Year-end Report 2001

YEAR-END REPORT 2001*) · Sales amounted to SEK 138 billion (207) · New sales of unit linked assurance decreased by 22% · New sales outside the USA decreased by 5% · Cash flow from operating activities improved by SEK 2.7 billion · The result of operations for the core businesses was SEK 1,250 million for the fourth quarter, compared with SEK 604 million for the third quarter · The group's operating result was SEK 3,597 million for the fourth quarter, compared with SEK -4,392 million for the third quarter. The operating result for the full year was SEK -2,104 million (8,029) · Assets under management increased by 2%, to SEK 1,013 billion · The Board proposes a dividend of SEK 0.30 per share Comments by Lars-Eric Petersson, President and CEO: The uncertainties in the world economy and the extraordinary events during the past year have had a major impact on the capital markets and thus on growth for equity-related savings. The stock market trend in 2001 was characterized by sharp declines in practically all markets. In the longer perspective, however, it is the underlying structural need for modern savings products that confirms our commitment to our business model and points to favourable development for Skandia's business around the world. Obviously, Skandia has felt the impact of the turbulence and uncertainty in the capital markets, particularly in the USA. Despite this, in 2001 Skandia recorded its second-best year ever in terms of new business, thanks in large part to our geographic expansion. Due to previous years' strong sales and thereby a substantial build-up of assets under management, we enjoyed a significant improvement in operating cash flow during the year, pushing cash flow into positive territory during the fourth quarter. Against the poor market conditions Skandia continues to focus its operations with a view to improve efficiency and to position itself to take full benefit of when market conditions improve. Product development is equally important in a declining market, which explains our relentless innovation of new products in our various markets, particularly in the USA. During the year we enhanced our distribution capacity in the UK, we continued to reduce our exposure to property & casualty insurance, and we successfully negotiated the sale of our Nordic asset management operations. Skandia today is a dramatically different company than it was five years ago, and I am confident that our business model will achieve superior returns for shareholders. During the course of 2002, the systematic work on refining our business, coupled with innovative product development and global distribution strength, will set the stage for positive sales and earnings growth. OVERVIEW The stock market decline during the year, and especially during the third quarter, has had a negative impact on sales, assets under management and the result. The fourth quarter showed a significant recovery, however. Despite the turbulence in the financial markets, the group's net asset value as well as assets under management were at the same level as at year-end 2000. Investment of unit linked assurance capital is determined by the policyholders. Therefore, Skandia has no direct investment or market risk. Since contracts in force span long periods of time, sharp swings in the financial markets during a short period of time indirectly affect the present value of future fees. The recovery of the financial markets during the fourth quarter entailed that the financial effects during the fourth quarter were positive, in the amount of SEK 2.3 billion, compared with SEK -4.3 billion during the third quarter. As a result of the market trend especially during the third quarter, the negative financial effects on the result for the full year amounted to SEK -5.1 billion (+0.1). The group's operating result for the full year amounted to SEK -2,104 million (8,029), and the return on the group's adjusted net asset value, after tax, was -2% (21). The operating result for the fourth quarter was SEK 3,597 million, compared with SEK -4,392 million for the third quarter. The result of operations for the core businesses for the full year (operating result for the core businesses, excluding financial effects in unit linked assurance) was positive, amounting to SEK 3,996 million (5,652), and the operational return on net asset value was 12% (20). The result of operations for the fourth quarter was SEK 1,250 million, compared with SEK 604 million in the third quarter. Sales of single-premium products have been affected the most by the stock market climate. Consequently, sales of mutual fund savings products decreased to SEK 34,831 million (55,812). The market climate also affected sales of unit linked assurance, which decreased by 33% to SEK 93,502 million (140,224). However, new sales of unit linked assurance decreased by only 22%, due to strong development for annual- premium products. Outside the USA new sales decreased by 5%. The result for newly written unit linked assurance business decreased to SEK 1,381 million (2,243). The profit margin was negatively affected, as lower volumes - particularly in the USA - gave rise to poorer cost coverage. This development was countered by continuous adaptation of cost levels. During the fourth quarter this led to a slight improvement in the profit margin in the USA compared with the third quarter. At the same time, product development was further intensified. Skandia's share of If's result during the first nine months of the year amounted to SEK -1,015 million (-554). A valuation of Skandia's holding in If as per 31 December 2001 indicates that there was no further impact on the reported result during the fourth quarter. In this valuation, all effects of changes in the ownership structure have been taken into account. INSURANCE AND SAVINGS PRODUCTS Market and Sales Unit Linked Assurance New sales during the year decreased by 5% outside the USA, and for the group as a whole the decrease was 22% (new sales defined by the industry- wide definition as periodic premiums recalculated to full-year figures plus 1/10 of single premiums during the period). Due to the focus on pension products, new sales of annual-premium products increased by 15%. Measured in terms of new sales, the markets in the USA, the UK and Sweden account for 28%, 34% and 23% of total, respectively, while other markets account for 15%. Sales in the USA consist mainly of single-premium variable annuities, which were strongly affected by the stock market decline. Moreover, Skandia has intentionally limited its risk by refraining from competing with products on the market that include generous guarantee commitments. New sales decreased by 52% in local currency. New products were successfully launched in 2001, and a new product platform was introduced in early 2002. Following the record year in 2000, new sales in the UK decreased by 18% in local currency. However, a 38% drop in sales of single-premium policies was offset to a significant degree by a 19% rise in sales of annual-premium policies - mainly pension plans. New sales in Sweden decreased by 4%. Success for pension products compensated for the decline in single-premium products in the private market. Skandia's market position improved strongly for the second year in a row. In Germany, new sales rose 25% in local currency at the same time that the market position is strengthening. A number of new distribution agreements have been signed. Changes in the tax code and Germany's pension reform will further contribute to greater sales of equity- related savings products. Unit linked assurance is expected to account for a growing share of the German life assurance market. Skandia's sales success is continuing in Japan, as evidenced by a 56% rise in new sales, among other things. Skandia's distribution capacity has strengthened considerably here, as well. New sales in Italy, Spain and Denmark were hurt by the turbulence in the stock markets, however, new sales rose in Austria. Assets under management increased by 0.5%, to SEK 504 billion. Payments to policyholders are well within underlying assumptions and amounted to 9.8% (9.5), expressed as a percentage of assets under management at the start of the year. Surrenders accounted for 8.3 percentage points of this total, compared with 8.0 percentage points in 2000. Mutual Fund Savings Products Sales were strongly affected by the stock market decline and decreased to SEK 34,831 million (55,812). However, assets under management increased by 5%, to SEK 113 billion. Net inflows also remained positive, amounting to SEK 12,994 million (42,645). Sales totalled SEK 20,819 million (36,365) in the USA and SEK 8,063 million (13,349) in the UK. Germany showed continued strong growth in sales volumes. Operating Result and Profitability Unit Linked Assurance Investment of unit linked assurance capital is determined by the policyholders. Therefore, Skandia has no direct investment or market risk. Since contracts in force span long periods of time, sharp swings in the financial markets during a short period of time indirectly affect the present value of future fees. The negative financial effects on the operating result are primarily caused by the impact of the stock market trend on the present value of future fees compared with Skandia's fund growth assumption of approximately 6% per year. However, the unit linked assurance operation is long-term, and therefore the result effect described above will be permanent only under the condition that the stock markets do not recover. The result of operations was SEK 4,341 million (6,026). The result was indirectly affected by the stock market decline due to lower sales volumes. The result for new business during the year thereby decreased to SEK 1,381 million (2,243). Lower volumes give rise to poorer cost coverage, which explains the lower profit margin. The profit margin was 9.2%. This can be compared with a profit margin for 2000 which, with comparable assumptions, amounted to 14.2%. The profit margin declined slightly during the fourth quarter compared with third quarter due to a change in both the product mix and the geographic composition of business. Measures are being taken in a number of markets to adjust the cost level and thereby improve margins. In the USA the profit margin improved slightly during the fourth quarter compared with the third quarter. The cost-savings now implemented in the USA will have an effect starting in 2002. The outcome compared with operative assumptions and the change in operative assumptions remained positive. A drop in surrenders, lower fund management costs and higher additional premiums contributed to the positive trend. Over time these result items should not have any material impact on the operating result. Mutual Fund Savings Products The negative result trend is attributable to substantial investments in infrastructure and new product development. The result was SEK -28 million (12). Life Assurance The result was SEK 111 million (83). Investment Income The parent company's investment assets of SEK 6.7 billion include SEK 3.2 billion on deposit for the acquisition of Bankhall. The return on the parent company's investment assets was SEK 96 million (232). Businesses SkandiaBanken SkandiaBanken's operating result was SEK 79 million (109). The result was charged with costs for IT infrastructure and intensified marketing in connection with establishment in new markets. Skandia Marketing is now included in SkandiaBanken. Deposits in SkandiaBanken increased to SEK 28.3 billion. The bank has a total of 600,000 customers, an increase of 50% since the start of the year, including 30,000 customers from the acquisition of Din Bank AS in Denmark. The number of online customers has risen by 124%, to 321,000. Asset Management Assets under management, consisting of assets from companies in the Skandia group, external clients, and fund management, amounted to SEK 363 billion (361). Assets under management include SEK 40 billion in managed mutual fund assets (37). Commissions from asset management are partly fixed and partly performance-related, the latter being ultimately determined in proportion to the achieved annual return. The result amounted to SEK 17 million (174) after interest expenses and goodwill amortization. Skandia Netline Skandia Netline provides products in the areas of Health Care, Group Insurance, Pension Administration and Knowledge Management. The result was affected by product development costs and decreased to SEK 15 million (52). Other Companies The operating result for other companies in the group was SEK -175 million (31). The result was charged with approximately SEK 120 million in development costs for the banking operation in Switzerland, which was granted a licence in July. Group Expenses Group expenses comprise management and structural costs, and goodwill amortization. Exchange Rate Effects After recalculation to higher average exchange rates compared with the preceding year, sales increased by SEK 11,810 million, while the operating result for the group decreased by SEK 409 million. Total assets increased by SEK 50 billion during the year as a result of changed exchange rates. PROPERTY & CASUALTY INSURANCE The result trend in 2001 for the Nordic property & casualty insurance company If was unsatisfactory. Investment income was hurt by the stock market trend, at the same time that claims - including reserve strengthening - were high. Cash flow and operating expenses developed favourably, however. During the first nine months of the year, Skandia's share of If's result was negative and amounted to SEK -1,015 million. On 11 November, If acquired Sampo P&C, and at the same time Varma-Sampo Mutual Pension Insurance Company acquired 10% of If through a new issue. Skandia Liv also acquired 10% of If from Skandia. Skandia now owns 19% of If. BALANCE SHEET AND NET ASSET VALUE Total assets increased by SEK 21.4 billion, to SEK 610.6 billion. Unit linked assurance and mutual fund savings products accounted for an increase of SEK 2.7 billion, and the bank operations accounted for an increase of SEK 14.8 billion. Net asset value amounted to SEK 37,236 million (37,031). Capital employed in the group, which in addition to net asset value consists of borrowings to finance investments in subsidiaries, amounted to SEK 51.5 billion (45.6). Of these funds, SEK 47.1 billion (41.4) pertains to the core businesses, while SEK 4.4 billion pertains to the financing of Skandia's share of the P&C insurance operations in If. Borrowing for the acquisition of Bankhall is not included in capital employed. Borrowing and Liquidity Cash flow from operating activities improved during the year by SEK 2.7 billion. External borrowings increased during the year by SEK 8.5 billion, including funds held on deposit for the acquisition of Bankhall. Assuming all other factors are unchanged, external borrowings will decrease by approximately SEK 5 billion during the first half of 2002. Excluding Bankhall, the increase in borrowings during the year, totalling approximately SEK 5.3 billion, is attributable essentially to investments in associated companies, subsidiaries and the bank operations, altogether amounting to approximately SEK 2 billion; an increase in investment assets, totalling SEK 0.9 billion; and exchange rate effects of SEK 1.9 billion. Granted, unutilized credit facilities on the balance sheet date amounted to SEK 9.4 billion. In pace with the decrease in borrowing, unutilized credit facilities will return to the former level of SEK 13.1 billion. Liquidity remains good. SIGNIFICANT POST-BALANCE SHEET EVENTS If P&C Insurance On 11 November it was announced that If P&C Insurance would be merging with Sampo's property & casualty insurance operation. The necessary regulatory approvals were received at the end of 2001, and as a result of this, the deal was finalized on 2 January 2002. This entailed a strengthening of If's capital base, among other things through a capital contribution of SEK 558 million from Skandia. To further broaden If's ownership base, a new issue was directed at Varma-Sampo Mutual Pension Insurance Company, which became a new owner. Varma-Sampo thereby acquired a 10.06% holding in If. In connection with this, Skandia also sold 10.06% of its holding in If to Skandia Liv, at the same terms that applied for Varma-Sampo. Skandia's holding in If thereafter amounts to 19.36%. Bankhall On 19 December it was announced that Skandia was making an offer valued at SEK 3.2 billion for the British company Lynx Group plc and its subsidiary Bankhall. Skandia's intention with the acquisition is to take over Bankhall, the UK's largest provider of services to Independent Financial Advisers. On 4 February it was announced that more than 90% of the shareholders had accepted the offer, which means that the deal will be completed. Skandia Asset Management On 8 January 2002 it was announced that Skandia is selling its asset management operation, Skandia Asset Management, to Den norske Bank. The purchase price is SEK 3.2 billion, with a capital gain of approximately SEK 2 billion. The deal is contingent upon customary regulatory approval. Stockholm, 13 February 2002 Lars-Eric Petersson President and CEO For questions, please contact: Jan Erik Back, Chief Financial Officer, tel. +46-8-788 3720 Harry Vos, Head of Investor Relations, tel. +46-8-788 3643 The Board of Directors proposes a dividend of SEK 0.30 for the 2001 financial year, and 22 April 2002 as the record date for payment of the dividend. If the Annual General Meeting decides in favour of this proposal, dividends are expected to be sent out from VPC on 25 April 2002. The Annual General Meeting of Skandia Insurance Company Ltd. (publ.) will be held on Wednesday, 17 April 2002, at 4.30 p.m. Location: Folkets Hus, Stockholm. In connection with the Annual General Meeting, shareholders are invited to attend an information and question & answer session with Skandia's Group Management Team. The information and question & answer session will be held from 1.00 p.m. - 2.30 p.m. on Wednesday, 17 April 2002, at Folkets Hus in Stockholm. The Annual Report is scheduled for distribution by mail to shareholders in late 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.com. This year-end report has been prepared in conformity with the guidelines of the Swedish Financial Supervisory Authority and Recommendation RR20 of the Swedish Financial Accounting Standards Council. The year-end report has been prepared in accordance with the same accounting principles as in the 2000 Annual Report. Financial calendar for Skandia: 17 April 2002, Annual General Meeting 26 April 2002, interim report January-March 2002 8 August 2002, interim report January-June 2002 30 October 2002, interim report January-September 2002 Skandia's published financial reports are available on Skandia's website: www.skandia.com. Skandia's website also provides links to the webcast of the analyst and press conference on Wednesday, 13 February 2002. GROUP OVERVIEW 2001 2000 2001 2000 SEK million Dec. Dec. Q 4 Q 4 Sales Unit linked assurance 93,502 140,22 21,708 31,445 4 Mutual funds 34,831 55,812 6,975 12,303 Premiums written, life 1,276 1,188 381 478 assurance Direct sales of funds 7,561 9,299 1,562 4,646 Businesses 414 344 106 107 Total sales 137,58 206,86 30,732 48,979 4 7 Result summary Result unit linked assurance 4,341 6,026 1,379 1,614 Mutual funds -28 12 -18 -41 Life assurance 111 83 25 54 Investment income 96 232 80 -100 Businesses -55 389 -83 114 Group expenses -469 -1,090 -133 -138 Result of operations 3,996 5,652 1,250 1,503 Financial effects unit linked -5,085 146 2,347 -1,014 assurance Operating result, core -1,089 5,798 3,597 489 businesses Operating result, P&C insurance -1,015 -554 0 -354 1) Items affecting comparability - 2,785 - 2,471 2) Operating result -2,104 8,029 3,597 2,606 Net asset value, SEK billion 3) 37 37 Shareholders' equity, SEK 21 21 billion Assets under management, SEK 1,013 992 billion Total assets, SEK billion 611 589 Operational return on net asset 12 20 value 3) Return on adjusted net asset -2 21 value, % 3) Return on shareholders' equity, 0 15 % 3) Per-share data Operating result per share, SEK -2.06 7.84 3.51 2.55 4) Earnings per share, SEK 3) 4) -0.05 2.76 0.17 1.43 Net asset value per share, SEK 36.38 36.18 Shareholders' equity per share, 20.07 20.27 SEK 1) After having taken into account If's operating result and released excess reserves after the divestment to Skandia Liv, no further result impact had to be taken during the fourth quarter. 2) Items affecting comparability include the result of sales of operations, totalling SEK 314 million, and repayment of surplus funds from Skandia's occupational pension plans with Skandia Liv, totalling SEK 2,471 million as per Dec. 2000. 3) For definition, see page 21. 4) According to recommendation RR18 of the Swedish Financial Accounting Standards Council the dilutive effect is calculated if the key ratio Earnings per share deteriorates. There is no dilutive effect. GROUP OVERVIEW - QUARTERLY ANALYSIS 2001 2001 2001 2000 2000 SEK million Q 4 Q 3 Q 2 Q 1 Q 4 Sales Unit linked assurance 21,708 20,522 25,445 25,827 31,445 Mutual funds 6,975 7,031 9,824 11,001 12,303 Premiums written, 381 238 313 344 478 life assurance Direct sales of funds 1,562 1,134 3,408 1,457 4,646 Businesses 106 93 108 107 107 Total sales 30,732 29,018 39,098 38,736 48,979 Result summary Unit linked assurance 1,379 736 1,349 877 1,614 Mutual funds -18 -42 19 13 -41 Life assurance 25 28 24 34 54 Investment income 80 -21 58 -21 -100 Businesses -83 27 -1 2 114 Group expenses -133 -124 -111 -101 -138 Result of operations 1,250 604 1,338 804 1,503 Financial effects 2,347 -4,342 257 -3,347 -1,014 unit linked assurance Operating result, 3,597 -3,738 1,595 -2,543 489 core businesses Operating result, P&C 0 -654 84 -445 -354 insurance Items affecting - - - - 2,471 comparability Operating result 3,597 -4,392 1,679 -2,988 2,606 EXCHANGE RATES 2001 2001 2001 2001 2000 SEK 31 30 30 31 31 Dec. Sept. June Mar. Dec. EUR Closing rate 9.33 9.72 9.22 9.15 8.86 EUR Average rate 9.29 9.22 9.08 9.00 8.45 GBP Closing rate 15.32 15.68 15.31 14.82 14.22 GBP Average rate 15.01 14.91 14.69 14.22 13.86 USD Closing rate 10.58 10.67 10.89 10.39 9.54 USD Average rate 10.43 10.37 10.26 9.74 9.17 JPY Closing rate 0.081 0.090 0.087 0.083 0.083 JPY Average rate 0.086 0.086 0.085 0.083 0.085 Average rates indicate the average rates for the period 1 January through the respective book- closing dates in 2001 and 2000. SALES Unit Mutua Life Total linked l assur assura funds ance nce 1) 2001 2000 2001 2000 2001 2000 2001 2000 SEK 12 12 12 12 12 12 12 12 million mos. mos. mos. mos. mos. mos. mos. mos. USA 40,008 75,357 20,81 36,36 60,82 111,7 9 5 7 22 UK 32,515 42,980 8,063 13,34 40,57 56,32 9 8 9 Sweden 10,174 10,145 521 638 10,69 10,78 5 3 Spain 1,193 1,632 1,687 2,237 1,105 1,058 3,985 4,927 Italy 2,640 4,707 2,640 4,707 Colombi 2,392 2,328 108 70 2,500 2,398 a Germany 1,726 1,216 583 204 2,309 1,420 Japan 1,877 1,049 1,877 1,049 Switzer 1,255 1,383 603 691 1,858 2,074 land Austria 961 724 961 724 Mexico 658 571 658 571 Denmark 393 432 63 60 456 492 Other 102 28 163 265 28 Sales 93,502 140,22 34,83 55,81 1,276 1,188 129,6 197,2 4 1 2 09 24 1) The busines s in Spain pertain s to discret ionary managem ent. SALES, MUTUAL FUNDS Sales Withd Net rawal depos s its 2001 2000 2001 2000 2001 2000 SEK 12 12 12 12 12 12 million mos. mos. mos. mos. mos. mos. USA 20,81 36,36 - - 4,069 26,90 9 5 16,75 9,461 4 0 UK 8,063 13,34 - - 6,118 12,08 9 1,945 1,262 7 Other 5,949 6,098 - - 2,807 3,654 3,142 2,444 Mutual 34,83 55,81 - - 12,99 42,64 funds 1 2 21,83 13,16 4 5 7 7 NEW Total SALES, annua UNIT lized LINKED ASSURAN CE Singl Annua new e l sales premi premi 2) um um 1) 2001 2000 2001 2000 2001 2000 SEK 12 12 12 12 12 12 million mos. mos. mos. mos. mos. mos. USA 39,76 75,14 242 212 4,219 7,727 5 5 UK 25,08 37,50 2,557 1,984 5,065 5,734 1 5 Sweden 3,945 5,115 3,144 3,167 3,539 3,679 Spain 1,171 1,614 70 84 187 245 Italy 2,572 4,707 83 340 471 Germany 10 8 527 385 528 386 Japan 1,484 815 164 117 312 199 Switzer 870 1,109 158 113 245 224 land Austria 174 222 321 218 338 240 Mexico 658 571 66 57 Denmark 133 289 114 162 127 191 Other 53 18 66 9 72 10 New 75,91 127,1 7,446 6,451 15,03 19,16 sales 6 18 8 3 1) Periodi c premium s recalcu lated to full- year figures . 2) Periodi c premium s recalcu lated to full- year figures plus 1/10 of single premium s during the period. ASSETS UNDER MANAGEM ENT, INSURAN CE AND SAVINGS PRODUCT S Invest ments in unit Unit linked linke and d mutual assur Mutual fund Life Total ance funds 1) companies assurance 2001 2000 2001 2000 2001 2000 2001 2000 2001 2000 SEK 31 31 31 31 31 31 31 31 31 31 million Dec. Dec. Dec. Dec. Dec. Dec. Dec. Dec. Dec. Dec. USA 274,2 283,1 58,98 60,45 6,158 4,187 339,3 347,7 46 34 7 2 91 73 UK 159,1 155,8 32,78 30,13 891 933 192,7 186,9 25 65 1 4 97 32 Sweden 40,44 36,39 1,308 951 766 654 42,52 38,00 6 7 0 2 Spain 2,943 3,055 9,931 8,457 47 12 15,07 15,12 27,99 26,64 0 5 1 9 Italy 10,47 9,579 342 320 10,82 9,899 8 0 Colombi 7,590 5,855 131 109 367 301 8,088 6,265 a Germany 2,966 2,134 831 419 231 196 4,028 2,749 Japan 2,428 1,150 584 547 3,012 1,697 Switzer 7,129 6,955 1,523 1,323 133 87 8,785 8,365 land Austria 2,142 1,634 159 130 2,301 1,764 Mexico 717 392 40 40 757 432 Denmark 959 677 136 124 5 1,095 806 Other 92 21 317 118 25 527 46 Total 503,6 500,9 113,2 107,5 9,736 7,364 15,43 15,43 642,1 631,3 assets 71 93 68 91 7 1 12 79 1) The busines s in Spain pertain s to discret ionary managem ent. ASSETS UNDER MANAGEM ENT, GROUP Manag Managed by External Total ed other by group management Management SAM companies 1) 2001 2000 2001 2000 2001 2000 2001 2000 SEK 31 31 31 31 31 31 31 31 million Dec. Dec. Dec. Dec. Dec. Dec. Dec. Dec. Unit 19,769 18,04 483,9 482,9 503,6 500,9 linked 3 02 50 71 93 assuran ce Mutual 126 17,521 14,312 95,62 93,27 113,2 107,5 funds 1 9 68 91 Investm ent in unit linked and 4,706 650 5,030 6,714 9,736 7,364 mutual fund compani es Life 15,437 15,431 15,43 15,43 assuran 7 1 ce Insuran ce and 24,60 18,69 37,988 36,457 579,5 576,2 642,1 631,3 savings 1 3 23 29 12 79 product s Skandia 261,8 271,4 277 641 262,1 272,0 Liv 41 43 18 84 Parent 6,740 4,923 6,740 4,923 company Fund 20,68 18,85 20,68 18,85 managem 6 9 6 9 ent Discret 48,657 47,20 4,190 1,921 52,84 49,13 ionary 9 7 0 managem ent Bank deposit s from the 28,264 15,129 28,26 15,12 general 4 9 public Index- 47 47 linked bonds Managed 362,5 361,1 70,719 54,195 579,5 576,2 1,012 991,5 assets 25 27 23 29 ,767 51 1) SAM = Skandia Asset Managem ent. TRADING ANALYSI S, UNIT LINKED ASSURAN CE 2001 2000 SEK 12 12 million mos. mos. Total 15,038 19,163 annuali zed new sales 1) Present 1,381 2,243 value of new busines s for the year Return on value of contrac ts in force from 3,095 2,629 previou s years Outcome 361 174 compare d with operati ve assumpt ions Change 600 1,809 in operati ve assumpt ions Value- 5,437 6,855 added from operati ons Busines -180 -10 s start- ups and other overhea ds Financi -5,085 -892 al effects 2) Market 1,038 adjustm ent of discoun t rate Financi -916 -819 ng costs Operati -744 6,172 ng result, unit linked assuran ce Profit 9.2% 11.7% margin, new sales 3) 1) Periodi c premium s recalcu lated to full- year figures plus 1/10 of single premium s during the period. 2) The effect on the present value of future fees caused by the deviati on of the financi al market trend from assumpt ions on fund growth and interes t rates. 3) Present value of new busines s for the year in relatio n to total annuali zed new sales. NEW SALES AND PROFIT MARGIN, UNIT LINKED ASSURAN CE PER GEOGRAP HIC AREA Presen Profit t margin value , new of new sales Annual busine New old ized ss for assump assumptions new the tions 2) sales year 1) 2001 2000 2001 2000 2001 2000 2000 SEK 12 12 12 12 12 12 12 million mos. mos. mos. mos. mos. mos. mos. USA 4,219 7,727 -57 1,260 -1.4% 13.6% 16.3% UK 5,065 5,734 507 425 10.0% 15.7% 7.4% Sweden 3,539 3,679 631 329 17.8% 12.5% 8.9% New 2,215 2,023 300 229 13.5% 14.8% 11.3% Markets Total 15,038 19,163 1,381 2,243 9.2% 14.2% 11.7% 1) Assumpt ions used startin g in 2001 for calcula ting the present value of new busines s for the year. 2) Assumpt ions used in 2000 for calcula ting the present value of new busines s for the year. ASSUMPT IONS, UNIT LINKED ASSURAN CE Fund Inflat growt ion h Disc assum assump ount ption tions rate s 1) 2001 2000 2001 2000 2001 2000 % 31 31 31 31 31 31 Dec. Dec. Dec. Dec. Dec. Dec. USA 8.50 8.75 5.75 6.00 2.50 2.50 UK 8.50 8.50 6.00 5.75 3.75 3.75 Sweden 8.75 8.50 6.50 6.00 3.25 2.50 1) After fund managem ent fees. SENSITI VITY ANALYSI S, UNIT LINKED ASSURAN CE Effect on operati ng result for unit linked assuran ce (before tax) of a one percent age point increas e in interes t-rate, growth and inflati on assumpt ions Effe ct on oper atin g resu lt (bef ore tax) Fund growt Infla h tion Expo Discount assum assum Total sure p- p- SEK VBIF rate tions tions Effect million 1) 2) USA 8,32 -485 581 -62 34 5 UK 10,5 -449 278 -29 -200 89 Sweden 4,94 -465 403 -42 -104 2 New 3,82 -184 131 -68 -121 Markets 2 Total 27,6 - 1,393 -201 -391 78 1,58 3 One- +/- time 198 effect of a 1% increas e/decre ase in stock market 1) Before deducti on of taxes and deferre d acquisi tion costs. 2) Before equaliz ation of financi al effects . RESULT OF OPERATIONS Unit Mutual Life Total linke funds 1) assur d ance assur ance 2001 2000 2001 2000 2001 2000 2001 2000 SEK million 12 12 12 12 12 12 12 12 mos. mos. mos. mos. mos. mos. mos. mos. USA 944 1,907 77 72 1,021 1,979 UK 1,753 2,363 21 -38 1,774 2,325 Sweden 1,379 1,252 -12 -9 1,367 1,243 Spain -35 -5 -5 99 67 59 62 Italy 151 117 151 117 Colombia 51 43 9 4 60 47 Germany 267 210 -57 -21 210 189 Japan -91 -33 -91 -33 Switzerland 64 148 3 -2 67 146 Austria 102 81 1 -3 103 78 Mexico -31 -23 -31 -23 Denmark 2 -4 3 12 5 8 Other -164 13 -107 -30 -271 -17 Result of 4,341 6,026 -28 12 111 83 4,424 6,121 operations OPERATING RESULT ( INCLUDING FINANCIAL EFFECTS 2)) Unit Mutual Total linke funds 1) Life d assur assur ance ance 2001 2000 2001 2000 2001 2000 2001 2000 SEK million 12 12 12 12 12 12 12 12 mos. mos. mos. mos. mos. mos. mos. mos. USA - 988 77 72 - 1,060 3,616 3,539 UK 1,740 2,471 21 -38 1,761 2,433 Sweden 1,131 1,277 -12 -9 1,119 1,268 Spain -48 -17 -5 99 67 46 50 Italy 14 63 14 63 Colombia 51 43 9 4 60 47 Germany 221 197 -57 -21 164 176 Japan -115 -24 -115 -24 Switzerland 7 115 3 -2 10 113 Austria 113 78 1 -3 114 75 Mexico -31 -23 -31 -23 Denmark -6 -4 3 12 -3 8 Other -154 13 -107 -30 -261 -17 Market adjustment of discount 1,038 1,038 rate 3) Operating result, including financial effects 4) -744 6,172 -28 12 111 83 -661 6,267 Return on 2 18 adjusted net asset value (moving 12- month figures) 5) 1) The business in Spain pertains to discretionar y management. 2) Financial effects relate only to unit linked assurance, as the present value of future fees is not recognized for mutual funds or life assurance. 3) In 2000 the discount rate used to calculate the operating result was adjusted to bring it nearer to interest rates prevailing in the industry. This adjustment resulted in a positive one-time effect on the operating result of SEK 1,038 million. 4) Of which, financing costs: USA -893 -778 -893 -778 UK -5 -10 -7 -12 -10 Colombia -1 0 0 -1 -1 -1 Germany -17 -10 -17 -10 Other -1 -21 -1 -2 -21 Total -916 -819 -9 0 0 -1 -925 -820 5) Excluding effects of market adjustment of discount rate. INVESTMENT INCOME 2001 2000 SEK million 12 mos. 12 mos. Changes in value Bonds and short-term 51 -19 investments Equities -85 -71 Real estate 0 14 Loans 0 17 Total changes in value -34 -59 Direct investment income 146 222 Foreign exchange gains/losses 35 122 Investment income 147 285 Allocated investment return transferred to other operations -51 -53 Investment income, net 96 232 Direct yield, % 2.7 4.4 Total return, % 1.5 3.8 OPERATING RESULT, BUSINESSES 2001 2000 SEK million 12 mos. 12 mos. SkandiaBanken 1) 79 109 Asset Management 17 174 Netline2) 15 52 Finance companies 9 23 Other 3) -175 31 Total -55 389 1) The result for SkandiaBanken includes the result for Skandia Marketing. 2) Comparison figures for 2000 pertain to Lifeline. 3) Includes start-up costs for Skandia Finanz, Skandia's new bank in Switzerland. A banking licence was received in July 2001, and business is scheduled to commmence during 2002. GROUP EXPENSES 2001 2000 SEK million 12 mos. 12 mos. Amortization of goodwill -53 -42 Structural costs -94 -136 Joint-group management expenses -322 -292 Total excluding profit-sharing -469 -470 plans Profit-sharing plans - -620 Total including profit-sharing -469 -1,090 plans STATEMENT OF CASH FLOWS 2001 2000 SEK billion 12 12 mos mos Cash flow from 0,1 -2.6 operating activities Items affecting - 2.5 comparability 1) Cash flow from -4,8 1.5 investments in operations 2) 3) Cash flow from 6.0 -1.5 financing activities 3) Net cash flow for 1.3 -0.1 the period Liquid assets at 3.1 3.0 the start of the period Exchange rate 0.2 0.2 differences in liquid assets Liquid assets at 4.6 3.1 the end of the period 1) Cash flow in 2000 was positively affected by a repayment of surplus funds from Skandia's pension insurance plans with Skandia Liv. 2) 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 changes in value these have had. 3) The financing of the acquisition of Bankhall has affected cash flow from investments in operations as well as cash flow from financing activities in the amount of approx. SEK 3 billion. NET ASSET VALUE 2001 2000 SEK million 31 31 Dec. Dec. Shareholders' 20,5 20,74 equity 38 9 Deferred taxes, 4,34 4,148 net 6 Surplus value of unit linked business in force after 12,2 12,01 deferred tax 49 9 Other surplus 103 115 values Net asset value 37,2 37,03 36 1 Subordinated loans 214 1,443 Risk-bearing 37,4 38,47 capital 50 4 CHANGE IN NET ASSET VALUE AND SHAREHOLDERS' EQUITY Net Sharehold asse ers' t valu equi e ty 2001 2001 2000 SEK million 31 31 31 Dec. Dec. Dec. Opening balance at 37,031 20,7 18,05 the beginning of 49 8 the year Result before - -122 3,951 taxes 2,10 4 Income taxes 505 64 - 1,118 Change in surplus -17 - - value of bonds Deferred tax on surplus value on unit linked 1,50 - - business in force 8 Dividend -614 -614 -512 Translation 924 458 377 differences Minority interests 3 3 -7 Closing balance 37,2 20,5 20,74 36 38 9 OPERATING RESULT SEK million Unit Gro P&C Ite up ms 2001 linked Mut Life Inve Busi- adm ins aff Operat ual stm. in. ur- ect ing . 12 mos. assura fun assura inco ness exp anc com Result nce ds nce me es . e p. Technical result P&C insurance 15 41 56 Life assurance 1,688 111 1,799 Non-technical result Investment 466 -106 51 -41 370 income Investment income, share in - -1,015 result of If 1,0 15 Financing costs -916 -9 202 -52 -775 Change in surplus value of unit linked business in -1,982 -1,982 force Mutual funds -19 -19 Other businesses -5 -5 Amortization of goodwill -64 -53 -117 Provision to profit- sharing plans - Structural costs -94 -94 Group expenses - -322 322 Operating result -744 -28 111 96 -55 - - - -2,104 469 1,0 15 Of which, change in surplus value of unit linked business in 1,982 1,982 force Pre-tax result 1,238 -28 111 96 -55 - - - -122 469 1,0 15 Unit Gro P&C Ite up ms 2000 linked Mut Life Inve Busi- adm ins aff Operat ual stm. in. ur- ect ing . 12 mos. assura fun assura inco ness exp anc com Result nce ds nce me es . e p. Technical result P&C insurance 45 41 2,4 2,557 71 Life assurance 2,639 84 2,723 Non-technical result Investment 274 85 42 -41 360 income Investment income, share in - -554 result of If 554 Financing costs -819 -1 147 -47 -720 Change in surplus value of unit linked business in 4,078 4,078 force Mutual funds 12 12 Other businesses 405 314 719 Amortization of goodwill -56 -42 -98 Provision to profit- sharing plans - -620 620 Structural costs - -136 136 Group expenses - -292 292 Operating result 6,172 12 83 232 389 - - 2,7 8,029 1,0 554 85 90 Of which, change in surplus value of unit linked business in -4,078 -4,078 force Pre-tax result 2,094 12 83 232 389 - - 2,7 3,951 1,0 554 85 90 PROFIT AND LOSS ACCOUNT 2001 2000 2001 2000 SEK million 12 12 Q 4 Q 4 mos. mos. Technical account, property & casualty insurance business Premiums earned, net of 398 321 102 87 reinsurance Allocated investment return transferred from the non-technical account 41 41 10 10 Claims incurred, net of -248 -209 -57 -45 reinsurance Operating expenses -135 -67 -53 -10 Other technical income and - - - 3 charges Repayment of surplus funds in - 2,471 - 2,471 Skandia Liv Technical result, property & 56 2,557 2 2,516 casualty insurance business Technical account, life assurance business Premiums written, net of 92,98 138,4 21,59 31,31 reinsurance 2 83 0 8 Investment income, including - - 40,28 - unrealized changes in value 68,57 46,20 4 45,12 9 9 4 Claims incurred, net of - - - - reinsurance 48,79 40,30 13,06 10,81 8 6 7 4 Change in other technical provisions where the investment risk is borne by the life assurance policyholders 29,20 - - 27,39 9 41,33 47,66 8 7 7 Operating expenses 1) - - - - 6,638 9,430 1,856 2,612 Other technical provisions 3,623 1,522 1,190 58 Technical result, life 1,799 2,723 474 224 assurance business Non-technical account Investment income, including unrealized changes in value and share in -645 -194 124 -504 result of If Financing costs -775 -720 -185 -209 Mutual funds -19 12 -15 -41 Other operations -5 719 -92 98 Amortization of goodwill -117 -98 -34 -44 Provision to profit-sharing - -620 - - plans Structural costs -94 -136 -25 -57 Group expenses -322 -292 -89 -53 Pre-tax result -122 3,951 160 1,930 Paid and deferred tax 64 - 3 -467 1,118 Minority interests in result 3 -7 12 -1 for the period Result for the period -55 2,826 175 1,462 Per-share data Average number shares before 1,024 1,024 1,024 1,024 dilution, millions Average number shares after 1,024 1,024 1,024 1,024 dilution, millions 2) Earnings per share before -0.05 2.76 0.17 1.43 dilution, SEK 3) 4) 1) Net change in DAC 4,082 3,307 1,336 1,023 of which change in CARVM 3,251 - 778 84 offset* 1,523 * In the US operations, DAC is carried net of the "CARVM offset", representing the approximate present value of surrender charges which could be payable if all contracts were surrendered today. Surrender charges, and consequently the CARVM offset, are primarily affected by account values, and thus a reduction in account value reduces the CARVM offset. This note shows the net decrease (+) or increase (-) in operating expenses resulting from the net change in DAC, including the amount caused by changes in the CARVM offset. 2) Data on the number of shares after dilution takes into account Skandia's stock option programme for the years 2000-2002. 3) According to recommendation RR18 of the Swedish Financial Accounting Standards Council the dilutive effect is calculated if the key ratio Earnings per share deteriorates. There is no dilutive effect. 4) Earnings per share are calculated as the result for the period divided by the average number of shares outstanding. BALANCE SHEET SUMMARY SEK billion 2001 2000 Shareholders' 2000 2000 equity, Assets 31 31 provisions and 31 31 Dec. Dec. liabilities Dec. Dec. 1) 1) Intangible assets 1.3 1.3 Shareholders' 20.5 20.7 equity Investment in If 4.5 4.2 Minority 0.0 0.0 etc. interests Investments 4) 26.3 24.3 Subordinated 0.2 1.4 loans 3) Investments, unit 503. 501.0 Technical 22.1 21.1 linked 7 provisions 2) Reinsurers' share Provisions, unit 487.1 481.7 of linked 2) technical 17.9 22.7 Liabilities in 29.5 16.3 provisions 2) bank operations 3) Assets in bank Deferred tax 4.7 4.4 operations liability and finance 32.4 17.6 Borrowings 3) 17.3 7.6 companies Debtors 4.4 4.6 Deposits from 19.0 24.2 reinsurers Tangible assets 0.8 0.7 Creditors 6.7 8.4 Cash at bank and 4.6 3.1 Reinsurers' share in hand of Other assets 0.5 0.0 deferred 0.6 0.1 acquisition costs 2) Deferred 13.1 7.9 Other accruals acquisition costs and 2) 5) Other prepayments deferred income 2.9 3.3 and accrued income 1.1 1.8 Shareholders' equity, Assets 610. 589.2 provisions and 610.6 589.2 6 liabilities 1) Comparison figures for 2000 have been recomputed to take into account the transfer of operations from Skandia Marketing to SkandiaBanken. 2) Technical provisions, net, after deducting deferred acquisition costs Life assurance 14.2 13.8 Unit linked 463.7 457.6 assurance Property & 0.9 0.9 casualty insurance Total 478.8 472.3 3) Group borrowings, excl. subordinated loans in Skandia Insurance Company Ltd. Borrowings as per 17.5 9.0 balance sheet, including subordinated loans Additional 0.1 0.1 borrowings by finance companies and bank operations Borrowings gross 17.6 9.1 Less: -0.2 -1.4 subordinated loans in Skandia Insurance Company Ltd. Borrowings net 17.4 7.7 4) Investments, current value Investments as 26.3 24.3 per balance sheet Recalculation to 0.7 0.8 current value Cash at bank and 4.6 3.1 in hand Securities 0.5 0.0 settlement claims, net Accrued interest 0.3 0.6 income Debt derivatives -0.1 -0.1 Total 32.3 28.7 Of which: Investments, life 15.4 15.4 assurance Investments, unit 8.9 6.8 linked assurance Investments, 0.8 0.6 mutual funds Investments, 3.5 4.9 parent company Deposit for the 3.2 - acquisition of Bankhall Currency 0.5 1.0 derivatives Deposits with 0.0 0.0 ceding undertakings Total 32.3 28.7 5) Deferred acquisition costs Deferred 21.9 19.1 acquisition costs before CARVM offset CARVM offset* -8.8 -11.2 Total 13.1 7.9 * See page 20, note 1 for explanation. Glossa ry Adjust ed net asset value: Net asset value after deduct ion for net deferr ed taxes. Annual ized new sales: Period ic premiu ms recalc ulated to full- year figure s, plus 1/10 of single premiu ms during the period . Capita l employ ed: Net asset value, borrow ings for invest ments in subsid iaries , and minori ty intere sts. Financ ial effect s: The effect on the presen t value of future fees caused by the deviat ion of the financ ial market trend from assump tions on fund growth and intere st rates. Net asset value: Shareh olders ' equity as per the balanc e sheet, net deferr ed tax liabil ity, surplu s values of unit linked busine ss in force after deduct ing deferr ed tax, and unreal ized change s in the value of fixed- income securi ties. Operat ing result : Pre- tax result plus change s in surplu s values of unit linked busine ss in force. Premiu ms earned : The portio n of premiu m income attrib utable to the period , i.e., premiu ms writte n less reinsu rance premiu ms, adjust ed for the portio n of premiu ms not yet earned . Premiu ms writte n: Total premiu ms receiv ed during the period or taken up as a receiv able at the end of the period . Result of operat ions: Operat ing result for the core busine ss before financ ial effect s in unit linked assura nce. Surplu s value of unit linked busine ss in force: The presen t value of calcul ated future surplu ses from the annual fees paid by policy holder s for contra cts in force. The group' s operat ing result includ es the change in these surplu s values for the period . Techni cal result , life assura nce: The balanc e on the techni cal accoun t for life assura nce, includ ing direct invest ment income and change s in value of invest ments transf erred from the non- techni cal accoun t. Techni cal result , proper ty & casual ty insura nce: Premiu ms earned less claim costs and operat ing expens es, plus the invest ment return transf erred from the non- techni cal accoun t. Value- added from operat ions (unit linked assura nce): Result of operat ions exclud ing financ ing costs, costs for busine ss start- ups and other overhe ads. Key Ratios Direct yield: Direct invest ment income (befor e deduct ing admini strati ve expens es) as a percen tage of a weight ed averag e of the curren t value of invest ments. Earnin gs per share: The result for the period divide d by the averag e number of shares outsta nding. Operat ional return on net asset value: The result of operat ions for the last 12- month period in relati on to averag e net asset value less invest ments in proper ty & casual ty insura nce compan ies. Profit margin : Presen t value of new busine ss for the year in relati on to total annual ized new sales. Return on adjust ed net asset value: Operat ing result for the last 12- month period plus other change s in surplu s values , less curren t and deferr ed tax and minori ty intere sts, in relati on to adjust ed averag e net asset value. Return on shareh olders ' equity : Result for the last 12- month period in relati on to averag e shareh olders ' equity . Total return : The sum of direct invest ment income (befor e deduct ing admini strati ve expens es) and realiz ed change s in value, as a percen tage of a weight ed averag e of the curren t value of invest ments. ------------------------------------------------------------ This information was brought to you by Waymaker http://www.waymaker.net The following files are available for download: http://www.waymaker.net/bitonline/2002/02/13/20020212BIT01560/bit0001.doc http://www.waymaker.net/bitonline/2002/02/13/20020212BIT01560/bit0001.pdf