Storebrand with strong result for life insurance in 1997, but weaker result for non-life

· Satisfactory consolidated result following positive capital market performance
· Good book yield 9.96 per cent, and value adjusted yield 10.5 per cent
· Sharp growth in sales of life and pension insurance
· Life insurance cuts expenses even further
· General business conditions put pressure on profitability in non-life
· Non-life insurance profitability measures will bear fruit in 1998 and 1999
· The non-life company harvests efficiency gains of NOK 367 million
· New investments in improvement programmes
· The Annual General Meeting on 1 April will deal with the redemption of the preference shares

In 1997, the Storebrand Group recorded an operating profit of NOK 4,809 million, before the distribution of profit to the life and pension insurance policyholders. This is NOK 689 million, or 16.7 per cent higher than in the preceding year. After distributing the life and pension policyholders` shares of the profit, the Group`s profit amounted to NOK 1,012 million, compared to NOK 1,254 million in 1996.

The Group`s net premium income amounted to NOK 14,642 million, against NOK 13,213 million in 1996.

In 1997, Storebrand`s life insurance company recorded an operating profit of NOK 4,359 million. This is NOK 925 million, or 27 per cent, higher than in the year before, and is due to the good financial result. The year`s financial result is the best in the market among the large Norwegian life insurance companies, with a book yield of 9.96 per cent (8.48 per cent), and a value-adjusted yield of 10.5 per cent (10.0).

The non-life company recorded an operating profit of NOK 684 million, compared to NOK 1,043 million in 1996. The non-life result was affected by the rise in claims paid, due to both an increase in the average cost of the claims and a higher claims frequency than in 1996.

Earnings per ordinary share in 1997 were NOK 3.57, compared to NOK 3.98 in the preceding year. The Board of Directors proposes that a dividend of NOK 0.50 per share be paid per preference share, and in line with the dividend policy followed over the last few years, that no dividend be distributed on the ordinary shares. Furthermore, the Board proposes that the Annual General Meeting adopts a resolution to redeem the preference shares and at the same time establish a redemption fund of NOK 500 million by way of a transfer from the Contingency reserve.

The Group`s total assets rose last year by almost 10 per cent to NOK 114,517 million. The Group`s unrealised gains rose by NOK 1.3 billion to NOK 1.5 billion. At the end of 1997, the Group`s capital ratio stood at 14.4 per cent, compared to 14.5 per cent at the end of 1996. The statutory minimum at the end of 1997 was 8 per cent.

US GAAP
Presented in accordance with US accounting principles (US GAAP), the Storebrand Group had a profit for the year of NOK 351 million, which is NOK 725 million lower than under Norwegian GAAP. This difference is due i.a. to the reduction in the need for additional technical allocations and security provisions in the non-life company. Under US GAAP, equity amounted to NOK 9.4 billion, compared to NOK 5.9 billion under N GAAP.

The work of restructuring continues
Commenting on the result, Storebrand President and Chief Executive Officer Åge Korsvold says that 1997 was a demanding year for Storebrand with strong focus on internal restructuring and improvement measures. Making changes to the distribution system for non-life insurance and carrying out cost reductions in the central staff area were two very wide-reaching processes. The cost-reduction measures have had a significant effect, but new activities have nevertheless resulted in the Group being unable to reach its expense-related targets for the year. `This calls for further focus on change and improvements in our business system, so that Storebrand can be on a par with the best international players with whom we compare ourselves`, says Korsvold.

`There is still much to be achieved through processes of change and through increasing efficiency. We will continue our restructuring in 1998, and will maintain a high investment level in order to improve our systems and to strengthen our customer-related activities. We will be working with new generations of improvement programmes in both life and non-life activities, while at the same time focusing our resources even more sharply on new market areas where Storebrand wants to have a stronger position. In 1998, Storebrand`s investment level will be the highest it has been for many years`, says Korsvold.

Life insurance
Premium income for own account at Storebrand Livsforsikring (the life company) amounted to NOK 7,287 million, up NOK 1,351 million (23 per cent) from 1996. Storebrand has strengthened its position on the life and pension insurance market. Measured in terms of total premium written (including reserves transferred to the company) the market share rose from 26.6 per cent in 1996 to 28.9 per cent in 1997. The growth in premium was particularly sharp in individual life and pension insurance. In this line, premium income rose almost 60 per cent, from NOK 1,818 million in 1996 to NOK 2,868 million in 1997. Storebrand registered a satisfactory premium development in the corporate market as well. The unit linked product Storebrand Link was introduced in the third quarter of 1997 and sales have developed well in comparison with the original forecasts.

87 per cent of the life company`s operating profit of NOK 4,359 million, or an amount of NOK 3,797 million was transferred to the policyholders. Of this, NOK 1,000 million has been transferred conditionally as an additional allocation to the insurance fund. The insurance customers` share is NOK 931 million higher than in 1996. NOK 562 million of the operating profit is allocated to the owners, compared to NOK 568 million in 1996. The owner`s share of the profit in 1997 was charged with a refinancing cost relating to a subordinated loan in the amount of NOK 96 million. The value-adjusted operating profit, which includes changes in unrealised gains, was NOK 5.471 million, which is NOK 328 million higher in 1997 than in 1996.

The life company`s net gains on the sale of securities amounted to NOK 3,409 million in 1997, or NOK 1,674 million more than in 1996. The increase is more than 96 per cent, and Storebrand is among the best in the market with regard to both book and value-adjusted yields. The company`s ability to assume risk was further strengthened in 1997. At the end of the year, the sum of the life company`s equity, additional allocations, and unrealised gains amounted to NOK 14.6 billion, compared to NOK 12.5 billion at the end of 1996.

Operating expenses in terms of average customer funds fell last year by 0.04 percentage points to 0.86 per cent. With this, Storebrand consolidates its leading role in cost-effectiveness and can therefore present its customers with what is clearly the best net book yield in the market.

Non-life insurance
The non-life company, Storebrand Skadeforsikring, recorded an operating profit of NOK 684 million, down NOK 359 million on 1996. The technical result was reduced by NOK 132 million to minus NOK 376 million. Including changes in run-off gains on prior-year claims and the accounting effect of changes in the minimum requirements of the Banking, Insurance and Securities Commission, the technical result was NOK 381 million weaker than in 1996.

The non-life company`s premium income for own account totalled NOK 7,240 million in 1997, down NOK 36 million on the preceding year. Total financial income amounted to NOK 1,033 million, down NOK 273 million on 1996.

The combined ratio, which is the sum of the cost ratio and the claims ratio, was 104.7 per cent last year, up from 103.4 per cent in 1996. The company`s goal is a combined ratio of 100 on average over a business cycle. The cost ratio for own account was 26.9 per cent, which is 1.6 percentage points lower than in the preceding year.

The claims ratio for own account rose by almost 3 percentage points to 77.8 per cent. General business conditions in non-life insurance in 1997 resulted in higher claims settlements because both average claims and a the claims frequency were higher than in 1996. Comprehensive measures aimed at improving profitability have been introduced, but the effect of these was hardly visible in 1997. The company expects the negative development in the claims ratio to turn in the course of 1998 and that we will see an improvement with effect from 1999.

In the area of claims settlement and tariffs/underwriting, improvement core projects generated gains worth NOK 367 million at the end of 1997. This is in line with the company`s previously stated goal.

The non-life company`s market share fell 1.1 percentage points in 1997 to 38.9 per cent. 0.3 percentage points of the fall was due the changes in the statistics on which the figure is compiled.

Other activities
Storebrand ASA recorded an operating result of NOK 614 million, which is NOK 517 million lower than in 1996. This fall was due to lower group contributions and dividends from subsidiaries, which fell by NOK 547 million.
Storebrand Bank AS returned a loss of NOK 65 million, which is in line with expectations for the bank`s establishment phase. The bank doubled the number of customers to 15,000 and last year it established 10 local advisory offices. Storebrand Finans, which was sold to Storebrand Bank with effect from 1 January 1997, had a good year in 1997, returning a profit of NOK 63 million.
Storebrand Spar`s profit amounted to NOK 11.9 million, which is NOK 2 million higher than in the preceding year.

Oslo, 4 March 1998

For further details, please contact:

Vidar Ullenrød, Director of Public Relations, telephone + 47 22 311444, mobile 91696803
Christian Storm, Treasurer, telephone + 47 22 311085, private + 47 22 437403
Jack Frostad, Chief Information Officer, telephone + 47 22 315757, mobile 92826255

Full Press release including tables is ready for download on http://www.huginonline.no/STB/DR/stb97k4_e.pdf

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