Good morning, ladies and gentlemen, and welcome to Storebrand's First Quarter Result Presentation. As usual, our CEO, Odd Arild Grefstad, will present the key highlights of the quarter, followed by CFO Lars Aasulv Løddesøl, 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. Without further ado, I give the word to our CEO, Odd Arild Grefstad.
Thank you, Johannes, and good morning, everyone. 2025 has so far been characterized by increased geopolitical uncertainty and market volatility. The impact on Storebrand has been very limited, and our risk management system worked as intended. Equity markets have recovered since Liberation Day, and interest rate volatility has stabilized. Through the first quarter, we saw increased demand for support and advice from our customers. Our customer-facing teams maintained high availability and swift customer response times. In periods of market volatility, Storebrand benefits from having un diversified business model and asset under management base. Storebrand's AUM is a mix of long-term pension money, which flows into equity mandates, and more stable AUM from alternatives and bonds. The captive AUM accounts for 44% of Storebrand's equity investments, making it very sticky. This is supported by an annual net inflow of around NOK 20 billion from the unit-linked pension business.
This is long-term money mostly coming from mandatory corporate-sponsored pension schemes. In addition to these supporting drivers, Storebrand's overall AUM base has become increasingly diversified. More than 50% of our AUM is now allocated to bonds and alternatives, characterized by longer commitments and less immediate sensitivity to market fluctuations. With that introduction, let me turn to highlights for the first quarter. Storebrand's group cash-based earnings amounted to NOK 1,167 million in the quarter, while the operating result was NOK 800 million, up by 16% year on year. The operating result was driven by strong growth, particularly in savings and insurance, and satisfactory cost control despite an increase in sales-driven cost in insurance. Meanwhile, the financial result of NOK 367 million was made up of profit sharing from both Norway and Sweden, and solid returns from the company portfolios.
Storebrand's long-term ambition is to conduct annual share buybacks of NOK 1.5 billion, taking total buybacks to NOK 12 billion by the end of 2030. The buyback program for 2025 is split into two tranches of NOK 750 million each, the first of which is expected to be completed by the end of June. During the first quarter, we executed buybacks of NOK 300 million. Since the end of the quarter, we have bought back shares worth NOK 140 million, taking the total amount so far this year to NOK 440 million. As many of you are familiar with, Storebrand aims to take three commercial positions in the markets we operate in: A, to be a leading provider of occupational pensions in both Norway and Sweden; and B, to be a Nordic powerhouse in asset management; and C, to be a 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. I'm again pleased to report that the growth in the business continued strongly during the quarter, particularly in our insurance segment. Now, let me go into further detail on our growth areas and share some highlights from the quarter. Within unit-linked, volumes grew by 9% year on year, supported by structural growth in both our core markets in Norway and Sweden. In the same period, we saw strong result growth of 9% in our Norwegian business. I'm pleased to report that we have entered into a new distribution partnership with Danske Bank in our Swedish pension business, which is expected to further enhance our market reach. Within public occupational pension, the majority of the mandates worth NOK 4.5 billion won in 2024 was transferred into Storebrand in this quarter.
Within asset management, fee and administration income increased by 19% from first quarter 2024. The inclusion of infrastructure asset manager AIP Management had a negative effect on our operating result in the quarter, but the full-year impact is expected to be positive. This is driven by additional fees expected to be recognized in the second half of the year. It is also worth mentioning that asset management saw positive net flow during the quarter, supported by flow from the captive unit-linked business. The Norwegian retail market is also this quarter characterized by strong growth. Notably, the result contribution from retail banking, including Kron, was up by 73% compared to the first quarter 2024. Additionally, portfolio premiums in retail insurance have increased by 24% since the first quarter of 2024, driven by effective repricing strategies and strong distribution.
The market share in P&C insurance is now 7.1%, up from 6.5% in the same quarter last year. Although strong sales contribute to increasing cost in the short term, I'm pleased to see that we continue to take market share in this market. More long-term, we gradually see a more balanced and scalable insurance business with more P&C risk in Storebrand. I'm convinced that this is a very value-creating journey for our shareholders. Now, let me take a step back and look at the business overall. The earnings momentum in the Storebrand Group remains strong. The shift in the business model continues. We capture the structural growth. Finally, we succeed with our new growth initiatives with insurance and public sector. With that, I give the word back to you, Johannes.
Thank you, Odd Arild. Now, let's take a closer look at the numbers. Lars, please go ahead.
Thank you, Johannes. The quarterly result of NOK 1,167 million is up 8% from last year. The operating result is up from the corresponding period last year, while the financial result is slightly down in turbulent financial markets. We have included a new reporting item in the upper right-hand side with our annualized return on equity for the quarter, which ended at 15% ahead of our financial target. The solvency margin is relatively stable, and the expected return on the guaranteed portfolios now has a 180 basis point spread to the average guaranteed rate of return, further strengthening the solidity and long-term profitability of the guaranteed business. The solvency margin at 198% has been positively affected by strong post-tax results in the quarter. Regulatory assumptions, volatility adjustment, and symmetric equity adjustment, together with the share buyback program initiated in February, have a negative effect.
With the current level of solvency, buffers, and interest rates, the solvency margin is very robust to fluctuations in the financial markets. Reduced capital requirements in Storebrand Bank Group, implemented in April, will have a positive effect on the solvency going forward. Let me start with a comment on the deviations between our results and market expectations. One, fee administration income is slightly below the expectations. This may be explained by periodization effects on AIP and lack of event-driven fees in Storebrand asset management in the first quarter. Two, the insurance result is somewhat behind expectations due to a combination of some minor reserve strengthening and large losses and runoff losses above normal. Three, costs are a little higher than expectations due to higher sales cost in connection with a very strong growth in P&C.
In combination, this has a negative impact of around NOK 100 million on the operating result. On the other side, financial results are a little better than consensus. The growth in the business continues, and the top-line growth for the first quarter was 10%. The insurance result is up 28%. With the seasonally weaker winter behind us, we expect further improvements in the insurance results in the coming quarters. Operational costs are up 11% due to the acquisition of AIP Management and increased sales-related cost in insurance, and this is in line with our guiding. The financial results are relatively flat. The tax charge for the quarter was 11%, well below normal due to currency movements and asymmetry in how tax is calculated on assets and currency hedges. Our tax guidance is still 19%-22%.
This table shows the same numbers as on the previous page, but split into the business lines: savings, insurance, and guaranteed. Storebrand's front book in savings and insurance continues to grow, while the guaranteed back book shows relatively stable results. There is satisfactory development in all business lines within savings. In unit-linked Norway, the margins remain stable. In Sweden, margins drifted downwards, explained by changes in the product mix. Within asset management, transaction fees were low in the quarter, while performance fees contributed positively. At our last presentation for the fourth quarter last year, I said that we expect AIP to deliver a positive result for the full year 2025. We maintain the guiding for the full year, but fee income is expected to be back-end loaded in the second half of the year, and we record a negative result of approximately NOK 20 million in the first quarter.
Total AUM in Storebrand asset management is down, primarily due to currency effects. Net flow is positive. The bank continues to grow and is now the ninth largest in Norway. We have changed the reporting on insurance results into retail insurance and corporate insurance for better comparability with competitors and in line with how we measure this internally. Both lines show improvement from last year. The strong growth and rotation into relatively more P&C risk and less biometric risk continues. The largest insurance line in retail is P&C, which is benefiting from implemented price increases and developing according to plan. The largest insurance line in corporate pension-related disability insurance delivers positive results after a few weak years. Reserve strengthening in some smaller product groups pulls down the net numbers. Growth comes with a cost, and strong sales have led to increased sales provisions.
The increased sales cost weakens the combined ratio by approximately 2 percentage points. We maintain the ambition to deliver 92% or less in combined ratio for the full year 2025. In guaranteed, we results are satisfactory. We have received approximately NOK 4 billion in municipality reserves in the quarter from tenders won last year. Profit sharing in the first quarter may seem soft, but is back-end loaded toward the end of the year like it was last year. We expect a gradual improvement in the coming quarters, depending, of course, on financial market development. Buffers are intact after the turbulence, and we have not incurred additional trading cost for rebalancing the portfolios during the ups and downs in 2025. Nothing special to comment on here. On sustainability, I would like to mention three things in particular. One, AIP sustainability report has just been published.
Investment in sustainable infrastructure is an important part of the green transition. AIP's current investment pipeline will generate 25,000 gigawatts of clean energy by 2028, which is enough to supply electricity for more than the total population of Norway. Two, we have just updated our green bond framework to align with the EU taxonomy and new market standards. Three, we have now passed NOK 16 billion in green bonds issued since we started in 2021. With the results we present today, we have good momentum in the group and are well on our way to deliver on our 2025 ambitions. I hand it back to you, Johannes.
Thank you, Lars. We are now ready to take questions from the audience. Please use the raise hand function in the Teams webinar to be placed in line to ask a question. To give everyone an opportunity to ask questions, we kindly ask you to limit yourself to two questions at a time. It seems like we have a first question here from Hans Rettedal Christiansen in Danske Bank. Please go ahead, Hans.
Yes, thanks for taking my question. My first question is on the fee income result. Lars, you mentioned that there's a lack of activity-related sort of transaction revenues. I was just wondering if you could explain what these are, and should we interpret it as sort of economic cycle-driven, or is it more the fact that they will be back-end loaded this year, or just when do you expect these to come back? My second question is on sort of revenues versus the cost side. It sounds like quite a lot of the revenues that you're expecting in 2025 will be back-end loaded versus it looks like the OpEx is more front-end loaded. Is this the correct interpretation, or should the OpEx also follow once we look into sort of the second half of this year?
Thank you, Hans. Let me start with your first question on fee income and transaction fees. You may recall that we have the subsidiary capital investment in Denmark, and they have a stable ongoing base of income based on the properties that they manage, and then they have transaction fees related to transactions happening from time to time. The Danish property market has been very quiet over the last year and into this year. However, the pipeline is good. We do expect more transaction fees coming from that business during the rest of the year. Furthermore, as I mentioned explicitly on the call earlier, on AIP, we have both some fees related to funds closing as well as to transactions, and they are expected to happen in the second half of this year.
On the fourth quarter presentation, I said that AIP would add both income and cost to our business in 2025, but that the bottom line should be positive by the end of the year. We do not see that in the numbers in the first quarter, but we still expect that to happen and take place during the second half of the year. In terms of your second question, some of the revenue is back-end loaded. The profit split in the guaranteed portfolios typically happens when you know what the return for the full year is towards the end of the year. During these volatile times that we have seen in the first quarter and also into the second quarter, we do not take out that estimated profit split in the first half. That typically happens in the second half.
On the front loading of cost, the particular cost elements in this quarter are related to P&C sales. P&C sales, we're very happy to see the growth in the P&C business. We're sure that this is profitable for shareholders, but it does have a cost in the first year to have that growth. The second part is also on the public sector side, where we have strong growth ambitions. There has been some investments in that area as well, which will pay off gradually when we take these new customers on board and hopefully bring new customers on board towards the end of this year.
Yeah, and as you know, there is no deferred acquisition cost calculations when we do the P&C business. We take all the cost upfront, and with this extraordinary growth, that has an impact.
Okay, thank you very much.
Thank you, Hans. We have a next question from Michele Ballatore in KBW. Please go ahead, Michele.
Yes, thank you for taking my question. The first question is about the movement in the assets under management, especially on the currency side. I see quite a material negative effect there, and I just want to understand the moving parts there, also considering the sharp move, sorry, the high volatility we have observed in the second quarter up to now. This is the first question. The second question is more generally on the solvency. I mean, of course, the solvency is quite a comfortable position. What are the chances for you to upgrade the second tranche of the share buyback, just logistically, if you need an approval, if it is something that you can do, any color on that? Thank you.
Sure, thank you, Michele. On the AUM movement, we have included in the analyst presentation, in the appendix, how we have what kind of currency exposure we have. You may want to look at that as well. The way it works with Norwegian krona strengthening versus the dollar in the quarter, our dollar investment has reduced in value. Also, the Swedish krona has strengthened. We do not have too many investments in Sweden, but compared to the US dollar, the investments that we have in the Swedish operation have fallen in value as they are in dollars. That is the main explanation on the change in AUM. What has happened after the quarter, I guess the dollar is still a little down, but the currency fluctuations, yeah, they can fluctuate on a short basis.
As I said in the appendix, you may find some more exact information about the exposure in the different currencies.
Yeah, and.
Sorry, there is no hedge there in general. I mean.
Yes, and that is also included in the appendix where you see the exposure, which is not the same as, so for example, in international index funds, you typically have 70% US dollar exposure. However, some of our funds have a dollar hedge, and therefore the currency exposure that we have is smaller than 70% of the index fund. That should have been all included in the chart in the appendix.
I can also add that, of course, on the long-dated guaranteed liabilities, everything is hedged in the right currency. When you look at a general AUM with external mandates and unit-linked pensions, there are different and various degrees of hedging, which Lars alluded to in the appendix.
That is very much, of course, the choice of the customers. When it comes to share buyback, as I said, we have the commitment of NOK 1.5 billion this year and the long-term commitment of NOK 12 billion up to 2030. On top of that, we have also been very clear on a growing annual dividend. That is the strategy from the board that we are very firm on.
Thank you.
Yeah, and Michele, obviously, if solvency continues to strengthen, we have a capacity to do additional M&A or increase the capital distribution in due course.
Of course. Thank you, Michele. We have a next question from Farooq Hanif in JP Morgan. Please go ahead.
Hi, there. I hope you can hear me. Can you hear me, by the way?
Yes. Hi.
Absolutely. Great, thank you. My first question is on P&C. You mentioned a number of items in the combined ratio that seem one-off in nature, so the additional cost of growth. Can you just run through all of the items, what you can mention in terms of large losses, other costs, just to get an idea of the direction of travel? Because to get to sub-92%, clearly you need a big improvement in the following quarters if it's possible, but I just want to understand what we can take out of the combined ratio in Q1 to get there.
Related to that, I am going to do three questions, even though it is going to sound like two, but just related to that, in the 24% growth that you talked about in premiums in P&C, how much of that is volume and how much of that is pricing? That would be very interesting to know. My last question is the impact of Danske. What will that do to the level of volumes in the business? Thank you.
Thank you, Farooq. On the insurance side, the most important element is the increased cost related to increased sales, which is an investment in growth and profitability long-term. I also mentioned that large losses and runoff losses were slightly above the expected level in the first quarter. However, those are not very abnormal, but somewhat above the average and the expected level. The last element is that we have had some reserve strengthening on some minor product lines. The important thing, I think, is that on the main retail product, i.e., P&C in the Norwegian retail market, continues to grow, is now back on the profitability path that we have established, and the price increases are coming through without additional churn. The main product in retail is more or less fixed. The main product line within corporate pension is the pension-related disability insurance.
That product is now profitable with a low 90% combined ratio. After several years of bad disability results in that product, we now see that the repricing and the work we've done on cost and other things is succeeding and that we are now reaching the desired profitability on that product line as well. We still have a few minor products that we need to fix, and where reserve strengthening has happened in the first quarter. The main products in both corporate and retail insurance are now developing according to plan, which means that we, according to our forecast, maintain the ambition to reach 92% or below by the end of the year.
May I quickly ask before you go on to the second question? On the elements that you talked about, the increased cost due to sales, large losses above expected levels, and reserve strengthening, are you able to give some combined ratio impact?
On the increased sales cost, that has, and if you compare that to the cost in the first quarter last year, that would have a two percentage points impact on the total. The other ones would be a couple of more percentage points, but I haven't given you, I don't want to give you a specific number on that.
Thank you.
Impact on Danske Bank in Sweden.
Yeah, then there was a question about Danske Bank. That was a second question. I think this is a good start, I would say, in the Swedish market that opened up the reach for distribution from SPP with external distribution. It's scalable how we build the solutions towards Danske Bank. It starts with some parts of the pension market in Sweden. Then we hopefully will also be open to broaden our cooperation going forward. It's not going to have a major impact on growth, on the results short term, but over time, we hope this could be an important contributor to the growth and result generation in the Swedish market.
It's basically part of how we broaden our distribution in the Swedish market. I believe I forgot to answer the second question on insurance, the price and volume balance. Of the increase of 21%, about two-thirds is price increases and about one-third is volume growth. Roughly like it was in the fourth quarter as well.
Thank you very much.
Thank you, Farooq. We have a next question from Jan Erik Gjerland in ABG. Please go ahead. Your line is muted, Jan Erik. Would you please unmute yourself? No response on our side.
Are you just in the middle now?
Yes.
Is it working now?
Now it's working.
Okay, good. Good. Thank you. When it comes to indexation and profit sharing in Norway and Sweden, I was sort of bearish into the quarter because I had some negative return outlook versus what you managed to go through. Could you shed some more light into the indexation in Sweden, if that is sort of an estimate, and we will get the full answer in September this year? Secondly, how should we think about profit sharing in Norway and Sweden versus your guided expectations for 2025 and 2026 and 2027 when it comes to your robustness when it comes to that line? Secondly, on the insurance part, could you give us some million numbers on how much you have provided for in the different areas so we can understand a more underlying level of combined ratio improvement, as the previous question also asked for?
Finally, would you prefer to do extraordinary dividends or extraordinary share buyback if you could choose?
All right, I will start on the indexation. Around half of the result from the Swedish business this quarter came from indexation, so roughly SEK 30 million. As you say, it is finally concluded at the third quarter. You can, of course, have volatility in it until that time, but as it looks now, it looks like we are going to be able to book that. The second part of the Swedish financial result was from the recuperation of so-called deferred capital contribution, and very little came from profit sharing this quarter. On the overall profit sharing, Lars?
Yeah, so the guiding at the capital markets a year and a half ago was about NOK 300 million from Sweden and about NOK 300 million from Norway. We maintain that guiding even if we are a little bit below with the financial performance in the first quarter, we should be able to reach that by the end of the year.
Yeah. Thank you so much.
Of course, we see also strong return on company capital based on higher interest rate compared to what we expected when we started the year.
On insurance reserves, I do not think I want to go into each product line in terms of reserve strengthening, so I think I will leave it with what I have already communicated.
If I would.
Take a bit more on dividend and share buyback, we are asking our shareholders regularly about what they prefer. For us, it's the same if we do share buybacks or doing dividends. The answer is quite balanced, actually. We see a good balance between share buyback and dividends seems to be the best way of taking down our capitalization over time. As you see, we have been doing a 15% growth in the annual dividends now over time. That is also what we expect to do going forward. Growth in dividends.
Okay, thank you.
Thank you, Jan Erik. We have a next question from Thomas Svensson in SEB. Please go ahead, Thomas.
Yes, good morning. A question to the non-life. It seems like you have this sort of sales push here. How is the response in the market for these growth initiatives? Should we expect this to continue in the following quarters of this year?
Yeah, if I start, it's fantastic to see how the brand name of Storebrand is appreciated in the market. We have a really good standing, are in front of the mind for people that want to look at especially retail P&C with our history in the Nordics, in Norway, after now 258 years doing P&C. That in combination with a good multi-channel distribution network with sales agents and digital distribution has led to very strong growth. We continue seeing that strong growth coming through and very pleased to see it and are sure that that brings a lot of value into Storebrand and our shareholders.
Yeah, and in the extension of that, have you considered or played with the thought of expanding into new segments in the SME segments like motor or more of the simpler segments?
We started up with pure retail. Now we have been doing for, is it a year or two? Now SME market, of course, with a starting point from zero, that takes a bit of time before we reach the critical point where we have profitability, but we are getting closer also in that market and have also ambitions for growth in combination with also our pensions customers. We see the combination of doing P&C and pension is an attractive offering to our SME clients in Storebrand in Norway.
It is also worth mentioning that we have entered the change of home ownership insurance in the quarter, very quick setup of the product already showing quite a good premium inflow.
If everything goes to plan with the distribution partnership we have, we think it could be possible to have a 7-10% market share in this market in the not too distant future.
Okay, and just finally, in the bank, you pointed to your size there, but the market share is still low. Is it fair to assume 10% annual lending growth in the coming years in the mortgage bank?
Yeah, the bank now is growing at that level and even a bit more. We see still that we have very strong growth in the bank, both on loans and on deposits, actually. We had the same growth size of loans and deposits in the first quarter. With also now lower capital charges in the second half or in the second quarter, we see that we can have very profitable growth in the bank standalone. It is an important basis also for distribution, both for savings and for pensions going forward.
Thank you for that.
Thank you, Thomas. It's a busy reporting day for Nordic Financials. I think we have a last question from Håkon Astrup in DNB Markets. Please go ahead, Håkon.
Good morning. Thank you for taking the questions. Two questions from me. The first one, could you just elaborate a bit on the competitive environment in the Norwegian unit-linked business? If I read your supplementary correctly, you seem that you have a negative net transfer balance there of over NOK 1 billion, so you have that for some quarters. The second question, you mentioned your increased market share on retail banking. How has this new and improved position impacted your ability to cross-sell insurance product and also savings product? It seems that you are still using a lot of agents on the insurance sides.
Yeah, there is a strong competition in the Norwegian market for unit-linked, and we see price pressure on some of the special risk products to be able to take also the savings part. We are very focused on profitability in this market. We want to also see results on the right side when it comes to the risk products that are attached to the corporate pension schemes. We are running this for profitability with strong focus on that. On top of that, I will say that in combination, we see also an individualization of part of this market where there are more people now that have also chosen their own pension account.
I'm very pleased to see again that the bank, with both their agents and also with the solution we now have developed in Kroon as a part of the bank, are taking a very large part of the flow when it comes to pension accounts for our own account in the individual market. A part of the flow goes also into own choices when it comes to pension. I think that is maybe the most important part, that we see that the bank now, with the size and the distribution, are taking with the integration of Kroon that also now will be pension-ready with new elements coming into the app very soon. We see that we are able to cross-sale into savings, cross-sale into also pensions, individual pensions.
We also have seen that I think around 40% of customers coming into the bank are taking one or another of the insurance products. This is starting to be a very important distribution platform for us in the retail market. Håkon, if I may add on the first question, there has been some volume departure on unit-linked Norway, but we do not see any negative impact on the bottom line as a consequence, i.e., the customers that have moved have been either low profitability or unprofitable for us, and therefore it is not a big loss that they are leaving us. We continue to run the business for profitability. When we see customers with large, for example, disability results over time, we have to reprice, and we can live with the consequences.
Perfect. Thank you so much.
Thank you, Håkon. That was the final question, so that concludes today's presentation from us. Our next set of results is due on July 11, and we look forward to seeing you again then. Goodbye.