Post on 04-Mar-2018
2
Overview
The savings market will see continued and strong growth
This positive trend is challenged by the bear market in the short term and by intensified competition in the longer term
Storebrand is positioning itself to take advantage of the opportunities and to meet the challenges of the future savings market
3
Continued and strong growth
� The demographics are changing dramatically
� People are adapting to a new set of life
� Less money can be expected to come from social welfare
� Long term investment yields are decreasing
� Current savings levels are relatively low
� The municipal market is opening up
4
Changing demographics
The shift in the age composition will trigger significant changes in the demand patterns for financial services
Changes in demographics from 1980 to 2030 (estimate) in Europe and the US
Percentage of total population
32 %
20 % 20 %
24 % 25 %
30 %
20 - 39 years 40 - 59 years over 60 years
1980
2030
Source: OECD
5
Changing values and lifestyles
Today’s working generations have become adapt to very different lifestyles than previous generations
Savings will be a prerequisite for lifestyle maintenance after the retirement age
Group-oriented
Careful
Traditional
Family
Goods
Social security
Individualistic
Ambitious
Innovative
Friends
Services
Self-realisation
Illustration of changes
6
A decline in the oil income
Source: The Norwegian Pension Commission
Pensions
% o
f G
DP
Net cash flowfrom petroleum operations
Changes in oil income and pensions expenditures
Reduced oil income means that the government’s ability to maintain today’s social welfare levels will be reduced
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The Norwegian pensions reform
Basic pension broadly in line with minimum pension today(abt. NOK97,000)
Everything above basic pensionfrom occupational pensionsObligatory or voluntaryFundedJointly – employer and employee Social security contributionsadjusted accordingly
Continue with additional pensionas public responsibilityObligatory funded schemeSocial security contributionabout the same as today
Additional pension under one of two models:
Flexible retirement age from age 62 to 70 Late retirement rewarded, early retirement discouragedCloser connection between contribution and paymentsPhase out AFP and special age limits Phase out gross guarantee of 66% in public sector
Commonfeatures
Two models
… with the result being an increased market for pension fund management
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Declining investment yields
Historic yield Future yield
Many academics, managers and others are now discussing the phenomenon of declining equity premiums
With falling investment yields people will have to save more to get the same amounts at their retirement age
IllustrativeA decline of 100 to 200bps?
9
Opening of municipal market
KLP is seeking to transform to a limited liability company
The current size of this market is 120 bNOK
Employees in the municipal sector
Source: Statistics Norway
400
450
500
550
6001992
1993
1994
1995
1996
1997
1998
1999
2000
2001
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Untapped potential in corporate pensions
There are currently 900.000 employees without corporate pension schemes in Norway
Corporate pension is an important topic for workers, unions and industry organisations
2020
Volume(bNOK)
4 bNOK in premiums*80 bNOK in funds*
* Assuming that 30 % of the 900.000 employees have a scheme in place in 20 years
(in 2002 numbers)
2002
Rough estimates
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Overview
The savings market will see continued and strong growth
This positive trend is challenged by the bear market in the short term and by intensified competition in the longer term
Storebrand is positioning itself to take advantage of the opportunities and to meet the challenges of the future savings market
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Challenges
The positive impact of continued and strong growth is challenged by the bear market in the short term as…
� The life company return is less than the guaranteed rate of return
� Sales of mutual funds to private customers continue to be low
…and by intensified competition in the longer term as…
� Technology enables lower cost levels
� Entry barriers are coming down for many products (not life)
� Price and product information becomes more transparent
� Product barriers are coming down (more substitute products)
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400
500
600
700
800
900
1000
1100
1200
Dec.99
Mar.00
Jun.00
Sep.00
Dec.00
Mar.01
Jun.01
Sep.01
Dec.01
Mar.02
Jun.02
Sep.02
The current bear market
2000: -11 % 2001: -15 % 2002: -25 %
Note: As of September 30, 2002
MSCI World in local currency
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Booked return generates results
Normal Case Storebrand Life - illustrative
(1,000)
(500)
0
500
1,000
1,500
-1% 1% 3% 5% 7% 9% 11% 13%
Booked return
Prof
it to
sha
reho
lder
s
Profit sharing model
35% limitis effective
Ownersrisk
Usage ofASR
Note: A ”normal” year implies no extraordinary reserve strengtheningand no buffer capital allocations
15
700
750
800
850
900
950
1000
1050
1100
1150
1200
des.97 sep.98 jun.99 mar.00 des.00 sep.01 jun.02-4 000
-2 000
0
2 000
4 000
6 000
8 000MSCI.WRLD.PI (left axis)
Quarterly net subscription mutual funds (right axis)
MNOK
Banks and insurers expanded AM-activities
...and reaped the benefits of the bull markets
...hoping that thedownturn was temporary
Mutual fund savings and industry expansion driven by bull markets
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Increased competition
Over the past decade intensified competition has forced financial institutions to improve their product and service offerings and at the same time cut costs.
Developments in technology and legislation as well as constant pressures from shareholders and customers will continue to shape the industry.
Tomorrow’s competitive area will be characterised by…
� A wider, but increasingly commoditised product and service range
� Distribution through multiple channels
� Increased standardisation, integration and automation of operations
� Decreased customer loyalty
� Increased consolidation
� An increased number of new and specialised players
17
Overview
The savings market will see continued and strong growth
This positive trend is challenged by the bear market in the short term and by intensified competition in the longer term
Storebrand is positioning itself to take advantage of the opportunities and to meet the challenges of the future savings market
18
Areas under our control
“Now is no time to think of what you do not have. Think of what you can do with what there is.”
Ernest Hemingway
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Storebrand’s positioning
Storebrand is positioning itself to take advantage of the opportunities and to meet the challenges of the future savings market
� Satisfactory financial position in life and exploitation of our risk management practices
� Continuous effectiveness and efficiency improvements of operations
� Commitment to developing attractive and profitable products and services
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Sound financial position –highlights 3Q
In the perspective of weak market conditions:
� Life capital ratio: 16,0%
� Risk capital in life: 3.2bn
� Equity market fall absorption*: 40%
� Equity allocation*: < 10%
and…
� Comforting liquidity and credit facilities
� Improvement programmes developing according to plan
* In the Life Company
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Prudent risk management
� Dynamic risk management model
� Rapid adaptation to market fluctuations (equity share down to <10% from 16 % at 2nd quarter)
� Low risk in bond portfolio
� Currency positions hedged
� Significant reserve strengthening in Finansbanken
� Strict credit allocation guidelines
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Positive cost development
� Significant cost reductions developing as planned
- Group: 150m (2002)*
- Banking: 75m (2003)
- Investments: 20% (2003-2005)
� Focus areas
- Co-ordination of banking units
- Distribution efficiency
- Specialisation and automation in asset management
� Life company with competitive cost ratio
* Compared with costs base of NOK 1.350m in 1st half 2001 (annualised). Excludes life business and sales provisions in Storebrand Bank.
�
�
�
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Focus areas for the businesses
� Growth in funds and premiums through a strong product range, good service and focused marketing
� Increased results through higher investment returns, strong risk control and operating performance
� Asset growth through more effective distribution and strong investment performance
� Increased effectiveness and efficiency through specialisation and cost reductions
� Increased exploitation of cross-selling opportunities
� Reduced operating costs through co-ordination of bank resources
� Minimised losses through strong credit and risk management practices
Life andpensions
Asset management
Banking
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Attractive and profitable products and services
Storebrand will continue to provide our customers with the best solutions through focused innovation and individual service
� Understanding different segments
� Creating strong value proposition to meet customer needs
� Focusing on solutions that are sustainable in the long term
� Training and motivating staff
Storebrand will ensure that operations are effective and efficient in order to deliver value for our shareholders
� Understanding product, customer and channel profitability and sustainability as well as the underlying value drivers
� Delivering continuous improvements
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Summary: Solid, alive and kicking
Storebrand is well positioned for value creation:
� Satisfactory solidity
� Competent organisation
� Positive local market macro trends