| · Storebrand`s operating result: NOK 1,623 million, compared to NOK 1,962 million last year.
· Consolidated profit: NOK 585 million, compared to NOK 534 million last year.
· Value-adjusted operating profit: NOK 2,068 million, compared to NOK 4,646 million last year.
· Sales of life insurance are still good.
· Non-life insurance reports improvement in result and lower claims.
· The market share in life insurance rose by 2 percentage points since the beginning of the year in a growing market.
· The market share in non-life insurance was stable in 2nd quarter.
For the first six months of 1998, the Storebrand Group recorded an operating profit of NOK 1,623 million, compared to NOK 1,962 million in the same period last year. After distribution of the policyholders` share of the profit from life and pension insurance, the Group`s profit was NOK 585 million, which is NOK 51 million higher than in the first half of 1997. The operating profit was affected by somewhat lower financial income in the 2nd quarter of 1998, and by higher insurance-related operating expenses.
The Group`s value-adjusted operating profit amounted to NOK 2,068 million, compared to NOK 4,646 million in the same period last year.
The operating profit for the first half of 1998 for the life company, Storebrand Livsforsikring, was NOK 1,322 million, compared to NOK 1,710 million in the same period last year. The non-life company, Storebrand Skadeforsikring, recorded an operating profit for the first half-year of NOK 419 million, compared to NOK 385 million in the same period last year.
Compared to the first six months of 1997, the Group experienced a rise in insurance-related operating expenses of NOK 294 million. This was due to IT investments and other investments in systems and improvement programmes. However, the most important single factor behind the rise in expenses was a change in the principle for accruing salary costs. This change resulted in a rise of NOK 133 million in booked expenses in the Group, compared to the same period last year. This change will not, however, have any impact on the total operating expenses for the year as a whole.
Net financial income from insurance activities amounted to NOK 3,869 million, which is NOK 34 million lower than in 1997. The Group`s net gains on securities in insurance activities totalled NOK 764 million, which is NOK 267 million lower than in the same period last year. The Group`s unrealised gains rose in the first six months of 1998 by NOK 445 million to NOK 6,994 million, but fell in the 2nd quarter by NOK 1,537 million.
Storebrand had total assets of NOK 121,470 million at 30 June 1998, which is 6.5 per cent higher than at the beginning of the year. The capital ratio at 30 June 1998 was 13.3 per cent, while the statutory minimum is 8.0 per cent. At the turn of the year, the capital ratio was 14.4 per cent, while at the end of the 1st quarter it stood at 14.2 per cent. The reduction in the capital ratio in the 2nd quarter was due to the growth in total assets and an increase in investments in shares. Storebrand`s capital strength is still very satisfactory.
Earnings per ordinary share in the first six month of 1998 amounted to NOK 1.98, compared to NOK 1.69 in the same period last year.
Storebrand`s President and Chief Executive Officer Åge Korsvold
particularly stresses the good market development in life and pension insurance. `It is especially gratifying that we have managed to increase our market share of life insurance by two percentage points in a market that has grown by more than 7 per cent. At the same time, we register a positive shift in non-life insurance, where the company managed to maintain its market share in the 2nd quarter. With regard to the financial markets, Storebrand is well positioned to meet the challenges. Over the last few years we have purposely built up our ability to assume risk in both the life and non-life company in order to meet the types of market fluctuation we are now experiencing.
With regard to the increase in expenses at Storebrand, Korsvold says that this is a reflection of the generally high level of activity with the Group. `We are investing considerable sums is new systems and improvement programmes. By and large, these are heavy investments which will begin to make positive contributions to the results as they gradually go `on the air`. At the same time, we have a general cost trend that we are coming to grips with through concrete measures being implemented. This will have a positive effect on both expenses and the efficiency of the organisation`.
Life insurance
Premium income for own account at Storebrand Livsforsikring (the life company) in the first half of 1998 amounted to NOK 5,023 million, up NOK 1,047 million or 21 per cent on the same period last year. The sharp rise in premium income came first and foremost from sales of individual endowment insurance. Premium income from this segment rose by 71 per cent in the first six months of 1998, compared to the first half of 1997.
In a sharply growing market, Storebrand`s total market share in life and pension insurance rose by 2 percentage points from the turn of the year, and stood at 28 percent at 30 June 1998.
Of the life company`s operating profit of NOK 1,322 million, NOK 1,038 million was transferred to the policyholders, and NOK 284 million allocated to the owners. Corresponding figures for the first half of 1997 were NOK 1,428 million to the policyholders and NOK 282 million to the owners.
Booked yield for the first six months of 1998 was 3.7 per cent, compared to 4.0 per cent last year. Expressed on an annual basis, the booked yield in the first half of 1998 was 7.5 per cent, compared to 8.2 per cent in the same period last year. The value-adjusted capital yield in the first half of the year was 4.4 per cent, compared to 6.6 per cent in the same period last year. On an annual basis, this corresponds to 8.9 per cent, compared to 13.3 per cent last year.
Net gains on sales of securities in the first six months totalled NOK 616 million, compared to NOK 864 million last year. The life company had unrealised gains of NOK 6,380 million at 30 June 1998, compared to NOK 7,606 million at the end of the 1st quarter of 1998. NOK 5,445 million of the unrealised gains at the end of June were in shares.
At the end of June, the company had recorded net premium reserves transferred to the company of NOK 193 million, while at the same time last year there was a net transfer from the company of NOK 508 million.
Non-life insurance
Gross premium written for non-life insurance in the first half of 1998 amounted to NOK 5,073 million, which is an increase of NOK 269 million. Earned premium for own account amounted to NOK 3,704 million, up NOK 107 million on the same period last year. Financial income rose by NOK 57 million to NOK 598 million. Value-adjusted financial income was NOK 176 million lower than last year.
In the first six months, net gains on sales of securities totalled NOK 148 million, compared to NOK 167 million in the same period last year. At the end of June, the non-life company had realised gains in the real estate portfolio of NOK 83 million.
Profitability varies between the various non-life insurance segments, and in some individual lines there is a need for further measures to improve profitability. The technical result was negative with NOK 192 million, which is NOK 10 million lower than last year. The effect on the result of run-off gains on prior-year claims and changes in the minimum requirements of the Banking, Insurance and Securities Commission was NOK 105 million, compared to NOK 303 million in the same period last year.
The booked claims ratio for own account was 76 per cent in the first half of 1998, compared to 80 per cent in the same period last year. Adjusted for the minimum requirements of the Banking, Insurance and Securities Commission and run-off gains on prior-year claims, the claims ratio for own account was 79 per cent, which is 10 percentage pints lower than last year. The combined ratio, which is the sum of the cost ratio and claims ratio, improved from 101.3 per cent in the first half of 1997 to 100.2 per cent in the first half of 1998.
The reinsurance result so far this year is significantly better than in the same period last year, in part because of major claims at Storebrand Sweden.
In an expanding non-life insurance market, Storebrand has maintained its 38.7 per cent market share in the 2nd quarter of 1998.
Other activities
Storebrand ASA recorded an operating profit of NOK 72 million in the first half of 1998, which is NOK 146 million higher than in the corresponding period last year. The improvement in the result is due to the life company paying a dividend of NOK 192 million.
The Storebrand Bank Group returned a loss of NOK 3 million, compared to a loss of NOK 13 million last year. The result includes the activities of Storebrand Finans, which returned a profit of NOK 55 million in the first six months of this year, compared to NOK 18 million last year.
Storebrand Spar recorded a profit of NOK 10 million, which is on a par with the first half of 1997.
Oslo, 26 August 1998
For further details, please contact:
Vidar Ullenrød, Director of Public Relations,
telephone + 47 22 31 14 44, mobile 916 96803
Christian Storm, Treasurer,
telephone + 47 22 31 10 85, private + 47 22 43 74 03
Jack Frostad, Chief Information Officer.
Telephone + 47 22 31 57 57, mobile 928 226255
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