Storebrand Asa · OSL:STB
Storebrand Asa — Investor Day (May 2016)
95 slides from Storebrand Asa's investor day presentation, May 13, 2016
Slide 1: Capital Markets Day May 13, 2016
Capital Markets Day May 13, 2016 1
Slide 2: Important information
Important information: This document may contain forward-looking statements. By their nature, forward-looking statements involve risk and uncertainty because they relate to future events and circumstances that may be beyond the Storebrand Group’s control. As a result, the Storebrand Group’s actual f
Slide 3: Speakers
Speakers Odd Arild Grefstad 15.09.1965 Trond Finn Eriksen 09.05.1977 CEO Head of Economic Capital Management Has worked for the Storebrand Group since Has worked for the Storebrand Group since 1994. His roles have included Group CFO, 2006. He has held various positions within Head of sales and marke
Slide 4: Agenda
Agenda Time Topic Speaker 09:00-09:20 Strategy update CEO Odd Arild Grefstad 09:20-09:35 Group commercial strategy CCO Staffan Hansén Transforming operations for a digital 09:35-09:50 cost efficient business model COO Heidi Skaaret 09:50-10:10 Q&A and break Storebrand management Head of Economic cap
Slide 5: Group Strategy
Capital Markets Day May 13, 2016 Group Strategy Odd Arild Grefstad CEO 5
Slide 6: Storebrand – an Integrated Financial Services Group
Storebrand – an Integrated Financial Services Group Life and pensions Asset management 40k corporate customers NOK 567bn in AuM of which 24% 1.9m individual customers external assets NOK 391bn of reserves of which 100% of investments assessed by approx. 1/3 Unit Linked sustainability crite
Slide 7: The Storebrand Investment Case
The Storebrand Investment Case Entered S2 without From capital intensive Growth in high quality 1 2 3 raising capital – set to to capital light earnings continues resume dividends #1 >150% Occupational Solvency target1 53% pensions4 Of AuM3 non guaranteed 12% ~5-10% Growth in Savings Normalised and
Slide 8: Healthy Growth in Nordic Pension Market Supported by Solid Macro Environment
Healthy Growth in Nordic Pension Market Supported by Solid Macro Environment Unit Linked pension premium growth1 Norway, NOK bn Sweden , SEK bn 52 42 46 37 20 15 17 CAGR 17% 13 25 27 29 32 CAGR 9% 2012 2013 2014 2015 Inverted government net debt ratio Unemployment rates2 as % of GDP2 250% 12% 200% 1
Slide 9: Record Low Interest Rates
Record Low Interest Rates Interest rates in Norway and Sweden (%) 4,0 3,5 3,0 2,5 2,0 1,5 1,0 0,5 0,0 -0,5 -1,0 31.12.2012 30.06.2013 31.12.2013 30.06.2014 31.12.2014 30.06.2015 31.12.2015 NOK SWAP 10Y SEK SWAP 10Y Key policy rate Norway Repo rate Sweden 9
Slide 10: Delivering on Business Transformation
Delivering on Business Transformation NOKm A Income Savings and Insurance1 6,304 4,523 CAGR Strong growth in capital efficient +12% savings and insurance 2012 2015 NOKm B Income Guaranteed pensions2 2,317 1,749 CAGR Managing down guaranteed back -9% book 2012 2015 NOKm C Operational cost3 3,228 3,17
Slide 11: Strategic Response
Strategic Response 1 Manage the guaranteed 2 Continued growth in balance sheet Savings and Insurance Continued transfer out of Leading position in occupational guaranteed reserves pensions Further cost reductions through Asset gatherer with strong automation and outsourcing Insurance offerin
Slide 12: Transition into a Solvency II based Regime has Required Discipline and Targeted Measures
Transition into a Solvency II based Regime has Required Discipline and Targeted Measures Transfer out of Reduction of Corporate Cost reductions guaranteed products Banking loan book (NOKm) (NOKbn)1 2,201 38,782 2012-14 2015 2016-18 Cost program Sale STB Baltic Cost reductions 7,729 15 -72% 2,232 400
Slide 13: Group Capital Management Policy
Group Capital Management Policy Solvency II Incl. transitional rules Consider increased pay out Consider share buy-backs 180% 175% Dividend pay out Current Maintain investment in growth level No dividend if solvency ratio without transition rules <110 % 150% Reduced dividend pay out Mo
Slide 14: Capital Generation will Increase over Time and is Sufficient to Pay Dividends
Capital Generation will Increase over Time and is Sufficient to Pay Dividends Annual estimated solvency generation (%)1 Storebrand will generate sufficient capital: (1) To stay in the targeted solvency Expected capital generation ~5-10% range of 150-180% Dividends/other ~1-3% (2) To cover dividend p
Slide 15: Revised Financial Targets
Revised Financial Targets Target Status 1Q 2016 Return on equity1 > 10% 7% Dividend ratio1 > 35% n/a Solvency II margin Storebrand Group (revised)2 > 150% 175% 15 1 Before amortisation after tax. 2 Including transitional rules.
Slide 16: Our Business Logic is built on Relations to Corporations and Individuals
Our Business Logic is built on Relations to Corporations and Individuals through Occupational Pension Schemes 60,000 700,000 60,000 1,200,000 new new retirees and employees in former holders of employees employees 40,000 businesses pension certificates each year each year Pension savings Asset mgmt.
Slide 17: Front Book has Strong Customer and Capital Synergies
Front Book has Strong Customer and Capital Synergies Diversification gives Capital efficient Builds >2pp of lower capital mortgages on life Solvency II capital Capital solvency ratio per consumption and balance sheet. generative synergies year earnings build NOK 1.4bn already solvency capital transf
Slide 18: Growth in Savings and Insurance
Growth in Savings and Insurance Unit Linked Asset management +22% +8% 128 125 571 567 105 535 85 487 442 54 64 414 2011 2012 2013 2014 2015 Q1 2016 2011 2012 2013 2014 2015 Q1 2016 UL reserves (NOKbn) AuM (NOKbn) Insurance Retail bank +6% +10% 28.4 4,327 4,397 26.9 23.7 23.9 23.9 3,569 3,699 22.0 3,
Slide 19: Customer Satisfaction Builds Shareholder Value
Customer Satisfaction Builds Shareholder Value Customer satisfaction gives clear effects And Storebrand has a strong track record How many recommendations the customers have made, on average, in the past year:1 Best customer satisfaction for 2.0 Norwegian corporates >20 employees 2004-2015 0.7 0.1 D
Slide 20: Continued Growth in Savings and Insurance
Continued Growth in Savings and Insurance Continue growth in savings and insurance 1 Maintain market leader role in growing occupational pensions market 3 Retail customers 2 Employees 1 Corporate relation 2 Convert employees to loyal Save for and profitable retail < retirement customers 3 Accelerate
Slide 21: Group Commercial Strategy
Capital Markets Day May 13, 2016 Group Commercial Strategy Staffan Hansèn CCO 21
Slide 22: Key Takeaways
On a transition from capital consuming guarantees to capital- light asset gatherer Unit linked assets expected to grow with ~15% annually next three Key Takeaways years Growth in Savings and Insurance to increase top line despite reduction in income from back book Ambition to at least keep c
Slide 23: Attractive and Growing Occupational Pensions Market
Attractive and Growing Occupational Pensions Market Pension premium income total market1 Pension premium income per product1 CAGR Norway, NOK bn Sweden, SEK bn Norway (NOKbn) Sweden (SEKbn) Unit Linked Unit Linked and Norway: CAGR 6% Depot Sweden: CAGR 5% 57 17% 9% 20 32 52 53 25 49 13 35 2012 2015
Slide 24: Main Commercial Challenge
Main Commercial Challenge Substitute capital consumptive guaranteed income with capital efficient growth from Savings and Insurance Pension premiums Storebrand1 Results Storebrand2 20,942 2,194 19,791 31% 38% 1,553 57% 46% NOKm NOKm 69% 62% 43% 54% 2012 2015 2012 2015 Guaranteed Non-guaranteed 24 1
Slide 25: Defined Contribution - Leading Position in Norway and Strong Contender in Sweden
Defined Contribution - Leading Position in Norway and Strong Contender in Sweden Norway – market leader defined Sweden – growing in defined contribution (private sector)1 contribution (private sector)2 34% 15% 15% 15% 14% 28% 11% 15% 8% 8% Storebrand DNB Nordea Gjensidige Spareb. 1 LF SEB Avanza Ska
Slide 26: Continued Growth in Unit Linked Reserves Driven by Premiums and Expected Market Return
Continued Growth in Unit Linked Reserves Driven by Premiums and Expected Market Return Development Unit Linked reserves1 Drivers net premiums CAGR ~15% Majority of premiums come 2016-18 180 000 from existing Unit Linked 170 000 business 160 000 150 000 140 000 Underlying growth through 130 000 s
Slide 27: Capital Efficient Guarantees and Insurance Adds to the Corporate Offering
Capital Efficient Guarantees and Insurance Adds to the Corporate Offering Increased demand for capital efficient guarantees Norway - Hybrid pensions Sweden – Capital efficient guarantees Capital light 85% of premium w/ 1.25% guarantee1 Nominal guarantees Strong returns Future potential in
Slide 28: Asset Management has Undergone a Turnaround and is Positioned for Further Growth
Asset Management has Undergone a Turnaround and is Positioned for Further Growth Storebrand Asset Management Profit development since turnaround1 - Revenue & cost1, NOKm +127% +34% 925 a 856 789 744 741 689 8.1 bps 481 538 482 464 466 +4% 450 459 2010 2011 2012 2013 2014 2015 Revenues Cost 4.7 bps 3
Slide 29: Moving Towards a Simpler Business Model with Long Term Asset Management as a Hub
Moving Towards a Simpler Business Model with Long Term Asset Management as a Hub in the Group Storebrand Asset Management Comments - AuM & Revenue mix Revenues Revenues AuM 2015 • 16% growth in external 2014 2015 revenues since last CMD External 24% • Share of external 31% 36% revenues increased fro
Slide 30: Efficient and Diversified Retail Distribution
Efficient and Diversified Retail Distribution P&C and individual life Long term savings Bank NOK 1.7bn portfolio premiums1 NOK 18bn retail assets1 NOK 28bn retail lending1 81% Combined Ratio2 Storebrand, SPP and Delphi Strong growth brands Distributed via cost efficient internal distribu
Slide 31: A Growing Share of Employees Becoming Profitable and Loyal Retail Customers
A Growing Share of Employees Becoming Profitable and Loyal Retail Customers Employees in corporate pension schemes becoming retail customers In thousands Target of 25% within 2018 435 428 409 14% 17% 25% 373 13% 12% 2012 2013 2014 2015 Target 2018 Employees in corporate schemes with retail product i
Slide 32: Growing Retail Sales through Customer Centric Innovation: Streamlining our Processes
Growing Retail Sales through Customer Centric Innovation 1) Streamlining our Processes Case: Retail bank – redesigning the loan process Retail loan book development NOKbn Automating and simplifying the loan process to improve customer experience and drive growth +18% 28 Some key results: 27 Conversi
Slide 33: Growing Retail Sales through Customer Centric Innovation: Engaging Customers
Growing Retail Sales through Customer Centric Innovation 2) Solutions that Engage Customers to Take Action Personalized advice on each customer's 'next best activity' Next Best Activity: Results from pilot: Customer-centric and personalized Sales success rate 15% recommendations Net Loyalty Sc
Slide 34: Growth Ambitions 2018
Growth Ambitions 2018 Unit Linked Asset management Maintain #1 market position Keep #1 position in Norway in occupational pensions and strengthen position in Norway Sweden resulting in ~NOK 150m in net revenue growth Build #1 position in occupational pensions Profit growth of ~NOK 100m Swede
Slide 35: Transforming Operations for a Digital Business Model and Reduced Costs
Capital Markets Day May 13, 2016 Transforming Operations for a Digital Business Model and Reduced Costs Heidi Skaaret COO 35
Slide 36: Nordic Customers are Digitally Mature and Storebrand is a Front Runner
Nordic Customers are Digitally Mature and Storebrand is a Front Runner in the Global Life & Pension Industry Digital Maturity1 Life Insurer Digitalization Scorecard2 100 80 75 95 % of population using online banking 70 90 Storebrand Digitalization Index Score (Max 100) Norway 65 85 60 Denmark 55 80
Slide 37: Storebrand Digital Business Model – Key to Future Growth Strategy
Storebrand Digital Business Model – Key to Future Growth Strategy 1 Digital solutions to accelerate growth Customer-centric innovation that adds value and drive sales My Pension Plan Next Best Activity Increasing customer satisfaction and loyalty – retention and 2 cross sales # Products1 7.6 1.5 2.8
Slide 38: Strategic Partnership to Leverage Innovation and Cost Reductions
Strategic Partnership to Leverage Innovation and Cost Reductions Enhanced customer experience Improved cost efficiency Process improvements and Increased offshoring and global automation (Robotics) delivery model Digital transformation Future-ready technology platform Partnership to drive innovation
Slide 39: Committed Plan to Achieve Cost Reductions and Efficiency Gains in Partnership
Committed Plan to Achieve Cost Reductions and Efficiency Gains in Partnership # Partner FTEs working for Storebrand ~220 ~250 (~40%) ~340 310 # Partner FTEs Additional Productivity gains # Partner FTEs working for STB outsourcing 2016-17 working for STB Q1 2016 2019E 39
Slide 40: Cost Initiatives Successfully Completed
Cost Initiatives Successfully Completed Cost reduction completed 2012 – 2016… …in a period with strong business growth Operational cost (NOKm) +29% ~10% 571 3 228 reduction1 442 3 171 2012 2015 Cost programme 2014 target reached 2012 2015 2012 - 2014 (>NOK 400m) AuM Storebrand Group NOKbn Baltic o
Slide 41: Further Cost Reductions to be Realized by 2018
Further Cost Reductions to be Realized by 2018 ~60% 3.171 ~25% ~15% ~NOK 300-400m cost reduction 2015 Salary increase Sourcing/partner Automation SG&A 2018E and inflation strategy and digitization 41 Note: Graph shows expected development in nominal operational costs (NOKm).
Slide 42: Key Takeaways
On a transition from capital consuming guarantees to capital- light asset gatherer Unit linked assets expected to grow with ~15% annually next three Key Takeaways years Growth in Savings and Insurance to increase top line despite reduction in income from back book Ambition to at least keep c
Slide 43: Solvency II and economic capital modelling in Storebrand
Capital Markets Day May 13, 2016 Solvency II and economic capital modelling in Storebrand Trond Finn Eriksen Head of Economic Capital Management 43
Slide 44: Key Takeaways
Solid Solvency II position with low volatility Solvency II requirements on back book is close to peak Key Takeaways New business written gives positive VNB and contributes with Solvency capital Robust and transparent Solvency II calculations 44 Solvency II and economic capital modelling
Slide 45: Long History of Economic Capital Modelling in Storebrand
Long History of Economic Capital Modelling in Storebrand 1998 2007 2008 2012 Today Embedded Adoption to Storebrand is using Value Solvency II the Solvency II introduced modelling since standard model QIS3 Market consistent "In house" better and Risk and business Embedded Value faster Solvency II mod
Slide 46: Solvency II Ratio Storebrand Group March 31, 2016
Solvency II Ratio Storebrand Group March 31, 2016 175% 46.6 Transitional measures 14.7 Subordinated loans 6.6 26.7 CRD IV capital requirements 2.5 Contribution to Own Funds from subsidiaries 1 5.4 from products 6.7 SCR from non-guaranteed business 2 SCR from guaranteed business Shareholder surplus 1
Slide 47: Key Assumptions in Storebrand's Solvency II Standard Calculation
Key Assumptions in Storebrand's Solvency II Standard Calculation Contract boundaries Operational assumptions Short contract boundaries: No future premiums Lapse on paid-up policies is set to 0% up until are accounted for except for some not material 2021, 1.5% lapses after this. 0% lapses also a
Slide 48: Low Sensitivities in Solvency II Ratio Including Transitionals
Low Sensitivities in Solvency II Ratio Including Transitionals Financial market sensitivities1 Solvency II ratio from transitionals Solvency II ratio excluding transitionals 173 173 173 167 161 150 50 61 39 55 45 123 112 134 112 116 Estimated economic Interest Interest Equity -25% Credit spread +50b
Slide 49: Front Book Well Adapted to Solvency II, while Back Book is Capital Intensive
Front Book Well Adapted to Solvency II, while Back Book is Capital Intensive Back book with considerable capital Front book has a sound Solvency II consumption % of reserves position % of reserves Contribution to Own Funds Contribution to Own Funds SCR SCR +7,0% +6,5% +0,6% -4,2% -4,0% -5,1% -4,9% -
Slide 50: Back Book in Run Off, Front Book is Growing Fast
Back Book in Run Off, Front Book is Growing Fast Forecast reserve development back Forecast reserve development front book NOKbn book NOKbn ILLUSTRATION ILLUSTRATION 400 400 350 350 300 300 250 250 200 200 150 150 100 100 50 50 0 0 2016 2018 2020 2022 2024 2026 2016 2018 2020 2022 2024 2026 High cap
Slide 51: What Determines the Solvency II Ratio Going Forward
What Determines the Solvency II Ratio Going Forward Forecast Solvency II ratio A ILLUSTRATION Interest rates: Small sensitivity in SII ratio including transitional 200% Financial measures, larger without markets Credit: Higher credit spreads will 190% improve SII ratio over time, but may weaken
Slide 52: From Solvency II to Economic Capital to Reflect More Realistic Business Assumptions
From Solvency II to Economic capital to Reflect More Realistic Business Assumptions From Solvency II standard model to economic capital1 NOKm 44.989 43.909 10.211 6.780 Reconciliation SII standard model 2.688 Reconciliation Storebrand Economic reserve incl. transitional reserve Capital rules 6.780 L
Slide 53: Economic Capital Values Reflect Value of Underlying Business
Economic Capital Values Reflect Value of Underlying Business From Solvency II standard model to economic capital1 NOKm 44,989 43,909 10,211 6,780 2,688 6,780 Storebrand group Group Economic Capital of NOK 37.1bn 14,893 8,450 37,129 Storebrand Group Economic Capital per share NOK 83.1 per share (
Slide 54: Strong Sales in 2015 - Value of New Business NOK 1bn
Strong Sales in 2015 - Value of New Business NOK 1bn Value of new business Strong new sales in 2015 NOKm 1,004 Strong sales of occupational pension Unit 90 Linked in Norway – increased market shares to 34% Strong VNB for individual Unit Link products of NOK 130m Positive value from paid up pol
Slide 55: Key Takeaways
Solid Solvency II position with low volatility Solvency II requirements on back book is close to peak Key Takeaways New business written gives positive VNB and contributes with Solvency capital Robust and transparent Solvency II calculations 55 Solvency II and economic capital modelling
Slide 56: Appendix
Appendix 56
Slide 57: Calculating Solvency II
Calculating Solvency II Solvency II Balance Sheet IFRS balance sheet Solvency II balance sheet under 1/200 years shock SCR Own Equity Funds Own Funds after shock Moving to 1 in 200 economic years shock balance sheet Market Market Assets Liabilities Assets Liabilities value of value of after after as
Slide 58: Calculating Market Value of Liabilities under Solvency II
Calculating Market Value of Liabilities under Solvency II Solvency II balance sheet Market value of liabilities Consist of both traditional IFRS Own Own Funds tangible capital, subordinated Funds debt and NPV of future profits 45 bn Risk Margin Cost of non-hedgeable risk. 6% 7 bn of cost of SCR comi
Slide 59: From IFRS Values to Solvency II Own Funds
From IFRS Values to Solvency II Own Funds Moving from IFRS to Solvency II capital1 NOKbn IFRS shareholders equity 26.7 Intangible assets 5.7 Intangibles Goodwill DAC Full market value of assets 12.0 Excess value bonds at amortised cost Best estimate liabilities 7.3 Increased liabilities gu
Slide 60: Calculating the Solvency Capital Requirements (SCR)
Calculating the Solvency Capital Requirements (SCR) SCR calculation Q1 2016 SCR dominated by financial market risk NOKbn Operational P&C & Health SCR before 35.8 4% Currency diversification 3% Interest Rate Down 5% 30% Diversification -6.9 Life Spread 29% 29% Risk absorbing -4.7 capacity of tax 63%
Slide 61: Liability Driven Investments
Capital Markets Day May 13, 2016 Liability Driven Investments Tørres Trovik CIO 61
Slide 62: Key Takeaways
Sufficient expected return to grow both buffers and solvency capital Buffer capital of 5.3% provides low risk for shareholders and reduces net SCR Key Takeaways Efficient risk management by segmentation A strong bonds at amortised cost portfolio providing 65% of required return 62 Liability
Slide 63: Guaranteed Asset Allocation
Guaranteed Asset Allocation Sweden NOK 91 bn Norway NOK 176 bn Comment on oil exposure: 1% of total asset allocation with direct oil exposure, whereof 0,3% Norwegian exposure 89% 49% 34% 12% 6% 5% 5% Equities Fixed Real estate Equities Fixed Bonds at Real estate income income amortised cost 63
Slide 64: Liability Driven AM with a Double Purpose
Liability Driven AM with a Double Purpose Financial targets sets priorities Two risk management perspectives Solvency generation and preservation main priority 1 Solvency II Long term perspective Return on equity1 > 10 % Risk management of own funds and SCR Asset return > Liability return Divi
Slide 65: Norwegian Guaranteed Book: Different Return Targets under Solvency II and IFRS
Norwegian Guaranteed Book:1 Different Return Targets under Solvency II and IFRS Expected market return vs. SII liability IRR Expected book return vs. IFRS guarantee 3.9% 2.6% + 3.2% 2.1% 5.3%2 in additional buffer capital Expected IRR liabilites Expected Guarantee 2016 market return (incl UFR) book
Slide 66: Norwegian Guaranteed Book – IFRS perspective: Expected Returns and Buffer Development
Norwegian Guaranteed Book – IFRS perspective: Estimate of Expected Returns and Buffer Development Expected return and buffer level 2016-2025 (%) Sufficient return to meet IFRS guarantee and build buffer capital 10,0% 5,3% 3,2% 3,9% 3,3% 2,9% 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 Buffer c
Slide 67: What If Interest Rates Go Even Lower?
What If Interest Rates Go Even Lower? Norwegian guaranteed portfolio – return sensitivities 4,0 % 3,5 % 3,0 % 2,5 % Hypothetical shortfall covered by buffers 2,0 % 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 Expected return IR +50 bps Expected return IR -50 bps Expected return Guarantee Intere
Slide 68: Norwegian Guaranteed Book - Solvency perspective: Expected Return and Liability Development
Norwegian Guaranteed Book - Solvency perspective: Estimate of Expected Return and Liability Development Expected mark to market return 2016-2025 (%) Sufficient return generates Solvency II capital 3,0% 2,6% 2,1% 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 Expected market return Average liabili
Slide 69: Paid up policies in Norway: Segmentation According to Risk Capacity
Paid up policies in Norway: Segmentation According to Risk Capacity 8% Segment 4 High Amortizing bonds 34 bn. Gov. Bonds 27% 15% Credit Real Estate Segment 3 Equities 29 bn. Buffer level 16% 5% Segment 2 34% 12% 28 bn. 8% 7% Segment 1 19% 54% 16 bn. 7% 6% 5% 9% 72% Low 90% Low Required book return H
Slide 70: High Quality Assets I - Characteristics of Bonds at Amortised Cost
High Quality Assets I - Characteristics of Bonds at Amortised Cost1 Market & book value – no reinvestment (NOKbn) Rating distribution (%) 96 Unrated 91 90 BBB 12 85 2% A 10 10 BB 10% 10 77 71 22% 9 1% 8 56 8 46 41 84 81 80 5 36 75 4 67 63 4 25 48 4 41 37 32 21 37% AAA 27% 2016 2016 2017 2018 2019 20
Slide 71: High Quality Assets II - Characteristics of Mark to Market Fixed Income
High Quality Assets II - Characteristics of Mark to Market Fixed Income1 Rating distribution (%) Geographical distribution (%) 4% 9% 8% 12% AAA Sweden 17% 43% AA Norway 50% A Europe ex.NO & SE 15% BBB US Loans, Unrated and <BBB Other 27% 14% Sector distribution (%) 8% 1% Sovereign and gov. guarantee
Slide 72: Key Takeaways
Sufficient expected return to grow both buffers and solvency capital Buffer capital of 5.3% provides low risk for shareholders and reduces net SCR Key Takeaways Efficient risk management by segmentation A strong bonds at amortised cost portfolio providing 65% of required return 72 Liability
Slide 73: Capital management framework and financial position
Capital Markets Day May 13, 2016 Capital management framework and financial position Lars Aa. Løddesøl Group CFO 73
Slide 74: Key Takeaways
On a transition from capital consuming guarantees to capital- light asset gatherer Growth and profitability from Savings and Insurance replace Key Takeaways run-off business Back book run off and front book solvency generation enable future capital release New capital management policy with
Slide 75: From Guaranteed to Non-Guaranteed Pension Savings
From Guaranteed to Non-Guaranteed Pension Savings Premium income Storebrand Life Insurance1 Storebrand Life Insurance2 Share of reserve distributed by age of policy-holder 10 000 NOKm Guaranteed Share of reserves Non-guaranteed 8 000 5,0 % 4,5 % 6 000 4,0 % 3,5 % 4 000 3,0 % 2,5 % 2 000 2,0 % 1,5 %
Slide 76: Long Term Balance Sheet Shift
Long Term Balance Sheet Shift Forecast assets under management (NOKbn) ILLUSTRATION 800 700 600 500 400 300 200 100 0 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 Company capital and Other Low capital consumptive Guarantees External AuM Medium capital consumptive Guarantees Non-guaran
Slide 77: Guaranteed Back Book: Expected Capital Consumption Reduced
Guaranteed Back Book: - Expected Capital Consumption Reduced Estimated reduced capital consumption Why reduction in capital need? Capital consumption includes sum of solvency capital requirement and sum of VIF for all guaranteed products Guaranteed portfolio in run off 25 ILLUSTRATION Average po
Slide 78: Capital Generation will Increase over Time and is Sufficient to Pay Dividends
Capital Generation will Increase over Time and is Sufficient to Pay Dividends Annual estimated solvency generation (%)1 Storebrand will generate sufficient capital: (1) To stay in the targeted solvency Expected capital generation ~5-10% range of 150-180% Dividends/other ~1-3% (2) To cover dividend p
Slide 79: What Determines the Solvency II Ratio Going Forward
What Determines the Solvency II Ratio Going Forward Forecast Solvency II ratio A ILLUSTRATION Interest rates: Small sensitivity in SII ratio including transitional 200% Financial measures, larger without markets Credit: Higher credit spreads will 190% improve SII ratio over time, but may weaken
Slide 80: A Solid and Profitable Company, but Profitability Under Pressure Short Term
A Solid and Profitable Company, but Profitability Under Pressure Short Term Group result1 Comments 3,423 473 2,935 277 314 Exiting public sector Defined 416 1,762 Benefit 1,952 398 Exiting Corporate Banking NOK mil 1,612 1,279 158 2,636 2,242 2,219 Lower interest rates 1,748 546 1,454 1,570 73
Slide 81: We Maintain >10% RoE Target
We Maintain >10% RoE Target Return on IFRS equity Comments 12% 11% 11% RoE target: 10% after tax, adjusted for amortisation Target >10 % 8% Increase in equity capital in light of higher capital 7% 7% requirements 6% Reduced income from guaranteed pension puts pressure on RoE Reduced capital
Slide 82: Reporting Structure Reflects Different Business Characteristics
Reporting Structure Reflects Different Business Characteristics Three main segments with close links between value drivers and reported results Transition towards Savings and Insurance Result before amortisation and longevity reserve Segments' share of result before amortisation and strengthening lo
Slide 83: Strong Returns on IFRS Equity in Savings and Insurance
Strong Returns on IFRS Equity in Savings and Insurance Savings Insurance Guaranteed Other Group IFRS earnings1 (NOKm) 1,020 488 329 -75 1,762 Allocated Equity 4.3 1.3 19.3 2.0 26.9 (NOKbn) Return 24% 37% 2% -4% 7% (%) The equity in the Group sits within different legal units. This allocation of equi
Slide 84: Group Equity and Capital Structure – Reduced Leverage
Group Equity and Capital Structure – Reduced Leverage Group equity Group capital structure2 Tangible equity increased by 72% 2011-2015, Improved leverage ratio intangible equity amortised according to plan 34,712 34,334 32,567 30,184 26,946 27,250 26,538 26,273 24,741 22,775 26,946 26,538 20,175 24,
Slide 85: Group Capital Management Policy
Group Capital Management Policy Solvency II Incl. transitional rules Consider increased pay out Consider share buy-backs 180% 175% Dividend pay out Current Maintain investment in growth level No dividend if solvency ratio without transition rules <110 % 150% Reduced dividend pay out Mo
Slide 86: Financial Targets
Financial Targets Target Status 1Q 2016 Return on equity1 > 10% 7% Dividend ratio1 > 35% n/a Solvency II margin Storebrand Group2 > 130% 175% Rating Storebrand Life Insurance A-level BBB+/Baa1 86 1 Before amortisation after tax. 2 Including transitional rules.
Slide 87: Revised Financial Targets
Revised Financial Targets Target Status 1Q 2016 Return on equity1 > 10% 7% Dividend ratio1 > 35% n/a Solvency II margin Storebrand Group (revised)2 > 150% 175% 87 1 Before amortisation after tax. 2 Including transitional rules.
Slide 88: Key Takeaways
On a transition from capital consuming guarantees to capital- light asset gatherer Growth and profitability from Savings and Insurance replace Key Takeaways run-off business Back book run off and front book solvency generation enable future capital release New capital management policy with
Slide 89: Appendix
Appendix 89
Slide 90: Increased Financial Flexibility for the Holding Company
Increased Financial Flexibility for the Holding Company Net debt ratio Storebrand ASA 15 12% 10 9% 9% 8% • Net debt in the holding company 5% 5 2% reduced by NOK 1.6bn since 2011 0 2011 2012 2013 2014 2015 2016 YTD Nominal interest bearing debt and liquid assets • Undrawn credit facility of EUR 240m
Slide 91: Life & Pensions Norway - Balance Sheet Dynamics
Life & Pensions Norway - Balance Sheet Dynamics Guaranteed Non-guaranteed PREMIUM INCOME PREMIUM INCOME Defined Benefit Defined Contribution Occupational Occupational Profitability1 Profitability1 Capital intensity2 Capital intensity2 51 Reserves (NOKbn) 29 Reserves (NOKbn) CONVERSION CONVERSION DB
Slide 92: Life & Pensions Sweden - Balance Sheet Dynamics
Life & Pensions Sweden - Balance Sheet Dynamics Guaranteed Non-guaranteed Guaranteed Unit Linked Profitability1 Profitability1 Capital intensity2 Capital intensity2 91 Reserves (NOKbn) 70 Reserves (NOKbn) Fee based adm.result Fee based adm.result Risk result Risk result Profit sharing mech
Slide 93: Closing remarks
Capital Markets Day May 13, 2016 Closing remarks Odd Arild Grefstad Group CEO 93
Slide 94: The Storebrand Investment Case
The Storebrand Investment Case Entered S2 without From capital intensive Growth in high quality 1 2 3 raising capital – set to to capital light earnings continues resume dividends #1 >150% Occupational Solvency target1 53% pensions4 Of AuM3 non guaranteed 12% ~5-10% Growth in Savings Normalised and
Slide 95: Investor Relations contacts
Investor Relations contacts Lars Aa Løddesøl Group CFO lars.loddesol@storebrand.no +47 9348 0151 Sigbjørn Birkeland Finance Director sigbjorn.birkeland@storebrand.no +47 9348 0893 Kjetil R. Krøkje Head of IR kjetil.r.krokje@storebrand.no +47 9341 2155