ANNUAL REPORT Länsförsäkringar Bank LÄNSFÖRSÄKRINGAR BANK THE 2014 FISCAL YEAR Business volumes and net interest income Customers and market shares SEK billion SEK M Customers, thousands % 400 2,800 1,200 6 1,000 5 300 2,350 800 4 200 1,900 600 3 400 2 100 1,450 200 1 0 1,000 0 0 2010 2011 2012 2013 2014 2010 2011 2012 2013 2014 Source: Länsförsäkringar and Statistics Sweden Mutual funds Mortgages Other loans Customers, thousands Deposits Agricultural loans Net interest income, Market share of retail deposits SEK M Market share of household and retail mortgages Total business volumes have increased an average of 17% over the past The number of customers has risen an average of 6% per year over the five years. Net interest income has risen an average of 18%. past five years. The market position is continuously strengthened. Key figures 2014 2013 2012 2011 2010 Return on equity, % 8.3 6.7 6.3 4.8 5.0 Return on total capital, % 0.42 0.31 0.30 0.24 0.24 Investment margin, % 1.15 1.06 1.11 1.07 0.93 Cost/income ratio before loan losses 0.62 0.63 0.66 0.71 0.72 Cost/income ratio after loan losses 0.62 0.69 0.70 0.75 0.75 Core Tier 1 ratio, % 16.2 14.4¹) 13.12) 11.52) 11.12) Tier 1 ratio, % 16.2 14.4¹) 13.72) 12.12) 11.82) Capital adequacy ratio, % 20.6 19.1¹) 15.62) 14.02) 13.52) Percentage of impaired loans, % 0.17 0.23 0.19 0.17 0.17 Reserve ratio in relation to loans, % 0.19 0.25 0.21 0.21 0.24 Loan losses in relation to loans, % 0.00 0.08 0.06 0.04 0.03 1) According to Länsförsäkringar Bank’s interpretation of the regulations at the time. 2) According to Basel II. 2014 in brief Operating profit increased 45% to SEK 935 million (647) and Lending increased 11% to SEK 179 billion (162). return on equity amounted to 8.3% (6.7). On 31 December 2014, the Bank Group’s Core Tier 1 ratio Net interest income increased 16% to SEK 2,580 M (2,230). amounted to 16.2%. Loan losses remained low at SEK –7 million (126), net, correspond- The number of customers increased 5% to 927,000, the number ing to a loan loss of 0.00% (0.08). of bank cards rose 10% to 425,000 and the number of deposit Business volumes increased 13% to SEK 354 billion (314). accounts increased 8%. Deposits rose 11% to SEK 77 billion (69). LÄNSFÖRSÄKRINGAR BANK 2014 BUSINESS VOLUMES NUMBER OF CUSTOMERS SEK 354 billion 927,000 CONTENTS INTRODUCTION Bank of the Year with Sweden’s most 1 The year in brief satisfied retail customers 2 Statement by the President Länsförsäkringar Bank is the fifth largest satisfied customers, maintain healthy growth OPERATIONS retail bank in Sweden with a business volume in volumes and profitability at low risk, and 4 Strategy and financial position of SEK 354 billion and 927,000 customers. to increase the share of customers who have 5 Economic environment and The strategy is to offer the Länsförsäkringar both banking and insurance with Länsförsäk- market Alliance’s customers attractive banking ser- ringar. Länsförsäkringar has Sweden’s most 7 Offering vices. Close customer relationships are cre- satisfied retail bank customers according to 9 Loans and credit quality ated during personal meetings at 128 of the the Swedish Quality Index, and was named 11 Funding and liquidity regional insurance companies’ branches 2014 Bank of the Year by Swedish financial 13 Employees throughout Sweden and via digital services magazine Privata Affärer. 14 Environmental work and and telephone. The aim is to have the most sustainability 16 Board of Directors’ Report 23 Five-year summary 24 Corporate Governance Report FINANCIAL STATEMENTS Group 31 Income statement 31 Statement of comprehensive income 31 Balance sheet 32 Cash-flow statement 33 Statement of changes in LÄNSFÖRSÄKRINGAR IN BRIEF shareholders’ equity 34 Notes to the financial Local companies with customers who are statements owners and the only principal FINANCIAL STATEMENTS Parent Company Länsförsäkringar comprises 23 local and cus- the insurance customers – there are no external 68 Five-year summary tomer-owned regional insurance companies shareholders and customers’ needs and and the jointly owned Länsförsäkringar AB requirements are always Länsförsäkringar’s 70 Income statement with subsidiaries. Customers are provided with primary task. Long-term respect for custom- 70 Statement of comprehensive income a complete solution for banking, insurance, ers’ money and their security is fundamental. 70 Balance sheet pension and real-estate brokerage services The Länsförsäkringar Alliance jointly has 71 Cash-flow statement through the regional insurance companies. The slightly more than 3.5 million customers and 72 Statement of changes in regional insurance companies are owned by approximately 5,900 employees. shareholders’ equity 73 Notes to the financial 3.5 million customers statements 88 Audit report 23 local regional insurance companies OTHER INFORMATION Länsförsäkringar AB 89 Board of Directors and auditor Länsförsäkringar Länsförsäkringar Sak Länsförsäkringar Fondliv Länsförsäkringar Liv 90 Executive management Bank AB Försäkrings AB Försäkrings AB Försäkrings AB* 91 Definitions * The company is operated in 91 Financial calendar Wasa Kredit AB accordance with mutual 92 Addresses principles and is not Länsförsäkringar Hypotek AB consolidated in Länsförsäkringar AB. Länsförsäkringar Fondförvaltning AB LÄNSFÖRSÄKRINGAR BANK 2014 THE YEAR IN BRIEF 1 A local and digital Bank of the Year Statement by the President. The local presence and expectations are at low levels. The falling inflation expectations made the Riksbank attractive offering are the foundation of our success – we are at the beginning of 2015 to lower its repo the customer-owned bank with Sweden’s most satisfied retail rate to negative which also affected other customers. market interest rates.Most indications sug- gest that these historically low interest rates will continue for a long time to It was with great joy and pride that we Continued favourable performance come. Low interest rates intensify focus received the award of 2014 Bank of the in 2014 on development in the housing market, Year from Swedish financial magazine We can report strong operating profit and which continued to feature rising prices Privata Affärer. The jury, consisting of net interest income and volume grew during the year. The housing price trend business journalists and industry players, during the year in both lending and depos- and household indebtedness are highly examined and analysed the banks, while its. Fund volumes at year-end totalled significant, not only for the private bank customers also had their say. The SEK 100 billion due to positive market finances of households but also for the jury’s commendation was as follows: “The growth and positive inflows. Customers national economy as a whole. This trend smallest ‘major’ bank is expanding with- have increasingly chosen to save in index imposes new demands on customers and out any growing pains and giving profits funds in recent years. Accordingly, to offer also us as a bank. Our operations are based back to satisfied customers.” This is con- customers one of the best fund offerings in on customer value and we want to help our firmation that our strategy based on cus- the market, we lowered our fees for index customers achieve financial security. tomer ownership and local presence is funds by 50% from the start of the year. highly successful. It is also the foundation We see healthy growth in lending, Responsible mortgage advice of our successful growth. We are the bank while we are maintaining high credit qual- In 2014, Länsförsäkringar was the first in with the highest growth and we are suc- ity. We have conservative and consistent the market to certify all of its mortgage ceeding as a competitive full-service bank loan origination that has given us a advisors. Interest on mortgages is the larg- in the retail segment without losing the high-quality loan portfolio. All loans are est expense for many households, mean- benefits of being a smaller-scale player. In granted in Sweden and in SEK. Most bor- ing that a mortgage has the greatest impact the autumn of 2014, the annual survey rowers are households across Sweden who on customers’ financial security. By certi- performed by the Swedish Quality Index take out loans for their single-family fying our mortgage advisors we can (SQI) once again revealed that Läns- homes or tenant-owned apartments. We ensure a high level of security in our advi- försäkringar has Sweden’s most satisfied continue to post a favourable trend in the sory services and strengthen consumer retail bank customers. For a long time, we agricultural sector, with our loan portfolio protection. Sound advice provides a plat- have been building a unique platform with mainly comprising smaller family-owned form for customers to make decisions that a strong, local full-service offering based agricultural operations. The bank has a result in secure and stable private finances, on making banking as straight-forward, stable credit rating due to its favourable which ultimately leads to satisfied custom- quick and personal as possible for our cus- capitalisation, high credit quality and sta- ers. We are convinced that what is good tomers, thus creating security and clarity. ble liquidity situation, which combined for customers in the long term is also good The SQI survey showed that modern-day with growth and improved profitability for us as a bank. It is ultimately an issue of bank customers have very high demands provide sustainability and low risk. trust in banks.