Storebrand Asa · OSL:STB
Storebrand Asa — Investor Day (2018)
130 slides from Storebrand Asa's investor day presentation, 2018
Slide 1: Storebrand Capital Markets Day 2018
Storebrand Capital Markets Day 2018 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: Agenda
Agenda Topic Presenter 09:00 Accelerating Nordic Savings Platform Odd Arild Grefstad, CEO People First – Digital Always: 09:40 Heidi Skaaret, EVP A customer-centric digital business model enabling growth and profitability Occupational pensions: 10:00 Staffan Hansén, EVP Preferred pension provider an
Slide 4: Accelerating Nordic Savings Platform
Accelerating Nordic Savings Platform Odd Arild Grefstad, CEO 4
Slide 5: Key Takeaways
Delivered on financial targets Well positioned to capture capital light and Key Takeaways profitable savings growth Back book capital consumption has peaked: increased capital return to shareholders 5
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 707bn in AuM of NOK 4.4bn 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 as presented at CMD 2016
Delivered on Financial Targets as presented at CMD 2016 Target Status 2017 Return on equity1 > 10% 11% Dividend pay-out ratio1 > 35% 40% % Solvency II margin Storebrand Group2 > 150% 172% 7 1 Before amortisation after tax. 2 Including transitional rules.
Slide 8: Delivered on Operational Ambitions as presented at CMD 2016
Delivered on Operational Ambitions as presented at CMD 2016 Asset Unit Linked Insurance Retail Bank Costs Management NOK #1 NOK #1 150m 100m ~10% ~90-92% Double >10% 0% market position Norwegian Revenue Profit Long term Combined growth Ratio Retail loan book ROE2 Cost increase3 asset manager growth
Slide 9: Solid macro environment supporting growth in Nordic pension market
Solid macro environment supporting growth in Nordic pension market Government net debt ratio as % of GDP1 Unemployment rates1 9.1% -300% -250% -200% 6.6% -150% -100% 4.3% -50% 0% 50% 100 150 Norway Sweden Euro area Finland France Norway Greece Netherlands Spain Switzerland Poland United Kingdom Euro
Slide 10: Interest rates rebounding from record lows
Interest rates rebounding from record lows 4% 3% NOK 10yr SWAP 2% SEK 10yr SWAP 1% 0% 01.01.2012 01.01.2013 01.01.2014 01.01.2015 01.01.2016 01.01.2017 01.01.2018 10
Slide 11: Demographic change has driven pension reforms in Norway
Demographic change has driven pension reforms in Norway with opportunity emerging in retail savings 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 38
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 24 135 2 940 721 22% 28% 34% 49% 16% 1 960 442 21% 6% 18% 64% 9% 15% 37% NOK bn NOK m NOK m 62% 51% 59% 36% 21% 23% 15% 14% 2012 2017 2012 2017 2012 2017 External Guaranteed Guaran
Slide 13: Growth in Savings and Insurance
Growth in Savings and Insurance Unit Linked Asset management +21% 168 +10% 721 128 140 535 571 577 105 487 85 442 64 2012 2013 2014 2015 2016 2017 2012 2013 2014 2015 2016 2017 UL reserves (NOKbn) AuM (NOKbn) Insurance Retail bank +6% +12% 42.1 4 327 4 502 4 462 35.4 3 569 3 699 3 308 26.9 23.7 23.9
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: Build a world class Savings business
Build a world class Savings business - Supported by Insurance A B C D Asset manager with strong Leading position Uniquely positioned in competitive position and Bolt-on M&A Occupational Pension growing retail savings market clear growth opportunities Double digit pension Double digit retail savi
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% Majority of premiums generated by 200 active policies Growth driven by: 150 18% ─ Increased salaries and savings rates ─ Population growth ─ Age distr
Slide 18: Moderate replacement rates and wealthy population fuel retail growth
B Moderate replacement rates and a wealthy population with an overweight in Retail 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% Ger
Slide 19: 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) DNB 26% Individual Life and pension ~1 000 Savings Storebrand 22% 38 % Nordea 15% ODIN 12% 380 Mut
Slide 20: Increased external share in Asset Management
C Asset Mgmt Increased external share in Asset Management AuM mix Revenue mix1 16% 24% 34% 36% 12% 9% 66% 22% 23% 7% 24% 6% 3% 62% 14% 47% 37% 37% 2% 18% 2009 2015 2017 2015 2017 External Unit Linked Other Guaranteed 20 1 Revenue & AuM include Skagen from 01.01.2017 proforma
Slide 21: Sustainability at the core of our business
Sustainability at the core of our business C Asset Mgmt NOK 707 bn AuM aligned to contribute to the UN Sustainability Goals Solutions All assets under management are subject to NOK 707 bn sustainability screening Active Exclusions ownership 21 AuM 1Q 2018
Slide 22: Commercialising Sustainability Enhanced Solutions
Commercialising Sustainability Enhanced Solutions: C Asset Mgmt Fossil free funds drive AuM growth AUM Sustainability Enhanced, NOK bn 59.8 Fossil Low carbon free footprint More Solution 10.3 sustainable companies 3.0 2015 2016 2017 22
Slide 23: Ambition: Build a world class Savings business supported by Insurance
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 Do
Slide 24: Significant difference in capital consumption between old and new business
Significant difference in capital consumption and return profile between old and new business ILLUSTRATIVE 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 Group sits withi
Slide 25: Ambitions Capital
Ambitions Capital Base case: Dividend policy Release capital from the business 2021 Dividend of more than 50% of Group result after tax. Expected start of capital release as dividends Ambition is to pay ordinary dividends per share of at when S2 ratio >180% least the same nominal amount as the p
Slide 26: Financial Targets
Financial Targets Target Return on equity1 > 10% Dividend pay-out ratio2 > 50% & nominal growth % Solvency II margin Storebrand Group3 > 150% 26 1 2 Before amortisation after tax. After tax 3 Including transitional rules.
Slide 27: People First – Digital Always
People First – Digital Always A customer-centric digital business model enabling growth and profitability Heidi Skaaret, EVP 27
Slide 28: A customer-centric digital business model enabling growth and profitability
A customer-centric digital business model enabling growth and profitability A B C D Asset manager with strong Leading position Uniquely positioned in competitive position and Bolt-on M&A Occupational Pension growing retail savings market clear growth opportunities 40k corporate customers 440k re
Slide 29: Key Takeaways
Well positioned for growth through a digitally advanced and scalable technology platform Continuously adapting and developing an Key Takeaways agile and customer-centric organization Strong record of cost control with continued ambition to keep costs nominally flat 29
Slide 30: Cutting costs while growing business volumes
Cutting costs while growing business volumes in a changing savings and pensions market Significant cost reductions to keep cost base flat … Operational costs, NOK bn 3.8 ~3.8 Cost Base Inflation and BPO & IT Automation & Other Cost Base 20151 financial service tax Outsourcing Digitalisation Initiati
Slide 31: A frontrunner operating in a digitally mature market
A frontrunner operating in a digitally mature market in the Nordic region Digital Market Maturity1 Digital Business Model2 100% … of B2B customers maintain pension 90% NO NL IS 98% contracts through digital solutions 80% EE FI DK … of health declarations are processed SE 94% Internet banking usage 7
Slide 32: Distinction between commodity and differentiation
A clear distinction between commodity and differentiation – enabling investments and growth Commodity IT is outsourced The majority of IT spend for cost-efficiency is focused on new development Bought services Develop the business Cost efficiency, market Create commercial value synergies and scale a
Slide 33: Digital transformation to renew the core
Digital transformation to renew the core – reducing costs and enabling business growth Digitising Pension Future Savings Platform Digital to the core 100% 1 Cost Reductions Customers are self- Of customer fund switches for unit link products are 1 Deliver cost synergies as 50 MNOK serviced through p
Slide 34: Creating business value from emerging technology
Creating tangible business value from emerging technology within the analytics and digital space Analytics & Machine Learning Digital & Mobile Channels Customer development and underwriting Health Insurance value chain digitised on one platform Data Insight Action Digital Trust Cloud-based Multi-cha
Slide 35: Agile, customer-centric organization with new ways of working
The agile, customer-centric organization is purpose driven with new ways of working New ways Innovation, of working agility & speed Autonomous teams in 20+ Norway & Sweden Purpose Employee Learning Pitches made to Digital Driven Engagement Culture 10+ Investment Board Daily automated ~10 deploys in
Slide 36: Cost reductions from sourcing and automation
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 36 1 Customer-oriented FTE's: Sales, Marketing & Customer Service. Back-of
Slide 37: Resource re-allocation from guaranteed back-book to capital-light growth
Resource re-allocation from guaranteed back-book to capital-light growth products Resource allocation1 20% 35% Capital release under Solvency II Allows for focus on 80% growth initiatives 65% Resource re-allocation will continue 2011 2018 Guaranteed Savings 37 1 Operating costs reported for segments
Slide 38: Regulatory changes managed within the existing budget
Regulatory changes to protect, empower and transform are managed within the existing budget Purpose Implementation Opportunity Protect and empower Centralised programme to Create competitive GDPR customer with regards ensure compliance in all advantage through to data privacy business processes Digi
Slide 39: The way ahead – profitable growth with strong cost control
The way ahead – profitable growth coupled with strong cost control A range of initiatives are creating profitable growth … M&A Platform Digitisation & Automation & Global Activities Programs Innovation Robotics Partnerships … with the ambition to keep the cost base flat on existing business in 2020
Slide 40: Occupational pensions
Occupational pensions Preferred pension provider and new opportunities Staffan Hansén, EVP 40
Slide 41: Leading position in Occupational Pension
Leading position in Occupational Pension A B C D Asset manager with strong Leading position Uniquely positioned in competitive position and Bolt-on M&A Occupational Pension growing retail savings market clear growth opportunities 40k corporate customers 440k retail customers (Norway) NOK 707bn
Slide 42: Key Takeaways
Strong profit growth driven by savings, insurance and cost reductions Key Takeaways Attractive structural market growth with new opportunities End-to-end digitalisation securing competitive edge 42
Slide 43: Attractive and growing occupational pensions market
Attractive and growing occupational pensions market Pension premium income - total market1 Pension premium income - per product1 NOK bn NOK bn 4% Guaranteed Unit Linked 37 CAGR 33 35 35 30 31 16% Norway CAGR 27 -10% 17 13 10 2012 2013 2014 2015 2016 2017 2012 2017 2012 2017 SEK bn SEK bn 2% 52 52 54
Slide 44: Shift from old guarantees to capital light savings
Storebrand has rapidly shifted from old guarantees to capital light savings… Storebrand premium income – Old Guarantees Storebrand premium income - Defined Contribution1 NOK bn NOK bn 15,1 +10% 13,7 12,6 10,9 10,3 9,1 8,2 -19% 6,3 4,9 3,9 2013 2014 2015 2016 2017 2013 2014 2015 2016 2017 44 1 Define
Slide 45: Strong and well balanced profit growth
…generating strong and well balanced profit growth Defined Contribution – operating profit1 859 Key drivers 323 Increased Savings and AuM +147% Increasingly important with insurance add-ons 348 Cost reductions 536 304 NOK m 44 2012 2017 Savings Insurance 1 Savings: Unit linked Norway and Unit
Slide 46: Net premiums and market return drive AuM growth
Net premiums and market return drive AuM growth AuM development Unit Linked NOK bn Drivers of expected net premiums 12-15% Majority of premiums generated by 200 active policies Growth driven by: 150 18% ─ Increased salaries and savings rates ─ Population growth ─ Age distribution of policyholder
Slide 47: Leading position in Norway and strong contender in Sweden
Leading position in Norway and strong contender in Sweden Market share occupational pensions (Unit Linked) Norway 1 Sweden 2 31% 18% 28% 17% 14% 12% 10% 14% 9% 9% Storebrand DNB Nordea Gjensidige Sparebank 1 LF SEB Skandia SPP Avanza Storebrand with clear value proposition in the corporate market We
Slide 48: How will we succeed going forward?
How will we succeed going forward? 48
Slide 49: Competitive edge through end-to-end digitalisation
Competitive edge through end-to-end digitalisation Digitalisation … … enables cost-efficient scalable growth Simplified architecture with straight-through-processing New standardised IT- 1 platform in Sweden Cost reductions of approx. 100 MNOK* 3 year digital to the core 2 program in Norway Fu
Slide 50: Best positioned for Individual Pension Account in Norway
Best positioned for Individual Pension Account in Norway Expected market dynamics Storebrand's response Leverage and maintain Storebrand's # 1 position in the corporate Competition for market shares market Relationship with individual Strengthen retail customer relationships through our digi
Slide 51: Capital light low guarantees provide opportunities in Sweden
Capital light low guarantees provide additional opportunities in Sweden Market premiums SPP (occupational pensions) SPP Market share Capital light low guarantees1 New, well-received, unique 1 individualised life cycle product Positions SPP with a complete savings 2 offering in corporate pensions Att
Slide 52: Regulatory change creates opportunities in public sector pension market
Regulatory change creates opportunities in Norwegian public sector pension market Large public sector market New regulation can lead to is closed for competition re-entry for Storebrand Annual market premium 2017, NOK bn 45 Market monopoly today Expected partial end of monopoly 27 Capital effi
Slide 53: Our ambition
Our ambition Gross Premium income – Defined Contribution1 Leading position Occupational Pensions #1 Market position Pension Norway +9% 13.7 15.1 Sweden Double CAGR 10.9 12.6 digit Pension Sweden 10.3 Deliver continued stream of Norway employees to retail segment NOK bn 2013 2014 2015 2016 2017 2018e
Slide 54: Digital first retail strategy
Digital first retail strategy A personalised and scalable business model Wenche Martinussen, EVP 54
Slide 55: Uniquely positioned in growing retail savings market
Uniquely positioned in growing retail savings market A B C D Asset manager with strong Leading position Uniquely positioned in competitive position and Bolt-on M&A Occupational Pension growing retail savings market clear growth opportunities 40k corporate customers 440k retail customers (Norway)
Slide 56: Key Takeaways
Creating a personalised customer experience for our 1.3 million customers through advanced analytics Key Takeaways Building a digital-first, scalable platform Providing a multiproduct offering to engage our customers and build long-term customer relationships 56
Slide 57: Norway – an aging, digitally mature market
Norway – an aging, digitally mature market with changing market dynamics Demography Digitalisation Individualisation 5 300 000 citizens 91% used online banking Pension reform shifting responsibility onto the last 3 months individual Effectively a cash-less society Historically preference for bank ac
Slide 58: Our 1.3 million customers
33 % 44 % Retail customers Customers with a paid up policy 23 % or pension certificate Our 1.3 million customers Customers with occupational pension 38% higher household income 77% higher household assets 28% higher employment rate1 +39% We have experienced strong retail growth 39% increase in numbe
Slide 59: Personal in a digital era
Using machine learning and AI with intelligent response has changed the way we communicate with our customers, enabling us to personalise the customer experience through relevant and engaging customer offerings… Our relationship with 1.3 million customers provide us with data and insight, which mean
Slide 60: Using data to determine the Next Best Activity
Using data on customer activities to determine the Next Best Activity 60
Slide 61: Deployments per day taking a digital-first approach
Storebrand has transformed from 10 traditional IT-delivery model to continuous, incremental deployments deployments, doubling the per day number of releases delivering customer experiences over two years Focus on our digital customer 76% interface is increasing our increase in digital sales signific
Slide 62: Customer, advisor and robot in the same digital solution
Customer, advisor and robot in the same digital solution ensures seamless communication Digitalisation, automation A personalised and and robotisation to gain scalable business reduction in costs and scalability model Chat robot "James" handles 50% of all chats on our website Highly skilled advisors
Slide 63: Engaging customers throughout the life cycle
Engaging customers throughout the life cycle As each individual must take more responsibility for their retirement finances, our foundation in pensions makes us uniquely positioned to offer a breadth of products and services across the life-cycle. But most of all, building trust and creating long-te
Slide 64: Achieving a double digit CAGR in retail savings AUM
Achieving a double digit CAGR in retail savings1 AUM Strengthened market position Sustainability expertise as Structural market drivers and product offering competitive advantage Market AuM NOK bn Green is good "20% of the world's population use 80% of the world's resources. Companies that are CAGR+
Slide 65: Profitable growth with a multi-product offering
Profitable growth with a multi-product offering Ensuring higher customer retention and deeper customer relationships Retail savings1 21% 22% DNB 26% Storebrand 22% 13% 13% 11% Nordea 15% Sparebank 1 12% Q4 2014 Q4 2015 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Life insurance2 P&C insurance2 Retail ban
Slide 66: Retail Norway 2018-2022
Retail Norway 2018-2022 Double digit 50% >10% CAGR Profit growth ROE P&C and Individual Retail savings Retail bank life insurance • B2B2C fundament • Focus on profitability • Focus on profitability • Well-positioned #2 player • Automation of back office • Automation of mortgage processes process • M
Slide 67: Fast growing Nordic asset manager with European presence
Fast growing Nordic asset manager with European presence Jan Erik Saugestad, EVP 67
Slide 68: Deliver client value through sustainable investment solutions and multi boutique platform
Deliver client value and growth in assets through sustainable investment solutions and a multi boutique platform A B C D Asset manager with strong Leading position Uniquely positioned in competitive position and Bolt-on M&A Occupational Pension growing retail savings market clear growth opportunitie
Slide 69: Key Takeaways
Strong competitive position driven by revenue growth, tight cost control and significant value to clients Key Takeaways Clear growth opportunities enabled by leading position on sustainable investments and SKAGEN Further scale as a multi boutique platform 69
Slide 70: Fast growing Nordic asset manager with captive and external clients
Fast growing Nordic asset manager with a blend of captive pension assets and external clients Main channels for AuM (NOK bn)1 External share1 Pension savings NO Institutional mandates 34% External Captive and distributors2 66% 259 bn 247 bn Asset types1 Equities 8% Real estate 2% 34% Bonds AuM Money
Slide 71: Strong revenue growth and tight cost control
Strong revenue growth and tight cost control has ensured our competitive position Net revenues and operational costs1, NOKm Margin1, bps Net revenues Operational costs 24 Net revenues Operational costs 22 CAGR +8% 20 18 17.1 17.3 17.4 16.9 16.8 16.6 16 CAGR 13.6 1.082 -1% 14 986 12.2 936 856 12 789
Slide 72: Strong fund performance across all asset classes
Strong fund performance across all asset classes – Significant value creation for clients Average annual net returns and outperformance of selected funds since inception1 Index/ESG Factor Selected active Alternatives Fixed income 18.0% 17.6% 16.1% 16.5% 14.7% 14.7% 14.6% 13.9% 12.2% 9.6% 9.6% 9.1% 8
Slide 73: Sustainability at the core of our business
Sustainability at the core of our business NOK 721 bn AUM, aligned to contribute to the UN Sustainability Goals World Kyoto-protocol UN Sustainable Development Goals (2005) (2009) (2015) (2016) 1995 2000 2005 2010 2015 2020 Decision to Next generation Fossil Low carbon free footprint Sustainability
Slide 74: Strategic Priorities
Strategic Priorities Strengthen Broader Strengthen retail Increase volume Further scale as a international commercialization of position in to gain cost multi boutique institutional capacity sustainable funds Scandinavia advantages platform 74
Slide 75: Potential to strengthen institutional offering and pursue international growth
Potential to strengthen institutional client offering and pursue international growth Build on our strong position in Norway and Sweden… …and pursue focused international growth Norway - No. 1 institutional asset manager1 Leverage our joint distribution to pursue focused international growth based o
Slide 76: Sizeable potential for sustainable solutions internationally
Sizeable potential for sustainable solutions internationally… Investor commitment Growth in sustainable AM Demand for low carbon solutions Global AUM represented in the United Nations 'Sustainably invested' assets in Europe, US, Canada, Storebrand AUM in low carbon solutions, NOK bn Principles for R
Slide 77: Storebrand is well positioned to capture growth
…and Storebrand is well positioned to capture growth A strong range of sustainable …a credible and transparent …with a long track record and investment solutions… process… strong recognition Scalable solutions covering all asset Strategy built on in-house A pioneer within sustainability, with classe
Slide 78: SKAGEN is an enabler in the retail savings market beyond Norway
SKAGEN is an enabler to take the next step in the retail savings market beyond Norway Market Brands Market position, AUM1 Market growth, AUM1 NOKbn 30% +15% 15% 15% 235 181 192 8% 134 151 6% DNB Odin/SB1 Storebrand Nordea Danske Bank 2013 2014 2015 2016 2017 fondene Group SEKbn 21% +13% 12% 12% 11%
Slide 79: Key opportunities in the Norwegian and Danish retail markets
Key opportunities in the Norwegian and Danish retail markets Norway – strengthening our Mutual Fund positions Denmark – capturing the ESG index opportunity A large (~NOK 390 bn) market1 for retail savings Approx. DKK 350 bn in Equity Retail Mutual Funds Mutual funds represent NOK 235 bn of thi
Slide 80: Operational synergies and tight cost control
Operational synergies and tight cost control lead to improved cost efficiency Delivering cost synergies Improved cost efficiency Operational costs as a share of AUM (bps), Asset First phase SKAGEN cost synergies under implementation with a target Management of NOK 50 million 16 Cost/AUM Client web
Slide 81: Market dynamics lead to broadening of client offering and need for scale
Market dynamics lead to further broadening of the client offering and the need for scale A changing asset mix.. …Revenue and cost pressure.. …And rising M&A deal sizes Global AUM split1 Average net revenues and costs as a Global Investment Management M&A deals – share of AUM (bps)1 number of deals a
Slide 82: Further scale as a multi-boutique platform
Further scale as a multi-boutique platform Four key criteria for further structural growth 721 Silver Volume and cost SKAGEN Institutional advantages offering and 577 capacity Storebrand Storebrand Commercialization of Retail position in sustainable funds Scandinavia 2016 2017 AUM, NOK bn 82
Slide 83: Our ambition
Our ambition Current targets on track New targets 2016-18 2018-21 #1 NOK 150m NOK 100m #1 NOK 250m Norwegian Norwegian asset manager asset manager Revenue growth Profit growth Profit growth1 with European footprint 83 1 Baseline: 2017 Operating profit for Storebrand Asset Management Group (pro
Slide 84: Increasing return to shareholders
Increasing return to shareholders Lars Aa. Løddesøl, CFO 84
Slide 85: Key Takeaways
Continued growth in Savings and Insurance with strong cost control Sufficient expected return to grow both solvency capital and buffers Key Takeaways Increasing solvency capital generation Low leverage and high remittance ratio Two sources of free capital generating shareholder dividend 85
Slide 86: Holistic sustainability reporting with long term targets and KPIs
Holistic sustainability reporting with clear long term targets and KPIs pr. input factor Financial capital and our Customers and community Our people and systems investment universe relations Linked to UN's sustainable development goals 86
Slide 87: Regulatory developments
Regulatory developments Solvency II – Standard model review Paid-up polices in Norway Public sector pension in Norway 87
Slide 88: Significant difference in capital consumption between old and new business
Significant difference in capital consumption and return profile between old and new business ILLUSTRATIVE 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 Group sits wit
Slide 89: Continued shift from Guaranteed to Non-Guaranteed Pension
Continued shift from Guaranteed to Non-Guaranteed Pension Premium income Storebrand Life Insurance1 Storebrand Life Insurance2 NOKm Share of Guaranteed 10 000 reserves Non-guaranteed 8 000 5% 6 000 4% 4 000 3% 2 000 2% 0 1% Guaranteed Non-guaranteed 0% 2012 2013 2014 2015 2016 2017 10 15 20 25 30 35
Slide 90: Net flows illustrate the shift in the business
Net flows illustrate the shift in the business Net flows Guaranteed Pension1 5 NOK bn 3 3 2 2 2 -14 -13 -13 -13 -13 -13 2018E 2019E 2020E 2021E 2022E 2023E Premiums Claims Net flows Savings non-guaranteed1 17 17 18 NOK bn 14 15 16 -3 -3 -4 -4 -5 -6 2018E 2019E 2020E 2021E 2022E 2023E Premiums2 Claim
Slide 91: Majority of total AUM is already capital efficient
Majority of total AUM in Storebrand is already capital efficient Forecast assets under management (NOKbn) Implications ILLUSTRATION 2017: 2028e: 66% of AuM ~85% of AuM Guaranteed portfolio has reached Solvency non guaranteed non guaranteed II peak capital consumption 1 200 New growth in Savings
Slide 92: Continued growth in Savings and Insurance with strong cost control
Continued growth in Savings and Insurance with strong cost control 92
Slide 93: Shift in Earnings to Front Book
Shift in Earnings to Front Book Three main segments with close links between value Transition towards Savings and Insurance drivers and reported results Result before amortisation Segments' share of result before amortisation 3,424 193 4% 2% 2,938 2,913 2,940 139 55 26% 405 1,465 766 53% 1,952 1,376
Slide 94: Improved quality of earnings
Improved quality of earnings Group result1 Comments 3,424 2,938 473 2,913 2,940 Operating earnings driven by AuM x 117 625 Margin 919 854 1,762 1,952 Insurance profits diversify earnings NOK mil 2,416 2,032 2,066 1,943 Increased profit sharing over time -101 -291 -13 2012 2013 2014 2015 2016 2
Slide 95: Illustrative P&L development
Illustrative P&L development NOK million Trajectory Fee and administration income Strong Savings growth, some margin decline. Back book run off Insurance result Moderate Insurance growth, stable margins Operational cost Flat nominal cost1 Operating profit Financial items and risk result life Gradual
Slide 96: Sufficient expected return to grow solvency capital and buffers
Sufficient expected return to grow both solvency capital and buffers 96
Slide 97: High quality assets backing guaranteed liabilities
High quality assets with mostly fixed income backing guaranteed liabilities Asset allocation Guaranteed Equities Real Estate NOK 179 bn 80% 7% 11% MSCI World Prime Location & Quality 20% Local Index (OMX & OBX) 30% NOK 80 bn Amortising bonds and loans Fixed income 7% 13% 52% Average rating Average r
Slide 98: Active risk management tailored to liability characteristics
Active risk management tailored to liability characteristics Paid up policies Norway NOK bn Allocation 5 18 bn. Equity Allocation 4 Bonds High 27 bn. Amortizing Bonds & Loans Allocation 3 Real Estate 30 bn. Allocation 2 27 bn. Buffer level Allocation 1 29 bn. Low Low Required book return High 98
Slide 99: Liability driven asset management with a double purpose
Liability driven asset management with a double purpose Financial targets sets priorities Two risk management perspectives Solvency generation and preservation main 1 Solvency II priority – basis for dividend capacity Long term perspective. Both assets and liabilities at market value Solvency II m
Slide 100: Liability driven investment strategy expected to generate SII capital
Liability driven investment strategy is expected to generate SII capital and increased IFRS results from profit sharing Expected excess SII buffer – over mark to market return guaranteed liabilities Asset return +0.6% +6.4% 1.0% 17.4% Discount rate SII 0.4% 11.0% Capital generation Expected Required
Slide 101: Increasing solvency capital generation
Increasing solvency capital generation 101
Slide 102: Strong historical growth in solvency ratio
Strong historical growth in solvency ratio Solvency ratio without transitional rules development 2014-2018 Q1 (%) 159 160 147 4 3 124 101 2014 2015 2016 2017 2018 Q1 Dividend paid Solvency ratio without transitionals 102
Slide 103: Savings and Insurance are close to self-financing
Savings and Insurance are close to self-financing going forward - SII-ratio of 186% excluding Savings and Insurance ILLUSTRATIVE PRO FORMA ALLOCATION BASED ON 165% SOLVENCY RATIO PR Q1 20181 Group SII 165% Q1 2018 Savings & Insurance SII1 Guaranteed & Other SII NOK bn NOK bn NOK bn 186% 43.4 Product
Slide 104: Reduced Solvency Capital Requirement from Guaranteed business
Reduced Solvency Capital Requirement from Guaranteed business Expected proportion of SCR 2018-2027 100% 4% 4% 4% 4% 4% 4% 4% 3% 3% 3% 3% Guaranteed products have more financial market risk 33% High buffer need to SCR because of high 37% 35% volatility 42% 40% 48% 45% 54% 51% 57% 56% 3% 3% 3% 3%
Slide 105: Guaranteed Back Book: reserves and capital consumption has peaked
Guaranteed Back Book: - reserves and capital consumption has peaked Estimated reduced capital consumption Why reduction in capital need? Capital consumption includes sum of solvency capital requirement and sum of VIF for all guaranteed products ILLUSTRATION Guaranteed portfolio in run off Averag
Slide 106: Capital generation will increase and support increasing dividends
Capital generation will increase over time and is sufficient to pay increasing dividends Annual estimated solvency generation short term (%)1 Expected capital generation ~10% Expected annual capital generation of ~10pp of improved solvency ratio after new business strain Dividends ~5% Further ma
Slide 107: Low leverage and high remittance ratio
Low leverage and high remittance ratio 107
Slide 108: Strong Group IFRS equity and capital structure
Strong Group IFRS equity and capital structure – reduced financial leverage Group equity (NOK bn) Group capital structure2 39,699 30,832 34,712 35,258 32,567 27,637 26,946 30,184 24,741 27,250 22,775 26,273 30,832 20,175 18,777 (78%) 24,537 26,946 27,637 24,741 (78%) 21,136 (80%) 22,775 (78%) 22,779
Slide 109: High quality capital base under Solvency II
High quality capital base under Solvency II SCR and own funds Q1 2018 (NOK bn) Own funds in % of SCR (excluding CRD IV subsidiaries) OF % OF % of Regulatory limit of SCR total 43.3 0.1 3.0 Tier 3 ≤ 15% SCR 0.3% 0.2% 6.3 0.9 26.3 CRD IV 2.5 Tier 2 ≤ 50% SCR 27% 16% capital ∑ T2+T3 requirements 33.1 T
Slide 110: Strong liquidity and low leverage
Strong liquidity and low leverage Net debt ratio Storebrand ASA (holding) 13% 11% 12% Proceeds from subsidiaries have been used to 9% 9% 9% 8% reduce the debt in the holding company and 5% increase the liquidity buffer 4% 3% -1% Holding company net debt ratio of 0 Refinancing of debt at lower
Slide 111: High remittance ratio in the Group
High remittance ratio in the Group Storebrand Life Storebrand Storebrand Storebrand Asset Storebrand Bank ∑ Group3 Group Forsikring Helseforsikring Management Earnings after tax1 1 805 81 39 146 513 2 584 (NOK m) Remittance2 1 300 81 36 292 535 2 244 (NOK m) Remittance ratio 72% 100% 92% 200% 104% 8
Slide 112: Two sources of free capital generating shareholder dividend
Two sources of free capital generating shareholder dividend 112
Slide 113: Two sources of free capital for shareholders
Two sources of free capital for shareholders 2.50 IFRS result growth - Ordinary 0.40 dividends minimum 50% of result after tax with nominal growth 1.55 Capital release from back book 2.10 when solvency ratio is above 180% or 1.55 special positive effects from results - Special dividends 2016 201
Slide 114: Operating IFRS earnings provide the base return to shareholders
Operating IFRS earnings provide the base return to shareholders Return on IFRS equity RoE target of 10% maintained 12% 11% 11% 11% RoE target: 10% after tax, adjusted for amortisation 9% Target >10% Increase in equity capital in light 8% of higher capital requirements 7% 6% Reduced income from
Slide 115: Group capital management policy sets thresholds for cash dividends
Group capital management policy sets thresholds for distribution of cash dividends Solvency II Incl. transitional rules Consider increased pay out Consider share buybacks 180% 165% Dividend of more than 50% of Group result after tax Current Ambition is to pay ordinary dividends per share of
Slide 116: Ambitions Capital – back book has reached peak capital
Ambitions Capital – back book has reached peak capital and is expected to contribute with cash together with growing front book Low case: Base case: High case: Release capital from the business Release capital from the business Release capital from the business 2021 Regulatory change Expected star
Slide 117: Financial Targets
Financial Targets Target Return on equity1 > 10% Dividend pay-out ratio2 > 50% & nominal growth % Solvency II margin Storebrand Group3 > 150% 117 1 2 Before amortisation after tax. After tax 3 Including transitional rules.
Slide 118: Dividend policy
Dividend policy Storebrand's objective is to create attractive and competitive returns for shareholders through dividends and value creation in the business. Our ambition is to pay stable and growing base dividends combined with special dividends to reflect financial markets volatility and capital r
Slide 119: Appendix
1. Economic Capital Reflects Value of Storebrand's Business today 2. Differences between Solvency II and Economic capital 3. From IFRS to Solvency II Own Funds 4. The Solvency calculation 5. Calculating the value of liabilities under Solvency II 6. Solvency Capital Requirements (SCR) Appendix 7. Sol
Slide 120: Economic Capital reflects value of Storebrand's business today
Economic Capital reflects value of Storebrand's business today NOKm 51,986 Subordinated loans 8,547 Look through 3,344 Storebrand group Group Economic Capital of NOK 43.4bn Reconciliation reserve 18,321 43,439 Storebrand Group Economic Capital per share NOK 92.9 per share (NOK 88.0 in 2016) Va
Slide 121: Differences between Solvency II and Economic capital
Differences between Solvency II and Economic capital From Economic capital1 to Solvency II standard model NOKm 51.986 8.547 46.164 Reconciliation Storebrand Economic 4.513 Reconciliation SII standard model reserve Capital 3.344 reserve incl. transitional rules Look through Calculate net present 8.54
Slide 122: From IFRS Values to Solvency II Own Funds
From IFRS Values to Solvency II Own Funds Moving from IFRS to Solvency II capital (NOK bn)1 IFRS shareholders equity 31.1 Intangibles Intangible assets 4.8 Goodwill DAC Full market value of assets 6.3 Excess value bonds at amortised cost Best estimate liabilities 8.2 Increased liabilities
Slide 123: The Solvency Calculation
The Solvency Calculation – moving to a market consistent balance sheet and risk sensitive capital requirements IFRS balance sheet Solvency II 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 124: Calculating market value of liabilities under Solvency II
Calculating market value of liabilities under Solvency II Solvency II balance sheet Market value of liabilities Consist of both traditional IFRS Own Both assets and tangible capital, subordinated Own Funds liabilities are mark to Funds debt and NPV of future profits market 43 bn For assets this
Slide 125: Solvency Capital Requirements (SCR)
Solvency Capital Requirements (SCR) SCR calculation Q1 2018 (NOK bn) SCR dominated by financial market risk… Operational P&C & Health Currency 4% 3% Interest Rate Down 15% Concentration 19% 0% SCR before diversification 36.2 Life 28% Spread 26% 26% Diversification -7.0 Equity 63% 14% 2% Property Ris
Slide 126: Solvency Capital allocation pr. segment
Solvency Capital allocation pr. segment ILLUSTRATIVE PRO FORMA ALLOCATION BASED ON 165% SOLVENCY RATIO PR Q1 20181 Savings Insurance Guaranteed Other Group Solvency II: Solvency II: Solvency II: Solvency II: Unit Linked reserves 172 bn Insurance portfolio premiums 4.4bn Guaranteed reserves 259bn Com
Slide 127: Solvency Capital allocation main life products
Solvency Capital allocation main life products ILLUSTRATIVE PRO FORMA ALLOCATION BASED ON 165% SOLVENCY RATIO PR Q1 20181 Hard capital to Contribution Solvency ratio Reserves have 165%1 Run off/ to Own Funds SCR – before use of (NOK bn) Solvency ratio Growth ('VIF') hard capital (NOK bn) Defined ben
Slide 128: High quality fixed income I - hold to maturity bonds
High quality fixed income I - High return, long duration bonds hold to maturity bonds1 Market & book value – no reinvestment (NOKbn) Rating distribution (%) 108 106 Loans and unrated 6 5 99 93 6% 4 BBB 3 80 2 68 14% 62 AAA 1 57 1 35% 1 45 102 101 95 90 0 37 78 0 30 67 61 25 22 56 0 45 0 0 36 29 25 2
Slide 129: High quality fixed income II - mark to market bonds
High quality fixed income II - Well diversified mark to market bonds1 Rating distribution (%) Geographical distribution (%) AAA 3% 20% 21% 2% Sweden 36% AA Norway 11% A 42% Europe ex. NO & SE BBB US 17% Loans, Unrated and <BBB 31% 15% Other Sector distribution (%) 11% Sovereign and gov. Guaranteed 1
Slide 130: Investor Relations contacts
Investor Relations contacts Lars Aa Løddesøl Group CFO lars.loddesol@storebrand.no +47 9348 0151 Kjetil R. Krøkje Head of IR kjetil.r.krokje@storebrand.no +47 9341 2155 Daniel Sundahl IR Officer daniel.sundahl@storebrand.no +47 9136 1899 This document contains Alternative Performance Measures as def