Storebrand ASA: New mortality tables
Finanstilsynet has decided new mortality tables for group pensions insurance, to be applied by life insurance companies and pension funds with effect from 1.1.2014. The tables requires higher premiums and higher technical provisions to cover for future obligations.
The new mortality tables increase longevity provisions considerably. A reservation period for up to five years, starting 2014, is recommended by Finanstilsynet. Finanstilsynet allows for surplus investment returns to cover the increased provision requirements, provided that "at least 20 percent of the total reservation need is covered by the pension providers."
Implications for Storebrand
The total reservation need for group pensions are estimated to be about 11.5 billion for Storebrand (approximately 8 percent of the premium reserves). Owner's contribution is expected to be 20 percent. Loss of profit sharing from paid-up policies will be part of owner's contribution. The total contribution from the owner is expected to amount to about 2.3 billion including loss of profit sharing.
Storebrand has, in the period from 2011 to 2012, set aside 4.3 billion to cover for the new mortality tables. From 2013 onwards, all surplus return from group pensions and paid-up policies portfolios will be used for longevity reservation. Storebrand has other buffers that may be used to ensure sufficient returns to cover the buildup of reserves.
Storebrand do not expect any immediate effect on reported IFRS accounts.
About the mortality tables from Finanstilsynet
Finanstilsynet has based the new mortality tables on the following:
· Finance Norway's proposal for mortality in 2013, plus 12 percent safety margin
· Drop in mortality corresponding to Statistics Norway "middle alternative", plus 10 percent safety margin
· High safety margins for increased mortality related to widows and orphans insurance
Finanstilsynet has based their proposal for reservation needs and reservation periods on existing regulations. Accordingly, they have not taken into consideration the Banking Law Commission's proposal for new rules for step-up plans and more flexible use of buffers.
The mortality tables are more stringent than expected. It is added safety margins both at current mortality rates and at expected changes in mortality. In addition, the tables include high safety margins for widows and orphans insurance. Widows and orphans insurance will in Storebrand's opinion have no need for additional safety margins.
Finance Norway will on behalf of the industry present their input to Finanstilsynet to clarify interpretation issues related to the received letter as well as propose a practical implementation plan.
Lysaker, 11 March 2013
Managing Director Storebrand Life Insurance, mob +47 934 80 034
Director of Communications, mob +47 934 80 538
Trond Finn Eriksen
Head of Investor Relations, mob +47 991 64 135
 Norwegian FSA (Financial Services Authority)