Year-end report 1999

YEAR-END REPORT For the period January - December 1999 * Sales increased by 82 per cent, to SEK 134 billion * Sales in the USA more than doubled, to USD 10.2 billion * The operating result for the core businesses rose 161 per cent, to SEK 5.9 billion * The group's operating result increased by SEK 5 billion, to SEK 8.6 billion * Assets under management increased by 40 per cent, to SEK 833 billion Comments by Lars-Eric Petersson, President and CEO: "Nineteen ninety-nine was a strong year. Our sales increased by more than 80 per cent, and the systematic build-up of our distribution strength and our product offering is now yielding results. In the USA alone our sales topped 10 billion dollars, which is more than a doubling compared with a year earlier. New markets, such as Italy and Japan, have developed better than expected. "In 1999 If P&C Insurance received the necessary local regulatory approvals in Norway, and in Finland these are expected within the next couple of months. "The sale of the Vesta group and NIG Skandia, and the acquisition of Carlson Investment Management, signify the conclusion of a period of refocusing as well as a shift to a new phase in Skandia's development. The transformation of Skandia into a personal financial services company is complete. The group can now rally all its forces around the build-up of our global savings and asset management operations. Our prospects for continued good growth look favourable. "The value of Skandia's stock more than doubled in 1999. The USA has become an increasingly important market for Skandia. Against this background, we are making preparations for a possible stock market listing in the USA during the second half of 2000, if the market conditions so allow." OVERVIEW The operating result for the core businesses increased by SEK 3,651 million, to SEK 5,924 million, and the return on net asset value, before tax, was 29 per cent (15) on a full-year basis. Sales for Long-Term Savings increased by 79 per cent. Due to the strong rise in sales, combined with growth in assets under management, the operating result for Long-Term Savings increased to SEK 4,883 million, compared with SEK 2,209 million in 1998. Investment income for the parent company totalled SEK 1,673 million and includes the result from the sale of the shareholding in Pohjola, which was sold to the Finnish insurance company Sampo in October 1999. Assets under management increased by SEK 239 billion (40 per cent), to SEK 833 billion. Of these, SEK 469 billion consist of assets under external management, pertaining to Long-Term Savings. During the fourth quarter, Vesta Liv was sold to Tryg-Baltica, and Skandia Liv Danmark was transferred to mutual Swedish Skandia Life. In addition, the property & casualty insurance company NIG Skandia, in the UK, was sold to Churchill. Capital gains on sales of operations amounted to SEK 1,398 million. The operating result, including property & casualty (P&C) insurance, was SEK 8,575 million (3,634), and the return on total net asset value was 29 per cent (14). Y2K preparations proved to be satisfactory. No incidents occurred. CORE BUSINESSES Long-Term Savings Market and Sales Sales totalled SEK 131,706 million (73,514), an increase of 79 per cent. At constant exchange rates the increase was 75 per cent. Sales of unit linked assurance increased by 65 per cent (61 per cent at constant exchange rates). Sales of other savings products (without an insurance element) tripled to more than SEK 37 billion. Sales of life assurance decreased after the divestment of Vesta Liv in Norway and Skandia Liv in Denmark. In these countries, as in Spain, operations are currently undergoing a strategic reorientation, with a focus on greater sales of unit linked assurance products. Skandia's sales in the USA reached a record level for the fourth quarter as well as for the full year, increasing by 107 per cent. Sales of variable annuities increased by 65 per cent, while sales of other savings products increased by 333 per cent. The sales increase can be credited to a broader product offering and expanded distribution capacity. Despite a difficult market situation in the UK, sales for Skandia's British operation rose 38 per cent, to a new record level. The continued strong sales in markets outside the UK contributed to these sales successes. Sales of unit linked assurance grew by 38 per cent, while sales of other savings products increased by 39 per cent. In Sweden, sales increased by 24 per cent, following a strong finish to the year. The Italian operation is growing rapidly, and sales totalled SEK 5,280 million (424). After two years in business the company is among the ten largest unit linked assurance companies in Italy, based on sales. Following a strong second half of the year, sales in Germany increased by 38 per cent. In Japan, sales more than doubled (+110 per cent). Assets under management increased during the year by SEK 196 billion (+60 per cent), to SEK 522 billion. The breakdown of assets under management was as follows: unit linked assurance SEK 430 billion, other savings products SEK 76 billion, and life assurance SEK 16 billion. Payments to unit linked policyholders decreased to 6.9 per cent (7.5) of technical provisions. Surrenders accounted for 5.7 percentage points of this total (6.0), which is well within the limits of underlying assumptions. For other savings products, payments to policyholders through withdrawals from funds amounted to SEK 4,932 million (2,466), which is also well within the limits of underlying assumptions. Operating Result and Profitability Unit Linked Assurance The operating result for unit linked assurance totalled SEK 5,398 million (2,443), an increase of 121 per cent excluding one-time effects in 1998. The result of business written prior to 1999 also improved, since the actual outcome was better than underlying assumptions. Performance of new business improved faster than growth in written premium, thus contributing to higher profitability. Growth in the value of funds under management exceeded underlying assumptions, which had a positive result impact. The profit recognition of value created by this appreciation is spread out over a three-year period. This is done to better reflect the operation's long-term result and profitability development. The accumulated equalization amount as per 31 December was SEK 3,423 million, compared with SEK 926 million at year- end 1998. Life Assurance The operating result for life assurance was SEK 82 million (141). Other Savings Products For non-insurance savings products, sales increased to SEK 37,129 million (12,769) and withdrawals to SEK 4,932 million (2,466). Acquisition costs are not yet deferred, which explains why the result - after deducting all costs for marketing as well as systems and product development - was negative. This is entirely in line with adopted plans. The assets being built up in the operations form the foundation for future, sustained revenues. Net Asset Value and Return The operating result, after deducting financing costs, increased by 79 per cent to SEK 4,883 million (2,731). The return on net asset value, after financing costs and taxes, was 23 per cent (14). Asset Management Assets under management, including assets from companies in the Skandia group, external clients, and fund management, increased by 14 per cent, to SEK 316 billion. This includes assets managed in Skandia Fonder, which increased to SEK 23.5 billion (13.7). Commissions from asset management are partly fixed and partly performance related, and the latter are determined on an annual basis in arrears. The result, totalling SEK 273 million, includes this performance related commission for two years. In October, an agreement was reached on the acquisition of 51 per cent of Carlson Investment Management. The deal is conditional upon customary regulatory approvals and is expected to be finalized in the first quarter of 2000. There is an option to acquire the remaining 49 per cent. Carlson has SEK 37 billion in assets under management for some one hundred institutional clients. Investment Strategy Skandia's management assignments are based on the clients' choice of investment horizon and risk level, and within these parameters, the goal is to maximize the return on managed assets. Investment Income Investment income for the parent company amounted to SEK 1,673 million and pertains to the return on funds released in connection with the formation of If P&C Insurance. The parent company's investment assets amounted to SEK 5.8 billion. Investment income includes the dividend as well as the value appreciation of the shareholding in Pohjola. Equities accounted for 25 per cent of invested assets. The equities portfolio is dominated by shareholdings in European and Nordic companies. Real estate holdings decreased in accordance with the current strategy through disposals totalling SEK 2.4 billion. Businesses SkandiaBanken SkandiaBanken's operating result was SEK 63 million (75). Earnings decreased slightly, in part due to investments in the newly started operation in Norway. Deposits in SkandiaBanken rose by nearly 10 per cent, to SEK 12.6 billion. SkandiaBanken's business is based on Internet and telephone service. The bank has 320,000 customers. Lifeline Intensified product development and marketing of the Lifeline concept was initiated during the spring. This entailed, among other things, the launch of a new, unique medical insurance plan - Skandia Preferred Health Care. Development and distribution of products is Lifeline's principal focus. This work is proceeding well. In October an agreement was reached on the sale of the Workline corporate health clinics, representing an important step in the refocusing of Lifeline's business. Lifeline's result amounted to SEK 44 million. Skandia Marknad AB Starting on 1 January 1999, the group's distribution resources in Sweden and Denmark are gathered in the company Skandia Marknad AB (Skandia Marketing). Operations developed well during the company's first financial year. Skandia Marknad AB's result was SEK 70 million. Other Companies The operating result for other companies, pertaining mainly to finance companies, was SEK 50 million (81). Group Expenses Group expenses comprise management and structural costs, as well as goodwill amortization. Also included is a SEK 705 million provision for profit-sharing plans. Exchange Rate Effects Exchange rate movements had a positive impact during the year. Sales for Long-Term Savings and the operating result for the group both increased by 4 per cent after recalculation to higher average exchange rates compared with the preceding year. Result from Sale of Operations Capital gains on sales of operations amounted to SEK 1,398 million and pertained mainly to the divestment of traditional life assurance operations in Denmark and Norway, and the sale of the property & casualty insurance company NIG Skandia in the UK. PROPERTY & CASUALTY INSURANCE A new, Nordic P&C organization has been formed through the combination of Pohjola's, Storebrand's and Skandia's P&C insurance operations in the company If P&C Insurance. Operations are developing according to plan. Skandia's share of If will be 42 per cent until the initial public offering, which is planned to take place by 2001 at the latest. The combination of the operations in If is unconditional between the parties, but is subject to customary regulatory approvals. In December 1999 Storebrand received permission from the Norwegian Ministry of Finance to transfer its insurance portfolio to If. The corresponding clearance is expected to be received in Finland during the first quarter of 2000. Operating Result and Profitability The technical result was weak due to high claim costs. The investment return was good, however. The return on the equities portfolio was at a high level, while the return on fixed-income investments was hurt by rising interest rates. The operating result includes the capital gain on the sale of Vesta Skadeforsikring, totalling SEK 1,198 million, of which Skandia's share was 42 per cent. The P&C operating result includes SEK 124 million pertaining to Skandia's former P&C operation for January and February 1999, as well as Skandia's share in If's pro forma result for the period 1 March to 31 December. As from 1 March, the operating result includes 56 per cent of the combined operation with Storebrand. As from 1 July 1999 it includes 42 per cent of the combined operation with Storebrand and Pohjola. Skandia's share of the P&C operating result was SEK 1,400 million, and is reported in accordance with the equity method. BALANCE SHEET AND NET ASSET VALUE Total assets increased by SEK 113.8 billion to SEK 488.5 billion. Long- Term Savings accounted for SEK 169 billion of this increase. The new P&C operation is reported in accordance with the equity method, entailing a decrease in total assets of approximately SEK 30 billion. External borrowings increased by SEK 1.9 billion to SEK 9.0 billion, excluding the parent company's subordinated loans. During the fourth quarter, a substantial portion of the liquid assets received from the sale of the shareholding in Pohjola was used to repay loans. Net asset value amounted to SEK 29,220 million (24,833). Capital employed in the group, which in addition to net asset value consists of borrowings to finance investments in subsidiaries, amounted to SEK 37.5 billion (33.0). Of total capital employed, SEK 23.5 billion (17.8) pertains to Long-Term Savings, while SEK 6.5 billion pertains to the financing of Skandia's share of If's P&C operation. Stockholm, Sweden, 16 February 2000 Lars-Eric Petersson President and CEO For questions, please call: Ulf Spång, Chief Financial Officer, tel. +46-8-788 2905 Harry Vos, Head of Group Business Control, tel. +46-8-788 3643 The Board of Directors proposes a dividend of SEK 1.00 for the 1999 financial year, and 10 April 2000 as the record date for payment of the dividend. If the Annual General Meeting decides in favour of this proposal, dividends will be sent out from the Swedish Securities Register Centre (VPC) on 17 April 2000. The Annual General Meeting of Skandia Insurance Company Ltd. (publ.) will be held on Wednesday, 5 April 2000, at 4.30 p.m. Location: Aula Magna, Stockholm University, in Stockholm (Frescati). The Annual Report is scheduled for distribution by mail to shareholders in mid-March and can be ordered from Skandia using one of the following alternatives: by phone, +46-8-788 10 00, by fax, +46-8-788 26 85, or via the Internet at http://www.skandia.se. Financial calendar: 5 April 2000, Annual General Meeting 8 May, interim report January-March 2000 9 August, interim report January-June 2000 1 November, interim report January-September 2000 GROUP OVERVIEW Accumulated outcome SEK million 1999 1999 1999 1999 1998 Dec. Sept. June March Dec. Sales Sales, unit linked assurance 93 036 65 80642 61218 49056 241 Sales, other savings products 37 129 25 71417 181 7 51712 769 Premiums written, life assurance 1 541 2 031 1 609 927 4 504 Sales, businesses 2 153 1 408 988 341 - Total sales 133 94 95962 39027 27573 514 859 Result summary Unit linked assurance 5 398 2 943 1 988 915 3 265 Other savings products -151 -88 -65 -18 -40 Life assurance 82 114 95 52 -159 Financing costs -446 -316 -204 -94 -335 Long-term savings, total 4 883 2 653 1 814 855 2 731 Asset Management 273 75 51 22 - Investment income 1 673 1 379 671 191 - Asset management, total 1 946 1 454 722 213 - Businesses 227 190 121 30 156 Group expenses -1 132 -646 -421 -95 -614 Operating result, core businesses 5 924 3 651 2 236 1 003 2 273 Result from sale of operations 1 398 - - - - Operating result, P&C insurance 1 524 447 498 302 1 531 1) Financing costs, P&C insurance -271 -173 -72 -60 -170 Operating result 8 575 3 925 2 662 1 245 3 634 2) 3) Net asset value 29 220 25 55724 78024 86024 833 2) Shareholders' equity 18 058 15 78615 57215 50214 975 Managed assets, long-term savings 521 409 172 398 362 325 2) 764 978 697 408 2) Total assets 488 397 252 393 368 374 498 244 216 713 Return on net asset value, % 29 28 8 6 14 Return on shareholders' equity, % 21 18 -1 -1 9 Per-share data Operating result per share, SEK 16,76 7,67 5,20 2,43 7,10 4) Earnings per share, SEK 6,75 2,68 1,90 0,95 2,43 Net asset value per share, SEK 57,10 49,94 48,42 48,58 48,52 2) Shareholders' equity per share, 35,29 30,85 30,43 30,29 29,26 2) SEK 1) The operating result for property & casualty insurance includes SEK 124 million pertaining to Skandia's former property & casualty insurance operation for January and February 1999, and Skandia's share in If's pro forma result for the period 1 March to 31 December. 2)Figures as per closing date. 3)See table on p. 16. 4)Earnings per share are calculated as the result for the period divided by the average number of shares outstanding during the period. LONG-TERM SAVINGS Unit linked Other savings SALES assurance products Life Total assurance SEK million 1999 1998 1999 1998 1999 1998 1999 1998 USA 56 33 27 6 84 39 204 737 070 584 134 321 UK 21 15 6 429 4 27 19 759 268 188 571 697 Sweden 5 4 334 119 6 189 4 992 855 873 Italy 5 424 5 280 424 280 Spain 1 717 1 3 2 493 3 754 108 385 037 Switzerland 973 953 353 260 1 326 1 213 Germany 721 446 46 113 767 559 Austria 534 411 534 411 Norway/Denm 208 22 55 1 263 1 394 ark 372 Other 352 137 2 383 1 101 95 2 836 1 804 572 Sales 93 56 37 12 1 4 131 73 514 036 241 129 769 541 504 706 SALES OF OTHER SAVINGS PRODUCTS SEK million Sales Withdrawals Net deposits 1999 1998 1999 1998 1999 1998 USA 27 6 -2 -249 25 5 885 584 134 295 289 UK 6 429 4 -870 -573 5 559 3 998 571 Other 3 116 2 -1 -1 1 349 420 064 767 644 Other savings 37 12 -4 -2 32 10 303 products 129 769 932 466 197 NEW BUSINESS, UNIT LINKED Single Annual ASSURANCE premium premium 1) 1999 1998 1999 1998 SEK million USA 56 33 737 070 UK 17 11 1 236 1 168 030 754 Italy 5 424 280 Sweden 2 2 1 390 985 691 352 1) Periodic premiums recalculated to full- year figures. LONG-TERM SAVINGS OPERATING Unit linked Other RESULT savings SEK million assurance products Life Total assurance 1999 1998 1999 1998 1999 1998 1999 1998 USA 3 276 1 422 -110 -57 3 166 1 365 UK 954 671 -37 8 917 679 Sweden 683 498 -12 -12 671 486 Italy 175 -9 175 -9 Spain 26 -1 6 2 80 114 112 115 Switzerland 59 25 -3 -3 56 22 Germany 273 27 2 -2 275 25 Austria 54 48 -2 52 48 Norway/Denmark -48 -40 -1 26 -49 -14 Other -54 -198 5 24 3 1 -46 -173 Operating result, excl. one-time 5 398 2 443 -151 -40 82 141 5 329 2 544 effect One-time 822 -300 522 1) effect Operating result, incl. one-time 5 398 3 265 -151 -40 82 -159 5 329 3 066 effect Financing -446 -335 2) costs OPERATING 4 883 2 731 RESULT Return on net asset 23 14 3) value 1) The interest rate and growth assumptions that formed the basis for calculating the operating result were adjusted to the declining interest rates. These adjustments had a positive one-time effect of SEK 522 million on the operating result in 1998. 2) Of which, -433 -318 USA 3) Weighted quarterly average ASSETS UNDER MANAGEMENT Unit linked Other savings assurance products Life Total assurance 31 Dec. 1999 1998 1999 1998 1999 1998 1999 1998 USA 253 146 42 7 295 153 217 062 429 589 646 651 UK 126 85 19 9 146 95 285 516 769 976 054 492 Sweden 31 19 525 116 31 19 243 278 768 394 Italy 6 251 540 6 251 540 Spain 2 056 1 079 7 5 16 26 25 32 100 046 049 078 205 203 Switzerland 6 209 4 647 675 302 6 884 4 949 Germany 1 777 963 257 265 2 034 1 228 Austria 1 403 732 2 1 1 405 733 Norway/Denmark 290 80 1 12 291 12 490 570 Other 1 165 797 4 3 274 282 6 226 4 648 787 569 Total assets 429 259 75 26 16 38 521 325 896 694 544 864 324 850 764 408 LONG-TERM SAVINGS PERFORMANCE ANALYSIS, UNIT LINKED ASSURANCE SEK million 1999 1998 1) Present value of new business for the year 1 483 884 Return on value of contracts in force from previous years 1 511 992 Outcome compared with op. 254 -12 assumptions Change in operative assumptions 549 138 Value-added from operations 3 797 2 002 Business start-ups and other -56 -248 overheads 2) Financial effects 4 043 1 270 Total value-added 7 784 3 024 Equalization of financial -2 386 -581 3) effects Operating result, unit linked assurance 5 398 2 443 1) Figures as per December 1998 recalculated according to the new assumptions and excluding one-time effect of SEK 822 million. 2) Of which, change in discount rate, SEK -1,142 million, change in fund growth assumption, SEK 1,611 million, and actual fund growth compared with previous assumptions, SEK 3,552 million. 3) The accumulated equalization amount before tax was SEK 3,423 million as per December 1999 (SEK 926 million as per Dec. 1998). ASSUMPTIONS AND SENSITIVITY ANALYSIS, UNIT LINKED ASSURANCE Interest rate assumptions % Discount Fund growth Inflation 1) rate assumptions assumptions 1999 1998 1999 1998 1999 1998 USA 10,50 9,25 7,25 6,50 3,00 2,00 UK 9,75 9,00 6,25 5,50 3,75 3,50 Sweden 10,25 9,00 7,00 5,00 2,50 2,00 1) After management fees. Effect on operating result (before tax) of a one per cent increase in the interest rate assumption SEK million Effect on operating result (before tax) Fund Exposure Discount growth Inflation Total 1) VBIF rate assumptioassumptio effect 2) n n USA 2 845 -580 642 -54 8 UK 2 497 -241 141 -36 -136 Sweden 1 964 -249 188 -26 -87 Other 813 -88 64 -30 -54 Total 8 119 -1 158 1 035 -146 -269 1) After tax. 2) Before result equalization. ASSET MANAGEMENT INVESTMENT INCOME SEK million 1999 1998 1) Changes in value Bonds and short-term investments -227 445 Equities 3 038 1 188 Real estate 356 113 Loans -1 -4 Total changes in value 3 166 1 742 Direct investment income 1 341 1 745 Foreign exchange gains/losses -67 -1 Investment income 4 440 3 486 Allocated investment return transferred 2) to other operations -2 767 -3 486 Investment income, net 1 673 0 Direct yield, % 5,4 4,8 Total return, % 15,4 9,1 1) Vesta Forsikring and NIG Skandia were sold in 1999 and thus are not included in investment income for the year. 2) In 1998, allocated to Skandia's P&C operation, and after 1 March 1999 to If P&C Insurance. TOTAL RETURN 1999 1998 % Bonds and short-term investments 0,3 8,2 Equities 42,6 11,0 Real estate 37,6 9,5 Loans n/a 6,4 Total 15,4 9,1 ASSET MANAGEMENT BREAKDOWN OF INVESTMENT ASSETS BY CURRENCY, CURRENT 1) VALUE SEK million 1999 SEK NOK GBP USD DKK EUR Other Total % 2) 31 Dec. Short-term investments 4 635 254 718 1 353 551 465 -18 7 958 32% Bonds 4 516 339 714 793 1 579 1 890 619 10 450 42% Loans 2 0 0 1 0 2 2 7 0% Equities 2 065 161 1 007 555 1 1 475 878 6 142 25% Real estate 177 0 0 0 17 0 29 223 1% Total 11 754 2 439 2 702 2 148 3 832 1 510 24 780100% 395 46% 3% 10% 11% 9% 15% 6% 100% 1998 SEK NOK GBP USD DKK Other Total % 3) 31 Dec. Short-term investments 4 628 529 140 -564 289 446 5 468 12% Bonds 1 7071 849 6 739 4 312 2 601 2 966 20 174 46% Loans 21 941 3 10 0 3 1 959 4% Equities 3 2181 458 2 013 1 383 237 5 459 13 768 31% Real estate 1 485 787 221 0 421 181 3 095 7% Total 116 564 9 116 5 141 3 548 9 055 44 464100% 040 25% 15% 21% 11% 8% 20% 100% 1) Excluding associated holdings and forward exchange contracts. 2) Of total assets, SEK 18,961 million pertains to assets which were transferred to If P&C Insurance after 1 March 1999. 3) Other currencies are broken down as follows: SEK million 1998 Other Other Total 31 Dec. worldEurop other e Short-term 7 439 446 investments Bonds 134 2 832 2 966 Loans 3 3 Equities 101 5 358 5 459 Real estate 23 158 181 Total 265 8 790 9 055 SALES, BUSINESSES 1999 SEK million 1) Skandia Marketing 1 114 Lifeline 305 1) Asset Management 734 Total 2 153 1) Corresponds to fees received. OPERATING RESULT, BUSINESSES 1999 1998 SEK million SkandiaBanken 63 75 Skandia Marketing 70 - Lifeline 44 - Finance companies 32 17 Other 18 64 Total 227 156 GROUP EXPENSES 1999 1998 SEK million Amortization of goodwill -34 -115 Profit-sharing plans -705 -180 Structural costs -95 - Joint-group management -298 -319 expenses Total -1 132 -614 STATEMENT OF CASH FLOWS 1999 1998 SEK million Cash flow from operating activities -3,7 -0,2 Cash flow from investments in 3,1 1,1 1) operations Cash flow from financing activities 0,3 -0,3 Net cash flow for the period -0,3 0,6 2) Liquid assets at start of 3,3 2,7 year Liquid assets at end of year 3,0 3,3 1) Purchases and sales of investment assets which are a natural element of an insurance company's operations are reported as cash flow from investments in operations. Cash flow has been affected by the direct yield from investments, but not by the substantial growth in value these have had. 2) The negative cash flow from the operating activities is explained primarily by the considerable volume of new sales of unit linked assurance products. This gives rise to an initial net outflow for Skandia, which is offset by the revenues the company receives during the term of the insurance. ASSET MANAGEMENT MANAGED ASSETS Managed Managed by External Total other by SAM group management management companies 1999 1998 1999 1998 1999 1998 1999 1998 31 3131 Dec. 31 31 31 31 31 Dec. Dec. Dec. Dec. Dec. Dec. Dec. Unit linked 19 76412 328 4 537 4 215 405 243 429 259 assurance 595 151 896 694 Mutual funds 108 36 4 778 3 72663 57818 05668 46421 818 Life assurance 12 490 16 32426 360 16 32438 850 Discretionary 7 080 5 046 7 080 5 046 mgmt. Long-term savings 19 87224 854 32 71939 347 469 261 521 325 173 207 764 408 Swedish Skandia 255 204 919 1 893 256 206 Life 400 221 319 114 Parent company 5 818 5 818 Mutual funds 10 838 5 084 10 838 5 084 Discretionary 23 67343 209 1 185 2 007 24 85845 216 mgmt. Bank deposits from the general 11 81611 071 11 81611 071 public Index-linked bonds 325 308 325 308 Other 775 675 775 675 Managed assets 315 277 47 73955 301 469 261 832 593 601 368 173 207 513 876 NET ASSET VALUE SEK million 1999 1998 31 31 Dec. Dec. Shareholders' 18 05814 975 equity Deferred taxes 2 905 3 821 Surplus value of unit linked business in force 8 119 5 468 Other surplus 138 569 values Net asset value 29 22024 833 Subordinated loans 1 305 2 175 Risk-bearing 30 52527 008 capital CHANGE IN NET ASSET VALUE SEK million Net asset value, December 1998 24 833 Operating result 8 575 Change in surplus value of -335 bonds Deferred tax on unit linked business in -1 433 force Income taxes -857 Translation differences 153 Minority interests -8 Dividend -460 Divested -36 operations Transfer of net asset value in connection with the formation of If P&C Insurance -1 212 Net asset value, December 1999 29 220 OPERATING RESULT SEK million Long- Asset GroupAlloc P&COperat- . TermManage- Busi- admin inv.insur- ing . 1999 Savings mentnesse Sales exp.retur ance result s n Technical result P&C insurance 1 238 -344 -105 Life assurance 1 235 1 1 236 Non-technical result Investment income 301 1 701 44 -238 1 868 3 676 Financing costs -446 -271 -717 Change in surplus value of unit linked business in force 3 944 3 944 Other savings -151 -151 products Other businesses 245 1811 398 1 824 Amortization of goodwill -34 -34 Provision to profit- sharing plans -705 -705 Structural costs -95 -95 Group expenses -298 -298 Operating result 4 883 1 946 2271 398 -1 0 1 253 8 575 132 Of which, change in surplus value of unit linked business in force -3 944 -3 944 Pre-tax result 939 1 946 2271 398 -1 0 1 253 4 631 132 Long- Asset GroupAlloc P&COperat- . TermManage- Busi-Divesadmin inv.insur- ing t . 1998 Savings mentnesse ments exp.retur ance result s n Technical result P&C insurance 1 754-1 877 -123 Life assurance 528 90 -78 540 Non-technical result Investment income 179 -1 3 486 1 821 844 Financing costs -335 -170 -505 Change in surplus value of unit linked business in force 2 399 2 399 Other savings -40 -40 products Other businesses 156 156 Amortization of goodwill -115 -115 Provision to profit- sharing plans -180 -180 Group expenses -319 -319 Operating result 2 731 156 -614 0 1 361 3 634 Of which, change in surplus value of unit linked business in force -2 399 -2 399 Pre-tax result 332 156 -614 0 1 361 1 235 PROFIT AND LOSS ACCOUNT SEK million 1999 1998 Technical account, property & casualty insurance business Premiums earned, net of reinsurance 2 285 14 552 Allocated investment return transferred from the non-technical account 238 1 754 Claims incurred, net of reinsurance -1 972 -12 350 Operating expenses -653 -4 114 Other technical income and charges -3 35 Technical result, property & casualty insurance business -105 -123 Technical account, life assurance business Premiums written, net of reinsurance 92 080 60 260 Investment income, including unrealized changes in value 94 037 32 335 Claims incurred, net of reinsurance -31 891 -20 826 Change in other technical provisions where the investment risk is borne by the life assurance policyholders -151 -64 858 251 Operating expenses -6 971 -5 278 Other technical provisions 5 838 -1 790 Allocated investment return transferred from the non-technical account 1 90 Technical result, life assurance business 1 236 540 Non-technical account Investment income, including unrealized changes in value 3 676 1 800 Financing costs -717 -505 Other savings products -151 -40 Asset Management 245 36 Other operations 1 579 141 Amortization of goodwill -34 -115 Provision to profit-sharing plans -705 -180 Structural costs -95 - Group expenses -298 -319 Pre-tax result 4 631 1 235 Paid and deferred tax -1 167 13 Minority interests in result for the period -8 -6 Result for the period 3 456 1 242 BALANCE SHEET SUMMARY SEK billion 1999 1998 1999 1998 Assets 31 31Shareholders' equity, 31 Dec31 Dec Dec. Dec. provisions and liabilities Goodwill 0,1 0,1Shareholders' equity 18,1 15,0 Investment in If P&C 6,5 -Minority interests 0,0 0,0 3) Investments 24,0 80,1Deferred tax liability 2,9 3,8 Investments, unit 424,7 255,5 linked 2) Reinsurers' share of Subordinated loans 1,3 2,3 2) technical provisions 2,6 8,0Borrowings 8,3 6,3 1) Debtors 5,3 6,0Technical provisions 22,4 76,6 1) Tangible assets 0,7 0,8Provisions, unit linked 410,8 247,7 1) Cash at bank and in 3,0 3,3Creditors 8,0 8,4 hand Other assets 0,0 0,2Reinsurers' share of Deferred acquisition deferred acq. Costs 0,3 0,2 1) 1) costs 3,7 3,6 Other prepayments and Other accruals and accrued income 1,7 2,7 deferred income 2,8 1,9 Assets in finance 1,5 1,6Liabilities in fin. 0,8 0,7 2) cos. cos. Assets in bank 14,7 12,8Liabilities in bank op. 12,8 11,8 2) operations Shareholders' equity, Assets 488,5 374,7provisions and 488,5 374,7 liabilities 1) Technical provisions, net, after deducting deferred acquisition costs Life assurance 14,4 34,6 Unit linked assurance 411,7 246,6 Property & casualty 1,1 31,7 insurance Total 427,2 312,9 2) Group borrowings, excl. Subordinated loans in Skandia Insurance Company Ltd. Borrowings as per balance 9,6 8,6 sheet Additional borrowings by finance companies and bank 0,7 0,7 operations Less: subordinated loans in Skandia Insurance Company -1,3 -2,2 Ltd. Total 9,0 7,1 3) Investments, current value Investments as per balance 24,0 80,1 sheet Recalculation to current 0,9 3,5 value Cash at bank and in 3,0 3,3 hand Securities settlement 0,0 0,0 claims, net Accrued interest 0,5 1,2 income Debt derivatives -0,1 -0,1 Total 28,3 88,0 Of which: Investments, life assurance 16,3 38,8 Investments, unit linked assurance 5,2 4,2 Other investments, long-term 0,4 0,3 savings Investments, parent company 5,8 - Investments, property & casualty insurance 44,5 Currency derivatives 0,6 0,0 Deposits with ceding 0,0 0,2 undertakings Total 28,3 88,0 SUMMARY OF CHANGES IN GROUP OVERVIEW 1999 1998 Capitalization and financing Skandia's share of the capital in Capital employed in property & casualty If P&C Insurance amounts to insurance was SEK 13.4 billion. SEK 6.5 billion. Financing costs are reported in Financing costs were reported as the other respective operating areas. (joint-group) costs Investment income Investment income pertains to All investment income was reported in investment assets belonging to the property & casualty insurance. parent company. Property & casualty insurance The result for Skandia's property Skandia's property & casualty & insurance casualty insurance operation is operation was reported as a reported business unit. in full for January-February As from 1 March, the combined operations of If P&C Insurance are reported in accordance with the equity method: 56% share for the period March- June and 42% share for the period July- December. Skandia Asset Management The business unit's operating The result was included in result investment is reported separately. income, property & casualty insurance. Skandia Marketing The operating result for the The sales organization was included Swedish and Danish sales organization is in the property & casualty insurance reported separately. operation. ------------------------------------------------------------ Please visit http://www.bit.se for further information The following files are available for download: http://www.bit.se/bitonline/2000/02/16/20000215BIT01140/bit0001.doc http://www.bit.se/bitonline/2000/02/16/20000215BIT01140/bit0002.pdf http://www.bit.se/bitonline/2000/02/16/20000215BIT01140/bit0003.xls Tables