Quarterly Report • Jul 14, 2023
Quarterly Report
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Storebrand Group (unaudited)
| Storebrand Group 3 | |
|---|---|
| Savings 7 | |
| Insurance 9 | |
| Guaranteed pension 11 | |
| Other 13 | |
| Balance sheet and capital situation 14 | |
| Outlook 17 |
| Income statement 21 | |
|---|---|
| Statement of comprehensive income 22 | |
| Statement of financial position 23 | |
| Statement of changes in equity 24 | |
| Statement of cash flow 25 | |
| Notes 27 |
| Income statement 77 | |
|---|---|
| Statement of comprehensive income 77 | |
| Statement of financial position 78 | |
| Statement of changes in equity 79 | |
| Statement of cash flow 80 | |
| Notes 81 | |
| Declaration by member of Board 82 |
Storebrand's ambition is to provide our customers with financial freedom and security by being the best provider of long-term savings and insurance. The Group offers an integrated product range spanning from life insurance, P&C insurance, asset management and banking to private individuals, companies and public sector entities. The Group is divided into the segments Savings, Insurance, Guaranteed Pension and Other.
| 2023 | 2022 | 01.01 - 30.06 | Full year | |||||
|---|---|---|---|---|---|---|---|---|
| NOK million | Q2 | Q1 | Q4 | Q3 | Q2 | 2023 | 2022 | 2022 |
| Fee and administration income | 1,591 | 1,552 | 1,641 | 1,507 | 1,456 | 3,143 | 2,914 | 6,062 |
| Insurance result | 382 | 357 | 390 | 475 | 427 | 739 | 799 | 1,664 |
| Operational cost | -1,460 | -1,391 | -1,410 | -1,272 | -1,181 | -2,851 | -2,326 | -5,008 |
| Cash equivalent earnings from operations | 513 | 518 | 621 | 710 | 703 | 1,031 | 1,387 | 2,718 |
| Financial items and risk result life | 264 | 255 | 219 | -38 | -119 | 519 | -168 | 13 |
| Cash equivalent earnings before amortisation | 777 | 773 | 841 | 672 | 583 | 1,550 | 1,219 | 2,732 |
| Amortisation and write-downs of intangible assets | -56 | -62 | -62 | -61 | -39 | -119 | -79 | -202 |
| Cash equivalent earnings before tax | 720 | 711 | 778 | 611 | 544 | 1,431 | 1,140 | 2,530 |
| Tax | 222 | 70 | 12 | -136 | -37 | 292 | 349 | 225 |
| Cash equivalent earnings after tax | 942 | 781 | 790 | 475 | 507 | 1,723 | 1,489 | 2,754 |
From 2023, the Storebrand Group reports its official IFRS financial statements in accordance with IFRS 17 and IFRS 9, which replaced IFRS 4 and IAS 39 from 1 January 2023. The purpose of the new standard is to establish uniform practices for the accounting treatment of insurance contracts and greater transparency, both between insurance companies and sectors. The implementation of IFRS 17 has a significant impact on the accounting for insurance contracts in the Storebrand Group, including the timing of recognition and presentation in the financial statements.
A comment on the financial performance under IFRS is given in the subsection below. For the remaining part of the report, Storebrand continues to report and comment on the alternative income statement in parallel with IFRS statements of financial position. The alternative income statement may differ significantly from the IFRS financial statements, especially for the insurance part of the business reporting in accordance with IFRS 17. While the alternative income statement is an approximation of the cash generated in the period, the IFRS statement includes profit-and-loss effects of updated estimates and assumptions about the timing of future cash flows and insurance services provided3 . Detailed disclosure of Storebrand Group's IFRS statements and notes are available under the "Financial statements Storebrand Group" section in this report.
Storebrand Group's net insurance service result under IFRS was NOK 487m in the 2nd quarter (NOK 693m). Figures in brackets are restated numbers according to IFRS 17 from the corresponding period last year. A decrease of NOK 207m is primarily related to the IFRS 17 contracts with a coverage period on less than 12 months, and is driven by an increase in the reported claims as well as an increase in inflation. The contracts measured under variable fee approach and general measurement model have contributed positively to the total net insurance service result in the 2nd quarter, mainly due to increased interest rates that increases the contractual service margin and thus the contractual service margin release into the insurance service revenue. Storebrand Group's profit after tax expenses was NOK 816m in the 2nd quarter under IFRS, compared to NOK 475m on a restated basis for the corresponding period last year. Higher volatility is expected on a general basis under IFRS 17 due to measurement models applied.
Storebrand Group's cash equivalent earnings before amortisation were NOK 777m (NOK 583m) in the 2nd quarter and NOK 1,550m (NOK 1,219m) year to date. The underlying growth continues to be strong across the business. Rising global equity markets, positive net flow and favourable currency effects year to date drive record high assets under management. Storebrand has an ambition to achieve cash equivalent earnings before amortisation of NOK 4bn in 2023.
1 Cash equivalent earnings before amortisation and tax. www.storebrand.no/ir provides an overview of APMs used in financial reporting.
2 The income statement is based on reported IFRS results for the individual group co
3 Due to the fundamental differences between IFRS 17 and the alternative income
statement, it is not possible to reconcile the numbers.
During the year external factors such as persistent high inflation, currency effects and increasing disability levels have had negative implications on the cost and claims development. Whilst these factors represent increased uncertainty, the Group works actively with measures to reach the full year ambition. Measures include repricing and cost initiatives.
Total fee and administration income amounted to NOK 1,591m (NOK 1,456m) in the 2nd quarter and NOK 3,143m (NOK 2,914m) year to date, corresponding to an increase of 9% compared to the same quarter last year and an increase of 8% year to date. Income growth is driven by strong premium growth in Unit Linked Norway, supported by the Danica acquisition, and in Storebrand Bank. In Asset Management, fewer transaction fees have led to some income decline compared to last year.
The Insurance result decreased to NOK 382m (NOK 427m) in the 2nd quarter and NOK 739m (NOK 799m) year to date due to high claims in P&C and Health & Group business lines. Compared to the corresponding period last year growth remains strong for all segments, driven by a combination of organic growth and the Danica acquisition. High frequency of claims in motor and negative result from the natural perils loss pool explains the weak P&C result. 'Health and Group life' has a high claims ratio driven by increased claims frequency and high disability respectively. Measures, including further repricing with full effect from 2024, have been taken to improve the robustness and profitability in the affected segments. The total combined ratio for the Insurance segment was 96% (88%) in the 2nd quarter and 96% (90%) year to date – above the full year target of 90-92%.
The Group's operational cost amounted to NOK -1,460m (NOK -1,181m) in the 2nd quarter and NOK -2,851m (NOK -2,326m) year to date. The increase is mainly attributed to acquired business and integration cost. Inflation, currency, performance related costs, growth initiatives and digital investments are also contributing factors. For the acquired business, profitability will increase as synergies are gradually realised.
Storebrand has cost guidance of NOK 5.3bn for the full year. The cost guidance does not include integration cost, currency and performance related cost, amounting to NOK -250 m year to date. Adjusted for this, operational cost year to date was NOK -2,601m. The full year cost guidance remains intact. Storebrand continues to focus on strong cost discipline, as has been demonstrated over the past decade.
Overall, the cash equivalent earnings from operations amounted to NOK 513m (NOK 703m) in the 2nd quarter and NOK 1,031m (NOK 1,387m) year to date.
The 'financial items and risk result' amounted to NOK 264m (NOK -119m) in the 2nd quarter and NOK 519m (NOK -168m) year to date. Net profit sharing amounted to NOK 53m (NOK 11m) in the 2nd quarter and NOK 72m (NOK -28m) year to date. In the Norwegian portfolio focus is on rebuilding buffer capital after last year's reduction, and profit sharing is close to zero in the quarter and year to date.
In the Swedish business profit sharing is positive but moderate in the quarter and year to date driven by development in market returns as well as the high Swedish inflation. The risk result amounted to NOK 69m (NOK 54m) in the 2nd quarter and NOK 149m (NOK 135m) year to date. A strong longevity risk result as well as a positive reserve adjustment in Norwegian Paid-up policies are the main contributing factors.
Amortisation of intangible assets from acquired business amounted to NOK -56m (NOK -39m) in the 2nd quarter and NOK -119m (NOK -79m) year to date. The increase compared to the restated figures for 2022 is attributed to the Danica acquisition.
Storebrand booked a tax income for the Group of NOK 222m (NOK -37m) in the 2nd quarter and NOK 292m (NOK 349m) year to date. As previously announced, Storebrand Livsforsikring AS appealed to the Tax Appeals Committee (Skatteklagenemda) a decision made by The Norwegian Tax Administration (TNTA) regarding the uncertain tax position for the income year 2015 claiming changes should be made in the tax returns for Storebrand Livsforsikring AS. During the quarter, Storebrand received a ruling from the Tax Appeals Committee, which gives Storebrand full consent. Based on the decision from the Tax Appeals Committee, Storebrand has recognized a tax gain of approx. NOK 440m in the quarter. The tax case in question is described in more detail in note 27 in the annual accounts for 2022 as "case A" and "case C". The estimated normal tax rate is 19-22%, depending on each legal entity's contribution to the Group result. Different tax rates in different countries of operations as well as currency fluctuations impact the quarterly tax rate.
The Group reports its cash equivalent earnings by business segment. For a more detailed description, see the sections by segment in the report.
During the quarter Storebrand completed the NOK 500m share buyback program announced on 29 March 2023. The total number of shares purchased under the program was 6,147,178 at an average price of NOK 81.34 per share. When the solvency ratio is above 175%, the Board of Directors intends to continue with share buybacks. Based on the strong solvency position a forward-looking assessment of expected solvency generation with considerations of future events and risks, the Board intends to continue the share buyback program.
Storebrand applied to the Financial Supervisory Authority (FSA) for additional share buybacks amounting to a maximum of NOK 1bn (divided into two tranches) to be carried out during second half of 2023. The approval from the FSA was received on 13 July 2023, and a first tranche amounting to a maximum of NOK 500m is initiated on 14 July 2023 and will end no later than 22 September 2023. As previously stated, the ambition is to return NOK 10bn of excess capital by the end of 2030, primarily in the form of share buybacks, as the run-off of the guaranteed business releases capital.
| 2023 | 2022 | 01.01 - 30.06 | Full year | |||||
|---|---|---|---|---|---|---|---|---|
| NOK million | Q2 | Q1 | Q4 | Q3 | Q2 | 2023 | 2022 | 2022 |
| Savings - non-guaranteed | 395 | 361 | 456 | 401 | 392 | 757 | 796 | 1,653 |
| Insurance | 63 | 56 | 92 | 211 | 176 | 120 | 293 | 596 |
| Guaranteed pension | 293 | 285 | 270 | 148 | 254 | 578 | 485 | 903 |
| Other profit | 25 | 71 | 23 | -89 | -238 | 95 | -354 | -420 |
| Cash equivalent earnings before amortisation | 777 | 773 | 841 | 672 | 583 | 1,550 | 1,219 | 2,732 |
| 2023 | 2022 | 01.01 - 30.06 | Full year | |||||
|---|---|---|---|---|---|---|---|---|
| Q2 | Q1 | Q4 | Q3 | Q2 | 2023 | 2022 | 2022 | |
| Cash equivalent EPS | 2.16 | 1.82 | 1.83 | 1.14 | 1.16 | 3.98 | 3.33 | 6.31 |
| Equity | 28,902 | 30,266 | 29,519 | 28,903 | 28,968 | 28,902 | 28,968 | 29,519 |
| Cash ROE, annualised | 15.3% | 12.9% | 12.7% | 7.8% | 8.1% | 13.9% | 11.7% | 10.6% |
| Solvency II ratio | 196% | 179% | 184% | 174% | 195% | 196% | 195% | 184% |
| Target | Actual |
|---|---|
| Cash return on equity (after tax) | 13.9% |
| Future Storebrand (Savings & Insurance)* | 45% |
| Back book (Guaranteed & Other)* | 4% |
| Dividend pay-out ratio | 72% |
| Solvency II ratio Storebrand Group > 150% |
196% |
* The RoE is calculated based on the profit for the last 12 months, after tax and before amortisation of intangible assets, divided on a pro forma distribution of the IFRS equity less hybrid capital per line of business (opening balance). The capital is allocated based on the capital consumption under SII and CRD IV adjusted for positive capital contribution to own funds. The segments Savings, Insurance and Other are calibrated at 150% of the capital requirement (before own funds contribution), while the remainder of the capital is allocated to the Guaranteed segment. The methodology is an estimation of ROE pr. reporting segment.
The Savings segment includes savings products without interest rate guarantees. The segment consists of Defined Contribution pensions in Norway and Sweden under the Unit Linked products, asset management and retail banking products.
| 2023 | 2022 | 01.01 - 30.06 | Full year | |||||
|---|---|---|---|---|---|---|---|---|
| NOK million | Q2 | Q1 | Q4 | Q3 | Q2 | 2023 | 2022 | 2022 |
| Fee and administration income | 1,269 | 1,234 | 1,293 | 1,174 | 1,130 | 2,503 | 2,266 | 4,733 |
| Operational cost | -898 | -861 | -848 | -763 | -718 | -1,759 | -1,420 | -3,031 |
| Cash equivalent earnings from operations | 371 | 373 | 445 | 410 | 412 | 745 | 846 | 1,701 |
| Financial items and risk result life | 24 | -12 | 11 | -9 | -20 | 12 | -50 | -49 |
| Cash equivalent earnings before amortisation | 395 | 361 | 456 | 401 | 392 | 757 | 796 | 1,653 |
The Savings segment reported cash equivalent earnings before amortisation of NOK 395m (NOK 392m) in the 2nd quarter and NOK 757m (NOK 796m) year to date. Positive net flow and good market returns have led to strong growth in assets under management year to date to an all-time high level of 1,143 bn.
The fee and administration income in the Savings segment amounted to NOK 1,269m (NOK 1,130m) in the 2nd quarter and NOK 2,503m (NOK 2,266m) year to date, corresponding to a growth of 9% (adjusted for currency effect NOK vs SEK). In Asset Management, the income is reduced by 4% both compared to the same quarter last year and year to date, explained by fewer transaction fees. Earned but not booked performance related income amounts to NOK 79m (NOK 20m) in the quarter and NOK 132m (NOK 47m) year to date, and will be booked in December for the full year. In the bank, income grew by 46% from the 2nd quarter last year and 43% year to date, driven by lending growth and a higher net interest margin. In Unit Linked Norway, income grew 23% compared to the same quarter last year and 22% year to date. The growth is attributed to the Danica acquisition and solid growth in the underlying business. In Sweden, income grew 10% compared to the same quarter last year and 4% year to date.
Operational cost amounted to NOK -898m (NOK -718m) in the 2nd quarter and NOK -1,759m (NOK -1,420m) year to date. Performance related costs in funds with performance fees amounted to NOK -36m (NOK -6m) in the quarter and NOK -58m (NOK -17m) year to date. Cost increases are below inflation, adjusted for performance related cost, currency effects and costs associated with acquisitions.
The financial result was NOK 24m (NOK -20m) in the 2nd quarter and NOK 12m (NOK -50m) year to date.
The Norwegian fintech company Kron has been a part of the Storebrand Group since January 2023 and will be reported in the Savings segment. Kron had a negative effect on cash equivalent earnings before amortisation amounting to NOK -25m in the quarter and NOK -47 year to date.
Total assets under management in Unit Linked increased to NOK 357bn (NOK 276bn) from NOK 343bn last quarter. Unit Linked premiums increased to NOK 7.0bn (NOK 5.3bn) in the 2nd quarter. Net inflow (from premiums, claims and withdrawals, and transfers) amounted to NOK 1.0bn (NOK 1.6bn).
In the Norwegian Unit Linked business, assets under management increased to NOK 196bn (NOK 146bn). The growth stems from high occupational pension premiums, new sales, asset return and limited pension payments due to the young nature of the product. Storebrand is the largest provider of Defined Contribution pensions in Norway, with a market share of 30,5% of gross premiums written (at the end of the 1st quarter 2023).
In the Swedish market, SPP is the second largest provider of nonunionised occupational pensions with a market share of 16% measured by gross premiums written including transfers (at the end of the 1st quarter 2023). In local currency, Unit Linked assets under management increased during the quarter by SEK 11.0bn and amounted to SEK 162bn. The underlying growth is driven by strong growth in sales (APE), amounting to NOK 841m (NOK 676m) in the quarter. The transfer balance has shown a positive development and net inflow amounted to NOK 2.0bn (NOK -0.1bn) in the 2nd quarter.
Assets under management in Storebrand Asset Management increased during the quarter by NOK 32.5bn (3%) to NOK 1,143bn. The net inflow was NOK 8.7bn in the quarter and NOK 26.7bn year to date.
The bank lending portfolio increased by NOK 2.8bn (4%) to NOK 72.7bn during the quarter and NOK 5.6bn year to date. The growth is attributed to continued strong sales. The portfolio consists of low-risk home mortgages with an average loan-tovalue (LTV) of 62%. NOK 16.6bn of the mortgages are booked on the balance sheet of Storebrand Livsforsikring AS.
| 2023 2022 |
|||||
|---|---|---|---|---|---|
| NOK million | Q2 | Q1 | Q4 | Q3 | Q2 |
| Unit linked Reserves | 357,150 | 343,347 | 314,992 | 302,337 | 276,319 |
| Unit linked Premiums | 7,024 | 6,883 | 6,583 | 6,278 | 5,333 |
| AuM Asset Management | 1,143,232 | 1,110,733 | 1,019,988 | 1,001,100 | 1,008,705 |
| Retail Lending* | 72,700 | 69,812 | 67,061 | 64,879 | 62,559 |
The Insurance segment provides health insurance in the Norwegian and Swedish corporate and retail markets, P&C insurance and personal risk products in the Norwegian retail market and employer's liability insurance and pension-related insurance in the Norwegian and Swedish corporate markets.
| 2023 | 2022 | 01.01 - 30.06 | |||||||
|---|---|---|---|---|---|---|---|---|---|
| NOK million | Q2 | Q1 | Q4 | Q3 | Q2 | 2023 | 2022 | 2022 | |
| Insurance premiums f.o.a. | 1,727 | 1,672 | 1,630 | 1,613 | 1,449 | 3,399 | 2,846 | 6,088 | |
| Claims f.o.a. | -1,345 | -1,315 | -1,240 | -1,138 | -1,021 | -2,660 | -2,047 | -4,424 | |
| Operational cost | -308 | -310 | -318 | -284 | -260 | -618 | -510 | -1,112 | |
| Cash equivalent earnings from operations | 74 | 47 | 72 | 192 | 168 | 121 | 289 | 552 | |
| Financial result | -11 | 9 | 20 | 20 | 8 | -1 | 4 | 43 | |
| Contribution from SB Helseforsikring AS | -52 | -20 | 0 | 7 | 0 | -71 | -7 | -1 | |
| Cash equivalent earnings before amortisation | 63 | 56 | 92 | 211 | 176 | 120 | 293 | 596 | |
| Claims ratio | 78% | 79% | 76% | 71% | 71% | 78% | 72% | 73% | |
| Cost ratio | 18% | 19% | 20% | 18% | 18% | 18% | 18% | 18% | |
| Combined ratio | 96% | 97% | 96% | 88% | 88% | 96% | 90% | 91% |
Insurance premiums f.o.a. amounted to NOK 1,727m (NOK 1,449m) in the 2nd quarter and NOK 3,399m (NOK 2,846m) year to date, corresponding to an increase of 19% compared to the same quarter last year and an increase of 19% year to date. Adjusted for Danica, insurance premiums f.o.a. increased by 12% compared to the same quarter last year.
Cash equivalent earnings before amortisation amounted to NOK 63m (NOK 176m) in the 2nd quarter and NOK 120m (NOK 293m) year to date. The total combined ratio was 96% (88%) in the 2nd quarter and 96% (90%) year to date, above the targeted combined ratio of 90-92%. The weak combined ratio development is driven by P&C and Group Life segments. In P&C, the claims ratio deteriorated due to high frequency in motor claims and claims inflation due to higher cost for spares parts following the weakened currency. A large claim covered by the Natural Perils Pool, where Storebrand has a market share of just under 3%, also contributed negatively. In Group life, the weak development is attributed to challenging disability development in the association's segments. Reserves was strengthened due to inflation adjustment of the national base amount, which defines compensation levels in the products. Measures such as further reprising where needed and enhanced risk selection is implemented with full effect from 2024.
Within 'P&C & Individual life', strong growth continued with premiums f.o.a. growing 19% in the 2nd quarter compared to last year. The cash equivalent earnings before amortisation was NOK 82m (NOK 128m) in the 2nd quarter and NOK 154m (NOK 206m) year to date. The claims ratio was 72% (63%) in the 2nd quarter and 72% (66%) year to date. Operational cost increased to NOK -
234m (NOK -186m) in the 2nd quarter and NOK -462m (NOK - 366m) year to date due to growth and increased activity. Altogether, the product segment delivered a combined ratio of 95% (85%) in the 2nd quarter and 95% (88%) year to date.
'Health and Group life' reported a cash equivalent earnings before amortisation of NOK -81m (NOK 14m) in the 2nd quarter and NOK -105m (NOK 8m) year to date. The disability development in the associations segment of the Group life business has been challenging and measures including repricing is taken to improve the profitability. The corporates segment of the business had a positive development in the 2nd quarter. The Health insurance business delivered a weak result in the quarter due to higher claims in both the Norwegian and Swedish business. This impacts the financial result negatively. A comprehensive action plan is being implemented to restore profitability. In sum, 'Health and Group life' reported a combined ratio of 114% (97%) in the 2nd quarter and 108% (99%) year to date.
The cash equivalent earnings before amortisation for 'Pension related disability insurance Nordic' was NOK 62m (NOK 34m) in the 2nd quarter and NOK 70m (NOK 78m) year to date. Disability levels improved in the Norwegian business in the 2nd quarter, but the development is being monitored closely as we generally see disturbing trends in work absence due to sickness and disability statistics. Price increases will be implemented with full effect from 2024. In the Swedish business development is stable with satisfactory claims levels. Altogether the combined ratio was 86% (91%) in the 2nd quarter and 93% (89%) year to date.
The cost ratio was 18% (18%), with cost amounting to NOK -308m (NOK -260m) in the 2nd quarter and NOK -618m (NOK -510m) year to date. The higher cost level is driven by growth in the business and the take-over of the Danica Business.
The Insurance investment portfolio is primarily invested in fixed income securities with short to medium duration and achieved a financial return of 0.8% in the 2nd quarter and 1.4% year to date. With higher rates, the return on the insurance investment portfolio is expected to increase in the coming quarters.
The Insurance segment offers a broad range of products to the retail market in Norway, as well as to the corporate market in both Norway and Sweden. Storebrand has an ambition to grow the insurance business, particularly within P&C. As of the 2nd quarter, 51% of the insurance portfolio is within 'P&C & Individual Life'. Storebrand is one of the fastest growing companies within Norwegian retail P&C and now holds a market share of 6.5% as of the 2nd quarter compared to 6.2% in the same quarter last year.
Overall growth in annual portfolio premiums amounted to 18% compared to the same quarter last year. Growth in 'P&C & Individual life' amounted to 24% and is driven by strong contribution from sales agents, distribution partnerships and Danica. 'Health & Group life' grew by 15%, driven by price adjustments, and 'Pension related disability insurance' grew by 27%, driven by price adjustments and salary increases, and the acquisition of Danica. Overall, double digit growth is expected to continue within Insurance in the coming years.
| 2023 | 2022 | ||||
|---|---|---|---|---|---|
| NOK million | Q2 | Q1 | Q4 | Q3 | Q2 |
| P&C & Individual life | 4,202 | 4,081 | 4,013 | 3,889 | 3,512 |
| Health & Group life* | 2,236 | 2,150 | 2,071 | 2,056 | 2,006 |
| Pension related disability insurance Nordic | 1,856 | 1,834 | 1,738 | 1,703 | 1,487 |
| Total written premiums | 8,294 | 8,065 | 7,822 | 7,648 | 7,005 |
| Investment portfolio** | 12,052 | 11,413 | 10,642 | 10,766 | 10,181 |
* Includes all written premiums in Storebrand Helseforsikring AS (50/50 joint venture with Ergo International).
** Ca. NOK 2,8bn of the investment portfolio is linked to disability coverages where the investment result goes to the customer reserves and not as a result element in the P&L.
The Guaranteed Pension segment includes long-term pension savings products that give customers a guaranteed rate of return, but most products are closed for new business and are in run-off. The area includes defined benefit pensions in Norway and Sweden, paid-up policies, public sector occupational pensions, and individual capital and pension insurance.
| 2023 | 2022 | 01.01 - 30.06 | Full year | |||||
|---|---|---|---|---|---|---|---|---|
| NOK million | Q2 | Q1 | Q4 | Q3 | Q2 | 2023 | 2022 | 2022 |
| Fee and administration income | 387 | 378 | 413 | 398 | 395 | 765 | 786 | 1,597 |
| Operational cost | -216 | -192 | -233 | -208 | -206 | -408 | -409 | -850 |
| Cash equivalent earnings from operations | 171 | 186 | 180 | 190 | 189 | 357 | 377 | 747 |
| Risk result life & pensions | 69 | 81 | 53 | 74 | 54 | 149 | 135 | 262 |
| Net profit sharing | 53 | 18 | 38 | -116 | 11 | 72 | -28 | -106 |
| Cash equivalent earnings before amortisation | 293 | 285 | 270 | 148 | 254 | 578 | 485 | 903 |
Guaranteed pension achieved cash equivalent earnings before amortisation of NOK 293m (NOK 254m) in the 2nd quarter and NOK 578m (NOK 485m) year to date.
Fee and administration income was reduced to NOK 387m (NOK 395m) in the 2nd quarter and NOK 765m (NOK 786m) year to date. The reduction mainly stems from the paid-up policies where some adjustments in the fee structure and income accruals were made. The majority of the guaranteed products are closed for new business and are in long term run-off, which should gradually reduce the fee income. However, Public Occupational Pensions (reported under Defined Benefit Norway) is a growth area.
Operational cost amounted to NOK -216m (NOK -206m) in the 2nd quarter and NOK -408m (NOK -409m) year to date.
The cash equivalent earnings from operations was stable and amounted to NOK 171m (NOK 189m) in the 2nd quarter and NOK 357m (NOK 377m) year to date.
The risk result was NOK 69m (NOK 54m) in the 2nd quarter and NOK 149m (NOK 135m) year to date. A strong longevity and disability risk, result as well as a positive reserve adjustment in Norwegian Paid-up policies are the main contributing factors to the result, which altogether amounted to NOK 59m (NOK 24m) in the quarter.
Net profit sharing amounted to NOK 53m (NOK 11m) in the 2nd quarter and NOK 72m (NOK -28m) year to date, generated in the Swedish business. In the Norwegian portfolio focus is on rebuilding buffer capital after last year's reduction, and profit sharing is close to zero in the quarter and year to date. In the Swedish business profit sharing is positive but moderate in the quarter and year to date driven by development in market returns as well as the high Swedish inflation. The deferred capital contributions (DCC) was reduced in the quarter.
The majority of the guaranteed products are in long term run-off as pension payments are paid out to policyholders. Most customers have switched from guaranteed to non-guaranteed products.
As of the 2nd quarter, customer reserves of guaranteed pensions amounted to NOK 279bn. This is an increase of NOK 6bn in the year to date, primarily from growth in public sector pensions as well as currency effects from the Swedish business. Net flow of guaranteed pensions amounted to NOK -2.5bn in 2nd quarter (NOK -2.5bn in 2022). As a share of the total balance sheet, guaranteed reserves amounted to 43.9% (49.9%) at the end of the 2nd quarter.
A growth area for Storebrand is public sector occupational pensions, where Storebrand won its first mandates in 2020. The public sector effort has been the driver for a net increase in Defined Benefit reserves in the Norwegian business over the last years. Reserves for public sector mandates were NOK 18bn as of the 2nd quarter reflecting an increase of 2bn year to date due to tender offers won in late 2022. A new municipality representing 0.5bn was won in the 2nd quarter and will be transferred in 2024.
Paid-up policies are experiencing some growth over time as active Defined Benefit contracts eventually become Paid-up policies. Reserves amounted to NOK 143bn as of the 2nd quarter, the same level as the start of the year.
Guaranteed portfolios in the Swedish business totalled NOK 83bn as of the 2nd quarter, an increase of NOK 3bn year to date, driven by strengthening of the currency (SEK).
Storebrand's strategy is to have solid buffer capital levels in order to secure customer returns and shield shareholder's equity under turbulent market conditions. Buffer capital (excluding excess value of bonds at amortised cost) was 25.4bn as of the 2nd quarter, in line with the 1st quarter and an increase of NOK 2.0bn year to date. As a share of guaranteed reserves, buffer capital levels in Norwegian products amount to 6.0% (6.9%) and 21.1% (17.5%) in Swedish products. This does not include off-balance sheet excess values of bonds at amortised cost, which at the end of the 2nd quarter amounted to a deficit of NOK -15.5bn (NOK - 9.6bn). The deficit indicates that the reinvestment yield in the market currently is higher than the average yield in the portfolio. As bonds at amortised cost mature, their excess values will trend to zero.
| 2023 | 2022 | ||||
|---|---|---|---|---|---|
| NOK million | Q2 | Q1 | Q4 | Q3 | Q2 |
| Guaranteed reserves | 279,358 | 282,559 | 273,673 | 275,622 | 274,918 |
| Guaranteed reserves in % of total reserves | 43.9% | 45.1% | 46.5% | 47.7% | 49.9% |
| Net flow of premiums and claims | -2,486 | -2,259 | -2,846 | -2,720 | -2,454 |
| Buffer capital in % of customer reserves Norway | 6.0% | 6.5% | 6.3% | 6.2% | 6.9% |
| Buffer capital in % of customer reserves Sweden | 21.1% | 19.0% | 19.0% | 18.2% | 17.5% |
The result for Storebrand ASA is reported under Other, as well as the financial result for the company portfolios of Storebrand Life Insurance and SPP. Group eliminations are reported in a separate table below.
| 2023 | 2022 | 01.01 - 30.06 | Full year | |||||
|---|---|---|---|---|---|---|---|---|
| NOK million | Q2 | Q1 | Q4 | Q3 | Q2 | 2023 | 2022 | 2022 |
| Fee and administration income | 6 | 6 | 2 | 6 | 4 | 11 | 9 | 17 |
| Operational cost | -109 | -94 | -77 | -87 | -70 | -203 | -134 | -299 |
| Cash equivalent earnings from operations | -104 | -88 | -75 | -82 | -66 | -192 | -125 | -282 |
| Financial items and risk result life | 129 | 159 | 98 | -7 | -172 | 287 | -230 | -138 |
| Cash equivalent earnings before amortisation | 25 | 71 | 23 | -89 | -238 | 95 | -354 | -420 |
| 2023 | 2022 | 01.01 - 30.06 | Full year | |||||
|---|---|---|---|---|---|---|---|---|
| NOK million | Q2 | Q1 | Q4 | Q3 | Q2 | 2023 | 2022 | 2022 |
| Fee and administration income | -71 | -66 | -66 | -70 | -73 | -137 | -148 | -284 |
| Operational cost | 71 | 66 | 66 | 70 | 73 | 137 | 148 | 284 |
| Financial items and risk result life | ||||||||
| Cash equivalent earnings before amortisation |
The Other segment reported cash equivalent earnings before amortisation of NOK 25m (NOK -238m) in the 2nd quarter and 95m (NOK -354m) year to date. The positive result this year stems primarily from positive returns on investments in company portfolios due to higher interest rates and hence higher running yield in the bond portfolios.
The operational cost amounted to NOK -109m (NOK -70m) in the 2nd quarter and -203m (NOK -134m) year to date, but includes integration costs related to acquired business of NOK -30m in the quarter.
The financial result for the Other segment amounted to NOK 129m in the 2nd quarter and 287m year to date, reflecting higher yields on fixed income investments at higher interest rates. The result mainly stems from returns in the company portfolios of SPP and Storebrand Life Insurance, and the financial result of Storebrand ASA. The investments in the company portfolios are primarily in interest-bearing securities in Norway and Sweden. The Norwegian company portfolio achieved a return of 0.8% in the 2nd quarter and 1.6% year to date, while the Swedish company portfolio reported a return of 0.8% in the 2nd quarter and 1.8% year to date. The company portfolios in the Norwegian and Swedish life insurance companies and the holding company amounted to NOK 29.8bn at the end of the quarter.
The Storebrand Life Insurance Group is funded by a combination of equity and subordinated loans. Interest expenses in the quarter amounted to NOK -139m. Given the interest rate level at the end of the 1st quarter, interest expenses of approximately NOK -190m per quarter are expected going forward.
Continuous monitoring and active risk management is a core area of Storebrand's business. Risk and solidity are both followed up on at the Group level and in the legal entities. Regulatory requirements for financial strength and risk management follow the legal entities to a large extent. The section is thus divided up by legal entities.
Storebrand uses the standard model for the calculation of Solvency II. The Storebrand Group's target is to have a solvency ratio above 150%. Above 175%, the Group is considered to be overcapitalised. This solvency target includes the use of the transitional rules, but with the current balance sheet in the current interest rate environment, Storebrand does not benefit from any transitional capital.
The solvency ratio was 196% at the end of the 2nd quarter, an increase of 17 percentage points from the previous quarter. Increased interest rates in combination with an increased volatility adjustment (VA) is the main explanation behind the strengthening. A strong post tax result also contributes positively to the solvency position. The solvency ratio continues to be above the threshold for overcapitalisation of 175%.
Upon transition to IFRS 17 and IFRS 9, Storebrand decided to rename its adjusted Return on equity to Cash equivalent return on equity, abbreviated to Cash ROE1 . The adjustment is done to emphasize that this is an alternative performance measure (APM) based on the alternative income statement. The reported Cash ROE can deviate significantly from a Return on equity purely based on IFRS numbers. Due to the reduced equity applicable to the calculation post transition, a new return target will be communicated as part of a capital markets day late in 2023.
Overall, the Group's quarterly Cash ROE (adjusted for amortisation and annualised) was 15.3% in the second quarter. Storebrand is a blend of fast-growing capital-light business that delivers high returns, and capital-intensive run-off business with low returns. As the business mix continue to shift towards capital light business, the Cash ROE is expected to be sustainably higher in the coming years.
The back book of guaranteed business ties up more than three quarters of the Group's capital, delivering an estimated annualised Cash ROE of 4% for the last 12 months. Whereas the front book, the "future Storebrand" delivered an estimated annualised Cash ROE of 45%2 for the same period. Large variations in the estimated pro forma return on equity in the front book are expected as earnings are market dependent, while the capital base is primarily related to mortgage lending in the bank and to insurance.
Storebrand ASA (holding company) held liquid assets of NOK 4.0bn at the end of the 2nd quarter. Liquid assets consist primarily of short-term fixed income securities with a high credit rating and bank deposits. Storebrand ASA's total interest-bearing liabilities were NOK 0.5bn at the end of the 2nd quarter. The next maturity date for bond debt is in September 2025, when NOK 0.5bn matures. In addition to the liquidity portfolio, the company has an unused credit facility of EUR 200m that runs until December 2025.
Storebrand ASA owned 13,297,612 of the company's own shares at the end of the 2nd quarter, representing 2.82% of the share capital, following repurchases under Storebrand's share buyback program. In April 2023, Storebrand ASA's General Meeting adopted the proposal of the Board of Directors to redeem (i.e. cancel) 6,477,024 shares. These shares will be redeemed in the 3rd quarter. The shares repurchased under subsequent buyback programs will be redeemed, subject to permission from the Financial Supervisory Authority and resolution from Storebrand ASA's General Meeting in 2024.
1 Please find detailed information in Storebrand's guide to Alternative Performance Measures (APMs) on the investor relations pages.
2The RoE is calculated based on the profit for the last 12 months, after tax and before amortisation of intangible assets, divided on a pro forma distribution of the IFRS equity less hybrid capital per line of business (opening balance). The capital is allocated based on the capital consumption under SII and CRD IV adjusted for positive capital contribution to own funds. The segments Savings, Insurance and Other are calibrated at 150% of the capital requirement (before own funds contribution), while the remainder of the capital is allocated to the Guaranteed segment. The methodology is an estimation of ROE pr. reporting segment.
Additional staturory reserves in % of customer funds with guarantee
The market value adjustment reserve and buffer fund decreased during the 2nd quarter by NOK 0.6bn and increased by NOK 0.9bn year to date. At the end of the 2nd quarter 2023 the market value adjustment reserve and buffer fund amounted to NOK 2.7bn, corresponding to 1.6% (2.0% at the end of 1st quarter 2023) of customer funds with a guarantee. New business transferred in contributed positively with NOK 0.2bn in buffer fund for the 1st quarter 2023.
The additional statutory reserves amounted to NOK 8.3bn, corresponding to 5.0% (5.2% at the end of the 1st quarter 2023) of customer funds with guarantee at the end of the 2nd quarter 2023. Investment returns in customer portfolios lower than the guaranteed interest rate in the quarter decreased reserves by NOK 0.4bn in 2nd quarter and NOK 0.7bn year to date.
Together, the customer buffers amounted to 6.6% (7.2% at the end of the 1st quarter 2023) of customer funds with guarantee at the end of the 2nd quarter 2023.
Customer assets increased in the 2nd quarter by NOK 4.2bn and by NOK 20.3bn year to date, amounting to NOK 393bn at the end of the 2nd quarter 2023. Customer assets within non-guaranteed savings increased by NOK 4.9bn during the 2nd quarter and by NOK 16.7bn year to date, amounting to NOK 196bn at the end of the 2nd quarter 2023. Guaranteed customer assets have decreased by NOK 0.7bn in the 2nd quarter and increased by NOK 3.7bn year to date, amounting to NOK 197bn at the end of 2nd quarter 2023.
Conditional bonuses in % of customer funds with guarantee
The buffer capital (conditional bonuses) amounted to SEK 14.5bn (SEK 12.5bn) at the end of the 2nd quarter.
Q2 2022 Q3 2022 Q4 2022 Q1 2023 Q2 2023
Customer assets amounted to SEK 242bn (SEK 215bn) at the end of the 2nd quarter. Customer assets within non-guaranteed savings amounted to SEK 162bn (SEK 135bn) at the end of the 2nd quarter, which is an increase of 20% compared to the same quarter last year. Guaranteed customer assets had a flat development compared to the same quarter last year and amounted to SEK 80bn (SEK 80bn).
Loans outstanding increased by NOK 3.4bn during the 2nd quarter. The home mortgage portfolio managed on behalf of Storebrand Livsforsikring AS was reduced by NOK 0.5bn during the quarter. The combined portfolio of loans in Storebrand Bank and Storebrand Livsforsikring increased by NOK 2.9bn during the quarter and by NOK 5.6bn year to date.
The bank Group has had an increase in the risk-weighted balance sheet of NOK 2.9bn year to date. The Storebrand Bank Group had a net capital base of NOK 4.8bn at the end of the 2nd quarter. The capital adequacy ratio was 20.7 per cent and the Core Equity Tier 1 (CET1) ratio was 15.7% at the end of the quarter, compared with 21.3 per cent and 15.7%, respectively, at the end of 2022. The combined requirements for capital and CET1 were 17.3% and 13.8% respectively at the end of the 2nd quarter.
Storebrand's strategy gives a compelling combination of selffunded growth in the front book, i.e. the growth areas of the "future Storebrand", and capital return from a maturing back book of guaranteed pensions.
Storebrand aims to (a) be the leading provider of Occupational Pensions in both Norway and Sweden, (b) continue a strategy to build a Nordic Powerhouse in Asset Management and (c) ensure fast growth as a challenger in the Norwegian retail market for financial services. The combined capital, customer base, cost and data synergies across the Group provide a solid platform for profitable growth and value creation.
Storebrand continues to manage capital and a back book with guaranteed products for increased shareholder return. This includes both a dividend policy of growing ordinary dividends from earnings as well as managing the legacy products that carry interest guarantees in a capital-efficient manner. The ambition is to return NOK 10bn of excess capital by the end of 2030, primarily in the form of share buybacks, while generating additional excess capital which may fund further growth or could be returned to shareholders.
At the capital markets day in December 2020, Storebrand announced an ambition to achieve a profit before amortisation and tax of NOK 4bn in 2023. The profit ambition was reached in 2021, helped by gains from the sale of AS Værdalsbruket and strong performance in funds with performance fees. During 2023 external factors such as persistent high inflation, currency effects and increasing disability levels have had negative implications on the cost and claims development. Whilst these factors represent increased uncertainty, the Group works actively with measures to reach the full year ambition. Measures include repricing and cost initiatives.
In Norway, the market for Defined Contribution pensions is growing structurally due to the young nature of the product. High single-digit growth in Defined Contribution premiums and doubledigit growth in assets under management are expected during the next years. Storebrand aims to defend its strong position in the market, while also focusing on cost leadership and improved customer experience through end-to-end digitalisation. In July 2022, Storebrand acquired Danica in Norway, which will strengthen Storebrand's presence in the segment for small and medium sized businesses, and it will increase Storebrand's distribution capacity of both Defined Contribution pensions and personal risk products.
In the coming years, Storebrand is also looking to leverage customer, product and capital synergies by expanding our insurance offering to corporate clients within P&C. This will generate an additional income stream for the Group.
In Sweden, SPP is a leading market challenger within the segment for non-unionised pensions, with an edge in digital and ESGenhanced solutions. SPP has become a significant profit contributor to the Storebrand Group, supported by an ongoing capital release from its guaranteed products in run-off. Growth is expected to continue, driven by new sales and transfers.
As a leading occupational pension provider in the private sector, Storebrand also has a competitive pension offering to the Norwegian public sector. It is a growing market which is larger than the private sector market. It is currently dominated by one monopolist. To succeed in the market, municipalities will need to tender their pension procurements to a larger extent than today. This represents a potential additional source of revenue for Storebrand. The ambition is to gain 1% market share annually, or approximately NOK 5bn in annual net inflow.
Overall reserves of guaranteed pensions are expected to decrease in the coming years. Guaranteed reserves represent a declining share of the Group's total pension reserves and amounted to 43.9% of the pension reserves at the end of the quarter, 6 percentage points lower than a year ago. With interest rates having risen to approximately the average level of interest rate guarantees, the prospects for future profit sharing with customers has increased. Higher interest rates also allow Storebrand to build customer buffers at a faster pace, which strengthens the Group's solvency position.
In addition to managing internal pension funds, Storebrand Asset Management is growing its external mandates from institutional and retail investors. Storebrand is a local partner for Nordic investors, and a gateway to the Nordics for international investors. We offer a full product range of index, factor and actively managed funds. Storebrand is also one of the strongest providers of alternative assets (private equity, real estate, private debt and infrastructure) in the Nordic region. Over the past three decades, Storebrand has focused on ESG investments with a strong track record. The overall ambition is to grow assets under management by NOK 250bn in the period 2021-2023, while maintaining a stable fee margin.
The brand name 'Storebrand' is well recognised in Norway. It facilitates our rapid growth in the Norwegian retail market to leverage capital, customer, and operational synergies. The ambition is to grow more than 10% annually within retail savings, mortgage lending and insurance through digital sales channels and distribution partnerships. P&C insurance is a key area for profitable growth. Storebrand Bank plays an important strategic role in offering a complete range of financial products and services to the retail market. In January 2023, Storebrand also strengthened its retail savings offering by acquiring the fast growing Norwegian fintech company Kron. The acquisition will combine Kron's user experience with Storebrand's customer base, product platform and distribution. Whilst the Kron acquisition is expected to be a negative result contributor for 2023, concrete synergies with other business lines will be realised throughout the year.
Storebrand maintains a disciplined cost culture. The Group reported flat nominal costs from 2012-2020, adjusted for acquisitions, currency and performance related cost. Simultaneously, assets under management more than doubled. To accelerate growth and the Group's profit ambitions, investments in profitable growth has gradually increased costs. This includes growth in digital solutions, public occupational pensions and P&C insurance, in addition to acquired business. Should the growth not materialise, management has contingency plans in place to cut costs. Storebrand has cost guidance of NOK 5.3bn for the full year. The cost guidance does not include integration cost, currency and performance related cost, amounting to NOK -250 m year to date. Adjusted for this, operational cost year to date was NOK -2,601m. The full year cost guidance remains intact. Storebrand continues to focus on strong cost discipline, as has been demonstrated over the past decade.
Our dynamic risk management framework is designed to take appropriate risk in order to deliver returns to customers and shareholders. At the same time, the framework shall ensure that we shield our customers, shareholders, employees and other stakeholders from undesirable incidents and losses. The framework covers all risks that Storebrand may be exposed to. In 2022, the outbreak of war on the European continent has led to increased geopolitical and economic uncertainty, resulting in increased financial market volatility and increased risk monitoring in the Group.
Financial market risk is the Group's biggest risk, but main risks also include business risk, insurance risk, counterparty risk, operational risk, climate risk, currency risk, and liquidity risk. In the Board's self-assessment of risk and solvency (ORSA) process, developments in interest rates, credit spreads, and equity and property values are considered to be the biggest risks that influence the solvency of the Group. Should the economic situation worsen, and financial markets deteriorate, investment losses may occur from reduced valuations of such instruments. Storebrand has invested in a high quality real estate portfolio. However, under prevailing market conditions model-based valuations of financial instruments (Level 3), such as investment property, contain greater uncertainty than usual. Storebrand operates an active risk management strategy to optimise customer returns and shield shareholder's equity under turbulent market conditions through dynamic risk management, strong customer buffers, and by holding a significant amount of bonds at amortised cost.
Storebrand has prioritised building buffer capital from excess returns over many years. The customer buffers limit the financial risk to shareholders and policyholders in turbulent financial markets by absorbing investment losses. With 10% of customer buffers as a share of customer reserves, Storebrand effectively has NOK 27bn more in customer assets than guaranteed liabilities.
Inflation has risen in much of the world, including in Norway and Sweden. High and rapidly rising inflation rates may increase costs and insurance claims in Storebrand. However, pension liabilities (payments) are not inflation linked, limiting the impact of inflation on the Group's liabilities. Pension premiums and some insurance premiums are directly linked to wage inflation, which automatically results in premium growth. Other products, including P&C insurance, are actively repriced to mitigate the negative effects of inflation.
A consequence of higher inflation may be rising interest rates, as seen in 2022. Higher interest rates strengthen Storebrand's balance sheet and improves our ability to fulfil guaranteed pension liabilities in the long run, which also strengthens the solvency ratio and reduces solvency risk. However, the immediate short-term impact of increasing rates lead to fair value losses on fixed income investments. To reduce the financial impact from rising interest rates, Storebrand holds shorter duration bonds at fair value, and has over time built a robust portfolio of longduration bonds of high credit quality which are held at amortised cost. Changes in interest rates does not have an accounting effect on the latter.
In the long term, interest rates below the average guaranteed interest rate to customers could represent a financial risk. Over the last decade, during a period with record low interest rates, we have demonstrated Storebrand's ability to successfully adapt to the prevailing interest rate environment. The level of the average annual interest rate guarantee gradually declines as older policies with higher guarantees are phased out. To reduce the risk, Storebrand has over time reduced the asset-duration mismatch in the Norwegian portfolio and has an asset-duration matched portfolio in Sweden. Customer buffers also increase the expected booked returns in Norway and can compensate for a shortfall in returns in a low-rate environment, limiting the financial risk to shareholders and policyholders.
Increased longevity and development in disability are the main insurance risk factors for the Group. A weakening of the Norwegian economy that leads to higher unemployment may lead to higher disability levels, which can result in increased claims. The Covid-19 pandemic led to increased uncertainty in disability and related claims. The removal of infection controls in 2022 somewhat improved disability levels, but during 2023 the promising trend has reversed. Storebrand continues to monitor the development closely and seeks to be a part of the solution through both reactivation- and preventive measures.
Storebrand is affected by currency movements between the Norwegian krone and foreign currency. The exchange rate between the Norwegian krone and the Swedish krona affects the reported balance sheet and results in the Swedish entities at a consolidated level, including the effective tax rate for the Group. Several reporting lines are exposed to foreign exchange risk as a result of investments in international securities, but also as a result of some international debt funding.
To limit currency risk, Storebrand uses hedging instruments. For company portfolios and guaranteed customer portfolios, most of the assets that are in currencies other than the domestic currency are hedged. Currency hedging is also performed for a significant part of Unit Linked related investments, and for borrowing in foreign currency.
Operational risk could also affect the Group adversely. As a consequence of increased geopolitical uncertainty in 2022, Storebrand has been on heightened alert with increased monitoring of suppliers and value chains, cyber risk, and antimoney laundering (AML). Several regulatory processes, both on the domestic and international level, with potential implications for capital, customer returns and commercial opportunities are also described below in a separate section.
Changes have been made to the Norwegian tax legislation for the insurance industry over many years. Storebrand and the Norwegian Tax Administration have interpreted some of the legislation changes and the associated transitional rules differently. Consequently, Storebrand has had three uncertain tax positions with regards to recognised tax expenses. These are described in more detail in in more detail in note 27 in the annual accounts for 2022, as "case A", "case B" and "Case C". During the quarter, Storebrand received a ruling from the Tax Appeals Committee (Skatteklagenemda), which gives Storebrand full consent regarding the uncertain tax position for the income year 2015 claiming changes should be made in the tax returns for Storebrand Livsforsikring AS. Based on the decision from the Tax Appeals Committee, Storebrand has recognized a tax gain of approx. NOK 440m in the quarter. The tax case in question is described in more detail in note 27 in the annual accounts for 2022 as "case A" and "case C". The decision from the Tax Appeals Committee can be appealed to the court within 6 months. Should Storebrand's interpretation be accepted in "case B" an estimated positive tax result of up to NOK 1.6bn may be recognised. The timeline for settling the process with the Norwegian Tax Administration might take several years. If necessary, Storebrand will seek clarification from the court of law on the matter. The uncertain tax position is described in more detail in note 9.
Parliament has passed new legislation on flexible buffer fund for private sector guaranteed pension products, such as defined benefit contracts and paid-up policies. The new regulation will take effect from 1 January 2024.
Market value adjustment reserves will merge with the additional statutory reserves into a more flexible customer buffer fund which can cover negative returns. There is no cap on the size of the new buffer fund. The buffer fund is allocated to contracts, and can be subject to profit sharing. Storebrand believe that the new flexible buffer fund will have a positive impact on the investment strategy for guaranteed pension products.
A report proposing changes in the Norwegian National Insurance Pension Scheme was delivered to the Government in June 2022 and has been on public hearing. Among the proposals is automatic adjustment of retirement age for earliest possible withdrawal of pensions as longevity expectations increase. The report states that age limits in occupational and individual pension schemes should be adjusted accordingly. The Government will present proposals to parliament this autumn.
Storebrand has filed two complaints to the EFTA Surveillance Authority (ESA). Storebrand has claimed that municipalities, RHFs and hospitals have entered contracts on occupational pension with KLP, in breach of the rules on public procurement. Storebrand has also claimed that municipalities, RHFs and hospitals have granted KLP State aid in violation of Article 61 of the EEA Agreement. According to Storebrand, KLP, by withholding earned equity when customers move to other providers, is given access to capital from municipalities and hospitals on more favourable terms than other market participants would receive.
The Norwegian government has commented on the complaints, and argues that EEA-legislation does not apply, as KLP is not an economic actor and municipal occupational pension is social security. Storebrand argues that this is an insurance product delivered by life insurance companies in the marketplace. Facilitating competition has been a major goal for Norwegian insurance regulation, also for regulation particular to this product.
Storebrand expect ESA to decide on the complaints before the end of the year.
Storebrand has established a framework for capital management that links dividends to the solvency margin. The dividend policy intends to reflect the strong growth in fee-based earnings, the more volatile financial markets related earnings and the future capital release from the guaranteed book. The Board's ambition is to pay a gradually and growing ordinary dividend. When the solvency margin is sustainably above 175%, the Board will conduct share buyback programs. The purpose of buyback programs is to return excess capital released from the guaranteed liabilities that are in long-term run-off.
Due to expected increased volatility in the official financial statements under IFRS 17, Storebrand adjusted the dividend policy as of 10 May 2023. The dividend policy is stated as following:
The Board of Directors' ambition is to pay ordinary dividends per share of at least the same nominal amount as the previous year. Ordinary dividends are subject to a sustainable solvency margin of above 150%. If the solvency margin is above 175%, the Board of Directors intends to propose special dividends or share buy backs.
Lysaker, 13 July 2023 Board of Directors of Storebrand ASA
| Q2 | 01.01 - 30.06 | Full year | |||
|---|---|---|---|---|---|
| NOK million Notes |
2023 | 2022 1) | 2023 | 2022 1) | 2022 1) |
| Income from unit linked | 523 | 419 | 1,032 | 870 | 1,888 |
| Income from asset management | 712 | 689 | 1,381 | 1,348 | 2,783 |
| Income from banking activities | 686 | 305 | 1,302 | 561 | 1,460 |
| Other income | 137 | 107 | 197 | 213 | 320 |
| Operating income excl. insurance | 2,059 | 1,521 | 3,911 | 2,992 | 6,450 |
| Insurance revenue | 8 2,251 |
2,059 | 4,521 | 4,076 | 8,514 |
| Insurance service expenses 8,9 |
-1,715 | -1,357 | -3,330 | -2,666 | -6,167 |
| Net expenses from reinsurance contracts held | 8 -49 |
-8 | -68 | -30 | -66 |
| Net insurance service result | 8 487 |
693 | 1,123 | 1,380 | 2,282 |
| Operating income incl. insurance result | 2,546 | 2,214 | 5,035 | 4,372 | 8,732 |
| Operating expenses | 9 -1,306 |
-1,044 | -2,550 | -2,064 | -4,409 |
| Interest expenses banking activities | -449 | -132 | -842 | -225 | -739 |
| Other expenses | -107 | 26 | -219 | -21 | -115 |
| Total expenses | -1,863 | -1,150 | -3,611 | -2,310 | -5,264 |
| Operating profit | 683 | 1,064 | 1,424 | 2,062 | 3,468 |
| Profit from investment in associates and joint ventures | -214 | 33 | -121 | 156 | -334 |
| Net income on financial and property investments | 17,332 | -32,253 | 31,515 | -61,036 | -36,328 |
| Net change in investment contract liabilities | -20,982 | 19,655 | -28,533 | 32,110 | 9,833 |
| Finance expenses from insurance contracts issued | 3,926 | 12,195 | -2,107 | 28,204 | 26,637 |
| Interest expenses securities issued and other interest expenses | -130 | -139 | -405 | -222 | -594 |
| Net finance result | -67 | -509 | 349 | -789 | -787 |
| Profit before amortisation | 616 | 555 | 1,773 | 1,274 | 2,681 |
| Amortisation of intangible assets | -92 | -70 | -190 | -140 | -324 |
| Profit before income tax | 524 | 486 | 1,584 | 1,133 | 2,357 |
| Tax expenses | 292 | -11 | 282 | 401 | 19 |
| Profit for the period | 816 | 475 | 1,866 | 1,535 | 2,376 |
| Profit/loss for the period attributable to: | |||||
| Share of profit for the period - shareholders | 810 | 472 | 1,854 | 1,529 | 2,362 |
| Share of profit for the period - hybrid capital investors | 6 | 3 | 13 | 5 | 14 |
| Total | 816 | 475 | 1,866 | 1,535 | 2,376 |
| 1) Restated numbers | |||||
| Earnings/diluted earnings per share (NOK) | 1.75 | 1.00 | 4.00 | 3.25 | 5.04 |
| Average number of shares as basis for calculation (million) | 463.2 | 470.3 | 468.4 |
| Q2 | 30.06.23 | Full year | ||||
|---|---|---|---|---|---|---|
| NOK million | 2023 | 2022 1) | 2023 | 2022 1) | 2022 1) | |
| Profit/loss for the period | 816 | 475 | 1,866 | 1,535 | 2,376 | |
| Actuarial assumptions pensions own employees | -3 | -2 | -5 | -4 | -12 | |
| Fair value adjustment of properties for own use | -18 | 39 | -32 | 41 | 63 | |
| Other comprehensive income allocated to customers | 18 | -39 | 32 | -41 | -63 | |
| Tax on other comprehensive income elements not to be reclassified to profit/loss |
-2 | 2 | ||||
| Total other comprehensive income elements not to be reclassified to profit/loss |
-4 | -2 | -3 | -4 | -12 | |
| Exchange rate adjustments | 129 | -5 | -188 | -73 | 19 | |
| Gains/losses from cash flow hedging | 4 | -14 | -7 | -18 | -15 | |
| Change in unrealised gains on financial instruments available for sale | -165 | -177 | -139 | -576 | -576 | |
| Tax on other comprehensive income elements that may be reclassified to profit/loss |
43 | 144 | 144 | |||
| Total other comprehensive income elements that may be reclassified to profit/loss |
-32 | -153 | -334 | -523 | -428 | |
| Total other comprehensive income elements | -36 | -155 | -336 | -527 | -439 | |
| Total comprehensive income | 780 | 320 | 1,530 | 1,008 | 1,937 | |
| Total comprehensive income attributable to: | ||||||
| Share of total comprehensive income - shareholders | 774 | 317 | 1,517 | 1,003 | 1,923 | |
| Share of total comprehensive income - hybrid capital investors | 6 | 3 | 13 | 5 | 14 | |
| Total | 780 | 320 | 1,530 | 1,008 | 1,937 |
1) Restated numbers
| NOK million Notes |
30.06.23 | 30.06.22 1) | 31.12.22 1) |
|---|---|---|---|
| Assets | |||
| Deferred tax assets | 3,222 | 3,004 | 2,979 |
| Intangible assets | 6,338 | 4,922 | 5,990 |
| Tangible fixed assets | 1,183 | 1,241 | 1,174 |
| Investments in associated companies and joint ventures | 8,809 | 8,992 | 8,910 |
| Financial assets: | |||
| - Equities and fund units 7 |
319,988 | 248,905 | 270,532 |
| - Bonds and other fixed-income securities 7 |
273,625 | 265,406 | 275,461 |
| - Derivatives 7 |
12,681 | 9,714 | 14,343 |
| - Loans to financial institutions 7 |
1,184 | 81 | 109 |
| - Loans to customers 7, 11 |
83,226 | 74,327 | 78,310 |
| - Investment properties 7 |
35,817 | 35,594 | 35,171 |
| Bank deposits | 12,847 | 12,441 | 14,511 |
| Reinsurance contracts assets | 202 | 65 | 317 |
| Accounts receivables and other short-term receivables | 44,349 | 11,619 | 4,193 |
| Minority portion of consolidated mutual funds | 58,827 | 52,728 | 55,005 |
| Total assets | 862,297 | 729,056 | 767,005 |
| Equity and liabilities | |||
| Paid-in capital | 13,135 | 13,195 | 13,163 |
| Retained earnings | 15,414 | 15,547 | 16,029 |
| Hybrid capital | 353 | 226 | 327 |
| Total equity | 28,902 | 28,968 | 29,519 |
| Insurance contracts liabilities 8 |
304,805 | 304,169 | 303,211 |
| Investment contracts liabilities 8 |
332,934 | 255,088 | 292,931 |
| Reinsurance contracts liabilities 8 |
2 | 9 | 38 |
| Pension liabilities | 164 | 180 | 162 |
| Deferred tax | 1,428 | 806 | 1,311 |
| Financial liabilities: | |||
| - Subordinated loan capital 6 |
10,662 | 11,841 | 10,585 |
| - Loans and deposits from credit institutions 6 |
1,585 | 10 | 403 |
| - Deposits from banking customers | 22,398 | 19,275 | 19,478 |
| - Debt raised by issuance of securities 6 |
36,477 | 29,783 | 32,791 |
| - Derivatives | 14,365 | 13,986 | 12,629 |
| - Other non-current liabilities | 1,128 | 1,182 | 1,106 |
| Other current liabilities | 48,620 | 11,030 | 7,836 |
| Minority portion of consolidated mutual funds | 58,827 | 52,728 | 55,005 |
| Total liabilities | 833,395 | 700,088 | 737,486 |
| Total equity and liabilities | 862,297 | 729,056 | 767,005 |
1) Restated numbers
| Majority's share of equity | |||||||||
|---|---|---|---|---|---|---|---|---|---|
| NOK million | Share capital 1) |
Own shares |
Share premium |
Total paid in equity |
Currency translation differences |
Other equity |
Total retained earnings |
Hybrid capital 2) |
Total equity |
| Equity 31.12.21 | 2,360 | -9 | 10,842 | 13,192 | 1,041 | 23,249 | 24,291 | 226 | 37,709 |
| Changes in accounting principles | -8,103 | -8,103 | -8,103 | ||||||
| Adjusted equity 01.01.22 | 2,360 | -9 | 10,842 | 13,192 | 1,041 | 15,147 | 16,188 | 226 | 29,606 |
| Profit for the period | 2,362 | 2,362 | 14 | 2,376 | |||||
| Total other comprehensive income elements |
-439 | -439 | -439 | ||||||
| Total comprehensive income for the period |
1,923 | 1,923 | 14 | 1,937 | |||||
| Equity transactions with owners: | |||||||||
| Own shares | -30 | -30 | -431 | -431 | -460 | ||||
| Hybrid capital classified as equity | 4 | 4 | 100 | 104 | |||||
| Paid out interest hybrid capital | -13 | -13 | |||||||
| Dividend paid | -1,646 | -1,646 | -1,646 | ||||||
| Other | -8 | -8 | -8 | ||||||
| Equity 31.12.22 | 2,360 | -39 | 10,842 | 13,163 | 1,041 | 14,988 | 16,029 | 327 | 29,519 |
| Profit for the period | 1,854 | 1,854 | 13 | 1,866 | |||||
| Total other comprehensive income | -188 | -149 | -336 | -336 | |||||
| elements Total comprehensive income for the period |
-188 | 1,705 | 1,517 | 13 | 1,530 | ||||
| Equity transactions with owners: | |||||||||
| Own shares | -28 | -28 | -428 | -428 | -456 | ||||
| Hybrid capital classified as equity | 3 | 3 | 25 | 28 | |||||
| Paid out interest hybrid capital | -12 | -12 | |||||||
| Dividend paid | -1,715 | -1,715 | -1,715 | ||||||
| Other | 7 | 7 | 7 | ||||||
| Equity 30.06.23 | 2,360 | -66 | 10,842 | 13,135 | 853 | 14,561 | 15,414 | 353 | 28,902 |
1) 471 974 890 shares with a nominal value of NOK 5.
2) Perpetual hybrid tier 1 capital classified as equity.
| Equity 31.12.21 | 2,360 | -9 | 10,842 | 13,192 | 1,041 | 23,249 | 24,291 | 226 | 37,709 |
|---|---|---|---|---|---|---|---|---|---|
| Changes in accounting principles | -8,103 | -8,103 | -8,103 | ||||||
| Adjusted equity 01.01.22 | 2,360 | -9 | 10,842 | 13,192 | 1,041 | 15,147 | 16,188 | 226 | 29,606 |
| Profit for the period | 1,529 | 1,529 | 5 | 1,535 | |||||
| Total other comprehensive income | -73 | -453 | -527 | -527 | |||||
| elements Total comprehensive income for the period |
-73 | 1,076 | 1,003 | 5 | 1,008 | ||||
| Equity transactions with owners: | |||||||||
| Own shares | 3 | 3 | 35 | 35 | 37 | ||||
| Hybrid capital classified as equity | 1 | 1 | 1 | ||||||
| Paid out interest hybrid capital | -5 | -5 | |||||||
| Dividend paid | -1,646 | -1,646 | -1,646 | ||||||
| Other | -33 | -33 | -33 | ||||||
| Equity 30.06.22 | 2,360 | -7 | 10,842 | 13,195 | 968 | 14,580 | 15,547 | 226 | 28,968 |
| 01.01 - 30.06 | ||
|---|---|---|
| NOK million | 2023 | 2022 |
| Cash flow from operating activities | ||
| Net receipts premium - insurance | 14,399 | 16,248 |
| Net payments claims and insurance benefits | -10,717 | -11,518 |
| Net receipts/payments - transfers | -323 | -106 |
| Other receipts/payments - insurance liabilities | 24,906 | 109 |
| Receipts - interest, commission and fees from customers | 1,284 | 588 |
| Payments - interest, commission and fees to customers | -55 | -19 |
| Taxes paid | -442 | -973 |
| Payments relating to operations | -2,405 | -3,123 |
| Net receipts/payments - other operating activities | 4,019 | 1,787 |
| Net cash flow from operations before financial assets and banking customers | 30,666 | 2,996 |
| Net receipts/payments - loans to customers | -2,410 | -4,930 |
| Net receipts/payments - deposits bank customers | 2,777 | 2,003 |
| Net receipts/payments - securities | -31,848 | 4,260 |
| Net receipts/payments - investment properties | 605 | -15 |
| Receipts - sale of investment properties | 1 | 622 |
| Payments - purchase of investment properties | -266 | -789 |
| Net cash flow from financial assets and banking customers | -31,140 | 1,151 |
| Net cash flow from operating activities | -474 | 4,146 |
| Cash flow from investing activities | ||
| Payments - purchase of subsidiaries | -340 | -96 |
| Net receipts/payments - sale/purchase of fixed assets | -90 | -65 |
| Net receipts/payments - sale/purchase of associated companies and joint ventures | -140 | -630 |
| Net cash flow from investing activities | -570 | -791 |
| Cash flow from financing activities | ||
| Receipts - new loans | 8,184 | 5,500 |
| Payments - repayments of loans | -4,576 | -4,575 |
| Payments - interest on loans | -595 | -250 |
| Receipts - subordinated loans | -7 | 1,050 |
| Payments - repayment of subordinated loans | -432 | -249 |
| Payments - interest on subordinated loans | -224 | -245 |
| Receipts - loans to financial institutions | 8,137 | 7,056 |
| Payments - repayments of loans from financial institutions | -7,457 | -7,548 |
| Receipts - issuing of share capital / sale of shares to employees | 49 | 42 |
| Payments - repayment of share capital | -500 | |
| Payments - dividends | -1,715 | -1,646 |
| Receipts - hybrid capital | 125 | |
| Payments - repayment of hybrid capital | -100 | |
| Payments - interest on hybrid capital | -12 | -5 |
| Net cash flow from financing activities | 878 | -869 |
| Net cash flow for the period | -166 | 2,486 |
| Cash and cash equivalents at the start of the period | 14,182 | 10,054 |
| Currency translation cash/cash equivalents in foreign currency | 14 | 7 |
| Cash and cash equivalents at the end of the period 1) | 14,030 | 12,547 |
| 01.01 - 30.06 | ||
|---|---|---|
| NOK million | 2023 | 2022 |
| 1) Consists of: | ||
| Loans to financial institutions | 1,184 | 81 |
| Bank deposits | 12,847 | 12,466 |
| Total | 14,030 | 12,547 |
1
The Group's interim financial statements include Storebrand ASA, subsidiaries, associated companies and joint ventures. The financial statements are prepared in accordance with IAS 34 Interim Financial Reporting. The interim financial statements do not contain all the information that is required in the full annual financial statements.
This is the first set of the Group's interim financial statements in which IFRS 17 Insurance contracts and IFRS 9 Financial Instruments have been applied. The changes in significant accounting policies are described below.
The remainder of the accounting policies applied in the preparation of the financial statements are described in the 2022 annual report, and the interim financial statements are prepared in accordance with these accounting policies. Accounting policies that relate to IFRS 4 Insurance contracts and IAS 39 Financial Instruments are no longer applicable.
IFRS 9 Financial Instruments replaced IAS 39, and was generally applicable from 1 January 2018. However, for insurancedominated groups and companies, IFRS 4 allowed for the implementation of IFRS 9 to be deferred until implementation of IFRS 17. The Storebrand Group qualified for temporary deferral of IFRS 9 because over 90 per cent of the Group's total liabilities as at 31 December 2015 were linked to the insurance businesses. For the Storebrand Group, IFRS 9 was implemented together with IFRS 17 from 1 January 2023. Storebrand has restated the 2022-figures according to IFRS 9.
The Storebrand Group did conduct a provisional analysis of the classification and measurement of financial instruments in accordance with IAS 39 for the transition to IFRS 9, based on the business model for the individual instruments. For debt instruments that were expected to be classified and measured at amortised cost or fair value through total comprehensive income upon transition to IFRS 9, a SPPI ("Solely payment of principal and interest") test was carried out. A significant majority of the financial assets has been measured at fair value (the fair value option was used).
The Ministry of Finance has stipulated regulatory provisions that permit pension providers to recognise investments that are measured at fair value through total comprehensive income in accordance with IFRS 9 at amortised cost in the customer and company accounts. For the consolidated financial statements, the financial assets are measured at fair value through profit or loss, where the fair value option is used because the insurance liabilities are measured at fair value.
IFRS9 - Financial instruments to amortised cost and FVOCI
| Booked value | Fair value | |||
|---|---|---|---|---|
| NOK million | IAS 39 classification |
IFRS 9 classification |
after IAS 39 1.1.2022 |
after IFRS 9 1.1.2022 |
| Financial assets | ||||
| Bank deposits | AC | AC | 9 986 | 9 986 |
| Bonds and other fixed-income securities | AC | FVOCI | 12 955 | 12 981 |
| Loans to financial institutions | AC | AC | 67 | 67 |
| Loans to customers | AC | FVOCI | 38 086 | 38 086 |
| Loans to customers | AC | AC | 416 | 416 |
| Accounts receivable and other short-term receivables |
AC | AC | 11 661 | 11 661 |
| Total financial assets | 73 172 | 73 199 | ||
| Financial liabilities | ||||
| Deposits from banking customers |
AC | AC | 17 239 | 17 239 |
| Liabilities to financial institutions | AC | AC | 502 | 502 |
| Debt raised by issuance of securities | AC | AC | 24 924 | 25 000 |
| Subordinatd loan capital | AC | AC | 11 441 | 11 441 |
| Other current liabilities | AC | AC | 14 643 | 14 643 |
| Total financial liabilities | 68 749 | 68 824 |
| NOK million | IAS 39 classification |
IFRS 9 classification |
Booked value after IAS 39 1.1.2022 |
Fair value after IFRS 9 1.1.2022 |
|---|---|---|---|---|
| Financial assets | ||||
| Shares and fund units | FVP&L (FVO) | FVP&L | 278 326 | 278 326 |
| Bonds and other fixed-income securities | FVP&L (FVO) | FVP&L | 168 516 | 168 516 |
| Bonds and other fixed-income securities | AC | FVP&L | 113 416 | 116 745 |
| Loans to customers | FVP&L (FVO) | FVP&L | 7 931 | 7 931 |
| Loans to customers | AC FVP&L/ Hedge |
FVP&L FVP&L/ Hedge |
23 052 | 23 060 |
| Derivatives | accounting | accounting | 4 912 | 3 816 |
| Total financial assets | 596 153 | 598 395 | ||
| Financial liabilities | FVP&L/ Hedge | FVP&L/ Hedge | ||
| Derivatives | accounting | accounting | 3 144 | 2 048 |
| Total financial liabilities | 3 144 | 2 048 |
An assessment of the effects for the Group from IAS 39 to IFRS 9 shows that the most significant changes in the transition from IAS 39 to IFRS 9 will be linked to hedge accounting and new calculation of expected losses. According to IFRS 9, provisions for losses must be calculated based on expected credit losses when establishing a commitment and must be continuously assessed for impairment in subsequent periods. At year-end 2022, expected credit loss (ECL) was calculated at NOK 60.4 million for the Storebrand Group. The expected credit loss has not changed significantly when compared with the loss provision under IAS 39. The most important changes in hedge accounting for the Storebrand Group is that IFRS 9 sets different criteria than IAS 39 for the use of hedge accounting. It is no longer a requirement under IFRS 9 that the hedging arrangement needs to be within a specific interval, and it is now possible to rebalance the hedge under existing hedging arrangements and it is also possible to use multiple hedging instruments for the same hedge item. The transition to IFRS 9 has no accounting effects for existing hedging.
The Storebrand Group and Storebrand Livsforsikring Group have implemented IFRS 17 in the consolidated financial statements. IFRS 17 is also incorporated in the statutory reporting of Storebrand Forsikring AS (P&C insurance business). For the remaining companies within the Storebrand Group, including life insurance, the statutory reporting remains unchanged. Storebrand has chosen not to apply the OCI option for contracts measured under IFRS 17. The OCI option involves recognizing impacts of changes in financial assumptions for products measured under GMM or PAA over the other comprehensive income, rather than in the profit and loss.
An insurance contract pursuant to IFRS 17 is a contract in which Storebrand accepts significant insurance risk from a policyholder by consenting to pay compensation to the policyholder if an insured event adversely affects the policyholder.
Certain investment contracts that have a legal form of an insurance contract, but do not expose the Group to significant insurance risk, are classified as investment contracts under IFRS 9. Unit link for Storebrand and unit link at SPP are not considered to satisfy the definition of an insurance contract pursuant to IFRS 17 due to the insurance risk being considered immaterial. The contracts are therefore recognised in accordance with IFRS 9.
Storebrand uses reinsurance to limit insurance risk. Reinsurance contracts are covered by IFRS 17, but since the reinsurance programme is relatively limited, the new accounting policies have a minor impact on the accounts.
IFRS 17 introduces measurement models in which insurance revenue is recognised through profit and loss over time as the entity provides insurance related services. The model is based on the present value of expected future cash flows that are expected to arise when the entity fulfils contracts (FCF), an explicit risk adjustment for non-financial risk (RA) and the unearned profit the entity expects to earn as it provides services, the contractual service margin (CSM).
Insurance contracts are subject to different requirements for measurement models based on whether the insurance contracts are classified as contracts with or without direct participation features, meaning whether the policyholder is expected to receive an amount equal to a substantial share of the returns on the underlying items, the contractual terms specify that the policyholder participates in a share of a clearly identified pool of underlying items, and the entity expects to pay a substantial proportion of any change in the amounts paid to the policyholder to vary with the change in fair value of the underlying items. Contracts with direct participation features are measured according to the variable fee approach (VFA), and contracts without direct participation features are measured according to the general measurement model (GMM). For short-term contracts with a coverage period up to 12 months, the simplified premium allocation approach (PAA) is applied.
Storebrand determines whether a contract meets the definition of a contract with direct participation features at inception. There is no new classification of the contract unless the contract is modified by amending the contract terms in such a manner that they no longer meet the mentioned conditions. Storebrand issues a number of insurance contracts which are essentially investment-related service contracts, for which the company promises a return on investment based on underlying items. These satisfy the definition of insurance contracts with direct participation features and include a substantial proportion of the Group's guaranteed products. Insurance contracts with direct participation features are measured using the variable fee approach. Other insurance contracts with a short coverage period up to 12 months are measured according to the premium allocation approach. The group disability pensions is measured according to the general measurement model.
| Company | Product category | Measurement model |
|---|---|---|
| Storebrand Livsforsikring |
Group pension, paid-up policy and paid-up policy with investment choice (Private) |
Variable fee approach |
| Individual endowment and pension insurance | Variable fee approach | |
| Group pension (Public) | Variable fee approach | |
| Hybrid pension | Variable fee approach | |
| Group pension related disability | General measurement model | |
| Group life and individual life | Premium allocation approach | |
| SPP Pension & | Individual pension insurance | Variable fee approach |
| Försäkring | Group pension (Private) | Variable fee approach |
| Individual pension related | Premium allocation approach | |
| Storebrand Forsikring | Non-life | Premium allocation approach |
At initial recognition, the carrying value of the insurance contract liability is measured as the sum of:
Storebrand classifies a contract as onerous at initial recognition if the fulfilment cash flows that are allocated to the contracts, plus any cash flows previously recognised upon acquisition or at initial recognition, are expected to be a net outflow. This does not apply to contracts measured at transition based on the fair value.
The contractual service margin is included in the insurance liability for contracts that are not onerous and is systematically recognised in the income statement over the coverage period based on the pattern of transferred insurance contract services. Determining the release pattern is subject to significant use of judgement and is determined by:
• Identifying the coverage units (CU) in the Group based on the quantity of the insurance contract services that are provided under the contracts in the Group and the expected coverage period.
• Allocating the contractual service margin to each coverage unit provided in the current period and expected to be provided in the future.
• Recognising in profit or loss the amount allocated to coverage units provided in the period.
If an insurance contracts' cash flows is negative, Storebrand recognises a loss component (LC) in profit or loss equivalent to the net outflow for the group of onerous contracts. The determination of a loss component entails that the carrying value of the liability for the contract group is equal to the fulfilment cash flows, and that the contract group's contractual service margin is equal to zero after the loss recognition.
Upon subsequent measurement, the carrying value of a group of insurance contracts at the reporting date corresponds to the total sum of the liability for remaining coverage (LRC) and the liability for incurred claims (LIC). Liability for remaining coverage period corresponds to the present value of future fulfilment cash flows that relate to future services and the remaining contractual service margin. The liability for incurred claims includes fulfilment cash flows that relate to incurred claims, including events that have occurred but for which claims have not been reported, and other incurred insurance expenses.
The present value of expected future cash flows is updated at the end of each period based on updated estimates of future cash flows, discount rate and risk adjustment for non-financial risk. The change in fulfilment cash flows is recognised as follows for contracts measured using the variable fee approach:
| Changes that relate to future services, such as changes in | Adjusted in relation to contractual service margin |
|---|---|
| assumptions relating to long life expectancy, disability and | |
| mortality. | |
| Differences between any investment component expected to | Adjusted in relation to contractual service margin |
| become payable in the period and the actual investment | |
| component that becomes payable. | |
| Changes that relate to current or previous services, for example | Recognised in profit and loss from insurance |
| difference between estimated and actual insurance service | services |
| expenses. | |
| The entity's share of the effects that result from the time value of | Adjusted in relation to contractual service margin |
| money, financial risk and the effect of these on the cash flows. |
In the subsequent measurement, the contractual service margin is only adjusted for changes that apply to future services. This entails that changes in cash flows for future services are recognised as profit or loss as Storebrand provides services. At the end of each reporting period, the contractual service margin represents the profit that is not recognised in the income statement as profit or loss since it relates to future services.
One of the primary differences between the variable fee approach and general measurement model is that when using the variable fee approach, the contractual service margin must be adjusted for the entity's share of any effects resulting from market variables and their effect on the cash flows. The purpose of the adjustment is to reduce mismatch and volatility by recognising Storebrand's share of changes in the value of the underlying items in the contractual service margin. When applying general measurement model, the entity is not permitted to make such an adjustment. The change in fulfilment cash flows is thereby recognised as follows for contracts measured using general measurement model:
| Changes that relate to future services, such as changes in | Adjusted in relation to contractual service |
|---|---|
| assumptions relating to long life expectancy, disability and | margin. |
| mortality. Differences between any investment component expected to become payable in the period and the actual investment component that becomes payable. |
Not applicable for Storebrand contracts measured under the general measurement model. |
| Changes that relate to current or previous services, for example difference between estimated and actual insurance service expenses. |
Recognised in profit and loss from insurance services. |
| Effects that result from time value of money, financial risk | Recognised as financial insurance income or |
| and the effect of these on the cash flows. | expenses. |
| Change from IFRS 4 | Net effect on equity upon transition to IFRS 17 |
|---|---|
| The present value of fulfilment cash flows increases in total as a result of a reduction in discounting, since IFRS 17 requires the use of market values. |
Reduction |
| IFRS 17 requires the calculation of a risk adjustment for non-financial risk that increases the present value of FCF. |
Reduction |
| The contractual service margin upon transition is determined using the fair value method. |
Reduction |
| Reclassification of risk equalisation reserve from equity to liability. | Reduction |
| Under IFRS 4, the value-of-in-force (VIF) that arises in connection with acquisitions is classified as intangible assets and amortized on an ongoing basis. With the introduction of IFRS 17, VIF is included as part of contractual service margin and thus the total intangible assets will be reduced upon the transition to IFRS 17. |
Reduction |
The premium allocation approach is an optional, simplified measurement model for insurance and reinsurance contracts with a short coverage period that is a maximum of 12 months, or when the entity reasonably expects that applying the premium allocation approach would produce a measurement of the liability for remaining coverage for the Group that would not differ materially from the one that would be produced applying the general measurement model. The coverage period is defined as the period during which the entity provides insurance contract services, which includes the insurance contract services that apply to all premiums within the limits of the contract. The premium allocation approach measures the liability for the remaining coverage period based on premiums received, rather than the present value of expected future fulfilment cash flows as under variable fee approach and general measurement model. Storebrand applies premium allocation approach to all P&C insurance and risk products in the Norwegian and Swedish markets.
Upon initial recognition of each group of insurance contracts, the carrying value of the liability for the remaining coverage period is measured as the total of premiums received as of the recognition date. Storebrand has chosen to recognise cash flows for the acquisition of insurance costs in the income statement when these are incurred. In the subsequent measurement, the carrying value of the liability for the remaining coverage period is increased by new premiums received and reduced by the share of premiums recognised for services provided. Insurance income for the period is equal to the amount of expected premium payments allocated to the period. The expected premium payments are allocated over each period based on the passage of time unless the expected pattern for release of risk during the coverage period differs significantly from the passage of time. Since Storebrand provides insurance services within one year of receiving the premiums, there will be no need to adjust the liability for the remaining coverage period for the time value of money in accordance with IFRS 17. If, at any time during the coverage period, facts and circumstances indicate that a group of insurance contracts is onerous, Storebrand recognises a loss in the income statement and correspondingly increase the liability for the remaining coverage period.
Storebrand recognises a liability for incurred claims for claims that are incurred as of the reporting date. The cash flows for incurred claims are adjusted for non-financial risk (RA) and discounted using the current discount rate if cash flows are expected to be paid out more than 12 months from the claim date. The premium allocation approach applies correspondingly to reinsurance contracts, with some adjustments which reflect that the reinsurance contracts entail that Storebrand has a net asset and that the risk adjustment is negative.
| Change from IFRS 4 | Effect on equity upon transition to IFRS 17 |
|---|---|
| The present value of fulfilment cash flows related to claims incurred is discounted if the cash flows are paid more than 12 months from the date of the claim. |
Increase |
| IFRS 17 requires the calculation of risk adjustment for non financial risk that increases the present value of fulfilment cash flows. |
Reduction |
| IFRS 17 requires adjustment of the income profile/liability for remaining coverage if the expected pattern of release of risk during the coverage period differs significantly from the passage of time. |
Increase/decrease |
Under IFRS 17, insurance contracts are measured at group level. Groups of insurance contracts are determined by identifying portfolios of insurance contracts that include contracts that are subject to similar risk and are managed together. Storebrand identifies groups of insurance contracts by assessing the underlying insurance risk in the contracts and how changes in underlying assumptions influence the contracts. The insurance risks are described in more detail in Note 5. Furthermore, managed together is assessed based on, among other things, how the business areas manage the insurance contracts internally, the levels used when reporting to management and in risk management. Contracts within different product lines, or that are issued by different Group companies, are included in different portfolios of contracts. At initial recognition, contracts within a portfolio are further divided into groups of onerous contracts, groups that have no significant possibility of becoming onerous if any and groups of the remaining contracts in the portfolio.
The standard prohibits the grouping of contracts issued more than one year apart in the same group. This involves requirements for further division into annual cohorts based on the year of issue. In adopting IFRS 17, the EU has introduced an optional exemption from annual cohorts for contracts with direct participation features measured under variable fee approach. This means that portfolios of contracts with direct participation features are grouped solely based on profitability, irrespective of the year of issue. Storebrand has chosen to make use of the EU exemption from annual cohorts.
When measuring a group of insurance contracts under IFRS 17, all future cash flows within the boundaries of an existing insurance contract are included. Cash flows are within the boundary of an insurance contract if they arise from substantive rights and obligations that exist during the reporting period in which the entity can compel the policyholder to pay the premiums or in which the entity has a substantive obligation to provide the policyholder with insurance contract services.
Such an obligation to provide insurance contract services ends when:
For guaranteed products measured under the variable fee approach, the boundaries of the contract generally include future premiums, as well as the associated fulfilment cash flows. This is because Storebrand is unable to reassess the policyholder's risk and thus cannot set a new price or level of benefits that fully reflects these risks. This applies both to the individual contracts and at portfolio level.
The estimated cash flows for a group of contracts include all ingoing and outgoing payments that are directly related to the fulfilment of insurance contract services. This includes benefits and compensation to policyholders including, but not limited to:
Claims and benefits to or on behalf of a policyholder.
Costs associated with handling compensation claims.
Transaction-based taxes and fees for SPP.
An allocation of fixed and variable joint expenses that are directly attributable to fulfilling insurance contracts (for example, costs of accounting, HR and IT). Allocation takes place at group level using systematic and rational methods that are applied consistently.
In addition, cash flows arising from expenses relating to the sale, subscription and establishment of a group of insurance contracts will be included in the measurement of an insurance contract. This applies to cash flows that are directly attributable to the portfolio of insurance contracts to which the group belongs.
The risk adjustment for non-financial risk (RA) represents the compensation that Storebrand requires for bearing the uncertainty about the amount and timing of cash flows that arise from non-financial risk. The risks covered by the risk adjustment for non-financial risk are insurance risk and other non-financial risks such as:
The risk adjustment is calculated separately from the estimates of future cash flows and included in the measurement of insurance contracts in an explicit way. This ensures that the estimates of future cash flows do not account for any additional risk adjustment beyond the explicitly calculated risk adjustment. The method used to calculate the risk adjustment for nonfinancial risks is described in Note 2.
To calculate a present value of future expected cash flows, a discount rate must be defined that reflects the time value of money and the financial risks associated with those cash flows. The discount curve is determined for the first time at the transition date and then updated continuously at each reporting date. Storebrand has chosen to use a bottom-up approach for determining the discount rate, whereby a risk-free yield curve is used that is adjusted for liquidity premium to reflect the liquidity characteristics of insurance contracts. The risk-free yield curve is derived using the Norwegian and Swedish ten year swap rate, and the credit risk adjustment is determined by using EIOPAs credit risk adjustment. After ten years, the yield curve is extrapolated to a forward rate using EIOPAs ultimate forward rate (UFR). An illiquidity premium is added to reflect the assumption that the fulfilment cash flows is illiquid during the period.
According to IFRS 17 a retrospective transition method must be applied for the opening balance sheet. However, a modified retrospective transition method or fair value approach is permitted if retrospective application is impracticable. Storebrand has decided to use the fair value approach at the transition date when transitioning to IFRS 17, since the retrospective transition method is not considered to be practicable. This applies to contracts with a coverage period of more than one year. For contracts with a coverage period of less than one year the full retrospective approach has been applied, as there is concluded that only current and prospective information is required to reflect circumstances at the transition date. Storebrand uses the fair value hierarchy in accordance with IFRS 13, where fair value reflects the market price that well-informed parties would agree on as a fair transaction price. For products for which there is an active transfer market, the transfer value is used as an estimate of fair value. For contracts where there are no active market, Storebrand uses relevant transactions as a reference point to determine the fair value. By using the fair value approach at the transition date of 1 January 2022, the difference between the fair value of a group of contracts and the fulfilment cash flows, with the addition of risk adjustment in accordance with IFRS 17, will form the basis for the contractual service margin. For all contracts measured under the fair value approach, Storebrand has used reasonable and documentable information available at the transition date to make assessments related to the recognition and measurement of the contracts, including:
Determining the level of aggregation based on portfolios and profitability groups.
Determining risk adjustment.
Determining measurement method, including assessment of criteria for the use of premium allocation approach for contracts with a short coverage period and variable fee approach for contracts that satisfy the definition of contracts with direct participation features.
How to identify discretionary cash flows for insurance contracts without direct participation features.
The following table shows changes in equity during the transition to IFRS 17. In the transition to IFRS 17, the equity is decreased by approximately 21%. The decrease in equity will mainly be offset by the creation of the contractual service margin. Under IFRS 4, Value-of-in-force (VIF) which arises in connection with acquisitions were classified as intangible assets and are amortized on an ongoing basis. With the introduction of IFRS 17, VIF is included as part of contractual service margin and thus total intangible assets will be reduced by the transition to IFRS 17.
| NOK million | |
|---|---|
| Equity 31.12.21 | 37,709 |
| Changes in accounting principles (IFRS 9 and IFRS 17): | |
| Contractual Service Margin (CSM) | -11,810 |
| Risk Adjustment | -4,685 |
| Present value of future cash flows | 5,480 |
| Risk equalization fund | -547 |
| Deferred acquistion fund | -119 |
| Value of business in force (VIF) acquired insurance business | -1,607 |
| Deferred tax assets | 1,823 |
| IFRS 9 - reclassificiation from amortised cost to fair value | 3,363 |
| Adjusted equity 1.1.22 | 29,606 |
The table below shows a consolidated statement of the financial position in accordance with IFRS 9 and IFRS 17 for the transition on 1 January 2022 compared to the balance sheet in the annual accounts on 31 December 2021.
| NOK million | 31.12.21 | Reclassification | 01.01.22 |
|---|---|---|---|
| Assets | |||
| Deferred tax assets | 1,513 | 1,827 | 3,340 |
| Other assets | 8,715 | -1,607 | 7,108 |
| Financial assets | 690,114 | 3,372 | 693,486 |
| Insurance contracts assets | 32 | 1 | 33 |
| Bank deposit | 9,986 | 9,986 | |
| Receivable | 9,816 | -1,178 | 8,637 |
| Minority portion of consolidated mutual funds | 54,912 | 54,912 | |
| Total assets | 775,088 | 2,415 | 777,502 |
| Equity and liabilities | |||
| Equity | 37,709 | -8,103 | 29,606 |
| Insurance liabilities (excl CSM) | 300,819 | -5,879 | 294,939 |
| Contractual Service Margin (CSM) | 11,810 | 11,810 | |
| Risk Adjustment (RA) | 4,685 | 4,685 | |
| Investment contracts liabilities | 309,330 | 309,330 | |
| Reinsurance contracts liabilities | 14 | 14 | |
| Financial liabilities | 57,565 | 9 | 57,573 |
| Other liabilities | 14,740 | -108 | 14,632 |
| Minority portion of consolidated mutual funds | 54,912 | 54,912 | |
| Total liabilities | 737,379 | 10,517 | 747,896 |
| Total equity and liabilities | 775,088 | 2,415 | 777,502 |
The increase in deferred tax asset is due to effects on deferred tax as a result of changes in equity when implementing IFRS 9 and 17.
Under previous reporting framework, IFRS 4, the value-of-in-force (VIF) that arises in connection with acquisitions was classified as intangible assets and amortized on an ongoing basis. With the introduction of IFRS 17, VIF is included as part of CSM and thus the total intangible assets is reduced.
The increase in financial assets is due to transition to IFRS 9 and is mainly related to an increase in the valuation of debt instruments which is measured at fair value through profit or loss. These instruments were previously measured at amortised cost under IFRS 4.
The decrease in receivables is mainly related to reclassification effects where the receivables related to direct operations in the P&C business is reclassified to insurance liabilities. The decrease is related to deferred acquisition cost from the Swedish insurance business, SPP. With the introduction of IFRS 17, deferred acquisition costs is reduced, which impacts both receivables and other liabilities.
The decrease in equity is explained in the equity reconciliation above.
The insurance liabilities excluding CSM and risk adjustment decrease with the introduction of IFRS 17. The decrease is due to reclassification effects as explained under Receivable, new measurement models and discounting effects. According to IFRS 17, the CSM and risk adjustment is a part of the insurance contract liability and will be presented collectively in the financial statement.
The contractual service margin is introduced with the transition to IFRS 17 and represents expected future profits. The contractual service margin is derived at transition from the difference between the fair value of a group of contracts and insurance liabilities including risk adjustment.
The risk adjustment is introduced with the transition to IFRS 17 and represents the non-financial risk arising from insurance contracts.
The decrease is related to deferred acquisition cost from the Swedish insurance business, SPP. With the introduction of IFRS 17, deferred acquisition cost is reduced, which impacts both receivables and other liabilities.
In preparing the consolidated financial statements the management is required to apply estimates, make discretionary assessments, and apply assumptions for uncertain amounts. The estimates and underlying assumptions are reviewed on an ongoing basis and are based on historical experience and expectations of future events and represent the management's best judgement at the time the financial statements were prepared.
A full description of the most important areas in which the Group use accounting estimates and applies significant judgement is provided in the 2022 annual reports. A description of the use of significant judgement and accounting estimates related to the new accounting policies introduced by IFRS 17 Insurance contracts and IFRS 9 Financial instruments is provided below.
Significance of insurance risk:Storebrand applies judgement to assess the significance of insurance risk. The assessment is performed at initial recognition on a contract-by-contract basis. When classifying contracts under IFRS 17, Storebrand takes into consideration its substantive rights and obligations, irrespective of whether these stem from a contract, a law, or a regulation. Storebrand considers possible elements that have commercial substance when assessing the significance of insurance risk, including events that are extremely unlikely.
Contracts that have a legal form of an insurance contract are considered to have insignificant insurance risk if the additional amounts paid upon the occurrence of an insured event make up 5% or less of the amount payable to the policyholder in all other circumstances. Contracts that fall marginally above or below this threshold are subject to closer assessment from a specialized unit to insure consistency across all group companies. The application of judgement in this area excludes unit-link contracts with investment choice in Storebrand and SPP from the scope of IFRS 17.
Investment component:Storebrand considers all the contractual terms to determine whether an investment component exists. The amount an insurance contract requires the group to repay to a policyholder in all circumstances, regardless of whether an insured event occurs, are classified as non-distinct investment components. For collective group insurance contracts with mutualization features, amounts repayable to "a policyholder" include amounts the group is required to repay to any current or future policyholder within the collective group of policyholders.
All contracts measured under the variable fee approach feature investment components that the group is required to repay to current or future policyholders under all possible circumstances. Payouts that relate to such amounts are not part of the insurance service expenses. The effect of any deviation or changes in the expected pattern or timing of such repayments adjusts the CSM.
Storebrand uses a combination of deterministic and stochastic projection methods to estimate the future cash flows for a group of insurance contracts. The estimates of future cash flows reflect the Group's best estimates given current conditions at the reporting date and take into account any relevant market variables in accordance with observable market data.
Expenses:The estimated future expenses that are directly attributed to the fulfilment of existing insurance contracts are taken into account. The expenses are estimated according to the Group's own cost analyses and are based on the current level of operating costs during the most recent periods combined with assumptions about future inflationary trends and wage developments that reflect the management's best estimate. Only immediate cost-rationalization measures are taken into account when estimating future expenses.
The cash flows within the contract boundary include an allocation of fixed and variable overhead costs directly attributable to the fulfilment of insurance contracts. To reflect such overhead costs, Storebrand uses systematic and rational allocation methods that reflect the products driving the costs. The allocation method is applied consistently for cost categories that share similar characteristics.
Biometric assumptions:Contracts measured under the general measurement model and the variable fee approach expose Storebrand to biometric risks such as longevity, mortality and disability. This means that a key source of estimation uncertainty when measuring the fulfilment cash flows for non-PAA contracts is related to assumptions and estimates concerning biometric variables.
Storebrand applies widely recognized actuarial models to make best estimate assumptions related to biometric variables. When estimating biometric variables, the Group incorporates measures to reflect recent historical data and the characteristics of the underlying populations, including gender, age, disability and other relevant policyholder data. The best estimate assumptions used under IFRS 17 are consistent with those applied under Solvency II.
Adverse development in biometric risks may result in a reduction in the insurance service result or the contractual service margin. However, due to mutualisation, Storebrand's exposure to biometric risk is often limited by existing buffers.
Lapse rates:Lapse rates are determined using statistical measures based on the Group's own experience and vary by product category and external market conditions. For large parts of the guaranteed pension segment, the lapse rate is assumed to be close to zero percent. This is due to an inactive market for group and individual defined benefit plans in a low interest rate environment in recent years. Changes in the expected lapse rates affects mainly the contractual service margin.
Investment returns:Storebrand applies a stochastic modelling technique to project asset returns for all contracts measured under the variable fee approach or the general measurement model. Using this model, the Group generates a range of potential economic scenarios based on a probability distribution that reflects the investment strategy and other relevant market variables. The random variations are therefore based on the volatility of asset portfolios backing a specific category of insurance contracts.
Applying IFRS 17 standard, the expected return on assets equals on average the discount rate applied in the measurement of the fulfilment cash flows.
Discount rates:The discount rate is determined as the risk-free rate, plus an illiquidity premium to reflect the liquidity characteristics of the insurance contracts. The key sources of estimation uncertainty relate to determining the yield curve beyond the observable data points at which interest rate swaps in Norway and Sweden are traded and adjusting for any inherent credit risk in the underlying reference rates. Storebrand addresses this uncertainty by using well established methodologies set out by EIOPA to determine the ultimate forward rate and credit risk adjustment. The methodology used is described in Note 1. This method maximizes the use of observable market variables and ensures that the estimates reflect the current market conditions and other reasonably available information. Other sources of estimation uncertainty relate to the estimation of the liquidity characteristics of the insurance contracts and the underlying financial instruments.
| Q2 2023 | 1 year | 5 years | 10 years | 15 years | 20 years |
|---|---|---|---|---|---|
| NOK | 5,11 % | 4,34 % | 3,96 % | 3,82 % | 3,75 % |
| SEK | 4,11 % | 3,25 % | 2,92 % | 3,02 % | 3,12 % |
The yield curves that were applied for discounting the estimated future cash flows are listed below:
Risk adjustment for non-financial risk:The risk adjustment is calculated based on cost of capital. The basis for the calculation is the capital charge under Solvency II standard model for the relevant risks for the entire coverage period and a cost of capital of 6 percent p.a., discounted by the discount rate. This shares similarities with the risk margin under Solvency II, but with some adjustments which primarily are the exclusion of operational risk and counterparty risk.
The corresponding confidence level is based on the distribution of the one-year value at risk for the solvency capital due to losses from the included risks. The risk calibration is based on the partial internal model, including a simplified approach for non-life risks which are outside of scope for the partial internal model. The confidence level is >95 percent.
The main source of uncertainty when determining the risk adjustment for non-financial risk is related to the non-financial risk factors listed in note 5 Insurance risks.
Amortization of the contractual service margin:Storebrand applies judgement to identify the quantity of benefits provided in a group of insurance contracts and allocate the contractual service margin based on coverage units. The coverage units are determined based on the expected duration linked to the group of insurance contracts, this is applied consistently over time and across contracts that share similar characteristics:
Contracts with direct participation (VFA): Storebrand Livsforsikring uses the policyholder's reserves as a basis for determining the level of benefits provided when calculating the coverage unit per group of insurance contracts measured under the variable fee approach. For SPP, policyholder funds, including the deferred capital contribution (DCC), are used as a basis for the assessment of coverage unit. This insures a relatively stable amortization and serves as a scaling factor for variable fee approach contracts providing both insurance coverage and investment-related services.
Non-participating contracts (GMM): For group disability insurance in Norway, Storebrand uses insurance premiums as a basis to determine the quantity of benefits during the first coverage year (accumulation phase), as opposed to the policyholder reserves during the pay-out phase. At the end of each reporting period, the total coverage units are reassessed to reflect the expected pattern of service, contract cancellations and lapse when applicable. Storebrand provides no investment-return services under the group disability insurance, as the contract does not feature any investment components.
For contracts measured under the variable fee approach, Storebrand makes further adjustments to the coverage units to ensure that the contractual service margin release reflects the insurance services provided in the reporting period. These adjustments are made to account for the fact that the expected financial return on average exceeds the discount
rate used to project future assets under IFRS 17. This creates a state in which the contractual service margin release must be adjusted to avoid an artificial delay in the recognition of such excess earnings for variable fee approach contracts. The contractual service margin is discounted using the discount rates provided above.
Storebrand ASA has purchased Kron AS. Kron offers its clients a wide range of funds through engaging digital tools and digital advisory services. The company was established in 2017 as a spin-off from the Nordic financial advisory firm, Formue. Approximately NOK 7 billion is managed on behalf of 67,000 retail customers who have established an investment account on Kron's platform. Kron has also assumed a position as a popular alternative among people who want to manage their pension account with a provider of their choice.
The transaction was completed on 3 January 2023.
| NOK million | Book values in the company |
Excess value upon acquisition |
Book values |
|---|---|---|---|
| Assets | |||
| - Brand name | 22 | 22 | |
| - Customer relationships | 25 | 25 | |
| - IT systems | 15 | 37 | 52 |
| Total intangible assets | 15 | 83 | 99 |
| Other assets | 5 | 5 | |
| Bank deposits | 66 | 66 | |
| Total assets | 87 | 83 | 170 |
| Liabilities | |||
| Current liabilities | 14 | 14 | |
| Deferred tax | 21 | 21 | |
| Net identifiable assets and liabilities | 73 | 63 | 135 |
| Goodwill | 286 | ||
| Fair value at acquisition date | 422 | ||
| Conditional payment | 23 | ||
| Cash payment | 399 |
A final purchase price allocation (PPA) analysis has been completed within the measurement period of 12 months in accordance with IFRS 3. The final PPA of Danica Pensjonsforsikring is shown in the table below.
| NOK million | Booked valuue - Company |
Excess value upon |
Book values |
|---|---|---|---|
| Assets | |||
| - Distribution | 106 | 106 | |
| - Customer relationships | 809 | 809 | |
| - IT systems | 21 | -21 | |
| Total intangible assets | 21 | 894 | 915 |
| Financial assets | 28,479 | 28,479 | |
| Other assets | 309 | 309 | |
| Bank deposits | 362 | 362 | |
| Total assets | 29,170 | 894 | 30,064 |
| Liabilities | |||
| Insurance liabilities | 27,724 | 68 | 27,792 |
| Current liabilities | 282 | 18 | 300 |
| Deffered tax | 24 | 202 | 226 |
| Net identifiable assets and liabilities | 1,140 | 606 | 1,746 |
| Goodwill | 302 | ||
| Fair value at acquisition date | 2,048 | ||
| Cash payment | 2,048 |
Note 4
Storebrand's operation includes the segments Savings, Insurance, Guaranteed Pension and Other.
The savings segment includes products for retirement savings with no interest rate guarantees. The segment consists of defined contribution pensions in Norway and Sweden, asset management and retail banking products. In addition, certain other subsidiaries in Storebrand Livsforsikring and SPP are included in Savings.
The insurance segment provides health insurance in the Norwegian and Swedish corporate and retail markets, P&C insurance and personal risk products in the Norwegian retail market in addition to employer's liability insurance and pension-related insurance in the Norwegian and Swedish corporate markets.
The guaranteed pension segment includes long-term pension saving products which provides customers a guaranteed rate of return. The area includes defined benefit pensions in Norway and Sweden, paid-up policies and individual capital and pension insurances.
The result for Storebrand ASA is reported under Other, as well as the result for the company portfolios of Storebrand Livsforsikring and SPP. The elimination of intra-group transactions is also included in the Other segment.
The alternative income statement is based on the statutory accounts of the legal entities in the Group, adjusted for intercompany transactions. The statutory accounts in the legal entities is primarily similar to IFRS with the exception of IFRS 17 for Storebrand Livsforsikring AS and SPP Pension & Forsäkring AB where the local GAAP is more aligned with the historical IFRS 4 reporting. Since the alternative income statement is based on the statutory accounts of the legal entities, the group adjustments related to amortisation and tax effects on acquired business is not included in the alternative income statement. The results in the segments are reconciled against the statutory income statement of each legal entity in the Group.
Due to the fundamental differences between the alternative income statement and IFRS 17, it is not possible to reconcile the numbers for most IFRS 17 products since the underlying drivers for the profit and loss recognition is based on different principles. The exception is products in Storebrand Forsikring AS, whom statutory accounts will be subject to IFRS 17, causing some non-material adjustments to the alternative income statement. Storebrand has communicated that it will continue to report its alternative income statement post IFRS 17, as this cash-equivalent reporting provides useful information about the value creation in the business.
The statutory income statements includes gross income and costs linked to both the insurance customers and owners (shareholders). The alternative statement of the result only includes result elements relating to owners (shareholders) which are the result elements that the Group has performance measures and follow-up for. The result lines that are used in segment reporting will therefore not be identical with the result lines in the statutory profit and loss accounts. Below is an overall description of the most important differences.
Fee and administration income consists of fees and fixed administrative income. Storebrand Livsforsikring charges a fee for interest rate guarantee and profit risk. The interest rate guarantees in group pension insurance with a interest guarantee must be priced upfront. The level of the interest rate guarantee, the size of the buffer capital (additional statutory reserves and market value adjustment reserve), and the investment risk of the portfolio in which the pensions assets are invested determine the fee that the customer pays for the interest rate guarantee.
There are also fee's for asset management, net interest income from bank and other administration fees for both savings and guaranteed products.
The insurance result consists of insurance premiums and claims
Insurance premiums consist of premium income relating to risk products (insurance segment) that are classified as premium income in the statutory income statements.
Claims consist of paid-out claims and changes in provisions for claims incurred but not reported (IBNR) and claims reported but not settled (RBNS) relating to risk products that are classified as claims in the statutory income statements.
Administration costs consist of the Group's operating costs in the statutory income statements minus operating costs allocated to traditional individual products with profit sharing.
Financial items and risk result life and pensions include risk result life and pensions and financial result includes net profit sharing and Loan Losses.
Risk result life and pensions consists of the difference between risk premium and claims for products relating to definedcontribution pension, unit linked insurance contracts (savings segment) and defined-benefit pension (guaranteed pension segment). Risk premium is classified as premium income in the statutory income statements.
The financial result consists of the return for the company portfolios of Storebrand ASA, Storebrand Livsforsikring AS and SPP Pension & Försäkring AB (Other segment), while returns for the other company portfolios in the Group are a financial result within the segment which the business is associated with. Returns on company portfolios are classified as net income from financial assets and property for companies in the statutory income statements. The financial result also includes returns on customer assets relating to products within the insurance segment, and in the statutory income statements this item will be entered under net income from financial assets and property for customers.
A modified profit-sharing regime was introduced for old and new individual contracts that have left group pension insurance policies (paid-up policies), which allows the company to retain up to 20 per cent of the profit from returns after any allocations to additional statutory reserves. The modified profit-sharing model means that any negative risk result can be deducted from the customers' interest profit before sharing, if it is not covered by the risk equalisation fund. Individual endowment insurance and pensions written by the Group prior to 1 January 2008 will continue to apply the profit rules effective prior to 2008. New contracts may not be established in this portfolio. The Group can retain up to 35 per cent of the total result after allocations to additional statutory reserves. Any negative returns on customer portfolios and returns lower than the interest guarantee that cannot be covered by additional statutory reserves/buffer reserves must be covered by the company's equity and will be included in the net profit-sharing and losses line.
For premiums paid from and including 2016, previous profit sharing is replaced by a guarantee fee for premiumdetermined insurance (IF portfolio). The guarantee fee is annual and is calculated as 0.2 per cent of the capital. This goes to the company. For contributions agreed to prior to 2016, the profit sharing is maintained, i.e. that if the total return on assets in one calendar year for a premium-determined insurance (IF portfolio) exceeds the guaranteed interest, profit sharing will be triggered. When profit sharing is triggered, 90 per cent of the total return on assets passes to the policyholder and 10 per cent to the company. The company's share of the total return on assets is included in the financial result. In the case of defined-benefit insurance (KF portfolio), the company is entitled to charge an indexing fee if the group profit allows the indexing of the insurance. Indexing is allowed up to a maximum equalling the change in the consumer price index (CPI) between the previous two Septembers. Pensions that are paid out are indexed if the ratio between assets and guaranteed insurance liabilities in the portfolio as at 30 September exceeds 107 per cent, and half of the fee is charged. The entire fee will be charged if the ratio between assets and guaranteed insurance liabilities in the portfolio as at 30 September exceeds 120 per cent, in which case paid-up policies can also be included. The total fee equals 0.8 per cent of the insurance capital. The guaranteed liability is continuously monitored. If the guaranteed liability is higher than the value of the assets, a provision must be made in the form of a deferred capital contribution. If the assets are lower than the guaranteed liability when the insurance payments start, the company supplies capital up to the guaranteed liability in the form of a realised capital contribution. Changes in the deferred capital contribution are included in the financial result.
Loan losses consist of individual and group write-downs on lending activities that are on the balance sheet of Storebrand
Bank Group. In the Group's income statement, the item is classified under loan losses. With regard to loan losses that are on the balance sheet of the Storebrand Livforsikring Group, these will not be included on this line in either the alternative income statement or in the Group's income statement, but in the Group's income statement will be included in the item, net income from financial assets and property for customers. Amortisation of intangible assets includes depreciation and possible write-downs of intangible assets established through acquisitions of enterprises.
| Group result by result area | Q2 01.01 - 30.06 |
Full year | |||
|---|---|---|---|---|---|
| NOK million | 2023 | 2022 | 2023 | 2022 | 2022 |
| Savings | 395 | 392 | 757 | 796 | 1,653 |
| Insurance | 63 | 176 | 120 | 293 | 596 |
| Guaranteed pension | 293 | 254 | 578 | 485 | 903 |
| Other | 25 | -238 | 95 | -354 | -420 |
| Cash equivalent earnings before amortisation |
777 | 583 | 1,550 | 1,219 | 2,732 |
| Amortisation of intangible assets | -56 | -39 | -119 | -79 | -202 |
| Cash equivalent earnings before tax | 720 | 544 | 1,431 | 1,140 | 2,530 |
| Savings | Insurance | Guaranteed pension | ||||
|---|---|---|---|---|---|---|
| Q2 Q2 |
Q2 | |||||
| NOK million | 2023 | 2022 | 2023 | 2022 | 2023 | 2022 |
| Fee and administration income | 1,269 | 1,130 | 387 | 395 | ||
| Insurance result | 382 | 427 | ||||
| - Insurance premiums for own account | 1,727 | 1,449 | ||||
| - Claims for own account | -1,342 | -1,019 | ||||
| Operating expense | -898 | -718 | -308 | -260 | -216 | -206 |
| Cash equivalent earnings from operations | 371 | 412 | 74 | 168 | 171 | 189 |
| Financial items and risk result life & pension | 24 | -20 | -11 | 8 | 122 | 65 |
| Cash equivalent earnings before amortisation | 395 | 392 | 63 | 176 | 293 | 254 |
| Amortisation of intangible assets 1) | ||||||
| Cash equivalent earnings before tax |
| Other | Storebrand Group | |||
|---|---|---|---|---|
| Q2 | Q2 | |||
| NOK million | 2023 | 2022 | 2023 | 2022 |
| Fee and administration income | -66 | -69 | 1,591 | 1,456 |
| Insurance result | 382 | 427 | ||
| - Insurance premiums for own account | 1,727 | 1,449 | ||
| - Claims for own account | -1,342 | -1,019 | ||
| Operating expense | -38 | 3 | -1,460 | -1,181 |
| Cash equivalent earnings from operations | -104 | -66 | 513 | 703 |
| Financial items and risk result life & pension | 129 | -172 | 264 | -119 |
| Cash equivalent earnings before amortisation | 25 | -238 | 777 | 583 |
| Amortisation of intangible assets 1) | -56 | -39 | ||
| Cash equivalent earnings before tax | 720 | 544 |
| Segment information as of 01.01 - 30.06 | Savings | Insurance | Guaranteed pension | |||
|---|---|---|---|---|---|---|
| 01.01 - 30.06 01.01 - 30.06 |
01.01 - 30.06 | |||||
| NOK million | 2023 | 2022 | 2023 | 2022 | 2023 | 2022 |
| Fee and administration income | 2,503 | 2,266 | 765 | 786 | ||
| Insurance result | 739 | 799 | ||||
| - Insurance premiums for own account | 3,399 | 2,846 | ||||
| - Claims for own account | -2,657 | -2,051 | ||||
| Operating expense | -1,759 | -1,420 | -618 | -510 | -408 | -409 |
| Cash equivalent earnings from operations | 745 | 846 | 121 | 289 | 357 | 377 |
| Financial items and risk result life & pension | 12 | -50 | -1 | 4 | 221 | 108 |
| Cash equivalent earnings before amortisation | 757 | 796 | 120 | 293 | 578 | 485 |
| Amortisation of intangible assets 1) | ||||||
| Cash equivalent earnings before tax |
| Other 01.01 - 30.06 |
Storebrand Group | |||
|---|---|---|---|---|
| 01.01 - 30.06 | ||||
| NOK million | 2023 | 2022 | 2023 | 2022 |
| Fee and administration income | -126 | -139 | 3,143 | 2,914 |
| Insurance result | 739 | 799 | ||
| - Insurance premiums for own account | 3,399 | 2,846 | ||
| - Claims for own account | -2,657 | -2,051 | ||
| Operating expense | -66 | 14 | -2,851 | -2,326 |
| Cash equivalent earnings from operations | -192 | -125 | 1,031 | 1,387 |
| Financial items and risk result life & pension | 287 | -230 | 519 | -168 |
| Cash equivalent earnings before amortisation | 95 | -354 | 1,550 | 1,219 |
| Amortisation of intangible assets 1) | -119 | -79 | ||
| Cash equivalent earnings before tax | 1,431 | 1,140 |
1) Amortisation of intangible assets are included in Storebrand Group
| Q2 | Q1 | Q4 | Q3 | Q2 | Q1 | |
|---|---|---|---|---|---|---|
| NOK million | 2023 | 2023 | 2022 | 2022 | 2022 | 2022 |
| Group | ||||||
| Earnings per ordinary share1) | 4.00 | 2.25 | 5.04 | 3.67 | 3.25 | 2.25 |
| Equity | 28,902 | 30,266 | 29,519 | 28,903 | 28,968 | 30,298 |
| Savings | ||||||
| Premium income Unit Linked2) | 6,883 | 6,583 | 5,642 | 5,333 | 5,288 | 5,288 |
| Unit Linked reserves | 343,347 | 314,992 | 276,446 | 276,319 | 291,036 | 291,036 |
| AuM asset management | 1,110,733 1,019,988 1,001,100 1,008,705 1,039,654 1,039,654 | |||||
| Retail lending | 69,812 | 67,061 | 64,879 | 62,559 | 59,223 | 59,223 |
| Insurance | ||||||
| Total written premiums | 8,065 | 7,822 | 7,648 | 7,005 | 6,791 | 6,791 |
| Claims ratio2) | 79% | 76% | 71% | 71% | 73% | 73% |
| Cost ratio 2) | 19% | 20% | 18% | 18% | 18% | 18% |
| Combined ratio 2) | 97% | 96% | 88% | 88% | 91% | 91% |
| Guaranteed pension | ||||||
| Guaranteed reserves | 282,559 | 273,673 | 274,825 | 274,918 | 281,474 | 281,474 |
| Guaranteed reserves in % of total reserves | 45.1% | 46.5% | 49.9% | 49.9% | 49.2% | 49.2% |
| Net transfer out of guaranteed reserves2) | -2,198 | -2,847 | -2,720 | -2,454 | -2,480 | -2,480 |
| Capital buffer in % of customer reserves Storebrand Livsforsikring AS 3) |
6.5% | 6.3% | 6.2% | 6.9% | 8.6% | 8.6% |
| Capital buffer in % of customer reserves SPP Pension & Försäkring AB 4) |
19.0% | 19.0% | 18.2% | 17.5% | 17.9% | 17.9% |
| Solidity | ||||||
| Solvency II 5) | 196% | 179% | 184% | 174% | 195% | 184% |
| Capital adequacy Storebrand Bank | 16.5% | 17.2% | 16.1% | 14.8% | 15.6% | 15.6% |
| Core Capital adequacy Storebrand Bank | 14.9% | 15.7% | 14.4% | 13.6% | 14.3% | 14.3% |
1) Accumulated
2) Quarterly figures
3) Additional statutory reserves + market value adjustment reserve
4) Conditional bonuses
5) See note 13 for specification of Solvency II
Risks are described in the annual report for 2022 in note 7 (Insurance risk), note 8 (Financial market risks), note 9 (Liquidity risk), note 10 (Credit risk), note 11 (Concentration of risk) and note 12 (Climate risk).
The group accounts for Storebrand Livsforsikring AS and Storebrand ASA is prepared in accordance with IFRS. From 2023, new accounting standards for financial instruments (IFRS 9) and insurance contracts (IFRS 17) applies. The corporate account for Storebrand Livsforsikring AS (Storebrand Livsforsikring) continue to be prepared in accordance with Norwegian GAAP, consistent with the customer accounts. The corporate account for SPP Pension & Försäkring AB (SPP) continues to be prepared in accordance with Swedish GAAP.
The risk management of the investments is still aimed at controlling the risk based on the customer accounts and GAAP corporate account for Storebrand Livsforsikring and SPP. The description of financial market risk below, mainly reflect the risk measured by these principles.
The new IFRS-standards change the dynamics of the reported group results. The effect of changes in financial market for the IFRS result is reported below under Sensitivities.
Note 5
Market risk means changes in the value of assets due to unexpected volatility or price changes in the financial markets. It also refers to the risk that the value of the insurance liability develops differently than the assets due to interest rate changes. The most significant market risks are interest rate risk, equity market risk, property price risk, credit risk and currency exchange rate risk.
The financial assets are invested in a variety of sub-portfolios. Market risk affects Storebrand's income and profit differently in the different portfolios. There are three main types of sub-portfolios: company portfolios, customer portfolios without a guarantee (unit linked insurance) and customer portfolios with a guarantee.
The market risk in the company portfolios has a direct impact on the profit. Storebrand aims to take low financial risk for the company portfolios, and most of the funds are invested in short and medium-term fixed income securities with low credit risk.
The market risk in unit linked insurance is borne by the customers, meaning Storebrand is not directly affected by changes in value. Nevertheless, changes in value do affect Storebrand's profit indirectly. Income is based mainly on the size of the portfolios, while the costs tend to be fixed. Lower returns from the financial market than expected will therefore have a negative effect on Storebrand's income and profit.
For customer portfolios with a guarantee, the net risk for Storebrand will be lower than the gross market risk. The extent of risk sharing with customers depends on several factors, the most important being the size and flexibility of the customer buffers, and the level and duration of the interest rate guarantee. If the investment return is not sufficiently high to meet the guaranteed interest rate, the shortfall will be met by using customer buffers in the form of risk capital built up from previous years' surpluses. The buffers primarily consist of unrealised gains, additional statutory reserves, and conditional bonuses. Storebrand is responsible for meeting any shortfall that cannot be covered by the customer buffers. The risk is affected by changes in the interest rate level. Rising interest rates are negative in the short term because resulting price depreciation for bonds and interest rate swaps reduce investment return and buffers. But long term, rising interest rates are positive due to higher probability of achieving a return above the guarantee.
During the first half of 2023, high inflation, together with Russia's invasion of Ukraine, continued to impact the economic news flow. Economic activity has held up better than expected. Inflation has fallen slightly from elevated levels, particularly due to falling energy prices, but the underlying price and wage-pressure is still high. Central banks have continued to rise interest rates to combat inflation. During the first half of 2023, Bank of Norway raised the interest rate by 100bp to 3,75 percent and the Swedish Riksbank raised the interest rate by 125bp to 3,75 percent. Both banks signal further increases later in 2023.
The equity market was positive in the first half of 2023. Global equities rose 15 percent and Norwegian equities rose 2 percent. The credit market was temporarily negatively affected by the closure of two regional banks in the US and the forced merger of Credit Suisse with UBS, but credit spreads generally have fallen slightly during the first half of the year.
Short-term interest rates continued to increase in the first half of 2023, in line with increased policy-rates from the central banks. Long-term interest rates were volatile during the first half of the year, as the market aims to balance the need for combating inflation against the risk of a weaker economy. The Norwegian 10-year swap-rate rose 0.5 pp to 3.8 percent. The Swedish 10-year swap-rate fell 0.1 pp to 3.0 percent.
For the customer accounts and the corporate accounts for Storebrand Livsforsikring AS, most of the interest rate investments in the Norwegian guaranteed customer portfolios are valued at amortized cost. This dampens the effect from interest rate changes on booked returns. The amortized cost portfolio valuation in the accounts is now higher than fair value. For SPP, both investments and liabilities are valued at fair value. Since SPP has a similar interest rate sensitivity on assets and liabilities, changes in interest rates have a quite limited net effect on SPP's financial result under Swedish GAAP.
For the group accounts for Storebrand Livsforsikring AS and Storebrand ASA, all interest rate investments are valued at fair value. The value of these investments is negatively affected by rising interest rates and positively affected by falling interest rates. For the group accounts, the value of the insurance liabilities is also interest rate sensitive with value moving in the opposite direction of the investments. This dampens the risk, but net the risk is falling interest rates.
The Norwegian krone weakened 6 percent against the Swedish krone, 11 percent against the euro and 10 percent against the US dollar in the first half of 2023. A high degree of currency hedging in the portfolio means that the exchange rate fluctuations have a modest effect on results and Storebrand's market risk.
There is an elevated risk associated with the valuation of financial instruments. There is thus greater uncertainty than normal related to pricing of financial instruments that are priced based on models, and it must be assumed that, when concerning illiquid assets, there is a difference between the estimated value and the price achieved when sold in the market. Valuations related to investment properties are considered to have particularly increased uncertainty because of macroeconomic developments, and the total transaction volume for investment properties was significantly lower in 2022 and in the first half of 2023 when compared to 2021. Furthermore, the valuation of investment properties is sensitive to changes in input factors such as inflation and interest rates. There is a wide spectrum of possible outcomes for these input factors and thus for the modelled valuations. The values therefore reflect management's best estimate, however, contain greater uncertainty than what would be the case in a normal year.
The market-based return for guaranteed customer portfolios in Norway in general was positive in the first half of 2023. The booked return was also positive but was lower than accrued interest rate guarantee for some of the portfolios. Based on expected investment returns for the rest of the year and the possibility of utilising customer buffers, the effect on the financial result was limited.
The return for guaranteed customer portfolios in Sweden was positive and higher than the change in the value of the liabilities. The effect on the financial result was limited.
The return for the unit linked portfolios was generally positive in the first half of 2023 due to positive equity markets.
During the first quarter, the investment allocation towards equities was increased for the guaranteed customer portfolios in Norway. Other than that, investment allocation has not been materially changed during the first half of 2023.
The sensitivities show the effect for the IFRS result from changes in financial market variables. The effect is disclosed for Fulfillment cash-flows and Contractual Service Margin (CSM) or Loss component (LC) for the main products reported under the Variable Fee-approach (VFA) under IFRS17.
Changes in Fulfillment cash-flows does not affect the result directly but impact the result through changes in CSM or LC. The CSM is transformed to result as the contractual service is performed. A lower CSM will correspond to a proportionate fall in future results. The CSM can't be negative, so further falls will lead to a LC with an immediate negative result effect. Similarly, an increase in LC will correspond to an immediate negative result effect.
For SPP the effect on CSM from interest rate movements should be limited as the interest rate sensitivity on the asset side closely matches the liability side. The interest rate hedge is however constructed to minimize volatility in the financial result according to Swedish GAAP and there could hence be some volatility in CSM due to the differences between the two accounting standards (IFRS and Swedish GAAP).
Part of SPP's investment strategy is to take investments risk via investments in credits, equities and real assets and the financial result is hence affected by movements in these types of assets. The asset allocation is however individualized, and the investment risk is adjusted according to the risk capacity on the different policies.
Because it is the immediate market changes that are calculated, dynamic risk management will not affect the outcome. If it is assumed that the market changes occur over a period, then dynamic risk management would reduce the effect of the negative outcomes and reinforce the positive outcomes to some extent.
Insurance risk is the risk of higher-than-expected payments and/or an unfavourable change in the value of an insurance liability due to actual developments deviating from what was expected when premiums or provisions were calculated. Most of the insurance risk for the group is related to life insurance. Changes in longevity is the greatest insurance risk for Storebrand because higher longevity means that the guaranteed benefits must be paid over a longer period. There are also risks related to disability and early death.
The development of the insurance reserves is dependent on future scenarios and are currently more uncertain than normal. Storebrand will continue to monitor the development of Covid-19 and effects for the economy. A prolonged situation with high unemployment could lead to higher disability levels and increased reserves. However, the current insurance reserves represent Storebrand's best estimate of the insurance liabilities.
Storebrand Livsforsikring AS acquired Danica Pensjonsforsikring Norge AS in 2022 and renamed the company to Storebrand Danica Pensjonsforsikring AS. The companies merged on the 2 January 2023. The insurance risk from Storebrand Danica Pensjonsforsikring is mainly related to disability risk. Other insurance risk was not materially changed during the first half of 2023.
The following sensitivities are calculated:
The insurance risk and financial market risk affect the CSM volatility and consequently the profit and loss. The sensitivities indicate the uncertainty of the mentioned risks. Storebrand's products hold different insurance- and financial market risk, but the sensitivity calculation is based on the same sensitivities for each product as it is assumed that any changes in assumptions are distributed evenly between the products. The sensitivities are calculated separately for SPP and SBL.
The sensitivities are chosen based on the assumption that they are expected to have the highest impact on the results.
The table presents the CSM impact per 30.06.2023 for the mentioned sensitivities.
The sensitivity calculations indicate that the financial market risk has the largest impact on CSM. A fall inequities, real estate and interest rates reduce the CSM as it reduces the probability of achieving returns according to the guarantee. In addition, Storebrand's revenue decreases in line with the lower market value of the portfolio. CSM is also impacted negatively with the increase of credit spreads and VA. Changes in non-financial factors give a lower impact on the CSM.
| NOK million Sensitivities |
CSM as at end of period |
Impact on CSM |
|---|---|---|
| 10 634 | ||
| Equity down | -2 411 | |
| Property down | -1 320 | |
| Interest rate up | 622 | |
| Interest rate down | -1 256 | |
| Spread up | -1 230 | |
| Mortality down | -298 | |
| Disability up | -10 | |
| Expenses up | -281 |
Note Liquidity risk
6
| Book value | |||||||
|---|---|---|---|---|---|---|---|
| NOK million | Nominal | value Currency | Interest rate | Call date | 30.06.23 | 30.06.22 | 31.12.22 |
| Issuer | |||||||
| Perpetual subordinated loans 2) | |||||||
| Storebrand Livsforsikring AS | 1,100 | NOK | Variable | 2024 | 1,101 | 1,100 | 1,101 |
| Storebrand Livsforsikring AS 3) | 900 | SEK | Variable | 2026 | 896 | 870 | 856 |
| Dated subordinated loans | |||||||
| Storebrand Livsforsikring AS 3,4) | 899 | SEK | Variable | 2022 | 869 | ||
| Storebrand Livsforsikring AS 3) | 900 | SEK | Variable | 2025 | 892 | 867 | 851 |
| Storebrand Livsforsikring AS 3) | 1,000 | SEK | Variable | 2024 | 994 | 965 | 947 |
| Storebrand Livsforsikring AS | 500 | NOK | Variable | 2025 | 500 | 500 | 500 |
| Storebrand Livsforsikring AS 5) | 650 | NOK | Variable | 2027 | 652 | 652 | 651 |
| Storebrand Livsforsikring AS 3,5) | 750 | NOK | Fixed | 2027 | 770 | 773 | |
| Storebrand Livsforsikring AS 5) | 1,250 | NOK | Variable | 2027 | 1,258 | 1,261 | |
| Storebrand Livsforsikring AS 3,6) | 38 | EUR | Fixed | 2023 | 0 | 2,639 | 421 |
| Storebrand Livsforsikring AS 3,5) | 300 | EUR | Fixed | 2031 | 2,772 | 2,552 | 2,397 |
| Storebrand Bank ASA | 125 | NOK | Variable | 2025 | 126 | 125 | 126 |
| Storebrand Bank ASA | 300 | NOK | Variable | 2026 | 300 | 300 | 300 |
| Storebrand Bank ASA | 400 | NOK | Variable | 2027 | 402 | 401 | 402 |
| Total subordinated loans and hybrid tier 1 capital | 10,662 | 11,841 | 10,585 |
1) Storebrand Bank ASA has issued hybrid tier 1 capital bonds/hybrid capital that is classified as equity. See the statement of changes in equity. 2) In the case of perpetual subordinated loans, the cash flow is calculated through to the first call date
3) The loans are subject to hedge accounting
4) The loan has been repaid November 2022
5) Green bonds
6) The loan has been repaid April 2023
| Book value | |||
|---|---|---|---|
| NOK million | 30.06.23 | 30.06.22 | 31.12.22 |
| Call date | |||
| 2022 | 10 | ||
| 2023 | 1,585 | 403 | |
| Total loans and deposits from credit institutions | 1,585 | 10 | 403 |
| Book value | |||||
|---|---|---|---|---|---|
| NOK million | 30.06.23 | 30.06.22 | 31.12.22 | ||
| Call date | |||||
| 2022 | 952 | ||||
| 2023 | 175 | 4,759 | 4,321 | ||
| 2024 | 6,112 | 6,102 | 6,110 | ||
| 2025 | 8,310 | 6,120 | 8,326 | ||
| 2026 | 8,368 | 5,602 | 7,375 | ||
| 2027 | 8,143 | 5,506 | 5,907 | ||
| 2028 | 4,131 | ||||
| 2031 | 1,239 | 741 | 752 | ||
| Total securities issued | 36,477 | 29,783 | 32,791 |
The loan agreements contain standard covenants.
For issued covered bonds (OMF) that are allocated to Storebrand Boligkreditt's collateral pool, regulatory requirement for over-collateralisation of 105 per cent applies.
Storebrand ASA has an unused credit facility of EUR 200 million, expiration December 2025.
Note 7
Storebrand classify financial instruments valued at fair value in three different levels. The criteria for the classification and processes associated with valuing are described in more detail in note 13 in the annual report for 2022.
The group has established valuation models and gathers information from a wide range of well-informed sources with a view to minimize any uncertainty in the valuations.
| NOK Million | Fair value 30.06.23 |
Book value 30.06.23 |
Fair value 31.12.22 |
Book value 31.12.22 |
|---|---|---|---|---|
| Financial assets | ||||
| Loans to and due from financial institutions | 1,184 | 1,184 | 109 | 109 |
| Loans to customers - corporate | -1 | |||
| Loans to customers - retail | 419 | 419 | 452 | 452 |
| Bonds classified as loans and receivables | 5,006 | 5,025 | 4,266 | 4,281 |
| Total financial assets 30.06.23 | 6,607 | 6,628 | ||
| Total financial assets 31.12.22 | 4,826 | 4,841 | ||
| Financial liabilities | ||||
| Debt raised by issuance of securities | 36,341 | 36,477 | 32,777 | 32,791 |
| Loans and deposits from credit institutions | 1,585 | 1,585 | 403 | 403 |
| Deposits from banking customers | 22,398 | 22,398 | 19,478 | 19,478 |
| Subordinated loan capital | 10,671 | 10,662 | 10,513 | 10,585 |
| Total financial liabilities 30.06.23 | 70,996 | 71,122 | ||
| Total financial liabilities 31.12.22 | 63,171 | 63,256 |
| Level 1 | Level 2 | Level 3 | Total fair value | ||
|---|---|---|---|---|---|
| NOK Million | Quoted prices | Observable assumptions |
Non-observable assumptions |
30.06.23 | 31.12.22 |
| Assets | |||||
| Loans to customers | |||||
| - Loans to customers - corporate | 3 | 3 | 3 | ||
| - Loans to customers - retail | 55,166 | 55,166 | 49,153 | ||
| Total loans to customers 30.06.23 | 55,169 | 55,169 | |||
| Total loans to customers 31.12.22 | 49,156 | 49,156 | |||
| Bonds and other fixed-income securities | |||||
| - Government bonds | 1,783 | 1,783 | 1,863 | ||
| - Corporate bonds | 4,108 | 4,108 | 4,567 | ||
| - Structured notes | 464 | 464 | 479 | ||
| Total bonds and other fixed-income securities | |||||
| 30.06.23 | 6,355 | 6,355 | |||
| Total bonds and other fixed-income securities 31.12.22 | 6,909 | 6,909 |
| NOK million | Loans to customers |
|---|---|
| Book value 01.01.23 | 49,156 |
| Net gains/losses on financial instruments | 4 |
| Additions | 15,085 |
| Sales | -9,076 |
| Book value 30.06.23 | 55,169 |
| Level 1 | Level 2 | Level 3 | Total Fair Value | ||
|---|---|---|---|---|---|
| Observable | Non-observable | ||||
| NOK Million | Quoted prices | assumptions | assumptions | 30.06.23 | 31.12.22 |
| Assets: | |||||
| Equities and fund units | |||||
| - Equities | 40,224 | 8,338 | 156 | 48,718 | 47,728 |
| - Fund units | 250,148 | 21,122 | 271,269 | 222,804 | |
| Total equities and fund units 30.06.23 | 40,224 | 258,486 | 21,278 | 319,988 | |
| Total equities and fund units 31.12.22 | 30,690 | 221,334 | 18,507 | 270,532 | |
| Loans to customers | |||||
| - Loans to customers - corporate | 10,997 | 10,997 | 11,534 | ||
| - Loans to customers - retail | 16,643 | 16,643 | 17,169 | ||
| Total loans to customers 30.06.23 | 27,639 | 27,639 | |||
| Total loans to customers 31.12.22 | 28,703 | 28,703 | |||
| Bonds and other fixed-income securities | |||||
| - Government bonds | 25,369 | 32,190 | 57,559 | 54,717 | |
| - Corporate bonds | 102,607 | 8 | 102,614 | 105,635 | |
| - Collateralised securities | 5,023 | 5,023 | 4,506 | ||
| - Bond funds Total bonds and other fixed-income securities |
69,058 | 14,859 | 83,918 | 85,122 | |
| 30.06.23 | 25,369 | 222,009 | 14,867 | 262,244 | |
| Total bonds and other fixed-income securities 31.12.22 | 16,824 | 233,630 | 13,818 | 264,271 | |
| Derivatives: | |||||
| - Interest derivatives | 7,742 | -8,593 | -852 | -680 | |
| - Currency derivatives | -832 | -832 | 2,394 | ||
| Total derivatives 30.06.23 | 7,742 | -9,425 | -1,684 | ||
| - of which derivatives with a positive market value | 7,742 | 4,939 | 12,681 | 14,343 | |
| - of which derivatives with a negative market value | -14,365 | -14,365 | -12,629 | ||
| Total derivatives 31.12.22 | 7,761 | -6,046 | 1,714 | ||
| Properties: | |||||
| Investment properties | 34,085 | 34,085 | 33,481 | ||
| Properties for own use | 1,731 | 1,731 | 1,689 | ||
| Total properties 30.06.23 | 35,817 | 35,817 | |||
| Total properties 31.12.22 | 35,171 | 35,171 |
There is no significant movements between level 1 and level 2 in this quarter.
| NOK million | Equities | Fund units | Loans to customers |
Corporate bonds |
Bond funds | Investment properties |
Properties for own use |
|---|---|---|---|---|---|---|---|
| Book value 01.01.23 | 402 | 17,666 | 7,076 | 8 | 13,810 | 33,481 | 1,689 |
| Change in principle IFRS9/IFRS17 Net gains/losses on financial |
2 | 20,171 | |||||
| instruments | -47 | 3,117 | 168 | 478 | -244 | -38 | |
| Additions | -201 | 569 | -25 | 871 | 265 | 38 | |
| Sales | -406 | -77 | -874 | -1 | |||
| Exchange rate adjustments | 164 | 326 | 574 | 599 | 46 | ||
| Other | 12 | -16 | -2 | ||||
| Book value 30.06.23 | 156 | 21,122 | 27,639 | 8 | 14,859 | 34,085 | 1,731 |
As at 30.06.23, Storebrand Livsforisikring had NOK 8.051 million invested in Storebrand Eiendomsfond Norge KS and VIA, Oslo. The investments are classified as "Investment in associated companies and joint ventures" in the Consolidated Financial Statements.
Sensitivity assessments of investments on level 3 are described in note 13 in the 2022 annual report. There is no significant changes in sensitivity in this quarter.
Note 8
| 30.06.23 | 30.06.22 | 31.12.22 | ||||||
|---|---|---|---|---|---|---|---|---|
| Guaranteed pension | Insurance | |||||||
| NOK Million | Guaranteed products - Norway |
Guaranteed products - Sweden |
Pension related disability insurance - Norway |
P&C and Individual Life |
Group Life and Disability Insurance |
Total | Total | Total |
| Contracts measured under VFA and GMM |
||||||||
| Amounts relating to changes in LRC | ||||||||
| Expected incurred claims and other insurance service expenses |
||||||||
| Expected incurred claims | 289 | 289 | 218 | 482 | ||||
| Expected incurred expenses | 257 | 101 | 55 | 413 | 376 | 773 | ||
| Change in the risk adjustment for non | ||||||||
| financial risk for risk expired | 92 | 50 | 28 | 170 | 179 | 344 | ||
| CSM recognised in P&L for services | ||||||||
| provided | 556 | 232 | 191 | 979 | 1,035 | 2,056 | ||
| Recovery of insurance acquisition cash | ||||||||
| flows | 1 | 2 | 3 | 6 | 2 | 7 | ||
| Insurance revenue from contracts measured under VFA and GMM |
906 | 385 | 566 | 1,857 | 1,810 | 3,662 | ||
| Insurance revenue from contracts | ||||||||
| measured under the PAA | 2,009 | 653 | 2,663 | 2,266 | 4,852 | |||
| Total insurance revenue | 906 | 385 | 566 | 2,009 | 653 | 4,520 | 4,076 | 8,514 |
| Incurred claims and other directly | ||||||||
| attributable expenses | ||||||||
| Incurred claims | -1 | -271 | -1,376 | -544 | -2,192 | -1,803 | -3,561 | |
| Incurred expenses | -294 | -106 | -48 | -402 | -89 | -938 | -886 | -1,892 |
| Changes that relate to past service - Adjustment to the LIC |
-131 | -36 | -167 | 99 | -240 | |||
| Losses on onerous contracts and | ||||||||
| reversal on those losses | 283 | -6 | -294 | -9 | -26 | -74 | -467 | |
| Insurance acquisition cash flows | ||||||||
| amortisation | -1 | -2 | -3 | -6 | -2 | -7 | ||
| Total insurance service expenses | -12 | -114 | -616 | -1,909 | -678 | -3,329 | -2,667 | -6,167 |
| Net income (expenses) from | ||||||||
| reinsurance contracts he | -8 | -53 | -6 | -68 | -30 | -66 | ||
| Total insurance service result | 894 | 263 | -51 | 47 | -31 | 1,122 | 1,380 | 2,281 |
| Guaranteed pension | Insurance | |||||||
|---|---|---|---|---|---|---|---|---|
| NOK Million | SBL Guaranteed products |
SPP Guaranteed products |
SBL Pension related disability insurance |
Total Guaranteed pension |
P&C and Individual Life |
Group Life and Disability Insurance |
Total Insurance |
Total |
| 30.06.23 | ||||||||
| Insurance contract liabilities | 206,310 | 82,979 | 8,231 | 297,519 | 3,588 | 3,696 | 7,285 | 304,804 |
| Reinsurance contract assets | 1 | 1 | 193 | 7 | 201 | 202 | ||
| Reinsurance contract liabilities | 3 | 3 | -4 | 3 | -1 | 2 | ||
| 30.06.22 | ||||||||
| Insurance contract liabilities | 209,944 | 81,041 | 6,616 | 297,601 | 2,959 | 3,608 | 6,567 | 304,168 |
| Reinsurance contract assets | -1 | -1 | 32 | 33 | 64 | 64 | ||
| Reinsurance contract liabilities | 9 | 9 | 9 | |||||
| 31.12.22 | ||||||||
| Insurance contract liabilities | 209,311 | 79,168 | 7,692 | 296,171 | 3,689 | 3,350 | 7,039 | 303,210 |
| Reinsurance contract assets | 309 | 9 | 317 | 317 | ||||
| Reinsurance contract liabilities | 4 | 4 | 34 | 34 | 38 |
| 30.06.23 | ||||
|---|---|---|---|---|
| LRC | ||||
| NOK Million | Excluding loss component |
Loss component | LIC | Total |
| Opening insurance contract liabilities | 295,234 | 937 | 296,171 | |
| Net opening balance | 295,234 | 937 | 296,171 | |
| Insurance revenue | -1,857 | -1,857 | ||
| Insurance service expenses | ||||
| Incurred claims and other directly attributable expenses |
-5 | 726 | 721 | |
| Losses on onerous contracts and reversal of those losses |
17 | 17 | ||
| Insurance acquisition cash flows amortisation | 6 | 6 | ||
| Insurance service expenses | 6 | 12 | 726 | 743 |
| Insurance service result | -1,851 | 12 | 726 | -1,114 |
| Finance expenses from insurance contracts issued recognised in profit or loss |
2,117 | -4 | 2,113 | |
| Finance expenses from insurance contracts issued |
2,117 | -4 | 2,113 | |
| Total amounts recognised in comprehensive income |
266 | 8 | 726 | 999 |
| Investment components | -8,057 | -7 | 8,064 | |
| Other changes | 39 | 39 | ||
| Effect of changes in foreign exchange rates | 3,888 | 3,888 | ||
| Cash flows | ||||
| Premiums recieved | 5,839 | 5,839 | ||
| Claims and other directly attributable expenses paid |
-601 | -8,790 | -9,391 | |
| Insurance acquisition cash flows | -26 | -26 | ||
| Total cash flows | 5,212 | -8,790 | -3,578 | |
| Net closing balance | 296,582 | 938 | 297,519 | |
| Closing insurance contract liabilities | 296,582 | 938 | 297,519 | |
| Net closing balance | 296,582 | 938 | 297,519 |
| 30.06.22 | ||||
|---|---|---|---|---|
| LRC | ||||
| NOK Million | Excluding loss component |
Loss component | LIC | Total |
| Opening insurance contract liabilities | 327,380 | 480 | 327,860 | |
| Net opening balance | 327,380 | 480 | 327,860 | |
| Insurance revenue | -1,810 | -1,810 | ||
| Insurance service expenses | ||||
| Incurred claims and other directly attributable | ||||
| expenses | 640 | 640 | ||
| Losses on onerous contracts and reversal of those losses |
60 | 60 | ||
| Insurance service expenses | 2 | 60 | 640 | 702 |
| Insurance service result | -1,808 | 60 | 640 | -1,108 |
| Finance expenses from insurance contracts | ||||
| issued recognised in profit or loss | -28,188 | -28,188 | ||
| Finance expenses from insurance contracts | ||||
| issued | -28,188 | -28,188 | ||
| Total amounts recognised in comprehensive income |
-29,996 | 60 | 640 | -29,296 |
| Investment components | -7,581 | 7,581 | ||
| Other changes | -37 | -37 | ||
| Effect of changes in foreign exchange rates | -1,101 | -1,101 | ||
| Cash flows | ||||
| Premiums recieved | 8,211 | 8,211 | ||
| Claims and other directly attributable expenses | ||||
| paid | 217 | -8,221 | -8,004 | |
| Insurance acquisition cash flows | -31 | -31 | ||
| Total cash flows | 8,397 | -8,221 | 176 | |
| Net closing balance | 297,062 | 540 | 297,601 | |
| Closing insurance contract liabilities | 297,062 | 540 | 297,601 | |
| Net closing balance | 297,062 | 540 | 297,601 |
| 31.12.22 | ||||
|---|---|---|---|---|
| LRC | ||||
| NOK Million | Excluding loss component |
Loss component | LIC | Total |
| Opening insurance contract liabilities | 327,380 | 480 | 327,860 | |
| Net opening balance | 327,380 | 480 | 327,860 | |
| Insurance revenue | -3,662 | -3,662 | ||
| Insurance service expenses Incurred claims and other directly attributable expenses |
1,331 | 1,331 | ||
| Losses on onerous contracts and reversal of those losses |
457 | 457 | ||
| Insurance acquisition cash flows amortisation | 7 | 7 | ||
| Insurance service expenses | 7 | 457 | 1,331 | 1,795 |
| Insurance service result | -3,655 | 457 | 1,331 | -1,867 |
| Finance expenses from insurance contracts issued recognised in profit or loss |
-26,624 | -26,624 | ||
| Finance expenses from insurance contracts issued |
-26,624 | -26,624 | ||
| Total amounts recognised in comprehensive | ||||
| income | -30,279 | 457 | 1,331 | -28,492 |
| Investment components | -15,216 | 15,216 | ||
| Other changes | -285 | -285 | ||
| Effect of changes in foreign exchange rates | -2,693 | -2,693 | ||
| Cash flows | ||||
| Premiums recieved | 17,227 | 17,227 | ||
| Claims and other directly attributable expenses paid |
-843 | -16,546 | -17,390 | |
| Insurance acquisition cash flows | -56 | -56 | ||
| Total cash flows | 16,328 | -16,546 | -218 | |
| Net closing balance | 295,235 | 937 | 296,172 | |
| Closing insurance contract liabilities | 295,235 | 937 | 296,172 | |
| Net closing balance | 295,235 | 937 | 296,172 | |
| 30.06.23 | ||||
|---|---|---|---|---|
| NOK Million | Present value of future cash flows |
Risk adjustment for non-financial risk |
CSM | Total |
| Opening insurance contract liabilities | 283,085 | 3,557 | 9,530 | 296,172 |
| Net opening balance | 283,085 | 3,557 | 9,530 | 296,172 |
| Changes that relate to current service CSM recognised in prodit or loss for the services probided Change in the risk adjustment for non-financial |
-979 | -979 | ||
| risk for the risk expired | -171 | -171 | ||
| Experience adjustments | 18 | 18 | ||
| Total changes that relate to current service | 18 | -171 | -979 | -1,132 |
| Change that relate to future service | ||||
| Changes in estimates that adjust the CSM Changes in estimates that results in onerous |
-1,657 | 131 | 1,526 | |
| contract losses or reversal of losses | -187 | 24 | -162 | |
| Contracts initially recognised in the period | -316 | 92 | 403 | 179 |
| Total changes that relate to future service | -2,160 | 247 | 1,929 | 17 |
| Insurance service result | -2,142 | 76 | 950 | -1,115 |
| Finance expenses from insurance contracts issued recognised in profit or loss |
2,092 | 21 | 2,113 | |
| Finance expenses from insurance contracts issued |
2,092 | 21 | 2,113 | |
| Total amount recognised in comprehensive income |
-50 | 76 | 972 | 998 |
| Other changes | 39 | 39 | ||
| Effect of changes in foreign exchange rates | 3,707 | 49 | 133 | 3,888 |
| Cash flows | ||||
| Premiums received Claims and other directly attributable expenses |
5,839 | 5,839 | ||
| paid | -9,391 | -9,391 | ||
| Insurance acquisition cash flows | -26 | -26 | ||
| Total cash flows | -3,578 | -3,578 | ||
| Net closing balance | 283,203 | 3,683 | 10,634 | 297,519 |
| Closing insurance contract liabilities | 283,203 | 3,683 | 10,634 | 297,519 |
| Net closing balance | 283,203 | 3,683 | 10,634 | 297,519 |
| 30.06.22 | ||||
|---|---|---|---|---|
| NOK Million | Present value of future cash flows |
Risk adjustment for non-financial risk |
CSM | Total |
| Opening insurance contract liabilities | 311,533 | 4,517 | 11,810 | 327,860 |
| Net opening balance | 311,533 | 4,517 | 11,810 | 327,860 |
| Changes that relate to current service | ||||
| CSM recognised in prodit or loss for the services probided |
-1,035 | -1,035 | ||
| Change in the risk adjustment for non-financial risk for the risk expired |
-180 | -180 | ||
| Experience adjustments | 47 | 47 | ||
| Total changes that relate to current service | 47 | -180 | -1,035 | -1,169 |
| Change that relate to future service | ||||
| Changes in estimates that adjust the CSM | -3,211 | -807 | 4,017 | |
| Changes in estimates that results in onerous | ||||
| contract losses or reversal of losses | -163 | -50 | -213 | |
| Contracts initially recognised in the period | -63 | 84 | 253 | 274 |
| Total changes that relate to future service | -3,436 | -774 | 4,271 | 61 |
| Insurance service result | -3,390 | -954 | 3,236 | -1,108 |
| Finance expenses from insurance contracts | ||||
| issued recognised in profit or loss Finance expenses from insurance contracts |
-27,850 | -338 | -28,188 | |
| issued | -27,850 | -338 | -28,188 | |
| Total amount recognised in comprehensive | ||||
| income | -31,239 | -954 | 2,897 | -29,296 |
| Other changes | -37 | -37 | ||
| Effect of changes in foreign exchange rates | -1,035 | -17 | -49 | -1,101 |
| Cash flows | ||||
| Premiums received | 8,211 | 8,211 | ||
| Claims and other directly attributable expenses paid |
-8,004 | -8,004 | ||
| Insurance acquisition cash flows | -30 | -30 | ||
| Total cash flows | 177 | 177 | ||
| Net closing balance | 279,398 | 3,546 | 14,659 | 297,603 |
| Closing insurance contract liabilities | 279,397 | 3,546 | 14,659 | 297,601 |
| Net closing balance | 279,397 | 3,546 | 14,659 | 297,601 |
| 31.12.22 | ||||
|---|---|---|---|---|
| NOK Million | Present value of future cash flows |
Risk adjustment for non-financial risk |
CSM | Total |
| Opening insurance contract liabilities | 311,532 | 4,517 | 11,810 | 327,860 |
| Net opening balance | 311,532 | 4,517 | 11,810 | 327,860 |
| Changes that relate to current service CSM recognised in prodit or loss for the services |
||||
| probided Change in the risk adjustment for non-financial risk for the risk expired |
-344 | -2,056 | -2,056 -344 |
|
| Experience adjustments | 75 | 75 | ||
| Total changes that relate to current service | 75 | -344 | -2,056 | -2,325 |
| Change that relate to future service | ||||
| Changes in estimates that adjust the CSM | 900 | -660 | -240 | |
| Changes in estimates that results in onerous contract losses or reversal of losses |
193 | -21 | 172 | |
| Contracts initially recognised in the period | -288 | 101 | 472 | 286 |
| Total changes that relate to future service | 805 | -580 | 232 | 458 |
| Insurance service result | 880 | -923 | -1,824 | -1,867 |
| Finance expenses from insurance contracts issued recognised in profit or loss |
-26,276 | -349 | -26,624 | |
| Finance expenses from insurance contracts issued |
-26,276 | -349 | -26,624 | |
| Total amount recognised in comprehensive | ||||
| income | -25,396 | -923 | -2,173 | -28,492 |
| Other changes | -285 | -285 | ||
| Effect of changes in foreign exchange rates | -2,548 | -38 | -107 | -2,693 |
| Cash flows | ||||
| Premiums received | 17,227 | 17,227 | ||
| Claims and other directly attributable expenses paid |
-17,390 | -17,390 | ||
| Insurance acquisition cash flows | -56 | -56 | ||
| Total cash flows | -218 | -218 | ||
| Net closing balance | 283,085 | 3,556 | 9,530 | 296,171 |
| Closing insurance contract liabilities | 283,085 | 3,556 | 9,530 | 296,171 |
| Net closing balance | 283,085 | 3,556 | 9,530 | 296,171 |
| 30.06.23 | |||||||
|---|---|---|---|---|---|---|---|
| Contracts originated | Contracts aquired | Total | |||||
| NOK Million | Non-onerous contracts originated |
Onerous contracts originated |
Non-onerous contracts aquired |
Onerous contracts aquired |
Non-onerous contracts total |
Onerous contracts total |
Total |
| Estimates of the present value of future cash outflows |
|||||||
| Insurance acquisition cash flows | 12 | 14 | 12 | 14 | 26 | ||
| Claims and other directly attributable | |||||||
| expenses | 978 | 2,328 | 839 | 1,817 | 2,328 | 4,145 | |
| Estimates of the present value of cash | |||||||
| flows | 990 | 2,342 | 839 | 1,829 | 2,342 | 4,171 | |
| Estimates of the present value of future | |||||||
| cash inflows | -1,346 | -2,213 | -929 | -2,275 | -2,213 | -4,488 | |
| Risk adjustment for non-financial risk | 35 | 49 | 8 | 43 | 49 | 92 | |
| CSM | 321 | 82 | 403 | 403 | |||
| Increase in insurance contract liabilities | |||||||
| from contracts recognised in the period | 178 | 178 | 178 |
| LRC | LIC for contracts under the PAA | Risk adjustment | |||
|---|---|---|---|---|---|
| NOK Million | Excluding loss component |
Loss component | Present value of future cash flows |
for non-financial risk |
Total |
| Opening insurance contract liabilities | 275 | 10 | 6,584 | 171 | 7,039 |
| Net opening balance | 275 | 10 | 6,584 | 171 | 7,039 |
| Insurance revenue | -2,663 | -2,663 | |||
| Insurance service expenses Incurred claims and other directly attributable expenses |
2,408 | 2,408 | |||
| Adjustment to liabilities for incurred claims | 174 | -5 | 170 | ||
| Losses on onerous contracts and reversal of those losses |
9 | 9 | |||
| Insurance service expenses | 9 | 2,582 | -5 | 2,587 | |
| Insurance service result | -2,663 | 9 | 2,582 | -5 | -76 |
| Finance expenses from insurance contracts issued recognised in profit or loss |
7 | 7 | |||
| Finance expenses from insurance contracts issued |
7 | 7 | |||
| Total amounts recognised in comprehensive income |
-2,663 | 9 | 2,589 | -5 | -69 |
| Effect of changes in foreign exchange rates | 48 | 3 | 51 | ||
| Cash flows | |||||
| Premiums recieved | 2,636 | 2,636 | |||
| Claims and other directly attributable expenses paid |
-2,372 | -2,372 | |||
| Total cash flows | 2,636 | -2,372 | 264 | ||
| Net closing balance | 248 | 19 | 6,848 | 169 | 7,285 |
| Closing insurance contract liabilities | 248 | 19 | 6,848 | 169 | 7,285 |
| Net closing balance | 248 | 19 | 6,848 | 169 | 7,285 |
| 30.06.22 | ||||||
|---|---|---|---|---|---|---|
| LRC | LIC for contracts under the PAA | |||||
| NOK Million | Excluding loss component |
Loss component | Present value of future cash flows |
Risk adjustment for non-financial risk |
Total | |
| Opening insurance contract liabilities | 169 | 6,037 | 167 | 6,373 | ||
| Net opening balance | 169 | 6,037 | 167 | 6,373 | ||
| Insurance revenue | -2,266 | -2,266 | ||||
| Insurance service expenses Incurred claims and other directly attributable expenses |
2,049 | 2,049 | ||||
| Adjustment to liabilities for incurred claims | -90 | -9 | -99 | |||
| Losses on onerous contracts and reversal of those losses |
14 | 14 | ||||
| Insurance service expenses | 14 | 1,959 | -9 | 1,964 | ||
| Insurance service result | -2,266 | 14 | 1,959 | -9 | -303 | |
| Finance expenses from insurance contracts issued recognised in profit or loss |
15 | 15 | ||||
| Finance expenses from insurance contracts issued |
15 | 15 | ||||
| Total amounts recognised in comprehensive | ||||||
| income | -2,266 | 14 | 1,974 | -9 | -287 | |
| Effect of changes in foreign exchange rates | -13 | -1 | -14 | |||
| Cash flows | ||||||
| Premiums recieved Claims and other directly attributable expenses |
2,545 | 2,545 | ||||
| paid | -2,050 | -2,050 | ||||
| Total cash flows | 2,545 | -2,050 | 495 | |||
| Net closing balance | 448 | 14 | 5,948 | 157 | 6,567 | |
| Closing insurance contract liabilities | 448 | 14 | 5,948 | 157 | 6,567 | |
| Net closing balance | 448 | 14 | 5,948 | 157 | 6,567 | |
| 31.12.22 | |||||||
|---|---|---|---|---|---|---|---|
| LRC | LIC for contracts under the PAA | ||||||
| NOK Million | Excluding loss component |
Loss component | Present value of future cash flows |
Risk adjustment for non-financial risk |
Total | ||
| Opening insurance contract liabilities | 169 | 6,037 | 167 | 6,373 | |||
| Net opening balance | 169 | 6,037 | 167 | 6,373 | |||
| Insurance revenue | -4,852 | -4,852 | |||||
| Insurance service expenses Incurred claims and other directly attributable expenses |
4,122 | 4,122 | |||||
| Adjustment to liabilities for incurred claims | 262 | -21 | 240 | ||||
| Losses on onerous contracts and reversal of those losses |
10 | 10 | |||||
| Insurance service expenses | 10 | 4,384 | -21 | 4,372 | |||
| Insurance service result | -4,852 | 10 | 4,384 | -21 | -480 | ||
| Finance expenses from insurance contracts issued recognised in profit or loss |
13 | 13 | |||||
| Finance expenses from insurance contracts issued |
13 | 13 | |||||
| Total amounts recognised in comprehensive income |
-4,852 | 10 | 4,397 | -21 | -467 | ||
| Effect of changes in foreign exchange rates | -33 | -2 | -35 | ||||
| Cash flows | |||||||
| Premiums recieved Claims and other directly attributable expenses |
5,368 | 5,368 | |||||
| paid | -4,201 | -4,201 | |||||
| Total cash flows | 5,368 | -4,201 | 1,167 | ||||
| Net closing balance | 685 | 10 | 6,200 | 144 | 7,039 | ||
| Closing insurance contract liabilities | 685 | 10 | 6,200 | 144 | 7,039 | ||
| Net closing balance | 685 | 10 | 6,200 | 144 | 7,039 |
| 30.06.23 | 30.06.22 | 31.12.22 | ||||
|---|---|---|---|---|---|---|
| NOK million | Garanteed products - Norway |
Garanteed products - Sweden |
Garanteed products - Norway |
Garanteed products - Sweden |
Garanteed products - Norway |
Garanteed products - Sweden |
| Assets | ||||||
| Shares and fund units | 35,255 | 10,450 | 32,496 | 8,618 | 29,862 | 9,092 |
| Bonds and other fixed-income securities | 125,893 | 47,660 | 129,884 | 46,661 | 128,209 | 46,406 |
| Loans to customers | 14,686 | 6,911 | 15,237 | 7,027 | 15,729 | 6,636 |
| Derivatives | -1,289 | 484 | -1,830 | -614 | -563 | 767 |
| Investment properties | 23,673 | 14,294 | 24,393 | 13,875 | 23,337 | 13,893 |
| Cash and other underlying items | 8,090 | 3,179 | 9,769 | 5,474 | 12,736 | 2,374 |
| Total underlying items | 206,308 | 82,979 | 209,949 | 81,041 | 209,311 | 79,168 |
| Amortisation/write-downs | -105 | -85 | -211 | -165 | -360 |
|---|---|---|---|---|---|
| Other operating expenses | -857 | -684 | -1,654 | -1,370 | -2,910 |
| Total operating expenses 1) | -1,793 | -1,461 | -3,492 | -2,891 | -6,142 |
1) Total operating expenses are in the income statement on the lines "operating expenses" and "insurance service expenses"
Tax
The effective tax rate is influenced by the fact that the Group has operations in countries with tax rates that are different from Norway and differences from currency hedging of the Swedish subsidiary SPP. The tax rate for companies' subject to the financial tax is 25 per cent. The Storebrand Group includes companies that are both subject to and not subject to the financial tax. Therefore, when capitalising deferred tax/deferred tax assets in the consolidated financial statements, the company tax rate that applies for the individual companies is used (22 or 25 per cent).
The tax rate for companies in Sweden is 20.6 per cent, but a majority of Storebrand's business related to occupational pension is subject to a standardized return tax on the assets managed on behalf of policyholders and not company tax. The expected tax rate from Storebrand's Swedish business is therefore lower than the company tax rate.
Storebrand has hedged part of the currency risk from the investment in the Swedish subsidiaries. Gains/losses on currency derivatives are taxable/deductible, while agio/disagio on the shares in the subsidiaries falls under the exemption method. Hence, large SEK/NOK movements will affect the group tax cost.
The tax rules for the insurance industry have undergone changes in recent years. In some cases, Storebrand and the Norwegian Tax Administration have had different interpretations of the tax rules and associated transitional rules. As a result of this, uncertain tax positions arise in connection with the recognised tax expenses. Whether or not the uncertain tax positions have to be recognised in the financial statements is assessed in accordance with IAS 12 and IFRIC 23. Uncertain tax positions will only be recognised in the financial statements if the company considers it to be probable that the Norwegian Tax Administration's interpretation will be accepted in a court of law. Any paid tax related to the uncertain tax positions not recognised in the financial statements is classified as receivables. Significant uncertain tax positions are described below.
(This is described in point B in previous tax notes for the annual accounts and quarterly reporting) New tax rules for life insurance and pension companies were introduced for the 2018 financial year. These rules contained transitional rules for how the companies should revalue/write-down the tax values as at 31 December 2018. In December 2018, the Norwegian Directorate of Taxes published an interpretive statement that Storebrand does not consider to be in accordance with the wording of the relevant act. When presenting the national budget for 2020 in October 2019, the Ministry of Finance proposed a clarification of the wording of the transitional rules in line with the interpretive statement from the Norwegian Directorate of Taxes. The clarification was approved by the Norwegian Parliament in December 2019. Storebrand considers there to be uncertainty regarding the value such subsequent work on a legal rule has as a source of law, and which in this instance only applies for a previous financial year. In the tax return for 2018, Storebrand Livsforsikring AS applied the wording in the original transitional rule. However, in October 2019 Storebrand received a notice of adjustment of tax assessment in line with the interpretive statement from the Norwegian Directorate of Taxes and the clarification from the Ministry of Finance. Storebrand Livsforsikring AS disagrees with the Norwegian Tax Administration's interpretation but considers it uncertain as to whether the company's interpretation will be accepted if the case is decided by a court of law. In April 2022 and January 2023, Storebrand received a decision from the Norwegian Tax Administration based on similar grounds as the ones outlined in the draft decision. Storebrand continues to disagree with the view of the Norwegian Tax Administration and has challenged the decision to the Norwegian Tax Appeals Committee. The uncertain tax position has therefore been recognised in the financial statements. Based on our revised best estimate, the difference between Storebrand's interpretation and the Norwegian Tax Administration's interpretation is approximately NOK 6.4 billion in an uncertain tax position. If Storebrand's interpretation is accepted, a deferred tax expense of approximately NOK 1.6 billion will be derecognised from the financial statements.
During the quarter, Storebrand received a ruling from the Tax Appeals Committee which gives Storebrand full consent in previous uncertain tax positions. Based on the decision from the Tax Appeals Committee, Storebrand has recognized a tax gain of approx. NOK 440 million in the quarter. The tax case in question is described in more detail in note 27 in the annual accounts for 2022 as "case A" and "case C". The decision from the Tax Appeals Committee can be appealed to the court within 6 months.
Storebrand has reviewed the uncertain tax positions as part of the reporting process. The review has not reduced the company's assessment of the probability that Storebrand's interpretation will be accepted in a court of law. The timeline for the continued process with the Norwegian Tax Appeals Committee is unclear, but Storebrand will, if necessary, seek clarification from the court of law for the aforementioned uncertain tax positions.
Note 11
| NOK million | Book value 30.06.23 |
Book value 31.12.22 |
|---|---|---|
| Loans to customers at amortised cost | 453 | 484 |
| Loans to customers at fair value through profit and loss | 27,639 | 28,704 |
| Loans to customers at fair value through other comprehensive income (OCI) | 55,200 | 49,191 |
| Total gross loans to customers | 83,293 | 78,379 |
| Provision for expected loss stage 1 | -9 | -10 |
| Provision for expected loss stage 2 | -16 | -19 |
| Provision for expected loss stage 3 | -41 | -40 |
| Net loans to customers | 83,226 | 78,310 |
| 30.06.23 | |||||
|---|---|---|---|---|---|
| Stage 1 | Stage 2 | Stage 3 | |||
| NOK million | 12-month ECL | Lifetime ECL - no objective evidence of impairment |
Lifetime ECL - objective evidence of impairment |
Total | |
| Loan loss provisions 01.01.2023 | 12 | 24 | 40 | 76 | |
| Transfer to stage 1 (12-month ECL) | 4 | -3 | -1 | ||
| Transfer to stage 2 (lifetime ECL - no objective evidence of impairment) |
-1 | 1 | -1 | ||
| Transfer to stage 3 (lifetime ECL - objective evidence of impairment) |
-2 | 2 | |||
| Net remeasurement of loan losses | -3 | 5 | 7 | 9 | |
| New financial assets originated or purchased | 4 | 3 | 2 | 9 | |
| Financial assets that have been derecognised | -2 | -3 | -1 | -5 | |
| ECL changes of balances on financial assets without changes in stage in the period ECL allowance on written-off (financial) assets |
-2 | -2 | -1 -7 |
-5 -7 |
|
| Loan loss provisions 30.06.23 | 11 | 23 | 42 | 76 | |
| Loan loss provisions on loans to customers valued at amortised cost |
4 | 7 | 23 | 35 | |
| Loan loss provisions on loans to customers valued at fair value through other comprehensive income (OCI) |
3 | 9 | 18 | 30 | |
| Loan loss provisions on guarantees and unused credit limits |
4 | 7 | 12 | ||
| Total loan loss provisions | 11 | 23 | 42 | 76 |
| NOK million | 30.06.23 | 30.06.22 | 31.12.22 |
|---|---|---|---|
| Non-performing and loss-exposed loans without identified | |||
| impairment | 178 | 54 | 73 |
| Non-performing and loss-exposed loans with identified impairment | 28 | 26 | 25 |
| Gross non-performing loans | 206 | 80 | 98 |
| Write-downs stage 3 | -41 | -36 | -40 |
| Net non-performing loans 1) | 165 | 44 | 58 |
1) The figures apply in their entirety Storebrand Bank
| Total contingent liabilities | 26,589 | 23,440 | 23,309 |
|---|---|---|---|
| Undrawn capital in alternative investment funds | 13,116 | 10,198 | 12,238 |
| Uncalled residual liabilities re limited partnership | 3,990 | 4,410 | 4,087 |
| Loan commitment retail market | 5,103 | 5,256 | 3,246 |
| Unused credit facilities | 4,380 | 3,575 | 3,737 |
| NOK million | 30.06.23 | 30.06.22 | 31.12.22 |
Unused credit facilities encompass granted and any unused credit accounts and credit cards, as well as, any unused flexible mortgage facilities.
Storebrand has received a letter from the Norwegian FSA (Finanstilsynet) regarding the fee structure on paid up policies. The fee element in question amounts to approximately NOK 100 million in annual fees. Storebrand is of the opinion that the fee is legitimate and hence that the company is entitled to it. Storebrand has however chosen not to recognize it as income for the current year until the case is settled/awaiting further proceedings.
Storebrand Group companies are engaged in extensive activities in Norway and abroad, and are subject for client complaints and may become a party in legal disputes, see note 44 in the 2022 annual report.
The Storebrand Group is an insurance-dominated, cross-sectoral financial group with capital requirements in accordance with Solvency II. Storebrand calculates Solvency II according to the standard method as defined in the Solvency II Regulations.
Consolidation is carried out in accordance with Section 18-2 of the Norwegian Act relating to Financial Undertakings and Financial Groups. The solvency capital requirement and minimum capital requirement for the Group are calculated in accordance with Section 46 (1)-(3) of the Solvency II Regulations using the standard method.
Storebrand places particular emphasis on continually and systematically adapting the levels of equity in the Group. The level is adapted to the financial risk and capital requirements in the business, where growth and the composition of segments are important motivating factors for the need for capital. The purpose of capital management is to ensure an efficient capital structure and provide for an appropriate balance between in-house goals and regulatory and rating company requirements. If there is a need for new capital, this is raised by the holding company Storebrand ASA, which is listed on the stock exchange and is the ultimate parent company.
The Storebrand companies are subject to various capital requirements depending on the type of business. In addition to the capital requirements for the Storebrand Group and insurance companies, the banking and asset management businesses have capital requirements in accordance with CRD IV. The companies in the Group governed by CRD IV are included in the group's solvency capital and solvency capital requirements with their respective primary capital and capital requirements.
Storebrand has the goal of paying a dividend of more than 50% of the Group profit after tax. The board has the ambition of ordinary dividends per share being, at a minimum, at the same nominal level as the previous year. The normal dividend is paid with a sustainable solvency margin of more than 150%. If there is a solvency margin of more than 175%, the board's intention is to propose extraordinary dividends or share buy-backs. In general, equity in the Group can be
controlled without material limitations if the capital requirement is met and the respective legal entities have sufficient solvency.
| NOK million | Total | Group 1 unlimited |
Group 1 limited |
Group 2 | Group 3 | Total |
|---|---|---|---|---|---|---|
| Share capital | 2,360 | 2,360 | 2,360 | |||
| Share premium | 10,842 | 10,842 | 10,842 | |||
| Reconciliation reserve | 29,201 | 29,201 | 25,877 | |||
| Including the effect of the transitional arrangement | ||||||
| Counting subordinated loans | 9,074 | 1,965 | 7,109 | 9,661 | ||
| Deferred tax assets | 242 | 242 | 540 | |||
| Not-counting tier 3 capital | -231 | |||||
| Risk equalisation reserve | 1,033 | 1,033 | 905 | |||
| Deductions for CRD IV subsidiaries | -5,414 | -5,414 | -4,804 | |||
| Expected dividend | -858 | -858 | -1,718 | |||
| Total basic solvency capital | 46,479 | 36,130 | 1,965 | 8,142 | 242 | 43,431 |
| Subordinated capital for subsidiaries regulated in accordance with CRD IV |
5,414 | 4,804 | ||||
| Total solvency capital | 51,894 | 48,236 | ||||
| Total solvency capital available to cover the minimum capital requirement |
40,034 | 36,130 | 1,965 | 1,940 | 36,381 |
| NOK million | 30.06.23 | 31.12.22 |
|---|---|---|
| Market risk | 20,056 | 21,267 |
| Counterparty risk | 1,017 | 1,119 |
| Life insurance risk | 9,712 | 9,004 |
| Health insurance risk | 928 | 971 |
| P&C insurance risk | 669 | 620 |
| Operational risk | 1,459 | 1,485 |
| Diversification | -7,221 | -7,075 |
| Loss-absorbing ability deferred tax | -4,445 | -4,954 |
| Total solvency capital requirement - insurance company | 22,176 | 22,438 |
| Capital requirements for subsidiaries regulated in accordance with CRD IV | 4,366 | 3,837 |
| Total solvency capital requirement | 26,542 | 26,276 |
| Solvency margin | 196% | 184% |
| Minimum capital requirement | 9,698 | 9,647 |
| Minimum margin | 413% | 377% |
The Storebrand Group has also a requirement to report capital adequacy in a multi-sectoral financial group (conglomerate directive). The calculation in accordance with the Solvency II regulations and capital adequacy calculation in accordance with the conglomerate directive give the same primary capital and essentially the same capital requirements.
| NOK million | 30.06.23 | 31.12.22 |
|---|---|---|
| Capital requirements for CRD IV companies | 4,746 | 4,079 |
| Solvency capital requirements for insurance | 22,176 | 22,438 |
| Total capital requirements | 26,922 | 26,517 |
| Net primary capital for companies included in the CRD IV report | 5,414 | 4,804 |
| Net primary capital for insurance | 46,479 | 43,431 |
| Total net primary capital | 51,894 | 48,236 |
| Overfulfilment | 24,971 | 21,719 |
Under Solvency II, the capital requirement from the CRD IV companies in the Group is included in accordance with their respective capital requirements. In a multi-sectoral financial group, all the capital requirements of the CRD IV companies are calculated based on their respective applicable requirements, including buffer requirement for the largest company in the Group (Storebrand Bank). This increases the total requirement from the CRD IV companies in relation to what is included in the Solvency II calculation. As at 30 June 2023, the difference amounted to NOK 380 million.
Storebrand conducts transactions with related parties as part of its normal business activities. These transactions take place on commercial terms. The terms for transactions with management and related parties are stipulated in notes 23 and 46 in the 2022 annual report.
Storebrand has not carried out any material transactions other than normal business transactions with related parties at the close of the 2nd quarter 2023.
| Q2 | 01.01 - 30.06 | ||||
|---|---|---|---|---|---|
| NOK million | 2023 | 2022 | 2023 | 2022 | 2022 |
| Operating income | |||||
| Income from investments in subsidiaries | 9 | 3,187 | |||
| Net income and gains from financial instruments: | |||||
| - equities and other units | -9 | -13 | -7 | -15 | -25 |
| - bonds and other fixed-income securities | 37 | -11 | 79 | -21 | 51 |
| Other financial instruments | 4 | 1 | 5 | 1 | 2 |
| Operating income | 32 | -24 | 77 | -26 | 3,215 |
| Interest expenses | -6 | -8 | -12 | -14 | -23 |
| Other financial expenses | -1 | 81 | -3 | 95 | 110 |
| Operating expenses | |||||
| Personnel expenses | -13 | -14 | -25 | -25 | -50 |
| Other operating expenses | -56 | -40 | -105 | -78 | -170 |
| Total operating expenses | -68 | -54 | -130 | -103 | -220 |
| Total expenses | -76 | 18 | -145 | -22 | -133 |
| Pre-tax profit | -44 | -6 | -68 | -49 | 3,082 |
| Tax | 8 | 19 | 15 | 35 | -143 |
| Profit for the period | -36 | 13 | -53 | -14 | 2,939 |
| Q2 | 01.01 - 30.06 | ||||
|---|---|---|---|---|---|
| NOK million | 2023 | 2022 | 2023 | 2022 | 2022 |
| Profit for the period | -36 | 13 | -53 | -14 | 2,939 |
| Other total comprehensive income elements not to be classified to profit/loss |
|||||
| Change in estimate deviation pension | 14 | ||||
| Tax on other comprehensive elements | -3 | ||||
| Total other comprehensive income elements | 10 | ||||
| Total comprehensive income | -36 | 13 | -53 | -14 | 2,949 |
| NOK million | 30.06.23 | 30.06.22 | 31.12.22 |
|---|---|---|---|
| Fixed assets | |||
| Deferred tax assets | 51 | 81 | 36 |
| Tangible fixed assets | 28 | 28 | 28 |
| Shares in subsidiaries and associated companies | 25,119 | 23,011 | 24,100 |
| Total fixed assets | 25,198 | 23,119 | 24,164 |
| Current assets | |||
| Owed within group | 86 | 136 | 3,178 |
| Other current receivables | 13 | 15 | 14 |
| Investments in trading portfolio: | |||
| - equities and other units | 33 | 40 | 40 |
| - bonds and other fixed-income securities | 3,745 | 5,649 | 4,629 |
| Bank deposits | 208 | 67 | 433 |
| Total current assets | 4,085 | 5,907 | 8,294 |
| Total assets | 29,283 | 29,026 | 32,458 |
| Equity and liabilities | |||
| Share capital | 2,360 | 2,360 | 2,360 |
| Own shares | -66 | -7 | -39 |
| Share premium reserve | 10,842 | 10,842 | 10,842 |
| Total paid in equity | 13,135 | 13,195 | 13,163 |
| Other equity | 15,458 | 15,154 | 15,932 |
| Total equity | 28,594 | 28,349 | 29,095 |
| Non-current liabilities | |||
| Pension liabilities | 118 | 142 | 118 |
| Securities issued | 501 | 500 | 501 |
| Total non-current liabilities | 618 | 642 | 618 |
| Current liabilities | |||
| Debt within group | 1 | 1,002 | |
| Provision for dividend | 1,718 | ||
| Other current liabilities | 70 | 35 | 25 |
| Total current liabilities | 71 | 35 | 2,745 |
| Total equity and liabilities | 29,283 | 29,026 | 32,458 |
| NOK million | Share capital | Own shares | Share premium | Other equity | Total equity |
|---|---|---|---|---|---|
| Equity at 31. December 2021 | 2,360 | -9 | 10,842 | 15,128 | 28,321 |
| Profit for the period | 2,939 | 2,939 | |||
| Total other result elements | 10 | 10 | |||
| Total comprehensive income | 2,949 | 2,949 | |||
| Provision for dividend | -1,718 | -1,718 | |||
| Own shares bought back 2) | -32 | -468 | -500 | ||
| Own shares sold2) | 3 | 37 | 40 | ||
| Employee share2) | 4 | 4 | |||
| Equity at 31. December 2022 | 2,360 | -39 | 10,842 | 15,932 | 29,095 |
| Profit for the period | -53 | -53 | |||
| Total comprehensive income | -53 | -53 | |||
| Provision for dividend | 2 | 2 | |||
| Own shares bought back 2) | -31 | -469 | -500 | ||
| Own shares sold2) | 3 | 41 | 44 | ||
| Employee share2) | 5 | 5 | |||
| Equity at 30. June 2023 | 2,360 | -66 | 10,842 | 15,458 | 28,594 |
| 1) 471 974 890 shares with a nominal value of NOK 5. |
2) In 2023, Storebrand ASA has bought 6.147.178 own shares. In 2023, 613.792 shares were sold to our own employees. Holding of own shares 30. June 2023 was 13.297.612.
| Equity at 31. December 2021 | 2,360 | -9 | 10,842 | 15,128 | 28,321 |
|---|---|---|---|---|---|
| Profit for the period | -14 | -14 | |||
| Total comprehensive income | -14 | -14 | |||
| Own shares sold | 3 | 35 | 37 | ||
| Employee share | 5 | 5 | |||
| Equity at 30. June 2022 | 2,360 | -7 | 10,842 | 15,154 | 28,349 |
| 01.01 - 30.06 | ||
|---|---|---|
| NOK million | 2023 | 2022 |
| Cash flow from operational activities | ||
| Net receipts/payments - securities at fair value | 997 | -859 |
| Payments relating to operations | -133 | -113 |
| Net receipts/payments - other operational activities | 3,095 | 4,414 |
| Net cash flow from operational activities | 3,958 | 3,442 |
| Cash flow from investment activities | ||
| Payments - purchase/capitalisation of subsidiaries | -2,005 | -1,285 |
| Net cash flow from investment activities | -2,005 | -1,285 |
| Cash flow from financing activities | ||
| Payments - repayments of loans | -500 | |
| Payments - interest on loans | -12 | -14 |
| Receipts - sold own shares to employees | 49 | 42 |
| Payments - buy own shares | -500 | |
| Payments - dividends | -1,715 | -1,646 |
| Net cash flow from financing activities | -2,178 | -2,118 |
| Net cash flow for the period | -224 | 39 |
| Net movement in cash and cash equivalents | -224 | 39 |
| Cash and cash equivalents at start of the period | 433 | 28 |
| Cash and cash equivalents at the end of the period | 208 | 67 |
1
3
Accounting policies
The financial statements are presented in accordance with the accounting policies applied in the annual financial statements for 2022. The accounting policies are described in the 2022 annual report.
Storebrand ASA does not apply IFRS to the parent company's financial statements.
In preparing the interim accounts, Storebrand has used assumptions and estimates that affect reported amounts of assets, liabilities, revenues, and costs, and information in the notes to the financial statements. The final values realised may differ from these estimates.
| Total 1) | 501 | 500 | 501 | |||
|---|---|---|---|---|---|---|
| Bond loan 2020/2025 | Variable | NOK | 500 | 501 | 500 | 501 |
| NOK million | Interest rate | Currency | Net nomial value |
2023 | 2022 | 2022 |
| 01.01 - 30.06 | Full year |
1) Loans are booked at amortised cost and include earned not due interest.
Signed loan agreements have covenant requirements.
Storebrand ASA has an unused drawing facility for EUR 200 million, expiration December 2025.
The Board of Directors and the Chief Executive Officer have today considered and approved the Interim report and Interim financial statements for Storebrand ASA and the Storebrand Group for the first six months of 2023 (Report for the first six months, 2023).
The Interim report has been prepared in accordance with the requirements of IAS, 34 Interim Financial Reporting as adopted by the EU and additional Norwegian requirements pursuant to the Norwegian Securities Trading Act.
In the best judgement of the Board and the CEO, the financial statements for the first six months of 2023 have been prepared in accordance with applicable accounting standards, and the information in the financial statements provides a fair and true picture of the parent company's and Group's assets, liabilities, financial standing and results as a whole as at 30 June 2023. In the best judgement of the Board and the CEO, the six-month report provides a fair and true overview of important events during the accounting period and their effects on the financial statements for the first six months for Storebrand ASA and the Storebrand Group. In the best judgement of the Board and the CEO, the descriptions of the most important elements of risk and uncertainty that the Group faces in the remaining six months, and a description of related parties' material transactions, also provide a true and fair view.
Lysaker, 13 July 2023 Board of Directors of Storebrand ASA
Martin Skancke Karin Bing Orgland Marianne Bergmann Røren
Jarle Kjell Roth Christel Elise Borge Fredrik Åtting
Hanne Seim Grave Hans-Petter Salvesen Svein Thomas Lømork
Odd Arild Grefstad Chief Executive Officer
14 July 2023 Results Q2 2023 25 October 2023 Results Q3 2023
Lars Aa. Løddesøl Group CFO [email protected] +47 934 80 151 Kjetil R. Krøkje Group Head of Finance, Strategy and M&A [email protected] +47 934 12 155 Trond Finn Eriksen Investor Relations (Interim) [email protected] +47 991 64 135
Storebrand ASA Professor Kohtsvei 9, P.O. Box 500, N-1327 Lysaker, Norway Phone +47 22 31 50 50
www.storebrand.com/ir
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