Storebrand ASA · OSL:STB
Storebrand ASA — Analyst Conference 6 October 2009
60 slides from Storebrand ASA's conference presentation, Oct 6, 2009
Slide 1: Analyst Conference
Analyst Conference 06 October 2009
Slide 2: Contents
Contents Page: Storebrand's business model 4 – 17 Odd Arild Grefstad, Group Chief Financial Officer Risk Management Life and Pensions Norway 18 – 36 Frederic Ottesen, Group Finance Director Risk Management Life and Pensions Sweden 37 – 50 Staffan Hansén, Chief Investment Officer, SPP Positioned for
Slide 3: Important notice
Important notice: This presentation may contain forward looking statements, including such statements within the meaning of Section 27A of the US Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. These statements concern or may affect future matters, such as the Storebra
Slide 4: Storebrand's Business Model
Storebrand's Business Model Analyst Conference 06 October 2009 Odd Arild Grefstad Group CFO
Slide 5: Storebrand Group
Storebrand Group Life and Pensions Storebrand Life Insurance NOK 312 bn in assets SPP Life Insurance Asset Management Storebrand Investments NOK 336 bn in AuM Storebrand Real Estate Storebrand Bank NOK 46 bn in assets Storebrand Skadeforsikring (P&C) NOK 1,7 bn in assets Figures as at 30.06.
Slide 6: Life and Pensions - 3 main product groups
Life and Pensions - 3 main product groups Fee-based Fee based Unit Traditional profit guaranteed Linked and risk sharing business products Individual and Defined Benefit Defined contribution paid-up policies (NOK 78bn) and Unit Linked (NOK 78bn) (NOK 11bn) Defined contribution BenCo Risk products (S
Slide 7: Life and Pensions Norway
Life and Pensions Norway Value of in-force1 as at Reserve development 31/12/2008 NOK billion NOK billion 78 83 78 Traditional 75 76 1,3 profit 1% sharing Fee-based 58 67 72 77 78 8,2 guaranteed 7% business 11 Fee-based 7 9 9 6 1,9 Unit Linked 16 % Premiums - NOK million 1.234 1.338 1.4082 Risk 883 9
Slide 8: Life and Pensions Sweden
Life and Pensions Sweden Value of in-force1 as at Reserve development 31/12/2008 NOK billion NOK billion Traditional 74 73 72 68 2,3 profit sharing Fee-based 7,8 7,7 7,4 0,5 guaranteed business 0,9 Fee-based 23 27 23 21 1,9 Unit Linked Premiums - NOK million Risk 491 463 462 4172 0,5 Products 2006 2
Slide 9: The life insurance balance sheet
Illustrative The life insurance balance sheet - key differences Norway and Sweden Norway Sweden Norway Sweden Client buffers Equities Real Estate S/H equity Alpha/hedge Sub debt Marked to market Marked to market Book Guaranteed Marked to value products market Fixed income Amortised cost (L&R) Unit L
Slide 10: Asset management - sizeable and efficient operation
Asset management - sizeable and efficient operation Total assets under management Exploiting scale advantage 336 73 NOK billion 227 229 18 217 59 4 205 30 23 25 16 20 32 28 36 165 29 30 Basis points 16 20 26 28 28 14 10 15 13 12 10 141 142 144 138 144 127 8 6 2004 2005 2006 2007 2008 Q2 - Q2 Q2 Q2 Q
Slide 11: Storebrand Bank
Storebrand Bank - focused banking operation Gross lending by sector as at 30.06.09 5% Banking supports Storebrand's retail market strategy 27% Strong growth in retail customers – high customer satisfaction 67% 2% Cost reductions implemented, additional initiatives planned Sound capital posit
Slide 12: P&C business
P&C business - strong growth and distribution innovation Sales per distribution channel Successful distribution through direct sales channels Direct channel awarded "international best 44% practice"* 47% More than 37 000 customers and 110 000 Call centre Strong brand name and 10% Other high
Slide 13: Storebrand ASA
Storebrand ASA Financial holding company Adjustments in debt financing according to plan Net debt ratio target of zero over the longer term Liquidity and net debt ratio (NOK billion) Maturity structure (NOK billion) 22% 13% Repaid 9% September 1,3 0,6 0,75 0,55 2,2 0,4 1,7 1,4 1,5 -4% 2H 2009
Slide 14: Sound capital position
Sound capital position Storebrand Life SPP 207% 160% 187% 135% 154% 148% 2,3% 9,7% 9,0% 1,7% 1,9% 7,8% Q4 2008 Q1 2009 Q2 2009 Q4 2008 Q1 2009 Q2 2009 ASR as % of insurance reserves* CB as % of insurance reserves* Solvency margin Storebrand Life Group Solvency margin SPP Storebrand Bank Storebrand G
Slide 15: Strong RoE in Life Insurance
Strong RoE in Life Insurance Storebrand Life Insurance – RoE (pre amortisation and tax) RoE 35 % 25 % Average RoE 15 % 17% 5% -5 % -15 % 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 RoE pre amortisation and tax 15
Slide 16: Storebrand Life Group Solvency Capital
Eq uit y 16 14.034 In NOK mill ta n g as ible se ts 6.474 E li gib t ie le 1 r 1 hy ca brid pit al 1.354 E li gib le 2 su bo loa rdin n c at e ap d i ta l 5.020 Solvency Capital Ad dit io re nal se r v s ta t u es 1) Eligible amount limited to 15% of total tier 1 capital 1.500 (5 tory 0% ) Storebran
Slide 17: Capital structure
APPENDIX Capital structure STOREBRAND GROUP Equity: NOK 15.7 bn STOREBRAND ASA Hybrid and subordinated: NOK 7.6 bn Equity/debt Equity: NOK 14.9bn Senior debt (ASA): NOK 3.0 bn* 60/40 Senior debt: NOK 1.7bn* Credit facility (amount drawn): NOK 1.3 bn STOREBRAND LIVSFORSIKRING STOREBRAND B
Slide 18: Risk Management Life and Pensions Norway
Risk Management Life and Pensions Norway Analyst Conference 06 October 2009 Frederic Ottesen Group Finance Director
Slide 19: Agenda
Agenda 1. Main business Lines 2. Asset Quality 3. Approaching solvency 4. Summary 19
Slide 20: Main business lines
Balance sheet Volume per 30.06.09 Premium income 2008 Main business lines - Continuing trend towards non-guaranteed solutions Corporate Retail 1. Defined 2. Paid up policies & With benefit plans individual pension guarantees 78 bn 78 bn NOK 9,7 bn NOK 1,7 bn NOK NOK 3. Defined 4. Risk products & con
Slide 21: Defined benefit plans
1. Defined 2. Fully paid benefit plans policies 3. Defined 4. Risk producs contribution and Unit Defined benefit plans plans Linked - A major contributor to quality of earnings Earnings profile Product characteristics Reserves (Q2 09): 78 bn NOK Result to owner NOK million Buffer capital (Q2 09): 1,
Slide 22: Pricing of interest rate guarantee
Illustrative Pricing of interest rate guarantee Guarantee 0% 1% 2% 3% 4% 0% Price influenced by: 1% Level of guarantee 2% Level of interest rates Buffer capital 3% Level and use of buffer capital 4% Time horizon 5% Portfolio volatility Portfolio risk management 6% 1 # 32 years 53 Custome
Slide 23: Paid-up policies - upside potential
1. Defined 2. Fully paid benefit plans policies 3. Defined 4. Risk producs contribution and Unit Paid-up policies plans Linked - upside potential Earnings profile Product characteristics Reserves (Q2 09): 54 bn NOK Result to owner Buffer capital (Q2 09): 0,6 bn NOK NOK million Value of in-force 08:
Slide 24: Individual pension - stable but significant upside potential
1. Defined 2. Fully paid benefit plans policies 3. Defined 4. Risk producs contribution and Unit plans Linked Individual pension - Stable- but significant upside potential Earnings profile Product characteristics Return to owner NOK million Reserves (Q2 09): 24 bn NOK 400 Buffer capital (Q2 09): 0,6
Slide 25: Defined contribution plans - the coming star
1. Defined 2. Fully paid benefit plans policies 3. Defined 4. Risk producs contribution and Unit plans Linked Defined contribution plans - The coming star Total market - AuM2 Product characteristics NOK billion 25 20 Reserves (Q2 09): 7 bn NOK 15 Value of in-force 08: 1,9 bn NOK 1 VNB 08: 157 millio
Slide 26: Unit linked - focus on sufficient scale activities
1. Defined 2. Fully paid benefit plans policies 3. Defined 4. Risk producs contribution and Unit plans Linked Unit linked - focus on sufficient scale activities Premiums Unit Linked Product characteristics Reserves (Q2 09): 4,1 bn NOK Value of in-force 08: 1,9 bn NOK1 1.200 VNB 08: 157 million NOK1
Slide 27: Risk products - continuing high margins
1. Defined 2. Fully paid benefit plans policies 3. Defined 4. Risk producs contribution and Unit Risk products plans Linked - continuing high margins Product characteristics: Premiums risk products1 +14% Reserves (Q2 09): 2,6 bn NOK 1.382 1.400 Value of in-force 08: 2,1 bn NOK1 1.277 1.177 VNB 08: 1
Slide 28: Company capital
Company capital Company portfolio allocation Portfolio characteristics Bonds at amortised cost Other - AuM (Q2 09): 11,7 bn NOK Real estate 3% - Value adjusted return (YTD Q2 09): 2,2 % 3% 13% - Hybrid and sub. debt: 6,6 bn NOK - Interest costs per quarter (Q2 09): 125 mill NOK 81% Portfolio charact
Slide 29: Agenda
Agenda 1. Main business Lines 2. Asset Quality 3. Approaching solvency 4. Summary 29
Slide 30: Real estate
1. Main business Lines 2. Asset Quality 3. Approaching solvency 4. Summary Real estate Real estate segments Return on portfolio Total: 27.4 bn NOK 2005-Q2 2009 100 % 86,1 8% Direct domestic office 80 % 72,3 2% Shopping malls 68,7 9% Logistics 58,6 60 % 40% International funds Norwegian funds 40 % 20
Slide 31: Private equity portfolio
1. Main business Lines 2. Asset Quality 3. Approaching solvency 4. Summary Private equity portfolio Life cycle segmentation Investment characteristics Venture 16% Vintages: 1997-2010 Average return year since 1997: 13,1% Return 2008: -22,4 % Growth 18% Write down since peak (Q2 09): - 26, 8 %1 66% S
Slide 32: P&L and solvency sensitivities to changes in asset returns
P&L and solvency sensitivities to changes in asset returns Sensitivities based on investment return being equal to the guaranteed rate NOK million Equity -160 79 -20% +20% -1% 0,4% -220 Private Equity 118 -3% -20% +20% 0,6% -310 Interest rates 174 -6% +100 bps -100 bps 0,9% -750 Real estate 286 -13%
Slide 33: Agenda
Agenda 1. Main business Lines 2. Asset Quality 3. Approaching solvency 4. Summary 33
Slide 34: Approaching Solvency II
1. Main business Lines 2. Asset Quality 3. Approaching solvency 4. Summary Approaching Solvency II Mark-to-market of reserves Illiquid market Illustrative example New discounting model introduced in SPP in Q4 2008 to reduce volatility in the financial accounts Band for long-term Partial intern
Slide 35: Agenda
Agenda 1. Main business Lines 2. Asset Quality 3. Approaching solvency 4. Summary 35
Slide 36: Summary – Continuing trend towards non-guaranteed solutions
Summary – Continuing trend towards non-guaranteed solutions Earnings profile Result to owner A major contributor to Defined Defined mill NOK Benefit Benefit plans plans quality of earnings 1.500 1.000 Paid-up Paid-up policies policies Upside potential 500 0 Individual Individual Stable- but signific
Slide 37: Risk Management Life and Pensions Sweden
Risk Management Life and Pensions Sweden Analyst Conference 06 October 2009 Staffan Hansén Chief Investment Officer, SPP
Slide 38: Key take aways
Key take aways SPP's income, opportunities and risks + Administration result + Risk result + Profit sharing – "Long Call Option" - Guaranteed Amount – "Short Put Option" Further opportunities + DCC* recovery given sound capital position Position today: Emerging strongly from the financial cris
Slide 39: SPP is improving its market position through successful risk management
SPP is improving its market position through successful risk management Storebrands long experience with protecting downside Effect of Storebrand risk risk, while keeping upside return potential management implemented in 20 SPP Group 15 10 5 0 -5 -10 -15 2000 2001 2002 2003 2004 2005 2006 2007 2008
Slide 40: Key product areas in Sweden
Key product areas in Sweden AuM VIF1 Premium Profit Average Fee income (SEK) (NOK) growth sharing Guarantee Defined 35,8 bn 2,1 bn -1%4 10%2 Risk & 3,5% benefit Admin Defined 43,8 bn 0,2 bn -5%4 10%3 Risk & 3,7% contribution Admin Risk, admin Unit & asset 27,7 bn 1,9 bn +6% 4 No No linked mgmt fees
Slide 41: Defined contribution - evolution of a policyholder contract
Defined contribution - evolution of a policyholder contract D Individual contracts Client Buffers CB DCC B * R at e an teed G u ar A Guaranteed Amount Premium = Paid Premium x (1+guaranteed rate*) z paid C Provision = Guaranteed Amount / (1 + discount rate(t=0) )z t=0 t=z Provisions (Marked to marke
Slide 42: …but policyholder buffers differ…
…but policyholder buffers differ… Scenario Asset return = + 5% "Steve": Guaranteed return = + 5% "Derek": Discount rate = stable = 4% t=0: t=1: t=0: t=1: 11,4 CB DCC 9,4 10 CB DCC 10 105,0 114,4 100 93,6 110 105,0 90 100 Assets Liabilities Assets Liabilities Assets Liabilities Assets Liabilities Red
Slide 43: …which requires dynamic risk management
…which requires dynamic risk management All policyholders DCC policyholders Mitigated and managed by: AuM ~80bn SEK exposure 10% 5% Equity 10% 5% 40% Alternative 40% Investments Government and government guaranteed bonds 45% Guarantee Groups 45% Credit Bonds Asset Liability Duration CPPI Strategy Ma
Slide 44: Actively managing the risk profile
Guarantee Groups Asset Liability CPPI Strategy Duration Match Risk Appetite Strategy Actively managing the risk profile Financial Result Changes in DCC + Hedge Portfolio + Profit Sharing – tailoring risk for guarantee level Defined contribution portfolio Asset allocation as at 30.06.09 All new sales
Slide 45: Convexity managed through CPPI
Guarantee Groups CPPI Asset Liability Strategy Duration Match Risk Appetite Strategy Convexity managed through CPPI Financial Result Changes in DCC + Hedge Portfolio + Profit Sharing Illustrative Convexity in liabilities CPPI risk management Financial result from portfolio return Portfolio return 4,
Slide 46: Convexity managed through asset liability matching
Guarantee Groups CPPI Strategy Asset Liability Duration Match Risk Appetite Strategy Convexity managed through asset Financial Result liability matching Illustrative Financial accounts liabilities Solvency accounts liabilities Discounting rate Duration Varying Discounting rate Duration target Swap c
Slide 47: Risk appetite strategy - depending on solvency
Guarantee Groups Asset Liability CPPI Strategy Duration Match Risk Appetite Strategy Risk appetite strategy Financial Result Changes in DCC + Hedge Portfolio + Profit Sharing - depending on solvency Sensitivity to financial result ~ -260 MSEK ~- 220 MSEK ~ -150 MSEK ~ -160 MSEK Equity Interest Credi
Slide 48: Profit sharing defined contribution
Guarantee Groups Asset Liability CPPI Strategy Duration Match Risk Appetite Strategy Profit sharing defined contribution Financial Result Changes in DCC + Hedge Portfolio + Profit Sharing Profit sharing DC contingent on: Asset return in each of the guarantee groups > guarantee on annual basis 80 Por
Slide 49: Defined benefit portfolio - addressing remaining risks
Guarantee Groups Asset Liability CPPI Strategy Duration Match Risk Appetite Strategy Defined benefit portfolio Financial Result Changes in DCC + Hedge Portfolio + Profit Sharing -addressing remaining risks Capital markets day 2008 Development 1st half 2009 Improving consolidation Profit sharing Im
Slide 50: Emerging strongly from the financial crisis
Emerging strongly from the financial crisis Strong solvency position: - Solvency margin improved from 135% (Q4 08) to 207% (Q2 09) Improved buffer and thereby risk capital situation creating more upside potential for profit sharing and DCC recovery Successful implementation of improved valuati
Slide 51: Positioned for long-term value creation
Positioned for long-term value creation Analyst Conference 06 October 2009 Odd Arild Grefstad Group CFO
Slide 52: Storebrand is positioned for growth and long-term value creation
Storebrand is positioned for growth and long-term value creation Top line growth Improve profitability Growth in Market Cost and Capital market growth productivity efficiency share Long-term value creation 52
Slide 53: The Nordic market is strong
Top line growth Improve profitability Growth in Market Cost and Capital market growth productivity efficiency share Long-term value creation The Nordic market is strong – steady pensions growth through economic cycles Market growth Growth drivers Annual premiums in total market – NOK billion Regul
Slide 54: Storebrand has a strong position in Norway
Top line growth Improve profitability Growth in Market Cost and Capital market growth productivity efficiency share Long-term value creation Storebrand has a strong position in Norway Accumulated net transfer balance Market share occupational pension Defined Contribution – Premiums written NOK billi
Slide 55: SPP - successful integration
Top line growth Improve profitability Growth in Market Cost and Capital market growth productivity efficiency share Long-term value creation SPP - successful integration New sales Broker Channel Synergies ahead of plan (APE) Increased brand recognition +98% 255 245 112 65 Improved sales proces
Slide 56: Life and Pensions Norway - cost savings according to plan
Top line growth Improve profitability Growth in Market Cost and Capital market growth productivity efficiency share Long-term value creation Life and Pensions Norway - cost savings according to plan Lean programs implemented - 20% improved efficiency Target: positive administration result 200 - Re
Slide 57: Life and Pensions Sweden - cost cutting initiatives implemented
Top line growth Improve profitability Growth in Market Cost and Capital market growth productivity efficiency share Long-term value creation Life and Pensions Sweden - cost cutting initiatives implemented Phase 1 of cost reduction program launched - Improved efficiency in sales Target: adm res > S
Slide 58: Capital efficient growth towards products with lower earnings volatility
Top line growth Improve profitability Growth in Market Cost and Capital market growth productivity efficiency share Long-term value creation Capital efficient growth towards products with lower earnings volatility Low Fee based Unit Linked Risk Capital requirement Products Fee-based guaranteed busin
Slide 59: Summary
Top line growth Improve profitability Growth in Market Cost and Capital market growth productivity efficiency share Long-term value creation Summary Market Market growth/ growth/ Market Strong position in a growing market – robust Market share share top line growth Comprehensive cost program and con
Slide 60: Storebrand's objective is to be the leading and most respected Nordic institution
Storebrand's objective is to be the leading and most respected institution in the Nordic market for long-term savings and insurance 60