Storebrand Asa · OSL:STB
Storebrand Asa — Q2 2020 Earnings Presentation
63 slides from Storebrand Asa's earnings presentation, 2020
Slide 1: Investor Presentation Q2 2020
Investor Presentation Q2 2020 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
▪ Resilient through Covid-19 period ▪ Well positioned for continued growth in Swedish and Norwegian occupational pensions Key Takeaways ▪ Digitisation and partnerships provide scalable growth in Norwegian retail market ▪ Leading Nordic asset manager with a modern platform enabling continued growth 3
Slide 4: Storebrand | Response to COVID19
Storebrand | Response to COVID19 1. Keep employees safe 2. Respond and allocate 7. Open to new oppurtunites resources to customers' partnerships and M&A needs Storebrand 6. Keep growing the core We're in this together 3. Operations are with the rest of society running close to normal 5. High degree
Slide 5: Strategy
Strategy 5
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 880bn in AuM of ▪ NOK 5.2bn in which 41% external clients portfolio premiums ▪ 100% of investments Pension & Savings subject to sustainability ▪ 40k corporate customers screenin
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 30% 20% 27% 16% 15% 14% 14% 11% 7% 9% Storebrand DNB Nordea Sparebank 1 Gjensidige LF SEB Skandia SPP Movestic Clear value proposition World leader in corporate susta
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: Moderate replacement rates and wealthy population 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 18 000 5% 3 2 2 2 16 000 14 000 4% Share of reser
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 26 278 3 037 831 24 584 20% 41% 40% 49% 15% 1 960 442 2% 14% 18% 64% 32% 15% 9% NOK bn NOK m NOK m 65% 45% 59% 36% 21% 26% 15% 14% 2012 2019 2012 2019 2012 2019 Exte
Slide 13: Our strategy: self-funding growth and capital return from back-book
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% 220 +9% 831 179 721 707 168 140 535 571 577 128 442 487 105 85 64 2012 2013 2014 2015 2016 2017 2018 2019 2012 2013 2014 2015 2016 2017 2018 2019 UL reserves (NOKbn) AuM (NOKbn) Insurance Retail bank +5% +11% 48.2 46.5 42.1 4 327 4
Slide 15: Double digit growth continues in Unit Linked
A Occupational Pension Double digit growth continues in Unit Linked AuM development Unit Linked NOK bn 12-15% Drivers of expected net premiums 280 260 ▪ Majority of premiums generated by 240 active policies 220 ▪ Growth driven by: 200 180 ─ Increased salaries and savings rates 160 19% ─ Population g
Slide 16: Stable and solid growth in Norwegian DC products
A Occupational Pension Stable and solid growth in Norwegian DC products Annual DC Premiums (NOK m) DC & PCC AuM (in bill.) Comments Defined Contribution Pension Capital Certificates • Stable growth business. +8% 10 345 +16% 87 • Reoccurring premiums keeps AUM stable despite financial 9 227 76 market
Slide 17: SPP is on a strong growth track…
A Occupational Pension SPP is on a strong growth track… Premium income (SEK m) Non-unionised New sales, APE (SEK m) +24% 11.558 +39% 1.724 9.682 7.504 1.244 6.812 6.822 892 889 773 2015 2016 2017 2018 2019 2015 2016 2017 2018 2019 Premium income (SEK m) Unionised Net flow (SEK m) 2.567 +42% 2.322 1.
Slide 18: …while improving its financial record
A Occupational Pension …while improving its financial record Accumulated SPP dividends from profit Assets under Management (SEK bn) Growing operating profit (SEK m) growth and capital release 2015-2019 (SEK m) Unit linked Low guarantees High guarantees +16% 520 +3.662 +3% 195 491 +18% 5.535 171 168
Slide 19: Norwegian public sector pension market offers great new potential
A Occupational Pension Norwegian public sector pension market offers great new potential Estimated current AuM: 455 NOK bn Value proposal 5 50 • Value adding sustainable investments Virke (Trade Association) • Lower expenses, but still the same pensions for the 100 Other public corporations employee
Slide 20: Building on our relationship with corporations to reach their employees
B Building on our relationship with corporations Retail to reach out to their employees 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 30% +78% Market Retail 3 2
Slide 21: Fast growing Nordic asset manager with a strong competitive position
C Asset Mgmt Fast growing Nordic asset manager with a strong competitive position CAGR AuM since millenium On sustainable #1 9% investments with CAGR +9% 831 experience and a 567 strong track record of 407 205 innovations 150 2000 2005 2010 2015 2019 Nordic Asset Manager with a modern multi boutique
Slide 22: Blend of captive Storebrand pension assets and external mandates
C Blend of captive Storebrand pension assets and mandates Asset Mgmt from external clients Main channels for AuM (NOK)1 Pension savings NO Institutional mandates External share and distributors External Captive 307 bn 317 bn 41% 59% AuM2 Pension savings SE 880 bn Direct retail Asset types savings NO
Slide 23: Increased external share in Asset Management
C Asset Mgmt Increased external share in Asset Management AuM mix Revenue mix1 16% 24% 36% 40% 12% 9% 22% 72% 7% 24% 26% 3% 62% 2% 47% 11% 37% 32% 1% 14% 2009 2015 2019 2015 2019 External Other Unit Linked Guaranteed 23 1 Revenue & AuM include Skagen from 01.01.2017 proforma
Slide 24: Sustainability at the core of our business
Sustainability at the core of our business C Asset Mgmt NOK 880 bn AuM aligned to contribute to the UN Sustainability Goals Solutions AUM Sustainability Enhanced, NOK bn 277.3 880 bn Active Exclusions 59.8 68.1 ownership 3.0 10.3 2015 2016 2017 2018 2019 All assets under management are subject to su
Slide 25: Three methods to invest for better returns and a better world
Three methods to invest for better returns and a better world We invest more in companies that are positioned to solve problems related to the UN Development goals Climate Sustainable Cities Companies that offer solutions to climate change issues Companies that are central to building sustainable ci
Slide 26: 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 27: 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 28: Significant difference in capital consumption 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 29: Majority of AUM is capital efficient while guaranteed AUM trails off
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 2019: 2029e: 71% of AuM ~85% of AuM 1 400 non guaranteed non guaranteed ▪ Guaranteed portfolio has reac
Slide 30: Capital generation from fee based 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 term1 Estimated reduced capital consumption back book Capital consumption includes sum of solvency capital requirement and sum of VIF for
Slide 31: Group capital management policy sets thresholds for dividends
2 Group capital management policy sets thresholds for distribution of cash dividends Solvency II Incl. transitional rules ▪ Share buybacks to be considered on a semi-annual basis 180% ▪ Dividend of more than 50% of Group result after tax 163% ▪ Ambition is to pay ordinary dividends per share of at l
Slide 32: Financial Targets are maintained
Financial Targets are maintained Target Actual 2019 Return on equity1 > 10% 8.0% Cancelled Dividend pay-out ratio2 > 50% due to Covid-19 % Solvency II margin Storebrand Group3 > 150% 176% 1 Before amortisation after tax. 32 2 After tax 3 Including transitional rules.
Slide 33: Capital Management
33 Capital Management G9 storebrand
Slide 34: 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 35: Strong Group IFRS equity and capital structure
Strong Group IFRS equity and capital structure – reduced financial leverage Group equity (NOK bn) Group capital structure2 42,323 41,980 40,821 35,258 32,873 33,398 32,873 32,567 27,637 27,250 24,741 33,398 32,873 32,873 (79%) (78%) 27,637 (81%) 20,175 24,795 25,748 24,432 24,741 (77%) (74%) (78%) (
Slide 36: Strong liquidity and low leverage
Strong liquidity and low leverage Net liquidity ratio Storebrand ASA (holding) 12% 10% ▪ Proceeds from subsidiaries have been used to pay dividends, reduce debt in the holding company -3% 0% and increase the liquidity buffer -5% -4% -8% -9% -9% -9% -13% -11% -12% ▪ Holding company net liquidity rati
Slide 37: Group Liquidity
Group Liquidity NOK bn 5.6 2.21 3.4 0.8 2.6 Liquidity Undrawn RCF Liquidity inc RCF Debt Financed Equity financed Total liquidty inc RCF 1 Revolving Credit Facility of EUR 300 Million, exchange rate 10.88 applied 37
Slide 38: Term structure debt
Term structure debt Term structure sub-debt Storebrand Livsforsikring1 (bn NOK) Term structure senior debt Storebrand ASA (bn NOK) 3.8 Perpetual Non- perpetual 2.1 1.1 1.4 1.0 0.5 0.8 0.3 1.0 2020 2021 2022 2023 2024 2025 2020 2021 2022 2023 2024 2025 1 EUR 300 Million. SEK 750 Million 1,0 BN, 1,0 B
Slide 39: 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 40: High quality capital base under Solvency II
High quality capital base under Solvency II SCR and own funds (NOK bn) Own funds in % of SCR (excluding CRD IV subsidiaries) OF % OF % of Regulatory limit of SCR total 51 0 3 Tier 3 ≤ 15% SCR 1% 1% 8 1 31 CRD IV 3 Tier 2 ≤ 50% SCR 26% 16% capital ∑ T2+T3 requirements 38 Tier 1 ≤ 20% T1 4% 2% Restric
Slide 41: Solvency Capital Requirements (SCR)
Solvency Capital Requirements (SCR) SCR calculation Q2 2020 SCR dominated by financial market risk… NOKbn Operational P&C & Health 4% Currency 3% Interest Rate Down Concentration 14% 20% 0% SCR before diversification 43 Life 26% 29% Spread Diversification -8 23% Equity 64% 3% 14% Risk absorbing Coun
Slide 42: Reduced Solvency Capital Requirement from Guaranteed business
Reduced Solvency Capital Requirement from Guaranteed business Expected proportion of SCR 2019-2028 2% 100% 2% 2% 2% 2% 2% 2% 2% 2% 2% ▪ Guaranteed products have more financial market risk ▪ High buffer need to SCR because of high 41% 38% volatility 46% 43% 51% 49% 54% 61% 58% 64% 3% 3% ▪ Insurance p
Slide 43: Investment management
43 Investment management G9 storebrand
Slide 44: Liability Driven Investments expected 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 +0.8% +7.2% 1.6% 11.5% Long term perspective SII 0.8% 4.3% Risk management of own funds and SCR Expected Required Risk Q2 2020
Slide 45: High quality assets with fixed income as the backbone
High quality assets with fixed income as the backbone1 NOK 186 bn 6% Equities Real estate 11% 18% 85% Prime MSCI World Location & Quality 15% SEK 86 bn Local Index (OMX & OBX) 11% 12% 65% Amortising Fixed income bonds and loans 78% Average rating Average rating Norway Sweden AA- A Equities Fixed inc
Slide 46: High Quality Fixed Income I - Bonds at Amortised Cost
High Quality Fixed Income I - Characteristics of Bonds at Amortised Cost1 Market & book value – no reinvestment (NOKbn) Rating distribution (%) 129 129 123 9 9 112 8 8 88 20% 22% AAA 84 7 7 71 AA 61 0% 6 52 121 120 114 5 A 104 4 44 3 35 BBB 81 77 26 17% 65 3 56 47 2 20% Unrated & BB 40 32 24 Mortage
Slide 47: High Quality Fixed Income II - Mark to Market Fixed Income
High Quality Fixed Income II - Characteristics of Mark to Market Fixed Income1 Rating distribution (%) Geographical distribution2 (%) 19% 21% 19% AAA Europe ex. NO & SWE 36% AA Norway 4% 7% 2% A Sweden BBB Other 14% Unrated & BB US 13% Mortages, Loans & ABS 54% 11% Sector distribution (%) 19% Sovere
Slide 48: Buffer level
Paid up policies in Norway: Segmentation According to Risk Capacity High Segment 4 49 bn. Segment 5 19 bn. Amortizing bonds and loans Government bonds Credit Segment 3 Real Estate Buffer level 27 bn. Equities Segment 2 26 bn. Segment 1 21 bn. Low Low Required book return High 48
Slide 49: Q2 2020 Results
49 Q2 2020 Results G9 storebrand
Slide 50: Key figures
Key figures Group Result development1 Earnings per share2 Financial items and risk result life Operating profit MNOK Special items 1.68 Performance related result 1,026 700 808 1.21 1.22 1.23 579 319 105 114 228 251 0.82 568 635 456 599 265 -44 -50 -49 -19 -588 -11 -334 Q2 2019 Q3 2019 Q4 2019 Q1 20
Slide 51: Lower interest rates affect the Solvency ratio
Lower interest rates affect the Solvency ratio 2.47 0.40 1.79 0.71 1.25 0.79 0.75 2.07 0.35 0.10 0.36 0.46 % 1.08 0.90 % 0.69 0.17 0.39 0.29 31.12.2019 31.03.2020 30.06.2020 31.12.2019 31.03.2020 30.06.2020 Volatility adjustment NOK Swap 10y Volatility adjustment SEK Swap 10y ▪ Lower interest rates
Slide 52: Movement from Q4 2019 to Q2 2020
Movement from Q4 2019 to Q2 2020 Group Storebrand ASA +174 % +1 % +5 % -3 % -2 % +26 % +163 % -23 % +5 % +137 % +5 % -2 % -20 % -2 % Q4 2019 Model and Updated Updated Equity Interest Asset Asset Retained Results Dividend Q2 2020 Transitional Q2 2020 assumptions UFR VA stress rates return allocation
Slide 53: Movement from Q1 2020 to Q2 2020
Movement from Q1 2020 to Q2 2020 Group Storebrand ASA +26 % +163 % +155 % +1 % +14 % +4 % +137 % -1 % -6 % -23 % -3 % -3 % Q1 2020 Model and Updated VA Equity Interest Asset Asset Q2 results Dividend Q2 2020 Transitional Q2 2020 assumptions stress factor rates return allocation and sub Q2 2020 incl.
Slide 54: SII position Storebrand Group
SII position Storebrand Group Group Solvency position(%)1 Estimated sensitivities Target SII margin 150% 172 163 17 26 SII-margin Q2 137 26 163 155 137 Interest 127 43 170 rates -50bp Interest Q1 2020 Q2 2020 rates +50 bp 149 10 158 Transitional rules SII standard model Equity -25% 129 36 165 Key ta
Slide 55: Storebrand Group
Storebrand Group Group Profit1 Q2 01.01 - 30.06 Full year NOK million 2020 2019 2020 2019 2019 Fee and administration income 1 301 1 235 2 649 2 450 5 308 Insurance result 255 269 184 514 1 005 Operational cost -975 -1 030 -1 999 -1 960 -4 015 Operating profit 580 474 834 1 005 2 298 Financial items
Slide 56: Storebrand Group
Storebrand Group Group Profit1 Q2 01.01 - 30.06 Full year NOK million 2020 2019 2020 2019 2019 Fee and administration income 1 301 1 235 2 649 2 450 5 308 Insurance result 255 269 184 514 1 005 Operational cost -975 -1 030 -1 999 -1 960 -4 015 Operating profit 580 474 834 1 005 2 298 Financial items
Slide 57: Savings (non-guaranteed)
Savings (non-guaranteed) Savings Profit Q2 01.01 - 30.06 Full year NOK million 2020 2019 2020 2019 2019 Fee and administration income 974 911 2 017 1 807 3 996 Operational cost -600 -672 -1 269 -1 287 -2 621 Operating profit 374 239 748 521 1 375 Financial items and risk result life 22 -16 -76 -7 -1
Slide 58: Savings (non-guaranteed)
Savings (non-guaranteed) Savings -Strong premium and reserve growth Reserves and premiums Unit Linked Comments1 5.0 5.1 4.6 ▪ 23% growth in Unit Linked premiums. Continued growth 4.2 4.2 235 despite furloughs in Q2. 220 ▪ 18% growth in Unit Linked reserves. 207 210 198 BNOK ▪ NOK +4.6bn net transfer
Slide 59: Insurance
Insurance Insurance Profit Q2 01.01 - 30.06 Full year NOK million 2020 2019 2020 2019 2019 Insurance premiums f.o.a. 1 070 965 2 090 1 913 3 909 Claims f.o.a. -816 -696 -1 906 -1 399 -2 904 Operational cost -175 -159 -350 -309 -648 Operating profit 80 111 -166 205 357 Financial result 44 28 22 36 83
Slide 60: Insurance
Insurance Insurance – C/R back on track Combined ratio Comments Combined ratio and results Claims ratio Cost ratio Combined ratio 124% ▪ 92% combined ratio in line with target (90-92%). 96% 92% ▪ Continued strong cost control. 89% 89% 107% 72% 73% 78% 76% 16% 17% 17% 17% 16% Q2 2019 Q3 2019 Q4 2019
Slide 61: Guaranteed pension
Guaranteed pension Guaranteed Profit Q2 01.01 - 30.06 Full year NOK million 2020 2019 2020 2019 2019 Fee and administration income 360 364 710 724 1 475 Operational cost -214 -209 -416 -395 -819 Operating profit 147 155 294 329 657 Risk result life & pensions 50 52 24 113 215 Net profit sharing -205
Slide 62: Guaranteed pension
Guaranteed pension Guaranteed - Strong buffer capital Reserves guaranteed products Comments 262 264 263 272 274 30 30 ▪ Asset returns increase overall level of reserves in the quarter and 33 33 33 the level of buffer capital. 142 143 BNOK 137 137 137 ▪ Guaranteed reserves as a share of total reserve
Slide 63: 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 Investor Relations & Rating daniel.sundahl@storebrand.no +47 9136 1899 This do