Contents. THE CHIEF EXECUTIVE S COMMENTS 2 Administration report 4 Five-year overview Group 8 Five-year overview Parent company 9

Transcription

1 Annual Report 2017

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3 Contents THE CHIEF EXECUTIVE S COMMENTS 2 Administration report 4 Five-year overview 8 Five-year overview 9 FINANCIAL REPORTS Alternative income statement 10 Income statement 11 Statement of comprehensive income 11 Analysis of results 12 Balance sheet assets 13 Balance sheet liabilities 14 Statement of changes in equity 15 Cash flow statement 16 Notes 17 SIGNATURES OF THE BOARD AND THE CHIEF EXECUTIVE 38 AUDITOR S REPORT 39 BOARD AND MANAGEMENT 42 DEFINITIONS 43 Handelsbanken Liv AB Corporate identity number: Registered office: Stockholm handelsbanken.se/forsakring This Annual Report is also available in Swedish. 1

4 THE CHIEF EXECUTIVE'S COMMENTS A market in transition Ongoing development of Handelsbanken s occupational pension offering, adjustments to new regulations in the pensions market, even faster adaptation towards sustainability in a nutshell, it was an eventful year at Handelsbanken Liv. At Handelsbanken Liv, we are driven by the ambition to provide an outstanding pension offering for both corporate and private customers. This made 2017 a successful year. A growing number of customers are concentrating their pensions both personal or for their company with us. That helped us achieve our highest profit ever: SEK 1,068 million. We close the books on an intensive financial year. In addition to major sales growth, the year saw far-reaching preparations for changes brought on by new financial market regulations. During the year, we continued improving our occupational pension offering to corporate customers by including more building blocks in our Pensionsplan Företag (corporate pension plan). A simplified, entirely digital enrolment procedure was well received by customers and advisors. Demand grew apace, and premiums climbed by 18 per cent. We see a rising trend among those private customers who have chosen to transfer all their pensions to us. During the year, we set up a support tool by which pension specialists can provide advice to help customers who are interested in consolidating their pension funds with us a service greatly appreciated. We also improved our offering in the Nordic market. For example, in Norway the right to tax deductions for private pension savings was expanded, so in November we launched a new product called IPS, which was favourably received by customers. In 2017, we maintained a brisk pace as we continued to revamp our range of mutual funds to accentuate sustainability. Mutual funds that did not meet the stricter sustainability criteria adopted in 2016 were excluded, and new funds have been added that have a more pronounced sustainability profile. In addition, several mutual funds in the range expanded their sustainability activities. By year-end, fossil-free funds accounted for 21 per cent of funds in the unit-linked insurance offering. In the traditionally managed portfolios, investments in green bonds increased. In addition, the majority of equity funds in the portfolio exclude fossil fuels or have a restrictive approach to investments in coal. We also began working with analyses using climate change scenarios to assess how well the portfolios comply with the Paris Agreement s two-degree target. Work to promote the Sustainable Development Goals resulted this year in a clearer definition of our responsibilities as a life insurance company, investor and institution in society. For example, we conducted training and analyses to improve knowledge as well as to further integrate and measure the effects of sustainability in future projects and activities. Long-term sustainable development was also at the heart of the agreement across the political blocs in Sweden, to ensure sustainable, secure, increased pensions in the long term, which was presented towards yearend. This agreement will entail new conditions for individuals saving for retirement as well as for employers. Saving in a private pension will be increasingly important for individuals who desire the flexibility to retire at an age they themselves choose. Finally, I note with pleasure that Swedish Quality Index (SKI) continues to rank our insurance customers as the most satisfied among those of the major Swedish banks. Stockholm, March 2018 Louise Sander 2

5 THE CHIEF EXECUTIVE'S COMMENTS 3

6 Administration report Administration report Handelsbanken Liv Försäkringsaktiebolag, corporate identity number (Handelsbanken Liv), is domiciled in Stockholm. The company is a wholly owned subsidiary of Svenska Handelsbanken AB (publ), corporate identity number (Handelsbanken). The Board and Chief Executive of Handelsbanken Liv hereby submit the annual accounts and consolidated accounts for the 2017 financial year. INTRODUCTION The Handelsbanken Liv conducts life insurance operations that include traditionally managed insurance, unit-linked insurance and risk insurance. Operations The Handelsbanken Liv offers its customers a broad range of risk and savings insurance products. This is done through Handelsbanken, where long-term savings are a natural part of the customer offering. structure At the start of 2017, in addition to the parent company Handelsbanken Liv, the Handelsbanken Liv comprised the wholly owned subsidiaries SHB Liv Försäkrings AB in Finland and Handelsbanken Fastigheter AB. Savings insurance in Norway and Finland is sold via the subsidiary SHB Liv Försäkrings AB, while risk insurance in Norway and Finland is sold through branches of the parent company Handelsbanken Liv. Handelsbanken Fastigheter AB manages properties that are mainly rented by Handelsbanken and its subsidiaries. The Handelsbanken Liv purchases services from its parent company Handelsbanken, mainly IT services, insurance mediation, HR services, internal audit and asset management. These are settled according to established internal prices at Handelsbanken, based on generally accepted transfer pricing principles according to the cost price principle, but never exceeding the market price. Financial performance At year-end, assets managed in the Handelsbanken Liv totalled SEK 139 billion (123). The positive net flow for unit-linked insurance continued during 2017, reaching SEK 4.2 billion (3.5). Assets managed in unit-linked insurance rose by SEK 14.7 billion, to SEK 107 billion (93), due to the net flow as well as to value growth during the year. The net flow was also positive for portfolio bond insurance, at SEK 0.8 billion (0.7). Assets managed in portfolio bond insurance rose by 11 per cent, to SEK 24 billion (21), thanks to positive value growth and a positive net flow. Assets in insurance with guaranteed interest fell, from SEK 7.9 billion at the start of the year, to SEK 7.5 billion at year-end. The net flow totalled SEK -0.6 billion (-0.7). Profit before tax was SEK 1,068 million (956). Improved profit was a result of fee and commission income growing more than expenses during the year. Expenses increased in 2017 primarily because of the provision to the Oktogonen Foundation and somewhat higher costs for consultants fees. For most policyholders, the returns in traditionally managed portfolios at Handelsbanken Liv were lower than the guaranteed interest rate, so the company had to contribute funds for these policies. For unit-linked and portfolio bond insurance, profit remained healthy and continued growing along with volume. Appropriation of profits The Board of Directors proposes that the entire amount at the disposal of the annual general meeting, SEK 6,193,789,670, be carried forward to the next year. The detailed recommended appropriation of profits is in note 44. INSURANCE OPERATIONS Market The Handelsbanken Liv offers products for long-term savings in the form of insurance with investments in mutual funds or custody accounts and other insurance as cover in the event of death, sickness or accident. The target market is companies and their employees as well as private individuals. Handelsbanken Liv The focus of operations in Sweden is to expand market share in occupational pensions for small and medium-sized companies and to become the leading institution to which private customers choose to move their pension savings. Customer meetings currently happen mainly face-to-face at Handelsbanken s branches, with a minor volume of business coming from the internet, mobile banking and individual options in plans based on collective bargaining agreements. Handelsbanken s branches expedite growth in the pension business thanks to their unique proximity to and familiarity with their customers. Historically, activities targeting the corporate segment have been relatively low-key, and the potential is great. In 2017, about 15 per cent of the Bank s active corporate customers had their occupational pension with the Bank. During the year, the company enjoyed favourable development in the corporate market, both in occupational pensions and company-owned endowment insurance, with continued enhancement of the offering to companies, to further satisfy needs in the market and to make the offering more attractive to customers and advisors. Privately owned occupational pensions were launched in In addition, a digital tool was developed to help advisors enrol customers in occupational pension plans at branches or on customers premises. Also, agreements were renewed for occupational pensions within collective agreements for the SAF-LO and KAP-KL areas. During 2017, the offering was further enhanced based on new policies and guidelines for responsible investment. The mutual funds offered to insurance customers are periodically evaluated according to several sustainability measures. Mutual funds that do not meet the stricter sustainability criteria have been excluded, and new funds with a more distinct sustainability profile have been added. Also, several mutual funds stepped up their sustainability work. At year-end, fossil-free funds accounted for 21 per cent of funds in the unit-linked insurance offering. SHB Liv Försäkrings AB In Norway, PKB (defined contri bution paid-up policies) was launched at the beginning of 2016, and in 2017 volumes in this segment doubled. In addition, in Norway the right to tax deductions for private pension savings was expanded. In connection with this, a new IPS product was launched which was favourably received by customers. In Finland, volumes rose sharply for investments in structured products within insurance. During the autumn, a digital enrolment tool for Gruppension was rolled out to branches, with good prospects for increased sales. FUTURE DEVELOPMENTS Handelsbanken Liv The aim is to continue developing and growing in the area of occupational pensions, with the goal of growing more quickly than the market outside traditionally managed insurance. In addition, we have high hopes that conditions will improve for customers to transfer and consolidate their pension assets. This would enable customers to gather their finances in 4

7 Administration report one place, for a clearer overview and simpler management. Another area of focus is to strengthen and more clearly define investment offerings in terms of sustainability so that customers can easily choose a more sustainable pension. The coming year will also be affected by work adapting to the new regulations which cover life insurance companies and which will take effect during the next few years. Business models in the market have changed and will continue to be challenged in the future, both as a result of regulations and the need for increased digitalisation. Going forward, the focus will remain on continuous adaptation to new conditions and satisfaction of customers demands and needs, as well as efforts to protect the environment by reducing paper sent by post. SHB Liv Försäkrings AB For about a decade, occupational pensions have been mandatory in Norway, so there is great market potential among small and medium-sized companies in terms of new sales as well as additional sales to existing customers, that is, through a higher savings rate. Customers in Norway can also freely transfer their occupational pension assets after premium payments cease. The possibility of PKB transfers means this market embodies great potential. In addition, the heightened incentives for private pension saving (new IPS) are fostering excellent conditions for increased sales to private customers. In Finland, the occupational pension Gruppension is a focus area where we see continued opportunities for growth. Also, the Active Life concept, which includes discretionary management of customers assets, has successfully made inroads into this market. The market share is only a few per cent as yet, but healthy growth is expected to continue, even if the Finnish market looks to be quite turbulent in 2018 as a result of changes announced in various regulations that could negatively affect the business. ASSET MANAGEMENT Since 2009, Handelsbanken Liv has divided its portfolio of policies with guaranteed interest rates into sub-portfolios based on the guaranteed rate, the policyholder s age and the tax bracket. The capital in each sub-portfolio is managed in a linked asset portfolio. The assets are managed so that, based on the conditions for each sub-portfolio, they secure the company s insurance commitments to its customers. Each sub-portfolio is allocated the yield rate generated by that respective asset portfolio. Thus customers have different yield rates. The assets are managed in diversified portfolios consisting chiefly of interest-bearing securities, equity index funds and alternative investments. Handelsbanken Liv s Board establishes the company s investment policy which defines the overall framework for asset allocation. All portfolios are based on interestbearing bonds; a small part is invested in other assets with higher risk. The proportion of noninterest-bearing assets varies over time and among the sub-portfolios. The managed portfolios are divided into three main categories: insurance with an annual 3 per cent guarantee insurance with a 3 per cent final guarantee insurance with an annual 5 per cent guarantee. In the category with an annual 3 per cent guarantee, the average return for 2017 was +1.1 per cent (+1.4); for insurance with a 3 per cent final guarantee, +1.6 per cent (+1.5); and for insurance with an annual 5 per cent guarantee, it was +1.3 per cent (+1.6). For unit-linked and portfolio bond insurance savings, Handelsbanken Liv provides no guarantees in terms of value growth. Unit-linked insurance customers are primarily offered mutual funds managed by Handelsbanken s fund management company for their investments. In 2017, both unit-linked and portfolio bond insurance increased in value. SOLVENCY Handelsbanken Liv applies transitional regulations, which means that Solvency 2 regulations are applied to other life insurance while Solvency 1 and the Swedish traffic light model are applied to occupational pensions. Solvency 2 regulations are risk-based regulations for establishing the capital requirement aimed at ensuring that insurance companies have sufficient capital to meet their commitments even under unfavourable conditions. The company has chosen internally to ensure that the solvency capital requirement according to Solvency 2 is also satisfied by a good margin for all operations. Handelsbanken Liv reported a green light at 31 December Own funds at 31 December 2017 covered by a good margin the solvency capital requirement calculated according to Solvency 2 for all operations. EMPLOYEES At the end of 2017, the Handelsbanken Liv had 173 employees, 90 per cent of them employed in Sweden. Principles and processes for remuneration to executive officers are presented in note 13, Operating expenses. The head of the internal audit function is employed by both Handelsbanken and Handelsbanken Liv and is not included in the number of employees. CAREER DEVELOPMENT The Handelsbanken takes a long-term approach to its employees. To attract and retain staff, the Handelsbanken Liv has created conditions favourable for development at work through different career opportunities. For the Handelsbanken Liv, competency is defined as an employee s ability to solve the tasks encountered in their daily work. Employees have a great deal of responsibility not only for their own competency development but also for sharing this competency with their colleagues. All employees take part in their unit s business planning process. Guided by the business plan, employees meet their immediate superior at least once a year for a personal development dialogue, including a competency mapping. This involves discussing the employee s contribution to business goals and the conditions required for the employee to deal with their tasks. The dialogue results in an individual action plan which is continuously followed up. GENDER EQUALITY AND DIVERSITY The Handelsbanken Liv proceeds from the Handelsbanken s work with gender equality and diversity. Working with gender equality, diversity and an inclusive corporate culture should be an integral part of the daily work. The goal is an equal opportunity company where women and men have the same opportunities and prerequisites to shape the company and their own career. To be a more equal opportunity company, we must challenge traditional gender norms to ensure that everyone has the same opportunities for professional development. For example, employees who take parental leave have the same right to salary development as other staff. WORK ENVIRONMENT AND HEALTH The Handelsbanken Liv adheres to the Handelsbanken s work environment policy. The overall goal is to have a workplace where employees enjoy good health, develop on a personal level, and function in an optimum way. Health promotion activities are essential to achieving the work environment goal; the aim is to help employees enjoy an active life. Handelsbanken Liv subsidises all forms of exercise approved by the Swedish Tax Agency and provides a health promotion subsidy of SEK 3,000 per employee per year. ETHICAL STANDARDS The Handelsbanken Liv has a policy on ethical standards adopted by the board of each company. The policy is based on Handelsbanken s policy on ethical standards, which states that operations must embody high ethical standards. Employees must conduct themselves in a manner that upholds confidence in the company. A basic premise is that the operations and employees comply with the laws and regulations which govern the operations in various ways. Regulations and general guidelines from the Swedish Financial Supervisory Authority and other authorities must be taken into account when drafting procedures and instructions. All employees are clearly accountable for their actions, professionally and in social and ethical matters. The company s success in the market depends on the confidence that the general public as well as public authorities have in it. 5

8 Administration report SYSTEMATIC ENVIRONMENTAL WORK The Handelsbanken Liv adheres to the decisions made by Handelsbanken concerning environmental activities. To promote long-term sustainable development, Handelsbanken Liv strives to minimise the company s direct and indirect impact on the environment. A few ways that this should be achieved include: integrating environmental sustainability in all business operations making long-term sustainable business decisions in which environmental factors are taken into consideration setting environmental requirements in all central procurements and ensuring that these are complied with encouraging environmental awareness and environmental competence among employees constantly developing environmental activities so that the s environmental impact is continuously minimised. ENVIRONMENTAL IMPACT We are continually reducing paper sent by post by increasing communication through electronic channels, such as customers inboxes in Online Banking. One innovation this year is a completely digital enrolment process for occupational pensions. Dynamic forms reduce paper use and streamline processing, because the built-in guidance dialog helps staff complete forms correctly. More digital services also help reduce environmental impact, such as when customers can review their pension and insurance savings using mobile banking or can enrol in occupational pension plans using an entirely digital process. Mailings to customers are continually co-ordinated, which means fewer letters sent, less use of paper, and lower carbon dioxide (CO 2 ) emissions. CO 2 emissions are one way the Handelsbanken Liv s operations have a direct impact on the environment. Thus processes and flows are under review with the aim of reducing environmental impact. For many years, the Handelsbanken has measured the CO 2 emissions generated by its operations. Direct environmental impact mainly derives from the use of heating and electricity, as well as business travel. The Handelsbanken Liv s CO 2 emissions are included in the emission figures published annually by Handelsbanken in its Annual Report and CDP (formerly the Carbon Disclosure Project). SUSTAINABILITY AND RESPONSIBLE INVESTMENT Handelsbanken Liv has a policy for sustainability that sets the direction for sustainability work and a policy for responsible investment based on the UN Global Compact and Principles for Responsible Investment (PRI). Sustainability in insurance operations, for example, entails offering sustainable insurance products in savings, pensions and security and ensuring that sustainability is integral to the range of investment alternatives offered customers. In 2017, work continued on ensuring that the mutual funds offered meet the stricter sustainability requirements. The proportion of Criteria funds (mutual funds that invest according to specific sustainability criteria) in Handelsbanken Liv s range increased, to 21 per cent at year-end, which was one reason that a larger proportion of the funds now exclude fossil fuels. Mutual funds from external asset managers also increasingly have a sustainability focus, as mutual funds that do not comply with Handelsbanken Liv s sustainability criteria are being excluded and new mutual funds with a distinct sustainability focus are being added to the offering. To foster sustainable development, Handelsbanken Liv has identified focus areas, such as climate change. Analysing and comparing work methods used by fund management companies encourages external fund managers to develop their work with sustainability. How these mutual funds integrate sustainability factors in their investment process has been examined, in order to assess opportunities for contributing to sustainable development. The proportion of green bonds in the traditionally managed portfolios increased during the year. The equity exposure has also been directed towards holdings that, for example, partly or completely exclude fossil fuels. During 2017, Handelsbanken Liv also mapped out ways that the company can contribute to the Sustainable Development Goals. As a result, the company s responsibilities as an insurance company, an investor and an institution in society are more clearly defined. For instance, training and analysis are needed to improve our knowledge about sustainability and to integrate it and measure its effects in future projects and activities. In the traditionally managed portfolios, work with analyses using climate change scenarios has also begun in order to assess how well the company complies with the Paris Agreement s two-degree target. These efforts will be ongoing. Read more about Handelsbanken s work for the 2030 Agenda for Sustainable Development in the s Sustainability Report at handelsbanken.se/sustainability. Handelsbanken Liv is part of the Handelsbanken and is subject to the formal sustainability reporting requirement in the Swedish Annual Accounts Act. Svenska Handelsbanken AB (publ), corporate identity number , with its registered office in Stockholm, has prepared a sustainability report for 2017 that meets the requirements in the Act. The reporting in the sustainability report covers the as a whole. Review of mutual funds In 2017, Handelsbanken Liv continued to refine its processes for selecting and evaluating the sustainable investments it offers customers. Work realigning the range of funds continued during the year, as more criteria that encourage positive selection and engagement were adopted in policy documents and integrated in our processes. In addition, ongoing monitoring has contributed further sustainability data, and the approach used to monitor asset classes and asset management styles has been improved. The selection and assessment of asset managers takes into account how well they meet the stipulated sustainability requirements. If this evaluation indicates that a fund does not fulfil the responsible investment criteria, it may be excluded from the range of funds available. Financial, social and environmental sustainability are taken into account in the assessment and selection of which funds to offer. Investments in mutual funds and in investment products are preceded by an assessment of the suppliers as well as their individual products. For example, the aim is for each fund management company to have policies or principles for systematic work for sustainability and to periodically screen their mutual funds. All the funds on offer are followed up regularly to identify companies that systematically violate international norms for the environment, human rights, labour law, anti-corruption and controversial weapons. If the evaluation of a mutual fund indicates non-compliance with these norms, a dialogue is initiated with the fund manager to influence them to review their fund s holdings. Handelsbanken Liv also examines the fund management company s capacity to integrate sustainability in its own operations. If engagement with the asset manager does not lead to a change, the mutual fund may be excluded from the offering as a result. Handelsbanken Liv s fund selection committee compiles such reviews and prepares supporting documentation for decisions as to which mutual funds will be included in or excluded from its range of funds. The decision is made by the Chief Executive of Handelsbanken Liv. Inclusion, exclusion and engagement Handelsbanken Liv strives to include mutual funds that integrate sustainability in their investment process and make efforts to contribute to sustainable development. Handelsbanken Liv also strives to exclude funds that invest in companies with significant operations that mine coal for combustion or generate coal-fired power, or invest in companies involved in the manufacture or distribution of weapons that are banned under international law, such as cluster munitions, anti-personnel mines, chemical weapons and biological weapons. Handelsbanken Liv also excludes funds that invest in companies involved in the production or distribution of nuclear weapons. Handelsbanken Liv also wishes to influence external fund managers to promote sustainable development. By analysing and comparing work methods used by fund management companies, we can encourage our external fund managers to develop their sustainability activities. 6

9 Administration report The majority of customers pension capital is managed by Handelsbanken s fund management company, making it the largest provider of Handelsbanken Liv s traditional pension management and unit-linked management services during the year. CORPORATE GOVERNANCE The Board s activities The Board of Handelsbanken Liv convened at eight ordinary Board meetings. The Board regularly discusses the company s financial situation and its business and risk strategies for the short and long term. During the year, the Board studied quarterly reports from the heads of the risk management, compliance and actuary functions. The Board has two preparatory committees: one for remuneration and one for risk, audit and compliance. The remuneration committee consists of two Board members, one of whom is the Chairman. This committee is responsible for assisting the Board in the review, design, implementation and application of the company s remuneration policy and remuneration system. The remuneration committee prepares matters concerning remuneration which are to be decided by the Board or the shareholders meeting, and also carries out an annual independent assessment of the remuneration policy and remuneration system. The risk, audit and compliance committee consists of two Board members, one of whom is the Chairman, and is responsible for preparing matters for and advising the Board. This committee s task is to ensure, in dialogue with the auditors, company management and central functions, that the Board can perform the tasks related to its responsibility to supervise and monitor corporate governance. This committee also monitors the financial reporting and the effectiveness of the company s internal control and risk management. management management consists of the Chief Executive, Deputy Chief Executive and the heads of six departments at Handelsbanken Liv. Details about management are given on page 42. Auditors Daniel Eriksson, Authorised Public Accountant, Ernst & Young AB, is principal auditor for Handelsbanken Liv. Remuneration Handelsbanken Liv complies with the remuneration policy established by the Board, described in note 13, Operating expenses. Internal control Good internal governance and control are prerequisites for the Handelsbanken Liv to satisfactorily manage risk and achieve the goals set, as well as to comply with the statutory stability principle and sound customer protection. The internal control in the companies is intended to proactively ensure a fit-for-purpose organisation, reliable financial reporting, efficient operation and management of information systems, and good possibilities to identify, measure, monitor and manage the company s risks. Internal control is also intended to create satisfactory means for the companies to carry out their operations in compliance with current legislation and regulations adopted within the. Handelsbanken Liv s internal control system covers all processes and departments, in outsourced activities as well as activities under its own management. Responsibility for implementing internal control has been delegated from the Board to the Chief Executive, and thereafter to heads of units and departments who are responsible for internal control in their own departments. This responsibility means that fit-for-purpose instructions, procedures and processes for the operation must be in place and compliance with them must be monitored regularly. Thus, the responsibility for internal control and compliance is an integral part of the operations at all levels of the company. Within the framework of the company s purpose and strategy within Handelsbanken, the Board has formulated goals for the various parts of the operations, and these are the basis for the internal control system. At the companies within the insurance group, the following main procedures are performed in the internal control system: risk assessment, control environment, control activities, information and communication, and monitoring. Risks and risk management Handelsbanken Liv has a low risk tolerance and a restrictive approach to risk. Thus the company avoids high-risk transactions and constantly strives to reduce the level of risk. The company has good control of the risks related to its operations and prevents un expected or undesirable effects on financial performance while aiming to minimise variations in financial performance. In the company s risk policy, the Board has classified three main types of risk in Handelsbanken Liv s operations: financial risk insurance risk operational risk. Handelsbanken Liv continually strives to measure, monitor and limit these risks for the entire, including subsidiaries. The risks and their impact on operations are presented in note 2, Risks and risk management. Risk management function The risk management function has overall responsibility for identifying and managing risks that can affect the Handelsbanken Liv or prevent it from achieving its goals. The function must also help maintain a high level of risk awareness and ensure that the risk appetite, risk level and limits decided upon are followed. The risk management function is responsible for the overall internal reporting of all the Handelsbanken Liv s material risks at an aggregate level. The task of the risk management function is to identify, measure and monitor risks, to inform the Chief Executive, company management and the Board about these risks, and to report on analyses of how the risks are developing. The operations are responsible for managing individual risks. The head of the risk management function reports directly to the Chief Executive and the Board. Compliance The compliance function identifies and assesses compliance risks and provides information about the effects of new regulations and the risks and consequences which may arise in operations as a result of inadequate compliance. The function carries out regular controls and supervisory activities. The compliance function has a risk-based approach and each year updates its strategy and its work programme in an annual plan. The Board decides on a policy for the compliance function. This policy specifies the function s overall areas of responsibility, authority and reporting obligations. The head of the compliance function reports regularly to the Chief Executive and the Board on matters regarding compliance. Actuary function The actuary function is a control function that is independent of the operation being monitored. The function s responsibilities include assessing the adequacy of the technical provisions and the associated calculations of the solvency capital requirement. The actuary function reports directly to the Chief Executive and the Board. Internal audit function The internal audit function performs inde pendent, impartial audits of the operations, corporate governance system and accounting of Handelsbanken Liv, based on requirements stipulated in internal and external regulations. A central task for the function is to assess and verify processes for risk management, internal governance and control. The annual planned audit assignments are documented in an audit plan which is adopted by the Board of the company. In audits, a written report is submitted to the audited units and departments. The internal audit function compiles an annual report for the whole company which is submitted to the company s Board. The head of the internal audit function at Handelsbanken Liv reports directly to the company s Board. Through an agreement, Handelsbanken Liv has engaged the Handelsbanken s Audit to perform internal audit services under the direction of the insurance company s head of internal audit. 7

10 Five-year overview Five-year overview Profit/loss according to the alternative income statement Administration result Risk result Financial result Other result Profit before appropriations and tax 1, Profit/loss according to the statutory income statement Premiums written Net investment income in insurance business 1, , Claims incurred Operating expenses Balance on the technical account, life insurance business Profit for the year Financial position Properties 3,742 3,718 3,713 3,733 3,762 Shares and participating interests ,343 1,078 Bonds and other interest-bearing securities 6,602 6,704 7,043 8,130 9,094 Derivatives Other investment assets ,952 5,071 4,314 Total investment assets 11,197 11,384 13,590 18,277 18,254 Investments for which the policyholder bears the risk 131, , ,724 91,739 76,817 Unit-linked commitments 107,481 92,815 82,464 73,761 60,168 Conditional bonus for portfolio bond insurance 23,712 21,331 19,260 17,978 16,649 Provision for life insurance and conditional bonuses 8,148 8,598 9,064 10,215 10,933 Equity 7,100 6,117 9,309 8,549 7,731 Provisions for taxes Perpetual subordinated loan 1,129 1,129 1,129 1,129 1,129 Total solvency capital 8,252 7,258 10,438 9,752 8,860 Own funds for the insurance group 1 9,524 7,991 7,424 6,554 6,959 Required solvency margin for the insurance group Solvency capital requirement 4,903 4, Minimum capital requirement 1,571 1, Solvency ratio Key figures Management expense ratio, % Total return, savings insurance with a guaranteed annual rate of 3%, average for the category Total return, savings insurance with a guaranteed final rate of 3%, average for the category Total return, savings insurance with a guaranteed annual rate of 5%, average for the category Premiums paid Guaranteed interest Risk insurance Life insurance management Unit-linked insurance 9,798 8,278 9,809 8,246 7,334 Portfolio bond insurance 5,035 4,189 3,891 2,438 2,253 Total 15,401 13,060 14,345 11,384 10,372 Assets under management Guaranteed interest 7,472 7,881 8,348 9,407 10,145 Life insurance management Unit-linked insurance 107,481 92,815 82,464 73,761 60,168 Portfolio bond insurance 23,712 21,331 19,260 17,978 16,649 Total 139, , , ,748 87,576 1 Own funds consist solely of tier 1 capital. The collective consolidation ratio is not stated because it is not a relevant indicator for a profit-distributing life insurance company. Direct yield is not stated because it does not provide a fair presentation. Total return, which includes both direct yield and changes in value, is stated instead. 8

11 Five-year overview Five-year overview Profit/loss according to the alternative income statement Administration result Risk result Financial result Other result Profit before appropriations and tax Profit/loss according to the statutory income statement Premiums written Net investment income in insurance business 1, , Claims incurred Operating expenses Balance on the technical account, life insurance business Profit for the year Financial position Shares and participating interests 4,082 4,152 4,108 4,573 4,776 Bonds and other interest-bearing securities 6,602 6,704 7,043 8,130 9,094 Derivatives Other investment assets ,247 5,416 4,819 Total investment assets 10,755 11,059 13,404 18,119 18,695 Investments for which the policyholder bears the risk 122, ,762 95,335 86,481 73,021 Unit-linked commitments 98,615 85,431 76,075 68,503 56,372 Conditional bonus for portfolio bond insurance 23,712 21,331 19,260 17,978 16,649 Provision for life insurance and conditional bonuses 8,148 8,598 9,064 10,215 10,933 Equity 6,388 5,594 8,985 8,341 7,556 Provisions for taxes Perpetual subordinated loan 1,129 1,129 1,129 1,129 1,129 Total solvency capital 7,517 6,723 10,114 9,522 8,685 Own funds 1 8,961 7,410 7,278 6,482 6,851 Required solvency margin Solvency capital requirement 4,543 3, Minimum capital requirement 1,473 1, Solvency ratio Key figures Management expense ratio, % Total return, savings insurance with a guaranteed annual rate of 3%, average for the category Total return, savings insurance with a guaranteed final rate of 3%, average for the category Total return, savings insurance with a guaranteed annual rate of 5%, average for the category Premiums paid Guaranteed interest Risk insurance Life insurance management Unit-linked insurance 8,181 7,116 8,225 6,926 6,315 Portfolio bond insurance 5,035 4,189 3,891 2,438 2,253 Total 13,784 11,898 12,761 10,064 9,353 Assets under management Guaranteed interest 7,472 7,881 8,348 9,407 10,145 Life insurance management Unit-linked insurance 98,615 85,431 76,075 68,503 56,372 Portfolio bond insurance 23,712 21,331 19,260 17,978 16,649 Total 130, , ,214 96,490 83,780 1 Own funds consist solely of tier 1 capital. The collective consolidation ratio is not stated because it is not a relevant indicator for a profit-distributing life insurance company. Direct yield is not stated because it does not provide a fair presentation. Total return, which includes both direct yield and changes in value, is stated instead. 9

12 FINANCIAL REPORTS Alternative income statement The traditional income statement for a life insurance company is usually difficult to grasp or analyse. To make this easier and increase understanding of how the profit has resulted and how it has developed, Handelsbanken Liv has prepared an alternative income statement Administration result Risk result Financial result Other result Profit before tax 1, The profit/loss is based on the Handelsbanken Liv s profit/loss before tax Link to statutory income statement Profit before tax 1, Taxes Profit for the year Administration result Fee income Other income 3 4 Net fee and commission income Expenses Total The administration result is the difference between the fees charged on the insurance and the company s expenses. 3 Financial result Capital contribution Other -4-1 Total The insurance capital is managed in several separate sub-portfolios, each with an individual investment strategy so that the returns are allocated to the policyholders in their particular portfolio. Any yield split for the company is also calculated separately for each portfolio. This is included in the Other line item. 2 Risk result Premiums written Change of claims outstanding Insurance claims paid Result of reinsurance Other Total Other result Return on equity Interest expense on subordinated loans Profit/loss Handelsbanken Fastigheter AB Total The risk result is the difference between the fees that the company charges to cover the insurance risks (mortality, longevity, morbidity and accident) and the actual cost of these. 10

13 FINANCIAL REPORTS Income statement Technical account, life insurance business Premiums written (net of reinsurance) Note Investment income Note 8 1,238 1,125 1,170 1,069 Unrealised gains on investment assets Note Increase in value of investment assets for which the policyholder bears the investment risk: Assets for conditional bonus 1,454 1,279 1,454 1,279 Unit-linked insurance assets 10,800 6,876 10,099 6,678 Other technical income Note Claims incurred (net of reinsurance) Note Change in other technical provisions Note 12-12,820-8,749-12,115-8,545 Operating expenses Note Investment charges Note Unrealised losses on investment assets Note Investment income transferred to financial operations Balance on the technical account, life insurance business Non-technical account Balance on the technical account, life insurance business Investment income Note Unrealised gains on investment assets Note Investment income transferred from insurance operations Investment charges Note Unrealised losses on investment assets Note Profit before appropriations and tax 1, Appropriations Profit before tax 1, Taxes Note Profit for the year Statement of comprehensive income Profit for the year Other comprehensive income Items that cannot be reclassified into profit or loss for the period Defined benefit pension plans Items that may subsequently be reclassified into profit or loss for the period Translation differences for the year Total other comprehensive income Total comprehensive income for the year

14 FINANCIAL REPORTS Analysis of results Direct insurance of Swedish risks Direct insurance of foreign risks Occupational pension insurance Other life insurance Technical account, life insurance business Total 2017 Defined contribution traditional insurance Unit-linked insurance Occupational linked disability insurance and premium waiver insurance Individual traditional life insurance Unit-linked insurance Portfolio bond insurance Noncancellable disability and accident insurance and premium waiver insurance life and occupational group life insurance Premiums written (net of reinsurance) Investment income 1, Unrealised gains on investment assets Increase in value of investment assets for which the policyholder bears the investment risk, portfolio bond 1, , Increase in value of investment assets for which the policyholder bears the investment risk 10,099-5, , Other technical income Claims incurred (net of reinsurance) Change in other technical provisions -12, , ,167-1, Operating expenses Investment charges Unrealised losses on investment assets Investment income transferred to financial operations Balance on the technical account, life insurance business PREMIUMS WRITTEN Premiums written (gross of reinsurance) Premiums ceded Total premiums written (net of reinsurance) CLAIMS INCURRED Insurance claims paid Gross of reinsurance Reinsurers share Change in provision for claims outstanding Gross of reinsurance Reinsurers share Total claims incurred (net of reinsurance) Technical provisions 31 December 2017 Provision for life insurance 7,368 4, , Provision for claims outstanding ,663 4, , Technical provisions for which the policyholder bears the risk 31 December 2017 Conditional bonus Conditional bonus for portfolio bond insurance commitments 23, , Unit-linked commitments 98,615-58, , , , ,789 23, Reinsurers share of technical provisions Claims outstanding There is no received reinsurance. 12

15 FINANCIAL REPORTS Balance sheet assets Assets Intangible assets Goodwill Note Other intangible assets Note Investment assets Properties Note 21 3,742 3, Shares and interests in companies Note ,234 3,234 Shares and participating interests Note Bonds and other interest-bearing securities Note 24 6,602 6,704 6,602 6,704 Other loans Note Derivatives Note ,197 11,384 10,755 11,059 Investment assets for which the policyholder bears the investment risk Conditional bonus for portfolio bond insurance Note 35 23,712 21,331 23,712 21,331 Unit-linked insurance assets Note ,481 92,815 98,615 85, , , , ,762 Reinsurers share of technical provisions Claims outstanding Receivables Receivables referring to reinsurance Tax claims Note Other receivables Note Other assets Property and equipment Note Liquid funds Note 29 5,357 4,774 5,010 4,495 5,357 4,774 5,010 4,495 Prepaid expenses and accrued income Accrued interest income Deferred acquisition costs Note Other prepaid expenses and accrued income Total assets 148, , , ,722 The items Intangible assets, Property and equipment, Other loans and most of the Bonds and other interest-bearing securities have a longer life than one year. Other assets expire within one year. 13

16 FINANCIAL REPORTS Balance sheet liabilities Equity, provisions and liabilities Equity Share capital Note Fund for development costs Statutory reserve Defined benefit pension plans Translation reserve Retained earnings 6,030 5,149 5,401 4,735 Profit for the year Total equity 7,100 6,117 6,388 5,594 Subordinated liabilities Perpetual subordinated loan 1,129 1,129 1,129 1,129 Technical provisions (gross of reinsurance) Provision for life insurance Note 32 7,368 7,701 7,368 7,701 Provision for claims outstanding Note ,663 8,024 7,663 8,024 Technical provision for life insurance for which the policyholder bears the risk Conditional bonus Note Conditional bonus for portfolio bond insurance commitments Note 35 23,712 21,331 23,712 21,331 Unit-linked commitments Note ,481 92,815 98,615 85, , , , ,659 Provisions for other risks and charges Provisions for taxes Note Deposits from reinsurers Liabilities Liabilities referring to reinsurance Net pension liabilities Note Other liabilities Note Accrued expenses and deferred income Other accrued expenses and deferred income Note Total equity, provisions and liabilities 148, , , ,772 The items Perpetual subordinated loan, Provision for life insurance, Conditional bonus and Unit-linked commitments have a longer life than one year. Other liabilities expire within one year. 14