Good morning, ladies and gentlemen, welcome to Storebrand's First Half Result Presentation. My name is Kjetil Ramberg Krøkje, and I'm head of strategy and finance in Storebrand. As usual, CEO Odd Arild Grefstad will start with a presentation of the main points of the quarter. Afterwards, CFO Lars Løddesøl will go deeper into the numbers. After the presentation, the operator will open up for questions. To ask questions, you need to be dialed into the meeting. Dial-in numbers are to be found on the invitation and on the Storebrand investor relations website. With that short introduction, I leave the word to Group CEO Odd Arild Grefstad.
Thank you, Kjetil, welcome this morning to this presentation. I'm very pleased today to present for you a historical strong result for Storebrand for the second quarter 2021 of NOK 1,353 million.
This is driven by a continued underlying growth within savings and insurance, combined with disciplined cost control and increased profitability within the insurance segment. Reserves in unit-linked grew by 26% compared to last year, driven by growth in premium income and also a market return and very strong new sales. A milestone is passed this quarter, as Storebrand now exceeds NOK 1,000 billion in asset under management. This represents the 18% growth in asset under management during this last year. Within insurance, the annual portfolio premium also grew by 18% compared to last year. Storebrand's solvency ratio weakened by 4 percentage points from last quarter to 172%. The decrease is due to falling long-term interest rates in the quarter and increased regulatory counter-cyclical stress factors. This is offset by a strong group profit after tax.
The overall customer buffer capital level strengthens to more than 12% of the guaranteed customer reserves. The financial result is positively affected by a gain of NOK 546 million in the quarter due to the divestment of the shares in AS Værdalsbruket. Given strong investment performance in SKAGEN and Delphi in the first and the second quarter, the performance related cost is already booked while the matching NOK 230 million in performance fees is not recognized under IFRS. These performance fees will be booked at year-end. This means if we have closed the books after the second quarter, we would have a NOK 230 million higher result year to date. Moving to Storebrand's strategy. Storebrand follows a twofold strategy with a compelling combination of self-funded growth in the front book and capital return from a maturing back book of guaranteed pensions.
Storebrand aims to be the leading provider of occupational pension in both Norway and Sweden, to build a powerhouse in asset management, a Nordic powerhouse, and continue fast growth as a challenger in the Norwegian retail market for financial services. The combined synergies stemming from capital, customer base, cost, and data across the group provide a solid platform for profitable growth and value creation. The ambition is to deliver a profit of about NOK 4 billion in 2023. Storebrand also continues to manage capital and back book with guaranteed products for capital release. This leads to a dividend policy of growing ordinary dividends from earnings, as well as an estimated capital release of NOK 10 billion towards 2030. Moving to the strong growth across the future Storebrand. Unit-linked reserves grew by 26% compared to the second quarter in 2020.
The growth in unit-linked savings is driven by premiums from existing contracts, new sales, investment returns, and increased savings rates. Within retail unit-linked, we recognize a 42% premium growth year-by-year. Asset under management in Storebrand Asset Management increased by NOK 157 billion or 18% compared to last year. The growth is driven by positive net flows from new sales as well as market returns. Within insurance, the annual portfolio premium grew by 18% compared to last year. The premium growth is primarily attributed to retail P&C insurance due to strong contribution from sales agents, distribution partnerships, and the acquisition of the customer portfolios from Insr. Growth in P&C and individual life portfolio premiums amounted to the strong number of 48% compared to last year. The bank lending portfolio increased by NOK 2.7 billion, or 5%, to NOK 54 billion during the second quarter.
Compared to the same quarter last year, the growth was 15%. The portfolio consists of low-risk home mortgages with an average loan-to-value of 55%. Moving to asset management. The positive flow continues for Storebrand Asset Management from an increasing share of external clients. In the second quarter 2021, Storebrand for the first time exceeds NOK 1,000 billion in assets under management. The growth in 2021 has been NOK 75 billion, NOK 36 billion stems from external institutional clients, we also recognize strong growth from retail customers. In total, now 44% of the assets under management is coming from external non-captive assets. This is a radical difference from 2016, where there was only 24% of the assets stemming from these external non-captive assets. This transformation in business model has led to growth with stable fee margins.
The fee margins in 2021 is 18 basis points, which could be compared to 17 basis points in 2016. In the second quarter, Storebrand finished a successful transition to cloud for Storebrand Asset Management. This has been a 14-month, large-scale transformation project. It has included full consolidation of existing data centers for asset management and implies a shift from traditional infrastructure to fully automated cloud services. The purpose of this transformation has been to build a cost-effective and scalable platform for further growth and development. Storebrand continues to hold the number one position in sustainability in the industry and the region. We continue to push the agenda forward. In 2021, we have continued engagement in nature and biodiversity issues as part of the working group for Taskforce on Nature-related Financial Disclosures.
We are also continuing our growth of sustainable funds internationally. The Central Bank of Ireland has approved Storebrand ESG+ to be launched on AMX in August. In the 2021 Prospera surveys, Storebrand strengthens the position as the number one sustainable brand. 100% of our investment undergoes strict sustainability screening. More than 10% of the assets under management is in green solution companies. Last but not least, coming from a challenger position in the Norwegian P&C market, Storebrand has grown steadily over the past eight years, with high single-digit organic growth in portfolio premium and increased market share in the period. The performance is due to our strong position in the market, where we are able to leverage a strong brand name with significant customer product and capital synergies.
Over the past couple of years, we have increased the focus on cross-sales, and since December 2020, we have transferred approximately NOK 550 million from the Insr transaction. In total, we expect NOK 700 million to be the converted volume during 2021 from Insr. It is satisfactory to see the strong growth in retail P&C with a steady growth in market share, now increased to 5.2% by the end of the first quarter. With that, I leave the word to our CFO, Lars Løddesøl.
Thank you, Odd Arild, g ood morning, ladies and gentlemen. Storebrand delivers a solid set of figures for the second quarter and first half of 2021. All business areas are performing well. Financial markets have been generally good, and our risk management performance according to plan. This means strong results and a solid balance sheet. Let me start with the key figures. The underlying operating profit, adjusted for performance-related expenses of NOK 68 million, is at an all-time high of NOK 754 million. In addition, the financial result is strong at NOK 667 million, including profits from the announced sale of AS Værdalsbruket of NOK 546 million. The Solvency numbers are slightly down to 172%, following falling interest rates and higher regulatory stress factors. The regulatory Solvency does not contain any transitional capital.
Importantly, the customer buffers are at all-time highs, which lead to stronger risk capacity for customers and better protection for shareholders and customers for potential future financial market volatility. The solvency position ends the quarter at 172%, down by 4 percentage points. Model and assumption changes are neutral. The fall in Norwegian interest rates cause a reduction in solvency of 5 percentage points. This is slightly higher than what can be read from the Q1 sensitivities due to a twist in the interest rate curve. Lower volatility adjustment by 3 basis points in Norway and 1 basis point in Sweden have a negative impact of 2 percentage points, while a higher equity stress, now at 45%, cause another - 2 percentage points. Importantly, this also leads to higher solvency protection on the downside, should equity markets correct.
Strong asset returns and strong quarterly results give a positive contribution of 6 percentage points. As usual, we set aside for future dividends quarterly for a final solvency at 172%. This falls slightly behind market consensus, which may be a result of the interest rate fall at the end of the quarter and reduced volatility adjustment set by EIOPA after the end of the quarter. The sensitivities described here show strong resilience in different scenarios. I would like to emphasize that Storebrand aims to reach a solvency above 180% during 2022. Lower interest rates make this more challenging; we will continue to strive to close the gap through measures that we have at our own disposal. Fee and administration income continues to grow strongly at double-digit levels.
The insurance results are picking up after a period of weakness, with no extraordinary claims in the quarter and a positive development from growth and price adjustments. Importantly, we see that the employment market has started to recuperate towards the end of the second quarter, which leads to expected improvements in reactivation and disability results going forward. This is in line with previous communication. Despite including NOK 68 million in performance-related expenses in the quarter, overall reported cost remains well under control and below the run rate of our guided NOK 4.4 billion for the year as a whole, excluding performance-related expenses. We do expect the cost level in the second half to go up in line with increased economic activity, but within the previously guiding of NOK 4.4 billion. Financial items are particularly strong, including a gain of NOK 546 million from the sale of Værdalsbruket.
The profit from the sale of shares in Værdalsbruket is tax-free. Combined with lower taxes from our Swedish operation, this leads to a very low tax charge of only NOK 52 million for the quarter. Our normalized tax rate remains at 19%-22%. This picture shows the same results as the previous page, now broken into the profits area, savings, insurance, and guaranteed. As you can see, there is a positive development in all areas. The savings area shows continued good growth in earnings despite margin pressure. The reported cost is up primarily due to higher reported cost related to good performance in our funds with performance fees. The corresponding profits from good performance will be booked in the fourth quarter according to the IFRS accounting rules. All business lines show satisfactory growth and profitability.
The earned but not booked performance fees in asset management year to date are NOK 230 million. This means the best half-year value creation in the asset management section on record. The growth is further illustrated here, but since Odd Arild has already commented on most of the important parts, I will move on to insurance. Insurance continues its strong growth, partly driven by the acquisition of customers from Insr, but also from price adjustments and partnerships, as well as own sales. We have increased the number of people to handle the growth, as previously announced. Still, there is good cost control and a stable cost ratio. There are no significant extraordinary claims in the quarter.
The disability results, which have been weak since the beginning of the COVID-19 situation, show sign of improvement towards the end of the second quarter, and we hope to be able to report gradual improvements from here on. The combined ratio at 91% is within the targeted level in the quarter. The growth is particularly strong within P&C and individual life. At the end of the second quarter, we had signed up NOK 553 million from Insr clients, and we now expect a total acquisition of around NOK 700 million in portfolio premiums, somewhat ahead of the original business case. The portfolio shows satisfactory profitability and relatively low turnover. The guaranteed area delivers strong results, t he operational results continue to be stable.
The inclusion of new customers in the public sector in the beginning of the year, as well as a takeover of a small private closed pension fund with solid buffers, drive fee and administration income. There is strong cost control. High buffer levels across the different products, combined with continued good booked financial return, leads to profit sharing in some sub-portfolios, as well as reduced capital contribution in Sweden. The guaranteed reserves have now reached just below 50% of total pension reserves, continuing the long-term transition journey in Storebrand. The remaining liabilities have gradually lower guaranteed rates of return, lower duration, and better asset liability matching through long-term investments in long-dated fixed income instruments. The buffer capital is at all-time highs, ensuring the guaranteed rate of return to policyholders and protecting shareholders.
The high buffer capital level, as we have seen this quarter, is gradually lifting expectations of profit sharing in the guaranteed products, which may make them more profitable in the coming years. Under other, the financial results is primarily driven by the profit from sale of shares in Værdalsbruket, as communicated. With that, I leave the word to Kjetil.
Thank you, Lars, t he operator will now open up for questions.
If you would like to ask a question, please press star one on your telephone keypad. Please ensure your line is unmuted locally, as you will be advised when to ask your question. So once again, that's star one if you would like to ask a question. And the first question comes from the line of Peter Elliot from Kepler Cheuvreux, p lease go ahead.
Thank you very much. Three questions as normal, please, o kay. The first one, you hinted just now that you might have some tools, or you might think about using some tools to boost the solvency ratio to reach 180% next year. Could you maybe just remind us how you're thinking about those tools at the moment, and what you have available? You obviously mentioned the various ones before, debt, reinsurance, AM, internal model, et cetera. I'm thinking of the debt lever, I guess you've already called to an extent, and I don't know if there's any more you think you can do there. The internal model, I guess, will take some time to come into effect. Yeah, it'd just be useful to think about how you're thinking about those various levers. The second question was on net flows.
The NOK 24 billion year to date, I think, is the same number that you showed at Q1. I guess Q2 was zero in aggregate. I was just wondering, is it possible to break down, and especially the NOK 14 billion of non-captive net flows, break it down by segment, where they're coming from, and maybe give some hints on Q2 as well? Then finally, just looking at the solvency sensitivities, I was a little bit surprised by the equity sensitivity, which basically seems to say that if equities fall by 25%, then the without transitionals ratio increases by 2 percentage points. I just wonder if you could confirm what's happening there, and exactly what your net equity exposure is? Thank you very much.
Sure, t hank you, Peter. With respect to the solvency tools, we talked about that at some length at our Capital Markets Day, and you comment on all the right things. We will continue to work with the toolbox that we have, and you already mentioned the available tools for us. We don't want to go into any further detail, but we still have availability to work with those tools. In terms of net flows, we have had good sales both in alternatives in the Nordic, as well as a good sale in retail funds and institutional funds across the Nordic and Norway, I don't know if you.
I think just one point to add there is that there is a positive net flow also in the second quarter in isolation. The large bulk came in Q1, whilst I think by memory, it's roughly NOK +2 billion in net flows also in the second quarter.
Yeah, i n terms of solvency sensitivities, I guess that shows some of the weakness of the solvency, the model that you have some technicalities that makes this happen. It happens with respect to the Norwegian rules, where there is a limit as to how much solvency capital you have from the back book and the front book. If you have a strong fall in the equity markets, a cap is lifted in terms of the balance between the front book and the back book, which lifts the actual solvency level. Which doesn't really make a whole lot of sense, but that's the way the solvency model is set up with a Norwegian capping of solvency capital from the front book.
I think also what you see is that even the underlying solvency without any transitional rules increases with 2 percentage points. That is due to the fact that really now we have a very high level of stress of the equity in the model. With the fall of 25% in the equities, we will also have a corresponding reduced stress in equities. That reduced equity stress is even higher than the effect of the fall in equities. That is what you see with the countercyclical elements really kicking in.
The next question comes from the line of Ashik Musaddi from J.P. Morgan, p lease go ahead.
Yeah, h i, thank you, and good morning, Lars. Good morning, Odd. Just a couple of questions I have mainly with respect to the unit-linked margin. Unit-linked margin in the quarter declined quite a lot for both Norway as well as for Sweden. I agree that you have given some guidance that the unit-linked margin will gradually decline, but I think the decline quarter-on-quarter was, say, seven, eight basis points, which sounds a bit higher than what I would have assumed. Was there anything funny in this quarter that the margins decline, or would you say that this is what is reasonable we should be expecting going forward as well? Especially, how do we think about year-on-year, basically from a full-year basis?
I think last year you did 80 basis points, 81 basis points in unit-linked Norway, and you did about similar 80 basis points in unit-linked Sweden. Are we talking about 5 basis points decline every year for next three, four years, or are we talking about 1 basis points or 2 basis points decline a year over the next three, four years? I think some clarity on that would be very helpful because that was a big driver today. Secondly is how do you think about this asset management related margin? Clearly asset management, AUM has been going up pretty rapidly. It is up, say, quite a lot this year only. Does that put any pressure on margin because, is there any business shift mix et cetera, that drives it?
Third question I have is a simple one is, you have lots of tools to address the solvency concern, and you can move towards 180%, but is there anything you can do to reduce the interest rate volatility? The reason I'm asking this is interest rate is one of the biggest driver of your solvency up and down, and it just moves in a wild way. This quarter it just -5%. Clearly that creates a lot of noise in your solvency ratio. Like one quarter you are very closer to 180%, next quarter you'll be closer to 170%. Anything you can do on reducing the interest rate sensitivity? Thank you.
If we start with the unit-linked margin for Norway and Sweden, there are no particular extraordinary items this quarter. As we have mentioned, the own pension account in Norway will put pressure on margins for unit-linked Norway this year, and we've already made some adjustments in the pricing, and we have transferred customers into the individual pension accounts, which lead to gradually lower margins. In Sweden, there was also a big difference between last quarter and this quarter, but that's primarily related to a one-off gain in the last quarter. If you adjust the last quarter by NOK 36 million, you will get a much more straight line in terms of the development in Sweden.
On our Capital Markets Day in December last year, we guided that we expect the unit-linked premiums overall to remain in the 60 basis points-80 basis points level for 2023. We maintain that guiding on the overall. In terms of details for each individual product, that's too early to say exactly.
Good, w hen it comes to asset management, as you see, we see strong growth. We also see that a large part of the growth comes from alternatives, private equity, infrastructure, real estate has been very successful also for external sales. That keeps up the fee margin, the top line margin. We also have kept our cost level very steadily nominally over this growth period. That means that we have seen reduced cost margin over the last quarter. Actually, we have seen increased margins over the last years due to a falling level of the cost margin. As I thought about being now into an even more scalable platform, means that we believe we should be able to keep this margin also going forward due to the shift in the business mix and a very scalable platform.
In terms of sensitivities for interest rates in the solvency calculation, we have this year increased our holding of bonds at amortized cost. We have bought some NOK 14 billion of long-dated fixed income instruments with an average duration of 13 years, longer than the past, which means that we reduce the sensitivity to interest rate swings. As you are very well aware of, we have this dilemma where we have to manage the risk on a one-year horizon due to Norwegian guaranteed product rules, and at the same time, we have to hedge the long-term risk. In the balance between the two, we have increased duration in the investment portfolios so far this year, which will lead to a lower sensitivity on swings in the interest rates on the solvency.
It's impossible to lock this all together due to Norwegian product rules as they force us to also look at the one-year horizon in terms of our risk management.
That's very clear, I just have one follow-up question, again, going back to the retail margins, basically. I agree that 60 basis points-80 basis points is the margin guidance you have given. Is it possible at some point, not now, but at some point in the future to just narrow it down? The reason is, 60 basis points-80 basis points is a big gap. 20 basis points is basically 1/3 of your revenues in the retail business, which could be NOK 1 billion. NOK 1 billion is basically 1/3 of your group profits. If we can get a bit more narrowing down of this number, that would help a lot because it's just a very wide revenue margin number.
I agree that you have your limitations, how the book will evolve, the IPA book will evolve over time, I agree, but any thoughts at a later stage would be very, very helpful, t hank you for this.
Ashik, as you know, the own pension account is one of the largest changes in the Norwegian pension market that has taken place for a very, very long period of time, and it is impossible to say at this point exactly how that plays out in terms of margins. We will obviously come back to you with more guiding as this market is finding a new balance.
I think I would stress that the guiding we gave in our Capital Markets Day showing quite well, the result from these areas should be in line with what we saw in 2020. You will expect around NOK 100 million in decline in 2022. Due to the growth in the business and also cost measures, we expect to be at the same level as we have seen in 2020 already in 2023 again. There will be a dip due to this margin squeeze in 2022, but it's limited to around NOK 100 million.
Okay, sure, t hank you. Thanks a lot for this, v ery clear.
The next question comes from the line of Håkon Astrup from DNB Markets, p lease go ahead.
Good morning, I have two questions. First one, just a clarification with regard to Solvency II and dividend. In order to start to pay out the excess capital next year, do you need to have a Solvency II ratio above 180%? That is the first question. The second question is regarding the inflation and what exactly are you seeing, and I was wondering if you can share some thoughts on how this is expected to impact your insurance result and the measures that you are doing in order to limit claims inflation?
Well, the 180%, of course, is an internally set target, for us, where we measure ourselves to be over-capitalized when we are above this level. Of course, there is a gradual shift in the balance sheet that we also have to take into account, but that is our best estimate today to where we set target to being over-capitalized and to start doing share buybacks. As Lars said, we are very committed as a team to work towards reaching this goal during 2022.
Well, during 2021 and into 2022. In terms of inflation impact, obviously the insurance results, the P&C insurance result is a smaller impact on the overall results for us than for some of the large competitors.
We as everyone else, put our inflation expectations into the price adjustments we do. In terms of the results this first half year, we saw a particularly strong increase in the G in the base number in Norway, which means that we have increased reserves by some NOK 50 million to strengthen expected cost related to G-related expenses. That's something that is taken into the accounts right away.
Of course, this also drives the growth of the business because very much of premiums and so on is also regulated by this same inflation-based numbers. We see stronger growth coming out of inflation. Of course, if it also leads to higher interest rates, that is absolutely positive for Storebrand.
Thank you, j ust a quick follow-up here on the solvency. In the past, you have been talking about that you can down the road adjust 180% target in order to be more in line with the new business that you are, new Storebrand. Could that be as early as next year, or is this more of a five years down the road type of adjustment?
We are following of course this very closely, but we are not ready to change any target for our capitalization at this stage. It's still the 180% that we believe to be the limit for us to reach to start doing share buybacks.
Okay, t hank you, t hat was very clear.
The next question comes from the line of Ulrik Zürcher from Nordea, p lease go ahead.
Thank you for taking my questions, I have three. I think this was asked about previously, but I didn't quite hear it because I think the AUM inflow was 0% net in the quarter. I was just wondering if this is a sales issue or an outflow issue or a situation. Some color on that would be nice. I was wondering on the sensitivity, is it so that the increased duration of the bonds that have a big impact on your sensitivity to higher rates? I think it's fallen bit this year. It was 4 percentage point last quarter, now I think it's 7 percentage point , it's a bit up. I'm wondering what's driving that. The last one, since you're now at a positive sensitivity to the equity markets falling, does that mean you have a negative impact to equity markets, for example, going up 25%? Thank you.
All right, I can start on the net flow number. I think that the correct number for the second quarter is roughly NOK +2 billion net flow. I looked into it now, unfortunately, I think we have forgot to include company capital in the numbers here. We need to do a small correction there. Besides that point, there's normal outflows and good sales in asset management in the quarter. You are correct in assuming that when we have increased the duration of the investments and the interest rate sensitivity on the upside and the downside will go down. In terms of the equity sensitivities, it's, as I mentioned, a technicality that makes this the strong or the positive development in Solvency as a consequence of falling equities. You don't see the opposite happening if equities continue to go up. That will generate more returns and will be positive.
Actually, we now have a very high stress factors on equities, i t's on 45%. It cannot be higher than 49%. That will be the highest level you can have on these stresses, w e are now pushing this limit. Higher equity will be positive for us also in the solvency calculations going forward.
It's a very interesting position, t hank you a lot.
The next question comes from the line of Blair Stewart from Bank of America, p lease go ahead.
Thank you, j ust two questions from me. The developments in the defined contribution market that you mentioned in the report, it seems to have been expanded to more people, albeit at a lower level. Just wondering, is that a positive or is it a negative for you? It seems to be opening up to more people, possibly not the right types of people. I don't know if that's the correct interpretation. Secondly, could you comment on how much debt capacity you think you have, whether you're measuring that on a solvency basis or something else, just interested in how much debt capacity you think you have in the business.
Yep, l et me start on the question on expanding defined contribution pensions. This is a proposal that is now going to parliament to expand it to people who previously didn't have a right to earn pension. This is a positive for us. In expectation, if it goes through, it will increase premium volumes in the market with roughly NOK 3 billion annually, and we will then take whatever market share we get from that as premiums in Storebrand. I don't know, Lars, if you want to start on debt capacity, I think that we look at it on a Solvency II basis, first and foremost. Of course, also we look at it in terms of rating and IFRS measures.
We think that as of now, we are still in the lower end of the leverage scale compared to the sector, to think that we can be somewhere in the area of 20%-25% of leverage in terms of own funds, that it's reasonable. We still have room to do more debt if we should wish to do so.
Are you able to quantify the debt number? I can do it myself, but just wondered if you've got a number in mind to take you to 20%-25% of own funds.
Well, I think when you look at the SCR now, you could increase it with a couple of billions. There is a little bit fluctuations in the numbers here, and we also, of course, need to be within the limits of how much we can have in Tier two capital and in Tier one capital as a percent of the SCR. But again, in addition to that threshold, we need to, of course, look at rating and other measures before we make a decision to change the absolute level of leverage compared to what we have today.
Is that about 5 percentage points-10 percentage points then, Kjetil, of capital could come from debt if you chose to do so?
You can think that with a capital requirement of around NOK 30 billion, 10 percentage points is NOK 3 billion.
Yeah, s orry to go on, guys, conceptually, would the management or the board consider utilizing that debt capacity, say 10 percentage points, in order to push you above the 180% and trigger equity capital returns?
Well, as Lars said, we have a toolbox, and there's a lot of tools in that toolbox. You are talking about the debt and debt capacity, that is one. You also have reinsurance agreements that is possible to do that we have done in more debt earlier on that can be used. As you remember, we see what can get most solvency capital for us at the lowest cost. That is the trade-off we are doing and discussing with our board. What is very important to say is that the management team and the board is very committed to reach this 180% solvency threshold as soon as possible and working with the toolbox actively to do so.
Okay, t hat's interesting. Sorry, I apologize. Just on my first question, is it also the case that people with disabilities can also be eligible for a cheaper pension as well? Is that part of the proposal from the government?
This is quite simple, actually, because before pension was earned from a threshold, you needed to earn NOK 30,000 before you started to earn pension on your salary. The largest shift now is that everyone earns from the first Krone. It's people that's already in the schemes that now get more pension out of their wages and their savings. It's not like new people coming into schemes, but it's higher savings rates.
Part-time employees as well as young people.
Yeah, p art-time employees is also now included. Everyone from 13 year in Norway that has a work today will also have savings into pension based on this new regulation. That will have more than NOK 3 billion in annual increased savings into the market.
Understood, g reat, t hanks very much, guys.
The next question comes from the line of Johan Ström from Carnegie, p lease go ahead.
Thank you, I was wondering if you have any further comments on profit sharing in this quarter. Is all of this related to Sweden, or have you started to take anything out of the Norwegian book? Secondly, on the Insr premiums, has the level that you have reached now been better than expected? If so, do you think you will be able to transfer more than initially thought, or is the NOK 700 million still a base case? Thank you.
In terms of profit sharing, we do have some profit sharing in certain paid-up policy portfolios, as well as a little bit in the individual portfolios in Norway. As we've had very good book return in the Norwegian market, there is also some profit split in certain portfolios. This is still at a relatively low level, but as I mentioned previously in the presentation, when we continue to build very strong customer buffers, more and more portfolios will be able to get profit sharing in the future. There was a discussion on inflation here. Inflation usually leads to higher rates. Higher rates, again, will lead to a higher probability for profit sharing and a possible significant strengthening in the profitability of all the guaranteed products.
You are correct, we've also had good booked profit or good booked results in Sweden, which has led to a reduced need for deferred capital contribution, which then is reversed. Furthermore, the indexation fee in Sweden is strong at approximately NOK 140 million per year, which is booked into the income on a monthly basis or a quarterly basis based on strong consolidation in all the relevant product groups. In terms of the Insr premiums, we have had booked NOK 553 million at the end of the second quarter, and as I mentioned, we expect to be able to finalize this around NOK 700 million, which is slightly above the initial business case that we communicated.
I might also add one thing on the retail P&C that also if we take Insr and the growth from Insr out of that number, we are still growing that segment with 16% in the retail market.
Thank you.
The next question comes from the line of Vegard Toverud from Pareto, p lease go ahead.
Thank you, g ood morning. Just following up on the paid-up profit sharing there. With the current buffers you have, should we expect at least the current level that you reported in this quarter going forward? First question.
As I said, the actual profit split is booked in the fourth quarter. We make an estimate on a quarterly basis. We made an estimate based on the booked return so far this year and a normalized return the rest of the year. Whatever the actual return becomes at the end of the year will impact how much is actually booked as a profit split in the year as a whole.
Okay, thank you. On unit-linked in Norway, could you tell us how much of the reserves that are currently on the own pension account, and how much are on the pension capital certificates?
The paid-up policies that we had at the end of last quarter was NOK 39 billion.
Not paid-up policies.
Sorry, the pension certificates, yeah. Pension certificates was NOK 39 billion. It's currently at NOK 35 billion, that should go down towards the end of the year as more and more pension certificates are moved into individual pension accounts.
How much of those NOK 35 billion, or how much of the remaining NOK 150 billion is already in Pension Account now?
As I said, NOK 39 billion in pension certificates has gone down to NOK 35 billion, and we expect approximately half of the NOK 35 billion to be transferred into pension accounts by the end of the year.
Okay, i f you look at the transfer balance, it's NOK -2.5 billion in the quarter. Is that connected to pension accounts and volumes moving away from you?
Well, there's some volatility in the numbers with a lot of pension capital certificates being moved to us and being moved away from us, and there may be some periodic effect between the quarters in terms of when things are moved. We do expect a small leakage overall in terms of the pension capital certificates overall. In the numbers you look at in the supplementary information, that includes also customers moving to us and from us. There will be some volatility in these numbers this year due to the fact that we have quite large transfers in the own pension account market. There may be, as I said, some shifts between the different quarters in terms of the actual net numbers for the year.
Yes, i s it fair to assume that the numbers we see, the net ones now for Unit-linked Norway, is related to pension accounts?
Sorry, I didn't get that.
Is it fair to assume when we look at the transfer balance for unit-linked Norway, that this transfer balance, the net transfer balance, is related to pension accounts and not movement of unit-linked? Thank you.
It's a combination of the two. So far, 98.2% of all our individual clients have chosen to stay within Storebrand, either in their own individual pension accounts or in the corporate schemes that they have with Storebrand.
We actually see quite low activities with the transfer into their own choices these days. It was some activities at the starting point of the regulation, but it's very low activities as we speak.
Okay.
The next question comes from the line of Roy Tilley from Arctic Securities, p lease go ahead.
Thank you very much, g ood day, guys. A couple of questions from me. Just one follow-up on Vegard's question on the transfer balance. I also saw the transfer balance is negative in Sweden again for the third quarter in a row after we had quite a few quarters with a positive transfer balance. Just wondering how the competition looks there. That was the first question. Secondly, if there are any updates on the outstanding tax cases you have going on. Lastly, in the bank, you have a very strong growth rate there as well. Just wondering what's driving the growth there. Is it price or are you just doing better sales? Also if you could touch upon how much of your growth there is in fixed rate mortgages versus floating? Th ank you.
Yeah, t o start with Sweden, we have of course seen a very strong growth in Sweden over a number of years now, and we also still see strong growth in overall premiums. There is a strong competition, especially from one player in the Swedish market that has introduced also fees to customers to directly move to them. That is of course quite a costly way of customer acquisition. We have a very good position in the Swedish market. We have a very low cost level compared to our competitors, a very high degree of digitalization. We of course are looking into this situation and following it closely. So far we have not chosen to follow these players' introduction of fees to really transfer the balances. That is what we see as a situation that have occurred over the last half a year.
We find that the competitive position for SPP in Sweden is extremely strong, both due to sustainability, to digitalization, and to the very low relative cost level. We feel that over time we will be in position for further growth and also further transfer in the SPP.
Yep, o n the tax update, as we said before, we will challenge the tax authority's decision, and that has been done through a formal complaint to the tax authorities, and we expect that to take some time to be handled according to previous communication. Basically no news, just business as we have previously communicated. In terms of the bank growth, we have changed our sales strategy. We have entered new partnerships, and we have been able to maintain margins while still growing quite strongly. I do not have the mix between fixed and floating, but
I think it's mainly floating rate mortgages.
Yeah, t here is some interest for fixed rate, but we don't see that as a large part of the total yet.
The next question comes from the line of Thomas Hansen from SEB, p lease go ahead.
Yes, g ood morning, t wo questions. You highlight your recognition for sustainable impact. Does that make you optimistic about possible new business, new 12-month, new asset management, or is it so that the competition is also increasing here, that everyone else is doing things to getting more sustainable? That's the first question. The second question, in some M&A you have talked about and also commented about, of course, the headline positions. How do you see the environment now for M&A opportunities? Thank you.
I heard the first question about sustainability.
The second was on M&A and how you see opportunities.
Okay, w ithin the whole space?
That was how I understood it, t he line is unfortunately a little bit poor, Thomas.
Okay, o ther peers was able to get more business due to your strong ESG profile. Is the competition increasing for this green business or are you optimistic about the options?
Yeah, j ust start with that. We feel that we have a very strong position, and when we look at the scorings, like I talked about Prospera here, we see that we actually have increased our position towards our competitors during the last year. Everyone is working with sustainability, and that is a good thing for the world. I think we have been working with this for a very long time. We have increased our work also with active management towards our investments, and we feel that we have a very strong position and are recognized for that in the Nordics, but also internationally.
We absolutely see growth in sustainable solutions both in the Nordics and in Europe going forward and are looking very closely and are in part of competitions on that as we speak. When it comes to M&A, of course, we are following what is happening in the Nordics very closely. As I presented today, we have extremely strong growth rates, both when it comes to unit-linked, when it comes to asset management, when it comes to insurance. The growth rates are, I would say, fantastic. We don't need to do any M&A to have the growth coming through. Of course, if there are opportunities to strengthen our positions, I would say especially as we have done in asset management, where we have strengthened our offering in the Nordics towards alternatives.
We are looking very closely to that. We of course also feel that this has been a great success for us with the takeover with the Insr. If there is opportunities in the insurance space, we also look closely to that. Also, due to the fact that we have a very high capital synergy taking on more insurance volumes into our balance sheets.
Okay, thank you very much.
I don't see any other questions in the queue, so I'll hand the call back to your host for any closing remarks.
All right, thank you, and thanks to everyone who followed the call. We are, of course, available for questions later if anything should occur. Other than that, it just remains to wish everyone a nice summer break, and we look forward to seeing you over the summer as well, t hank you and goodbye.