High quality growth in Nordic Life and Pensions 2 December 2010 Berenberg European Conference 2010 Storebrand Odd Arild Grefstad Group CFO
Important information: This document may contain forward-looking statements. By their nature, forward-looking 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. 2
Storebrand Group - the leading Nordic Life and Pensions provider Life and Pensions Norway Premiums for own account NOK16 bn Customer reserves NOK 188 bn 24 000 corporate customers ~30% market share Life and Pensions Sweden (SPP) Premiums for own account NOK 7 bn Customer reserves NOK 120 bn 30 000 corporate customers ~10% market share Storebrand Bank NOK 34 bn net lending Storebrand P&C 150 000 policies Storebrand Asset Management NOK 396 bn AuM Figures as at Q3 2010. Premiums for own account FY 2009. 3
Agenda The case for growth Increased quality of earnings 4
Strong growth in life and pension premiums within the Nordic market is expected to continue Market growth Life premiums Nordic market 1 Bn NOK 400 350 300 250 173 Annual growth rates 2 : Sweden: 10% Norway: 9% Denmark: 7% Finland: 1% 200 150 100 50 78 27 23 60 0 1999 Sweden Norway Finland Denmark 63 27 126 2009 Growth drivers Sound macro environment Demographics Regulatory changes 1 Kilde: Finansnæringens Fellsorganisasjon (NO), Försäkringsförbundet (SE), Pensionsmyndigheten (SE), Finansbranchens Centralförbund (FI), Finanstilsynet (DK), Norges Bank (NO) 2 CAGR 1999-2009 5
Sound Scandinavian macro environment Market growth Budget deficit (as % of GDP2010E) 1 Total debt (as % of GDP 2010E) 2 CDS spreads 5-year (bps) Norway 9,9% Greece 125,3% Greece 810.3 Sweden (2,1)% Italy 120,6% Portugal 291,1 Finland (4,2)% Belgium 101,0% Ireland 259,1 Austria (4,7)% Ireland 85,1% Spain 211,7 Italy (5,1)% France 82,6% Italy 174,7 Germany (5,5)% Portugal 78,8% Belgium 112,8 Denmark (5,8)% Germany 77,5% Austria 94,8 Belgium (6,0)% Austria 70,2% France 81,8 Netherlands (6,2)% UK 69,7% UK 71,3 Portugal (7,9)% Spain 67,2% Netherlands 48,3 France (8,4)% Netherlands 65,5% Germany 42,0 Spain (9,9)% Sweden 47,6% Sweden 39,2 Greece (9,9)% Norway 42,9% Denmark 38,3 UK (10,5)% Denmark 42,8% Finland 30,7 Ireland (19,0)% Finland 41,9% Norway 25,6 Scandinavia is quietly emerging as Europe s own haven in the debt crisis. Underpinned by relatively strong public finances and a reasonable economic recovery, the Nordic region is outperforming its European neighbours (Financial Times, June 2, 2010) Source: Economist Intelligence Unit July, 2010, Bloomberg ¹ General government receipts minus central government outlays, as a percentage of GDP ² General government debt, as a percentage of nominal GDP 6
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 Finland Germany Netherlands Belgium Austria France Norway Switzerland UK Denmark Italy Portugal Ireland Spain Greece Spain Ireland Greece Portugal France Sweden Finland Italy UK Belgium Germany Austria Denmark Switzerland Norway (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% 4,2% 3,5% 3,0% 2,0% 1,8% 1,6% 1,6% 1,5% 1,5% 1,5% 1,4% 1,0% 0,8% (0,5)% (0,6)% 19,8% Sound Scandinavian macro environment (Continued) Market growth GDP growth among highest in Europe (real GDP growth 2010E) Relatively low unemployment (2010E) Household savings (2010E) Penetration broadly in line with Western European countries (life premiums as % of GDP 2009) (Net savings as % of disposable household income) 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
Market Growth Growing elderly population highlights the need for pension savings Norway Demographic trends Increased life expectancy Number of pensioners will double within 25-35 years Fewer workers pr pensioner Public pensions will count for up to 15% of GDP in the Nordic countries within 2050 Source: Statistics Norway 8
Three product categories Growth Traditional profit sharing Fee based guaranteed business Fee based Unit Linked and risk products Guarantees Capital intensive Earnings sensitivity to capital market development Centralised B2B market Guarantees Medium Capital intensive Earnings from administration, risk and fee for guarantee Centralised B2B market No guarantees Not capital intensive Earnings from administration and risk Individualised market 9
Return on Equity Growth Our business model is simple focus on fee based Illustrative Higher quality earnings Result drivers Participating Participating Portfolio size Investment return Fees/ Underwriting Fees/ Underwriting Portfolio size (Fees) Price of interest guarantee and risk margin Operational efficiency Underwriting 2006 2010 10
Storebrand from being a provider of traditional products in 2006... Growth 2006 Traditional profit sharing Fee based guaranteed business Fee based Unit Linked and risk products Insurance reserve Premiums 84% 4% 12% 72% 3% 26% VIF* 78% 22% *Value in Force Premiums and reserves includes SPP figures from before acquisition in 2007 for comparison. Data: 31.12.06 11
...actively growing the share of fee based and capital efficient products Growth 2009 Traditional profit sharing Fee based guaranteed business Fee based Unit Linked and risk products Insurance reserve 52% 32% 16% Premiums VIF* 22% 39% 39% 12% 43% 45% VNB** -15% 38% 77% Data: 31.12.09 *Value in Force **Value New Business 12
Storebrand Success in Defined Contribution / UL Growth Market share of premiums Defined Contribution Norway 40 % 35 % 30 % 25 % 21.4 % 23.8 % 29.7 % 29.0 % 31.9 % 28.9 % 29.7 % 29.2 % 29.7 % 30.2 % 20 % 15 % 10 % 5 % 0 % 2002 2003 2004 2005 2006 2007 2008 2009 Q1 2010 Q2 2010 Danica Gjensidige Nordea SHB Liv Sparebank 1 Storebrand Vital Frende 13
... and strong sales growth in unit linked in the Swedish Life and Pensions business (SPP) Growth Sales unit linked (12 months rolling in APE) 379 491 617 28 % increase in unit linked sales YTD measured in APE, 43 % for the quarter 55 % 50 % 2008 2009 2010 Unit linked share of premiums (12 months rolling) Premium income from unit linked up 12 % YTD, 10 % for the quarter Unit linked comprises half of the premium income in the last 12 months 45 % 40 % Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 20082009200920092009201020102010 14
Consistent focus on operational improvements in all business areas Growth 2006 2007 2008 2010 Delta One Synergy realisation Storebrand Baltic Lean project Operational efficiency Reduced cost 1.100 MNOK 550 MNOK Lean project Storebrand Baltic Synergy realisation 2009-2010 2009-2011 Delta One Process methodology reduces lead time and improves efficiency 69 projects completed, 6 ongoing More than 450 man labour year released Still ongoing 100% Storebrand owned operational centre in Lithuania 94 man labour year Skilled workers and high productivity Yearly synergies in excess of 400 mill NOK announced in SPP deal Yearly synergies in excess of 535 mill NOK achieved Cross border synergies 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
Bottom line effect from efficiency and cost programs Growth Administration result Life and Pension Norway 100 Administration result Life and Pension Sweden 50-100 -300 2006 2007 2008 2009 3Q 2010 0-50 2008 2009 3Q 2010-500 -100-700 -150 Tot adm res Adm res to owner Costs/ Customer funds Storebrand Costs/ Customer funds SPP 1,20 % 1,06 % 1,00 % 1,01 % 1,00 % 0,85 % 0,91 % 0,80 % 0,88 % 0,86 % 0,80 % 0,76 % 0,73 % 0,80 % 0,78 % 0,77 % 0,73 % 0,60 % 0,60 % 0,40 % 2006 2007 2008 2009 1Q10 2Q10 3Q10 0,40 % 2008 2009 1Q10 2Q10 3Q10 16
Growth Delta One program ahead of plan Achieved cash improvement 3Q10 1 Target cash improvements in 2010 1 MNOK 432 MNOK 371 MNOK 550 30 190 MSEK 210 40 110 Realised Target Other Bank 1 Result improvement, measured against 2009 levels, for the Norwegian and Swedish life business only includes the administration result. Total administration result is included for Life and Pensions Norway (both customer and owner). Result improvements from profit sharing, price on interest rate guarantee, risk and return on shareholder s equity are measured separately. 17 2010 Life and Pensions Norway Life and Pensions Sweden Asset Management
We believe in high quality growth going forward Main drivers Expectations Market growth Continued growth Increased earnings quality Shift towards fee based business Operational excellence Strong history more to come 18
Storebrand shall be the leading and most respected institution in the Nordic market for long-term savings and insurance. 19