Storebrand Asa · OSL:STB
Storebrand Asa — Q4 2019 Earnings Presentation
66 slides from Storebrand Asa's earnings presentation, 2020
Slide 1: Investor Presentation Q4 2019
Investor Presentation Q4 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
▪ Transformed business from guaranteed to non- guaranteed ▪ Well positioned to capture capital light and Key Takeaways profitable savings growth ▪ Back book capital consumption has peaked: increased capital return to shareholders ▪ Delivering on financial targets 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 831bn in AuM of ▪ NOK 4.7bn in which 40% external clients portfolio premiums ▪ 100% of investments Pension & Savings subject to sustainability ▪ 40k corporate customers screenin
Slide 7: 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 8: Demographic change has driven pension reforms in Norway with opportunities emerging
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 9: Moderate replacement rates and a wealthy population fuel growth potential in retail savings
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 10: 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 11: 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 2018 Exte
Slide 12: Our strategy: A compelling combination of 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 13: 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 14: 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 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% ─ Populatio
Slide 15: 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 16: 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 31% +78% Market Retail 3 200 000
Slide 17: Fast growing Nordic asset manager with captive pension assets and external clients
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 296 bn 325 bn 40% 60% AuM Pension savings SE 831 bn Direct retail Ass
Slide 18: 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 18 1 Revenue & AuM include Skagen from 01.01.2017 proforma
Slide 19: Sustainability at the core of our business
Sustainability at the core of our business C Asset Mgmt NOK 831 bn AuM aligned to contribute to the UN Sustainability Goals AUM Sustainability Enhanced, Solutions NOK bn 277.3 831 bn 59.8 68.1 Active Exclusions ownership 3.0 10.3 2015 2016 2017 2018 2019 All assets under management are subject to su
Slide 20: 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 21: 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 22: Significant difference in capital consumption and return profile 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 23: Majority of AUM is already capital efficient while guaranteed AUM is trailing 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 24: Capital generation from fee based earnings and capital release from back book
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 25: Strong historical growth in solvency ratio
2 Strong historical growth in solvency ratio Solvency ratio without transitional rules development 2014-2019 (%) 178 179 6 6 159 147 4 3 124 172 174 155 101 144 2014 2015 2016 2017 2018 2019 Set aside for Dividend Dividend paid Solvency ratio without transitionals 25
Slide 26: Group capital management policy sets thresholds for distribution of cash 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 176% ▪ Ambition is to pay ordinary dividends per share of at l
Slide 27: Ambitions Capital – back book has reached peak capital
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 28: Delivered on Financial Targets
Delivered on Financial Targets Target Actual 2019 Return on equity1 > 10% 8.0% Dividend pay-out ratio1 > 50% 73% ✓ % Solvency II margin Storebrand Group2 > 150% 176% ✓ 1 Before amortisation after tax. 28 2 After tax 3 Including transitional rules.
Slide 29: Capital Management
29 Capital Management G9 storebrand
Slide 30: 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 31: IFRS earnings close to cash allow for a 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 1846 101 24 213 414 2952 (NOK m) Remittance2 1520 80 65 1 465 2129 (NOK m) Remitt
Slide 32: Strong Group IFRS equity and capital structure – reduced financial leverage
Strong Group IFRS equity and capital structure – reduced financial leverage Group equity (NOK bn) Group capital structure2 42,323 40,821 39,699 35,258 32,873 33,398 32,567 30,832 27,637 27,250 24,741 33,398 30,832 32,873 (79%) 27,637 (78%) (81%) 20,175 24,795 25,748 24,741 23,900 (75%) (77%) (78%) 2
Slide 33: Term structure debt
Term structure debt Term structure senior debt Storebrand ASA (bn NOK) Development net liquidity Storebrand ASA 0.8 20 % MRD NOK 10 % 0.5 0% -10 % -20 % 2020 2021 2022 2023 2024 2025 Term structure sub-debt Storebrand Livsforsikring1 (bn NOK) Interest charge coverage Storebrand group2 EBITDA/Interes
Slide 34: The Solvency Calculation – moving to a market consistent balance sheet
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 35: High quality capital base under Solvency II
High quality capital base under Solvency II SCR and own funds Q4 2019 (NOK bn) Own funds in % of SCR (excluding CRD IV subsidiaries) OF % OF % of Regulatory limit of SCR total 47 0 3 Tier 3 ≤ 15% SCR 1% 1% 7 1 27 CRD IV 3 Tier 2 ≤ 50% SCR 29% 16% capital ∑ T2+T3 requirements 36 Tier 1 ≤ 20% T1 5% 3%
Slide 36: Solvency Capital Requirements (SCR)
Solvency Capital Requirements (SCR) SCR calculation Q4 2019 SCR dominated by financial market risk… NOKbn Operational P&C & Health 4% Currency 3% Interest Rate Down 16% 19% Concentration 0% SCR before diversification 36 Life 29% Spread 24% Diversification -7 29% 61% Equity 12% Risk absorbing Financi
Slide 37: Savings and Insurance are close to self-financing going forward
Savings and Insurance are close to self-financing going forward - SII-ratio of 204% excluding Savings and Insurance ILLUSTRATIVE PRO FORMA ALLOCATION BASED ON 174% SOLVENCY RATIO PR Q4 20191 Group SII 174% Q4 2019 Savings & Insurance SII1 Guaranteed & Other SII NOK bn NOK bn NOK bn 204% 47 Product c
Slide 38: Reduced Solvency Capital Requirement from Guaranteed business
Reduced Solvency Capital Requirement from Guaranteed business Expected proportion of SCR 2019-2028 2% 2% 2% 2% 2% 2% 2% 100% 2% 2% 2% ▪ Guaranteed products have more financial market risk 29% 27% 34% 32% ▪ High buffer need to SCR because of high 40% 37% volatility 43% 47% 51% 56% 3% 3% 3% 3% 3% 3% ▪
Slide 39: Investment management
39 Investment management G9 storebrand
Slide 40: Liability Driven Investments expected to generate SII Capital and Stabilise IFRS Results
Liability Driven Investments are expected to generate SII Capital and Stabilise IFRS Results Expected excess SII buffer – over mark to market return* guaranteed liabilities +0.7% +6.9% 1.2% 19.7% Long term perspective 12.8% SII 0.5% Risk management of own funds and SCR Expected Required Risk 2019 20
Slide 41: 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 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% 30.09.2019 9% 26% 2% 52% 10% 0% 31.12.2019 9% 25% 3% 52% 10% 0%
Slide 42: SPP asset allocation
SPP asset allocation 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Alternative Bonds Equities investments 31.12.2018 13% 81% 6% 31.03.2019 13% 82% 5% 30.06.2019 13% 83% 5% 30.09.2019 12% 84% 4% 31.12.2019 12% 81% 6% Note: The graph shows the asset allocation for all products with an interest rate guarantee
Slide 43: High quality assets with fixed income as the backbone
High quality assets with fixed income as the backbone NOK 192 bn 9% Equities Real estate 10% 25% 80% Prime MSCI World Location & Quality 20% Local Index (OMX & OBX) SEK 82 bn 6% 12% Amortising 55% Fixed income bonds and loans 82% Average rating Average rating Norway Sweden AA- A Equities Fixed incom
Slide 44: 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 (%) 117 113 Loans and unrated 5 5 97 BBB 6% 4 86 81 4 75 14% AAA 3 3 62 34% 113 2 50 108 2 43 93 1 35 83 77 27 72 1 24 60 1 23% 48 42 1 34 26 23 A 2019 2020 202
Slide 45: 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 distribution (%) Loans and unrated 26% 31% Europe ex. NO & SWE 27% AAA Norway 39% 4% 0% Sweden Other 11% US AA 39% 12% 11% BBB A Sector distribution (%) 7% 21% Sovereign and gov. Guara
Slide 46: Paid up policies in Norway: Segmentation According to Risk Capacity
Paid up policies in Norway: Segmentation According to Risk Capacity High Segment 4 44 bn. Segment 5 20 bn. Amortizing bonds and loans Government bonds Credit Segment 3 Real Estate Buffer level 27 bn. Equities Segment 2 25 bn. Segment 1 21 bn. Low Low Required book return High 46
Slide 47: Q4 2019 Results
47 Q4 2019 Results G9 storebrand
Slide 48: Highlights Q4 2019
Highlights Q4 2019 #1 sustainable insurance company in the world4 Group result1 23% Unit Linked reserve growth2 3 037 739 MNOK NOK 124bn AuM growth Asset Management2 1 026 2 298 319 707 Q4 2019 Full year 2019 176% Solvency margin5 Financial items and risk result life Operating profit NOK 3.25kr prop
Slide 49: Dividend 2019
Dividend 2019 +8.3% 3.25 3.00 ▪ IFRS result growth - Ordinary 2.50 dividends minimum 50% of result 0.40 after tax with nominal growth 1.55 ▪ Capital release from back book 2.10 when solvency ratio is above 180%. 1.55 Share buy backs preferred 2016 2017 2018 2019 Special dividends Ordinary dividends
Slide 50: Key figures Group
Key figures Group Result development1 Earnings per share2 Financial items and risk result life Operating profit MNOK Special items 4.18 Performance related result 1,026 563 730 579 700 319 114 85 11 202 105 251 1.68 1.26 1.21 1.22 569 546 568 635 456 -103 -18 -44 -50 -49 Q4 2018 Q1 2019 Q2 2019 Q3 2
Slide 51: Movement from Q3 2019 to Q4 2019
Movement from Q3 2019 to Q4 2019 Group Storebrand ASA -7 % +1 % -3 % +2 % +2 % +176 % +174 % +172 % 0% +9 % Q3 2019 Model Changes in VA, equity Business mix Operating Subordinated Q4 2019 Transitionals Q4 2019 without improvements interest rates stress level and asset earnings loan without transitio
Slide 52: Movement full year 2019
Movement full year 2019 Group Storebrand ASA 10% 179% 2% 176% 174% 172% 10% 6% 0% -1% 3% -1% -8% -5% Q4 2018 Model M&A VA, equity Reinsurance Subordinated Changes in Business mix Operating Q4 2019 Dividend Q4 2019 Transitionals Q4 2019 without improvements stress and liabilities interest rates and a
Slide 53: SII position Storebrand Group
SII position Storebrand Group Group Solvency position(%)1 Estimated sensitivities Target SII margin 150% 177 176 5 2 SII-margin Q4 174 2 176 172 174 Interest rates -50bp 161 9 170 Interest Q3 2019 Q4 2019 rates +50 bp 186 2 188 Transitional rules SII standard model Equity -25% 167 1 168 Key takeaway
Slide 54: Storebrand Group
Storebrand Group Group Profit1 Q4 Full year NOK million 2019 2018 2019 2018 Fee and administration income 1 561 1 301 5 308 5 011 Insurance result 223 282 1 005 1 291 Operational cost -1 077 -1 031 -4 015 -3 786 Operating profit 707 551 2 298 2 516 Financial items and risk result life 319 11 739 642
Slide 55: Storebrand Group
Storebrand Group Group Profit1 Q4 Full year NOK million 2019 2018 2019 2018 Fee and administration income 1 561 1 301 5 308 5 011 Insurance result 223 282 1 005 1 291 Operational cost -1 077 -1 031 -4 015 -3 786 Operating profit 707 551 2 298 2 516 Financial items and risk result life 319 11 739 642
Slide 56: Storebrand Group
Storebrand Group Group Profit1 Q4 Full year NOK million 2019 2018 2019 2018 Fee and administration income 1 561 1 301 5 308 5 011 Insurance result 223 282 1 005 1 291 Operational cost -1 077 -1 031 -4 015 -3 786 Operating profit 707 551 2 298 2 516 Operating profit adjusted for performance related i
Slide 57: Savings (non-guaranteed)
Savings (non-guaranteed) Savings Profit Q4 Full year NOK million 2019 2018 2019 2018 Fee and administration income 1 233 1 006 3 996 3 709 Operational cost -692 -652 -2 621 -2 405 Operating profit 541 354 1 375 1 303 Financial items and risk result life 6 -29 -11 -46 Profit before amortisation 547 3
Slide 58: Savings (non-guaranteed)
Savings (non-guaranteed) Group Profit Q4 Full year NOK million 2019 2018 2019 2018 Fee and administration income 1 233 1 006 3 996 3 709 Operational cost -692 -652 -2 621 -2 405 Operating profit 541 354 1 375 1 303 Operating profit adjusted for performance related income and costs1 Q4 Full year NOK
Slide 59: Savings (non-guaranteed) – strong AuM growth
Savings (non-guaranteed) – strong AuM growth Savings Reserves and premiums Unit Linked Comments1 4.6 4.1 4.2 4.2 4.2 ▪ 11% premium growth in UL premiums 220 207 198 191 ▪ 23% growth in UL reserves 179 BNOK ▪ 18% growth in assets under management2 Q4 2018 Q1 2019 Q2 2019 Q3 2019 Q4 2019 ▪ Higher net
Slide 60: Insurance
Insurance Insurance Profit Q4 Full year NOK million 2019 2018 2019 2018 Insurance premiums f.o.a. 1 014 1 003 3 909 3 854 Claims f.o.a. -792 -721 -2 904 -2 562 Operational cost -177 -175 -648 -614 Operating profit 45 107 357 677 Financial result 25 -9 83 71 Profit before amortisation 70 97 439 748 P
Slide 61: Insurance – overall in line with target
Insurance – overall in line with target Insurance Combined ratio Comments Combined ratio and results Claims ratio Cost ratio Combined ratio 90% 96% ▪ 91% combined ratio 2019, target ratio 90-92% 89% 89% 89% ▪ Good cost control 74% 78% ▪ Group life re-priced from 1 January 2020 72% 72% 73% 17% 16% 16
Slide 62: Guaranteed pension
Guaranteed pension Guaranteed Profit Q4 Full year NOK million 2019 2018 2019 2018 Fee and administration income 368 333 1 475 1 440 Operational cost -225 -223 -819 -816 Operating profit 143 111 657 624 Risk result life & pensions 71 58 215 191 Net profit sharing 118 48 157 333 Profit before amortisa
Slide 63: Guaranteed pension - strong financial result and robust buffer situation
Guaranteed pension Guaranteed - strong financial result and robust buffer situation Reserves guaranteed products Comments 261 261 262 264 263 33 32 33 33 33 ▪ As companies convert to DC schemes, the migration from DB to paid up policies continues to 137 reduce fee income in Guaranteed pensions BNOK
Slide 64: Other
Other1 Other Profit Q4 Full year NOK million 2019 2018 2019 2018 Fee and administration income 13 23 51 102 Operational cost -35 -42 -143 -190 Operating profit -22 -20 -91 -89 Financial items and risk result life 99 -56 296 128 Profit before amortisation 77 -76 205 40 Profit per product line Q4 Full
Slide 65: To register, please visit Storebrand.com/ir
To register, please visit Storebrand.com/ir 65
Slide 66: 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