Annual Report 2008 Storebrand Livsforsikring Contents REPORT OF THE BOARD OF DIRECTORS 3 AUDIT REPORT 128 PROFIT AND LOSS ACCOUNT CONTROL COMMITTEE’S STATEMENT 129 AND BALANCE SHEET 16 BOARD OF REPRESENTATIVES STATEMENT 130 ANALYSIS OF CHANGE IN EQUITY 25 EMBEDDED VALUE 131 CASHFLOW ANALYSIS 26 TERMS AND EXPRESSIONS 133 NOTES 27 ACTUARY REPORT 127 Report of the Board of Directors Main features Storebrand also offers actuarial services, The market for Norwegian municipality Storebrand Livsforsikring carries out the systems and a full range of operational pension schemes was characterised by little major part of its activities in Norway and its services for pension funds through its sub- pension transfer activity in 2008. Only eight head office is in Oslo. The company’s main sidiaries Aktuar Systemer AS and Storebrand municipalities invited competitive bidding areas of focus are pensions and life insu- Pensjontjenester AS. for their pension arrangements in 2008, rance products for private individuals, com- and three of these decided to change their panies and public sector bodies. Storebrand Storebrand Livsforsikring opened a Swedish pension provider. Four of Storebrand’s Livsforsikring’s objective is to be the most branch in 2005. The branch offers pension municipality customers invited competitive respected and customer-oriented life insu- insurance and unit linked policies in the bidding for their pension arrangements rance provider in the Norwegian market. Swedish market based on Norwegian insu- in 2008. Three of these remained with This can only be achieved and maintained by rance legislation. Sales are made through Storebrand, while one municipality transfer- offering the highest quality advice, customer insurance brokers. The branch was integra- red to KLP. Kongsvinger municipality service and product range in the market. The ted with SPP in 2008. transferred its pension arrangement from Storebrand group is the only player in the KLP to Storebrand. Norwegian market that specialises in long- Storebrand Finansiell Rådgivning (Storebrand term savings and life insurance as its major Financial Advice - SFA) was established as The retail market in 2008 was characterised area of activity, and Storebrand Livsforsikring a wholly owned subsidiary in response to by a decline in individual life insurance- intends to make the best possible use of changes in the statutory requirements for related saving, reflecting high interest this unique position. financial advice services (MiFID requirements) rates throughout the year that made bank that came into effect from 1 November 2007. deposits a more attractive form of saving. The Norwegian life insurance market has The company is wholly owned by Storebrand The new system for individual pension gone through changes in a number of Livsforsikring. saving with tax deduction, IPS, was laun- areas in recent years, including the intro- ched in the autumn of 2008. More than duction of a new regulatory framework for Storebrand Eiendom Holding is the holding 10,000 agreements were sold in total, of life insurance in 2008. The work carried company for Storebrand Livsforsikring’s real which Storebrand won a market share of out by Storebrand in response to these estate activities. The company is wholly around 15%. Many of these sales took place developments has included changes to owned by Storebrand Livsforsikring. thorough direct channels and to employees product pricing, portfolio structure and risk of companies where Storebrand provides management, as well as changes to internal Storebrand Livsforsikring sold its ownership the occupational pension scheme. The total systems. interest in Caveo in 2008. market was smaller than expected. This was partly because long-term savings that are Subsidiaries and associated Storebrand Livsforsikring directly owns 58% tied up until retirement age appeared less companies of Foran Real Estate in Latvia, and has a attractive as the financial crisis developed, Storebrand Livsforsikring owns 100% of further 31% ownership interest through SPP and partly because savers may find the tax Storebrand Holding AB, which in turn owns Livförsäkring. The company invests in forest treatment of the product unattractive and 100% of the SPP group and SPP Fonder. land in Latvia. unpredictable. SPP is a leading Swedish life insurance and occupational pension provider. SPP offers Sales The SPP transaction and integration unit-linked products, traditional insurance Following the introduction of mandatory Storebrand ASA took out a bridge loan of products and defined benefit pension occupational pensions in 2006, the EUR 580 million from a syndicate of banks products, as well as consulting services Norwegian occupational pension market in connection with the acquisition of SPP. for occupational pensions. It also offers has increasingly become a transfer market. Storebrand ASA in turn lent this money to insurance and administrative solutions for Storebrand is very competitive in this market. Storebrand Livsforsikring AS in the form of a municipalities and other organisations. The In 2008, as in 2007, Storebrand was the most subordinated loan. In the first half of 2008, acquisition of SPP made Storebrand and SPP successful company in the transfer market Storebrand Life Insurance issued capital the leading life insurance and pension provi- for occupational pension schemes, with a net securities and perpetual subordinated loan der in the Nordic region. SPP’s head office is inflow (transfers notified) of NOK 2.5 billion. in the market. Storebrand Life Insurance in Stockholm. used the proceeds to reduce the loan from A considerable number of the company’s Storebrand ASA by a total of EUR 510 Storebrand Livsforsikring owns 25% of corporate customers have either already million. The bridge loan was repaid in full Nordben Life and Pension Insurance switched from defined benefit pension in Q3 2008 from these proceeds and a Company Ltd. of Guernsey directly, and schemes to defined contribution schemes, new term loan facility of EUR 70 million for holds a further 50% indirectly through SPP. or are considering this alternative. Storebrand ASA. Annual Report 2008 3 Integration in the accounts on the basis of SPP’s equity equities that will normally represent a lower Four different sub-projects have worked on the as per 31 December 2007. SPP’s earnings risk exposure and a lower expected return. integration between SPP and Storebrand during for 2008 are consolidated in the Storebrand A higher exposure to equities will normally 2008. The integration is proceeding well: group result. represent a higher expected return, but it • The 100 days programme has focused will also increase the price of the guaranteed on increasing activity levels and product New life insurance legislation return. Over the longer term, a higher return improvements with a view to increasing in Norway will reduce the customer’s pension costs. sales in SPP. SPP’s extra sales in excess The new Insurance Activities Act and related Under the new Act, a policy’s additional of general market growth as per Q4 regulations came into force from 1 January statutory reserves can only be used to meet amounted to NOK 61 million measured 2008. The new Act represents considera- a shortfall in the return on the customer’s on an APE basis . The target for the extra ble changes for life insurance companies. policy, and the new rules allow greater sales synergy is defined by the increased Storebrand worked intensively in 2008 to flexibility in building up the level of additional value of new business. strengthen its competitiveness by taking statutory reserves. • The separation and integration project advantage of the new business opportuni- has worked on separating SPP from ties that became available as a result of the Under the new legislation, group pension Handelsbanken, introducing Lean into SPP, changes. The overall objective of the new customers can choose to invest their pension and putting a common IT infrastructure in legislation is to make the pricing of insurance assets in a specified investment portfolio. place in the group. The efficiency projects products more predictable and transparent, This gives these customers greater freedom that have been started in SPP are showing and to make a clearer distinction between of choice. They can choose between using positive results. the assets of the insurance company and standardised risk profiles or making their • The investments project has implemen- its policyholders. As an overall rule, the new own investment choices subject only to ted Storebrand’s investment philosophy legislation requires that premiums must be the limitations imposed by legislation and for SPP’s assets and ensured an efficient fixed and paid in advance. regulations. This means that a customer can transfer of SPP’s assets from Handelsbanken define its own investment strategy more or to Storebrand Investments from New opportunities for asset less in the same way as if the funds were 1 January 2009. management being managed through a separate company • The risk management project has Until 2008, customers’ assets and the pension fund. worked on conversion to Storebrand’s risk company’s own assets were managed in management model with a view to increas- the same portfolio, and customers had no The new legislation also permits a new type ing returns and reducing hedging costs influence on how their assets were invested. of long-term policy. The guaranteed return in SPP. The new legislation makes it possible for the was previously linked to a single financial company’s total portfolio to be divided into year, but it is now possible to agree a The costs synergies are developing well sub-portfolios with different asset allocation guaranteed return for periods of up to and the yearly effects as per Q4 makes and risk profile. This means that customers 5 years. The premium for a guaranteed return about NOK 24 million. Tax synergies can exercise greater influence over how their over a number of years will be lower than for exceeded targets as per Q4 by just under funds are invested. annual guarantees over the same period.