Storebrand Asa · OSL:STB
Storebrand Asa — Investor Presentation (September 2019)
54 slides from Storebrand Asa's investor presentation, September 2019
Slide 1: Company Presentation
Company Presentation Storebrand Livsforsikring AS: Compelling combination of self-funded savings growth and capital return from maturing guaranteed back-book 1
Slide 2: Important information
Important information: This document speaks only as of its date and 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,
Slide 3: Table of contents
Table of contents 1 Overview and strategy 4 2 Capital and solvency 30 3 Group results Q2 2019 43 3
Slide 4: Storebrand group – overview and strategy
Storebrand group – overview and strategy 4
Slide 5: Key Takeaways
Pension market leader in Norway and strong contender in Sweden Increasing quality earnings and robust solvency Transformed business from guaranteed to non- Key Takeaways guaranteed Well positioned to capture capital light and profitable savings growth Back book capital consumption has peak
Slide 6: 250 years of pioneering in the Nordic financial industry
250 years of pioneering in the Nordic financial industry 1767 1847 1861 1917 1995 2006 Foundation Expanded into Pioneered Pioneered Pioneered First - among the first other P&C Life Insurance Occupational sustainable fully digital Norwegian P&C insurance Pensions investments P&C operation companies d
Slide 7: Storebrand - An Integrated Financial Service Group
Storebrand - An Integrated Financial Service Group Insurance Health, P&C and group life Asset Management insurance NOK 752bn in AuM of NOK 4.5bn in which 33% external assets portfolio premiums 100% of investments Pension & Savings subject to sustainability 40k corporate customers screening
Slide 8: Delivered on Financial Targets
Delivered on Financial Targets Target Actual 2018 Return on equity1 > 10% 8.2%/13.7% Dividend pay-out ratio1 > 50% 68% % Solvency II margin Storebrand Group2 > 150% 173% 8 1 Finance Norway. Gross premiums defined contribution with and without investment choice. Q4 2018 2 Insurance Sweden. Segm
Slide 9: Leading position in Norway and strong contender in Sweden
Leading position in Norway and strong contender in Sweden Market share occupational pensions (Defined Contribution) Norway 1 Sweden 2 31% 20% 28% 17% 15% 14% 14% 7% 9% 9% Storebrand DNB Nordea Gjensidige Sparebank 1 LF SEB Skandia SPP Movestic Clear value proposition World leader in corporate sustai
Slide 10: Demographic change has driven pension reforms in Norway with opportunities emerging
Demographic change has driven pension reforms in Norway with opportunities emerging Workers per pensioner Occupational pension coverage2 1950 Public pension 100 % replacement rate1 55 % II 60 % 40 % Before Now I Pension Now pillar Retail savings Before Now III (AuM, bn NOK)3 1 000 380 2050 Now Soon
Slide 11: Continued shift from Guaranteed to Non-guaranteed pension
Continued shift from Guaranteed to Non-guaranteed pension Historic premium income1 Current share of reserves2 Expected flow of reserves3 Guaranteed premiums Non-guaranteed premiums Guaranteed Non-guaranteed Claims NOKm Guaranteed Non-guaranteed NOKbn 16,000 5% 3 3 2 2 2 14,000 4% 12,000 Share of res
Slide 12: Successful transition – with more to come
Successful transition – with more to come Premiums Storebrand1 Profit Storebrand2 Shift in total Storebrand AUM3 24 584 25 140 3 158 707 21% 36% 33% 49% 15% 1 960 442 5% 18% 24% 9% 15% 64% 37% NOK bn NOK m NOK m 64% 59% 40% 36% 21% 25% 15% 14% 2012 2018 2012 2018 2012 2018 External Guaranteed Guaran
Slide 13: Operating earnings are stable and increasing
Operating earnings are stable and increasing Group result1 Comments 1,952 3,158 473 2,940 86 2,914 117 493 Operating earnings driven by AuM x 919 625 Margin and insurance combined ratio 854 1,762 Insurance profits diversify earnings m NOK 2,416 2,579 2,032 2,066 1,943 Increased profit sharing
Slide 14: A holistic sustainable strategy…
A holistic sustainable strategy… Tangible and intangible input factors material for Storebrand - creating value for shareholders and society Financial capital and our Customers and community Our people and systems investment universe relations Financial targets Customer solutions People first.. Sust
Slide 15: …creates the backdrop for our financial strategy
…creates the backdrop for our financial strategy 1 A B C D Asset manager with Build a world class Uniquely positioned in Leading position strong competitive Savings business growing retail savings Bolt-on M&A Occupational Pension position and clear - supported by market growth opportunities Insuranc
Slide 16: Growth in Savings and Insurance
1 Growth in Savings and Insurance Unit Linked Asset management +19% +8% 168 179 721 707 128 140 571 577 535 105 442 487 85 64 2012 2013 2014 2015 2016 2017 2018 2012 2013 2014 2015 2016 2017 2018 UL reserves (NOKbn) AuM (NOKbn) Insurance Retail bank +5% +12% 46.5 42.1 4 327 4 502 4 462 4 455 35.4 3
Slide 17: Net premiums and market return drive AuM growth
A Occupational Pension Net premiums and market return drive AuM growth AuM development Unit Linked NOK bn Drivers of expected net premiums 12-15% 240 220 Majority of premiums generated by active policies 200 180 Growth driven by: 160 19% ─ Increased salaries and savings rates 140 ─ Population gr
Slide 18: Norwegian pension market becoming a retail market
Norwegian pension market becoming a retail market B Retail – Storebrand is well positioned to capture growth Retail savings market expanding Market share, AuM Double digit growth expected (AuM, NOK bn) Individual DNB 26% Life and pension ~1 000 Savings Storebrand 22% 38 % Nordea 15% ODIN 12% 380 [KA
Slide 19: Fast growing Nordic asset manager with a blend of captive pension assets and external clients
C Fast growing Nordic asset manager with a blend of captive Asset Mgmt pension assets and external clients Main channels for AuM (NOK bn)1 Pension savings NO Institutional mandates External share and distributors2 External 278 bn 270 bn 35% Captive 65% AuM Pension savings SE 752 bn Direct retail sav
Slide 20: Increased external share in Asset Management
C Asset Mgmt Increased external share in Asset Management AuM mix Revenue mix1 16% 24% 34% 33% 36% 12% 61% 9% 66% 22% 23% 25% 7% 24% 6% 5% 3% 62% 19% 14% 47% 37% 37% 37% 2% 3% 18% 17% 2009 2015 2017 2018 2015 2017 2018 External Other Unit Linked Guaranteed 20 1 Revenue & AuM include Skagen from 01.0
Slide 21: Sustainability at the core of our business
Sustainability at the core of our business C Asset Mgmt NOK 752 bn AuM aligned to contribute to the UN Sustainability Goals AUM Sustainability Enhanced, NOK bn Solutions 68.1 59.8 NOK 752 bn Active 10.3 Exclusions ownership 3.0 2015 2016 2017 2018 All assets under management are subject to sustainab
Slide 22: Selective bolt-on M&A: Strengthening our asset management offering
D Bolt-on M&A Selective bolt-on M&A: Strengthening our asset management offering and a further shift in the group's balance sheet towards non-guaranteed savings 1 Purchase of Cubera PE Sale of Nordben 2 Build a world class Savings Manage business balance sheet - supported by Leading player within
Slide 23: Ambition: Build a world class Savings business supported by Insurance
1 Ambition: Build a world class Savings business supported by Insurance Savings Insurance A B C Asset manager with strong Leading position Uniquely positioned in competitive position and clear SupportedInsurance by Insurance Occupational Pension growing retail savings market growth opportunities #1
Slide 24: Cost reductions from sourcing and automation
2 Cost reductions from sourcing and automation with a strong shift towards customer-oriented capabilities Reduced FTE Competency headcount shift1 -27% 48% Customer- 66% oriented FTEs Back-office FTEs 52% 34% 2012 2018 2012 2018 1 Within segment 'Other occupational pensions'. 24 2 RoE Retail banking
Slide 25: Significant difference in capital consumption and return profile between old and new business
2 Significant difference in capital consumption and return profile between old and new business ILLUSTRATIVE FROM CMD 2018 Savings Insurance Guaranteed3 Group IFRS earnings1 (NOKm) 1 552 638 982 3 172 Allocated Equity2 (NOKbn) 5.5 2.0 23.6 31.1 Pro forma RoE adj(%)4 31% 36% 5% 11% The equity in the
Slide 26: Majority of AUM in Storebrand is already capital efficient and growing
2 Majority of AUM in Storebrand is already capital efficient and growing while capital consumptive guaranteed AUM is trailing off Forecast assets under management (NOKbn) Implications ILLUSTRATION 2018: 2028e: 66% of AuM ~85% of AuM 1 200 non guaranteed non guaranteed Guaranteed portfolio has reac
Slide 27: Capital generation from increasing fee based earnings and capital release
2 Capital generation from increasing fee based earnings in front book and capital release from the back book From CMD Estimated solvency generation (annual) short term from front Estimated reduced capital consumption book1 in back book Capital consumption includes sum of solvency capital requirement
Slide 28: Group capital management policy sets thresholds for distribution of cash dividends
2 Group capital management policy sets thresholds for distribution of cash dividends Solvency II Incl. transitional rules Consider increased pay out Consider share buybacks 180% Dividend of more than 50% of Group result after tax 167% Ambition is to pay ordinary dividends per share of at lea
Slide 29: Financial Targets
2 Financial Targets Target Return on equity1 > 10% Dividend pay-out ratio2 > 50% & nominal growth % Solvency II margin Storebrand Group3 > 150% 29
Slide 30: Capital and solvency
30 Capital and solvency G2 storebrand
Slide 31: Key Takeaways
High quality capital base Capital requirements reflect well diversified set of risks Key Takeaways Guaranteed products will release capital over time Non-guaranteed business generates capital in excess of capital requirement 31
Slide 32: Storebrand Group Structure
Storebrand Group Structure Diversified cash flow to holding company Storebrand ASA Legal structure (simplified) Storebrand ASA Storebrand Livsforsikring AS Storebrand Asset Storebrand Forsikring Storebrand Bank ASA Management AS AS Reporting structure Storebrand Holding Benco SKAGEN AS AB Storebrand
Slide 33: Strong Group IFRS equity and capital structure – reduced financial leverage
Strong Group IFRS equity and capital structure – reduced financial leverage Group equity (NOK bn) Group capital structure2 40,821 40,234 39,699 32,873 32,242 30,832 35,258 32,567 27,637 24,741 27,250 30,832 32,873 32,242 20,175 24,795 24,029 (78%) (81%) (80%) 23,900 (75%) (75%) 27,637 (78%) 24,741 (
Slide 34: Strong financial flexibility – supported by low financial leverage
Strong financial flexibility – supported by low financial leverage Development net debt Storebrand ASA (MNOK) Interest charge coverage Storebrand group EBITDA/Interest costs Subordinated Debt (%) of Solvency II Own Funds Subordinated debt (%) of IFRS Capital 20% 13% 12% 11% 9% 9% 9% 8% 20% 10% 11.0
Slide 35: Term structure debt
Term structure debt Term structure sub-debt Storebrand Livsforsikring1 (bn NOK) Term structure senior debt Storebrand ASA (bn NOK) 3.1 Perpetual Non- perpetual 1.1 1.0 0.9 0.8 0.8 0.7 0.5 0.5 2019 2020 2021 2022 2023 2024 2025 2019 2020 2021 2022 2023 2024 2025 1 EUR 300 Million (EURNOK 9.7). SEK 75
Slide 36: A- rating with stable outlook from S&P Global
A- rating with stable outlook from S&P Global …reflecting business and capital improvement during the past years Rating and underlying rationale Key Comments Insurance Financial Strength Rating (IFSR) • S&P Global has assigned an "A-" rating with a stable outlook reflecting: • Improved and sustainab
Slide 37: The Solvency Calculation – moving to a market consistent balance sheet
The Solvency Calculation – moving to a market consistent balance sheet and risk sensitive capital requirements 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 she
Slide 38: Solvency II position Storebrand Group
Solvency II position Storebrand Group Solvency position(%)1 Estimated sensitivities 173 167 Target SII margin 150% 2 2 Estimated economic SII-margin Q1 2019 165 2 167 171 165 Interest rates -50bp 153 18 171 Interest Q1 2019 Q2 2019 rates +50 bp 178 2 180 Transitional rules SII standard model Equity
Slide 39: SII position Storebrand Livsforsikring AS
SII position Storebrand Livsforsikring AS Solvency position(%)1 Main differences between Storebrand Group solvency and Storebrand Livsforsikring AS solo calculation 215 212 2 2 SPP and Benco are treated as strategic participations Under SII there is a 22% capital charge on strategic participatio
Slide 40: High quality capital base under Solvency II
High quality capital base under Solvency II SCR and own funds Q2 2019 (NOK bn) Own funds in % of SCR (excluding CRD IV subsidiaries) OF % OF % of Regulatory limit of SCR total 44.37 0.33 2.86 Tier 3 ≤ 15% SCR 1% 1% 6.89 1.10 26.6 CRD IV 2.6 Tier 2 ≤ 50% SCR 29% 17% capital ∑ T2+T3 requirements 33.19
Slide 41: Solvency Capital Requirements (SCR)
Solvency Capital Requirements (SCR) SCR calculation Q2 2019 SCR dominated by financial market risk… NOKbn Operational P&C & Health 4% Currency 3% Interest Rate Down 14% Concentration 21% 0% SCR before diversification 36.3 Life 29% Spread 27% Diversification -7.0 26% 62% Equity 12% 2% Financial marke
Slide 42: Solvency II Movement from Q1 2019 to Q2 2019
Solvency II Movement from Q1 2019 to Q2 2019 +171% -1% -3% +2% +167% -2% +165% -1% +1% Q1 2019 Model and Market changes Business mix and M&A Operating Q2 2019 without Transitionals Q2 2019 assumptions asset allocation earnings, ex transitionals changes dividends 42
Slide 43: Group results Q2 2019
Group results Q2 2019 storebrand
Slide 44: Key figures Group
Key figures Group Result development1 Earnings per share2 Financial items and risk result life Performance related result MNOK Special items Operating profit 4.18 812 853 566 733 578 167 168 40 11 202 105 1.46 1.33 1.26 645 645 657 549 568 1.21 -18 -103 -44 -50 Q2 2018 Q3 2018 Q4 2018 Q1 2019 Q2 201
Slide 45: Storebrand Group
Storebrand Group Group Profit1 Q2 01.01-30.06 Full year NOK million 2019 2018 2019 2018 2018 Fee and administration income 1 235 1 245 2 450 2 465 5 011 Insurance result 269 358 514 693 1 291 Operational cost -1 030 -958 -1 960 -1 878 -3 786 Operating profit 474 645 1 005 1 280 2 516 Financial items
Slide 46: Storebrand Group
Storebrand Group Group Profit Q2 01.01-30.06 Full year NOK million 2019 2018 2019 2018 2018 Fee and administration income 1 235 1 245 2 450 2 465 5 011 Insurance result 269 358 514 693 1 291 Operational cost -1 030 -958 -1 960 -1 878 -3 786 Operating profit 474 645 1 005 1 280 2 516 Financial items
Slide 47: Savings (non-guaranteed)
Savings (non-guaranteed) Savings Profit Q2 01.01-30.06 Full year NOK million 2019 2018 2019 2018 2018 Fee and administration income 911 909 1 807 1 798 3 709 Operational cost -672 -602 -1 287 -1 188 -2 405 Operating profit 239 307 521 610 1 303 Financial items and risk result life -16 -2 -7 -12 -46
Slide 48: Savings (non-guaranteed)
Savings (non-guaranteed) Savings Reserves and premiums Unit Linked Comments 4.2 4.2 3.9 4.1 4.1 7% premium growth in UL1 198 191 11% growth in UL reserves2 187 178 179 6% growth in assets under management2 BNOK Higher net interest margin in bank Q2 2018 Q3 2018 Q4 2018 Q1 2019 Q2 2019 Assets
Slide 49: Insurance
Insurance Insurance Profit Q2 01.01-30.06 Full year NOK million 2019 2018 2019 2018 2018 Insurance premiums f.o.a. 965 946 1 913 1 901 3 854 Claims f.o.a. -696 -588 -1 399 -1 208 -2 562 Operational cost -159 -147 -309 -303 -614 Operating profit 111 211 205 390 677 Financial result 28 19 36 47 71 Pro
Slide 50: Insurance
Insurance Insurance Combined ratio Comments Combined ratio and results Claims ratio Cost ratio Combined ratio 89% 90% 89% Targeted combined ratio 90-92% 78% 81% Good cost control 72% 74% 72% Weak result in Group life, price increases under 67% 62% implementation 16% 14% 17% 16% 16% Q2 2018 Q3
Slide 51: Guaranteed pension
Guaranteed pension Guaranteed Profit Q2 01.01-30.06 Full year NOK million 2019 2018 2019 2018 2018 Fee and administration income 364 370 724 738 1 440 Operational cost -209 -215 -395 -415 -816 Operating profit 155 155 329 323 624 Risk result life & pensions 52 -140 113 42 191 Net profit sharing and
Slide 52: Guaranteed pension - reserves in long term decline and robust buffer situation
Guaranteed pension - reserves in long term decline and robust buffer situation Guaranteed Reserves guaranteed products Comments 258 258 261 261 262 34 34 33 32 33 As companies convert to DC schemes, the migration from DB to paid up policies continues to 133 137 reduce fee income in Guaranteed pens
Slide 53: Other
Other1 Other Profit Q2 01.01-30.06 Full year NOK million 2019 2018 2019 2018 2018 Fee and administration income 14 25 28 47 102 Operational cost -45 -54 -78 -91 -190 Operating profit -31 -29 -50 -44 -89 Financial items and risk result life 36 70 146 150 128 Profit before amortisation 5 41 96 106 40
Slide 54: Investor Relations contacts
Investor Relations contacts Lars Aa. Løddesøl Group CFO lars.loddesol@storebrand.no +47 9348 0151 Kjetil R. Krøkje Group Head of Finance, Strategy and M&A kjetil.r.krokje@storebrand.no +47 9341 2155 Nikola Heitmann Head of Capital Management nikola.heitmann@storebrand.no +47 4169 7236 This document