Trends and opportunities within Nordic Life and Pension

Transcription

1 Trends and opportunities within Nordic Life and Pension 2 September 2010 UBS Nordic Financial Services Conference Storebrand Odd Arild Grefstad Group CFO

2 Important Notice This document may contain forward-looking statements. By their nature, forwardlooking statements involve risk and uncertainty because they relate to future events and circumstances that may be beyond the Storebrand Group s control. As a result, the Storebrand Group s actual future financial condition, performance and results may differ materially from the plans, goals and expectations set forth in these forward-looking statements. Important factors that may cause such a difference for the Storebrand Group include, but are not limited to: (i) the macroeconomic development, (ii) change in the competitive climate, (iii) change in the regulatory environment and other government actions and (iv) market related risks such as changes in equity markets, interest rates and exchange rates, and the performance of financial markets generally. The Storebrand Group assumes no responsibility to update any of the forward looking statements contained in this document or any other forward-looking statements it may make.

3 Storebrand Group - the leading Nordic Life and Pensions provider Life and Pensions Norway Premiums for own account NOK16 bn Customer reserves NOK 184 bn corporate customers ~30% market share Life and Pensions Sweden (SPP) Premiums for own account NOK 7 bn Customer reserves NOK 118 bn corporate customers ~10% market share Storebrand Bank NOK 35 bn gross lending Storebrand P&C policies Storebrand Asset Management NOK 384 bn AuM Figures as at Q Premiums for own account FY

4 Strong growth in life and pension premiums within the Nordic market Life premiums Nordic market 1 Bn NOK Annual growth rates 2 : Sweden: 10% Norway: 9% Denmark: 7% Finland: 1% Sweden Norway Finland Denmark Growth drivers: Demographics Regulatory changes Sound macro environment 1 Kilde: Finansnæringens Fellsorganisasjon (NO), Försäkringsförbundet (SE), Pensionsmyndigheten (SE), Finansbranchens Centralförbund (FI), Finanstilsynet (DK), Norges Bank (NO) 2 CAGR

5 Growing elderly population highlights the need for pension savings Norway Demographic trends Increased life expectancy Number of pensioners will double within years Fewer workers pr pensioner Public pensions will count for up to 15% of GDP in the Nordic countries within 2050 Source: Statistics Norway 5

6 Regulatory changes an important growth driver for life premiums Bn NOK Life premiums Sweden & Norway Introduction of PPM (Sweden) Sweden Norway Introduction Mandatory occupational pension (Norway) Regulatory changes creates step changes in pension premiums European trends includes: Higher retirement age Decreased benefits from public pension Increased focus on occupational pension Important regulatory changes ahead: Solvency II Pension reform Norway Source: Finansnæringens Fellsorganisasjon (NO), Försäkringsförbundet (SE), Pensionsmyndigheten (SE), Finansbranchens Centralförbund (FI), Finanstilsynet (DK), Norges Bank (NO) 6

7 Spain ¹ Austria Sweden France Switzerland Germany Belgium Ireland Italy Netherlands Denmark Portugal ¹ UK ¹ Finland Norway UK Finland France Ireland Denmark Portugal Sweden Switzerland Belgium Italy Netherlands Germany Austria Spain Norway Greece 2,0% 1,0% 5,8% 5,3% 17,9% 14,7% 14,3% 13,7% 13,0% 12,3% 12,2% 11,3% 10,5% 10,0% 9,0% 8,9% 7,5% 7,2% 6,8% 6,8% 6,3% 6,2% 5,4% 5,3% 5,3% 4,2% 3,3% 2,7% 2,7% 2,6% 10,0% Sweden Switzerland France Denmark Norway Germany Austria UK Finland Netherlands Belgium Italy Portugal Ireland Spain Greece Spain Ireland Greece Portugal France Sweden Finland Italy UK Belgium Germany Austria Denmark Switzerland Norway (0,4)% (0,5)% (4,5)% 13,7% 12,0% 10,4% 9,9% 9,7% 8,7% 8,5% 8,3% 8,1% 7,3% 4,9% 4,4% 4,2% 3,7% 2,6% 1,7% 1,4% 1,3% 1,3% 1,2% 1,0% 0,9% 0,8% 0,8% 0,8% 0,7% 0,1% 19,8% Sound macro environment drive life premiums GDP growth among highest in Europe (real GDP growth 2010E) Relatively low unemployment (2010E) Household savings (2010E) (Net savings as % of disposable household income) Penetration broadly in line with Western European countries (life premiums as % of GDP 2009) Source: Economist Intelligence Unit (July 2010), Swiss Re Sigma 2009, OECD Economic Outlook, Issue 2, 2009 ¹ Gross savings %, including consumption of fixed capital 7

8 Largest growth within Unit Linked business Bn NOK Premiums - Occupational Pension Norway and Sweden Norway - UL Norway - traditional Sweden - UL Sweden - traditional Source: Finansnæringens Fellsorganisasjon (NO), Försäkringsförbundet (SE), Norges Bank (NO) 8

9 Characteristics with the pension products Traditional profit sharing Guarantees Capital intensive Earnings sensitivity to capital market development Centralised B2B market Fee based guaranteed business Guarantees Capital intensive Earnings from administration, risk and fee for guarantee Centralised B2B market Fee based Unit Linked and risk products No guarantees Not capital intensive Earnings from administration and risk Individualised market 9

10 Storebrand s Life and Pensions operations - 3 main product groups Traditional profit sharing Fee based guaranteed business Fee based Unit Linked and risk products Individual and paid-up policies (NOK 81bn) Defined contribution (SEK 50bn) Defined benefit (SEK 40bn) Defined benefit (NOK 84bn) BenCo (SEK 18bn) Defined contribution and Unit Linked (NOK 18bn) Risk products (NOK 2bn) Unit Linked (SEK 32bn) Risk products (SEK 2bn) Share of insurance reserves: 52% 32% 16% Data Q

11 Storebrand from being a provider of traditional products in Traditional profit sharing Fee based guaranteed business Fee based Unit Linked and risk products Insurance reserve Premiums VIF* 84% 4% 12% 72% 3% 26% 78% 22% Data: *Value in Force Premiums and reserves includes SPP figures from before acquisition in 2007 for comparison. 11

12 ...to being a provider of all products within occupational pension in 2008, but... Traditional profit sharing Fee based guaranteed business Fee based Unit Linked and risk products Insurance reserve 55% 33% 12% Premiums VIF* 24% 46% 31% 9% 52% 39% Data: *Value in Force 12

13 ...seeing growth and value mainly coming within fee based products from 2009 Traditional profit sharing Fee based guaranteed business Fee based Unit Linked and risk products Insurance reserve Premiums VIF* 52% 32% 16% 22% 39% 39% 12% 43% 45% VNB** -15% 38% 77% Data: *Value in Force **Value New Business 13

14 Different ways of creating values depending on product characteristics Traditional profit sharing Fee based guaranteed business Fee based Unit Linked and risk products Efficient operations Strong distribution Risk management Strong product offering Regulatory adaption 14

15 Continues focus on operational improvements in all business areas Efficient operations MNOK 550 MNOK 2006 Lean project Process methodology reduces lead time and improves efficiency 69 projects completed, 6 ongoing More than 450 man labour year released Still ongoing 2008 Synergy realisation Yearly synergies in excess of 400 mill NOK announced in SPP deal Yearly synergies in excess of 535 mill NOK achieved Cross border synergies Outsourcing to Storebrand Baltic Delta One Comprehensive programme introduced to further strengthen results 1 Comprises both cost and income measures Ongoing reporting Compensation model tied to programme performance 1. Result improvement, measured against 2009 levels, for the Norwegian and Swedish life business only includes the administration result (both customer and owner). Result improvements from profit sharing, price on interest rate guarantee, risk and return on shareholder s equity are measured separately. 15

16 Efficient operations Delta One program ahead of plan Achieved improvement 1H Target improvements in MNOK MNOK 270 MNOK MSEK Realised Target Other Bank 1. Result improvement, measured against 2009 levels, for the Norwegian and Swedish life business only includes the administration result (both customer and owner). Result improvements from profit sharing, price on interest rate guarantee, risk and return on shareholder s equity are measured separately Life and Pensions Norway Life and Pensions Sweden Asset Management

17 Bottom line effect from efficiency and cost programs Efficient operations Administration result Life and Pension Norway Administration result Life and Pension Sweden Q H Tot adm res Adm res to owner 17

18 bn NOK Efficiency and scale advantages also within Asset Management Efficient operations Storand Asset Management AuM Storand Asset Management Result development NOK mill Q Q Q Q Q Q Q Q Q Q Mutual funds External discretionary Real estate (group internal) Group internal Rolling 12 months income* Rolling 12 months costs Rolling 12 months result before tax *) Incl. net financial income and result before tax from Storebrand Eiendom and SPP Fonder 18

19 Satisfied customers and aknowledged product offering Strong product offering Highest customer satisfaction * Most satisfied customers 6 consecutive years within Norwegian Life and Pension Cross border synergies within New products 63 Storebrand Vital Nordea Appointed best unit linked provider in the Swedish market second year in a row by Söderberg & Partners' Selected as Best company on customer follow-up through direct channels * Norwegian Customer Barometer annual survey 2009 (>20 employees) 19

20 Strong distribution Reorganising the distribution channel Sales through worksite marketing 1 (YTD-week 31) Occupational pension based on Unit linked products brings Storebrand closer to the employees % Persistent and systematic work based on trust employees targeted in Storebrands worksite marketing program Sales channels in SPP (share of sales) 22% 14% 64% 38% 18% 44% Improved sales processes and successful implementation of new distribution strategy in SPP Increased brand recognition and market share in Sweden 2008 Brokers 2009 Tick-the-box Own sales 1 Number of unique employees who has bought one or more products from Storebrand in a given year 20

21 Exciting possibilities within direct channel distribution Strong distribution Insurance all products available on the web Increase in e-commerce, also in financial services Sole provider of online sale and service solutions for all insurance and savings products Kritisk sykdom Dødsfallskapital Savings all products available on the web New solutions for mobile units/smart phones 80% of P&C insurance sale through direct channels Storebrand fond Delphi fond 21

22 Corporate DB Individual Paid-up policies Risk management Tailored risk management 1H % % 7 3 % % 15 % 17 % 42 % 4 2 %% 42 % 17 % 17 % 15 % 34 % 35 % 36 % 28 % 5 % 18 % 26 % 15 % 9 % 45 % 5 % Dynamic risk management in volatile markets Asset allocation based on risk capacity in customer portfolios Substantial allocation to bonds at amortised cost yielding above interest rate guarantee 7 % 12 % 14 % 17 % 19 % 22 % 19 % 11 % 7 % Paid-up 1 Paid-up 2 Paid-up 3 42 % 17 % 25 % Other Alpha Real estate 12 % 28 % 13 % Individual 25 % Loans at amortised costs Money market Bonds Equities 42 % 4 % 2 % 3 2 % 16 % 16 % 16 % 25 % 26 % 8 % 12 % 20 % 14 % 27 % 37 % 19 % 13 % 9 % High Standard Low 22

23 Risk management How to deal with low interest rates 6,0 5,0 4,0 3,0 2,0 1,0 Norwegian interest rates Norway Short term positive result effects from declining interest rates Increasing money market rates Important with steady return components in the portfolios Customer buffers NIBOR 3M NOK 5y SWAP NOK 10y SWAP Swedish interest rates Sweden 4,0 3,0 2,0 1,0 Downside protected with duration matched assets and liabilities Increasing money market rates Customer buffers STIB 3M SEK 5y SWAP SEK 10y SWAP Source: Bloomberg

24 Solvency II Storebrand well prepared Regulatory adaption New regulatory requirements apply to all European insurance companies from 2013 Assets and insurance liabilities to be valued at market value Capital requirement to reflect actual economic risk Main adaptation themes: Macro model for discounting pension liabilities (Europe) Infrastructure/ alternative investments (Europe) Treatment of customer buffers and Value In Force Annual interest guarantee and terms for transfer rights (Norway) Focused efforts towards successful implementation Group wide project Developing internal models Good dialogue with authorities 24

25 Summary Sound Nordic macro environment with strong growth in pension premiums Low, but manageable, interest rates Strong shift towards capital light Unit Linked products with high quality of earnings Strong operations with focus on cost leadership, customer satisfaction and risk management 25

26 Storebrand shall be the leading and most respected institution in the Nordic market for long-term savings and insurance.