Quarterly Report • Feb 8, 2023
Quarterly Report
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Storebrand Group (unaudited)
| Storebrand Group3 | |
|---|---|
| Savings 6 | |
| Insurance 8 | |
| Guaranteed pension 10 | |
| Other 12 | |
| Balance sheet and capital situation 13 | |
| Outlook 16 |
| Income statement 20 | |
|---|---|
| Statement of comprehensive income 21 | |
| Statement of financial position22 | |
| Statement of changes in equity24 | |
| Statement of cash flow 25 | |
| Notes 27 |
| Income statement 49 | |
|---|---|
| Statement of comprehensive income 49 | |
| Statement of financial position50 | |
| Statement of changes in equity51 | |
| Statement of cash flow 52 | |
| Notes 53 |
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.
| 2022 | 2021 | Full year | |||||
|---|---|---|---|---|---|---|---|
| NOK million | Q4 | Q3 | Q2 | Q1 | Q4 | 2022 | 2021 |
| Fee and administration income | 1,641 | 1,507 | 1,456 | 1,457 | 2,108 | 6,062 | 6,607 |
| Insurance result | 393 | 482 | 430 | 365 | 307 | 1,670 | 1,201 |
| Operational cost | -1,410 | -1,272 | -1,181 | -1,145 | -1,377 | -5,008 | -4,678 |
| Operating profit | 624 | 717 | 705 | 678 | 1,038 | 2,724 | 3,130 |
| Financial items and risk result life | 217 | -47 | -129 | -50 | 329 | -8 | 1,372 |
| Profit before amortisation | 841 | 670 | 577 | 628 | 1,367 | 2,716 | 4,503 |
| Amortisation and write-downs of intangible assets | -160 | -159 | -138 | -138 | -140 | -596 | -527 |
| Profit before tax | 681 | 511 | 439 | 489 | 1,227 | 2,120 | 3,976 |
| Tax | 23 | -125 | -26 | 398 | -310 | 270 | -846 |
| Profit after tax | 704 | 386 | 413 | 887 | 917 | 2,390 | 3,130 |
Storebrand Group's profit before amortisation and tax was NOK 841m (NOK 1,367m) in the 4th quarter and NOK 2,716m (NOK 4,503m) for the full year. Figures in brackets are from the corresponding period last year. The underlying growth continued in the quarter and financial markets showed signs of improvement towards the end of the year. However, weak markets in 2022 have led to a negative financial result for the full year. This is primarily due to fair value changes from rising rates and wider credit spreads in the company portfolios, which will generate higher yields on investments going forward and a stronger financial result. Strong buffer capital levels at the start of the year and active risk management have secured sufficient customer returns in the guaranteed products and limited the impact from market volatility on the Group's results.
The acquisition of Danica was completed on the 1st of July 2022 and is included in the Group's accounts as of the 3rd quarter. Danica's contribution to the Group's profit before amortisation was NOK 55m in the 4th quarter and NOK 87m in the second half of 2022. The result is primarily driven by a strong insurance result. Its Insurance segment contributed to the full year result with a profit before amortisation of NOK 50m while its Savings segment reported a profit before amortisation of NOK 31m. The Guaranteed Pension segment in Danica incurred a loss of NOK -14m and the Other segment reported a profit of NOK 20m.
Total fee and administration income amounted to NOK 1,641m (NOK 2,108m) in the 4th quarter and NOK 6,062m (NOK 6,607m) for the full year, corresponding to a decrease of 22% compared to the same quarter last year and a decrease of 8% for the full year. Adjusted for performance related income, all booked in the 4th quarter, the fee and administration income fell by 2% for the full year compared to last year. Continued underlying growth in Unit Linked, Asset Management, Storebrand Bank, Public Occupational Pensions, as well as the acquisition of Danica contribute to income growth. However, the growth is offset by lower assets under management due to weak market returns, and by lower fee margins in Unit Linked due to the introduction of Individual Pensions Accounts in 2021.
The Insurance result improved to NOK 393m (NOK 307m) in the 4th quarter and NOK 1,670m (NOK 1,201m) for the full year due to strong premium growth and generally lower claims ratios in the different product lines. However, within P&C there were increased seasonal claims within motor insurance in the quarter, leading to a higher combined ratio compared to the previous quarter. The total combined ratio for the Insurance segment was 95% (96%) in the 4th quarter and 91% (94%) for the full year – in line with the target of 90-92% for the full year, but weaker than the target in the 4th quarter.
The Group's operational cost amounted to NOK -1,410m (NOK - 1,377m) in the 4th quarter and NOK -5,008m (NOK -4,678m) for the full year. Adjusted for performance related costs, currency effects and acquisitions, the operational cost for the year was NOK 4,760m. Growth initiatives have gradually increased costs during the year, but continued focus on cost discipline has kept the cost base under the guided level of NOK 4.9bn for 2022 (excluding performance related costs, currency effects and acquisitions). In the 4th quarter, cost is increased due to both integration cost of acquired business amounting to NOK -22m and performance
1 Profit 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 companies. The statement differs from the official accounts layout.
related cost in Asset Management amounting to NOK -29m. The updated cost guidance for 2023 (full year) is NOK 5.3bn and includes the acquired businesses Danica and Kron. The estimate excludes performance related cost, currency effects, and potential future acquisitions and integration cost of acquired business.
Overall, the operating profit amounted to NOK 624m (NOK 1,038m) in the 4th quarter and NOK 2,724m (NOK 3,130m) for the full year.
The 'financial items and risk result' amounted to NOK 217m (NOK 329m) in the 4th quarter and NOK -8m (NOK 1,372m) for the full year. Rising interest rates, wider credit spreads and falling equities have resulted in lower asset valuations in 2022, leading to a negative financial result – particularly in Storebrand's company portfolios. Running yield in the portfolios have increased accordingly. Net profit sharing amounted to NOK 38m (NOK 253m) in the 4th quarter and NOK -106m (NOK 504m) for the full year. The quarterly profit stems from improving financial markets. The risk result has strengthened in 2022 from previous years, particularly in the Norwegian guaranteed products where there has been less disability claims and an improved longevity result in 2022. The risk result amounted to NOK 53m (NOK 63m) in the 4th quarter and NOK 262m (NOK 187m) for the full year.
Amortisation of intangible assets from acquired business amounted to NOK -160m (NOK -140m) in the 4th quarter and NOK -596m (NOK -527m) for the full year.
Storebrand booked a tax income for the Group of NOK 23m (NOK -310m) in the 4th quarter and NOK 270m (NOK -846m) for the full year. The tax income in the quarter and for the full year is due to new information received and a partial reversal by The Norwegian Tax Administration on parts of the uncertain tax position for the income year 2018. The tax income in isolation was NOK 202m in the 4th quarter and NOK 770m for the full year. Tax related issues are described more under the Outlook section and in note 9. 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 the results by business segment. For a more detailed description of the results, see the sections by segment in the report. Savings reported a profit before amortisation of NOK 456m (NOK 916m) in the 4th quarter and NOK 1,653m (NOK 2,355m) for the full year. Profit before amortisation in Insurance increased in 2022 to NOK 92m (NOK 61m) in the 4th quarter and NOK 580m (NOK 423m) for the full year. In Guaranteed pensions, it decreased to NOK 270m (NOK 485m) in the 4th quarter and NOK 903m (NOK 1,432m) for the full year due to lower profit sharing. In the Other segment, the profit before amortisation was NOK 23m (NOK -95m) in the 4th quarter and -420m (NOK 293m) for the full year, supported by positive developments in financial markets in the 4th quarter but altogether weak investment returns in the company portfolios in 2022.
The solvency ratio was 184% at the end of the 4th quarter, an increase of 10 percentage points from the previous quarter. Result generation from operations and positive financial market developments strengthened the solvency ratio, but the improvement was more than offset by regulatory factors including a lower volatility adjustment (VA) and higher symmetric equity stress adjustment (SA). Risk management, including increased levels of reinsurance, reduced foreign currency exposure, and balance sheet and investment exposure optimisations, added to the solvency ratio. In addition, a reset of available additional statutory reserves to absorb stresses at the turn of the year improved the solvency ratio. The solvency ratio is now above the threshold for overcapitalisation of 175%, as it has been for most of the year.
Based on the Group's results, the board proposes an ordinary dividend of NOK 3.70 per share for 2022 to the Annual General Meeting, equal to a total amount of NOK 1,718m. This represents a NOK 0.20 nominal increase compared to the previously paid dividend, corresponding to an increase of 5.7% and a pay-out ratio of 72% of Group profit after tax.
Based on the reported solvency ratio of 184%, which is above the threshold for overcapitalisation of 175%, and a forward-looking assessment of expected solvency generation with considerations of future events and risks, the Board intends to continue the share buyback program with a tranche amounting to NOK 500m pending approval from the NFSA. 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.
| 2022 | 2021 | Full year | |||||
|---|---|---|---|---|---|---|---|
| NOK million | Q4 | Q3 | Q2 | Q1 | Q4 | 2022 | 2021 |
| Savings - non-guaranteed | 456 | 401 | 392 | 404 | 916 | 1,653 | 2,355 |
| Insurance | 92 | 210 | 169 | 109 | 61 | 580 | 423 |
| Guaranteed pension | 270 | 148 | 254 | 232 | 485 | 903 | 1,432 |
| Other profit | 23 | -89 | -238 | -116 | -95 | -420 | 293 |
| Profit before amortisation | 841 | 670 | 577 | 628 | 1,367 | 2,716 | 4,503 |
| 2022 | 2021 | Full year | |||||
|---|---|---|---|---|---|---|---|
| Q4 | Q3 | Q2 | Q1 | Q4 | 2022 | 2021 | |
| Earnings per share, adj. for amortisation | 1.85 | 1.16 | 1.16 | 2.18 | 2.25 | 6.34 | 7.81 |
| Equity | 37,935 | 37,375 | 37,268 | 38,430 | 37,709 | 37,935 | 37,709 |
| Adjusted ROE, annualised | 9.9% | 6.1% | 6.3% | 12.1% | 12.8% | 8.3% | 10.7% |
| Solvency II ratio | 184% | 174% | 195% | 184% | 175% | 184% | 175% |
| Target | Actual | |
|---|---|---|
| Return on equity (after tax)* | > 10% | 8.3% |
| Future Storebrand (Savings & Insurance)** | 43% | |
| Back book (Guaranteed & Other)** | 2% | |
| Dividend pay-out ratio | > 50% | 72% |
| Solvency II ratio Storebrand Group | > 150% | 184% |
* YTD profit after tax, adjusted for amortisation of intangible assets. Includes the tax income of NOK 770m in 2022. Excluding this effect, the figure was 6.1%.
** 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.
| 2022 | 2021 | Full year | |||||
|---|---|---|---|---|---|---|---|
| NOK million | Q4 | Q3 | Q2 | Q1 | Q4 | 2022 | 2021 |
| Fee and administration income | 1,293 | 1,174 | 1,130 | 1,136 | 1,748 | 4,733 | 5,215 |
| Operational cost | -848 | -763 | -718 | -702 | -838 | -3,031 | -2,927 |
| Operating profit | 445 | 410 | 412 | 434 | 910 | 1,701 | 2,288 |
| Financial items and risk result life | 11 | -9 | -20 | -30 | 6 | -49 | 67 |
| Profit before amortisation | 456 | 401 | 392 | 404 | 916 | 1,653 | 2,355 |
The Savings segment reported a profit before amortisation of NOK 456m (NOK 916m) in the 4th quarter and NOK 1,653m (NOK 2,355m) for the full year. Underlying growth continues to be strong, but negative market returns have led to a decline in assets under management this year. Danica is included in Norwegian Unit Linked as of the 3rd quarter this year with a profit contribution of NOK 20m in the 4th quarter and NOK 31m in the full year result.
The fee and administration income in the Savings segment amounted to NOK 1,293m (NOK 1,748m) in the 4th quarter and NOK 4,733m (NOK 5,215m) for the full year. This quarter includes performance fees for the full year in Asset Management. The performance related income amounted to NOK 133m (NOK 570m), of which NOK 67m (NOK 206m) was earned in the 4th quarter. When adjusting for Danica, performance fees and currency effects, the underlying income within Savings fell by 2% for the full year. In Asset Management, the underlying income adjusted for the mentioned effects was stable. In the bank, overall income grew by 17% in 2022, in line with the lending growth. In Unit Linked Norway, the underlying income has fallen 10% due a reduction in assets under management from weak financial markets and due to lower fee margins from the introduction of Individual Pension Accounts in 2021. In Sweden, Unit Linked income fell by 8%, adjusted for currency effects and a transaction fee income amounting to SEK 37m last year, due to a combination of falling assets under management and a lower fee margin.
The fee margin in Unit Linked Norway remained at 0.69% (0.65%), as in the previous quarter. In Sweden, the margin has fallen from 0.68% in the previous quarter to 0.67% (0.73%). The fee margin in Asset Management was 0.23% (0.40%) in the quarter, including performance fees. Excluding performance fees, the margin in the 4th quarter was 0.19% (0.19%), up from 0.18% last quarter. The Bank's net interest margin was 1.18% (1.19%) in the 4th quarter, down from 1.20% last quarter.
Operational cost amounted to NOK -848m (NOK -838m) in the 4th quarter and NOK -3,031m (NOK -2,927m) for the full year. Performance related costs in funds with performance fees amounted to NOK -29m (NOK -96m) in the quarter and NOK -53m (NOK -255m) year to date. Danica's cost amounted to NOK 40m in the quarter and NOK 90m full year. Adjusted for Danica and currency effects, the operational cost excluding performance related cost increased by 6% in the quarter and 9% year to date. The increase is attributed to inflation, growth initiatives in the business and digital investments.
The financial result was NOK 11m (NOK 6m) in the 4th quarter and NOK -49m (NOK 67m) for the full year. The loss stems primarily from the first half of the year, when wider credit spreads incurred fair value losses on credit bonds, and higher interest rates affected the value of fixed-rate mortgages in Storebrand Bank.
Total assets under management in Unit Linked increased to NOK 315bn (NOK 308bn) from NOK 302bn last quarter. Of these, NOK 27bn are managed in Danica. Unit Linked premiums increased to NOK 6.6bn (NOK 5.4bn) in the 4th quarter, and NOK 23bn (NOK 21bn) for the full year. Danica contributed with NOK 0.6bn of premiums in the quarter and NOK 1.3bn in the second half of the year. Net inflow (from premiums, claims and withdrawals, and transfers) amounted to NOK 4.7bn (NOK -2.8bn) in the 4th quarter and NOK 12.4bn (NOK -5.1bn) for the full year.
In the Norwegian Unit Linked business, assets under management increased to NOK 179bn (NOK 158bn), supported by the acquisition of Danica. Weak market developments have reduced assets by NOK 12bn during 2022. However, underlying growth continues with a net inflow of NOK 3bn in the quarter and NOK 7bn for the full year, driven by growth in occupational pension premiums, new sales, 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 31% of gross premiums written (at the end of the 3rd quarter 2022 and with the inclusion of Danica).
In the Swedish market, SPP is the second largest provider of nonunionised occupational pensions with a market share of 13% measured by gross premiums written including transfers (at the end of the 3rd quarter 2022). In local currency, Unit Linked assets under management increased during the quarter by SEK 8.1bn and amounted to SEK 143bn, but decreased by SEK 11.1bn (-7%) during the year, primarily due to weak market developments. The underlying growth is driven by strong growth in sales (APE), amounting to NOK 864m (NOK 505m) in the quarter and NOK 2,613m (NOK 1,790m) year to date. The transfer balance has stabilised and net inflow amounted to NOK 1.8bn (NOK -3.1bn) in the 3rd quarter and NOK 5.2bn (NOK -6.8bn) for the full year.
Assets under management in Storebrand Asset Management increased during the quarter by NOK 18.8bn (2%) to NOK 1,020bn,
but decreased by NOK 76.6bn (7%) during the year due to negative market returns. The net inflow was NOK 10bn in the quarter and NOK 17bn for the full year.
The bank lending portfolio increased by NOK 2.2bn (3%) to NOK 67.1bn during the quarter and by NOK 10bn (18%) full year. The growth is attributed to improved sales. The portfolio consists of low-risk home mortgages with an average loan-to-value (LTV) of 58%. NOK 17bn of the mortgages are booked on the balance sheet of Storebrand Livsforsikring AS.
| 2022 | 2021 | ||||
|---|---|---|---|---|---|
| NOK million | Q4 | Q3 | Q2 | Q1 | Q4 |
| Unit linked Reserves | 314,992 | 302,337 | 276,319 | 291,036 | 308,351 |
| Unit linked Premiums | 6,583 | 6,278 | 5,333 | 5,288 | 5,350 |
| AuM Asset Management | 1,019,988 | 1,001,100 | 1,008,705 | 1,039,654 | 1,096,556 |
| Retail Lending | 67,061 | 64,879 | 62,559 | 59,223 | 57,033 |
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.
| 2022 | 2021 | Full year | |||||
|---|---|---|---|---|---|---|---|
| NOK million | Q4 | Q3 | Q2 | Q1 | Q4 | 2022 | 2021 |
| Insurance premiums f.o.a. | 1,630 | 1,613 | 1,449 | 1,397 | 1,366 | 6,088 | 5,175 |
| Claims f.o.a. | -1,237 | -1,131 | -1,019 | -1,032 | -1,059 | -4,419 | -3,974 |
| Operational cost | -318 | -284 | -260 | -251 | -253 | -1,112 | -875 |
| Operating profit | 75 | 198 | 170 | 114 | 54 | 558 | 326 |
| Financial result | 17 | 11 | -1 | -5 | 6 | 22 | 97 |
| Contribution from SB Helseforsikring AS | 0 | 7 | 0 | -7 | -9 | -1 | 17 |
| Profit before amortisation | 92 | 210 | 169 | 109 | 61 | 580 | 423 |
| Claims ratio | 76% | 70% | 70% | 74% | 78% | 73% | 77% |
| Cost ratio | 20% | 18% | 18% | 18% | 19% | 18% | 17% |
| Combined ratio | 95% | 88% | 88% | 92% | 96% | 91% | 94% |
Insurance premiums f.o.a. amounted to NOK 1,630m (NOK 1,366m) in the 4th quarter and NOK 6,088m (NOK 5,175m) for the full year, corresponding to an increase of 19% compared to the same quarter last year and an increase of 18% for the full year. Adjusted for Danica, insurance premiums f.o.a. increased by 14% compared to the same quarter last year.
Profit before amortisation amounted to NOK 92m (NOK 61m) in the 4th quarter and NOK 580m (NOK 423m) for the full year. Danica contributed with NOK 20m to the profit in the quarter. The total combined ratio improved to 95% (96%) in the 4th quarter and 91% (94%) for the full year. The result is in line with the targeted combined ratio of 90-92%. Improving labour market conditions, after the removal of infection controls, seem to improve disability levels in Norway which remain on a high level, but future developments remain uncertain.
Within 'P&C & Individual life', strong growth continued with premiums f.o.a. growing 22% in the 4th quarter compared to last year. The profit before amortisation was NOK 69m (NOK 54m) in the 4th quarter and NOK 371m (NOK 393m) for the full year. The claims ratio was 70% (72%) in the 4th quarter and 67% (67%) for the full year. High claims in motor in December weakens the result in the quarter. Operational cost increased to NOK -241m (NOK - 178m) in the 4th quarter and NOK -816m (NOK -612m) for the full year due to growth and increased activity. Altogether, the product segment delivered a combined ratio of 95% (94%) in the 4th quarter and 90% (88%) for the full year.
'Health and Group life' reported a profit before amortisation of NOK -17m (NOK -6m) in the 4th quarter and NOK 8m (NOK -26m) for the full year. Measures, including repricing, have been taken to improve the robustness and profitability in the Group Life product. In the 4th quarter, reserves have been strengthened by NOK 25m due to expected wage inflation and increases in the national base amount. The Health insurance business delivered a near zero result in the quarter and for the full year. Higher claims in both the Norwegian and Swedish business impacted the result. In sum, 'Health and Group life' have had an increase in the combined ratio in the quarter to 106% (104%), but seen an improvement in profitability for the full year 100% (110%).
The result for 'Pension related disability insurance Nordic' was NOK 41m (NOK 13m) in the 4th quarter and NOK 201m (NOK 56m) for the full year. While the Norwegian business experienced increases in disability claims in the beginning of the year, partly due to aftereffects from the pandemic on the labour market, the development has seen a positive trend during the rest over the year. However, disability levels are still at high levels and followed closely. Measures to improve profitability, including repricing, contributed to the positive result development. In the Swedish business, the result is driven by low claims. Altogether the combined ratio was 89% (96%) in the 4th quarter and 86% (96%) for the full year.
The cost ratio was 20% (19%) in the 4th quarter and 18% (17%) for the full year, with cost amounting to NOK -318m (NOK -253m) in the 4th quarter and NOK -1,112m (NOK -875m) for the full year. The higher cost level is driven by the growth in the business, including sales commissions increasing in line with the growth in sales.
The Insurance investment portfolio is primarily invested in fixed income securities with short to medium duration and achieved a financial return of 0.6% in the 4th quarter and 2.1% for the full year. 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 4th 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 6.2% as of the 3rd quarter compared to 5.9% a year earlier.
Overall growth in annual portfolio premiums amounted to 21% compared to the same quarter last year, and 14% when adjusted for Danica. Growth in 'P&C & Individual life' amounted to 22% and is driven by strong contribution from sales agents, distribution partnerships and Danica. 'Health & Group life' grew by 17%, 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.
| 2022 | 2021 | ||||
|---|---|---|---|---|---|
| NOK million | Q4 | Q3 | Q2 | Q1 | Q4 |
| P&C & Individual life | 4,013 | 3,889 | 3,512 | 3,395 | 3,301 |
| Health & Group life* | 2,071 | 2,056 | 2,006 | 1,939 | 1,775 |
| Pension related disability insurance Nordic | 1,738 | 1,703 | 1,487 | 1,457 | 1,369 |
| Total written premiums | 7,822 | 7,648 | 7,005 | 6,791 | 6,445 |
| Investment portfolio** | 10,642 | 10,766 | 10,181 | 10,003 | 9,584 |
* 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.
| 2022 | 2021 | Full year | |||||
|---|---|---|---|---|---|---|---|
| NOK million | Q4 | Q3 | Q2 | Q1 | Q4 | 2022 | 2021 |
| Fee and administration income | 413 | 398 | 395 | 391 | 418 | 1,597 | 1,631 |
| Operational cost | -233 | -208 | -206 | -202 | -248 | -850 | -890 |
| Operating profit | 180 | 190 | 189 | 189 | 169 | 747 | 741 |
| Risk result life & pensions | 53 | 74 | 54 | 82 | 63 | 262 | 187 |
| Net profit sharing | 38 | -116 | 11 | -39 | 253 | -106 | 504 |
| Profit before amortisation | 270 | 148 | 254 | 232 | 485 | 903 | 1,432 |
Guaranteed pension achieved a profit before amortisation of NOK 270m (NOK 485m) in the 4th quarter and NOK 903m (NOK 1,432m) for the full year.
Fee and administration income was stable at NOK 413m (NOK 418m) in the 4th quarter and NOK 1,597m (NOK 1,631m) for the full year. The majority of the guaranteed products are closed for new business and are in long term run-off. However, Public Occupational Pensions (reported under Defined Benefit Norway) is a growth area.
Operational cost amounted to NOK -233m (NOK -248m) in the 4th quarter and NOK -850m (NOK -890m) for the full year.
The operating profit was stable and amounted to NOK 180m (NOK 169m) in the 4th quarter and NOK 747m (NOK 741m) for the full year.
The risk result was NOK 53m (NOK 63m) in the 4th quarter and NOK 262m (NOK 187m) for the full year. A strong longevity risk result as well as a positive disability risk result in Norwegian Paidup policies are the main contributing factors to the result. The other products had a marginally negative result in the quarter.
Net profit sharing amounted to NOK 38m (NOK 253m) in the 4th quarter and NOK -106m (NOK 504m) for the full year. Falling equity markets and a lower fair value of fixed income investments due to rising interest rates and wider credit spreads have resulted in weak investment returns in 2022. In Norway, losses have been absorbed by customer buffers, and net profit sharing has been marginal at NOK 1m (NOK 98m) in the 4th quarter and NOK 6m (NOK 154m) for the full year. The main impact on the result to shareholders in the 4th quarter and for the full year has been in the Swedish portfolio where net profit sharing amounted to NOK 36m (NOK 155m) in the quarter and NOK -112m (NOK 350m) in 2022. The main driver for the positive result in the quarter is good investment return on credit bonds, while the decrease in the volatility adjustment of 14bps during year has had the most significant negative impact and contributed to a total increase in deferred capital contribution (DCC) and financial loss of NOK 159m in 2022.
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 4th quarter, customer reserves of guaranteed pensions amounted to NOK 273bn. This is in line with previous quarter and a decrease of NOK -17bn since the beginning of the year. Net flow of guaranteed pensions amounted to NOK -2.9bn in 4th quarter and NOK -10.5bn in 2022. As a share of the total balance sheet, guaranteed reserves amounted to 46.5% (48.5%) at the end of the 4th 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. Mandates amounting to an estimated NOK 5.5bn of reserves were won in 2021, most of which was transferred to Storebrand in the first half of 2022. Public sector mandates are typically assigned in the second half of the year and in 2022 Storebrand won tenders that will add an additional NOK 2bn in reserves, most of which will be accounted for in the 1st quarter 2023.
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 4th quarter, a decrease of NOK 6.1bn in 2022. The decrease is primarily attributed to pension payments of NOK -6.9bn in 2022, and a decrease in the market value adjustment reserve due to financial market developments.
Guaranteed portfolios in the Swedish business totalled NOK 79bn as of the 4th quarter, a decrease of NOK 14.1bn in 2022, mainly driven by a lower fair value of assets and liabilities.
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) increased by NOK 0.4bn to NOK 23.9bn in the 4th quarter, and decreased by NOK 9.7bn in 2022 as a result of falling equity markets, rising interest rates, and wider credit spreads. As a share of guaranteed reserves, buffer capital levels in Norwegian products still amount to 6.3% (11.2%) and 19.6% (17.8%) in Swedish products. This does not include offbalance sheet excess values of bonds at amortised cost, which at the end of the 4th quarter amounted to a deficit of NOK -10.2bn from a surplus of NOK 3.4bn at the end of last year. The deficit indicates that the reinvestment yield in the market is currently higher than the average yield in the portfolio. As bonds at amortised cost mature, their excess values will trend to zero.
| 2022 | 2021 | ||||
|---|---|---|---|---|---|
| NOK million | Q4 | Q3 | Q2 | Q1 | Q4 |
| Guaranteed reserves | 273,465 | 275,622 | 274,918 | 281,474 | 290,862 |
| Guaranteed reserves in % of total reserves | 46.5% | 47.7% | 49.9% | 49.2% | 48.5% |
| Net flow of premiums and claims | -2,892 | -2,721 | -2,454 | -2,480 | -2,591 |
| Buffer capital in % of customer reserves Norway | 6.3% | 6.2% | 6.9% | 8.6% | 11.2% |
| Buffer capital in % of customer reserves Sweden | 19.6% | 18.2% | 17.5% | 17.9% | 17.8% |
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.
| 2022 | 2021 | Full year | |||||
|---|---|---|---|---|---|---|---|
| NOK million | Q4 | Q3 | Q2 | Q1 | Q4 | 2022 | 2021 |
| Fee and administration income | 2 | 6 | 4 | 6 | 8 | 17 | 21 |
| Operational cost | -77 | -87 | -70 | -64 | -103 | -299 | -246 |
| Operating profit | -75 | -82 | -66 | -59 | -96 | -282 | -225 |
| Financial items and risk result life | 98 | -7 | -172 | -57 | 0 | -138 | 518 |
| Profit before amortisation | 23 | -89 | -238 | -116 | -95 | -420 | 293 |
| 2022 | 2021 | Full year | |||||
|---|---|---|---|---|---|---|---|
| NOK million | Q4 | Q3 | Q2 | Q1 | Q4 | 2022 | 2021 |
| Fee and administration income | -66 | -70 | -73 | -75 | -66 | -284 | -260 |
| Operational cost | 66 | 70 | 73 | 75 | 66 | 284 | 260 |
| Financial items and risk result life | |||||||
| Profit before amortisation |
The Other segment reported a profit before amortisation of NOK 23m (NOK -95m) in the 4th quarter and -420m (NOK 293m) for the full year. The loss this year stems primarily from operational cost in the holding company Storebrand ASA, and negative returns on investments in company portfolios due to fair value changes from wider credit spreads. Correspondingly, the running yield has increased. The profit in 2021 includes a positive financial result of NOK 546m from the divestment of AS Værdalsbruket.
The financial result for the Other segment includes the company portfolios of SPP and Storebrand Life Insurance, and the financial result of Storebrand ASA. The financial result for the Other segment amounted to NOK 98m in the 4th quarter and -138m for the full year, reflecting a reversal of some of the year's weak investment returns from wider credit spreads. The investments in the company portfolios are primarily in interest-bearing securities in Norway and Sweden. The Norwegian company portfolio achieved a return of 1.0% in the 4th quarter and 1.3% for the full year, while the Swedish company portfolio reported a return of 0.6% in the 4th quarter and -1.5% for the full year. The company portfolios in the Norwegian and Swedish life insurance companies and the holding company amounted to NOK 29.5bn at the end of the year.
The Storebrand Life Insurance Group is funded by a combination of equity and subordinated loans. Interest expenses in the quarter amounted to NOK -133m. The repurchase of EUR 212m of an issued subordinated loan had a financial cost of NOK 53m in the quarter. However, the amount approximately equals the savings on interest expenses before the loan's first call date. Given the interest rate level at the end of the 4th quarter, interest expenses of approximately NOK -160m per quarter are expected going forward.
Continuous monitoring and active risk management is core to Storebrand's business. Risk and capital adequacy are monitored at both Group level and in the legal entities. Regulatory requirements for capital adequacy and risk management follow the legal entities. This section is thus divided by legal entities.
Storebrand uses the standard model for the calculation of Solvency II. The Storebrand Group's target solvency ratio is 150%- 175%. This 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 184% at the end of the 4th quarter, an increase of 10 percentage points from the previous quarter. The level is strong and above the threshold for overcapitalisation of 175%. Result generation from operations and positive financial market developments strengthened the solvency ratio, but the improvement was more than offset by regulatory factors including a lower volatility adjustment (VA) and higher symmetric equity stress adjustment (SA). Risk management, including increased levels of reinsurance, reduced foreign currency exposure, and balance sheet and investment exposure optimisations, added to the solvency ratio. In addition, a reset of available additional statutory accounts to absorb stresses at the turn of the year improved the solvency ratio.
Storebrand is a blend of fast-growing capital-light business that delivers high returns on equity, and capital-intensive run-off business with low returns on equity. The back book of guaranteed business ties up more than three quarters of the Group's capital, delivering an estimated return on equity of 2% over the last twelve months, whereas the front book, the "future Storebrand" delivered an estimated return on equity of 43%1 . 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. Overall, the Group's return on equity (adjusted for amortisation) was 8.3% on an annualised basis, and 6.1% adjusted for the positive tax effects in 2022. As the business mix shifts, the return on equity is expected to be sustainably higher in the coming years.
Storebrand ASA (holding company) held liquid assets of NOK 5.1bn at the end of the 4th 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 Sept 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 7,764,226 of the company's own shares at the end of the 4th quarter, representing 1.65% of the share capital, following repurchases under Storebrand's NOK 500m buyback program which was initiated in July and concluded in October. The total number of shares purchased under the program was 6,477,024, which will all be redeemed (i.e. cancelled) upon approval from Storebrand ASA's General Meeting in 2023.
The Solidity capital3 measures the amount of IFRS capital available to cover customer liabilities. The solidity capital amounted to NOK 49.6bn at the end of 4th quarter 2022, an increase in the 4th quarter by NOK 3.4bn and a decrease of NOK 24.5bn for the year. The change in the quarter is primarily due to decreased interest rates and subordinated loan has been repurchased by EUR 212m and SEK 899m.
1 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. 2 Storebrand Livsforsikring AS and SPP
3 Consists of equity, subordinated loan capital, market value adjustment reserve, risk equalisation reserve, unrealised gains/losses on bonds and loans at amortised cost, additional statutory reserves, conditional bonuses
Additional staturory reserves in % of customer funds with guarantee
The market value adjustment reserve and bufferfund increased during the 4th quarter by NOK 0.4bn and decreased by NOK 4.5bn in 2022. At the end of year, the market value adjustment reserve and bufferfund amounted to NOK 1.8bn, corresponding to 1.1% (0.9% at the end of 3rd quarter 2022) of customer funds with a guarantee. New business transferred in contributed positively with NOK 0.8bn to the bufferfund for the year, while it was unchanged in 4th quarter.
The additional statutory reserves amounted to NOK 9.6bn, corresponding to 5.8% (6.2% at the end of the 3rd quarter 2022) of customer funds with guarantee at the end of 2022. Investment returns in customer portfolios higher than the guaranteed interest rate in the quarter decreased reserves by NOK 0.4bn in 4th quarter and NOK 2.7bn year to date. In connection with the implementation of the buffer fund in Public Occupational Pensions at the start of the year, NOK 1bn was transferred from the market value adjustments reserve and the additional statutory reserves.
Together, the customer buffers amounted to 6.6% (7.0% at the end of the 3rd quarter 2022) of customer funds with guarantee at the end of 2022.
The excess value of bonds and loans valued at amortised cost increased by NOK 3.1bn in the 4th quarter due to decreased interest rates, but a decrease by NOK 13.6bn in 2022 due to higher interest rates. The value was minus NOK 10.2bn at the end of 2022. The excess value of bonds and loans at amortised cost is not included in the financial statements.
Q4 2021 Q1 2022 Q2 2022 Q3 2022 Q4 2022
Customer assets increased in the 4th quarter by NOK 9.4bn and decreased by NOK 9.4bn for the year, amounting to NOK 346bn at the end of 2022. Customer assets within non-guaranteed savings increased by NOK 8.9bn during the 4th quarter and decreased by NOK 5.3bn in 2022, amounting to NOK 153bn at the end of the year. Guaranteed customer assets are increased by NOK 0.5bn in the 4th quarter and decreased by NOK 4.1bn during the year, amounting to NOK 194bn at the end of 2022.
Customer assets amounted to NOK 28bn at the end of 2022, an increased in the 4th quarter by NOK 1.0bn. Customer assets within non-guaranteed savings amounted to NOK 27bn at the end of 2022, an increase in 4th quarter by NOK 1.0bn. Guaranteed customer assets amounted to NOK 1bn at the end of 2022 and were stable in the 4th quarter.
Conditional bonuses in % of customer funds with guarantee
The buffer capital (conditional bonuses) amounted to SEK 13.3bn (SEK 14.1bn) at the end of the 4th quarter.
Customer assets amounted to SEK 223bn (SEK 246bn) at the end of the 4th quarter, corresponding to a decrease of SEK 23bn over the last year. Customer assets within non-guaranteed savings amounted to SEK 143bn (SEK 155bn) at the end of the 4th quarter, which is a decrease of SEK 12bn compared to the same quarter last year. Guaranteed customer assets decreased by SEK 12bn in the same period and amounted to SEK 80bn (SEK 92bn) at the end of the 4th quarter.
Loans outstanding increased by NOK 2.2 billion during the quarter. The home mortgage portfolio managed on behalf of Storebrand Livsforsikring AS decreased by NOK 0.1 billion during the quarter. The combined portfolio of loans in Storebrand Bank and Storebrand Livsforsikring increased by NOK 2.1 billion during the quarter and by NOK 10 billion in 2022.
The bank group has had an increase in the risk-weighted balance sheet of NOK 4.0 billion in 2022. The Storebrand Bank Group had a net capital base of NOK 4.4 billion at the end of the quarter. The capital adequacy ratio was 21.3% and the Core Equity Tier 1 (CET1) ratio was 15.7% at the end of the quarter, compared with 20.3% and 15.4% respectively at the end of 2021. The combined requirements for capital and CET1 were 16.8% and 13.3% respectively at the end of the 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 about 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. Despite turbulent financial markets in 2022 reducing assets under management and the resulting fee income, the profit ambition for 2023 is maintained, supported by strong and profitable growth across the Group, and higher expected financial results in a higher interest rate environment.
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 46.5% of the pension reserves at the end of the quarter, 2 percentage points lower than a year ago. With interest rates having risen in 2022 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 product platform and distribution.
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 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. There are also cost savings initiatives in place to manage the effects of excess inflation. The cost guidance for 2023 is 5.3bn. This includes the cost base of the acquired companies Danica and Kron, but is before integration cost of acquired business, any potential new acquisitions, currency and performance related cost.
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 and liquidity risk. In the Board's selfassessment 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 24bn 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 seems to have improved disability levels, but Storebrand continues to monitor the development closely.
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 three uncertain tax positions with regards to recognised tax expenses. These are described in more detail in note 9. Should Storebrand's interpretation be accepted in all three cases, an estimated positive tax result of up to NOK 2.0bn may be recognised. Should all the Norwegian Tax Administration's interpretations be the final verdict, a tax expense of NOK 1.7bn could 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.
New legislation has made occupational pension contributions mandatory for all employees, regardless of age or employment fraction. The legislation has been implemented this year, with a transition period that ended 1 July 2022. As of 30 September 2022, the number om employees covered by defined contribution schemes has increased to 1.85 million, from 1.57 million at the start of the year. It is estimated that the changes will increase total savings in the Defined Contribution pension market by about NOK 3bn per year, of which Storebrand expects to receive its market share of premiums of 31% (including Danica).
A report proposing changes in the Norwegian National Insurance Pension Scheme was delivered to the Government in June 2022 and has received public consultation. Among the proposals is an automatic adjustment of the earliest possible retirement age as longevity expectations increase. The report states that age limits in occupational and individual pension schemes should be adjusted accordingly. The Government will now work on a bill to parliament to follow up on the proposals.
Storebrand has filed two complaints to the EFTA Surveillance Authority (ESA) in an effort to improve the competitive landscape for Public Occupational Pensions, which is dominated by a single player. Storebrand has claimed that municipalities, regional health authorities (RHFs) and hospitals have entered into occupational pension contracts 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, the mutual company KLP is given access to capital from municipalities and hospitals on more favourable terms than other market participants would receive by withholding retained earnings when customers move to other providers.
The European Commission presented proposals for changes in the Solvency II standard model in September 2021. The Commission's proposals differ significantly compared to earlier proposals from The European Insurance and Occupational Pension Authority (EIOPA).
The main purpose of the revision is to ensure that insurance companies continue to invest in accordance with the political priorities of the EU, especially with regards to financing the post Covid-19 recovery by facilitating long-term investments and increasing the capacity to invest in European business. The Commission emphasises the insurance sector's important role when it comes to financing the green transition and helping society to adapt to climate change. The review intends to correct deficiencies in current regulation and make the insurance sector more robust.
Storebrand currently applies the standard model. In the review, changes to the interest rate risk module could increase the solvency capital requirement for Norwegian and Swedish insurers. The Commission's proposals appear more representative for Norwegian interest rates than earlier proposals from EIOPA. The Commission also proposes changes that could have offsetting effects to increased capital requirements, such as a reduced risk margin. Several changes are proposed in the calculation of the volatility adjustment as well as an increased interval for the symmetric adjustment for equity risk. As they are currently outlined, the Commission's proposals are not expected to have a significant overall impact on Storebrand's solvency ratio.
The Commission has not outlined a timeline for the further process on adapting changes in the standard model, and changes are not expected to enter into force until 2025. The Commission will consider a phasing-in period of five years for new rules related to the calculation of interest rate risk and the new extrapolation method for interest rates will be phased in gradually until the end of 2031.
A new accounting standard for insurance contracts, IFRS 17, will be implemented in 2023. The purpose is to introduce common accounting rules for insurance contracts and improve the comparability of financial statements. IFRS 17 entails, among other things, fair value measurement of liabilities, grouping of insurance contracts based on risk characteristics, internal management and issue date, income recognition over the contract period rather than upfront, and an amendment of the profit and loss statement. Storebrand will implement IFRS 9 for financial instruments at the same time.
The implementation of IFRS 9 and IFRS 17 is not expected to significantly affect the solvency calculations nor the Group's dividend capacity. To accommodate the new accounting standard, some adjustments will be made to financial targets that are based on IFRS accounts.
For Storebrand's consolidated financial statements, the new standards will lead to changes in the recognition, measurement and presentation of insurance contracts, classification of fixed income investments and how profits are recognised. A new balance sheet item called Contractual Service Margin (CSM), representing the unearned profits of insurance contracts, will be introduced as part of the transition to IFRS 17. Amortisations of CSM will be recognised as income as the service is provided. Storebrand expects that the transition to IFRS 17 will result in approximately 20% the Group's equity to become CSM. Storebrand's first quarter results 2023 will be the first reporting under IFRS 17.
Whether IFRS 17 is implemented in the statutory reporting requirements is decided by national regulations in each country. Storebrand will only implement IFRS 17 in the statutory reporting for Storebrand Forsikring AS (the P&C Insurance business). For the remaining companies within Storebrand Group, including the life insurance companies, the statutory reporting will remain unchanged from today. The Ministry of Finance has also passed a regulation allowing for the continued use of amortised cost valuation of assets in both customer accounts and life insurance companies' financial statements when IFRS 9 is implemented.
The European Union's Action Plan on Sustainable Finance aims to contribute to realising the Paris goals of reduced carbon emissions. It intends to increase the share of sustainable investments, promote long-termism and clarify which financial products are actually sustainable. This is followed by new regulation to increase investments in sustainable activities and increase the resilience of the financial system when it comes to climate risk. New legislation introducing the EU Taxonomy on classification of sustainable activities and regulation on climaterelated disclosures in Norwegian law was passed in December 2021. The new rules for sustainable finance will establish standards for sustainable asset management, as well as clarify disclosure and customer information requirements. The development should result in a higher quality of financial and nonfinancial reporting, give better information to key stakeholders, and make it easier to compare data across the financial sector.
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.
Storebrand's dividend policy is stated as following:
Storebrand aims to pay an ordinary dividend of more than 50% of Group result after tax. 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, 7 February 2023
| Q4 | 01.01 - 31.12 | |||
|---|---|---|---|---|
| NOK million Notes |
2022 | 2021 | 2022 | 2021 |
| Premium income | 12,629 | 13,469 | 48,870 | 53,681 |
| Net income from financial assets and real estate for the company: | ||||
| - equities and fund units at fair value | -1 | 8 | -8 | 37 |
| - bonds and other fixed-income securities at fair value | 237 | 20 | 77 | 220 |
| - derivatives at fair value | 88 | 56 | 44 | 94 |
| - loans at fair value | 35 | -2 | 40 | 3 |
| - bonds at amortised cost | 75 | 61 | 208 | 220 |
| - loans at amortised cost | 463 | 195 | 1,254 | 720 |
| - profit from investments in associated companies/joint ventures | -15 | 3 | -20 | 30 |
| Net income from financial assets and real estate for the customers: | ||||
| - equities and fund units at fair value | 8,146 | 19,135 | -21,631 | 53,776 |
| - bonds and other fixed-income securities at fair value | 855 | 80 | -2,107 | 780 |
| - derivatives at fair value | 6,734 | 84 | -20,082 | -2,834 |
| - loans at fair value | 8 | 8 | 31 | 26 |
| - bonds at amortised cost | 911 | 1,073 | 3,662 | 4,101 |
| - loans at amortised cost | 61 | 60 | 453 | 275 |
| - properties | -245 | 612 | 713 | 2,164 |
| - profit from investments in associated companies/joint ventures | -302 | 543 | -314 | 790 |
| Other income | 1,219 | 1,754 | 4,913 | 5,698 |
| Total income | 30,898 | 37,159 | 16,101 | 119,781 |
| Insurance claims | -9,880 | -15,482 | -39,677 | -52,529 |
| Change in insurance liabilities | -13,343 | -15,833 | 25,834 | -50,615 |
| Change in capital buffer | -4,423 | -2,392 | 8,471 | -4,827 |
| Operating expenses 8 |
-1,694 | -1,694 | -6,142 | -5,784 |
| Other expenses | -98 | -196 | -497 | -836 |
| Interest expenses | -619 | -195 | -1,374 | -686 |
| Total expenses before amortisation | -30,057 | -35,792 | -13,385 | -115,278 |
| Group profit before amortisation | 841 | 1,367 | 2,716 | 4,503 |
| Amortisation of intangible assets | -160 | -140 | -596 | -527 |
| Group pre-tax profit | 681 | 1,227 | 2,120 | 3,976 |
| Tax expenses 9 |
23 | -310 | 270 | -846 |
| Profit/loss for the period | 704 | 917 | 2,390 | 3,130 |
| Profit/loss for the period attributable to: | ||||
| Share of profit for the period - shareholders | 699 | 915 | 2,376 | 3,121 |
| Share of profit for the period - hybrid capital investors | 5 | 2 | 14 | 9 |
| Total | 704 | 917 | 2,390 | 3,130 |
| Earnings per ordinary share (NOK) | 1.50 | 1.95 | 5.07 | 6.68 |
| Average number of shares as basis for calculation (million) | 468.4 | 467.1 | ||
| There are no financial instruments that gives diluted effect on earnings per share |
| Q4 | 31.12.22 | |||
|---|---|---|---|---|
| NOK million | 2022 | 2021 | 2022 | 2021 |
| Profit/loss for the period | 704 | 917 | 2,390 | 3,130 |
| Actuarial assumptions pensions own employees | -7 | 139 | -12 | 131 |
| Fair value adjustment of properties for own use | 5 | 66 | 63 | 139 |
| Other comprehensive income allocated to customers | -5 | -66 | -63 | -139 |
| Tax on other comprehensive income elements not to be reclassified to profit/loss |
9 | -1 | 8 | |
| Total other comprehensive income elements not to be reclassified to profit/loss |
-8 | 147 | -13 | 140 |
| Exchange rate adjustments | -54 | -65 | -123 | -167 |
| Gains/losses from cash flow hedging | 10 | -21 | -15 | -52 |
| Total other comprehensive income elements that may be reclassified to profit/loss |
-43 | -85 | -137 | -219 |
| Total other comprehensive income elements | -51 | 62 | -150 | -79 |
| Total comprehensive income | 653 | 979 | 2,240 | 3,051 |
| Total comprehensive income attributable to: | ||||
| Share of total comprehensive income - shareholders | 648 | 977 | 2,226 | 3,042 |
| Share of total comprehensive income - hybrid capital investors | 5 | 2 | 14 | 9 |
| Total | 653 | 979 | 2,240 | 3,051 |
| NOK million Notes |
31.12.22 | 31.12.21 |
|---|---|---|
| Assets company portfolio | ||
| Deferred tax assets | 1,289 | 1,104 |
| Intangible assets and excess value on purchased insurance contracts | 7,339 | 6,667 |
| Tangible fixed assets | 1,174 | 1,266 |
| Investments in associated companies and joint ventures | 442 | 387 |
| Financial assets at amortised cost: | ||
| - Bonds 7 |
11,741 | 12,955 |
| - Loans to financial institutions 7 |
109 | 67 |
| - Loans to customers 7, 10 |
52,546 | 38,503 |
| Reinsurers' share of technical reserves | 14 | 32 |
| Accounts receivable and other short-term receivables | 7,720 | 11,024 |
| Financial assets at fair value: | ||
| - Equities and fund units 7 |
453 | 543 |
| - Bonds and other fixed-income securities 7 |
23,516 | 27,706 |
| - Derivatives 7 |
317 | 903 |
| - Loans to customers 7, 10 |
319 | 489 |
| Bank deposits | 4,573 | 3,543 |
| Minority portion of consolidated mutual funds | 55,005 | 54,912 |
| Total assets company portfolio | 166,554 | 160,101 |
| Assets customer portfolio | ||
| Investments in associated companies and joint ventures | 8,469 | 7,141 |
| Financial assets at amortised cost: | ||
| - Bonds 7 |
110,299 | 104,974 |
| - Bonds held-to-maturity 7 |
7,402 | 8,441 |
| - Loans to customers 7, 10 |
18,679 | 23,051 |
| Reinsurers' share of technical reserves | 311 | 13 |
| Investment properties at fair value 7 |
33,481 | 33,376 |
| Properties for own use 7 |
1,689 | 1,659 |
| Accounts receivable and other short-term receivables | 800 | 638 |
| Financial assets at fair value: | ||
| - Equities and fund units 7 |
270,079 | 277,783 |
| - Bonds and other fixed-income securities 7 |
132,699 | 140,810 |
| - Derivatives 7 |
14,026 | 4,012 |
| - Loans to customers 7, 10 |
6,757 | 7,443 |
| Bank deposits | 9,938 | 6,443 |
| Total assets customer portfolio | 614,629 | 615,784 |
| Total assets | 781,184 | 775,885 |
| NOK million Notes |
31.12.22 | 31.12.21 |
|---|---|---|
| Equity and liabilities | ||
| Paid-in capital | 13,163 | 13,192 |
| Retained earnings | 24,445 | 24,291 |
| Hybrid capital | 327 | 226 |
| Total equity | 37,935 | 37,709 |
| Subordinated loans 6,7 |
10,585 | 11,441 |
| Customer buffer 11 |
23,952 | 33,693 |
| Insurance liabilities | 575,051 | 575,457 |
| Pension liabilities | 162 | 181 |
| Deferred tax | 1,363 | 832 |
| Financial liabilities: | ||
| - Loans and deposits from credit institutions 6,7 |
403 | 502 |
| - Deposits from banking customers 7 |
19,478 | 17,239 |
| - Securities issued 6,7 |
32,791 | 24,924 |
| - Derivatives company portfolio | 713 | 208 |
| - Derivatives customer portfolio | 11,994 | 2,935 |
| - Other non-current liabilities | 1,120 | 1,210 |
| Other current liabilities | 10,630 | 14,643 |
| Minority portion of consolidated mutual funds | 55,005 | 54,912 |
| Total liabilities | 743,249 | 738,177 |
| Total equity and liabilities | 781,184 | 775,885 |
| Majority's share of equity | |||||||||
|---|---|---|---|---|---|---|---|---|---|
| NOK million | Share capital 1) |
Own shares |
Share premium |
Total paid in equity |
Currency translation differences |
Other equity 2) |
Total retained earnings |
Hybrid capital 3) |
Total equity |
| Equity at 31 December 2020 | 2,339 | -2 | 10,521 | 12,858 | 1,208 | 21,631 | 22,839 | 226 | 35,923 |
| Profit for the period | 3,121 | 3,121 | 9 | 3,130 | |||||
| Total other comprehensive income elements |
-167 | 87 | -79 | -79 | |||||
| Total comprehensive income for the period |
-167 | 3,208 | 3,042 | 9 | 3,051 | ||||
| Equity transactions with owners: | |||||||||
| Own shares | -7 | -7 | -97 | -97 | -104 | ||||
| Issue of shares | 21 | 320 | 341 | 341 | |||||
| Hybrid capital classified as equity | 2 | 2 | 2 | ||||||
| Paid out interest hybrid capital | -9 | -9 | |||||||
| Dividend paid | -1,513 | -1,513 | -1,513 | ||||||
| Other | 18 | 18 | 18 | ||||||
| Equity at 31 December 2021 | 2,360 | -9 | 10,842 | 13,192 | 1,041 | 23,249 | 24,291 | 226 | 37,709 |
| Profit for the period | 2,376 | 2,376 | 14 | 2,390 | |||||
| Total other comprehensive income elements |
-123 | -27 | -150 | -150 | |||||
| Total comprehensive income for the period |
-123 | 2,348 | 2,226 | 14 | 2,240 | ||||
| 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 | 2 | 2 | 2 | ||||||
| Equity at 31 December 2022 | 2,360 | -39 | 10,842 | 13,163 | 919 | 23,527 | 24,445 | 327 | 37,935 |
1) 471 974 890 shares with a nominal value of NOK 5.
2) Includes undistributable funds in the risk equalisation fund amounting to NOK 820 million and security reserves/natural perials capital amounting NOK 197 million. 3) Perpetual hybrid tier 1 capital classified as equity.
Interim Report Storebrand Group 24
| 01.01 - 31.12 | ||
|---|---|---|
| NOK million | 2022 | 2021 |
| Cash flow from operating activities | ||
| Net receipts premium - insurance | 34,488 | 31,510 |
| Net payments claims and insurance benefits | -24,218 | -22,151 |
| Net receipts/payments - transfers | -1,704 | -7,313 |
| Other receipts/payments - insurance liabilities | 30,472 | 2,942 |
| Receipts - interest, commission and fees from customers | 1,466 | 918 |
| Payments - interest, commission and fees to customers | -152 | -64 |
| Taxes paid | -1,105 | -222 |
| Payments relating to operations | -6,542 | -5,851 |
| Net receipts/payments - other operating activities | 7,912 | 5,582 |
| Net cash flow from operations before financial assets and banking customers | 40,616 | 5,350 |
| Net receipts/payments - loans to customers | -9,027 | -6,762 |
| Net receipts/payments - deposits bank customers | 2,239 | 1,733 |
| Net receipts/payments - securities | -30,148 | -6,524 |
| Net receipts/payments - investment properties | 1,447 | 178 |
| Receipts - sale of investment properties | 610 | 721 |
| Payments - purchase of investment properties | -1,509 | -1,859 |
| Net change in bank deposits for insurance customers (bank deposit in customer portfolio) | -3,567 | 3,674 |
| Net cash flow from financial assets and banking customers | -39,955 | -8,839 |
| Net cash flow from operating activities | 661 | -3,489 |
| Cash flow from investing activities | ||
| Receipts - sale of subsidiaries | 815 | |
| Payments - purchase of subsidiaries | -2,405 | -408 |
| Net receipts/payments - sale/purchase of fixed assets | -137 | -292 |
| Net receipts/payments - sale/purchase of associated companies and joint ventures | -632 | -4 |
| Net cash flow from investing activities | -3,173 | 111 |
| Cash flow from financing activities | ||
| Receipts - new loans | 9,822 | 6,430 |
| Payments - repayments of loans | -1,932 | -2,106 |
| Payments - interest on loans | -621 | -260 |
| Receipts - subordinated loans | 1,650 | 4,211 |
| Payments - repayment of subordinated loans | -2,708 | -1,072 |
| Payments - interest on subordinated loans | -534 | -388 |
| Receipts - loans to financial institutions | 16,690 | 4,634 |
| Payments - repayments of loans from financial institutions | -16,789 | -5,784 |
| Receipts - issuing of share capital / sale of shares to employees | 45 | 44 |
| Payments - repayment of share capital | -500 | -144 |
| Payments - dividends | -1,646 | -1,513 |
| Receipts - hybrid capital | 100 | |
| Payments - interest on hybrid capital | -13 | -9 |
| Net cash flow from financing activities | 3,563 | 4,043 |
| Net cash flow for the period | 1,051 | 665 |
| Cash and cash equivalents at the start of the period | 3,611 | 2,878 |
|---|---|---|
| Currency translation cash/cash equivalents in foreign currency | 20 | 68 |
| Cash and cash equivalents at the end of the period1) | 4,681 | 3,611 |
| 1) Consists of: | ||
| Loans to financial institutions | 109 | 67 |
| Bank deposits | 4,573 | 3,543 |
| Total | 4,681 | 3,611 |
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 full annual financial statements.
A description of the accounting policies applied in the preparation of the financial statements are provided in the 2021 annual report, and the interim financial statements are prepared in accordance with these accounting policies.
There are none new or changed accounting standards that entered into effect in 2022 that have significant effect on Storebrand's consolidated financial statements.
Note 2 Important accounting estimates and judgements
In preparing the Group's financial statements the management are required to make estimates, judgements and assumptions of 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.
Actual results may differ from these estimates.
A description of the most critical estimates and judgements that can affect recognised amounts is included in the 2021 annual report in note 2, insurance risk in note 7 and valuation of financial instruments at fair value is described in note 13.
Storebrand Livsforsikring AS has purchased Storebrand Danica Pensjonsforsikring AS. Danica is the 6th largest provider of Defined Contribution pensions in Norway with 5% market share. In addition to managing NOK 22 billion in defined contribution pension funds for 14,000 companies and 98,000 active members, Danica manages NOK 6 billion in private savings and a small portfolio of guaranteed products of NOK 1 billion. Total asset under management amount to approximaterlig NOK 30 billion. Danica also offers commercial and private risk products, with a total of NOK 30 million in annual premiums. The transaction was completed on 1 July 2022.
The transaction was first known 20. December 2021, and approved by the Norwegian Financial Supervisory Authority and the Norwegian Competition Authority in June 2022. In connection with the purchase, the company has changed name to Storebrand Danica Pensjonsforsikring AS. A mother-daugther merger was completed 2. January 2023.
| NOK million | Booked valuue - Company |
Excess value upon |
Book values |
|---|---|---|---|
| - Distribution | 260 | 260 | |
| - Customer relationships | 809 | 809 | |
| - IT systems | 21 | -21 | |
| Total intangible assets | 21 | 1,048 | 1,069 |
| Financial assets | 28,479 | 28,479 | |
| Other assets | 309 | 309 | |
| Bank deposits | 362 | 362 | |
| Total assets | 29,170 | 1,048 | 30,218 |
| Liabilities | |||
| Insurance liabilities | 27,724 | 68 | 27,792 |
| Current liabilities | 282 | 18 | 300 |
| Deffered tax | 24 | 240 | 264 |
| Net identifiable assets and liabilities | 1,140 | 722 | 1,862 |
| Goodwill | 186 | ||
| Fair value at acquisition date | 2,048 | ||
| Cash payment | 2,048 | ||
| After | Before | |
|---|---|---|
| 2,905 | -782 | |
| 87 | 29 | |
| acquisition | acquisition |
1) According to the groups statement, Income contains premiums, net financial result and other income
2) According to the groups statement, Profit contains premiums, claims, changes in insurance obligations, financial result and other income and expences
Storebrand Asset Management AS acquired 3 100 000 shares in Quantfolio AS on 11 January 2022 at a purchase price of NOK 65 million. This represents 34.13% of the ownership interest in the company.
SPP Pension & Försäkring has on 8th of July 2022 purchased S:t Erik Livsförsäkring AB. The purchase price was SEK 260 million. The excess value is allocated to customer relationships. The company handles the City of Stockholm's commitment to the employees within the Stockholm Stadshus AB group. The company manages approx. SEK 2.3 billion distributed among 5 000 insured. A mother-daughter merger was completed 1st of November 2022.
| Booked valuue - | Excess value | ||
|---|---|---|---|
| NOK million | Company | upon | Book values |
| - Customer relationships | 30 | 30 | |
| Total intangible assets | 30 | 30 | |
| Financial assets | 2,289 | 2,289 | |
| Other assets | 32 | 32 | |
| Bank deposits | 382 | 382 | |
| Total assets | 2,703 | 30 | 2,733 |
| Liabilities | |||
| Insurance liabilities | 2,443 | ||
| Deffered tax | 30 | ||
| Net identifiable assets and liabilities | 230 | 30 | 260 |
| Cash payment | 260 |
| NOK million | After acquisition 3) |
Before acquisition |
|
|---|---|---|---|
| Income 1) | -77 | -160 | |
| Profit 2) | 2 | -26 |
1) According to the gorups statement, Income contains premiums, net financial result and other income
2) According to the groups statement, Profit contains premiums, claims, changes in insurance obligations, financial result and other income and expences
3) After acquistion is from the time of purchase until 01.11.2022., when St:Erik was merged with SPP Pension and Försäkring AB
Storebrand ASA has entered into an agreement to acquire the Norwegian fintech company Kron AS ("Kron"). The transaction was approved by the Financial Supervisory Authority of Norway in December 2022. The company's office is in Oslo. The transaction was completed on 3 January 2023.
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 purchase price (equity value) was NOK 399 million. Additional consideration is contingent on future commercial development at Kron. Kron's annual financial statements as of 31 December 2022 have not been completed, and an acquisition analysis will be presented in the quarterly accounts for the 1st quarter of 2023.
Note 4 Profit by segments
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.
Profit in the segments are reconciled with the corporate profit and loss account before tax. The corporate profit and loss account include gross income and gross expenses linked to both the insurance customers and owners. The various segments are to a large extent followed up on net profit margins, including risk and administration results. The profit lines that are used in segment reporting will therefore not be identical with the profit lines in the corporate profit and loss account.
A description of the most important differences is included in the 2021 annual report in note 4 Segment reporting.
| Q4 | 01.01 - 31.12 | |||
|---|---|---|---|---|
| NOK million | 2022 | 2021 | 2022 | 2021 |
| Savings | 456 | 916 | 1,653 | 2,355 |
| Insurance | 92 | 61 | 580 | 423 |
| Guaranteed pension | 270 | 485 | 903 | 1,432 |
| Other | 23 | -95 | -420 | 293 |
| Group profit before amortisation | 841 | 1,367 | 2,716 | 4,503 |
| Amortisation of intangible assets | -160 | -140 | -596 | -527 |
| Group pre-tax profit | 681 | 1,227 | 2,120 | 3,976 |
| Savings | Insurance | Guaranteed pension | ||||
|---|---|---|---|---|---|---|
| Q4 | Q4 | Q4 | ||||
| NOK million | 2022 | 2021 | 2022 | 2021 | 2022 | 2021 |
| Fee and administration income | 1,293 | 1,748 | 413 | 418 | ||
| Insurance result | 393 | 307 | ||||
| - Insurance premiums for own account | 1,630 | 1,366 | ||||
| - Claims for own account | -1,237 | -1,059 | ||||
| Operating expense | -848 | -838 | -318 | -253 | -233 | -248 |
| Operating profit | 445 | 910 | 75 | 54 | 180 | 169 |
| Financial items and risk result life & pension | 11 | 6 | 17 | 6 | 90 | 316 |
| Group profit before amortisation | 456 | 916 | 92 | 61 | 270 | 485 |
| Amortisation of intangible assets 1) | ||||||
| Group pre-tax profit |
| Other | Storebrand Group | |||
|---|---|---|---|---|
| Q4 | Q4 | |||
| NOK million | 2022 | 2021 | 2022 | 2021 |
| Fee and administration income | -64 | -58 | 1,641 | 2,108 |
| Insurance result | 393 | 307 | ||
| - Insurance premiums for own account | 1,630 | 1,366 | ||
| - Claims for own account | -1,237 | -1,059 | ||
| Operating expense | -11 | -38 | -1,410 | -1,377 |
| Operating profit | -75 | -96 | 624 | 1,038 |
| Financial items and risk result life & pension | 98 | 217 | 329 | |
| Group profit before amortisation | 23 | -95 | 841 | 1,367 |
| Amortisation of intangible assets 1) | -160 | -140 | ||
| Group pre-tax profit | 681 | 1,227 |
| Savings | Insurance | Guaranteed pension | ||||
|---|---|---|---|---|---|---|
| 01.01 - 31.12 | 01.01 - 31.12 | 01.01 - 31.12 | ||||
| NOK million | 2022 | 2021 | 2022 | 2021 | 2022 | 2021 |
| Fee and administration income | 4,733 | 5,215 | 1,597 | 1,631 | ||
| Insurance result | 1,670 | 1,201 | ||||
| - Insurance premiums for own account | 6,088 | 5,175 | ||||
| - Claims for own account | -4,419 | -3,974 | ||||
| Operating expense | -3,031 | -2,927 | -1,112 | -875 | -850 | -890 |
| Operating profit | 1,701 | 2,288 | 558 | 326 | 747 | 741 |
| Financial items and risk result life & pension | -49 | 67 | 22 | 97 | 157 | 691 |
| Group profit before amortisation | 1,653 | 2,355 | 580 | 423 | 903 | 1,432 |
| Amortisation of intangible assets 1) | ||||||
| Group pre-tax profit |
| Other | Storebrand Group | |||
|---|---|---|---|---|
| 01.01 - 31.12 | 01.01 - 31.12 | |||
| NOK million | 2022 | 2021 | 2022 | 2021 |
| Fee and administration income | -267 | -239 | 6,062 | 6,607 |
| Insurance result | 1,670 | 1,201 | ||
| - Insurance premiums for own account | 6,088 | 5,175 | ||
| - Claims for own account | -4,419 | -3,974 | ||
| Operating expense | -15 | 14 | -5,008 | -4,678 |
| Operating profit | -282 | -225 | 2,724 | 3,130 |
| Financial items and risk result life & pension | -138 | 518 | -8 | 1,372 |
| Group profit before amortisation | -420 | 293 | 2,716 | 4,503 |
| Amortisation of intangible assets 1) | -596 | -527 | ||
| Group pre-tax profit | 2,120 | 3,976 |
1) Amortisation of intangible assets are included in Storebrand Group
| Q4 | Q3 | Q2 | Q1 | Q4 | Q3 | Q2 | Q1 | |
|---|---|---|---|---|---|---|---|---|
| NOK million | 2022 | 2022 | 2022 | 2022 | 2021 | 2021 | 2021 | 2021 |
| Group | ||||||||
| Earnings per ordinary share 1) | 5.07 | 3.57 | 2.75 | 1.88 | 6.68 | 4.73 | 3.46 | 0.94 |
| Equity | 37,935 | 37,375 | 37,268 | 38,430 | 37,709 | 36,735 | 35,823 | 36,069 |
| Savings | ||||||||
| Premium income Unit Linked2) | 6,583 | 6,279 | 5,333 | 5,288 | 5,350 | 5,201 | 5,316 | 5,346 |
| Unit Linked reserves | 314,992 | 302,337 | 276,319 | 291,036 | 308,351 | 295,790 | 295,195 | 278,702 |
| AuM asset management | 1,019,988 1,001,100 1,008,705 1,039,654 1,096,556 1,058,435 1,037,470 | 987,397 | ||||||
| Retail lending | 67,061 | 64,879 | 62,559 | 59,223 | 57,033 | 55,663 | 54,288 | 51,594 |
| Insurance | ||||||||
| Total written premiums | 7,822 | 7,648 | 7,005 | 6,791 | 6,445 | 6,263 | 6,133 | 5,745 |
| Claims ratio2) | 76% | 70% | 70% | 74% | 78% | 74% | 74% | 82% |
| Cost ratio 2) | 20% | 18% | 18% | 18% | 19% | 15% | 17% | 17% |
| Combined ratio 2) | 95% | 88% | 88% | 92% | 96% | 90% | 91% | 98% |
| Guaranteed pension | ||||||||
| Guaranteed reserves | 273,465 | 275,622 | 274,918 | 281,474 | 290,862 | 292,161 | 294,909 | 286,410 |
| Guaranteed reserves in % of total reserves |
46% | 48% | 50% | 49% | 49% | 50% | 50% | 51% |
| Net transfer out of guaranteed reserves 2) | -2,892 | -2,721 | -2,454 | -2,480 | -2,591 | -2,753 | -2,446 | -2,107 |
| Capital buffer in % of customer reserves Storebrand Life Group3) |
6.3% | 6.2% | 6.9% | 8.6% | 11.2% | 10.8% | 11.3% | 9.8% |
| Capital buffer in % of customer reserves SPP4) |
19.6% | 18.2% | 17.5% | 17.9% | 17.8% | 15.5% | 15.1% | 14.1% |
| Solidity | ||||||||
| Solvency II 5) | 184% | 174% | 195% | 184% | 175% | 178% | 172% | 176% |
| Solidity capital (Storebrand Life Group6) | 49,570 | 46,932 | 50,450 | 57,712 | 74,074 | 73,780 | 75,284 | 69,352 |
| Capital adequacy Storebrand Bank | 21.3% | 20.3% | 19.1% | 20.5% | 20.3% | 19.6% | 18.5% | 17.4% |
| Core Capital adequacy Storebrand Bank | 17.2% | 16.1% | 14.8% | 15.6% | 16.8% | 16.1% | 16.8% | 15.6% |
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
6) The term solidity capital encompasses equity, subordinated loan capital, the risk equalisation fund, the market value adjustment reserve, additional statutory reserves, conditional bonuses, excess value/deficit related to bonds at amortised cost and accrued profit
Risks are described in the annual report for 2021 in note 7 (Insurance risk), note 8 (Financial market risks), note 9 (Liquidity risk), note 10 (Credit risk) and note 11 (Risk concentrations).
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 for Storebrand are interest rate risk, equity market risk, property price risk, credit risk and currency exchange rate risk.
For the life insurance companies, 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) and customer portfolios with a guarantee.
The market risk in the company portfolios has a direct impact on Storebrand's profit.
The market risk in customer portfolios without a guarantee (unit linked) 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 assets under management 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. Risk capital primarily consists of unrealised gains, additional statutory reserves, and conditional bonuses. Storebrand is responsible for meeting any shortfall that cannot be covered by the customer buffers.
For guaranteed customer portfolios, 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 rates 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.
The fourth quarter and the full year has been volatile for financial markets. The fourth quarter gave positive returns for most risk assets, but for the full 2022 returns have been mostly negative.
Going into 2022, inflation was already increasing due to supply-shortages and increased demand post Covid. The trend has been reinforced during the year, as the Ukraine war has led to a surge in energy and raw-material prices. This has led central banks to increase rates earlier and at a much faster pace than expected at the start of the year. Bank of Norway increased the policy rate by 2.25 pp to 2.75 percent during the year, of which 0.5 pp during the fourth quarter, and signal further increases to around 3 percent in 2023. The Swedish Riksbank increased the policy rate by 2.5 pp from zero during the year, of which 0.75 pp during the third quarter. The signal is for the rate to increase to slightly below 3 percent by early 2023.
The effects from Covid-19, the increase in inflation and the effects from the war in Ukraine going forward, implies that the risk may still be higher than normal market risk. Storebrand has risk management which through policies and principles handles and dampens the effect of volatile financial markets.
Global equities rose 7 percent in the fourth quarter but fell 16 percent in 2022. Norwegian equities rose 8 percent in the fourth quarter but fell 1 percent in 2022. The credit spreads for corporate bonds fell in the fourth quarter but rose in 2022.
Long-term interest rates were mixed in the fourth quarter but rose strongly during 2022. The Norwegian 10-year swap-rate fell 0.2 pp in the fourth quarter to 3.3 percent. For 2022, the increase was 1.4 pp. The Swedish 10-year swap-rate was little changed in the fourth quarter but rose 2.1 pp to 3.1 percent in 2022. Short-term interest rates have increased even more, as the central banks continued to raise interest rates and signal further increases going forward. Most of the interest rate investments in the Norwegian customer portfolios are held 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 other bond investments and exposure towards interest rate swaps, the increase in interest rates have affected investment returns negatively. Higher interest rates are positive for reinvestment opportunities and for the solvency position.
The Norwegian krone strengthened in the fourth quarter, particularly against the US dollar. For 2022, the Norwegian krone strengthened 4 percent against the Swedish krone but weakened 5 percent against the Euro and 11 percent against the US dollar. 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.
Financial instruments valued at fair value level three are priced based on models. Examples of such financial instruments are investment property, private equity, and mortgages. The valuation models gather and employ information from a wide range of well-informed sources. There is greater uncertainty regarding the input factors and the valuation from these models than
normal. Any continued spread of Covid-19, governmental measurements to contain the spread, the war in Ukraine, sanctions against Russia and rapid increase in inflation, creates extra uncertainty for the economy and may have impact on the valuation of financial instruments. There is a large range of possible outcomes for these input data and thus for the modelled prices. Hence, the values reflect management's best estimate, but contain greater uncertainty than in a normal quarter.
During the fourth quarter and full year 2022, the investment allocation towards equities has been reduced because of risk management. Interest rate duration has been reduced, as higher rates give lower hedging needs against the liabilities and for the solvency position.
The market-based return for guaranteed customer portfolios in Norway in general was positive in the fourth quarter but flat to negative in 2022, because of weak equity and credit markets and increased interest rates. The booked return in general was positive and sufficient to cover the guaranteed return after use of customer buffers. The effect on the financial result is limited, but customer buffers was reduced in 2022. The return for guaranteed customer portfolios in Sweden was negative. The effect on the financial result was limited, as reduced value of the liabilities from higher interest rates compensated for lower asset values. The financial result in SPP was also negatively affected by lower volatility adjustment (VA) of the interest curve used to discount the liabilities. VA fell to -3bp at the end of 2022 from 5bp at the end of the third quarter and 11bp at the end of 2021.
The return for the unit linked portfolios was generally positive in the fourth quarter but was negative in 2022 due to weak equity markets.
The tables show the fall in value for Storebrand Life Insurance and SPP's investment portfolios because of immediate changes in value related to financial market risk. The calculation is model-based, and the result is dependent on the choice of stress level for each category of asset. The stresses have been applied to the company portfolio and guaranteed customer portfolios as of 31 December 2022. The effect of each stress changes the return in each investment profile.
Unit linked insurance without a guaranteed annual return is not included in the analysis. For these products, the customers bear the market risk, and the effect of a falling market will not directly affect the result or buffer capital.
The amount of stress is the same that is used for the company's risk management. Two stress tests have been defined. Stress test 1 is a fall in the value of shares, corporate bonds, and property in combination with lower interest rates. Stress test 2 is a somewhat smaller fall in the value of shares, corporate bonds, and property in combination with higher interest rates.
| Stresstest 1 | Strestest 2 | |
|---|---|---|
| Interest level (parallel shiftt) | -100bp | +100bp |
| Equity | -20% | - 12 % |
| Property | - 12 % | - 7 % |
| Credit spread (share of Solvency II) | 50 % | 30 % |
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.
As a result of customer buffers, the effect of the stresses on the result will be lower than the values described in the tables. As of 31 December 2022, the customer buffers are of such a size that the effects on the result are significantly lower.
| Storebrand Livsforsikring | SPP Pension & Försäkring | ||||
|---|---|---|---|---|---|
| Sensitivity | NOK Million | Share of portfolio | NOK Million | Share of portfolio | |
| Interest rate risk | 1,452 | 0.6% | -171 | -0.2% | |
| Equtiy risk | -1,914 | -0.9% | -2,353 | -2.6% | |
| Property risk | -2,884 | -1.3% | -1,490 | -1.7% | |
| Credit risk | -864 | -0.4% | -712 | -0.8% | |
| Total | -4,210 | -1.9% | -4,725 | -5.3% |
| Storebrand Livsforsikring | SPP Pension & Försäkring | ||||
|---|---|---|---|---|---|
| Sensitivity | NOK Million | Share of portfolio | NOK Million | Share of portfolio | |
| Interest rate risk | -1,452 | -0.6% | 171 | 0.2% | |
| Equtiy risk | -1,149 | -0.5% | -1,412 | -1.6% | |
| Property risk | -1,682 | -0.8% | -869 | -1.0% | |
| Credit risk | -518 | -0.2% | -427 | -0.5% | |
| Total | -4,801 | -2.1% | -2,537 | -2.8% |
Stress test 2, which includes an increase in interest rates, makes the greatest impact for Storebrand Livsforsikring. The overall market risk is NOK 4.8 billion (NOK 6.0 billion as of 30 September 2022), which is equivalent to 2.1 (2.7) percent of the investment portfolio.
If the stress causes the return to fall below the guarantee, it will have a negative impact on the result. Similarly, if the customer buffer is not adequate the result will also be negatively impacted. Other negative effects on the result are a lower return from the company portfolio and that there is no profit sharing from paid-up policies and individual contracts.
For SPP it is stress test 1, which includes a fall in interest rates, that makes the greatest impact. The overall market risk is SEK 4.7 billion (SEK 4.4 billion as of 30 September 2022), which is equivalent to 5.3 (5.6) percent of the investment portfolio.
The buffer situation for the individual contracts determines if all or portions of the fall in value will affect the financial result. If the fall in value cannot be covered by the customer buffer, the result will be affected. In addition, reduced profit sharing or loss of the indexing fees may affect the financial result.
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.
At the start of the third quarter, Storebrand acquired Danica Pensjon, affecting the insurance risk. Other insurance risk was not materially changed during 2022.
Note
6
| Book value | ||||||
|---|---|---|---|---|---|---|
| NOK million | Nominal | value Currency | Interest rate | Call date | 31.12.22 | 31.12.21 |
| Issuer | ||||||
| Perpetual subordinated loans 2) | ||||||
| Storebrand Livsforsikring AS | 1,100 | NOK | Variable | 2024 | 1,101 | 1,100 |
| Storebrand Livsforsikring AS 3) | 900 | SEK | Variable | 2026 | 856 | 876 |
| Dated subordinated loans | ||||||
| Storebrand Livsforsikring A3,4) | 899 | SEK | Variable | 2022 | 976 | |
| Storebrand Livsforsikring 3) | 900 | SEK | Variable | 2025 | 851 | 877 |
| Storebrand Livsforsikring AS 3) | 1,000 | SEK | Variable | 2024 | 947 | 976 |
| Storebrand Livsforsikring AS | 500 | NOK | Variable | 2025 | 500 | 499 |
| Storebrand Livsforsikring AS 5) | 650 | NOK | Variable | 2027 | 651 | |
| Storebrand Livsforsikring AS 33,5) | 750 | NOK | Fixed | 2027 | 773 | |
| Storebrand Livsforsikring A3,5) | 1,250 | NOK | Variable | 2027 | 1,261 | |
| Storebrand Livsforsikring A3,6) | 38 | EUR | Fixed | 2023 | 421 | 2,685 |
| Storebrand Livsforsikring AS 33,5) | 300 | EUR | Fixed | 2031 | 2,397 | 2,876 |
| Storebrand Bank ASA | 150 | NOK | Variable | 2022 | 150 | |
| Storebrand Bank ASA | 125 | NOK | Variable | 2025 | 126 | 125 |
| Storebrand Bank ASA | 300 | NOK | Variable | 2026 | 300 | 300 |
| Storebrand Bank ASA | 400 | NOK | Variable | 2027 | 402 | |
| Total subordinated loans and hybrid tier 1 capital | 10,585 | 11,441 |
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 partly been repaid 2021 and December 2022
| Book value | ||
|---|---|---|
| NOK million | 31.12.22 | 31.12.21 |
| NOK million | ||
| Call date | ||
| 2022 | 502 | |
| 2023 | 403 | |
| Total loans and deposits from credit institutions | 403 | 502 |
| Book value | ||||
|---|---|---|---|---|
| NOK million | 31.12.22 | 31.12.21 | ||
| NOK million | ||||
| Call date | ||||
| 2022 | 5,532 | |||
| 2023 | 4,321 | 3,282 | ||
| 2024 | 6,110 | 6,100 | ||
| 2025 | 8,326 | 6,139 | ||
| 2026 | 7,375 | 3,075 | ||
| 2027 | 5,907 | |||
| 2031 | 752 | 795 | ||
| Total securities issued | 32,791 | 24,924 |
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 5 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 2021.
The company 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 31.12.22 |
Book value 31.12.22 |
Fair value 31.12.21 |
Book value 31.12.21 |
|---|---|---|---|---|
| Financial assets | ||||
| Loans to and due from financial institutions | 109 | 109 | 67 | 67 |
| Loans to customers - corporate | 4,391 | 4,541 | 5,057 | 5,046 |
| Loans to customers - retail | 66,395 | 66,683 | 56,521 | 56,507 |
| Bonds held to maturity | 7,474 | 7,402 | 9,103 | 8,441 |
| Bonds classified as loans and receivables | 112,190 | 122,039 | 120,623 | 117,929 |
| Total financial assets 31.12.22 | 190,558 | 200,774 | ||
| Total financial assets 31.12.21 | 191,371 | 187,991 | ||
| Financial liabilities | ||||
| Debt raised by issuance of securities | 32,777 | 32,791 | 25,000 | 24,924 |
| Loans and deposits from credit institutions | 403 | 403 | 502 | 502 |
| Deposits from banking customers | 19,478 | 19,478 | 17,239 | 17,239 |
| Subordinated loan capital | 10,513 | 10,585 | 11,584 | 11,441 |
| Total financial liabilities 31.12.22 | 63,171 | 63,256 | ||
| Total financial liabilities 31.12.21 | 54,324 | 54,106 |
| Level 1 | Level 2 | Level 3 | |||
|---|---|---|---|---|---|
| NOK million | Quoted prices | Observable assumptions |
Non-observable assumptions |
31.12.22 | 31.12.21 |
| Assets: | |||||
| Equities and fund units | |||||
| - Equities | 30,690 | 16,635 | 402 | 47,728 | 40,707 |
| - Fund units | 204,699 | 18,105 | 222,804 | 237,619 | |
| Total equities and fund units 31.12.22 | 30,690 | 221,334 | 18,507 | 270,532 | |
| Total equities and fund units 31.12.21 | 40,071 | 223,201 | 15,054 | 278,326 | |
| Loans to customers | |||||
| - Loans to customers - corporate | 6,757 | 6,757 | 7,443 | ||
| - Loans to customers - retail | 319 | 319 | 489 | ||
| Total loans to customers 31.12.22 | 7,076 | 7,076 | |||
| Total loans to customers 31.12.21 | 7,932 | 7,932 | |||
| Bonds and other fixed-income securities | |||||
| - Government bonds | 16,203 | 8,559 | 24,762 | 31,148 | |
| - Corporate bonds | 43,058 | 8 | 43,066 | 55,354 | |
| - Collateralised securities | 4,506 | 4,506 | 5,550 | ||
| - Bond funds | 70,029 | 13,810 | 83,839 | 76,464 | |
| Total bonds and other fixed-income securities | |||||
| 31.12.22 | 16,203 | 126,195 | 13,818 | 156,215 | |
| Total bonds and other fixed-income securities 31.12.21 | 16,722 | 139,124 | 12,670 | 168,516 | |
| Derivatives: | |||||
| - Interest derivatives | 7,761 | -8,519 | -759 | 2,292 | |
| - Currency derivatives | 2,394 | 2,394 | -519 | ||
| Total derivatives 31.12.22 | 7,761 | -6,125 | 1,636 | ||
| - of which derivatives with a positive market value | 7,761 | 6,583 | 14,343 | 4,915 | |
| - of which derivatives with a negative market value | -12,708 | -12,708 | -3,143 | ||
| Total derivatives 31.12.21 | 1,772 | 1,772 | |||
| Properties: | |||||
| Investment properties | 33,481 | 33,481 | 33,376 | ||
| Properties for own use | 1,689 | 1,689 | 1,659 | ||
| Total properties 31.12.22 | 35,171 | 35,171 | |||
| Total properties 31.12.21 | 35,035 | 35,035 |
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 01.01.22 | 376 | 14,678 | 7,932 | 8 | 12,663 | 33,376 | 1,659 |
| Net gains/losses on financial instruments | -268 | 1,318 | -204 | 233 | -380 | 51 | |
| Additions | 250 | 762 | 367 | 1,501 | 1,448 | 61 | |
| Sales | 44 | 1,432 | -802 | -258 | -610 | ||
| Exchange rate adjustments | -85 | -214 | -329 | -364 | -86 | ||
| Other | -2 | 10 | 4 | ||||
| Book value 31.12.22 | 402 | 18,105 | 7,076 | 8 | 13,810 | 33,482 | 1,689 |
As at 31.12.22, Storebrand Livsforisikring had NOK 8.211 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 2021 annual report. There is no significant changes in sensitivity in this quarter.
| 8 | |
|---|---|
| Q4 | 01.01 - 31.12 | |||
|---|---|---|---|---|
| NOK million | 2022 | 2021 | 2022 | 2021 |
| Personnel expenses | -773 | -751 | -2,871 | -2,725 |
| Amortisation/write-downs | -99 | -115 | -360 | -329 |
| Other operating expenses | -822 | -829 | -2,910 | -2,731 |
| Total operating expenses | -1,694 | -1,694 | -6,142 | -5,784 |
Tax
9
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 is not recognized in the financial statements and is classified as receivables. Significant uncertain tax positions are described below.
C. The outcome of the interpretation of tax rules for group contributions referred to above under (A) will have an impact when calculating the effect from the transitional rules for the new tax rules referred to under point (B). An equivalent interpretation to that described under (A) has been used as a basis in the financial statements when calculating tax input values on property shares owned by customer assets for 2016 and 2017. There is thus an uncertain tax position relating to the effect from the transitional rules described in (B). The decisions that Storebrand received in April 2022 and in January 2023 (described under point B) have reduced the uncertain tax position and have resulted in tax revenues of NOK 0.6 billion in the first quarter and NOK 0.2 billion in the fourth quarter. The effect as mentioned in point B depends on the interpretation and outcome of point A. If Storebrand's view prevails under item A, Storebrand will account for additional tax revenues of approximately NOK 0.044 billion if the company's view also prevails under item B. If the Norwegian Tax Administration prevails with its argument under point (A), Storebrand will recognise a tax expense of approximately NOK 0.5 billion.
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 if necessary, Storebrand will seek clarification from the court of law for the aforementioned uncertain tax positions.
| NOK million | 31.12.22 | 31.12.21 |
|---|---|---|
| Corporate market | 11,342 | 12,532 |
| Retail market | 67,066 | 57,042 |
| Gross loans | 78,408 | 69,574 |
| Write-down of loans losses | -108 | -88 |
| Net loans1) | 78,301 | 69,486 |
| 1) Of which Storebrand Bank | 49,917 | 38,992 |
| Of which Storebrand Livsforsikring | 28,384 | 30,494 |
| NOK million | 31.12.22 | 31.12.21 |
|---|---|---|
| Non-performing and loss-exposed loans without identified impairment | 73 | 48 |
| Non-performing and loss-exposed loans with identified impairment | 25 | 29 |
| Gross non-performing loans | 98 | 77 |
| Individual write-downs | -17 | -18 |
| Net non-performing loans1) | 82 | 59 |
1) The figures apply in their entirety Storebrand Bank
11
| NOK million | 31.12.22 | 31.12.21 |
|---|---|---|
| Additional statutory reserves | 9,643 | 13,602 |
| Market adjustment reserves 1) | 1,769 | 6,309 |
| Conditional bonuses | 12,540 | 13,781 |
| Total capital buffer | 23,952 | 33,693 |
1)Includes the occupational pensions buffer fund. The Norwegian parliament passed new legislation in December 2021, valid from 1.1.2022, regulating the buffer capital within public occupational pension schemes. The new legislation merges the market value adjustment reserves 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.
13
| NOK million | 31.12.22 | 31.12.21 |
|---|---|---|
| Unused credit facilities | 3,737 | 3,322 |
| Loan commitment retail market | 3,246 | 3,516 |
| Uncalled residual liabilities re limited partnership | 4,087 | 4,870 |
| Undrawn capital in alternative investment funds | 12,238 | 10,093 |
| Total contingent liabilities | 23,309 | 21,801 |
Guarantees essentially encompass payment and contract guarantees
Unused credit facilities encompass granted and any unused credit accounts and credit cards, as well as, any unused flexible mortgage facilities.
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 2 and note 44 in the 2021 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.
| 31.12.22 | 31.12.21 | |||||
|---|---|---|---|---|---|---|
| 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 | 25,877 | 25,877 | 28,711 | |||
| Including the effect of the transitional arrangement | ||||||
| Counting subordinated loans | 9,661 | 1,894 | 7,766 | 10,860 | ||
| Deferred tax assets | 540 | 540 | 356 | |||
| Not-counting tier 3 capital | -231 | -231 | ||||
| Risk equalisation reserve | 905 | 905 | 616 | |||
| Deductions for CRD IV subsidiaries | -4,804 | -4,804 | -3,728 | |||
| Expected dividend | -1,718 | -1,718 | -1,645 | |||
| Total basic solvency capital | 43,431 | 32,557 | 1,894 | 8,671 | 309 | 48,369 |
| Subordinated capital for subsidiaries regulated in accordance with CRD IV |
4,804 | 3,728 | ||||
| Total solvency capital | 48,236 | 52,098 | ||||
| Total solvency capital available to cover the minimum capital requirement |
36,381 | 32,557 | 1,894 | 1,929 | 40,688 |
| NOK million | 31.12.22 | 31.12.21 |
|---|---|---|
| Market risk | 21,267 | 25,258 |
| Counterparty risk | 1,119 | 720 |
| Life insurance risk | 9,004 | 10,829 |
| Health insurance risk | 971 | 931 |
| P&C insurance risk | 620 | 590 |
| Operational risk | 1,485 | 1,550 |
| Diversification | -7,075 | -7,804 |
| Loss-absorbing ability deferred tax | -4,954 | -5,218 |
| Total solvency capital requirement - insurance company | 22,438 | 26,856 |
| Capital requirements for subsidiaries regulated in accordance with CRD IV | 3,837 | 2,944 |
| Total solvency capital requirement | 26,276 | 29,800 |
| Solvency margin | 184% | 175% |
| Minimum capital requirement | 9,647 | 10,738 |
| Minimum margin | 377% | 379% |
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 | 31.12.22 | 31.12.21 |
|---|---|---|
| Capital requirements for CRD IV companies | 4,079 | 3,125 |
| Solvency capital requirements for insurance | 22,438 | 26,856 |
| Total capital requirements | 26,517 | 29,982 |
| Net primary capital for companies included in the CRD IV report | 4,804 | 3,728 |
| Net primary capital for insurance | 43,431 | 48,369 |
| Total net primary capital | 48,236 | 52,098 |
| Overfulfilment | 21,719 | 22,116 |
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 31 December 2022, the difference amounted to NOK 242 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 2021 annual report.
Storebrand has not carried out any material transactions other than normal business transactions with related parties at the close of the 4rd quarter 2022.
| Q4 | 01.01 - 31.12 | |||
|---|---|---|---|---|
| NOK million | 2022 | 2021 | 2022 | 2021 |
| Operating income | ||||
| Income from investments in subsidiaries | 3,178 | 4,542 | 3,187 | 4,542 |
| Net income and gains from financial instruments: | ||||
| - equities and other units | -3 | -1 | -25 | -2 |
| - bonds and other fixed-income securities | 64 | 6 | 51 | 39 |
| - financial derivatives/other financial instruments | ||||
| Other financial instruments | 1 | 2 | 204 | |
| Operating income | 3,239 | 4,547 | 3,215 | 4,783 |
| Interest expenses | -5 | -5 | -23 | -18 |
| Other financial expenses | 18 | -24 | 110 | -79 |
| Operating expenses | ||||
| Personnel expenses | -13 | -11 | -50 | -44 |
| Other operating expenses | -46 | -48 | -170 | -136 |
| Total operating expenses | -59 | -59 | -220 | -180 |
| Total expenses | -47 | -88 | -133 | -277 |
| Pre-tax profit | 3,193 | 4,459 | 3,082 | 4,505 |
| Tax | -192 | -285 | -143 | -258 |
| Profit for the period | 3,001 | 4,174 | 2,939 | 4,248 |
| Q4 01.01 - 31.12 |
||||
|---|---|---|---|---|
| NOK million | 2022 | 2021 | 2022 | 2021 |
| Profit for the period | 3,001 | 4,174 | 2,939 | 4,248 |
| Other total comprehensive income elements not to be classified to profit/loss |
||||
| Change in estimate deviation pension | 14 | 6 | 14 | 6 |
| Tax on other comprehensive elements | -3 | -1 | -3 | -1 |
| Total other comprehensive income elements | 10 | 4 | 10 | 4 |
| Total comprehensive income | 3,011 | 4,179 | 2,949 | 4,252 |
| NOK million | 31.12.22 | 31.12.21 |
|---|---|---|
| Fixed assets | ||
| Deferred tax assets | 36 | 46 |
| Tangible fixed assets | 28 | 27 |
| Shares in subsidiaries and associated companies | 24,100 | 23,006 |
| Total fixed assets | 24,164 | 23,079 |
| Current assets | ||
| Owed within group | 3,178 | 4,542 |
| Other current receivables | 14 | 15 |
| Investments in trading portfolio: | ||
| - equities and other units | 40 | 55 |
| - bonds and other fixed-income securities | 4,629 | 4,811 |
| - financial derivatives/other financial instruments | ||
| Bank deposits | 433 | 28 |
| Total current assets | 8,294 | 9,450 |
| Total assets | 32,458 | 32,530 |
| Equity and liabilities | ||
| Share capital | 2,360 | 2,360 |
| Own shares | -39 | -9 |
| Share premium reserve | 10,842 | 10,842 |
| Total paid in equity | 13,163 | 13,192 |
| Other equity | 15,932 | 15,128 |
| Total equity | 29,095 | 28,321 |
| Non-current liabilities | ||
| Pension liabilities | 118 | 142 |
| Securities issued | 501 | 1,001 |
| Total non-current liabilities | 618 | 1,143 |
| Current liabilities | ||
| Debt within group | 1,002 | 1,193 |
| Provision for dividend | 1,718 | 1,645 |
| Other current liabilities | 25 | 228 |
| Total current liabilities | 2,745 | 3,066 |
| Total equity and liabilities | 32,458 | 32,530 |
Statement of changes in equity
| NOK million | Share capital | Own shares | Share premium | Other equity | Total | equity | |
|---|---|---|---|---|---|---|---|
| Equity at 31. December 2020 | 2,339 | -2 | 10,521 | 12,609 | 25,467 | ||
| Profit for the period | 4,248 | 4,248 | |||||
| Total other result elements | 4 | 4 | |||||
| Total comprehensive income | 4,252 | 4,252 | |||||
| Issues of shares | 21 | 320 | 341 | ||||
| Provision for dividend | -1,640 | -1,640 | |||||
| Own shares sold2) | -7 | -97 | -104 | ||||
| Employee share2) | 4 | 4 | |||||
| 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 | |||||
| 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 |
1) 471 974 890 shares with a nominal value of NOK 5.
2) In 2022, Storebrand ASA has bought 6.477.024 own shares. In 2022, 552.574 shares were sold to our own employees. Holding of own shares 31. December 2022 was 7.764.226.
| 01.01 - 31.12 | ||
|---|---|---|
| NOK million | 2022 | 2021 |
| Cash flow from operational activities | ||
| Net receipts/payments - securities at fair value | ||
| Net receipts/payments - securities at fair value | 224 | 130 |
| Payments relating to operations | -233 | -184 |
| Net receipts/payments - other operational activities | 4,551 | 3,126 |
| Net cash flow from operational activities | 4,541 | 3,071 |
| Cash flow from investment activities | ||
| Receipts - sale of subsidiaries | 202 | |
| Payments - purchase/capitalisation of subsidiaries | -1,511 | -1,675 |
| Net cash flow from investment activities | -1,512 | -1,473 |
| Cash flow from financing activities | ||
| Payments - repayments of loans | -500 | |
| Payments - interest on loans | -23 | -18 |
| Receipts - sold own shares to employees | 45 | 44 |
| Payments - buy own shares | -500 | -144 |
| Payments - dividends | -1,646 | -1,513 |
| Net cash flow from financing activities | -2,624 | -1,631 |
| Net cash flow for the period | 405 | -33 |
| Net movement in cash and cash equivalents | 405 | -33 |
| Cash and cash equivalents at start of the period | 28 | 61 |
| Cash and cash equivalents at the end of the period | 433 | 28 |
1
The financial statements are presented in accordance with the accounting policies applied in the annual financial statements for 2021. The accounting policies are described in the 2021 annual report. The financial statements are presented in accordance with the accounting policies applied in the annual financial statements for 2021. The accounting policies are described in the 2021 annual report.
Storebrand ASA does not apply IFRS to the parent company's financial statements.
Note
2
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.
3
| NOK million | 2022 | 2021 |
|---|---|---|
| Storebrand Livsforsikring AS | 2,325 | 3,210 |
| Storebrand Bank ASA | 208 | 238 |
| Storebrand Asset Management AS | 510 | 948 |
| Storebrand Forsikring AS | 134 | 146 |
| Storebrand Facilities AS | 1 | |
| Storebrand Helseforsikring AS | 9 | |
| Total | 3,187 | 4,542 |
| 4 | |
|---|---|
| 01.01 - 31.12 | |||||
|---|---|---|---|---|---|
| NOK million | Interest rate | Currency | Net nomial value |
2022 | 2021 |
| Bond loan 2020/2025 | Variable | NOK | 500 | 501 | 500 |
| Bond loan 2017/2022 | Variable | NOK | 500 | 501 | |
| Total 1) | 501 | 1,001 |
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.
21 March 2023 Annual Report 2022 13 April 2023 AGM 2023 10 May 2023 Results Q1 2023 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 |
| Daniel Sundahl | Head of Investor Relations and Rating | [email protected] | +47 913 61 899 |
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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