Storebrand Asa · OSL:STB
Storebrand Asa — Q2 2019 Earnings Presentation
50 slides from Storebrand Asa's earnings presentation, 2019
Slide 1: Investor Presentation Q2 2019
Investor Presentation Q2 2019 Compelling combination of self-funded savings growth and capital return from maturing guaranteed back-book 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: Key Takeaways
Delivered on financial targets Transformed business from guaranteed to non- guaranteed Key Takeaways Well positioned to capture capital light and profitable savings growth Back book capital consumption has peaked: increased capital return to shareholders 3
Slide 4: Strategy
Strategy 4
Slide 5: 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 6: 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 7: 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% 7 1 Before amortisation after tax. Pay out ratio is adjusted for extraordinary tax benefit as per stock exchange release 15
Slide 8: 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 9: Demographic change has driven pension reforms in Norway
Demographic change has driven pension reforms in Norway with opportunities emerging Workers per pensioner Occupational pension coverage2 1950 Public pension replacement rate1 100 % 55 % II 60 % 40 % Before Now I Pension Now pillar Retail savings Before Now (AuM, bn NOK)3 III 1 000 380 2050 Now Soon
Slide 10: Replacement rates and bank deposits fuel retail savings growth
Moderate replacement rates and a wealthy population with an overweight in bank deposits fuel growth potential in retail market for savings Household disposable income1 Net replacement rate2 Household financial assets Norway3 NOK 1 600 bn Switzerland Netherlands 6% Norway 37 554 Italy 9% Germany Spai
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 from Guaranteed to non-guaranteed Savings
Successful transition from Guaranteed to non-guaranteed Savings 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 Exte
Slide 13: Our strategy: self-funding growth and capital return
Our strategy: A compelling combination of self-funding growth and capital return from maturing guaranteed back-book 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 pos
Slide 14: Growth in Savings and Insurance
1 Growth in Savings and Insurance Unit Linked Asset management +19% +8% 168 179 721 707 128 140 571 577 535 105 487 85 442 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 15: 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 16: Strong growth in Swedish Unit Linked
A Occupational Pension Strong growth in Swedish Unit Linked1 +25% +20% 4 279 ~5% 3 435 2 854 2 570 2 625 H1 2015 H1 2016 H1 2017 H1 2018 H1 2019 16 1 Premium income in SEK and including transfers.
Slide 17: Storebrand to enter Norwegian public sector pension market
A Occupational Pension Storebrand to enter Norwegian public sector pension market Large public sector market New regulation will make it attractive for opening up for competition Storebrand to enter the market again Annual market premium NOK bn1 With effect from 2020, the pension system for 52 pub
Slide 18: Building on our relationship with employers to reach out to individuals
B Building on our relationship with employers Retail to reach out to individuals Our position in the Norwegian ...gives us a customer base of 1.3 ..with above average financials occupational pension market… million individuals.. and savings capacity Household assets +78% 31% Retail 3 200 000 custome
Slide 19: Fast growing Nordic asset manager
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 Captive 278 bn 270 bn 35% 65% AuM Pension savings SE 752 bn Direct retail Ass
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, Solutions NOK bn 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: Storebrand's History of Sustainable Investments
C Asset Mgmt Storebrand's History of Sustainable Investments World UN Sustainable Kyoto Protocol (2005) (2009) (2015) Development Goals 1995 2000 2005 2010 2015 2020 Next generation Storebrand Sustainability Exclusions across Storebrand standard Decision to integrate sustainability funds team establ
Slide 23: Ambition: Build a world class Savings business
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: Capital consumption and return profile: old vs 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 25: Majority of AUM is 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 26: Capital generation from fee earnings and back book 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 Estimated reduced capital consumption from front book1 in back book Capital consumption includes sum of solvency capital requirement
Slide 27: Strong historical growth in solvency ratio
2 Strong historical growth in solvency ratio Solvency ratio without transitional rules development 2014-2019 Q2 (%) 177 6 159 3 147 4 3 124 165 101 2014 2015 2016 2017 2018 2019 Q2 Set aside for Dividend Dividend paid Solvency ratio without transitionals 27
Slide 28: Group capital management policy sets dividend thresholds
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: Back book has reached peak capital and will contribute cash
2 Ambitions Capital – back book has reached peak capital and is expected to contribute with cash together with growing front book FROM CMD 2018 Low case: Base case: High case: Release capital from the business Release capital from the business Release capital from the business 2021 Regulatory chan
Slide 30: Financial Targets
Financial Targets Target Return on equity1 > 10% Dividend pay-out ratio2 > 50% & nominal growth % Solvency II margin Storebrand Group3 > 150% 30
Slide 31: Capital Management
31 Capital Management G2 storebrand
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: IFRS earnings close to cash allow high remittance ratio
IFRS earnings close to cash allow for a high remittance ratio in the Group Storebrand Life Storebrand Storebrand Storebrand Asset Storebrand Bank ∑ Group3 Group Forsikring Helseforsikring Management Earnings after tax1 3098 118 32 129 356 3698 (NOK m) Remittance2 3090 324 39 83 0 3564 (NOK m) Remitt
Slide 34: Strong Group IFRS equity and capital structure
Strong Group IFRS equity and capital structure – reduced financial leverage Group equity (NOK bn) Group capital structure2 40,821 40,234 39,699 35,258 32,873 32,242 32,567 30,832 27,637 27,250 24,741 30,832 32,873 32,242 (78%) (81%) (80%) 20,175 27,637 24,795 24,029 24,741 23,900 (78%) (75%) (75%) (
Slide 35: Term structure debt
Term structure debt Term structure senior debt Storebrand ASA (bn NOK) Development net debt Storebrand ASA (MNOK) 0.8 20% 11% 9% 12% 9% 9% 8% 5% 4% 10% 3% 0.5 0.5 0% 0% -10% -10% -20% 2019 2020 2021 2022 2023 2024 2025 Term structure sub-debt Storebrand Livsforsikring1 (bn NOK) Interest charge cover
Slide 36: The Solvency Calculation
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 37: 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 0 3 Tier 3 ≤ 15% SCR 1% 1% 7 1 27 CRD IV 3 Tier 2 ≤ 50% SCR 29% 17% capital ∑ T2+T3 requirements 33 Tier 1 ≤ 20% T1 5% 3%
Slide 38: Solvency II position Storebrand Group
Solvency II position Storebrand Group Solvency position(%)1 Estimated sensitivities 167 Target SII margin 150% 2 Estimated economic SII-margin Q1 2019 165 2 167 165 Interest rates -50bp 153 18 171 Interest Q2 2019 rates +50 bp 178 2 180 Transitional rules SII standard model Equity -25% 160 7 166 Key
Slide 39: 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 Life 29% Spread 27% Diversification -7 26% 62% Equity 12% Risk absorbing 2% Prop
Slide 40: Savings and Insurance are close to self-financing
Savings and Insurance are close to self-financing going forward - SII-ratio of 187% excluding Savings and Insurance ILLUSTRATIVE PRO FORMA ALLOCATION BASED ON 165% SOLVENCY RATIO PR Q2 20191 Group SII 165% Q2 2019 Savings & Insurance SII1 Guaranteed & Other SII NOK bn NOK bn NOK bn 187% 44 Product c
Slide 41: Reduced SCR from Guaranteed business
Reduced Solvency Capital Requirement from Guaranteed business Expected proportion of SCR 2019-2028 100% 4% 4% 3% 3% 3% 3% 3% 3% 3% 3% Guaranteed products have more financial market risk High buffer need to SCR because of high 36% 34% 41% 38% volatility 46% 43% 51% 48% 56% 53% 2% 2% 2% 2% Insur
Slide 42: Investment management
42 Investment management G2 storebrand
Slide 43: Liability Driven Investments to generate SII Capital
Liability Driven Investments are expected to generate SII Capital and Stabilise IFRS Results Expected excess SII buffer – over mark to market return* guaranteed liabilities +0.6% +5.9% 1.2% 16.0% Long term perspective 10.1% SII 0.6% Risk management of own funds and SCR Expected Required Risk 2019 20
Slide 44: Storebrand Life Insurance asset allocation
Storebrand Life Insurance asset allocation 60% 50% 40% 30% 20% 10% 0% Bonds at Money Real Equities Bonds amortized Other market estate cost 30.06.2018 8% 25% 4% 52% 11% 1% 30.09.2018 8% 25% 3% 53% 11% 0% 31.12.2018 7% 27% 2% 52% 10% 0% 31.03.2019 8% 26% 3% 53% 10% 0% 30.06.2019 8% 26% 3% 52% 10% 0%
Slide 45: SPP asset allocation
SPP asset allocation 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Alternative Bonds Equities investments 30.06.2018 12% 81% 7% 30.09.2018 12% 80% 8% 31.12.2018 13% 81% 6% 31.03.2019 13% 82% 5% 30.06.2019 13% 83% 5% Note: The graph shows the asset allocation for all products with an interest rate guarantee
Slide 46: High quality assets with fixed income as the backbone
High quality assets with fixed income as the backbone NOK 191 bn 8% Equities Real estate 10% 29% 80% Prime MSCI World Location & Quality 20% Local Index (OMX & OBX) SEK 82 bn 5% 12% Amortising 53% Fixed income bonds and loans 83% Average rating Average rating Norway Sweden AA- A Equities Fixed incom
Slide 47: High Quality Fixed Income I
High Quality Fixed Income I - Characteristics of Bonds at Amortised Cost1 Market & book value – no reinvestment (NOKbn) Rating distribution (%) 118 115 Loans and unrated 112 8 8 8 99 BBB 4% 7 85 78 16% AAA 6 73 5 33% 5 61 4 50 110 108 104 42 92 3 34 79 73 2 28 68 2 57 1 25% 47 39 33 27 A 22% Q2 2019
Slide 48: High Quality Fixed Income II
High Quality Fixed Income II - Characteristics of Mark to Market Fixed Income1 Rating distribution (%) Geographical distribution (%) Loans and unrated 23% AAA 32% Europe ex. NO & SWE 31% 42% Norway Sweden BBB 10% Other 1% 3% 22% US 19% A 18% AA Sector distribution (%) 15% 17% Sovereign and gov. Guar
Slide 49: Paid up policies in Norway: Segmentation According to Risk Capacity
Paid up policies in Norway: Segmentation According to Risk Capacity High Segment 4 37 bn. Segment 5 22 bn. Amortizing bonds and loans Government bonds Credit Segment 3 Real Estate Buffer level 27 bn. Equities Segment 2 27 bn. Segment 1 22 bn. Low Low Required book return High 49
Slide 50: 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 Daniel Sundahl Head of Rating, Investor Relations daniel.sundahl@storebrand.no +47 9136 1899 This doc