Storebrand Asa · OSL:STB
Storebrand Asa — Investor Day (November 2008)
17 slides from Storebrand Asa's investor day presentation, Nov 12, 2008
Slide 1: Risk management through and post crisis
Risk management through and post crisis Capital Markets Day 12 November 2008 Frederic Ottesen Group Finance Director
Slide 2: Topics
Topics Structure of financial risks Actively managing the risk profile in 2008 Managing remaining risks in Storebrand and SPP Impact of risk management actions - SPP 2
Slide 3: The life insurance balance sheet – key levers for performance & risk
The life insurance balance sheet – key levers for performance & risk 1) ALM mismatching provides upside, but also some risk 2) α out-performance Insurance Bonds reserves and cash MtM in Sweden Combination in Norway Equity Real estate Client buffers Capital PE/ hedge Subordinated loan Assets Liab
Slide 4: Framework for balancing the objectives in risk management
Framework for balancing the objectives in risk management 1. Policyholder 3. Earnings expectations volatility n on sh Con c t o ositi or st pa p t-t ra Im itive er int m s t A m pe der a n cc he for o l d ou dg c ho d ea nt ing licy s an s rn ngi Po turn ntee ing , P re ara s q &L gu ua lity Risk Qu
Slide 5: Result sensitivity - Risk management limits downside
Result sensitivity - Risk management limits downside Illustration "2009-levels" 2,500 "2010-levels" 2008 2009 1,500 NOK MM 500 0% 1% 2% 3% 4% 5% 6% 7% 8% 9% 10% -500 6.2% 6.5% -1,500 expected expected return return -2,500 Note: Market return is based on 2009 expected asset allocation for each underl
Slide 6: Structure of financial risks – Swedish profit & risk profile
Structure of financial risks – Swedish profit & risk profile Profit sharing contingent Risks associated with: on: -Segments without buffer -Asset return in each of the capital guarantee groups > -Duration gaps guarantee on annual basis - To be expected for P250 and Opportunities associated P300 f
Slide 7: Actively managing the risk profile – Norwegian equity risk
Actively managing the risk profile – Norwegian equity risk Example: One CPPI risk management profile - Norway 2,000 Risk Adjusted share of equity Cumulative Buy/Sell 30% 0 -2,000 20% Reduction is a -4,000 combination of 10% selling futures short and selling off equity -6,000 0% -8,000 Q1 Q2 Q3 Q4 20
Slide 8: Actively managing the risk profile – Swedish equity and interest rate
Actively managing the risk profile – Swedish equity and interest rate Example: Sweden Defined Contribution portfolio Guarantee Groups Introduced Equity exposure actively managed CPPI Actively reducing basis risk within portfolio New investment Duration significantly Introduced revised policy introdu
Slide 9: Actively managing the risk profile – guarantee groups implemented
Actively managing the risk profile – guarantee groups implemented Pre GG After introduction of GG – Allocation per September 30th All new sales October 1st P250 P300 P520 Equities 5% 10 % 5% 3% 4% 18 % 24 % 32 % Bonds Alternative 58 % 71 % 77 % investments 93 % Discount 4.6% 4.5% 4.5% 4.5% rate: Exp
Slide 10: Actively managing the risk profile – further reducing equity allocation
Actively managing the risk profile – further reducing equity allocation After introduction of GG – Allocation per All new sales November 3rd P250 P300 P520 10% 5% 9% 2% 2% Equities 15% Bonds Alternative 75% 86% 96% investments Discount 4.0% 4.0% 4.0% rate: Expected 5.1% 4.6% 4.2% return: 10 Expected
Slide 11: Actively managing the risk profile – aligning risks with required returns
Actively managing the risk profile – aligning risks with required returns Guarantee Groups’ portfolio asset returns 10% 8% 6% 4% 2% 0% -2% -4% -6% 2008-09-30 2008-10-14 2008-10-28 P250 P300 P520 11
Slide 12: Managing remaining risks – Interest rate convexity in Sweden
Managing remaining risks – Interest rate convexity in Sweden Illustration of interest rate convexity for defined benefit business “Double guarantee” reduces earnings if interest rates suddenly rise or fall Earnings result Technical provisions ‘Policyholder fund’ value appreciate relative to asset re
Slide 13: Managing remaining risks – Interest rate convexity in Sweden
Managing remaining risks – Interest rate convexity in Sweden Illustration of actions to reduce interest rate convexity Financial instruments are used to reduce some of the Earnings result asset convexity in the results As interest rates gradually shift from their current position the portfolio is dy
Slide 14: Impact of risk management actions – SPP relative to Swedish competitors
Impact of risk management actions – SPP relative to Swedish competitors Nordea Trygg 0.7 SEB Nya -1.3 Storebrand SE -2.9 SPP DB -4.8 SHB Liv -5.6 SPP DC Asset returns -5.8 AMF -7.1 Alecta -7.4 Nordea Tillväxt -9.3 Skandia Liv -9.4 Swedbank -9.4 SEB Gamla -10.2 LF Liv -11.6 Alecta Optimal -13.5 LF Ny
Slide 15: Key takeaways – risk management through and post crisis
Key takeaways – risk management through and post crisis Storebrand has a strong risk management framework to manage critical trade-offs Focus in risk management is now on capital preservation Significant steps in risk management taken during 2008 (CPPI, guarantee groups, reduced duration gaps)
Slide 16: Travelling the Road to Nordic Leadership
Travelling the Road to Nordic Leadership 3 6 5 Growth and value creation in Risk Storebrand Investments Capturing management (Hans) value in the through and “Road to Nordic Leadership” Swedish post crisis market (Frederic) Manufacturing New business (Sarah) CAPITAL EFFICIENT RISK MITIGATION GROWTH I
Slide 17: 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