Storebrand Asa · OSL:STB
Storebrand Asa — Debt Investor Presentation (November 2017)
60 slides from Storebrand Asa's debt investor presentation, November 2017
Slide 1: 250 Years of Risk Management - Managing capital efficient growth
250 Years of Risk Management - Managing capital efficient growth INVESTOR PRESENTATION NOVEMBER 2017 Established in 1767
Slide 2: Key investment considerations
Key investment considerations • Storebrand is the leading Nordic pension and saving provider • Storebrand is celebrating 250 years and Storebrand Livsforsikring AS has a very long track record as a reliable lender • Owner Storebrand ASA has a diversified income and low leverage • Proven risk and cos
Slide 3: Storebrand Group overview and strategy
Storebrand Group overview and strategy 3
Slide 4: Storebrand – the world's most sustainable insurer
Storebrand – the world's most sustainable insurer Storebrand was named the world's most sustainable insurance company, and the second most sustainable company in any category, at the World Economic Forum 2017. We are proud and humbled. Proud, because sustainability is at the core of our business. Hu
Slide 5: Group Strategy
Group Strategy A Consistent strategy since 2012: Active management of the guaranteed balance sheet and create the new Storebrand through growth within Savings and Insurance B Doubled equity in 5 years and delivered stable solvency margin above 150% - In 2016 First dividend payout since 2011 - Back b
Slide 6: Storebrand Group – an integrated financial services group
Storebrand Group – an integrated financial services group Life and pensions Asset management 40k corporate customers NOK 626 bn in AuM of which 26% 1.9m individual customers external assets NOK 419bn of reserves of which 100% of investments assessed by approx. 40% Unit Linked sustainabilit
Slide 7: Our strategy
Our strategy 1 Manage the guaranteed 2 Continued growth in Savings balance sheet and Insurance >150% SII margin Capital-light and profitable growth Cost reductions through automation and Market leading asset gatherer with strong Insurance outsourcing offering Manage for future capital release
Slide 8: Healthy growth in Nordic pension market
Healthy growth in Nordic pension market - Supported by solid macro environment Unit Linked pension premium growth1 Norway, NOK bn Sweden, SEK bn 56 52 46 37 42 23 20 CAGR 17% 15 17 13 25 27 29 32 33 CAGR 9% 2012 2013 2014 2015 2016 Inverted government net debt ratio Unemployment rates2 as % of GDP2
Slide 9: Defined Contribution Pension Savings in the Nordic
Defined Contribution Pension Savings in the Nordic - Leading position in Norway and strong contender in Sweden Norway – market leader defined contribution Sweden – growing in defined contribution (private sector)1 (private sector)2 31.6 28.1 18.4 15.1 14.4 12.6 14.0 8.6 8.7 9.4 Storebrand DNB Nordea
Slide 10: Storebrand balance sheet shifts to capital efficient products
Storebrand balance sheet shifts to capital efficient products Forecast assets under management (NOKbn) Implications for capital ILLUSTRATION 2016: 2027e: 54% of AuM >80% of AuM 900 non guaranteed non guaranteed 800 700 1. Guaranteed portfolio has reached Solvency II peak capital consumption 600 500
Slide 11: Cross Selling to 1.9m individuals
Cross Selling to 1.9m individuals - Through Corporate Clients and External Partners 60,000 700,000 60,000 1,200,000 new new retirees and employees in former holders of employees employees 40,000 businesses pension certificates each year each year Pension savings Asset mgmt. Insurance Retail bank Ext
Slide 12: Growth in Savings and Insurance
Growth in Savings and Insurance Unit Linked Asset management +7% +21% 158 140 626 128 571 577 105 535 85 487 64 442 54 2011 2012 2013 2014 2015 2016 2017 3Q 2012 2013 2014 2015 2016 2017 3Q UL reserves (NOKbn) AuM (NOKbn) Insurance Retail bank +9% +10% 40,9 4,533 4,474 35.4 4,327 3,569 3,699 23.9 26
Slide 13: New business has strong capital synergies
New business has strong capital synergies Capital efficient Solvency II Builds >2pp of Diversification mortgages on Capital capital solvency ratio benefits life balance synergies generative per year sheet Product areas Pension savings Asset mgmt. Insurance Retail bank 13
Slide 14: Cost Target for Storebrand Group on track
Cost Target for Storebrand Group on track Target to reduce costs nominally… …on track despite strong business growth 3 728 1 60 New investments in fast growing business Increased investments in new digital growth ~400 3 268 2 Financial tax in Norway + NOK 60m in increased costs annually 2015 Wage Fi
Slide 15: Storebrand ASA acquires SKAGEN AS
Storebrand ASA acquires SKAGEN AS Strategic benefits positioning Storebrand + SKAGEN for continued growth Complementary strengths and customer base Combined no. 2 market position in attractive retail market European institutional distribution Scalable platform for growth Financial benefits supportin
Slide 16: Transaction structure – acquisition of 91% of outstanding shares
Transaction structure – acquisition of 91% of outstanding shares Initial payment in shares and cash Capital implication Group 1,629 • NOK 1,629m paid to the sellers on • Expected initial impact on solvency ratio of -2 407 closing percentage points • 75% in shares (NOK 1,222m) • Non guaranteed cash f
Slide 17: Storebrand is growing by building a well-diversified savings business
Storebrand is growing by building a well-diversified savings business Aging population and reduced Individualisation of savings and Consolidation in European asset state pensions increases savings pension market management industry Strengthened position in attractive growth market with long term val
Slide 18: Storebrand Livsforsikring AS acquires Silver's insurance portfolio
Storebrand Livsforsikring AS acquires Silver's insurance portfolio • 21,000 policies to be transferred to Storebrand Livsforsikring AS Customers & • NOK 8.5bn paid up polices with investment choice (no financial guarantees) portfolio • NOK 1.5bn risk products • NOK 520m financed by liquidity in Stor
Slide 19: Pillar III Savings introduced in Norway with sales start 1 November
Finally! Pillar III Savings introduced in Norway with sales start 1 November Pillar I Pillar II Pillar III State pensions Corporate Pensions Individual Savings 1 Savings for pension – Locked until retirement 2 Individuals can save NOK 40,000 annually 3 Income tax deduction of 24% (2017) 4 No wealth
Slide 20: Solvency position and Capital
Solvency position and Capital 20
Slide 21: Long History of Economic Capital Modelling in Storebrand
Long History of Economic Capital Modelling in Storebrand 1998 2007 2008 2012 Today Embedded Adoption to Storebrand is using Value Solvency II the Solvency II introduced modelling since standard model QIS3 Market consistent "In house" better and Risk and business Embedded Value faster Solvency II mod
Slide 22: Storebrand Group equity and capital structure
Storebrand Group equity and capital structure – Reduced financial leverage and increased tangible capital Group equity Group capital structure2 Tangible equity increased by 74% 2012-2017 Q3, intangible equity Improved leverage ratio amortised according to plan (MNOK) 36,609 35,258 34,712 32,567 29,0
Slide 23: Transition Into a Solvency II Based Regime has Required Discipline and Targeted Measures
Transition Into a Solvency II Based Regime has Required Discipline and Targeted Measures Transfer out of guaranteed products.. .. Strong cost reduction.. ... And strengthened reserves for longevity 842 40,728 NOK mil Operational cost, NOK mil1 NOK bn 3,305 12.4 -98% 7,729 3,228 3,212 CAGR -1% 14,823
Slide 24: 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 25: 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 tangible capital, subordinated Both assets and liabilities Own Funds are mark to market debt and NPV of future profits Funds 44 bn For assets this
Slide 26: Solvency II Ratio Storebrand Group Q3 2017
Solvency II Ratio Storebrand Group Q3 2017 160% 44.4 Transitional measures 1.9 Subordinated loans 7.44 Contribution to Own Funds from 3 non-guaranteed business1 11.2 27.8 2.5 CRD IV capital requirements Contribution to Own Funds from from subsidiaries 2.9 guaranteed business1 8.6 SCR from non-guaran
Slide 27: Solvency Capital Requirements (SCR)
Solvency Capital Requirements (SCR) SCR calculation Q3 2017 SCR dominated by financial market risk… NOKbn Operational P&C & Health 4% Currency 3% Interest Rate Down 14% Concentration 19% 0% SCR before Life 38.5 26% diversification Spread 26% 26% Diversification -2.5 Equity 66% 2% Counterparty 15% Pr
Slide 28: High quality capital base
High quality capital base SCR and own funds Q3 2017 (NOK bn) Own funds in % of SCR (excluding CRD IV subsidiaries) 44.4 2,7 0.1 OF % OF % of 4,6 Regulatory limit of SCR total 2,4 27.8 Tier 3 ≤ 15% SCR 0.4% 0.2% CRD IV capital 2.5 requirements Tier 2 ≤ 50% SCR ∑ T2+T3 18% 11% 34.6 SCR SII regulated 2
Slide 29: From IFRS Values to Solvency II Own Funds
From IFRS Values to Solvency II Own Funds Moving from IFRS to Solvency II capital NOKbn IFRS shareholders equity 29.1 Intangibles Intangible assets 4.9 Goodwill DAC Excess value bonds at amortized cost Full market value of assets 8.6 Increased liabilities guaranteed products: 6.1 bn Best e
Slide 30: SII position and sensitivities Storebrand Group
SII position and sensitivities Storebrand Group Solvency position(%)1 Estimated sensitivities Target SII margin 150% 163 160 11 10 Estimated economic 150 10 160 SII-margin Q2 2017 Interest 140 25 165 152 150 rates -50bp Interest rates +50 bp 158 3 161 Q2 2017 Q3 2017 Transitional rules SII standard
Slide 31: Strong returns on IFRS equity in Savings and Insurance
Strong returns on IFRS equity in Savings and Insurance ILLUSTRATIVE Savings Insurance Guaranteed Other Group IFRS earnings1 (NOKm) 910 554 934 296 2,694 Allocated Equity2 (NOKbn) 3.6 1.7 19.7 3.3 28.2 Pro forma 26% 33% 5% 9% 9.5% RoE adj(%) The equity in the Group sits within different legal units.
Slide 32: Storebrand Group is well Capitalized for Growth and Dividends
Storebrand Group is well Capitalized for Growth and Dividends Tangible equity more than doubled since 2010 Strong solvency position NOKbn +110% 160% 24.3 10% Transitional rules 150% SII standard model Requirement 100% 11.6 2010 2017 3Q Q3 2017 Tangible equity Solvency II margin 32
Slide 33: Group capital management policy
Group capital management policy Solvency II level Consider increased pay out Consider share buy-backs 180% Dividend pay out 160% Q3 Maintain investment in growth No dividend if solvency ratio without transition rules <110 % 150% Reduced dividend pay out More selective investment in gro
Slide 34: Financial targets
Financial targets Target As of end 2016 3Q 2017 Return on equity1 > 10% 9.5% 7.7% Dividend ratio1 > 35% 27% na Solvency II margin Storebrand Group2 > 150% 157% 160% 34 1 Before amortisation after tax. 2 Including transitional rules.
Slide 35: Storebrand Livsforsikring AS
Storebrand Livsforsikring AS 35
Slide 36: Storebrand Group Structure (simplified)
Storebrand Group Structure (simplified) - Diversified cash flow to holding company Storebrand ASA Legal structure (simplified) Storebrand ASA Storebrand Livsforsikring AS Storebrand Asset management Storebrand Bank ASA Storebrand Forsikring AS AS Reporting structure Storebrand Holding AB Benco Store
Slide 37: Solvency ratio for Storebrand Livsforsikring AS (issuer) vs Storebrand Group
Solvency ratio for Storebrand Livsforsikring AS (issuer) vs Storebrand Group - Including transition rules 220% 200% 180% 160% 140% 120% 2016 1Q 2016 2Q 2016 3Q 2016 4Q 2017 1Q 2017 2Q 2017 3Q Storebrand Group SII Stb Livforsikring AS SII - Issuer (Storebrand Livsforsikring AS) is well capitalized 37
Slide 38: Term structure debt Storebrand Livsforsikring AS
Term structure debt Storebrand Livsforsikring AS Term structure debt Storebrand Livsforsikring1 (MNOK) Hybrid T1 Dated Subordinated T2 Perp. Subordinated T2 2.8112 New dated subordinated T2 1.500 1.000 1.100 3 720 2017 2018 2019 2020 2021 2022 2023 2024 1 Call dates 2 EUR 300 Million (EURNOK 9.37) 3
Slide 39: BBB+ rating with positive outlook from S&P Global
BBB+ rating with positive outlook from S&P Global …reflecting business and capital improvement during the past years Rating and underlying rationale Key Comments Insurance Financial Strength Rating (IFSR) • S&P Global has assigned an "BBB+" rating with positive outlook reflecting: • Improved and sus
Slide 40: Transaction summary - Indicative key terms
Transaction summery - Indicative key terms Issuer Storebrand Livsforsikring AS Instrument: Solvency 2 Compliant Subordinated bond issue (Tier 2 Capital) S&P Global Ratings: BBB+ (issuer Rating)/[Baa3] (Expected Instrument Rating) Volume: Approx. 800 NOK/SEK Maturity Date: (-) 2047 Issuer's Call opti
Slide 41: Key investment considerations
Key investment considerations • Storebrand is the leading Nordic pension and saving provider • Storebrand is celebrating 250 years and Storebrand Livsforsikring AS has a very long track record as a reliable borrower • Owner Storebrand ASA has a diversified income and low leverage • Proven risk and c
Slide 42: Appendix: Results Q3 2017
Appendix: Results Q3 2017 42
Slide 43: Highlights 3Q 2017
Highlights 3Q 2017 Group result1 20% Unit Linked growth2 773 177 10% AuM growth Asset Management2 MNOK 596 3Q 2017 26% Retail Bank lending growth2 Financial items and risk result life Operating profit 160% Solvency II ratio4 1 Result before amortisation and write-downs. 2 Growth figures are from YTD
Slide 44: Key figures
Group Key figures Result development1 Earnings per share2 Financial items and risk result life Special items MNOK Operating result 912 1.89 878 1.77 1.64 773 676 386 671 225 177 1.23 1.25 209 208 88 495 578 565 596 463 -27 -52 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q
Slide 45: Storebrand Group
Group Storebrand Group Profit1 3Q 01.01-30.09 Full year NOK million 2017 2016 2017 2016 2016 Fee and administration income 1 103 1 040 3 201 3 097 4 235 Insurance result 320 238 885 694 945 Operational cost2 -8262 -811 -2 462 -2 330 -3 191 Operating profit 596 468 1 624 1 461 1 989 Financial items a
Slide 46: Storebrand Group
Group Storebrand Group Profit 3Q 01.01-30.09 Full year NOK million 2017 2016 2017 2016 2016 Fee and administration income 1 103 1 040 3 201 3 097 4 235 Insurance result 320 238 885 694 945 Operational cost -826 -8112 -2 462 -2 330 -3 191 Operating profit 596 468 1 624 1 461 1 989 Financial items and
Slide 47: Savings (non-guaranteed)
Savings (non-guaranteed) Savings - continued growth Profit 3Q 01.01-30.09 Full year NOK million 2017 2016 2017 2016 2016 Fee and administration income 763 681 2 210 2 014 2 758 Operational cost -445 -442 -1 342 -1 274 -1 700 Operating profit 318 239 868 739 1 058 Financial items and risk result life
Slide 48: Savings (non-guaranteed) - strong growth in assets and retail lending
Savings (non-guaranteed) Savings - strong growth in assets and retail lending Reserves and premiums Unit Linked Comments 3,7 3,6 3,7 3,4 3,5 7% premium growth in UL premiums1 158 147 151 26% retail lending growth2 140 BNOK 132 10% growth in assets under management2 Q3 2016 Q4 2016 Q1 2017 Q2 2
Slide 49: Insurance
Insurance Insurance Profit 3Q 01.01-30.09 Full year NOK million 2017 2016 2017 2016 2016 Insurance premiums f.o.a. 993 962 2 904 2 871 3 828 Claims f.o.a. -674 -724 -2 019 -2 177 -2 883 Operational cost -175 -152 -519 -435 -602 Operating profit 145 87 366 259 342 Financial result 76 74 209 173 233 P
Slide 50: Insurance - Lagging growth, strong combined ratio
Insurance Insurance - Lagging growth, strong combined ratio Combined ratio Comments Combined ratio and results Claims ratio Combined ratio Cost ratio 91% 91% 89% 88% 85% Combined Ratio 85% Reduced premiums due to on-going shift to more cost-effective distribution and new 75% 74% 71% 70% 68% disa
Slide 51: Guaranteed pension - strong quarter but long term run off
Guaranteed pension Guaranteed - strong quarter but long term run off Profit 3Q 01.01-30.09 Full year NOK million 2017 2016 2017 2016 2016 Fee and administration income 380 403 1 108 1 190 1 566 Operational cost -212 -257 -649 -721 -981 Operating profit 169 146 459 469 585 Risk result life & pensions
Slide 52: Guaranteed pension - reserves in long term decline and robust buffer situation
Guaranteed pension Guaranteed - reserves in long term decline and robust buffer situation Reserves guaranteed products Comments 262 259 261 260 262 47 46 42 37 36 As companies convert to DC schemes, the migration from DB to lower-margin paid up policies 128 115 116 121 126 continues to reduce fee
Slide 53: Other
Other Other1 Profit 3Q 01.01-30.09 Full year NOK million 2017 2016 2017 2016 2016 Fee and administration income 19 31 63 102 145 Operational cost -53 -35 -132 -108 -141 Operating profit -35 -4 -69 -6 4 Financial items and risk result life 30 158 209 456 401 Profit before amortisation -5 154 140 449
Slide 54: 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 This document contains Alternative Performance Measures as defined by the European Securities and Market Authority (ESMA). An overv
Slide 55: Storebrand ASA, Term structure debt
Storebrand ASA, Term structure debt Term structure senior bond debt Storebrand ASA (MNOK) 800 Senior unsecured 500 500 450 0 2017 2018 2019 2020 2021 2022 MEUR 240 55
Slide 56: Storebrand Group Targeted nominal flat costs 2012-2018
Storebrand Group Targeted nominal flat costs 2012-2018/ NOK 800m cost reduction1 Operational cost 2012-20182 NOKm 3,228 3,212 <3,200 2012 2016 2018e Cost reduction completed 2012 – 2016 Further Cost Reductions to be Realized by 2018 Cost programme 2014 target reached Cognizant Transfer of additi
Slide 57: Changes to the Solvency II from CMD 2016 to Q3 2017
Changes to the Solvency II from CMD 2016 to Q3 2017 Message on CMD 2016: What Determines Solvency II Q1 2016 Changes from Q1 2016 to Q3 2017 Solvency II Q3 2017 the Solvency II Ratio Going Forward A 175% Interest rates: Small sensitivity in SII ratio including transitional Interest rates: Small
Slide 58: Solvency Capital allocation pr segment
Solvency Capital allocation pr segment – most of the capital allocated to the guaranteed segment ILLUSTRATIVE PRO FORMA ALLOCATION BASED ON 159% SOLVENCY RATIO PR Q1 2017 1 Savings Insurance Guaranteed Other Group Solvency II: Solvency II: Solvency II: Solvency II: Solvency II group calculation Unit
Slide 59: Dividend NOK 1.55 pr. share
Dividend NOK 1.55 pr. share [market communication dividend from Q4 2016] Payout ratio >35% The Board proposes a dividend of NOK 35% 1.55 per share for 2016 27% Expected dividend of more than 35 per cent of the result for 20171 Expected development in the Solvency II ratio implies a further gra
Slide 60: Growth ambitions 2018
Growth ambitions 2018 - as presented on CMD 2016 Unit Linked Asset mgmt. Insurance Retail bank #1 #1 ~ 10% Double market position Norwegian asset manager Long term growth2 Retail loan book Norway & Sweden1 NOK 150m 90-92% >10% Revenue growth Combined Ratio ROE3 NOK 100m Profit growth 1 Within segmen
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