The sharp fall seen in equity and savings markets resulted in a very weak bottom line in the first half of 2002
Group results showed a loss of NOK 1,223 million in the second quarter and a loss of NOK 1,285 for the first 6 months of the year
Strong market position maintained with a positive transfer balance in the life insurance area and a high market share of net new inflows to securities funds
The company's solidity and liquidity are satisfactory. Active risk management strengthened the group's capital adequacy in the second quarter.
Previously announced cost reducing measures are proceeding according to plan
The Storebrand group's financial results are very dependent on conditions in the financial markets. The negative trend that has characterised equity markets for an extended period has led to a weak investment return on the company's assets and policyholders' funds, and represents the main reason for the group's weak results over the first six months.
"In these turbulent market conditions Storebrand has maintained a leading position in the Norwegian savings and life insurance market. At the same time, our active risk management ensures that the company's capital adequacy and liquidity are satisfactory ", comments Idar Kreutzer, Group Chief Executive Officer.
Storebrand has maintained its strong position for life insurance. The transfer balance is positive, and the life insurance company's risk insurance products that are not subject to profit sharing with policyholders made a positive contribution to the results. Storebrand Helseforsikring continues to report strong growth in sales, with premium income almost double the level achieved in the same period last year.
The realised investment return for Storebrand Livsforsikring was 1.0% for the first six months, equivalent to 1.9% on an annualised basis. The value-adjusted return for the first six months was 0.2%. Conditions in equity markets led to a reduction in Storebrand's exposure to equities from 26% at the close of the Q1 to 16% at 30 June 2002. This gave a 2.2 percentage point improvement in the capital ratio in Q2, to 13.3% at 30 June 2002.
Storebrand's market share for sales of asset management products performed well in a weak market. Storebrand Fondene and Delphi once again attracted a high level of net inflows to securities funds in Q2. Of total net inflows of NOK 1.0 billion for the market as a whole in Q2, Storebrand Fondene and Delphi attracted NOK 554 million. Net inflows to Storebrand Fondene and Delphi totalled NOK 1.53 billion for the first six months of the year, equivalent to a 52% market share of total net inflows.
The measures implemented to improve profitability at Storebrand Bank have led to a significant reduction in the cost base, and the net interest margin has also improved. The programme of measures to improve profitability launched last year, together with increased focus on matching costs to the current lower level of income, resulted in a NOK 88 million reduction in operating costs for the first six months of 2002 as compared to the same period last year.
Finansbanken reported a pre-tax loss of NOK 338 million. This weak result is mainly due to higher specified and unspecified provisions of NOK 336 million in the quarter. This increase in provisions was based on a detailed review of all the bank's problem loans. Real estate financing and other commercial lending were the main areas for higher provisions. Finansbanken decided to increase its specified and unspecified provisions by NOK 145 million in addition to the NOK 190 million already announced on 1 July in response to further market developments so far in Q3. The bank will carry out a private placement of up to NOK 240 million of shares with Storebrand ASA in August.
Earnings at If, where Storebrand has a 22.47% equity interest, remained weak although the insurance result showed a positive trend as a result of the measures implemented for premiums and cost savings. The company's combined ratio was 107.7 for the first six months of 2002, representing a 3.6 percentage point improvement from Q1 and a 1.7 percentage point improvement over the same period last year. With a normalised investment return, If would have reported a profit for both Q2 in isolation and for the first six months of the year as a whole. Storebrand's share of If's results for Q2 represented a loss of NOK 171 million.
Despite the progress in operations at If, the weak financial return has resulted in a weakening of If's capital situation. The owners will therefore provide a total of SEK1,600 million in new equity, of which Storebrand's share is NOK290 million.
As previously communicated, Storebrand has in the period from 1998-2000 granted 78 employees a cash bonus scheme linked to the performance of the Storebrand share price.
The scheme today covers 49 employees. Payments only become due if the share price is over NOK 60. In order to avoid costs for the company and its shareholders if bonus payments become due, a hedging arrangement (total return swap) was entered into in connection with the scheme. The hedging transaction generates a profit for Storebrand ASA if the share price exceeds approximately NOK 62, and similarly represents a loss at lower share prices. The fall in the Storebrand share price has resulted in a cost in this respect of NOK 71 million in the first six months of 2002, of which Q2 accounts for NOK 53 million. The estimated cost in Q3 on the basis of the current share price amounts to NOK 70 million.
The group is implementing the cost saving measures previously announced in line with the budget figures. In addition further cost saving measures are to be implemented in the asset management area.
Oslo, 14 August 2002
For full report with tables see attachment:
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
Appendix: Board of Directors' Interim report for Q2 2002