Interim Report. 3rd Quarter 2005

Transcription

1 Interim Report 3rd Quarter 2005

2 Interim results for the Storebrand Group - third quarter 2005 MAIN FEATURES Storebrand reports group profit of NOK 318 million for Q3 as compared to NOK 265 million for the same quarter in Sound investment return gives an acceptable result for the life company's customers and owner and strengthens risk capital further. Storebrand opened a branch in Sweden on 5 September to offer pension products in the Swedish market. Q3 earnings per share of NOK 1.18 (NOK 0.86). Group profit by quarter: Group profit: NOK million Q2 2004* Q Full year NOK million Life insurance Asset management Storebrand Bank Other activities Group profit Q Q4. Q1 400 Q kv Tony Stone 0 *) Q includes a total profit contribution from If of NOK 1,379 million. Q Q The comparable figures for 2004 provided in the following section exclude the profit contribution from If. The group result, which represents the owner s share of operating profit, showed a profit of NOK 318 million in Q (NOK 265 million), bringing the group result for the first nine months to NOK 1,024 million (NOK 603 million). Operating profit for Q was NOK 1,128 million (NOK 633 million) and NOK 3,095 million for the first nine months (NOK 1,634 million). Figures for the corresponding period in 2004 are shown in brackets. Storebrand Life Insurance reported premium income (excluding transfers) of NOK 13.6 billion for the first nine months of This represents a year-on-year increase of 31%. As previously advised, the company has taken steps to limit sales of individual savings contracts without a fixed contract period, and the effect of this was seen in Q3 as expected. Storebrand Life Insurance generated a booked investment return of 4.8% for the first nine months of 2005, while the value-adjusted return was 5.9%. The value-adjusted return for the period including unrealised gains on bonds held to maturity was 5.7%. Storebrand set up some 120 new defined contribution pension schemes for corporate customers in Q3 2005, bringing the total for the first nine months to approximately 320. Premium income showed a year-on-year increase of 56% for the year to date. Storebrand Helseforsikring, which provides health insurance products for the corporate and retail markets, reported a 26% year-on-year increase in premium income for the first nine months of Storebrand Investments had assets under management of NOK 177 billion at the close of Q3. This represents increases of NOK 12 billion since the start of the year and NOK 5 billion in Q3. Storebrand Bank reported a stable performance. The bank generated a pre-tax profit of NOK 42 million in Q3. This brings pre-tax profit for the first nine months of 2005 to NOK 182 million as compared to NOK 66 million for the same period in

3 LIFE INSURANCE Profit and loss - Storebrand Life Insurance and other life insurance activities: Q Full year NOK million Interest result Risk result Administration result Change in security and premium reserves Operating profit To additional statutory reserves -500 Profit after transfer to additional statutory reserves Profit allocated to policyholders Profit to owner Storebrand Livsforsikring AS Profit to owner Storebrand Livsforsikring Group Other life insurance activities IFRS effects Total for life insurance activities Storebrand Livsforsikring (Storebrand Life Insurance) Storebrand Livsforsikring AS reported an operating profit of NOK 1,104 million for Q3, bringing operating profit for the first nine months to NOK 2,945 million. Q3 operating profit for the Storebrand Life Insurance group was NOK 1,104 million (NOK 606 million). Operating profit for the first nine months of 2005 was NOK 2,948 million (NOK 1,692 million). Both the risk result and the administration result improved in Q3. The risk result for the first nine months of 2005 was NOK 197 million (NOK 160 million) of which Q3 accounted for NOK 98 million (NOK 80 million). The Q3 administration result was a profit of NOK 31 million (profit of NOK 7 million), but showed a loss for the first nine months of NOK 100 million (loss of NOK 64 million). Costs were equivalent to 0.90% of average policyholders' funds, in line with 31 December The interest result for the first nine months of 2005 was NOK 2,854 million (NOK 1,649 million) of which Q3 accounted for NOK 977 million (NOK 573 million). Net realised gains for the first nine months totalled NOK 2,344 million, of which NOK 1,032 million was realised in Q3. Unrealised gains increased by NOK 1,250 million in Q3, and totalled NOK 4,333 million at 30 September Pre-tax profit for the owner was NOK 289 million (NOK 232 million) for Q3 and NOK 860 million (NOK 644 million) for the first nine months. Profit for the owner includes earnings from products not subject to profit sharing with policyholders of NOK 51 million in Q3 (NOK 31 million) and NOK 93 million for the first nine months (NOK 78 million). Storebrand Life Insurance reported premium income (excluding transfers) of NOK 13.6 billion for the first nine months of This represents a year-on-year increase of 31%. Premium income for Q3 was 19% lower than in the same period last year. Low interest rates have helped to encourage very strong sales of savings-related products to the retail market for some considerable time. As previously advised, the company has taken steps to limit sales of individual savings contracts without a fixed contract period, and this explains the fall in premium income in Q3. If these products are excluded from the figures, premium income showed a year-on-year increase of 7% in Q3 and was in line with 2004 for the first nine months as a whole. Group pension business produced Q3 premium income in line with last year, but somewhat lower premium income for the first nine months. This reflects slower wage inflation and the shift towards defined contribution pensions. Personal pensions and annuity products showed growth in premium income, while premium income for group life business was lower than in 2004 for both Q3 and the year to date. Transfers of pension business produced a net inflow to Storebrand of NOK 690 million for the first nine months, of which Q3 accounted for NOK 48 million. Storebrand Life Insurance s booked investment return for the first nine months of 2005 was 4.8% (4.2%), of which Q3 accounted for 1.7%. The value-adjusted return for the year to date was 5.9% (4.6%), of which Q3 accounted for 2.6%. The value-adjusted return including unrealised gains on bonds held to maturity was 5.7% (4.9%) after the first nine months. Development in return on capital: 12% 10% 8% 6% 4% 2% 0% 8.7% 3.1% 3.0% 3.6% 1.5% 1.8% 2.7% 2.6% 1.9% 6.4% 7.2% 7.6% Q annualised Booked Value adjusted incl. bonds held to maturity Value adjusted excl. bonds held to maturity Total assets increased by NOK 13.8 billion in the first nine months to stand at NOK 148 billion at the end of Q3. Storebrand Life Insurance increased its overall exposure to equities, including derivatives, by 3 percentage points in Q3 to 24%. Net investment in bonds held to maturity has increased by NOK 2.1 billion since the start of the year, but fell by NOK 1 billion in Q3. Bonds and commercial paper held as current assets increased by NOK 1.6 billion in Q3, bringing the increase for the first nine months to NOK 6.1 billion. There were no significant purchases or sales of real estate in the first nine months. Unrealised gains on bonds held to maturity fell by NOK 0.4 billion in Q3, and totalled NOK 4.2 billion at the end of the quarter. Unrealised gains on this portfolio are not shown in the accounts, but ensure a relatively high and stable level of future interest income even if interest rates remain at their current low level. 7.2% 8.8% 11.2% 6.5% 7.9% 7.7% 3

4 Risk capital in NOK and % of customers funds excl. additional statutory reserves: 10% 12.7 bn 11.0 bn 8.9 bn 8% 5.8 bn 6% 4.7 bn for the first nine months to around 320. More than 1,350 companies have now set up defined contribution pension schemes with Storebrand Fondsforsikring since it launched this product in At the close of Q3, 72% of customers assets managed by Storebrand Fondsforsikring were invested in equity funds, as compared to 66% at the start of the year and 68% at the close of Q2. 4% 2% Assets under management - defined contribution pension products and unit linked: NOK billion 0% -2% Q Additional statutory reserves, up to 1 year s interest guarantee Adjusted core capital margin Market value adjustment reserve Profit accrued At the close of 2004, the company had risk capital of NOK 11.0 billion. Risk capital was NOK 12.7 billion at the end of Q3 following an increase of 2.1 billion in the quarter. The company satisfies all capital adequacy requirements by a sound margin. Q3 showed a decline in capital ratio from 12.5% to 11.8%. The company's solvency margin was 166.9% at the end of Q3, in line with the previous quarter. The Norwegian Parliament has approved the introduction of mandatory occupational pensions from The proposed legislation will make it compulsory for all Norwegian undertakings to operate a pension scheme for their employees to provide pension benefits in addition to the existing state pension. Storebrand expects the introduction of mandatory pension schemes to create considerable additional activity, and is heavily involved in positioning itself as the preferred supplier for this market. This in turn means that additional costs must be expected in future quarters as a result of this commitment. Storebrand s branch office in Sweden formally opened for business on 5 September. The branch offers pension insurance for the Swedish occupational pension market. Insurance brokers are the sales channels for Storebrand s pension products in this market. The Swedish market has responded positively to the opening, and the branch has already written its first policies. Storebrand Fondsforsikring Storebrand Fondsforsikring reported a loss of NOK 2 million for the first nine months (loss of NOK 18 million), with a profit of NOK 2 million for Q3 (loss of NOK 4 million). Unit linked products showed an increase in premiums written from NOK 185 million in the first nine months of 2004 to NOK 191 million this year, while premiums for defined contribution pension products increased from NOK 188 million to NOK 294 million. Storebrand set up some 120 new defined contribution pension schemes in Q3, bringing the total Q Q Q Q Q Q Q Q Storebrand Helse Storebrand Helseforsikring generated an operating profit of NOK 8 million for the first nine months (NOK 5 million), with a profit of NOK 5 million in Q3 (NOK 5 million). Storebrand has a 50% interest in this company, which provides health insurance products for the corporate and retail markets. Premium income for the first nine months of 2005 was 26% higher than for the same period in 2004 at NOK 101 million. Sales of new policies to the Norwegian and Swedish markets in the first nine months represented annual premiums of NOK 42 million, of which Q3 accounted for NOK 13 million. ASSET MANAGEMENT ACTIVITIES Storebrand Investments reported a pre-tax loss of NOK 2 million for Q3 (profit of NOK 7 million). Profit and loss - Storebrand Investments: Q Full year NOK million Total revenue Total costs Net financial income/ other income Pre-tax profit Total revenue (management fees) amounted to NOK 42 million in Q3 (NOK 80 million). The decline in revenue relative to 2004 reflects lower performance-based fee income and the loss of revenue from If, which transferred its assets to 4

5 internal management in Q Operating costs totalled NOK 49 million in Q3 (NOK 76 million). The reduction resulted mainly from lower performance-related personnel costs. Storebrand Investments had assets under management of NOK 177 billion at the close of Q3, representing an increase of NOK 12 billion from the start of the year. Total funds under management were made up of NOK 152 billion of internal funds (including mutual funds) and NOK 25 billion of assets/funds managed for external clients. Total assets under management: NOK billion provisions and gains/losses on other financial items. After net write-downs of loans and other financial assets totalling NOK 3 million, pre-tax profit for the quarter was NOK 42 million (NOK 32 million). The bank's pre-tax profit for the first nine months was NOK 182 million (NOK 66 million). Net interest income amounted to NOK 106 million in Q3 (NOK 106 million). This represents an interest margin calculated on average total assets of 1.62% for the first nine months (1.63%). A general increase in competition has kept the bank's interest margin under pressure so far this year. This pressure is expected to increase over the remainder of the year since the bank intends to maintain competitive pricing on its products and further increase its total assets. Net interest income as a percentage of total assets: 2.00% % 1.00% Q % Group internal External discretionary Real Estate (group internal) Securities funds 0.00% Q1 Q2 Q3 Q4 Q1 Q2 Q Net new asset management business (discretionary external customers and mutual funds) represented an outflow of NOK 70 million in Q3 (inflow of NOK 600 million) and an outflow of NOK 1,300 million for first nine months (inflow of NOK 1,700 million). The numbers for net new business have been affected by the decision of one large customer to transfer to internal management. Storebrand Investments produced a better return than the comparable benchmark indices (before deducting management fees) on 54% of the securities funds it manages. Five of the ten portfolios managed for Storebrand Life Insurance outperformed their benchmark indices. Storebrand Investments has established four hedge funds in Luxembourg aimed at the institutional market. BANKING ACTIVITIES Storebrand Bank Group reported ordinary operating profit for Q3 of NOK 45 million (NOK 33 million) before loan loss Profit and loss - Storebrand Bank Group: Q Full year NOK million Net interest income Other income Total income Operating costs Profit before loan losses Loan losses Gain/losses on securities Pre-tax profit Operating expenses amounted to NOK 80 million in Q3 (NOK 155 million). Costs have fallen sharply over recent years, but the bank intends to further reduce costs in relation to its total assets and revenue base. The bank sold the Storebrand group s joint distribution unit for the retail market to Storebrand Livsforsikring AS with effect from 1 October This is a major factor in the reduction in operating costs from last year, but has also caused a reduction in non-interest income. Net new loan loss write-downs totalled NOK 3 million in Q3. This is due to a number of changes in the volume and value of loans with identified losses. Gross non-performing and loss-exposed loans totalled NOK 850 million at 30 September 2005, a drop of NOK 61 million from the previous quarter. The bank s loan loss provisions totalled NOK 505 million at the close of Q3, of which grouped provisions accounted for NOK 94 million. This represents a level of provisioning relative to non-performing and loss-exposed loans of 59%, virtually unchanged from Q2. The bank's assets totalled NOK 29 billion at the close of Q3, and gross lending increased by NOK 1,077 million in the quarter. The increase is made up of NOK 529 million in lending to retail customers and NOK 548 million of corporate lending. The deposit-to-loan ratio fell slightly to 45% at 30 September Storebrand Bank's net primary capital amounted to NOK 2.1 billion at 30 September The bank's capital ratio was 11.9% at the end of Q3, with a core capital ratio of 9.6%. 5

6 OTHER ACTIVITIES Other activities principally comprise Storebrand ASA (the holding company), Fair Forsikring and the run-off activities of Storebrand Skadeforsikring. Profit and loss - Other activities: Q Full year NOK million Storebrand ASA*) Fair Forsikring Storebrand Skadeforsikring Other companies/ eliminations**) Pre-tax profit *) Including dividends/group contributions from subsidiaries. **) Including elimination of dividends/group contributions from subsidiaries and gains from If. Fair Forsikring and run-off activities (non-life insurance) Storebrand s pre-tax share in Fair s Q3 results was NOK 18 million (NOK 8 million). The run-off activities of Storebrand Skadeforsikring and Oslo Re produced an operating loss of NOK 0.1 million in Q3 (loss of NOK 0.4 million). In addition to the operating result, run-off has recognised transfers of NOK 15 million (NOK 37 million) to profit from statutory security reserves for the first nine months, of which Q3 accounted for NOK 8 million. Storebrand ASA Net financial items represented income of NOK 11 million in Q3 (NOK 7 million). Q3 operating costs were NOK 42 million (NOK 17 million). The increase in operating costs was due to work carried out on a strategic project during the quarter. Profit and loss - Storebrand ASA: Q Full year NOK million Group contributions and dividends Interest income Interest expense Gains/losses on securities Other financial items Net financial items Operating costs Pre-tax profit As part of the refinancing of the Storebrand ASA exchangeable bond, the holding company issued two new bond loans in Q3 with maturities of 4 and 6 years respectively. The total amount borrowed was NOK 1,580 million, of which NOK 830 million was a four year issue with an interest margin of 0.2% and NOK 750 million was a six year issue with an interest margin of 0.3%. In connection with the two new issues, the company bought back NOK 79 million of floating rate notes issued earlier. At Q3 Storebrand ASA had NOK 2.0 billion in long-term debt and held liquid assets of NOK 2.9 billion, of which NOK 2.8 billion was invested in shortterm interest-bearing securities with good credit ratings. In line with the program of work to adjust the group s capital structure, Storebrand bought 878,000 of its own shares in Q3 at an average price of NOK These purchases were booked as a reduction in equity. Storebrand ASA held 7.4% of the company s own shares at 30 September The Board of Directors holds a mandate from the Annual General Meeting of Storebrand to buy back up to 10% of the company's share capital over the period to the 2006 Annual General Meeting. Storebrand ASA held an extraordinary general meeting on 14 September The meeting resolved to reduce the company's share capital from NOK 1,390,909,410 to NOK 1,292,631,225 by cancelling own shares held by the company. This reduction in capital involves the cancellation of 19,655,637 shares, equivalent to around 7.1% of total share capital, and will be carried out in Q4. IFRS regnskapsprinsipper Storebrand ASA s group accounts are presented in accordance with the International Financial Reporting Standards (IFRS) approved by the European Union. The effects of the transition to IFRS are described in the notes to the interim accounts below and in a separate note in the Storebrand 2004 Annual Report (page 83). The effects of the implementation of IFRS have been calculated on the basis of the IFRS standards expected to apply at 31 December 2005 and the current interpretation of these standards. Restating the opening balance sheet at 1 January 2004 in accordance with IFRS has reduced the group s reported equity by NOK 323 million. The treatment of pensions for employees is one of the main reasons for this change. Restating the balance sheet at 31 December 2004 in accordance with IFRS increases the group s reported equity by NOK 1,315 million, and a major part of this increase relates to the reversal of the provision for dividend. Profit after tax for 2004 restated in accordance with IFRS is NOK 12 million higher. The transition to the international accounting standard for financial instruments (IAS 39) has had only a limited net effect on the group s equity. Oslo, 1 November 2005 The Board of Directors of Storebrand ASA 6

7 Storebrand Group PROFIT AND LOSS ACCOUNT Q FULL YEAR NOK MILLION Net premium income Net interest income - banking Net interest income - other activities Net commission income Net income from financial assets at fair value: - shares and other equity participations bonds and other fixed-income securities financial derivatives/other financial instruments Net income from bonds in hold to maturity portfolio Change in market value of investment assets Real estate rental income and gains from sales of real estate Other financial income Other income Total income Share of profit in associated companies and jointly controlled businesses in accordance with the equity method of accounting Insurance claims for own account Change in insurance reserves Interest expense Other financial expense Loan losses Operating costs Other costs Total costs To/from market value adjustment reserve Operating profit/loss To/from additional statutory reserves - life insurance Funds calculated/allocated to policyholders - life insurance Group profit/loss Changes in security reserves etc. - non life insurance Profit/loss before extraordinary items Tax payable Minority interests' share of profit Profit/loss for the period Earnings per ordinary share Storebrand has not issued any options or other financial instruments that could cause dilution of its shares. 7

8 Storebrand Group BALANCE SHEET NOK MILLION Assets Deferred tax assets Pension fund assets Tangible fixed assets Intangible assets Other assets Investments recognised on the equity method Bonds held to maturity Lending Reinsurers' share of technical reserves Real estate at actual value Other current assets Other current receivables Financial assets at actual value: - shares and other equity participations bonds and other fixed-income securities other financial instruments Bank deposits Total assets Equity and liabilities Paid in capital Retained earnings Value adjustment fund Minority interests Total equity Subordinated loan capital Market value adjustment reserve Insurance reserves - life insurance Premium and claims reserves - non life insurance Security reserves etc. - non life insurance Pension liabilities Liabilities to financial institutions Deposits from and due to customers Securities issued Liabilities in respect of reinsurance Other financial debt Provisions Other current liabilities Total equity and liabilities

9 Storebrand Group RECONCILIATION OF CHANGES IN EQUITY RETAINED EARNINGS PAID-IN VALUE ADJUST- CURRENCY OTHER MINORITY EQUITY EQUITY NOK MILLION SHARE CAPITAL MENT FUND DIFFERENCES EQUITY INTERESTS Equity at (opening balance) Earnings items applied directly to equity Profit for the period Equity transactions with owners: Own shares Dividend paid Currency differences/other Equity at (closing balance) CASH FLOW ANALYSIS NOK MILLION Cash flow from operational activities Net receipts/payments - insurance Net receipts/payments - interest, commissions and fees Net receipts/payments - lending Net receipts/payments - deposits from others (banking activities) Net receipts/payments - trading portfolio securities Net receipts/payments - other operational activities Net cash flow from operational activities Cash flow from investment activities Net receipts/payments - bonds held to maturity Net receipts from sales of subsidiaries Net payments for purchase/capitalisation of subsidiaries -11 Net receipts/payments on sale/purchase of real estate and operational assets Net cash flow from investment activities Cash flow from financing activities Net receipts/payments - borrowing Net receipts/payments - share capital Payments - group contribution/dividend Net cash flow from financing activities Net cash flow for the period Net movement in cash and cash equivalent assets Cash and cash equivalent assets at start of the period Cash and cash equivalent assets at the end of the period

10 Notes to the interim accounts NOTE 1 INTERIM ACCOUNTS PRESENTED IN ACCORDANCE WITH EU APPROVED IFRS STANDARDS Storebrand s consolidated accounts for the first nine months of 2005 are presented in accordance with the International Financial Reporting Standards (IFRS) approved by the European Union. The quarterly accounts have been prepared on the basis of the IFRS standards expected to apply at 31 December 2005 and the current interpretation of these standards. The quarterly accounts are in accordance with the requirements of IAS 34 for interim accounts. In preparing the quarterly accounts, Storebrand has used assumptions and estimates that affect reported figures related to assets, liabilities, revenues and costs, as well as the information on contingent liabilities. Future events may cause the estimates to change. NOTE 2 CHANGES TO COMPARABLE HISTORIC FIGURES AND CHANGES TO ACCOUNTING PRINCIPLES Comparable figures for 2004 have been restated in accordance with IFRS with the exception of items accounted for in accordance with IAS 39 on accounting for financial instruments. IAS 39 has been applied for the period 1 January September This is in accordance with the IFRS transition rules. The Storebrand ASA 2004 Annual Report provides a separate note on the effects of the transition to IFRS (page 83 of the Annual Report). This note provides quantitative information on the changes to the group's equity capital at 1 January 2004 and 31 December 2004 and restated earnings for The note also provides a draft opening balance sheet at 1 January 2005 and information on the effect of the transition to IAS 39. The transition to IFRS has caused changes from the accounting standards and principles on which the official annual accounts for 2004 were based. The following sections provide information on the most significant changes caused by IFRS Insurance contracts IFRS 4 deals with the accounting treatment of insurance contracts. Storebrand s insurance products are subject to this standard, and this means that the Storebrand group can, to a large extent, continue to apply its previous accounting principles for insurance contracts. IFRS 4 requires that reinsurance of the group s insurance liabilities must be shown separately as an asset, whereas reinsurance was previously incorporated as a reduction to total (gross) insurance reserves. In Storebrand s restated consolidated accounts, the pre-tax effects of IFRS in respect of Storebrand Livsforsikring AS have been shared between the group s equity and the accounting item policyholders funds in the ratio 35:65. Financial instruments IAS 39, which deals with the accounting treatment of financial instruments, is of particular importance for Storebrand. The Storebrand group holds significant investments in financial instruments, and these have previously been recognised mainly at actual value or amortised cost. This will largely continue to be the case under IAS 39. Some effects relating to the group's banking activities are described below: Loan loss provisions Where there is objective evidence that the value of an individual loan has fallen, IAS 39 requires that the loan is valued at the discounted value of future cash flows. This discounting effect has not previously been applied. The reduction in the discounting effect on a loan as the cash flow moves closer in time will be recognised as interest income, and will have a positive effect on future net interest income. The bank will not be permitted to maintain general loan loss provisions in the way they have been calculated up to and including However, groups of loans can be valued together for the calculation of loan loss provisions if certain criteria are satisfied. Any fall in the value of such a group of loans must also be based on objective evidence. Structured products synthetic financial instruments The bank s treatment of equity linked bonds up to and including 2004 has been to recognise net commissions and fees earned at the time of issue. IAS 39 requires that bonds issued should be recognised at amortised cost using the effective yield method, and this means that all cash flows related to the loan are amortised over its life. Relative to the previous accounting treatment, the implementation of this change reduces the income recognised at the time such bonds are issued, but also causes a reduction in interest expense in future periods. Hedge accounting and use of actual values for derivatives and investment assets by the banking activities The bank makes extensive use of interest rate derivatives to hedge most of its net interest rate exposure. Unrealised gains and losses on interest rate derivatives were not shown in the balance sheet up to and including IAS 39 requires that derivatives are recognised at actual value, and hedge accounting can only be applied if strict conditions on the effectiveness of hedging transactions and their documentation are satisfied. The bank has applied hedge accounting since 1 January

11 Notes to the interim accounts IAS 39 has also caused some changes to the bank s approach to valuing certain investments in shares, which together with other items must now be valued at actual value. Pensions (for the group s employees) The effect of adopting IAS 19 on pension benefits relates mainly to the accounting treatment of deviations from estimates at 1 January 2004 and the discount rate used. IAS 19 requires that the discount rate used to calculate pension liabilities is equivalent to the risk-free return over the average remaining period. The discount rates applied in accordance with IFRS and the rate used in the official annual accounts are as follows: IFRS ACTUAL 1 January % 7.0 % 31 December % 6.5 % Charging the deviation from estimates directly to equity and the change in the discount rate have caused an increase in pension liabilities. Real estate The Storebrand group accounts have previously applied actual value to most real estate assets. The implementation of IFRS requires that the group s forestry holdings are also valued at actual value, giving an overall increase in the value of the group s real estate. IFRS requires that properties occupied by the group for its own use must be depreciated. However, real estate is carried in the balance sheet at restated actual value, so the effect on equity will only be the difference between depreciation and restated actual value. Goodwill The transition to IFRS means that goodwill is no longer depreciated in the group accounts. In its place, the standard has introduced an annual write-down test to ensure that any fall in value is charged to the accounts. The group included written-back depreciation of NOK 30 million in its pre-tax profit for NOTE 3: RECONCILIATION OF EQUITY AND EARNINGS BETWEEN NGAAP AND IFRS *) NOK MILLION Equity at NGAAP Pensions -621 Bonus scheme for senior employees -5 Real estate 11 Deferred tax assets 166 Biological assets 24 Goodwill 23 Guarantee scheme -3 Equity at IFRS NOK MILLION Earnings to NGAAP Pensions -7 Bonus scheme for senior employees 1 Depreciation of properties for own use -5 Goodwill 23 Gain on sale of shares 124 Earnings to IFRS *) NGAAP means Norwegian generally accepted accounting principles excluding IFRS. NOTE 4: ANALYSIS OF PROFIT AND LOSS BY BUSINESS AREA NOK MILLION Life insurance Asset management Storebrand Bank Other activities Total

12 Notes to the interim accounts ReclameService 10/2005 NOTE 5: OPERATING COSTS NOK MILLION Q Q Personnel costs Depreciation Other operating costs Total operating costs NOTE 6: PROFIT AND LOSS BY QUARTER NOK MILLION Q Q Q Q Q Q Q Total operating income Total costs Operating profit Group profit Pre-tax profit Profit for the period Profit by business area Life insurance Asset management Storebrand Bank Other activities Group profit NOTE 7: KEY FIGURES BY BUSINESS AREA - CUMULATIVE FIGURES NOK MILLION Q Q Q Q Q Q Q Group Earnings per ordinary share (NOK) Equity Capital ratio 12.6 % 13.6 % 14.6 % 15.3 % 18.0 % 19.4 % 14.7 % Life Insurance Storebrand Livsforsikring Premiums for own account *) Policyholders' funds incl. accrued profit Investment yield I **) annualised 6.5 % 6.4 % 5.7 % 6.4 % 5.7 % 5.7 % 5.4 % Investment yield II **) year to date 5.9 % 3.3 % 1.4 % 7.2 % 4.6 % 3.2 % 2.1 % Capital ratio (Storebrand Life group) 11.8 % 12.5 % 14.1 % 14.4 % 17.3 % 18.4 % 14.8 % Operating costs as % of policyholders' funds 0.90 % 1.00 % 0.86 % 0.90 % 0.87 % 0.91 % 0.93 % Storebrand Fondsforsikring Premiums for own account Policyholders' funds Storebrand Bank Interest margin % 1.62 % 1.69 % 1.78 % 1.63 % 1.63 % 1.63 % 1.68 % Cost/income % 63 % 63 % 61 % 84 % 84 % 84 % 84 % Non-interest income/total income % 15 % 15 % 17 % 39 % 44 % 45 % 46 % Net lending Capital ratio 11.9 % 12.2 % 15.1 % 13.8 % 12.4 % 12.3 % 12.8 % Storebrand Investments (Asset management) Total funds under management Funds under mgmt. for external clients *) Including inward transfers of premium reserves. **) Investment yield I: Realised financial income including revaluations (positive or negative) of real estate. Investment yield II: As Investment yield I but including change in unrealised gains on financial current assets. 12