Storebrand Livsforsikring has maintained its leading market position thanks to the strength of its risk management, and has produced a realised investment return of 0.93% for the first nine months of 2002.
Further falls in equity markets in Q3 caused weak financial income for the holding company and life insurance company as well as for If Skadeförsäkring.
Storebrand's financial condition is sound. The group's capital ratio improved from 13.1% to 14.9% in Q3, and refinancing of the bond loan that matures in June 2003 is fully underwritten.
The technical insurance results reported by If, where Storebrand has a 22.47% ownership interest, show a marked improvement. If's Q3 combined ratio was 103.6%.
Storebrand Bank and Finansbanken are to merge. The new bank will have a strong balance sheet and the merger will help promote further cost savings in the banking area.
Group result, which represents the shareholders' share of operating profit, showed a loss of NOK 446 million in Q3 (after transfers from additional statutory reserves) and a loss of NOK 1,730 million for the first nine months. Q3 produced an operating loss of NOK 1,353 million (before transfers from additional statutory reserves), bringing the operating loss for the first nine months to NOK 3,550 million.
Growth in sales of health insurance and personal risk products
"We have experienced yet another quarter of sharp falls in share prices. We are reporting weak earnings for the third quarter as a result of these difficult market conditions. However our diligent risk management has helped to ensure that the group has maintained its sound financial condition. It is very satisfying to report that the life insurance company has strengthened its leading market position with a sound balance sheet and the best realised investment return of any Norwegian life insurance company. Moreover sales of health insurance and personal risk products show a positive trend, and If has reported a sharp improvement in its technical insurance result. The internal measures we have implemented are proceeding as planned" comments Idar Kreutzer, Group Chief Executive Officer.
The proportion of the life insurance company's portfolio invested in shares at 30 September was 6.9%, down from 16.1% at the close of Q2. The realised investment return was 0% in Q3, giving a return for the first nine months of 0.93%. The life insurance company's capital ratio improved from 13.3% to 16.5% over the course of Q3.
Finansbanken's loan loss provisions at a normalised level
Finansbanken's gross lending fell by NOK 1.0 billion to NOK 15.6 billion at the end of Q3. This was principally due to a further reduction in the shipping portfolio, which amounted to NOK 1.9 billion at the end of the quarter. Loan loss provisions represented a charge of NOK 19.0 million in Q3, which is in line with the normalised level of loan losses and provisions expected. Net interest income was weak due to an increase in the volume of lending on which interest is no longer accrued. The cost-saving measures currently being implemented are producing the results expected.
The results reported by Storebrand Bank and Storebrand Kapitalforvaltning were significantly affected by falling share prices and low sales volumes for savings products. Storebrand's sales of asset management products in the current weak market have nevertheless maintained a strong level relative to the group's competitors. Net new inflows to Storebrand's mutual funds products totalled NOK 1.5 billion for the first nine months of the year, representing a sizeable 82% share of the Norwegian market. Storebrand Bank reported a pre-tax loss of NOK 16.4 million for Q3, bringing the bank's loss after the first nine months to NOK 19.1 million as compared to a loss of NOK 87 million for the same period last year. These figures include write-downs of shares in Acta of NOK 3.4 million and NOK 13.0 million for Q3 and the first nine months respectively.
If reported a further improvement in its technical insurance result for Q3, with a combined ratio of 103.6% as compared to 107.5% (pro forma) for the same period last year. This improvement is a result of the comprehensive program of measures If has implemented to improve profitability. Under Swedish GAAP bonds are booked at amortised value. These assets are booked at market value under Norwegian GAAP, and the resulting cumulative positive effect on earnings was NOK 97 million in Q3. No adjustment was previously made for this difference since the effect was not material. The weak financial income reported by If means that Storebrand's share in the company's Q3 results was a loss of NOK 56 million.
Merger of Storebrand Bank and Finansbanken
A merger between Finansbanken and Storebrand Bank has been approved. The merger is expected to come into force in March 2003 assuming that the necessary regulatory approvals are obtained, and will have accounting effect from 1 January 2003.
The merged bank will be known as Storebrand Bank, while the Finansbanken name will be retained as a separate brand for business with the corporate sector and high net worth individuals. Per Kumle will be the CEO of the new bank. Merging the two banks will ensure the co-ordinated management and development of Storebrand's banking activities, and will improve profitability in the banking area.
As part of the preparations for the merger of the two banks Storebrand has arranged new committed loan facilities totalling EUR 225 million. These facilities have a maturity of 12 months.
Oslo, 13 November 2002
Appendix: Board of Directors' Interim report for Q3 2002.
For further information contact:
Lars Aa Løddesøl, Executive Vice President, Finance Director Tel: +47 22 31 56 24
Mobile: +47 93 48 01 51
Egil Thompson, Director of Corporate Communications Tel: +47 22 48 95 86
Mobile +47 93 48 00 12
Nils Robert Hodnesdal, Investor Relations
Tel: +47 22 31 55 33 Mobile +47 93 40 38 13