Storebrand Asa · OSL:STB
Storebrand Asa — Q4 2006 Earnings Presentation
56 slides from Storebrand Asa's earnings presentation, Feb 14, 2007
Slide 1: Results 4th Quarter 2006 – Analyst Presentation
Storebrand Results 4th Quarter 2006 14 February 2007 Analyst Presentation Analyst Presentation 4th quarter 2006 Page # Slide # • Storebrand Group Group CEO Idar Kreutzer 2-11 3-22 Back-up: • Storebrand Group 12-17 23-34 • Storebrand ASA 18-19 35-38 • Storebrand Life Insurance 20-40 39-80 • Storebran
Slide 2: Highlights Q4 2006
Storebrand Results 4th Quarter 2006 14 February 2007 Idar Kreutzer Group CEO Highlights Q4 2006 Group profit of NOK 460 million in Q4 and NOK 1.585 million for 2006 19% return on equity in 2006 Value adjusted return 3.6% in Q4 and 8.3% in 2006 15,500 companies with 200 000 employees in total
Slide 3: Storebrand Group - Strong result
Storebrand Group - Strong result Q4 01.01-31.12 NOK million 2006 2005 2006 2005 Life activities 379 376 1 198 1 229 Investment activities 67 4 156 24 Storebrand Bank 36 59 190 241 Other activities -21 -9 41 -41 Group profit 460 429 1 585 1 453 Q4 2006 5 Storebrand Livsforsikring - Good result for cu
Slide 4: Building risk capital
Building risk capital Risk capital 14 % as % of NOK 16.8 bn customers' 12 % funds 13.6 Profit carried forward 10 % 11.1 8.9 8% Core capital margin 5.9 6% 4.8 Market value adj. res. 4% 2% Additional statutory reserves* 0% 2001 2002 2003 2004 2005 2006 -2 % *) 2006 includes NOK 0.6 billion in addition
Slide 5: Competitive return for defined contribution pensions
Competitive return for defined contribution pensions Return in 2006 for main alternatives for defined contribution/ mandatory occupational pension schemes 20,00 % 16.4% 15,00 % 11.0% 10,00 % 6.2% 5,00 % 0,00 % Cautious Balanced Aggressive Q4 2006 9 Successful investment in mandatory occupational pen
Slide 6: Strong Embedded Value
Strong Embedded Value 2006 embedded value earnings of NOK 3.4 billion*, 28 % return on opening embedded value Strong new sales - Mandatory Occupational Pensions - Transfer market traditional business Strong performance (positive variances) 2006 EEV based on current insurance legislation Ea
Slide 7: Storebrand Bank
Storebrand Bank Q4 Full year NOK million 2006 2005 2006 2005 Net interest income 101 116 419 447 Net fee and commission income 11 9 32 18 Other operating income 13 11 47 76 Total income 126 137 498 541 Operating expenses -96 -93 -355 -334 Operating profit before losses 30 43 143 207 Loan loss provis
Slide 8: Storebrand Investments - Strong return and growth in AuM
Storebrand Investments - Strong return and growth in AuM Q4 Year to date NOK million 2006 2005 2006 2005 Total income 153 65 399 242 Total costs -95 -63 -280 -232 Net financial income/ other 8 2 37 15 Profit before tax 67 4 156 24 Excess returns increases revenue from performance related fees Go
Slide 9: Successful launch of P&C insurance
Successful launch of P&C insurance Very well received in the market Faster volume growth than expected Web solution for insurance purchase seen as new market standard 12.10.06 01.12.06 08.12.06 31.12.06 14.02.07 Internal 1000 Internet 2000 3500 customers launch customers launch customers NOK 2
Slide 10: Improved productivity strengthens Storebrand's competitiveness
Improved productivity strengthens Storebrand's competitiveness Productivity target Measures started Positive Positiveadministration administration Competitiveness programmes result resulttotoowner ownerafter after implementation - Goal: over 20% improvement in implementationof ofnew new life lifei
Slide 11: Storebrand's objective statement
Storebrand's objective is to be the leading and most respected institution in the Norwegian market for long-term savings and insurance Q4 2006 21 (Page intentionally left blank) Q4 2006 22 11
Slide 12: IFRS accounting
Storebrand Group IFRS accounting Storebrand ASA’s group accounts are presented in accordance with the International Financial Reporting Standards (IFRS) approved by the European Union. Q4 2006 24 12
Slide 13: Operating Profit
Storebrand Group Operating Profit Q4 01.01 - 31.12 NOK million 2006 2005 2006 2005 Net premiums - insurance 3 714 3 085 19 539 19 383 Interests income 101 116 419 447 Financial income 5 761 2 565 13 167 11 422 Other income 284 197 950 471 Operating income 9 861 5 964 34 075 31 724 Insurance benefits
Slide 14: Earnings per share
Storebrand Group Earnings per share Q4 01.01-31.12 NOK million 2006 2005 2006 2005 Group profit 460 429 1 585 1 453 Changes in security reserve etc. - non life 2 12 0 10 Profit before tax 462 441 1 585 1 463 Tax -5 11 - 79 - 41 Minority interests -2 -1 - 10 -4 Profit for the year 455 452 1 496 1 419
Slide 15: Group profit by sub-group
Storebrand Group Group profit by sub-group 2006 2005 NOK million Q4 Q3 Q2 Q1 Q4 Q3 Q2 Q1 Life activities 379 244 277 299 376 291 307 255 Investment activities 67 38 32 20 4 -2 14 8 Storebrand Bank 36 47 59 48 59 42 69 72 Other activities -21 -13 -18 94 -9 -13 1 -20 Group profit 460 315 350 460 429 3
Slide 16: Other activities / Shareholder structure
Storebrand Group Other activities Q4 01.01 - 31.12 NOK million 2006 2005 2006 2005 Storebrand ASA *) -5 46 1 012 599 Fair Forsikring 0 -4 -1 22 Storebrand Skadeforsikring -18 19 21 19 Other companies/elimintations **) 2 -70 -990 -681 Total profit other activities -21 -9 41 -41 *) Including group con
Slide 17: Rating and key figures
Rating for Storebrand as at 14 February 2007 Storebrand ASA Moody’s: Baa2 (S) S&P: BBB+ (S) Storebrand Storebrand Livsforsikring AS Bank ASA Moody’s: A2 (S) Moody’s: Baa2 (S) S&P: A (S) S&P: BBB+ (S) P=positive outlook, S=stable outlook, N=negative outlook Q4 2006 33 Storebrand Group Key figures Q4
Slide 18: Storebrand ASA Profit for the year
Storebrand ASA Storebrand ASA Profit for the year *) Q4 01.01-31.12 NOK million 2006 2005 2006 2005 Group contributions and transfers 0 0 1 028 611 Interest income 18 17 73 58 Interest expense - 22 - 17 - 77 - 53 Realised/unrealised gains/losses on securities 21 76 70 213 Other financial income/cost
Slide 19: Storebrand ASA Quarterly development
Storebrand ASA Quarterly development 2006 2005 NOK million Q4 Q3 Q2 Q1 Q4 Q3 Q2 Q1 Group contributions and transfers 0 0 0 1 028 0 0 0 611 Interest income 18 18 21 16 17 12 11 18 Interest expense - 22 - 20 - 18 - 17 - 17 - 10 -4 - 22 Realised/unrealised gains/losses on securities 21 13 -2 39 76 11 1
Slide 20: Storebrand Life Group Highlights
Storebrand Life Insurance Storebrand Life Group Highlights as at 31.12.2006 Operating profit in Q4 was NOK 1,964 million, compared to NOK 1,427 million in Q4 2005. Operating profit as at 31.12.2006 was NOK 5,176 million compared to NOK 4,373 million as at 31.12.2005 (before effects from IFRS). Eff
Slide 21: Life Insurance Highlights as at 31.12.2006
Storebrand Life Insurance Highlights as at 31.12.2006 Total premium income (excluding net transfers) decreased by 22 % compared to 2005. Excl. individual savings contracts whitout fixed contract periods and individiual pension contracts, the premiums increased in 2006 by 24 %. Positiv net transf
Slide 22: Profit and loss
Storebrand Life Group Profit and loss Q4 01.01-31.12 NOK Million 2006 2005 2006 2005 Premiums written 3,116 2,744 13,069 16,805 Net transfers of premium reserve 418 -148 5,260 564 Net income of financial investments 5,471 2,325 12,687 10,445 Net incom Unit Linked asset 376 178 685 721 Claims paid -3
Slide 23: Asset allocation
Storebrand Livsforsikring AS Asset allocation Allocation and policyholders' fund Q4-06 Q3-06 Q2-06 Q1-06 Q4-05 Q3-05 Q2-05 Q1-05 Equity Norwegian *) 7% 5% 6% 7% 9% 6% 6% 6% Equity Foreign*) 22 % 22 % 19 % 20 % 18 % 17 % 16 % 16 % Real Estate 11 % 11 % 11 % 10 % 9% 9% 9% 9% Money market 4% 3% 5% 5% 6
Slide 24: Development in return
Storebrand Livsforsikring AS Development in return 12 % 11,2 % 10 % 8,8 % 8,3 % 7,5 % 8% 7,6 % Booked 7,2 % 6,9 % 7,2 % 7,1 % 6,9 % Value adjusted excl. Bonds 6% 6,4 % 6,5 % held to maturity Value adjusted incl. Bonds 4% held to maturity 2,7 % 2,6 % 2% 1,9 % 0% 2002 2003 2004 2005 2006 Q4 2006 47 St
Slide 25: Premiums excl. reserves transferred
Storebrand Life Group Premiums excl. reserves transferred to the company as at 31.12.2006 Total premiums written 13,069 million 1% 5% Group pension 5% Group pension defined contribution Group Life 22 % Individual endowment 55 % Individual endowment 4% Unit Linked Individual pension 8% Non-life insur
Slide 26: Premiums written, products without profit sharing
Storebrand Livsforsikring AS -premiums written, products without profit sharing as at 31.12 NOK million 2800 2600 Non-life insurance 2400 2200 Individual endowment 2000 Unit Linked Individual endowment 1800 Group life 1600 1400 Group pension defined 1200 contribution Group pension* 1000 800 *) Group
Slide 27: Profit analysis
Storebrand Life Group Net transfers of premium reserves in NOK million 5260 1493 381 564 2002 2003 2004 2005 2006 -758 Q4 2006 53 Storebrand Livsforsikring AS Profit analysis Q4 01.01.-31.12 NOK Million 2006 2005 2006 2005 Interest result 2,335 1,516 5,573 4,402 Risk result -65 166 220 365 Administr
Slide 28: Profit analysis and Balance sheet IFRS
Storebrand Livsforsikring AS Profit analysis -products without profit sharing Risk products Q4 01.01.-31.12 NOK Million 2006 2005 2006 2005 Interest result 36 27 87 68 Risk result 38 65 167 197 Administration result -41 -47 -112 -94 Change in security and premium reserve 2 -1 -7 -4 Operating profit
Slide 29: Balance sheet (continued)
Storebrand Life Group Balance sheet (continued) Share of Share of total assets total assets NOK Million 31.12.06 31.12.06 31.12.05 31.12.05 Equity 6,043 3% 5,751 3% Minority interests' share in equity 20 0% 18 0% Subordinated loan capital 2,962 2% 2,875 2% Market price adjustment reserve 5,890 3% 3,
Slide 30: Key figures
Storebrand Livsforsikring AS Key figures Q4 01.01.-31.12 2006 2005 2006 2005 Booked return 2.30% 2.04% 7.12% 6.89% Value adjusted return 3.55% 1.64% 8.28% 7.55% -including bonds held to maturity 2.70% 1.13% 6.52% 6.89% Solvency margin 174.6% 175,9 % Capital ratio (Storebrand Livsforsikring Group) 9.
Slide 31: Profit analysis
Storebrand Livsforsikring AS Profit analysis 2006 2005 NOK Million Q4 Q3 Q2 Q1 Q4 Q3 Q2 Q1 Interest result 2,307 589 1,568 1,046 1,505 977 1,158 719 Risk result -65 92 103 87 166 99 69 30 Administration result -257 -19 -91 -91 -230 31 -102 -29 Change in security and premium reserve 1 -6 -3 -10 -5 -2
Slide 32: EEV methodology
European Embedded Value Contents 1. Methodology and key assumptions 2. EEV results 2006 3. New legislation 4. EEV Sensitivities Q4 2006 63 EEV methodology CFO Forum* EEV principles Approach adopted (key areas) 1. What is EEV Should allow for the cost of holding the required capital Basis adopted: 2.
Slide 33: Cost of capital / Economic assumptions
Cost of capital Capital requirement based on maximum of - Norwegian regulatory requirement - Banking requirement (Basel I) - EU minimum solvency (Solvency I) - Internal requirement based on obtaining a targeted rating Required capital 2005 2006 Regulatory NOK 3.1 bn NOK 4.1 bn. requirement Interna
Slide 34: Economic assumptions (2) / Cost of volatility
Economic assumptions (2) Risk premiums 2005 2006 Equity 3.0% 3.0% Govt. bonds 0.0% 0.0% Credit bonds 0.5% 0.5% Real estate 2.0% 2.0% Yield curves 2005 and 2006: 5,0 % 4,5 % 4,0 % 3,5 % 3,0 % 2,5 % 2,0 % 1,5 % 1,0 % 0,5 % 0,0 % Year 1 3 5 7 9 11 13 15 17 19 21 23 25 27 29 31 33 35 37 39 41 43 45 47 4
Slide 35: 2006 EEV earnings analysis
European Embedded Value Contents 1. Methodology and key assumptions 2. EEV results 2006 3. New legislation 4. EEV Sensitivities Q4 2006 69 2006 EEV earnings analysis NOK million 2006 embedded value earnings of EEV 2005 12,025 NOK 3,351 million - 28 % RoEV Interest on opening value 735 Historic hig
Slide 36: Value of New Business
Value of New Business NOK million 2005* 2006 Present value of future profits 489 853 comprising − Group with-profits business 184 393 − Individual with-profits business 98 38 − Defined contribution business 134 314 − Unit linked business 14 10 − Other non-profit sharing business 58 98 Cost of capita
Slide 37: Embedded Values 2004 – 2006
Embedded Values 2004 – 2006 NOK million EEV 2004* EEV 2005* EEV 2006 Total shareholder surplus 4,955 5,512 5,977 comprising - required capital 3,544 3,713 4,111 - free surplus 1,411 1,799 1,865 Cost of capital -628 -711 -986 Value of in-force 7,252 8,614 10,813 comprising − Group with-profits busine
Slide 38: Embedded value reporting / Product portfolio under new legislation
Embedded value reporting 2004 2005 2006 2007 2008 2009 2010 EEV based on new legislation Embedded Value reporting for Storebrand CFO Forum New Norwegian insurance Solvency II EEV Principles legislation enters into force Implementation (?) Q4 2006 75 Product portfolio under new legislation - from 200
Slide 39: Expected impact on embedded value
Expected impact on embedded value Positive NOK million EEV 2006 − Expect lower capital requirement − Regulatory capital relief not expected before Total shareholder surplus 5,977 Solvency II is implemented Cost of capital -986 ~ Neutral − Will depend on fee model, profit sharing Value of in-forc
Slide 40: EEV Sensitivities
EEV Sensitivities Change Value of new Change NOK million Total EEV in % business in % Base 14,544 700 1. Risk discount rate +1% 13,410 -7.8 % 596 -14.9 % 2. Risk discount rate -1% 15,878 9.2 % 823 17.6 % 3. Beta 1.2 14,273 -1.9 % 675 -3.6 % 4. Beta 1.0 14,825 1.9 % 726 3.7 % 5. Interest rates +1%* 1
Slide 41: Storebrand Investments Highlights Q4
Storebrand Investments Storebrand Investments Highlights Q4 Profit before tax NOK 67 million compared to 4 million NOK in Q4 last year. Significant value added through additional yields in the discretionary portfolio provides a boost in performance fees for Q4. NOK 217 billion in assets under
Slide 42: Profit before tax / Profit development
Profit before tax Q4 2006 Q4 Year to date NOK million 2006 2005 2006 2005 Total income 153 65 399 242 Total costs -95 -63 -280 -232 Net financial income/ other 8 2 37 15 Profit before tax 67 4 156 24 Increased income due to boost in performance fees. The increase in total costs, is mainly due to
Slide 43: Profit development
Profit development NOK million 399 400 380 Cost/income ratio 64%1 as of 360 Q4 (72% in Q3 and 91% in 340 2005). 320 67 Boost in performance related 300 fees. 280 280 Increased operating costs due 38 to performance related pay. 260 32 240 220 20 17 14 15 7 8 8 4 4 -2 Q4- Q1- Q2- Q3- Q4- Q1- Q2-
Slide 44: Contribution to Storebrand Life portfolio
Contribution to Storebrand Life portfolio year to date Relative performance Norwegian Equities 38,3 % 32,2 % 6,1% European Equities 4,0 % 4,3 % -0,3% North American Equities 3,0 % 3,7 % -0,7% 0,2 % Norwegian Bonds 0,3% -0,1 % 3,2 % International Bonds 0,5% 2,7 % 3,0 % Norwegian Money Market 0,3% 2,7
Slide 45: Market share Norwegian registered mutual funds
Market share Norwegian registered mutual funds Mutual funds market in Norway All mutual funds (market share in %) Norwegian mutual funds exceeded 8,4 7,9 8,4 8,3 7,8 Nordea NOK 222 billion in assets under 11,2 12,5 11,6 12,0 Odin management. 12,7 14,4 16,7 Skagen The overall market consists of 1
Slide 46: Assets under management
Storebrand Investments Assets under management Total assets under management Allocation assets under management Real est ate 9% Other 217 Hold t o 4% 205 maturity 24,6 27 % Equity Norway NOK billion 20,3 5% 159 165 30,3 29,4 15,8 140 13,2 14,6 20,0 9,7 10,6 25,3 12,9 21,6 10,1 M oney market 10,6 Equ
Slide 47: Storebrand Bank Group Highlights Q4 2006
Storebrand Bank Group Storebrand Bank Group Highlights Q4 2006 Storebrand Bank Group reports a pre-tax profit of NOK 36 million in Q4 (NOK 59 million in Q4 2005). Growth in gross lending of NOK 2.4 billion in Q4. Net income from loan loss provisions of NOK 6 million in Q4. 6,000 new accounts
Slide 48: Profit and loss
Profit and loss Q4 Full year NOK million 2006 2005 2006 2005 Net interest income 101 116 419 447 Net fee and commission income 11 9 32 18 Other operating income 13 11 47 76 Total income 126 137 498 541 Operating expenses -96 -93 -355 -334 Operating profit before losses 30 43 143 207 Loan loss provis
Slide 49: Development in net interest income
Development in net interest income Net interest income / avg. total assets Still very competitive environment for retail NOK million mortgages 2.00 % 33 000 31000 1.50 % Pressure on margins 29 000 1.00 % 27 000 Increased competition for 25 000 larger residential 0.50 % 23 000 mortgages 0.00 %
Slide 50: Development in loan portfolio
Development in loan portfolio Development in gross lending Gross lending by sector NOK billion 5% 31.2 28.6 Residential 27.9 mortgages 27.3 26.8 Other retail 32 % 25.6 24.5 24.2 23.6 Real estate 54 % Other corporate Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 2004 2005 2005 2005 2005 2006 2006 2006 2006 9% Corporate
Slide 51: Customer deposits / Capital adequacy
Development in customer deposits NOK million Customer deposits have 16 000 60 % 14 000 increased by NOK 459 50 % 12 000 million in Q4 10 000 40 % 8 000 30 % 6 000 20 % Deposits / gross lending 4 000 10 % was 43.4 % at year end 2 000 0% Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 2004 2005 2005 2005 2005 2006 200
Slide 52: New accounts - 2004 to 2006
New accounts - 2004 to 2006 2 500 2004 2005 2006 2 000 1 500 1 000 500 0 jan. feb. mar. apr. may jun. jul. aug. sep. oct. nov dec. Gross new accounts in the period More than 21 000 new accounts opened in 2006 Q4 2006 103 (Page intentionally left blank) Q4 2006 104 52
Slide 53: Storebrand Non-Life Highlights Q4 2006
Storebrand Non-Life Non-Life Highlights Q4 2006 Operating loss in Q4 was NOK 18 million (NOK 15 million) and YTD profit of NOK 20 million (NOK 41 million). Operating loss, adjusted for statutory insurance reserves, in Q4 amounts to NOK 19 million (profit of NOK 21 million) and YTD profit of NOK 20
Slide 54: Non-Life Group Profit and loss
Non-Life Highlights Q4 2006 Sale of Fair Insurance to Gjensidige was approved in the end of March. The result from Fair in Q1 was a loss of NOK 1 million (NOK 4 million in Q4 2005). Operating loss in Oslo Re in Q4 was NOK 2 million (profit of NOK 11 million) and YTD loss of NOK 2 million (profit
Slide 55: Non-life Group Balance sheet
Non-life Group Balance sheet Share Share NOK million 31.12.2006 31.12.2006 31.12.2005 31.12.2005 Deferred tax 23 1% Intangible assets 27 1% Shares 20 1% 20 1% Bonds and other intrest bearing financial assets 524 21 % 564 18 % Other assets 1,978 78 % 2,548 81 % Total assets 2,549 100 % 3,155 100 % Eq
Slide 56: Oslo Reinsurance Company Balance sheet
Oslo Reinsurance Company Balance sheet Share Share NOK million 31.12.2006 31.12.2006 31.12.2005 31.12.2005 Deferred tax asset - 0% 10 1% Financial assets 417 63 % 469 58 % Receivables 12 2% 10 1% Other assets 233 35 % 325 40 % Total assets 662 100 % 814 100 % Equity 129 19 % 153 19 % Premium and cla