Annual Report SpareBank 1 Gruppen 2011

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Annual Report SpareBank 1 Gruppen 2011

  1. 1. 1Annual Report 2011SpareBank 1 Gruppen
  2. 2. 2 SpareBank 1 GruppenContentBoard of Directors Report 3 Note 28 Lending to and deposits with customers and financialIncome statement 18 institutions 59Statement of comprehensive income 18 Note 29 Net loan and guarantees loss provisions 61Balance Sheet 19 Note 30 Credit risk exposure for each internal risk class 62Consolidated statement of cash flow 20 Note 31 Maximum credit risk exposure, not taking intoStatement of changes in equity 21 account pledged security 63 Note 32 Contractual maturity of financial liabilities 63Note 1 General information 23 Note 33 Age distribution of overdue, but not impaired loansNote 2 Accounting policies 23 and premium revenues 64Note 3 Financial risk management 29 Note 34 Market risk related to currency risk 65Note 4 Critical accounting estimates and judgements 35 Note 35 Market risk related to interest rate risk 65Note 5 Changes in Group structure 37 Note 36 Deposits from and liabilities to customers andNote 6 Segment information 41 financial institutions 66Note 7 Net insurance premium income 42 Note 37 Subordinated loan capital and hybrid tier 1 capital 67Note 8 Net commissions 42 Note 38 Securities issued 67Note 9 Gains and losses from financial assets and liabilities 43 Note 39 Capital adequacy 68Note 10 Net income from investment properties 44 Note 40 Reinsurance receivables 68Note 11 Other operating income 44 Note 41 Insurance receivables from policyholders 69Note 12 Operating costs 44 Note 42 Insurance liabilities in life insurance 69Note 13 Shareholder structure 45 Note 43 Insurance provisions in P&C insurance 71Note 14 Goodwill 45 Note 44 Liabilities related to reinsurance 73Note 15 Other intangible assets 46 Note 45 Insurance risk in life insurance 73Note 16 Investments in subsidiaries 47 Note 46 Insurance risk in P&C insurance 75Note 17 Investments in associates and joint ventures 47 Note 47 Salaries and other remuneration of CEO and seniorNote 18 Property, plant and equipment 48 executives 77Note 19 Other assets 49 Note 48 Pensions 79Note 20 Classification of financial assets and liabilities 50 Note 49 Number of employees and full-time equivalents 82Note 21 Valuation hierarchy 51 Note 50 Taxes 83Note 22 Securities at fair value 53 Note 51 Other liabilities 84Note 23 Financial derivatives 54 Note 52 Material transactions with related parties 85Note 24 Securities available for sale 55 Note 53 Events after the balance sheet date and legal disputes 88Note 25 Bonds at amortised cost 56 Note 54 Revised balance sheet for SpareBank 1 GruppenNote 26 Fair value of securities stated at amortised cost 57 Group as of 31 December 2010 89Note 27 Investment properties 58 Auditors Report 90
  3. 3. 3Board of Directors’ Report for 2011SpareBank 1 GruppenOPERATIONS IN 2011 to NOK 831.5 million in 2010. The result represents an annualised The weak development of the securities markets combined return on equity of 11.1%, compared to 18.7% for 2010. 2011 was with natural disasters and large claims resulted in reduced a year of weak financial markets and high claims ratios. In earnings for SpareBank 1 Gruppen addition to this, some larger items totalling NOK 245 million SpareBank 1 Livsforsikring ASs record result was due in part were recognised as income in 2010, including negative goodwill to a significantly improved administration result. The company of NOK 117.9 million in connection with the acquisition of maintained good buffers throughout the year Unison Forsikring AS. A high proportion of large claims, floods and storms resulted in a negative insurance result in SpareBank 1 Skadeforsikring SpareBank 1 Gruppens total assets amounted to NOK 42.0 billion Group as of 31 December 2011. This represents growth of around 3% The debt collection company Conecto AS merged with Actor since 2010. Fordringsforvaltning AS with effect from 1 January 2011 Aggressive focus on national capital markets segment via SpareBank 1 Gruppens capital adequacy ratio as of 31 December SpareBank 1 Markets AS 2011 was 16.2%, compared to 16.1% at year-end 2010. Its core SpareBank 1 Gruppen decided to establish its own card capital adequacy ratio at year-end 2011 was 14.6%, compared to company 12.5 % in 2010. SpareBank 1 Gruppens capital situation is considered satisfactory and, in the opinion of the Board, theSpareBank 1 Gruppen AS is a holding company that produces, Group is well capitalised with regard to meeting the expectedprovides and distributes products in the fields of life and P&C requirements of the Solvency II regulations.insurance, fund management, capital markets, factoring, debtcollection services and long-term monitoring. SpareBank 1 Livsforsikring AS achieved its best result ever in 2011 despite falling equity markets. SpareBank 1 Livsforsikring ASSpareBank 1 Gruppen AS is owned by SpareBank 1 Nord-Norge maintained good buffers throughout 2011, which helped ensure(19.5 %), SpareBank 1 SMN (19.5 %), SpareBank 1 SR-Bank the company was less affected by the market unrest during the(19.5%), Samarbeidende Sparebanker AS (19.5%), Sparebanken year. The companys financial performance shows a significantlyHedmark (12%) and the Norwegian Confederation of Trade Unions improved administration result in 2011. The company achievedand affiliated trade unions (10%). SpareBank 1 Gruppen ASs an investment result of NOK 368.5 million in 2011, whichoffice address is in Tromsø, and the Groups primary market is represents an increase of NOK 51.2 million from 2010. SpareBank 1Norway. Livsforsikring AS increased provisions for reserves due to longer life expectancy by NOK 187.3 million. The company saw taxIn this Directors Report, SpareBank 1 Gruppen AS refers to the income of NOK 97.8 million in 2011. This was due to the combinedholding company and SpareBank 1 Gruppen refers to the Group. effect of the tax exemption method and provisions to the securities adjustment reserve now being subject to the Taxation Acts ruleSpareBank 1 Gruppen reported a pre-tax profit of NOK 387.3 concerning the right to make deductions for insurance provisions.million for 2011, compared to NOK 985.1 million in 2010. The net The Ministry of Finance has proposed that the tax exemptionprofit for the period amounted to NOK 525.8 million, compared method should not apply to equities, etc. included in the group life
  4. 4. 4 SpareBank 1 Gruppenand investment choice portfolio of life insurance companies from separate company. It therefore decided in 2011 to establish a cardand including 1 January 2012. The expected effect of this is that business area.the tax cost will approach the general taxation rate of 28%.SpareBank 1 Skadeforsikring Group experienced strong portfolio SPAREBANK 1-ALLIANCEgrowth in 2011 and strengthened its market shares within land- The SpareBank 1-alliance consists of a total of 15 independentbased P&C insurance. Measured by premiums written, the growth banks, SpareBank 1 Gruppen AS and its subsidiaries, Bank 1amounted to NOK 515 million or 11.0%. A high proportion of Oslo Akershus AS and BN Bank ASA. The independent banks innatural disaster claims and a greater number of large claims resulted the alliance are:in higher compensation costs than in 2010, meaning that the Samarbeidende Sparebanker (SamSpar)gross claims ratio in 2011 was 80.9%, an increase of 3.6 percentage Sparebanken Hedmarkpoints since 2010. SpareBank 1 Nord-Norge SpareBank 1 SMNODIN Forvaltning Groups total assets under management amounted SpareBank 1 SR-Bankto NOK 23.4 billion as of 31 December 2011. This is a reductionof NOK 8.9 billion, compared to 2010. ODIN Forvaltning Group SamSpar is a group of several smaller savings banks. These savingsredeemed equity funds worth a net NOK 1.9 billion in 2011. banks are:Management fees amounted to NOK 303.5 million in 2011, which SpareBank 1 Buskerud-Vestfoldis NOK 14.4 million lower than in 2010. SpareBank 1 Gudbrandsdal SpareBank 1 HallingdalSpareBank 1 Markets Group experienced a loss of NOK 154.8 SpareBank 1 Lom og Skjåkmillion in 2011. It focused on investments during the year with the SpareBank 1 Modumaim of putting in place the required framework conditions for a SpareBank 1 Nordveststrong capital markets unit. All the business areas were significantly SpareBank 1 Nøtterøy-Tønsbergstrengthened by investments in human capital and infrastructure. SpareBank 1 Ringerike HadelandThe result for the year was affected by the building up that took SpareBank 1 Søre Sunnmøreplace, while a challenging market situation affected the earnings SpareBank 1 Telemarkpotential of all players in the industry. SpareBank 1 Østfold AkershusSpareBank 1 Gruppen Finans Group, which operates in the factoring, The alliance cooperates on banking services and products. As adebt collection and long-term monitoring business areas, achieved whole the alliance is one of the largest providers of financiala pre-tax profit of NOK 27.9 million in 2011. The factoring business products and services in the Norwegian market. The member banksarea, organised in SpareBank 1 Gruppen Finans AS, was the in the SpareBank 1-alliance distribute the SpareBank 1 Gruppen’scountrys third largest with a market share of 14.1 % in 2011, products and collaborate in key areas such as brands, work processes,compared to 11.6 % in 2010. The pre-tax profit of the debt competence building, IT operations, systems development andcollection business area, organised in Conecto AS, was NOK 24.7 purchasing. The alliance has signed strategic cooperation agreementsmillion in 2011, compared to NOK 19.5 million in 2010. Despite with the Norwegian Confederation of Trade Unions (LO) and LOsthe reduced debt recovery fees and slightly lower number of affiliated unions, and delivers products and services to LOsreferrals, the debt collection business area maintained its turnover members via the LOfavør advantage card scheme.through one-time income, higher recovery rates and a largerproportion of business referrals. Actor Fordringsforvaltning AS and The SpareBank 1-alliances main goal is to ensure each bank’sConecto AS were merged into an integrated debt collection independence and regional affiliation through strong competitive-company with effect from 1 January 2011. ness, profitability and financial soundness. At the same time, the SpareBank 1-alliance represents a complete competitive bankingSpareBank 1 Gruppen has made strategic investments in important alternative at the national level. To achieve common goals, theproduct areas in recent years via a series of acquisitions and banks in the alliance have established a national marketing profilestructural changes, with debt collection, factoring and capital and developed a common strategy for brand building andmarkets being the most recent examples of these. The goal is communication. This strategic marketing platform also forms thecontrol of the product and value chain for the benefit of both basis for joint development of products and concepts. The marketingcustomers and owners. SpareBank 1 Gruppen also wishes to offer efforts are primarily aimed at the retail market, small and medium-products and services within the card and payment fields via a sized enterprises, and unions affiliated with LO.
  5. 5. 5The product companies established under SpareBank 1 Gruppen AS relevant to a company whose shares are not listed on a stockand the alliance banks have developed a common technology exchange.platform. Sharing lessons learned and expertise within the alliance,based on best practice, are key elements of the alliances development. The Boards overall report on the companys corporate governanceAs part of these efforts, resource centres have been established for has been incorporated into the Norwegian version of 2011 annualcredit management in Stavanger, payments in Trondheim, and report.training in Tromsø. Executive management teamsThe SpareBank 1-alliance managed assets totalling around NOK 710 SpareBank 1 Gruppen has two executive management teams thebillion at year-end 2011, compared to around NOK 665 billion at group executive management team and the alliance executiveyear-end 2010. management team. The group executive management team is responsible for operating and developing the financial group,SpareBank 1 Gruppens has two main functions in the SpareBank 1- and focuses on the results and operations of the companies in thealliance: Group. The alliance executive management team is responsible for Managing and developing the financial group with respect to the operational cooperation between SpareBank 1 Gruppen and the producing and delivering competitive products and services for SpareBank 1-banks. The head of the alliance executive management distribution via the alliance banks and other banks with a team is represented in the group executive management team. distribution agreement with companies in SpareBank 1 Gruppen, and LO. This work is performed by SpareBank 1 Gruppen AS. Information about remuneration Information about the remuneration of the CEO, group executive Manage and develop the alliance cooperation with respect to management team, Board, Supervisory Board and Control common management, development and execution of activities Committee is provided in the financial statements note 47, and that provide economies of scale and competitive advantages. information about the auditors remuneration is described in note 12. This work is performed by Alliansesamarbeidet SpareBank 1 DA. Dividend policySelskapet Alliansesamarbeidet SpareBank 1 DA represents the SpareBank 1 Gruppen ASs long-term goal is to pay out 30–50%administrative superstructure of the alliance. The company handles of its profits, at a consolidated level, as a net dividend to itsthe financing and ownership of applications, concepts, contracts and owners. When fixing the net dividend for SpareBank 1 Gruppen,brands on behalf of the alliance partners. the focus is on maintaining satisfactory core and total capital adequacy in relation to planned growth, as well as maintaining aAlliansesamarbeidet SpareBank 1 DA is owned by: satisfactory overall financial position in relation to internal ICAAP SpareBank 1 SR-Bank (17.74%) calculations and the Groups liquidity. The target for the core SpareBank 1 SMN (17.74%) capital ratio, including hybrid tier 1 capital, is a minimum of SpareBank 1 Nord-Norge (17.74%) 11% and for the total capital adequacy ratio it is a minimum of Samarbeidende Sparebanker Utvikling DA (17.74%) 13%. SpareBank 1 Gruppen should achieve the capital adequacy Sparebanken Hedmark (11.3%) goals established by the Solvency II regulations by a good margin. SpareBank 1 Gruppen AS (10.0%) Bank 1 Oslo Akershus AS (7.74%) SPAREBANK 1 GRUPPEN – RESULTS AND KEY FIGURES SpareBank 1 Gruppen AS and the Group prepare their financialCORPORATE GOVERNANCE statements in accordance with the EU approved InternationalShares in SpareBank 1 Gruppen AS are not publicly traded, but Financial Reporting Standards (IFRS).as of 31 December 2011 the company did have a bond issue listedon Oslo ABM. The company has, as shown in the section on SpareBank 1 Gruppen reported a pre-tax profit of NOK 387.3«Operations in 2011», a concentrated shareholder structure. All million in 2011, compared to NOK 985.1 million in 2010.shareholders and groupings of shareholders are represented on the Uncertainty and turbulence in the financial markets affected theBoard, either directly or indirectly. There is continuous, good development of the financial results, which constitutes acontact with all shareholders and groupings of shareholders in the substantial part of the Groups value creation. Natural disasters andcompany. The Board of SpareBank 1 Gruppen AS has discussed large claims also affected the result in 2011.the «Norwegian Code of Practice for Corporate Governance»and has determined to comply with those sections that are The net profit for the period was NOK 525.8 million, which
  6. 6. 6 SpareBank 1 Gruppenprovided a annualised return on equity of 11.1 %. The Group due to a strong increase in provisions for compensation for disabilitysaw tax income of NOK 138.5 million in 2011, compared to a taxes within individual interest insurance and increased disabilityof NOK 153.6 million in 2010. The high level of tax income was compensation within group life insurance and group pensiondue in part to the calculated effect of the tax exemption method. insurance. The risk result improved within individual endowment insurance and individual life insurance.Financial performance: Administration resultNOK million 2011 2010 The administration result amounted to a loss of NOK 65.9 millionProfit before tax in subsidiaries: in 2011, which represents an improvement of NOK 121.0 million,SpareBank 1 Livsforsikring AS 414.1 350.4SpareBank 1 Skadeforsikring Group 1) 185.3 641.1 compared to 2010. The improvement was due in part to theODIN Forvaltning AS 21.8 64.6 profitability programme implemented in 2010, which identifiedSpareBank 1 Markets Group -154.8 -57.6SpareBank 1 Medlemskort AS 12.1 11.1 possible cost savings and income increasing measures. Most ofSpareBank 1 Gruppen Finans Group 2) 27.9 8.6Group adjustments 28.7 17.8 the administration loss in 2011 occurred within the operation ofTotal profit before tax in subsidiaries: 535.1 1 036.0 group pension insurance.1) Unison Forsikring AS was consolidated into SpareBank 1 Skadeforsikring with effect from 1 July 2010. Investment result2) Conecto AS became 100% owned by SpareBank 1 Gruppen Finans AS with financial effect from 10 September 2010. Profit before this is recognised directly NOK 187.3 million of the return profit in 2011 was used to strengthen in equity. the premium reserve due to expected longer life expectancy. The corresponding provision in 2010 was NOK 45.3 million. The reservesSpareBank 1 Livsforsikring AS were built up gradually instead of strengthening supplementarySpareBank 1 Livsforsikring ASs products are primarily distributed provisions at year-end. The company had supplementary provisionsthrough the banks in the SpareBank 1-alliance and the Norwegian of NOK 344.1 million at year-end 2011.Confederation of Trade Unions (LO). The value-adjusted capital yield in the group portfolio as a wholeFinancial performance: was 2.5% in 2011. The booked return on assets was 5.4%. The corresponding returns in 2010 were 7.1% and 5.2%, respectively.NOK million 2011 2010 The capital yield in the company portfolio was 4.3% in 2011,Risk result after technical provisions 241.4 325.4 compared to 4.5% in 2010.Administration result -65.9 -186.9Interest result 368.5 317.3Provisions -187.3 -45.3 Asset allocation per portfolio as of 31 December 2011:Remuneration for interest guarantee 22.7 29.9Total result for supplementary provisions 379.4 440.4Allocation to supplementary provisions - -125.3 Group portfolioProfit to customers -61.5 -36.3 2011 2010Return on the companys funds 96.2 71.6 Shares 13.8 % 14.8 %Profit to customers before tax 414.1 350.4 Other -0.2 % 7.1 %Tax charge 97.8 -60.2 Property 21.0 % 21.5 %Profit to customers after tax 511.9 290.2 Bonds-Amortised costs 28.0 % 21.8 % Bonds-Market value 37.4 % 34.8 % Total value (NOK million) 15 707 16 030SpareBank 1 Livsforsikring AS achieved its best result ever in Company portfolio2011 despite falling equity markets. This was in part due to the 2011 2010 Shares 0.0 % 0.1 %company having built up and sustained good buffers throughout the Other -4.5 % 17.0 % Property 18.8 % 21.7 %year. The net profit to owner before tax amounted to NOK 414.1 Bonds-Amortised costs 24.8 % 11.1 %million in 2011, compared to NOK 350.4 million in 2010. The Bonds-Market value 60.9 % 50.1 % Total value (NOK million) 2 862 2 844total net profit for the period amounted to NOK 511.9 million,which is an improvement of NOK 221.7 million on 2010. The Investment choice portfolio 2011 2010company saw tax income of NOK 97.8 million in 2011, compared Shares 54.2 % 61.0 % Other -0.1 % 0.0 %to taxes of NOK 60.2 million in 2010. Part of the reason for the high Bonds 45.9 % 39.0 %level of tax income was the calculated effect of the tax exemption Total value (NOK million) 6 896 6 701method for equity related investments. Solvency and capital situationRisk result The companys total assets amounted to NOK 26.6 billion as of 31The net risk result decreased by NOK 84.0 million compared to 2010 December 2011. This represents an increase of 0.5% since 2010.and amounted to NOK 241.4 million in 2011. This was primarily
  7. 7. 7 Group portfolio Company portfolio Investment choice portfolio Total value: NOK 15.7 billion Total value: NOK 2.9 billion Total value: NOK 6.9 billion Bonds - Market value Bonds - Market value Bonds 13.8% Bonds - Amortised costs 18.8% Bonds - Amortised costs Shares 37.4% 21.0% Real estate 60.9% Real estate 45.9% 24.8% 54.2% Shares 28.0%The buffer capital, after the proposed application of the years profit, SpareBank 1 Skadeforsikring Group achieved a pre-tax profit ofamounted to NOK 1.7 billion, equivalent to 11.0% of insurance NOK 185.3 million for 2011, compared to NOK 614.1 million forprovisions. By way of comparison, the buffer capital at year-end 2010. The portfolio grew strongly and, measured by premiums2010 amounted to NOK 2.3 billion, equivalent to 14.6 % of written, the growth amounted to NOK 515 million, equivalent toinsurance provisions. The main reason for the change was a fall 11.0 %. The growth via bank distribution, the Norwegianin the securities adjustment reserve from NOK 616.9 million in Confederation of Trade Unions (LO) and the subsidiary Unison2010 to NOK 184.9 million in 2011. Forsikring AS was solid. The Group strengthened its market shares within land-based P&C insurance in 2011.The companys capital adequacy was 18.5% at year-end 2011,compared to 19.3% at year-end 2010. The entire subordinated loan Compensation costscomprises core capital. A time limited subordinated loan amounting The result for 2011 was strongly affected by natural disastersto NOK 200 million with a due date of 15 June 2016 was, with the caused by extreme weather in the fourth quarter and floodsNorwegian Financial Supervisory Authoritys approval, redeemed earlier in the year. Total gross compensation for natural disasters(call option) on 15 June 2011. In 2011, the company received amounted to NOK 184.3 million in 2011. This is a significantNOK 223.0 million in equity through group contributions. increase on previous years, and NOK 155.6 million higher than in 2010. Compensation linked to natural disasters accounted for 3.6The company’s solvency margin capital ratio was 303.5% as of 31 percentage points of the Groups gross claims ratio in 2011.December 2011, compared to 290.1% for 2010. The minimumrequirement for the solvency margin capital is 100%. At year-end Gross compensation, natural disasters (NOK million):2011, the solvency margin requirement was NOK 794.6 million, 200 184.3compared to NOK 859.0 million in 2010. 150The company is continuously assessing the consequences of, andadapting to, the coming Solvency II regulations. 100SpareBank 1 Skadeforsikring Group 59.7SpareBank 1 Skadeforsikring Group is the leading Norwegian seller 43.1 50of insurance via banks, but also sells directly to retail customers 32.5 28.7and via broker channels to corporate market customers. 0 2007 2008 2009 2010 2011Financial performance:NOK million 2011 2010Gross overdue premiums 5 358.2 4 731.8 SpareBank 1 Skadeforsikring Group was also affected by anAccrued premiums for own account 4 695.9 4 184.4Accrued compensation for own account -3 784.0 -3 208.5 unusually high proportion of large claims in 2011. There were 6Insurance-related operating costs for own account -1 074.2 -880.6 large claims involving total compensation of more than NOK 10Other insurance-related income/costs 31.8 132.0Other technical provisions 93.2 39.6 million within the fire combined corporate market. TotalInsurance result: -37.3 266.9Net financial income 260.3 432.7 compensation for larger claims amounted to NOK 144 million andOther costs - -2.7 accounted for 2.8 percentage points of the Groups gross claimsOperating result 223.0 696.9Change in security provisions -37.7 -55.8 ratio in 2011. Claims submitted in connection with the 22 JulyPre-tax profit 185.3 641.1 terrorist attack amounted to NOK 63.4 million.Tax charge -94.6 -60.1Net profit for the period 90.7 581.1
  8. 8. 8 SpareBank 1 GruppenThe Groups gross claims ratio was 80.9% in 2011, representing 197.2 million in 2011, and a net loss for the period of NOK 158.0an increase of 3.6 percentage points from 2010. million in 2011. The result both before and after tax was a loss of NOK 49.9 million in 2010. During 2011, Unison Forsikring ASOperating costs achieved strong growth in premium volumes and helpedThe gross cost ratio was 22.5% in 2011, representing an increase SpareBank 1 Skadeforsikring Group achieve a higher market shareof 1.7 percentage points since 2010. Last years cost ratio was for land-based P&C insurance.affected by a positive one-time effect on pensions of NOK 42.5 million,as well as the absence of profit commissions to distributors. ODIN Forvaltning Group ODIN Forvaltning Group is one of Norways largest managers ofDevelopment of combined ratio for own account (%): equity funds. ODIN Forvaltning Group is a value-oriented equity120 fund manager, which on behalf of its unit holders invests in 103.4 undervalued companies with good products, a strong cash flow, 96.2 97.7100 94.6 94.0 solid balances and a high dividend capacity. 89.9 21.0 22.9 80 20.7 21.9 22.5 20.6 76.7 80.5 Financial performance: 73.9 72.1 73.7 60 69.3 NOK million 2011 2010 40 Management fees 303.5 317.9 Total operating income 303.5 317.9 20 Payroll costs -108.5 -104.2 Amortisation -23.5 -14.8 Other operating expenses -151.2 -137.8 0 Total operating costs -283.2 -256.8 2006 2007 2008 2009 2010 2011 Operating result 20.3 61.1 Net financial income 1.5 3.5 Pre-tax profit 21.8 64.6 Claims ratio Cost ratio Tax charge -7.0 -19.3 Net profit for the period 14.8 45.3The combined ratio for own account, including natural disasters,was 103.4% in 2011, which was 5.7 percentage points higherthan in 2010. ODIN Forvaltning Group achieved a pre-tax profit of NOK 21.8 million in 2011, compared to NOK 64.6 million in 2010. 2011 wasFinancial result a year characterised by a great deal of uncertainty and2011 was affected by turbulent financial markets, which is reflected turbulence in the financial markets. This led to a decrease in totalin the lower financial income compared to 2010. SpareBank 1 assets throughout the year and a fall in management fees. One-timeSkadeforsikring Groups financial income totalled NOK 260.3 costs were also incurred from investments aimed at better equippingmillion in 2011, compared to NOK 432.7 million in 2010. The ODIN Forvaltning Group to deliver high quality services. Duringfinancial return on the Groups portfolio was 2.8%. The Group 2011, the Group took important steps to strength the managementachieved a positive return of 3.7% in the fixed income portfolio, team, expand the fund portfolio to include one bond fund andbut a negative return of minus 7.8% on the equity portfolio. three attractive combination funds, and further develop its invest- ment processes.Capital situationAt year-end 2011, SpareBank 1 Skadeforsikring Groups total All self-managed equity funds produced weaker returns than theirassets amounted to NOK 13.3 billion. This represents growth of respective benchmarks in 2011. This was largely due to «value9.5% since 2010. The capital adequacy ratio was 32.8% at year- companies» developing more weakly than «growth companies» inend 2011, which corresponds to excess coverage of NOK 1,397 2011 as well.million in relation to the authorities minimum requirements.The capital adequacy ratio was 0.3 percentage points stronger Total assetscompared to year-end 2010. At year-end 2011, ODIN Forvaltning Group was managing a total of NOK 23.4 billion, NOK 22 billion of which was in equity funds.Unison Forsikring AS ODIN Forvaltning Group redeemed equity funds worth a net NOKUnison Forsikring AS is a wholly owned subsidiary of SpareBank 1.9 billion in 2011.1 Skadeforsikring AS. The company is a specialised partner fororganisations and their members, and offers a broad spectrum of The SpareBank 1-banks broad distribution network, distributionP&C insurance. Unison Forsikring AS saw a pre-tax loss of NOK through other banks and distributors in Norway, Sweden and
  9. 9. 9Finland, together with the measures implemented in 2011, provide Financial performance:a good starting point for 2012. NOK million 2011 2010SpareBank 1 Markets Group SpareBank 1 Gruppen Finans AS 12.2 -5.6 Management -5.9 -9.3SpareBank 1 Markets Group is an analysis based capital markets Factoring 14.6 2.0 Portfolio 3.5 1.7unit that is active within corporate finance, foreign capital and Conecto AS1) 24.7 19.5stockbroking. SpareBank 1 Gruppen AS owned 97.2 % of the Total profit before tax in subsidiaries 36.9 13.9 Excess value amortisation -9.0 -5.3shares in SpareBank 1 Markets AS at year-end 2011. The remainder Pre-tax profit 27.9 8.6of the shares were owned by employees. Tax charge -8.8 -4.3 Net profit for the period 19.1 4.3 1) Conecto and Actor Fordringsforvaltning were merged with effect from 1 JanuaryFinancial performance: 2011. Conecto was purchased with financial effect from 10 September 2010.NOK million 2011 2010 SpareBank 1 Gruppen Finans Group achieved a pre-tax profit ofTotal operating income 77.6 77.9 NOK 27.9 million, which is NOK 19.3 million better than inOther income 8.6 5.3Payroll, bonus and other staff costs -159.6 -89.7 2010.Amortisation -8.0 -6.9Other operating expenses -71.2 -43.2Operating result -152.6 -56.6 SpareBank 1 Gruppen Finans ASNet financial income -2.2 -1.0Pre-tax profit -154.8 -57.6 SpareBank 1 Gruppen Finans ASs operations in 2011 wereTax charge 41.7 16.8 characterised by consolidation and a focus on growth in order toNet profit for the period -113.1 -40.8 strengthen the companys market position. The companys total income in 2011 amounted to NOK 74.5 million, compared toThe result for 2011 was a loss of NOK 154.8 million. Total turnover NOK 94.4 million in 2010. The 2010 income includes a groupin 2011 amounted to NOK 86.2 million, compared to NOK 83.2 contribution of NOK 26.0 million in 2010. The pre-tax profitmillion in 2010. NOK 35.9 million of the turnover in 2011 came from amounted to NOK 12.2 million, compared to a loss of NOK 5.7brokerage from equity and derivatives trading, NOK 29.6 million million in 2010.from corporate finance fees, NOK 15.1 million from foreign capital,and NOK 5.6 million from other operating income. Factoring The factoring business area is involved in funding within theSpareBank 1 Markets Group carried out restructuring approved by areas of factoring and guarantees. Its pre-tax profit amounted tothe companys board and SpareBank 1 Gruppen AS in 2011. 2011 NOK 14.6 million in 2011, compared to NOK 2.0 million in 2010.was primarily spent putting in place the necessary framework for a The improvement in the result was due in part to lower lendingstrong capital markets unit. All the business areas were significantly losses. Losses on lending amounted to NOK 0.4 million in 2011,strengthened by investments in human capital and infrastructure. compared to NOK 10.4 million in 2010.The result for the year was affected by this, as well as a challengingmarket situation that affected the earnings potential of all players in Factoring achieved net operating income of NOK 58.1 million inthe industry. 2011, which represents an increase of NOK 5.7 million since 2010. The business area is noticing pressure on margins both inIts competitiveness after the phasing in of new resources indicates its lending and factoring operations. Client turnover experiencedthat the company will start 2012 at full market power. a good increase of 29.9%.SpareBank 1 Gruppen Finans Group PortfolioSpareBank 1 Gruppen Finans AS produces, delivers and distributes The portfolio business area is involved in the acquisition ofservices within factoring, portfolio acquisition and portfolio portfolios of monetary claims that are then recovered by themanagement. The companys registered address is in Oslo and it runs Groups debt collection company. The pre-tax profit for 2011 wasits factoring operations in Ålesund and Tromsø. SpareBank 1 Gruppen NOK 3.5 million, compared to NOK 1.7 million in 2010, representingFinans AS owns 100% of the shares in Conecto AS, which works an improvement of NOK 1.9 million. The turnover in 2011 increasedwithin out of court and judicial debt collection. Both companies are by NOK 4.3 million in relation to 2010. The portfolio volumeorganised in a sub-group of SpareBank 1 Gruppen AS in which the increased by 86% and was NOK 1,152 million as of 31 Decemberownership and management lies in SpareBank 1 Gruppen Finans AS. 2011. The book value at year-end 2011 was NOK 78.3 million, which is an increase of NOK 43.8 million from 2010.
  10. 10. 10 SpareBank 1 GruppenConecto AS while the total equity amounted to NOK 3,172 million. TheConecto AS is primarily involved in the collection of invoiced company had distributable equity amounting to NOK 1,202claims. The company also provides fund management, legal debt million at year-end 2011.collection services and legal advice. Capital adequacy in 2011 was 40.0%, compared to 53.7% inIts pre-tax profit amounted to NOK 24.7 million in 2011, compared 2010. The companys core capital adequacy ratio was 35.4% into NOK 19.5 million in 2010. Despite the reduced debt collection 2011 and 44.9% in 2010.fees and slightly lower number of referrals, the company maintainedits turnover through one-time income, higher recovery rates and SpareBank 1 Gruppena larger proportion of business referrals. The Groups cash and cash equivalents increased by NOK 185.0 million in 2011 to NOK 1,276 million. The increase was due to netSpareBank 1 Medlemskort AS cash flows from operating activities and financing activities ofSpareBank 1 Medlemskort AS is tasked with operating the joint NOK 1,048 million and NOK 162,8 million, respectively, exceedingmembership database of the unions affiliated to the Norwegian the cash flow of NOK 1,025 million from investing activities.Confederation of Trade Unions (LO) that is used to administer Investing activities in 2011 were mainly financed by operatingmembership card deliveries, collect premiums for group insurance, activities.and run and administer the LOfavør advantage card scheme foraround 877,000 members. The company works closely with LO The largest changes between the operating result and cash flowand the unions, and delivers the advantage card concept, LOfavør, from operating activities in 2011 were due to an increase into members on behalf of the unions and LO. The company has technical insurance provisions of NOK 677.2 million. Securitythree business areas: membership card administration, the holdings were reduced by a net NOK 1,006 million to NOK 30,077LOfavør advantage card scheme, and systems and subsidiary million as of 31 December 2011. The portfolio of investmentledger operations. properties reduced by a net NOK 36.2 million to NOK 4,154 million. Liabilities arising from the issuance of securities increasedFinancial performance: by a net NOK 528.1 million to NOK 1,905 million. The dividend paid to owners amounted to NOK 440 million in 2011.NOK million 2011 2010Operating income 58.5 62.2 SpareBank 1 Gruppens total equity at year-end 2011 amounted toPayroll costs -6.6 -6.1Operating costs Medlemskort -2.0 -2.8 NOK 4,942 million, compared to NOK 4,628 million at year-endOperating costs LOfavør -32.6 -36.4 2010. Recognised goodwill in the Group totalled NOK 861.1Operating costs Reskontro -6.1 -6.5Total operating costs -47.3 -51.8 million as of 31 December 2011, compared to NOK 850.8 millionOperating result 11.2 10.4Net financial income 0.9 0.7 at year-end 2010.Pre-tax profit 12.1 11.1Tax charge -3.6 -3.1Net profit for the period 8.5 8.0 The Groups capital adequacy ratio was 16.2% as of 31 December 2011, compared to 16.1% in 2010. The Groups core capitalThe pre-tax profit for the year amounted to NOK 12.1 million, adequacy ratio was 14.6% as of 31 December 2011, compared tocompared to NOK 11.1 million for 2010. The net profit for the 12.5% as of year-end 2010.period was NOK 8.5 million, which is NOK 0.5 million better thanin 2010. The annual accounts have been presented on the assumption that the company will continue as a going concern. The BoardSpareBank 1 Gruppen AS finds that the prerequisites for such a going concern assumptionIn addition to shares in subsidiaries, SpareBank 1 Gruppen ASs are met by the financial statements for 2011 and the earningsassets consist of bank deposits and minor assets. The company had forecast for 2012. Beyond matters mentioned in this report, noliquidity reserves of NOK 414 million as of 31 December 2011. circumstances have arisen after the end of the accounting year thatUnused credit facilities accounted for NOK 200 million of this would be of material significance to the companys position andamount. The liquidity reserves increased by around NOK 120 results.million, compared with 2010.The equity consists of share capital, a share premium reserve DIVIDENDSand retained earnings. The share capital in SpareBank 1 Gruppen The Board proposes that SpareBank 1 Gruppen AS distribute aAS amounted to NOK 1,870 million as of 31 December 2011, dividend of NOK 433.9 million for 2011. At the same time, a
  11. 11. 11NOK 430.0 million share issue will be carried out aimed at share- Internal control in the Group is regulated by key mandatory guide-holders in order to maintain the companys solvency. lines, but are primarily defined as a line management responsibility. In accordance with the «Regulations on Risk Management and Internal Control» and the Groups own guidelines, risk factors inRISK FACTORS the operations are reviewed annually and action plans are preparedThe operations of SpareBank 1 Gruppen are organised into different in all units, which are reported to the respective company boards.business areas through subsidiaries. There are major differences In addition, the Group also conducts surveys across the group within the risk structure of the individual subsidiaries. The most regard to internal control, Personal Data Act, and security matters.important risk categories to which the Group is exposed are market SpareBank 1 Gruppen has outsourced internal auditing to Ernst &risk, insurance risk, ownership risk, operational risk, credit risk, Young AS. This has supplied added expertise to the Group. Theliquidity risk, concentration risk, and strategic and commercial risk. internal auditing operations also encompass the subsidiaries.2011 presented challenges in a number of areas for SpareBank 1Gruppen. Given its substantial investment portfolio, the results Performance of risk management in 2011were negatively affected by weak equity markets and a challenging As a financial group, SpareBank 1 Gruppen is subject to extensiveinterest rate market with widening credit spreads. The financial regulations which are under continuous development. Newresult for 2011 was therefore far lower than the financial result for regulations for calculating capital requirements, Solvency II, are2010. The results were also affected by SpareBank 1 Markets AS being developed.undergoing a substantial strengthening process aimed at securinga position as a leading capital markets unit. The company is now Even though Solvency II is first expected to come into effect on 1considered well equipped to establish itself as a strong player within January 2014, SpareBank 1 Gruppens goal is to meet all offthe capital markets segment. 2011 was characterised by high claim Solvency IIs requirements from 2013 onwards. In the same wayratios for SpareBank 1 Skadeforsikring AS, both due to a large as the Basel II regulations have been of major importance for thenumber of large claims in the corporate segment and extra costs development of banks risk management, Solvency II will have asdue to the development of the subsidiary Unison Forsikring AS. least as large an effect on the calculation of capital requirements, as well as the need to develop new models for managing risk inResponsibility for risk management, compliance and control insurance companies. Substantial work is being done on developingThe Groups Board is responsible for risk management and insurance companies in order to improve on new regulations,compliance in the Group. The company boards are responsible for including participation in regulatory trial projects.their own companys risk management and compliance. The parent company will also be covered by the coming regulations.Responsibility for the overall risk management within the This has resulted in a need to establish far stronger interactionorganisation lies with the Director responsible for strategy, risk between the risk environments in the companies. This is necessarymanagement and analysis in the parent company. This position to ensure more consistent and uniform risk management. It is alsoreports directly to the CEO of SpareBank 1 Gruppen AS. a means of trying to ensure there is better expertise throughout the Group.Risk management in SpareBank 1 Gruppen should support theGroups strategic development and achievement of its objectives, Risk categoriesand ensure the fulfilment of statutory capital requirements. Risk The Groups risk exposure is primarily related to market risk,management should ensure financial stability and sound asset insurance risk, ownership risk, credit risk and concentration risk,management. This is to be achieved by: as well as operation risk (including compliance risk), liquidity risk and strategic and commercial risk. Please refer to the financial A moderate risk profile statements note 3, financial risk management, for an explanation A strong risk culture characterised by a high level of risk of the individual risk categories. management awareness Striving for an optimum application of capital within the Market risk adopted business strategy The Group’s consolidated market risk is measured and reported Exploiting synergy and diversification effects quarterly to the Board of SpareBank 1 Gruppen AS. The calculations Adequate core capital in accordance with the chosen risk are based on a VaR model. A corresponding model is used for the profile follow-up of each individual company. The subsidiaries in the Ensuring compliance with all regulatory capital and solvency Group manage and also monitor their own risk exposure in margin requirements accordance with their own models and routines.
  12. 12. 12 SpareBank 1 GruppenThe value-adjusted return in SpareBank 1 Livsforsikring ASs is risk associated with the servicing of rental agreements. The riskcustomer portfolios was 2.5%, while the booked return in the in this category is also considered to be limited.customer portfolios was 5.4%. SpareBank 1 Livsforsikring ASssecurities adjustment reserve was reduced from NOK 616.9 The credit risk in SpareBank 1 Gruppen Finans AS is related to themillion to NOK 184.9 million during 2011. The supplementary factoring activities. Overall the credit risk in this portfolio isprovisions as of 31 December 2011 amounted to NOK 344.1 considered limited.million, compared to NOK 379.3 million at year-end 2010. Thecompany made no significant changes to the equity portfolio, Concentration riskbut the proportion of equity investments decreased due to a fall Both SpareBank 1 Livsforsikring AS and SpareBank 1 Skadeforsikringin value over the year. The buffer capital in the life insurance AS are assumed to have some exposure to concentration risk oncompany as of 31 December 2011 amounted to 11.0 % of the the investment side, particularly related to investments in bondsinsurance provisions, compared to 14.6% as of 31 December issued by financial institutions. SpareBank 1 Skadeforsikring AS2010. The buffer capital was primarily reduced due to a reduction is exposed to a certain level of concentration risk associated within the securities adjustment reserve. Despite this, the life insurance reinsurers. The capital needs for this risk have not been calculatedcompanys buffer capital situation is considered satisfactory. as of 31 December 2011.SpareBank 1 Skadeforsikring ASs investment portfolio has a Insurance riskconservative investment profile and achieved a financial return of Insurance risk is an inherent part of the business of both SpareBank2.8% in 2011, compared to 5.0% in 2010. At year-end 2011, the 1 Livsforsikring AS and SpareBank 1 Skadeforsikring AS. Lossescompany had an equity portfolio of 7.9%. The equity portfolio was in SpareBank 1 Skadeforsikring AS can arise as a result of9.4% in 2010. The companys fixed income investments have a fluctuations in the years claims ratio and prior-year losses.very short maturity. 12.7% of the companys investment portfolio SpareBank 1 Livsforsikring ASs insurance risk is mainly associatedwas placed in property, compared to 13.6% in 2010. The market with risk products without profit sharing.risk in the P&C insurance company is considered medium high. Both SpareBank 1 Livsforsikring AS and SpareBank 1 SkadeforsikringOwnership risk AS reduce risk through reinsurance, partly by the reinsurersSpareBank 1 Gruppen ASs financial position is regarded as assuming portions of the risk within individual businesssatisfactory overall, given the current risk exposure. Financially, segments and partly by limiting the own account share forthe parent company is deemed to have sufficient financial individual claims through reinsurance. The reinsurance alsocapacity to support the subsidiaries adopted strategies. covers cumulative claims and disasters. The risk associated with the reinsurers’ creditworthiness is placed under credit risk.Credit riskThe credit risk in SpareBank 1 Livsforsikring AS and SpareBank Insurance risk is deemed to be subject to satisfactory control1 Skadeforsikring AS is related to investments in money market in both SpareBank 1 Skadeforsikring AS and SpareBank 1instruments and bonds. Investments in this area are generally Livsforsikring AS.made in high rated papers. The exposure to the so-called PIGScountries is very limited. As of 31 December 2011, the life Operational riskinsurance companys exposure to Spain amounted to 1.2% of Operational risk in the subsidiaries is documented in connectionthe total financial assets in the company and group life portfolios. with work relating to compliance with the «Regulations on RiskThe exposure is to the Spanish state and Spanish covered bonds. Management and Internal Control». This work normally requiresDespite the very turbulent credit markets, SpareBank 1 Gruppen the management group of a particular subsidiary and staff area inachieved a satisfactory return on its fixed income portfolio and has the holding company to identify operational risk both before andnot experienced credit losses associated with the money market after the implementation of measures. This work did not identifyinstruments and bonds. any serious risk factors in the Group in 2011.The risk related to the other fixed income investments is limited In connection with the implementation of the Groups ICAAPto companies that have a high credit rating. The credit risk in this calculations, models were put in place for calculating necessaryportion of the portfolio is considered to be low to moderate. The capital needs for operational risk. Reference is made to the Pillarinsurance companies are also exposed to a credit risk associated 3 report for a more detailed description of these calculations.with various reinsurers. Their rating is monitored closely andthe risk is considered to be low. In the real estate portfolio there All mandatory guidelines in the Group were updated in 2011.
  13. 13. 13There is a dedicated compliance function in the Group, which Third Pillarcontinuously works to ensure compliance with the law, regulations, Please refer to the separate Pillar 3 report for a more detailedindustry standards and so on, including through following up review of the Groups capital and risk situation. The report isinternal guidelines. Compliance with statutory risk processes produced in accordance with the requirements stipulated in partand an efficient implementation of these are ensured through IX, chapters 45 and 46, of the Capital Requirements Regulations,this work. At a group level, compliance risk is primarily followed up as well as to satisfy the markets stricter requirements concerningin the form of regular qualitative analyses, as well as continuously transparency and openness concerning risk issues in generally. Thein day-to-day operations. At a company level, compliance reports Pillar 3 report is published on: http://investor.sparebank1.no.are also produced in connection with the management of theinvestment portfolios. Compliance reports are submitted to theAudit Committee, the board of the parent company, and the ORGANISATION AND WORKING ENVIRONMENTvarious subsidiaries on a quarterly basis. OrganisationLiquidity risk SpareBank 1 Gruppen had a total of 1,272 employees and 1,237Management of the Groups financial structure is based on an full-time equivalents at year-end 2011. The corresponding figuresoverall liquidity strategy that is assessed and approved by the for 2010 were 1,195 and 1,162 respectively. SpareBank 1 GruppenBoard at least annually. The liquidity risk is reduced by the AS had 234 employees and 229 full-time equivalents as of 31diversification of loans in different markets, funding sources, December 2011. The number of full-time equivalents in SpareBank 1instruments and maturity periods. The liquidity risk in SpareBank Skadeforsikring Group increased by 34, largely due to the claims1 Gruppen in 2011 was primarily linked to the parent company settlement unit. SpareBank 1 Markets Group increased its full-timeand is judged to be low. A group account scheme was established equivalents by 22 during 2011.in 2011, which overall reduces liquidity risk. The larger SpareBank1-banks work together closely in the area of funding. Total turnover for the Group was 6.4% in 2011. The equivalent figure for 2010 was 9.9 %,and was influenced by a majorStrategic and commercial risk profitability programme. Corrected for statutory early retirementSpareBank 1 Gruppen has established a contingency plan for pensions, retirement pensions and disability pensions the Groupshandling sensitive public relations issues. Part of this is a list of turnover for 2011 was 4.9%, compared to 7.6% in 2010.relevant issues, which is reviewed and updated every quarter.Work on a concrete issue is initiated and led by the Director for HR strategycommunication. SpareBank 1 Gruppens HR strategy is based on the Groups vision and values. The main goal is to ensure that SpareBank 1Together with the alliances risk management forum, the Group Gruppen:will continue to focus on the establishment of quantitative modelswith a view to estimating the capital needs for the strategic and Attracts the right employees by focusing on the values «expertscommercial risk in the Group. and close to you» Retains the best employees by giving them responsibilities,Changes in the regulations communicating with them and rewarding them for goodFollowing the spin-off of Bank 1 Oslo Akershus AS, SpareBank 1 performanceGruppen AS is not duty bound to prepare ICAAP documentation Develops employees by involving them, giving them clearpursuant to the Basel II regulations. Nonetheless, some of objectives and following them upSpareBank 1 Gruppens subsidiaries are duty bound to prepareICAAP documentation. SpareBank 1 Gruppen prepared ICAAP The HR strategy follows the employment cycle of an employee anddocumentation pursuant to the applicable Basel II regulations contains frameworks and guidelines for how SpareBank 1 Gruppenin both 2011 and 2010. The consequence of this is that the as an employer should administer and develop its most importantrequirements for equivalent reporting in relevant subsidiaries resources, its employees.lapses, and that ICAAP documentation is only reported toFinanstilsynet at a Group level. The HR strategy contains guidelines intended to help SpareBank 1 Gruppen remain an attractive and inclusive workplace withoutSpareBank 1 Gruppen is regarded as an insurance dominated any form of discrimination.mixed financial group. The Group will thus, as mentioned, becovered by the future Solvency II regulations. Key elements of SpareBank 1 Gruppens HR strategy are: the
  14. 14. 14 SpareBank 1 Gruppentrainee scheme, pay and remuneration, HSE, skills development, SpareBank 1 Gruppen continued its Inclusive Workplacecareer opportunities, life phase policy and equality. agreements for the companies in the Group in 2011. The sick leave rate in 2011 was 3.8%, which is low compared to the rest ofTrainee scheme the industry. Training in various HSE disciplines was provided forThe trainee scheme was introduced in 2006 and has been active managers and safety coordinators, respectively, in 2011. This wasever since. A total of 20 trainees have concluded their trainee carried out in consultation with the individual working environmentperiod since the start of the scheme. Several of these now work in key committees.positions in the Group. SpareBank 1 Gruppen had eight traineesin 2011 and will recruit a new group of trainees in 2012. The One occupational accident and injury was recorded in 2011.purpose of the trainee programme is to recruit future managers and Damage to buildings was reported in connection with the terroristtechnical specialists who, during a two year trainee period, will attack in Oslo on 22 July 2011. The damage largely involvedacquire wide-ranging expertise in the Groups various business damaged glass in facades. Apart from this, no further damage toareas. the companys buildings was reported in 2011.Pay and remuneration The SpareBank 1 Gruppen ethical guidelines specify rules for howRegular analyses are conducted to ensure that the Group offers the employees and representatives shall give notice if theycompetitive terms without being a leader. The incentive scheme become aware of matters that are in violation of laws, regulationsand profit sharing at the group level and bonus scheme at the or the Groups internal rules. A separate notification routine hascompany level was continued in 2011. also been established.SpareBank 1 Gruppen has implemented changes in the Groups Skills developmentremuneration scheme pursuant to the Ministry of Finances Joint HR and skills work in the alliance is organised via an HRregulations relating to remuneration schemes in financial Committee. The mandate of the HR Committee is to develop ainstitutions, which came into force on 1 January 2011. The shared general HR strategy that includes attracting the rightremuneration policy in SpareBank 1 Gruppen was adopted by the employees and developing employees.Board. The most important changes in relation to previousremuneration practices are: SpareBank 1 Gruppen has its own overarching skills strategy. The measurement period/earnings period for financial bonus Technical and professional training and other skills-enhancement criteria has been changed from one year to two years for managers measures are initiated and run primarily in the individual A model for deferred payment has been introduced in which subsidiary as needed. Management development programmes half earned bonuses are given in the form of synthetic equity have also been established at different levels, and these are certificates (a curve of equity certificates) managed jointly by SpareBank 1 Gruppen AS on behalf of the companies. Similarly, SpareBank 1 Gruppen has a programme forA written report will be prepared each year on how the remuneration key resources. SpareBank 1 Gruppen also has a mentor programmescheme in SpareBank 1 Gruppen AS is practised. The report is in which key managers act as mentors for talented employees.presented to the Compensation Committee and the companysBoard. Life phase and equality The Group has a life phase committee that, among other things,Working environment and sickness absence ensures compliance with the Gender Equality Act in theThe Group’s working environment is generally considered to be organisation. The committee also focuses on how SpareBank 1very good. Annual work organisation surveys are conducted in the Gruppen can be an attractive employer for employees in variousGroup, with further follow-up through systematic activities in the life phases.organisation to remedy any weaknesses identified in thesurveys. The organisation survey is meant to provide a measure A life phase policy has been adopted for the Group in which oneof the performance culture in order to support the culture the of the goals is to increase the actual retirement age in the Group.Group wants to cultivate. The aim is to reduce the need for recruitment and at the same time take advantage of valuable expertise.SpareBank 1 Gruppen has separate working environmentcommittees in each company. The safety service in the companies Of the Groups employees, 46 % were women and 54 % wereworks actively, and a Workplace Anti-Alcoholism and Drug men as of 31 December 2011. 6.2% of female and 1.4% of maleAddiction Dependency Committee has also been appointed. employees work part-time. Two of the nine members of the group
  15. 15. 15executive management team are women and three of the nine measures, safeguarding life, health and property, good products formembers of the alliance executive management team are women. customers, business ethics, environmental impact, credit policy,The key management groups in the holding company and awareness campaigns and local commitment.subsidiaries have 23% female representation. The Group wants toincrease the proportion of women in senior positions and has The environment, climate accounts and the Eco-Lighthouseinitiated measures to achieve this. There was one woman among SpareBank 1 Gruppens impact on the external environment, boththe eight members of the Groups Board at the end of the year, direct and indirect, is limited. This includes through waste,while female representation on the subsidiary boards was on energy use, travel, transport, material choices, purchasing andaverage 36%. water consumption.SpareBank 1 Gruppen applies a method of assessing roles and SpareBank 1 Gruppen will, for the fourth year in a row, preparepositions in order to ensure it fixes pay levels objectively. Equal climate accounts based on the total energy consumed by thepay in relation to work of equal worth is also a topic in annual organisations daily operations. A process to secure SpareBank 1salary reviews. The main reason that the pay level of men is Gruppen Eco-Lighthouse certification from 2012 has also started.slightly higher than for women in the Group is that there Eco-Lighthouse certification is a Norwegian, official certificationare more men in both senior positions and highly technical scheme. The scheme is supported and recommended by thepositions. Ministry of the Environment. The climate accounts are published on: http://investor.sparebank1.no.As a member of the Norwegian Financial Services Association(FNH), SpareBank 1 Gruppen AS continued to participate in the Social engagementFUTURA programme in 2011. This is a development programme SpareBank 1 Gruppen has involved itself in a microcreditthat aims to increase the share of women in the recruitment base company, Kolibri Kapital. Microcredit involves providing smallfor leading positions. loans to poor, enterprising people in developing countries that can be used to develop a business or improve living conditions.Attractive employer Kolibri Kapital raises money in Norway by continuouslySpareBank 1 Gruppen is experiencing greater interest from young expanding its share capital. All the loans are made to microbanksemployees. The Group regards this as a result of SpareBank 1s in South Africa, Asia and South America. SpareBank 1 Gruppenstrong branding combined with the targeted marketing of contributes share capital.SpareBank 1 Gruppen as an attractive employer at universities anduniversity colleges. 161 new employees were recruited in 2011, In 2011, SpareBank 1 Gruppen was the main sponsor of theof whom 59 were women and 102 were men. The majority of Norwegian Heart and Lung Patient Organisations «A heartythose who were recruited have at least tree years education after welcome» campaign which was aimed at women. The goal of theupper secondary school. Most of the new employees are in the campaign was to raise womens awareness about heart disease, and26–35 age group, but the Group also recruited employees in all age raise money for research into heart disease in women.groups in 2011. The average age of employees in SpareBank 1Gruppen was 42.5 in 2011. The banks in the SpareBank 1-alliance returned a total of NOK 416 million in 2011 to local communities through sponsorships andEfforts to promote the Group as an attractive employer with donation funds.exciting career opportunities and competitive terms will continuein 2012. CHANGES TO THE BOARD AND THE GROUP EXECUTIVE MANAGEMENT TEAMCORPORATE RESPONSIBILITY On 26 January 2011, Tor-Arne Solbakken, Vice President of theSpareBank 1 Gruppen undertakes to take into consideration how Norwegian Confederation of Trade Unions (LO), replaced Bente N.the Groups behaviour impacts people, society and the environment. Halvorsen as a board member. Terje Vareberg retired from theThis responsibility entails setting targets that exceed those in the Board at the same time. Arne Austreid, CEO of SpareBank 1legislation to which the financial markets are subject. Corporate SR-Bank from 1 January 2011, was at the same time elected to theresponsibility covers everything from asset management and Board as the vice chairman. Arne Austreid was electedinvestments in inclusive workplaces and employee rights. Chairman of the Board in April 2011. He succeeded Hans Olav Karde, CEO of SpareBank 1 Nord-Norge, who had been theCorporate responsibility is also about fraud and loss prevention chairman since April 2010.
  16. 16. 16 SpareBank 1 GruppenOUTLOOK SpareBank 1 Markets AS is undergoing a building up process. TheThe outlook for the Norwegian economy was uncertain at the Board is expecting a substantial improvement in the result instart of 2012. Nonetheless, there is reason to believe that 2012 will 2012. Its competitiveness after the phasing in of new resourcesalso be a relatively good year for Norway with continued low indicates that the company will start 2012 at full market power. Theunemployment, low interest rates and low price inflation. market situation is excepted to remain challenging in theTherefore, the macroeconomic conditions for profitable growth short-term, but it is assumed that the level of activity willshould be relatively good in 2012. On the other hand, volatile gradually increase in 2012. The Board believes the conditions arefinancial markets are resulting in uncertainty about financial now right for SpareBank 1 Markets AS to establish itself as aresults, which constitute a significant portion of value creation in leading capital markets unit in Norway, which is regarded asSpareBank 1 Gruppen. strategically important for the SpareBank 1-alliance.The Group will continue its work on cooperation right across In the opinion of the Board, SpareBank 1 Gruppen will be able tothe companies to extract efficiency gains within costs, income and cope well with continued volatility in the financial markets inskills in 2012. 2012 as well. SpareBank 1 Gruppen is exposed to the securities market through its various subsidiaries, and the development ofThe breadth of SpareBank 1 Gruppens product range, combined equity prices and interest rates have a major effect on the Groupswith its partnership with the Norwegian Confederation of Trade earnings. Given a normal return in the securities market, theUnions (LO) and the SpareBank 1-banks distribution network, Board expects a substantially improved result in 2012.means the Board believes that SpareBank 1 Gruppen is wellpositioned to increase its volume of business within life insurance. In the opinion of the Board, SpareBank 1 Gruppen is well capitalised and in a good position to satisfy the new, stricterDefined benefit pensions and paid-up policies currently face capital requirements due to the introduction of the Solvency IIchallenging regulations. These products have high annual regulations.guaranteed returns and will thus be capital-demanding pursuantto the Solvency II regulations. The authorities are working onchanges to the regulations that could potentially result in better A WORD OF GRATITUDEprofitability and reduced capital requirements. The employees displayed great drive in 2011, which was a demanding year for many of the business areas. Collaboration withThe Board believes the outlook for 2012 is also good for profitable the employee organisations has been close and productive. Thegrowth within P&C insurance. SpareBank 1 Skadeforsikring Group Board would like to thank all of SpareBank 1 Gruppens employeesis systematically working on various measures aimed at improving for their contributions in 2011.both the claims ratio and the cost ratio, and these are expected tohave a positive effect on the P&C insurance groups combined ratiogoing forward. Oslo, 16 March 2012 Arne Austereid Hans Olav Karde Bjørn Engaas CHAIRMAN OF THE BOARD Finn Haugan Knut Bekkevold Richard Heiberg Tor-Arne Solbakken Sally Lund-Andersen Kirsten Idebøen CHIEF EXECUTIVE OFFICER NOTE: This translation from Norwegian has been prepared for information purposes only.
  17. 17. Financial statements 2011SpareBank 1 Gruppen

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