Storebrand ASA

Good morning, ladies and gentlemen, and welcome to Storebrand's Third Quarter Results Presentation. As usual, our CEO, Odd Arild Grefstad, will present the key highlights of the quarter, followed by CFO, Kjetil Krokje, who will dive deeper into the numbers.

At the end of the presentation, participants in the Teams, webinar will have a chance to ask questions. Details on how to join the webinar are found on the Investor Relations website.

But without further ado, I give the word to our CEO, Odd Arild Grefstad.

Thank you, Johannes, and good morning, everyone. I am excited to share another strong quarter with you, marked by substantial growth and improved profitability.

We gained trust among new and existing customers and are on track to deliver on our targets for 2025. Before I get into the numbers, I want to highlight one important change in our executive management team.

Kjetil Krokje, as many of you are familiar with, has been appointed as Storebrand's CFO, succeeding Lars Loddesol, who steps down after nearly 25 years in executive management positions in Storebrand, including 14 years as CFO. Lars has been instrumental in shaping Storebrand's financial strength and strategic direction.

And I want to thank him sincerely for his dedication and leadership. And I appreciate that Lars will remain an active contributor to the group also going forward.

Now let's start with the financial highlights. Storebrand delivered a record high group profit of NOK 1,586 million in the third quarter, reflecting continued growth, solid cost control and improved insurance results.

The operational result was NOK 1,091 million, up 16% year-on-year. It's worth noting that insurance premiums exceeded NOK 10 billion, representing a 20% increase from last year.

These results show the strength of the diversified business model and our ability to deliver value for both customers and shareholders. Our commitment to increasing dividends and long-term share buybacks continues.

Since 2016, we have steadily raised our dividend per share, and our ambition next year is to continue a growth rate broadly consistent with previous years. The Board's long-term plan is to return NOK 12 billion to shareholders through annual buybacks by 2030, while also growing the ordinary dividend.

It remains NOK 342 million in share buyback in the fourth quarter, completing the NOK 1.5 billion program for 2025. As many of you are familiar with, Storebrand aims to take 3 commercial positions in the markets we operate in: A, to be the leading provider of occupational pensions in both Norway and Sweden; and b, to be the Nordic powerhouse in asset management; and c, to be the fast-growing challenger in the Norwegian retail market for financial services.

These positions are strengthened by our strategic enablers, people, sustainability and digital frontrunner, together unlocking additional growth. Let's look at the growth delivered in the quarter.

I am pleased to report that the double-digit growth continues across the group. Our strong growth underlines Storebrand's robust and consistent performance.

Storebrand is positioned in attractive and structural growing savings markets as well as rapidly increasing our market shares within insurance and retail banking. Moving to occupational pension.

Storebrand and Kron has now more than 20% of the assets under management in the fast-growing market for individualized pension, reflecting our strong offering and competitive position. This is the part of the pension system where individuals freely can choose their own provider as a part of the corporate-sponsored schemes.

In the Guaranteed segment, activity among closed pension funds has increased and several public occupational pension tenders are ongoing. A highlight this quarter is the commercialization of our innovative and preventive concept, VEL, designed to help employees stay healthy, recover faster and reduce long-term sick leave.

The concept now progress from a pilot to full-scale implementation. VEL will be an integrated part of our disability insurance products.

Rising disability levels are a pressing challenge for Norwegian society. We believe that VEL will make a positive contribution both to helping people back to work and reducing costs for our corporate clients.

We also expect reduced insurance claims. The government has proposed tax exemptions for mutual funds.

This is good news for our customers. Consequently, Storebrand can maintain Storebrand domicile for its mutual funds instead of reallocating them.

The government's proposals show a willingness to listen to industry feedback and to create a more competitive environment for Norwegian fund management. Operationally, this quarter, Storebrand Asset Management reached NOK 1, 561 billion in assets under management.

Net inflows were NOK 16 billion, mainly from external clients. Active funds generated NOK 90 million in performance-based income this quarter and NOK 239 million year-to-date.

Speaking of performance, I'm proud to share that our flagship Norwegian equity fund, Storebrand Norge, has delivered a stunning 10,000% net return to customers since its launch in 1983. This is a milestone in the Norwegian fund history with no other domestic equity fund reaching this level of total return.

The fund has outperformed its reference index by around 4,300 percentage points net of fees. The performance illustrates the power of successful active management when done right and the power of compound interest.

If you had NOK 100,000 in Storebrand Norge fund in 1983, your investment would be worth NOK 10 billion today. Finally, let's look at our strong progress in the Norwegian retail market.

We have reached a 7.6% market share in retail P&C, up from 7.4% last quarter. Retail insurance portfolio premium grew by 26% year-on-year.

And our bank lending portfolio increased by 12% to NOK 95 billion. Our digital-first multichannel approach is reasoning well with customers, and we continue to see strong growth in both insurance and banking.

Kron is a key enabler for Storebrand's retail growth, an important part of our strategy to deliver scalable customer-centric solutions for savings and also now for pensions. Storebrand Kron assets under management have shown impressive growth, reaching approximately NOK 29 billion by the third quarter.

This represents a compound annual growth rate of 70% since Storebrand's acquisition of Kron. The platform's growth is driven by both pension and savings products with about 45% of assets now in pension solutions and 55% in savings products.

Kron's digital-first approach and user-friendly interface have made it an attractive choice for customers seeking simple, transparent and cost-effective ways to manage their long-term savings and pensions. And with that, I leave the word back to you, Johannes.

Thank you, Odd Arild. Now let's take a closer look at the numbers.

Kjetil, please go ahead.

Thank you, Johannes, and let's dive a little deeper into the numbers. The quarterly result before amortization was NOK 1.586 billion, this represents an increase of 5% compared to the strong third quarter last year and an 11% increase compared to the second quarter this year.

The result development confirms the positive momentum in the business. In particular, the operating result is strong with a record NOK 1.091 billion, benefiting from improving insurance results and growth in the business.

As for special items, in the top left corner, we have chosen to highlight NOK 70 million of the finance result as a positive special item as this stems from a reevaluation of future earn-out liabilities related to the acquired Danish infrastructure asset manager, AIP. Earnings per share ended at NOK 3.08.

This is slightly reduced from the third quarter last year, which was influenced by a lower tax rate than normal due to currency hedging and hedging effects in general. The annualized return on equity for the quarter ended at 19%, confirming Storebrand's trajectory towards a capital-light business model.

It's also fair to note that this is higher than our medium-term expectations as there is some seasonality and special items in the results. Let me move to the solvency ratio for the quarter.

The solvency margin ended at 195%, down from 200% last quarter. Post-tax results contributed positively.

This was offset by the NOK 750 million buyback program and accrued dividends in the quarter. The remainder of the reduction in the quarter was driven by growth in the business and changes in regulatory assumptions.

With the current level of solvency buffers and interest rates, the balance sheet is very robust to fluctuations in the financial markets. Let's go a little deeper into the results line by line at the group level and then through the lens of the reporting segments.

So the growth in the business continues. The top line growth for the third quarter was 8%.

The insurance result is up 44% compared to the third quarter last year. Growth, price increases and other measures are giving the expected effects.

Storebrand has a double-digit growth ambition for 2025 and a corresponding cost guidance of NOK 6.9 billion for the full year. Performance-related costs and currency effects was not included in the guided amount.

Record strong insurance sales have led to additional distribution costs year-to-date. Altogether, these items add additional NOK 100 million in costs compared to the guided amount so far this year.

The underlying cost development since the beginning of the year is broadly in line with the plan. Changes to the Norwegian VAT Act as announced in the national budget is expected to have a negative cost impact for Storebrand amounting to approximately NOK 100 million annually starting from the second half of 2026.

We are working with measures to mitigate the effect of the VAT change. Financial results are strong following an increased profit sharing in the Norwegian guaranteed portfolios.

Good profit sharing in the Swedish portfolios and a stable return on company capital has also contributed in the quarter. Amortization and write-down of intangible assets from acquired business amounted to NOK 128 million in the quarter.

The increase compared with the third quarter in 2024 is mainly due to a NOK 50 million write-down of intangible assets related to the capital investment acquisition. The tax charge for the quarter was 18%.

Currency movements and asymmetry in how tax is calculated on assets and currency hedges will affect tax cost from quarter-to-quarter. Our tax guidance is still 19% to 22%.

This table shows the number as on the previous page, but split into the business lines, savings, insurance and guaranteed. Savings and Insurance reports a positive development in the quarter and year-to-date, whilst guaranteed is slightly reduced.

I will comment on each area in the following slides. The unit-linked business shows continued growth in premiums and reserves.

Reserves has grown at 11% compared with the same period last year. The margins are down by approximately 3 basis points in the same period.

The Asset Management business reports record high AUM at the end of the quarter and strong performance results. The top line margins are at 20 basis points, in line with expected levels.

The infrastructure asset manager, AIP, is still in a buildup and commercialization phase. Longer lead times in attracting new capital in the current financial environment have caused delays in the current fundraising.

This has led to a negative result of around NOK 10 million in the quarter and NOK 60 million year-to-date. We expect a neutral result for AIP in the fourth quarter and a positive contribution for 2026.

Lastly, the bank grows lending by 12% with satisfactory margins in the quarter. When we go to Kron, we see that the assets under management is now close to NOK 30 billion and has more than tripled since the acquisition of the platform.

The insurance business is delivering strong results after a challenging couple of years. In particular, the retail P&C business is developing strongly.

We continue to grow the number of customers despite price increases and our market share, which is recorded with a quarterly delay, has increased from 7.4% to 7.6%. Growth comes at a cost and strong sales have led to increased sales provisions.

We book all sales costs upfront and do not book any deferred acquisition cost in the Insurance segment. The increased sales cost weakens the combined ratio by approximately 2 percentage points compared to the same period last year.

With 89% combined ratio, it's fair to mention that it was a quarter with lower large losses than normal. We maintain the ambition to deliver 92% or less in combined ratio, but continued strong sales and associated sales costs and weather-related claims could lead to somewhat higher combined ratio for 2025.

Looking into the fourth quarter, we expect a negative impact of less than NOK 50 million from the Storm Amy that hit Norway after the close of the quarter. In Guaranteed, the results are satisfactory.

Worth to notice is profit sharing improvement in the Belgian financial markets, especially in Norwegian paid policies. Customer buffers are increased in the quarter and is now at 8% in Norway and almost 27% in Sweden.

Moving to the financial results on company capital in the Other segment. The main result driver in this segment is the return on company capital in the Holdco and the life insurance companies, less the cost of debt.

The company capital was at NOK 28.4 billion as of the third quarter, and the financial result in the segment amounted to NOK 155 million in the quarter. Let's end with a status update on our nonfinancial and financial targets.

Storebrand is here for the long term, and we want to help our customers create a brighter future for the long term. It means that Storebrand is still committed to science-based target setting and the green transition.

I'm happy to report that we are ahead of our sustainability targets this quarter. Also worth noting this quarter is that we were ranked among the top 5% in the insurance industry in the S&P Global Corporate Sustainability Assessment.

Furthermore, the broker, Soderberg & Partners, recognized Storebrand as the most sustainable Norwegian life insurer. As for the financial ambitions, with the results we present today, we have good momentum in the group, and we are well on our way to delivering on our 2025 ambitions on results and return on equity.

Lastly, we want to remind you and extend an invite to our CMD in Oslo on the 10th of December. The event will be hybrid and may be followed online, but we hope to see as many as possible in Oslo to meet us in person.

I would also again invite all stakeholders to contact us with any suggestions you may have for which topics you want us to cover at the CMD. And with that, I hand the word back to you, Johannes.

Thank you, Kjetil. We are now happy to take questions from our audience.

[Operator Instructions]. While we are waiting for the first question, Odd Arild, you added a little test on the return in the flagship fund, Storebrand Norge, is that correct?

Very well spotted, Johannes. It's a tremendous story about Storebrand Norge, but of course, NOK 100,000 with this development since 1983 would have been NOK 10 million today, not NOK 10 billion, but well spotted.

Good to have that clarified. With the returns of this fund, we might actually come there someday.

Now over to the first question, which comes from Hans Rettedal Christiansen from Danske Bank.

So my first question is on the Savings segment and just trying to kind of understand the broader picture here. Looking at the cash equivalent earnings in the quarter, it's NOK 815 million, but that includes sort of AIP extraordinary effect.

So if you adjust for that, it looks like it's sort of just below Q3 in 2024. So I'm just trying to understand the dynamics there given the fact that your AUM growth is up 16% year-over-year and what the moving parts are and how you kind of plan to show increasing profitability in that segment?

And then my second question is, you've previously mentioned around the liquidity in the holding company, and it looks like it's at NOK 3.9 billion this quarter, where you've said you aim to be at around NOK 3.5 billion to NOK 4 billion going forward. So in Q4 '24, you gave us an expectation of remittance of NOK 4.2 billion in 2025.

Can you just say something about how that NOK 4.2 billion in total remittances is developing according to your expectations back then and with the deliveries so far in 2025?

Thank you, Hans. Let's start with the Savings segment and the earnings development.

As you are correctly pointing out, there's been flattish if you exclude the bank over the last year. Looking on the medium term, we see that the growth has come through also in the result in this segment.

And then as you mentioned, this year, there has been a negative drag from AIP of around NOK 60 million. We have done some investments in growth, and it's worth to mention that the segment now in unit-linked is having costs associated with distribution in the bank of unit-linked products.

And that means that the success we have seen in own pension account now taking 20% of the market share of the flow also on the retail space, adds some cost in the unit-linked line, but this is an internal cost allocation, not a new cost. And then it's -- our view is that over time, you will see the structural growth on the top line and the AUM also come down and continue to scale down on the bottom line, even with some further margin pressure.

On the Holdco liquidity, I think the short answer there is that you should, all else equal, expect somewhat more from the bank and in the insurance business than you saw last year. So those will be the main changes, I think, in the liquidity upstreaming from the NOK 4.2 billion you saw last year to what you can expect this year.

And also, we aim to take out somewhat more than the annual results from the life insurance company also this year.

And if I could just have a follow-up. Could you maybe on timing of the life insurance company, sort of what do you expect there over the perhaps medium term?

When do you expect to see more remittances going forward?

Yes. So on the life insurance company, that is overcapitalized with a solvency ratio well above 100%.

And then over time, we will take out capital from that company as a part of the capital management in the group, but you shouldn't expect any kind of sudden lumps in capital coming from the life company. It should be predictable, and it should be in good dialogue with all stakeholders.

I think you saw us taking NOK 1 billion last year, NOK 500 million the year before. And that's the ballpark number, I think, you should expect us to also be able to take out going forward.

That was all from my side. Congratulations on the appointment, Kjetil.

Thank you for the questions, Hans. We have a next question from Ulrik Zürcher in Nordea.

Sorry, I thought there was one guy ahead of me in the line, so I was a bit -- the two questions. I was just wondering if you could help me year-to-date.

If we take the solvency generation, subtract the dividend accrual and the buybacks and the cost of the net growth from P&C insurance, bank, but also runoff from guarantees, like how much solvency are you generating above when we net out the growth and the accruals?

Yes. It's actually a tricky question to take on the back foot here, Ulrik.

I'll work a little bit through the numbers and get back to that. I think the guidance of roughly 18% before any dividends, buybacks, that is roughly where we are at, at the moment.

And then I need to go a little bit back in time to look at kind of what is special, what is allocation changes in the guaranteed portfolios and other things that kind of impact from moment-to-moment analysis. But on a run rate basis, the around guided level from the last CMD shouldn't be too far off.

Yes. That's very helpful.

But then I was also following up a bit on what Hans is saying. If you -- you're basically saying that you will upstream or remittance will be roughly the same from Life, but you are generating a lot of capital and you have a lot of excess capital.

Is there anything on the sort of runoff buyback potential assumptions that has changed?

I can start. And I think what is most important here is that we've always said that if we end up with more liquidity, more solvency and more result generation, of course, then you will continuously make new assessments.

But you need to -- you can't sell the skin before you have shot a bear. So that I think is an important place to start.

But just to be clear also, last year, we gave the hold result in the life insurance company, upstreamed it to Holdco. And on top of that, we took NOK 1 billion up to the holding company.

And of course, over time, such an upstreaming above this year's results that you also need to have an apply to the regulator to do more than 100% upstreaming. But we have done that for a couple of years, and as I said, expect to do that also going forward.

Yes. That's helpful.

And then I was just wondering, one last thing, you have, I think, a record high spread between your guarantees and the expected return, Page 13, 190. I was just wondering what is the amount of assets that's in position for profit sharing in the Paid-up segment right now?

Yes. I think we can also point back to the Capital Markets Day guidance from 2023 there, Ulrik, where roughly 1/3 of the portfolio were in profit sharing last year in Norway, meaning NOK 50 billion.

And then we are around NOK 100 billion this year, meaning 2/3 of the paid-up policies portfolio and some individual contracts. Then we will give you an update on that area when we have the Capital Markets Day on December 10, I think.

Okay. But in general, I get the feeling this is a very stable business.

Yes, I think what we -- we are very pleased to see the development in the Guaranteed segment, where we have been now massively building buffers also in this quarter. It's, of course, much used also the opportunity to take out the mismatch, interest rate mismatch very much in the portfolio.

And that, of course, gives opportunities for more stable and also somewhat growing profit sharings going forward. And the guiding this year is for around NOK 600 million in profit sharing, somewhat lower in Sweden this year compared to what we said, but it seems to be somewhat higher in Norway.

And on top, we should, with normal, of course, markets, be able to be a bit above the guided NOK 600 million.

Sorry for a bit difficult questions today. But how dependent are you on the equity in the Life company to keep that asset liability hedge?

So the asset liability hedge is only coming from interest rate papers, whilst the equity allocation is there to provide risk premiums so that we can have surplus return in the portfolios that have high buffers.

Thank you, Ulrik. Then we have a next question from David Barma in Bank of America.

Firstly, on insurance, could you please give us a sense of where you see the underlying performance in the quarter and maybe how you expect margins to develop? You still have a lot of pricing to earn through, and you've made a big point about the cost being upfronted and that becoming a tailwind.

So is there any reason you wouldn't be able to get below 90% in the next quarters? That's my first question.

And then secondly, on the solvency partial internal model, can you just update us on the time line for this, please, and whether we should expect it by year-end still?

Yes. No -- on the insurance part, I guess it's worth noting on this quarter's 89%.

We had a quarter with lower -- large losses than normal. And then when you look into the fourth quarter, we still think it's possible to reach the 90% to 92%, but we've also said that with the NOK 50 million coming from the Storm Amy and continued high sales, it might be a little bit above.

We will see where we end up when we do the fourth quarter accounts. And then going forward, we still see a good trajectory within the P&C business, both on the corporate side and on the retail side.

As we have said earlier, we have had somewhat weaker result on the disability line on workers' comp and the more long-tail lines. So they are still delivering higher combined ratios than the more pure P&C.

And then looking at the longer-term picture, what's happening in Storebrand is that we are moving from a predominantly long-tailed insurance business to a more short-tailed insurance business with more P&C in it.

Yes. And I think it's fair to say that it's quite a strong seasonality in the Nordics when it comes to insurance.

It goes without saying with the winter, with car insurance and so on. So typically, you see higher combined ratios in the fourth quarter and the first quarter.

But it also goes with the more personal lines in corporate pension, where you see more disability reported in the winter time compared to holiday seasons and summer. So seasonality is a part of this.

And then again, fourth quarter will be fourth quarter. We have Amy and these kind of things.

But long term, of course, we see disability, some pockets still coming out with negative result, but we have pricing effects coming into 1st of January in these smaller portfolios that we believe will take care of the profitability in these products. And also, as I talked about, our VEL concept really shows promising results and I think might be a differentiator for us and also reduce our costs in the disability products going forward.

As for the partial internal model, as you're familiar with, we have sent it to the regulator, and we're now in the period where we are discussing elements of the model with the regulator. I think in general, it's very hard to guide on time lines when you're working together with the regulator.

And it's also worth noting that this is the first partial internal model for a Norwegian life insurance company. So this is new also for the regulator.

So those discussions will continue, and it's hard to guide on an exact time line. The most important part, though, is that we use this model as a risk management tool and a capital allocation tool day-to-day in Storebrand, and it helps us make better decision on capital allocation.

Can I just ask you on the disability point? Are you able to give us an estimate of the combined ratio for disability within insurance in the first 9 months of the year?

I think we're close to 100, but a little below. I'm looking at you, Johannes.

Yes. I think that's true Kjetil.

The Corporate Insurance segment we report externally very much represent our disability products. The disability-linked insurance product is the largest by far product in that segment, and it has delivered results year-to-date, more or less in line with our plans.

We have a next question here from Thomas Svendsen in SEB..

Yes. I have two questions.

First, on the mortgage bank, you posted strong growth Q-o-Q this quarter as well. So with increased competition from Sbanken, maybe other players, do you see any change in -- or how much do you feel the increased competition in this mortgage lending space?

And second question on non-life insurance. What is the message from the sales force these days?

Are there any changes in sort of the competitive pressure on selling these nonlife insurance policies? Or is it unchanged?

I can start with the bank. I must say the development in the bank is very strong.

We have a very dedicated sales force in the bank in combination with the digital platform, Kron, as we talked about. We are not seeing that the growth in the bank is tailing off.

We have a good inflow of clients. And I think one of the elements here is to have good solutions, digital solutions close to your customers.

You are swift in giving the right, well, set of cates and so on if someone is hunting for a new home. So it's a lot of elements that is important to attract new customers.

And we feel that we are in a very good competitive position to still have good growth in the bank going forward.

Yes. And then I'll just continue on the insurance part.

What we have seen so far is a little bit higher churn in the second half of the year, but not any large changes really. And you see that we're still increasing the market shares with 0.2 percentage points now in the quarter.

So I think it's -- we are, of course, trying to have a disciplined approach to pricing in this segment as this is a segment where we need to, from time to time, have [indiscernible] and other things. So I think a disciplined market and there's competition, but there is not a huge increase in churn.

Thank you, Thomas. It looks like we have covered all the questions.

So that wraps up today's presentation. We look forward to seeing you again on the Capital Markets Day on December 10 here at Lysaker.

Thank you for attending, and goodbye.