Storebrand - Results 3 quarter 2001
Difficult conditions in financial markets lead to weak results
· Storebrand's third quarter earnings were heavily affected by the falls seen in financial markets. Group result showed a loss of NOK 891 million in the third quarter after a write-back of additional statutory reserves of NOK 1,837 million. The quarter produced an operating loss of NOK 3,150 million.
· Storebrand has maintained its position as the market leader for unit linked products, and again attracted the largest market share of net new inflows to equity funds. Sales of health insurance showed strong growth.
· A strong performance in the corporate market ensured that the growth in premium income reported by Storebrand Livsforsikring in the second quarter continued in the third quarter.
· The group has intensified its focus on measures to reduce costs and improve profitability. Measures have been identified and implemented that will create annual savings of NOK 150 million.
In such a difficult market Idar Kreutzer notes with satisfaction that Storebrand has maintained a strong position in important sectors of the life insurance and savings market. He draws particular attention to the group's 24.9% market share of new inflows to mutual funds products and its 20.9% market share for unit linked products, as well as pointing out that Storebrand attracted a net inflow of premium reserves from group pension transfers amounting to NOK 152 million in the third quarter.
Close contact
"It is all the more important to maintain close contact with our customers when market conditions are difficult. The purpose and value of Storebrand Bank's major commitment to providing an advisory service to its retail customers is particularly apparent at a time like this" observes Idar Kreutzer.
The results reported by If, in which Storebrand has a 44% interest, continue to be weak, reflecting a situation in which the measures implemented to improve underwriting results have not yet produced the required effect.
The third quarter produced an operating loss of NOK 3,150 million as compared to a profit of NOK 1,799 million in the same period last year. Operating loss for the first nine months amounts to NOK 3,071 million as compared to an operating profit of NOK 6,008 million for the same period last year. Group result, which represents the share of operating profit due to equity, showed a loss of NOK 891 million in the third quarter as compared to a profit of NOK 373 million for the third quarter of last year. This brings the loss for the first nine months of the year to NOK 1,234 million as compared to a profit of NOK 933 million for the same period last year.
Storebrand Livsforsikring has previously increased its additional statutory reserves, which can be used to support the company's guarantee of interest on policyholders' funds. The group's results for the third quarter include a write-back of NOK 1,837 million from additional statutory reserves. This write-back is included in the figures for group result, but is not included in the operating result.
Taking into account the general fall in values seen in global equity markets, the group's solidity remained satisfactory at the close of the third quarter. The losses incurred have reduced the group's financial solidity and surplus capital. The group's equity amounted to NOK 9,576 million at 30 September 2001, representing a drop of NOK 732 million since 30 June 2001. The capital ratio was 12.9% at 30 September 2001, which is 0.2 percentage points lower than at the end of the second quarter.
Program of measures to improve profitability
The sharp falls seen in equity markets have led to weak demand for long-term savings products. The group has implemented measures over the course of the year to reduce costs and improve profitability, and these efforts were intensified in the third quarter. Measures have been identified and implemented that will create annual savings in excess of NOK 150 million.
"The falls seen in share prices have a major effect on Storebrand's results and income base. We therefore need to adapt to this changed scenario and ensure that we make the best possible use of the group's resources" explains Idar Kreutzer.
Organisational changes
Storebrand operates with a decentralised, flexible and focused organisational structure in order to ensure that the group has both strategic freedom of manoeuvre and the strength of resources necessary to implement its business plans. This approach has also been reinforced by the organisational changes implemented in Storebrand Kapitalforvaltning and Finansbanken.
In addition to its ongoing ambitious programs to improve efficiency at the level of each business unit, Storebrand has implemented a comprehensive review of the group's business areas with a view to identifying opportunities for greater co-ordination, simplification and the realisation of internal synergies. This review is intended to ensure that the group makes the best possible use of the resources it has available. As part of this process it has been decided that Finansbanken will sell Delphi Fondsforvaltning to Storebrand Kapitalforvaltning. Delphi will continue to operate with its independent investment philosophy and market profile, whilst at the same time realising synergies in the areas of systems and production. In addition a specific process has been instigated for the group's banking activities. Shared systems are to be established in order to reduce unnecessary duplication of resources, increase quality and create greater momentum in the development of new products and services for both Finansbanken and Storebrand Bank.
In addition to its ownership of the two banks, the life insurance company and the asset management company, Storebrand also owns a number of smaller and medium-sized companies and businesses. A review has been initiated to evaluate the position and suitability of these businesses as members of the Storebrand group.
Oslo, 31 October 2001
The attached interim report from the Board of Storebrand ASA provides a more detailed
account of the third quarter results.
Egil Thompson, Director of Corporate Communications: <br>Tel: +47 22 48 95 86, Mobile +47 93 48 00 12 <br> <br>Lars Aa Løddesøl, Executive Vice Present, Finance Director: <br>Tel: +47 22 31 56 24, Mobile +47 93 48 01 51 <br>