Good afternoon, ladies and gentlemen, and welcome to the Storebrand ASA Quarter One, 2015. My name is Anna, I will be your coordinator for today's conference. For the duration of the call, you will be on listening only. However, at the end of the presentation, you will have opportunity to ask questions. If any time you need assistance, please press star zero on your telephone keypad, and you will be connected to an operator. I will now hand you over to Head of Investor Relations, Kjetil Ramberg Krøkje, to begin today's conference. Thank you.
Good afternoon, ladies and gentlemen. Welcome to Storebrand's first quarter 2015 conference call. My name is Kjetil Ramberg Krøkje, and I'm Head of Investor Relations at Storebrand. Together with me today, I have Group CEO, Odd Arild Grefstad, and Group CFO, Lars Løddesøl, and Head of Economic Capital Management, Trond Finn Eriksen. In the presentation today, Odd Arild will give an overview of the development in Q1, and Lars will give some more details on elements in the results, and a brief presentation of the 2014 embedded value results. The slides will be similar to the analyst presentation released this morning and are available on our webpage. After the presentation, the operator will open up for questions. To be able to ask questions, you will need to dial into the conference call.
I will now leave the word to Storebrand's CEO, Odd Arild Grefstad, who will start the presentation on slide three.
Thank you, Kjetil, and start on slide three. Storebrand delivers a group result of NOK 450 million for the first quarter of 2015, and a group embedded value of NOK 34.2 billion for the full year of 2014. The income grew significantly, with 6.6%, adjusted for corporate banking and public sector pension in run-off. This is driven by strong sales and returns. Strong sales in unit-linked pension and external customer inflows has, together with strong markets, increased asset under management with 13% compared to last year and 4% in the quarter. We have experienced strong sales in insurance in the quarter, with 70,000 new customers, both from the agreement with Akademikerne and also from other customers. In total, a 13% growth in written premiums.
We have succeeded in moving more than expected to paid-up policies with investment choice, with NOK 1.7 billion in the quarter. This affects results negatively by the building up of longevity reserves compared to last year. This is due to higher conversions to non-guaranteed paid-up policies and the use of risk reserves for reserve strengthening. Let me also comment on a couple of things on the balance sheets. We have strengthened longevity reserves with NOK 1.2 billion in the quarter. We are now very comfortable with the situation, as I said last quarter, and we prioritize measures that strengthen the balance sheet over short-term results. We report a Solvency I ratio of 173%, and an estimated Solvency II ratio of 152% in the quarter.
I will revert to these numbers in more detail in the presentation, and Lars will also go through similarities and differences in economic capital and MCEV and Solvency II during the presentation. Let's then move to slide four. Storebrand's business model is undergoing a fundamental transformation. We have a dual strategy to manage the guaranteed balance sheet and continue to grow in savings and insurance. We manage the guaranteed balance sheet, now aiming for at least 130% solvency ratio. We will continue to grow in savings and insurance by leverage our position in the individualized occupational pension market. Let me start with a brief update on the left side of the strategy implementation, and then we move to slide five. We continue to transfer out guaranteed liabilities from the balance sheet in the first quarter.
The transfer this quarter consists of NOK 1.7 billion of paid- up policies to paid- up policies with investment choice, and a little more than NOK 3 billion in public sector transfers. We still expect to keep transferring NOK 1 billion in paid-up policies per quarter in 2015. Then let's move to slide 6. Storebrand has reported estimates on life group solvency for the last two quarters. The solvency ratio, including transitional rules, is strengthened with four percentage points in the quarter to 152%. All of the effects come from the increase in transitional rules and is caused by lower interest rates and increased equity stress.
The solvency ratio without transition rules is reduced from 101% to 98%, and the reduction is caused by lower interest rates and an increase, equity stress from 42% to 47%. The result for the period and increased buffers gives positive contribution. And I'd like to add that with, the increased interest rates we have seen now in the second quarter, we are above 100% again. We are now in the first quarter of 2015, and, the Solvency II is implemented first of January, 2016. We have a clear objective to increase the underlying solvency ratio by 10 percentage points by year end. Then let's move to slide number seven, longevity. We went into 2014 with a reserve strengthening need of NOK 12.4 billion.
One year and one quarter later, we have filled 16.6% of the gap, equal to around NOK 7.4 billion. This is a very clear example of us prioritizing strengthening of the balance sheet over short-term IFRS profits. As you can see on the right, right-hand side of the slide, we have a negative direct impact of NOK 154 million in the quarter, and NOK 121 million indirect negative result effect from foregone profit sharing and risk results. Let's move to slide number eight. Unit-linked is still growing rapidly, with 33% year-over-year and 10% from last quarter. This strong growth is driven by premiums, growth by 17% quarter-over-quarter, NOK 1.7 billion on new paid-up policies with the investment choice, and of course, strong markets. The asset management continues to grow despite transfer out of guaranteed.
Both external public clients and assets from the life company is growing, and the business area works extremely well as the group's asset gatherer. The bank has been relatively flat in the quarter, and it's fair to say that a lot of our sales forces use the effort on paid-up policies and with the investment choice and on insurance in this quarter. Lastly, on insurance. The Akademikerne deal and sales to large corporates has really accelerated growth in the quarter. As you can see on the slide, there is a 14% growth from our written premium year-on-year. But more impressive, there is 10% growth since the fourth quarter. Then I move to slide number nine, and I just wanted to end my part of this presentation to show that the transformation is taking place in the business mix.
Since last year, income from savings has grown with 14%, and insurance premiums, which is not on the slide, has grown by the same amount. At the same time, income from guaranteed pension has been reduced by 9%. This is really our strategy coming through in the PNL. And I will now leave the word to Group CFO, Lars Aasulv Løddesøl, who will give some more flavor on the results and also take you into the 2014 embedded value calculations.
Thank you, and, good afternoon. On the figure 10 with key figures, we show the continued delivery of results before profit sharing and loan losses, above NOK 500 million per quarter, even in a quarter where we see revenues from guaranteed business going up, and also weak risk results from the guaranteed pension business. We also see the buffer building continues, and earnings per share in the quarter was NOK 0.78 . Over on page 11, I think Odd Arild has already mentioned many of the key points, and I would like to comment briefly on four areas where we see that the consensus estimates were slightly higher than the numbers achieved in the quarter.
First, we see that the financial result and profit split from the Swedish business was weaker than anticipated, and that you, as analysts, had reason to anticipate based on the sensitivities we give in the supplementary information. The explanation for this is that certain contracts, when they are reserved in conditional bonuses by 15%, any additional return does not go into the buffer, but goes into their pension capital, i.e., it's a guaranteed contribution to the contract. The new guaranteed contribution does not have a return requirement as such, it's only a capital guarantee, but that means that NOK 35 million this quarter has gone to increase pension liabilities for guaranteed customers as a result of the falling interest rates and the good returns in the quarter.
This is something that happens with full effect from the end of the year, so this is an estimate in the first quarter, and it may be reversed if the returns does not continue to be as good for the rest of the year. That accounts for a difference of NOK 35 million on the net profit sharing and loan losses from the Swedish business. The second area where we see a difference between the presented results and the estimates, which is connected to the paid-up policies with investment choice, where we have converted NOK 1.7 billion, as Odd Arild just mentioned, much higher than the NOK 1 billion anticipated in the market. And as such, the reservation cost is about NOK 35 million higher than was anticipated by the consensus.
Thirdly, the risk result for risk result Life & Pension is weaker than last year, where we had release of reserves in the first quarter, and weaker than people had anticipated, amongst other things, because of the risk utilization plan, which we are not allowed to take as a result component in a period where we are increasing reserves for longevity. This is a result component that will decrease during the period of longevity reserve requirement, which Odd Arild Grefstad also mentioned earlier. Fourthly, the cost level is slightly higher than was anticipated.
In the first quarter last year, we had some VAT returns and some bonus, some money that was set aside for bonuses that wasn't used, which means that there were certain one-off elements that brought the cost down somewhat in the first quarter last year. If we look at the underlying trend, the cost is up 2%, and that cost increase is connected to our preparing to take on board the Statoil contract and the Akademikerne contract, as well as certain IT investments. We will continue to follow the cost level very thoroughly, and we will have continued tight cost control. The cost income objective of 60% for the year as a whole is something that we aim to deliver on by the end of the year.
At this stage, cost income was 61% on a 12-month rolling basis, and we'll revert with that on a quarterly basis with the exact figures so that you can see the development yourself. That concludes what I want to say about the results. For the sake of time, we will move over to the embedded value numbers, which are shown from page 21 onwards. Storebrand group MCEV, or embedded value, was NOK 34.2 billion at the end of 2014. For the Life Group, the embedded value was up from NOK 27.7 billion to NOK 30.3 billion before closing adjustments, which gives 9.5% return on the opening balance.
By adding on to that, the closing adjustments and the IFRS value of other subsidiaries, we get the embedded value for the group at NOK 34.2 billion or NOK 76.6 kroner per share. This is an improvement of NOK 3.3 billion, of which NOK 2.3 billion is an increase of the capital, while the value in force is up NOK 1 billion. The numbers are impacted negatively by the interest rate fall, and positively by buffer building and by changes in the investment strategy and the risk management. There is a significant gap between the embedded value of NOK 34 billion, the book value of NOK 25 billion, and the value on the stock exchange of NOK 13 billion.
This can be partly explained by the fact that embedded value measures the value of future business, and the discount factor today is very low, which means that the value of future profits gets a high, high value. Furthermore, we see that the return on embedded value for, or on the value in force, is low compared to some European peers, and this is probably related to the way we measure new sales when new people work, that work in a corporation are replaced, or when one person leaves a corporation with a pension plan in Storebrand, is replaced by a new person. That's replacement sales and not new sales.
The value of new sales is down in 2014, partly because of margin pressure, and partly and mainly because of a change in the cost allocation model, where we more granularly allocate cost to operations or new sales, and that has negatively impacted the value of new business. While this picture shows the correct technical way to present embedded value and the movement, I will like to lead your attention to the following page, page 22, to go through the movement in a slightly more simplistic way. The interest rates fall in 2014 decreases embedded value by NOK 4.3 billion. In addition, we have harmonized the embedded value model with the Solvency II assumptions and changed the discount factor to the same as Solvency II.
This reduces the values by an additional NOK 2.9 billion, altogether NOK 7.2 billion. Previously in our embedded value calculations, we showed this as a sensitivity with the Smith-Wilson Curve. Now we have certainty around the Solvency II curve, and we use this curve also for embedded value. The strong returns and results during 2014 increases values by NOK 2 billion, first and foremost, as a result of higher assets under management in the unit- linked business, which creates future profits. Then we add on to that the value of new business, and the fact that we have gotten a lot of new unit- linked customers in Norway as they are converting out of defined benefit schemes, moving into defined contribution schemes, and that increases the future value.
The total value of this is NOK 3.2 billion. Reduced cost and the cost allocation model that I mentioned a moment ago, a moment earlier, increases the value by an additional NOK 1.8 billion. The next step is building of hold-to-maturity bonds, risk management between different paid-up policy portfolios, and modeling that is more granular in terms of expected new paid-up policies with respect to the interest rate guarantee and the buffers on those policies improves the numbers. On the contrary, we have put in an expectation that in the future there will be further margin pressure on unit-linked contracts in Norway, both in terms of the defined contribution contract as well as the pension certificates coming out of those contracts in due course.
This, in itself, it reduces the value, but the totality is an improvement of NOK 2.5 billion. And lastly, there are some currency changes and other elements that, increases capital by an additional NOK 1.3 billion, for a total of NOK 31.4 billion for the life group. On page 23, we have put together the value and Solvency II in the same picture. And as, I've mentioned, we now use the same interest rate curve to deduct, or for the, in both models. And both Solvency II and Embedded Value starts with shareholder surplus or equity, and the two numbers are very similar, approximately NOK 15 billion. In Embedded Value, we add on to that the look-through value, which is the net present value of the margin that the life business leaves in Storebrand Asset Management.
This is not calculated as part of Solvency II. Thereafter, furthermore, we add on to that the Value in Force, which is a Solvency II name, or the reconciliation reserve, which is the Embedded Value name. Here, there are large differences in the methodology. In Solvency II, you start with today's business without future profits, i.e., short contract boundaries. In Embedded Value, we take on the new premiums for ex- new premiums in existing contracts, which gives more income into the future, i.e., long contract boundaries. This is a realistic assumption in a company that is not in run-off. The difference is about NOK 4 billion in value. Furthermore, there is a big difference in the way you calculate CNHR in Embedded Value and Risk Margin in Solvency II.
In simple terms, Solvency II has more and higher stresses, especially for lapse risk, something that is corrected out in embedded value. Last, we see that embedded value does not account for subordinated loans, which is tried to mark here with a red square in the picture. Moving over to the following page 24, we put the values of transitional rules in Solvency II, and we see that this accidentally give a similar value for total economic capital as embedded value. So I guess we could say that the Solvency II numbers is the correct regulatory capital with standard model. While embedded value is a similar now with the same assumption, similar model, however, with more realistic assumptions in terms of on the stress and on contract boundaries.
Which means to some extent, that is, approximation to Solvency II with internal model. We use both in the way we manage the business and manage the risk in the business. And with that, I give the word back to Odd Arild to sum up our presentation.
Well, thank you, Lars. I just want to add on that there is strong growth in the strategic white areas this quarter that fuels the shift in the business mix. We show that we prioritize buffer building and strengthening of the balance sheet. Most obvious evidence is that we have increased the longevity buffers by NOK 1.2 billion, and that we transferred paid-up policies of NOK 1.7 billion into investment choice. I think that ends our presentation, and I suppose we open up for questions.
Yes. Thank you. Operator, you can open up for Q&A.
Thank you. Ladies and gentlemen, if you would like to ask a question, please press star one on your telephone keypad. The first question comes from Peter Eliot from Berenberg. Please go ahead, your line is now open. I am so sorry for that. There's a technical issue. I will open the right line open. I'm so sorry. Peter, your line is now open.
Thank you very much. I have two question areas, please. The first one comes in a couple of parts, I apologize. But looking at the NOK 6.4 billion that you transferred from fee-based to paid up in the quarter, would you be able to say how much of that was from your own scheme closing? And whether the remainder, sort of how the remainder sort of compares to a run rate you might expect going forward. I would appreciate there's some seasonality in there, but just perhaps you could sort of tie that into, you know, the forecast that you've made before for the progression of paid- up policies. And could you... Am I right in thinking that if we hadn't had that, then the solvency ratio would have been about five percentage points higher, probably?
The second thing I wanted to ask on was, I read it very easy early in the year to talk about a dividend, but just because you mentioned sort of 100%, and clearly you're 152% at the moment, that would point to very positive. But, I guess, clearly, you know, the market is probably more focused on the 98% as the relevant number. I'm wondering if you could just sort of remind us, you know, what bearing you consider the without transition rule number has on your end, and perhaps the regulators' impact on that decision eventually? Thank you.
Peter, if I answer the first one. The transfer out of Defined Benefit plans is as expected, and we have made a projection in our Solvency II calculations, as well as our Embedded Value calculations in terms of expectations as to what happens this year. And Storebrand is part of that expectation, and the run rate, if you take the Storebrand contract out, is approximately as expected. And there is also seasonality, as you say. We expect more to take place by at year-end, i.e., with an effect in the first quarter than during the rest of the year. I'm not sure whether we've published the size of the Storebrand plan, but it's in about NOK 2.5 billion.
So that's almost half of the number that took place in the first quarter. Then, so your expectation about NOK 5 billion more capital as this is according to plan, and that's according to expectations. This is not a change in the capital as such.
If I should comment on David, I would say that we are well satisfied with the development in the balance sheet in this quarter. Also, of course, satisfied with the numbers on Solvency II, with the transitional rules. Then, there is no new message around given on this quarter. It's the same as we did on our capital markets day, and of course, the board will make up the mind at the end of the year.
Okay, thank you.
The next question comes from Matti Ahokas from Danske Bank. Please go ahead. The line is now open.
Yes, good afternoon. It's, Matti Ahokas here from Danske. Two questions, please. Firstly, on capital. As you say, you've been increasing, capital at the expense of short-term profits. But, like, Peter pointed out also in the previous question, actually, as you say, that even on full solvency, too, you're above 100% on, on the transition rules, you're clearly above the target. So is this really necessary, or was this more of a function of the significant fall in the interest rates in the first quarter? And how should we look at, at things going, going forward?
Also, on the same note, that if you look at your subordinated capital or subordinated loan, are around NOK 7.5 billion, wouldn't a good way to increase the solvency also, but to potentially increase that level, especially when interest rates are this low? The second question is regarding the guaranteed pension business, and you point out in the presentation that, you say that the lower results are the new normal, but, should we take that the NOK 81 million that we're seeing this quarter is the new normal run rate for the business, or, or, is it something else? Thanks.
If I start on paid-up policies and the conversion, if that is necessary, if I understand your, your question, right, I would say that it makes perfect sense, both from a customer perspective, to make this possible for our customers to move from paid-up policy into investment choice. Then it also make perfect sense economically. When you look at it, we free capital by moving from capital-heavy paid-up policies into paid-up policies with investment choice. We also fuel our growth in the savings area, and of course, it will give us a good results in the years to come.
So this is a win-win situation, as I view it, and I'm very happy to see an increased charge in the quarter for this extra conversion from paid-up policies into investment choice.
Your second question on subordinated loans. I guess you could say that we have a toolbox of available things to strengthen the solvency position. Increase subordinated loans is in that toolbox, and we will evaluate using some additional subordinated loans in the second half of the year. We're not likely to do anything before the summer.
Yeah, looking at the guaranteed segment, just looking at the three main products, I think on defined benefit, you see that we hold the same top-line margin, but the top line will go down in accordance with the assumptions you use for the reserves. Paid-up policies will also develop according to assumptions and the margins that is there. Then you have the charge for longevity, which is 90 a quarter, which is communicated. We have said that we will do NOK 1 billion a quarter this year in paid-up policies with investment choice, and that will also give a charge of roughly NOK 30 million -NOK 40 million a quarter. Of course, if we do more or less, that will affect that charge.
Then when it comes to the Swedish line, you know that there's volatility in that result line. Of course you need to follow the sensitivities and also your own models to look on that results for profit sharing. So with that said, I think that yes, low results are the new normal, but there are also some more volatile elements in this, the segment that you need to look on a quarterly basis.
NOK 81 million is not the new normal, is it?
Sorry. Yeah, well, it's a lower result is the new normal, but just given the volatility in the guaranteed segment, we to say that it's exactly 81, that would be a very precise estimate for something that isn't so precise.
Great. And if I just have, can I have another follow-up on the capital? We talk about 10 percentage point increase in the solvency margin. Is that meaning that it would be from 150 to 10 percentage points, or is that the full Solvency II, or which one are we talking about here?
We are talking about the one without the transition rules.
The one without transition rules?
Yeah.
Okay. Thanks very much.
The next question comes from Ashik Musaddi from JP Morgan. Please go ahead. Your line is now open.
Thank you, and good afternoon, everyone. So I have, like, three questions. First of all, can you just update us whether your Solvency II numbers that you reported on slide number 22, I guess, slide number 23, sorry, yeah. Includes, the, five billion you still need to add in longevity reserving. So is that adjusted in that? That would be great if you can give some color. Secondly is, can you give us some more color on, on what is really this, NOK 11.5 billion transition rules? So what are the sort of transition rules are you using at the moment, so to get some sense. And thirdly is, are you using Ultimate Forward Rate as well? And if yes, what's the benefit of that under both the Solvency II numbers that you have flagged? Thank you.
If I may start, the Solvency II number published on slide 22 includes that there is a longevity charge that needs to be met over the coming years.
Okay. Yep.
The second question on transition rules, we are taking use of two different transitional rules. So the first one is that we are applying a 22% stress to the equity instead of 47%. That's included in those NOK 11.5 billion that you see.
Yeah.
It also include the difference of the value of the best estimate liabilities on the Solvency II and under Solvency I.
Okay. So the best estimate liability of Solvency I is used under Solvency II?
Yeah. So, you take the difference between the Solvency I liabilities and the Solvency II liabilities, and you add that.
Okay. Yeah. Thank you.
And your last question was on the Ultimate Forward Rate?
Yeah.
Yes, we are using the Ultimate Forward Rate in the calculations. Of course, the reason why we use the Ultimate Forward Rate is because there is no available long-dated bonds in the market. So it's kind of difficult to say what the figure would be without using the Ultimate Forward Rate, because there is really no market rate to use.
So even if you use a euro curve, there's still not any idea about what should be the benefit, or is it really difficult to judge because we don't have a Norwegian risk-free rate for that?
Yeah, it's at least very precise to use the long-term euro market, since Norwegian interest rates tends to be quite much higher.
You're using this for both the Solvency II numbers, both standard and the transition rules one?
Yeah. We are using it for the standard model. On the transitional rules, it's implemented, with, of course, the difference between the Solvency I figure, which is based on today's Solvency I calculations in Norway, and the Solvency II calculation, as shown with without the transitional rules.
Okay, that's very clear. Thank you.
The next question comes from Blair Stewart, from Merrill Lynch. Please go ahead. Your line is now open.
Thank you, and good afternoon. I've got a couple of small questions just to pick up on. Firstly, on the 10-point underlying improvement that you're expecting in the economic capital, could you perhaps outline what those actions are? Are they standard operational aspects that we're seeing at the moment in the numbers, or are there exceptional management actions still to come through? Secondly, you talked... I think you said that you still expect to be transferring, on average, NOK 1 billion of reserves into the new paid-up with investment choice, for the year.
I just wonder, is that the NOK 1.7 billion we've had in Q1 plus NOK 1 billion targeted for each of Q2, Q3, and Q4, or are you still sticking to the NOK 4 billion for the year, even though you've had a strong Q1? Just finally on the impact of the higher than expected longevity provisioning that you've done. You're clearly ahead of plan. What is the impact of that in the first quarter on the economic capital position? Because obviously, you're further ahead in your reserving plans than you would have expected at the end of the year. Thank you.
If I start with the conversion of paid-up policies, I would say that we're very pleased to see the NOK 1.7 billion in the first quarter. When I just went in for this conference call, I also saw that we have now crossed the line for NOK 3 billion so far. We started 15th of October, and the progress has been very good. Our official numbers is still NOK 5 billion for the full year and year-end of 2015. But of course, we are very pleased to see that we have started very well off, and expectation is more on the positive side, or on the negative side when it comes to that guiding.
So NOK 5 billion for 2015?
That is our official numbers. We haven't reverted those, but of course, we have now a run rate that is still about NOK 1 billion a quarter. So, and we are doing all our efforts to beat that, and I will expect to see more or less NOK 1 billion a quarter going forward.
Just a quick comment. The NOK 5 billion was, including the, the NOK 1 billion we did in Q4 last year.
So NOK 4 billion for 2015.
Yeah, that is our numbers.
Yeah.
When it comes to the impact of the longevity reserve strengthening on economic capital position, it's somewhat difficult. It's like, it's like the different effects. But it would be approximately three percentage points from reserving NOK 1.22 billion. It should also be noted that in our projections we are going or with the answer there, I think, approximately three percentage points.
Is the three points the full NOK 1.2 billion, or is that the additional amount? I mean, I guess you would expect to reserve something like NOK 800 million rather than NOK 1.2 billion. Is it the additional, is it the incremental amount, or is it the full NOK 1.2 billion that's a three-point effect?
That's it. The full NOK 1.2 billion , that gives the 3% effect. And that shows actually that in Solvency II model, with discounting, with low interest rates, a large part of the remaining NOK 5 billion in the calculation, is expected to be covered by shareholders' equity. But of course, in the real world, when we are going forward with this high level of buffers, and also with already 60% covered, we expect to be much closer to a 20%. That is the rule of use of equity compared to the number that comes out of the calculation. So that is a part of the growth of the solvency number underlying that we expect going forward.
So back to your first question on the 10 percentage points improvement plan. That includes what Matti asked about in terms of subordinate loan that's available in there. You have the result generation, you have the reserve building, and you have the further refinement of models that we are working on, where we see that we are able to improve the quality of the modeling. So there are a number of. And some of the improvements in modeling, I should say, goes both ways, not only improvements, there are also things that go the other way. But in, on balance, we expect that these things will go in the right direction.
And the toolbox has a number of tools in it which we can use more or less of, depending on interest rate movements and successful implementation of different tools.
Okay, but you have, just to be clear, you have included the expectation of a additional debt raise in that 10-point target?
I would say that that is a tool in the toolbox available us for, for us to use if other tools do not give the, expected effect.
Okay. So if needed?
Yeah, yeah. We can-
Thanks. Thank you. See you tomorrow.
Ladies and gentlemen, if you would like to ask a question, please press star one on your telephone keypad. We do have another question from David Andrich, from Morgan Stanley. Please go ahead, the line is now open.
Hi, good afternoon. Thank you for taking my question. Just one question on my side. I was just wondering, you're sitting with the transition rules under Solvency II, about, you know, 152%, and you stated your target is before 130. And I guess I was wondering, I know in a question regards to the dividend earlier, you said, you know, obviously it's up to the board. But I guess I was wondering, in terms of if you were to fast forward to the end of the year and be sitting in this position, would you feel then comfortable recommending a dividend?
I feel very comfortable about the situation and the way our buffers are developing. Of course, it's a clear aim for us to come back as soon as possible with a dividend. I will have a clear view on that with my board at the year-end.
All right. Thank you very much.
Yet again, ladies and gentlemen, if you would like to ask a question, please press the one on your telephone keypad. We do have another question from Gianandrea Roberti from Carnegie. Please go ahead, your line is now open.
Yes. Hi, that was Gianandrea Roberti from Carnegie. Just a couple of questions on my part as well. On the dividend, do you know or do you feel like the fact that although you have done quite a bit of longevity strengthening, there is quite a bit to go, do you feel that this is an impediment from a regulatory point of view for you to paying a dividend, or do you get any signal on that, or you just don't know? That's the first question. And then if I go back to the earnings power, I understand everything that you've been said and trying to explain. I basically have a strong feeling that in the current situation, you basically have around NOK 450 million-NOK 500 million per quarter of group results.
That's what we should be looking at. Is this something that you can confirm, or, how do you feel about that? Thank you.
Can I start with the first question then? I think it's fair to say that the regulator, of course, have the opportunities to have guidance on dividend in Storebrand. But it's also fair to say that the life insurance company's dividend capacity is not the only dividend capacity in the group. I think last year we had NOK 700 million from asset management, from banking activities, from insurance activities. So there is also upstreaming opportunities beside the life insurance company that can be utilized for dividend payments.
Andrea, we are not giving earnings guidance, as you know. But instead of, of giving you a number, we could reason around the numbers that we gave now and, volatility in those numbers, if you want to. And if you look at page 10 in the presentation, graphically, we show that result before profit sharing and loan losses has been in the order of NOK 600 million-NOK 550 million in the last, last several quarters. And, the compensation of that is fee and administration income, where we show that we have, an increase, although we are losing business from, corporate banking and, municipality business. I said the risk result to life and pension is somewhat weaker than we expect going forward.
We see a strong growth in insurance premiums with the contract that we have with Akademikerne. We know that the second and third quarter tend to have fewer claims than the first quarter and the fourth quarter due to the weather seasons in Norway. On operational costs, we should be able to control that throughout the year. In terms of financial results, I said that the financial results were good due to good financial markets in the first quarter. So at least that gives you guidance on some of the components coming into result before profit sharing and loan losses.
Then below the line, net profit sharing and loan losses is really dependent on the profit split in Sweden, and that again, it depends on interest rates and interest rate movements, and your guess is as good as mine, or yours probably is better because you're an analyst. And provisions for longevity, and we talked about that during this call. And then maybe I should add that in the fourth quarter, we tend to take into net profit sharing and loan losses also what do you call it? Surplus return or performance fees-
Yeah.
in the asset management business. So there's usually a pickup on that in the fourth quarter. So that at least is some comments around the different elements in the results.
Yeah, and then based on that, of course, with a very strong development, moving paid-up policies into investment choice, NOK 1.7 billion. That is somewhat higher than you should expect on a quarterly basis going forward.
Thank you.
Ladies and gentlemen, we do one more reminder. If you would like to ask a question, please press star one on your telephone keypad. There are no question coming through, so I will hand the call back for any concluding remarks. Thank you.
Okay, thanks. We will just want to say thank you, everyone, for dialing into the call, and we hope to see some of you at the analyst presentation tomorrow in London at 2:00 P.M. London time. Goodbye.
Thank you for joining today's conference. You may now replace your handset to end this call. Thank you.