6 Company capital and Other: Company portfolios, buffer capital and BenCo. External AuM: Non-life AuM in Storebrand Asset Management. Non-guaranteed Life: Unit Linked Norway and Sweden. Low capital consumption Guarantees: Capital-light guarantees Sweden. Medium capital consumption Guarantees: Defined Benefit and medium guaranteed Sweden. High capital consumption Guarantees: Paid-up policies, Individual Norway and capital consumptive guarantees Sweden..

7 Growth in Savings continues, Insurance growth paused by changes in distribution 2 Manage guaranteed balance sheet Growth in Savings and Insurance Unit Linked Asset management 25 7% 47 20% growth in Sweden (SEK) 567 6% 599 Growth driven by nonguaranteed and external mandates Q 206 Q % growth in Norway Q 206 Q % adjusted for weakening of SEK UL reserves (BNOK) AuM (BNOK) Insurance Retail loans % 4 44 Changes in distribution and new disability product temporarily dampens growth 28,4 32% 37,6 NOK 2bn placed on life balance sheet as of Q 207 Q 206 Q 207 New product launches and partnerships to boost growth Q 206 Q 207 Margin improvement in Q Portfolio Premiums (MNOK) Balance (BNOK) 7

8 2 Manage guaranteed balance sheet Growth in Savings and Insurance Innovating the customer journey Products and concepts People and technology Customer service Digitally driven sales front Launched Fossil free mutual funds in Norway Improved customer deliveries through strategic partnership Customer loyalty at all-time high Doubled digital sales of individual savings YTD 207 Fastest growing mortgage lender 206 8

9 Individuals change mortgage provider more frequently - Storebrand Bank fastest growing in Manage guaranteed balance sheet Growth in Savings and Insurance Increased customer awareness Fastest growing mortgage banks 206 (%) Storebrand 32% 25% of Norwegian mortgage customers have changed provider or negotiated terms during the last year Competitor Competitor 2 Competitor 3 Competitor 4 3% 3% 2% 2% Storebrand's customer offer and capital advantages have led to strong growth Competitor 5 Competitor 6 Competitor 7 Competitor 8 2% 2% % % High quality loan portfolio LTV<55% Competitor 9 % 9 Finance Norway: Forbruker- og finanstrender 207 Bank. 2 Growth in retail mortgages Norway.

10 Key figures Group Result development Earnings per share 2 Financial items and risk result life Special items MNOK Operating result Q 206 Q Q Q4 206 Q 207 Q 206 Q2 206 Q3 206 Q4 206 Q 207 Solidity capital Storebrand Solidity capital Life Group Customer buffers development 60,53 6,439 6,490 57,260 58,844 MNOK 5.9% Customer buffers Norway 4 Customer buffers Sweden 6.6% 6.3% 6.3% % of customer funds 3 6.7% 6.7% 5.6% 5.7% 5.4% 7.9% Q 206 Q2 206 Q3 206 Q4 206 Q 207 Q 206 Q2 206 Q3 206 Q4 206 Q Result before amortisation, write-downs. 2 Earnings per share after tax adjusted for amortisation of intangible assets. 3 Customer buffers in Benco not included. 4 Solidity capital/customer buffers does not include provisions for future longevity reserves.

11 Storebrand Group Group Profit Q Full year NOK million Fee and administration income Insurance result Operational cost Operating profit Financial items and risk result life Result before amortisation Amortisation and write-downs of intangible assets Result before tax Tax Profit after tax The result includes special items. Please see storebrand.com/ir for a complete overview. 2 The operational cost in Q 207 includes around NOK 30 million of costs either related to 206 or of a one-time nature.

12 Storebrand Group Group Profit Q Full year NOK million Fee and administration income Insurance result Operational cost Operating profit Financial items and risk result life Profit before amortisation Profit per line of business Q Full year NOK million Savings - non-guaranteed Insurance Guaranteed pension Other profit Profit before amortisation

13 Savings (non-guaranteed) - continued growth Savings Profit Q Full year NOK million Fee and administration income Operational cost Operating profit Financial items and risk result life Profit before amortisation Profit per product line Q Full year NOK million Unit linked Norway Unit linked Sweden Asset Management segment Retail banking Profit before amortisation

14 BNOK BNOK MNOK BNOK Savings (non-guaranteed) - strong growth in retail lending Savings Reserves and premiums Unit Linked 3,7 3,5 3,4 3,5 3,7 Comments 47 7% premium growth in UL premiums % retail lending growth 2 Higher allocated costs negatively affects results Q 206 Q2 206 Q3 206 Q4 206 Q 207 Assets Under Management Retail bank balance and Net Interest margin (%),20,6,5,03, Life insurance balance sheet Banking balance sheet Q 206 Q2 206 Q3 206 Q4 206 Q 207 Q 206 Q2 206 Q3 206 Q4 206 Q Excluding transfers. Growth from YTD 206 to YTD Growth figures from YTD 206 to YTD 207.

15 Insurance Insurance Profit Q Full year NOK million Insurance premiums f.o.a Claims f.o.a Operational cost Operating profit Financial result Profit before amortisation Profit per product line Q Full year NOK million P&C & Individual life Health & Group life Pension related disability insurance Nordic Profit before amortisation

16 MNOK Insurance - combined ratio on target level Insurance Combined ratio Comments Combined ratio and results Claims ratio Cost ratio Combined ratio 92% 90% 9% 9% 89% Combined Ratio 89% 77% 75% 75% 74% 7% Reduced premiums due to on-going shift to more cost-effective distribution and new disability product 5% Q 206 4% 2Q 206 6% 3Q 206 8% 8% 4Q 206 Q 207 Growth ambition maintained Portfolio premiums Comments premiums and growth P&C & Individual life Health & Group life Disability Insurance % premium growth within P&C & Individual life % premium growth within Health & Group life % premium growth in Pension related disability Nordic Q 206 2Q 206 3Q 206 4Q 206 Q Growth figures show development from 206 to 207 YTD.

17 Guaranteed pension - strong quarter but long term run off Guaranteed Profit Q Full year NOK million Fee and administration income Operational cost Operating profit Risk result life & pensions Net profit sharing and loan losses Profit before amortisation Profit per product line Q Full year NOK million Defined benefit (fee based) Paid-up policies, Norway Individual life and pension, Norway Guaranteed products, Sweden Profit before amortisation

18 BNOK Guaranteed pension - reserves in decline Guaranteed Reserves guaranteed products Q 206 Q2 206 Q3 206 Q4 206 Q 207 Comments As companies convert to DC schemes, the migration from DB to lower-margin paid up policies continues to reduce fee income in Guaranteed pensions Strong profit sharing and risk results in the quarter Defined Benefit NO Paid up policies NO Individual NO Guaranteed products SE Buffer capital Guaranteed reserves in % of total reserves NOK million Q 4Q Change Market value adjustment reserve ,6% 68,0% 67,5% 66,5% Excess value of bonds at amortised cost ,9% Additional statutory reserve ,8% Conditional bonuses Sweden Total Q4 205 Q 206 Q2 206 Q3 206 Q4 206 Q 207 ) The term Buffer capital in this table is not consistent with the definition of buffer capital made in the IFRS accounting. 8

19 Other Other Profit Q Full year NOK million Fee and administration income Operational cost Operating profit Financial items and risk result life Profit before amortisation Profit per product line Q Full year NOK million Corporate Banking BenCo Holding company costs and net financial results in company portfolios Profit before amortisation Excluding eliminations. For more information on eliminations, see Supplementary Information.

20 Economic capital (EC) measures the present value of the Group From Solvency II standard model to economic capital full year 206 NOKm Reconciliation reserve SII standard model incl. transitional rules Reconciliation reserve Storebrand Economic Capital Look through Contract boundaries No Look through to revenues from asset management Short: Only current reserves are accounted for. No new premiums Look through Contract boundaries Calculate net present value of income from asset management on life assets Long: New premiums on existing contracts Costs Only costs associated with maintaining existing contracts Costs Includes costs of receiving new premiums and maintain customers Risk margin 6% of all unhedgeable risk Risk margin 6% of all unhedgeable risk, reducing mass lapse stress from 40/70% to 20% SII standard model incl. transitional rules Storebrand Economic Capital Transitional measures Subordinated loans Look through Reconciliation reserve Shareholder surplus 20

21 Growth in the value of Storebrand EC driven by operating earnings - Increase of 3.7 bn in available economic capital NOKm 46,80 43,064 6,780 2,434 4,302 9,548 Assumption & model changes + More accurate modelling of fee on capital certificates (PKB) Improved modelling of Risk Margin "New" ESG that allows negative interest rates and increased volatility Increased lapse assumption on UL Movement reconciliation reserve mill NOK mill NOK Operating earnings + Increased AuM in nonguaranteed business + Decreased costs + Asset returns and longevity reserve strengthening Increased volumes of paid-up-policies Margin pressure -200 mill NOK Economic variances Norway: Increased interest rates and increased VA Sweden: Decreased interest rates and decreased VA Changed volatility 7,98 2,729 6,827 20,046 Storebrand Economic Capital 205 Subordinated loans Look through Reconciliation reserve Shareholder surplus Storebrand Economic Capital Movement in shareholder surplus and increased subordinated loans account for the rest of the movement in total available economic capital.

22 Storebrand Economic Capital - NOK 88.4 per share NOKm 43,064 6,780 2,434 46,80 7,98 2,729 Storebrand group Group Economic Capital of NOK 46.8bn (NOK 43. bn in 205) 4,302 9,548 6,827 20,046 Storebrand Group Economic Capital, excluding subordinated loans of NOK 39.6 bn or NOK 88.4 per share (NOK 37. bn or NOK 83. per share in 205) 22 Storebrand Economic Capital 205 Subordinated loans Look through Economic capital as of FY206. Storebrand Economic Capital 206 Reconciliation reserve Shareholder surplus Economic capital shareholders Value of new business of NOK 0.5bn

23 23 Appendix

24 The Solvency Calculation moving to a market consistent balance sheet and risk sensitive capital requirements IFRS balance sheet Solvency II balance sheet Solvency II Balance Sheet under /200 years shock SCR Equity Own Funds Own Funds after shock Moving to economic balance sheet in 200 years shock Assets Liabilities Market value of assets Market value of liabilities Assets after shock Liabilities after shock Solvency II ratio = Own Funds SCR = NOK 43bn NOK 27bn = 59% (Q 207) 24 Including transitional rules.

25 Calculating Market Value of Liabilities under Solvency II Solvency II balance sheet Market value of liabilities Both assets and liabilities are mark to market For assets this means using observable market prices Own Funds Own Funds 43 bn Risk Margin 7 bn Consist of both traditional IFRS tangible capital, subordinated debt and NPV of future profits Cost of non-hedgeable risk. 6% of cost of SCR coming from non-market risks For insurance liabilities there is a standardised methodology for estimating the value of insurance customers contracts Own funds is the difference between the market value of assets and liabilities Market value of assets Market value of liabilities Valuing liabilities using stochastic models in a risk neutral calculation Discretionary benefits 26 bn Value of liabilities 39 bn Expected future benefits for the customers, that reduces impact from stress to own funds Guaranteed liabilities discounted using market rates, including time value of options and guarantees (TVOG) 25

26 Solvency II Ratio Storebrand Group Q 207 Transitional measures Subordinated loans % Contribution to Own Funds from non-guaranteed business Contribution to Own Funds from guaranteed business CRD IV capital requirements from subsidiaries SCR from non-guaranteed business Shareholder surplus SCR from guaranteed business Own Funds SCR Contribution to Own Funds from products = NPV of future profit Risk margin. Including LKT for Guaranteed products SPP. 2 Shareholder surplus at market value. 3 Includes effect of transitionals on equity of NOK -63m.

27 Solvency Capital Requirements (SCR) SCR calculation Q 207 SCR dominated by financial market risk NOKbn Operational P&C & Health 4% 3% Concentration 0% Currency 4% 23% Interest Rate Down SCR before diversification 36.6 Life 25% Spread 26% Diversification -6.6 Risk absorbing capacity of tax -5. Counterparty 2% 67% Financial market Property 4% 23% Equity CRD IV from subsidiaries 2.5 SCR 27.3 SCR includes effect of transitionals on equity of NOK -63m. which is the risk with the lowest diversification factor. 50% 67% 0% 4% Operational Financial market Life Counterpaty 67% Health 76% P&C 27 E.g. a NOK 00m increase of Market SCR leads to a NOK 96m increase of Basic SCR, because 4% are absorbed by diversification benefit.

28 From IFRS Values to Solvency II Own Funds Moving from IFRS to Solvency II capital NOKbn IFRS shareholders equity 28.2 Intangible assets 5.0 Intangibles Goodwill DAC Full market value of assets 8.8 Excess value bonds at amortized cost Best estimate liabilities 5.4 Increased liabilities guaranteed products: 5.4 bn Decreased liabilities non-guaranteed products: 0.8 bn Subordinated loans 7.3 Tier capital: 2.6 bn Tier 2 capital: 4.8 bn Changes in deferred tax 2.4 Tax effect of changes in valuation Other.0 Minorities SII valuation of subsidiaries Transitional rules 2.9 Transitional rules equals Solvency II liabilities less Solvency I liabilities in Norwegian life and pension Forseeable dividends 0.9 Solvency II Own Funds

29 High quality capital base SCR and own funds Q 207 (NOK bn) Own funds in % of SCR (excluding CRD IV subsidiaries) Regulatory limit OF % of SCR OF % of total CRD IV capital requirements Tier 3 5% SCR 0.5% 0.3% Tier 2 50% SCR T2+T3 8% % SCR SII regulated entities Tier Restricted 20% T 0% 6% Tier Unrestricted 50% SCR All T 35% 83% SCR Own funds CRD IV capital Tier 3 Tier 2 Tier restricted Tier unrestricted 29

30 Solvency Capital allocation pr segment most of the capital allocated to the guaranteed segment ILLUSTRATIVE PRO FORMA ALLOCATION BASED ON 59% SOLVENCY RATIO PR Q 207 Savings Insurance Guaranteed Other Group Solvency II: Unit Linked reserves 47bn CRR/CRD IV: Retail mortgage lending 26bn Asset management 599bn Solvency II: Insurance portfolio premiums 4.bn Solvency II: Guaranteed reserves 26bn Solvency II: Company portfolios 25bn Reserves in BenCo 7bn CRR/CRD IV: Corporate banking,5bn Solvency II group calculation OWN FUNDS SCR OWN FUNDS SCR OWN FUNDS SCR OWN FUNDS SCR OWN FUNDS SCR Transitional technical provisions Products contribution to own funds Hard capital Solvency capital requirement The equity and debt in the Group sits within different legal units. This allocation of solvency capital is done on a pro-forma basis to reflect an approximation to the solvency II capital consumed in the different reporting segments after group diversification. The estimated allocation is based on the capital consumption under SII and CRD IV adjusted for positive capital contribution to own funds. Storebrand has a target of a solvency ratio above 50%. The pro forma allocation of capital is based on the actual solvency ratio pr. Q 207 of 59%. Hard capital is defined as paid in and earned equity, subordinated debt and other tangible capital elements. Products contribution to own funds in Guaranteed includes positive contribution from deferred capital contribution (DCC) in the Swedish business. 30

31 Strong Returns on IFRS Equity in Savings and Insurance ILLUSTRATIVE Savings Insurance Guaranteed Other Group IFRS earnings (NOKm) Allocated Equity 2 (NOKbn) Pro forma RoE adj(%) 26% 33% 5% 9% 9,5% The equity in the Group sits within different legal units. This allocation of equity is done on a pro-forma basis to reflect an approximation to the IFRS equity consumed in the different reporting segments after group diversification. The estimated allocation is based on the capital consumption under SII and CRD IV adjusted for positive capital contribution to own funds. The Insurance segment has been allocated an increased capital level which is more in line with long-term expected diversification effects. 3 Result before amortisation and after tax, Q 206 Q Based on solvency II position pr. Q 207 incl. transitional rules on 59%. IFRS equity allocated on a pro forma basis.

32 Storebrand Life Insurance asset allocation 60% 50% 40% 30% 20% 0% 0% Equities Bonds Money market Bonds at amortized cost Real estate % 26% 7% 49% 2% % % 29% 5% 49% % % % 28% 6% 50% % % % 27% 4% 52% % % % 25% 4% 53% % % Other 32 Note: The graph shows the asset allocation for all products with an interest rate guarantee in Storebrand Life Insurance Norwegian operations.

33 SPP asset allocation 00 % 90 % 80 % 70 % 60 % 50 % 40 % 30 % 20 % 0 % 0 % Alternative investments Bonds Equities % 88 % 5 % % 87 % 5 % % 87 % 5 % % 86 % 6 % % 86 % 6 % Note: The graph shows the asset allocation for all products with an interest rate guarantee in SPP. 33

34 Investor Relations contacts Lars Aa Løddesøl Kjetil R. Krøkje Group CFO Head of IR This document contains Alternative Performance Measures as defined by the European Securities and Market Authority (ESMA). An overview of APMs used in financial reporting is available on storebrand.com/ir.