• Share
  • Email
  • Embed
  • Like
  • Save
  • Private Content
SpareBank 1 Gruppen - Annual Report 2010
 

SpareBank 1 Gruppen - Annual Report 2010

on

  • 15,316 views

Download the Annual Report 2010 - SpareBank 1 Gruppen.

Download the Annual Report 2010 - SpareBank 1 Gruppen.

Statistics

Views

Total Views
15,316
Views on SlideShare
2,691
Embed Views
12,625

Actions

Likes
0
Downloads
39
Comments
0

6 Embeds 12,625

http://investor.sparebank1.no 12605
http://translate.googleusercontent.com 15
https://www.google.co.uk 2
http://131.253.14.250 1
http://131.253.14.98 1
http://investor.test.sparebank1.no 1

Accessibility

Upload Details

Uploaded via as Adobe PDF

Usage Rights

© All Rights Reserved

Report content

Flagged as inappropriate Flag as inappropriate
Flag as inappropriate

Select your reason for flagging this presentation as inappropriate.

Cancel
  • Full Name Full Name Comment goes here.
    Are you sure you want to
    Your message goes here
    Processing…
Post Comment
Edit your comment

    SpareBank 1 Gruppen - Annual Report 2010 SpareBank 1 Gruppen - Annual Report 2010 Document Transcript

    • 1Annual Report 2010SpareBank 1 Gruppen
    • 2 SpareBank 1 GruppenContentBoard of Directors Report for 2010 3 Note 28 Lending to and deposits with customers andIncome statement 18 credit institutions 54Statement of comprehensive income 19 Note 29 Net loan loss provisions 55Consolidated balance sheet 20 Note 30 Credit risk exposure for each internal risk class 56Consolidated statement of cash flow 21 Note 31 Maximum credit risk exposure, assets pledge asStatement of changes in equity 22 security not taken into account 57 Note 32 Contractual maturity of financial liabilities 57Note 1 General information 23 Note 33 Age distribution of overdue, but not impaired loansNote 2 Summary of significant accounting policies 23 and premium revenues 58Note 3 Financial risk management 29 Note 34 Market risk related to currency exchange risk 59Note 4 Critical accounting estimates and judgements 32 Note 35 Market risk related to interest rate risk 59Note 5 Changes in Group structure in 2010 34Note 6 Segment information 37 Note 36 Deposits from customers and loans and deposits fromNote 7 Net insurance premium revenue 38 credit institutions 60Note 8 Net fee and commission income 38 Note 37 Subordinated loan capital 61Note 9 Gains and losses from financial assets and liabilities 39 Note 38 Securities issued 61Note 10 Net income from investment properties 40 Note 39 Capital adequacy 62Note 11 Other operating income 40 Note 40 Reinsurance receivables 63Note 12 Operating expenses 40 Note 41 Insurance receivables from policyholders 63Note 13 Shareholder structure 41 Note 42 Insurance liabilites in life insurance 64Note 14 Goodwill 41 Note 43 Incurance result and provisions in P&C insurance 65Note 15 Other intangible assets 42 Note 44 Liabilities related to reinsurance 66Note 16 Investments in subsidiaries - parent company 42 Note 45 Underwriting risk SpareBank 1 Livsforsikring AS 66Note 17 Investments in associates and joint ventures 43 Note 46 Underwriting risk SpareBank 1 Skadeforsikring 68Note 18 Property, plant and equipment 44 Note 47 Wages and other remuneration to CEO and keyNote 19 Other assets 45 management 70Note 20 Classification of financial assets and liabilities 46 Note 48 Pensions 72Note 21 Valuation hierarchy 47 Note 49 Employees and full-time equivalent 74Note 22 Financial instruments designated at fair value 49 Note 50 Taxes 75Note 23 Financial derivatives 50 Note 51 Other liabilities 76Note 24 Financial instruments classified as available for sale 51 Note 52 Events after the balance sheet date, legal matters 76Note 25 Bonds at amortised cost 51 Note 53 Group consolidated exclusive Bank 1 Oslo Group 77Note 26 Fair value on financial instruments measured at Note 54 Cash flow without Bank 1 Oslo Group as amortised cost 52 of December 31, 2010 79Note 27 Investment property 53 Independent auditors report 80
    • 3Board of Directors’ Report for 2010SpareBank 1 GruppenOPERATIONS IN 2010 SpareBank 1 Skadeforsikring AS’ acquisition of Unison Forsikring High return on equity due to good results in the largest AS resulted in negative goodwill of NOK 117.9 million being production companies entered as income. SpareBank 1 Gruppen’s total assets were NOK The Group is well capitalised 40.7 billion as of December 31, 2010, compared to NOK 61.5 New strategic positions through acquisitions (36.51) billion as of December 31, 2009. This is a decrease of NOK SpareBank 1 Skadeforsikring AS acquired 100 % of the shares 20.8 billion compared to 2009 and is mainly due to the separation in Unison Forsikring AS, and took over Skandia Lifeline of the Bank 1 Oslo Group. Norges portfolio within treatment and child insurance SpareBank 1 Gruppen Finans AS acquired the debt The capital adequacy ratio was 16.1 % as of December 31, 2010, collection company Conecto AS compared to 16.3% in 2009. The core capital adequacy ratio was Bank 1 Oslo AS was sold out with effect from January 1, 2010 12.5 % compared to 11.82 % in 2009. The capital position of The profitability improvement programme, Delta, was finished SpareBank 1 Gruppen is considered satisfactory, and it is the successfully. opinion of the Board that the Group is well capitalized to meet the expected requirements in the Solvency II regulations.SpareBank 1 Gruppen AS is a holding company that, through itssubsidiaries, provides and distributes products in the fields of life and In SpareBank 1 Skadeforsikring AS the gross claims ratio wasP&C insurance, fund management, securities brokering, factoring, 77.3 % in 2010 which is 2.4 % higher than in 2009. The increasereceivables management and debt collection of old claims. in the claims ratio is due to the extreme weather conditions during the winter season which resulted in a high frequency ofIn this Directors’ Report, SpareBank 1 Gruppen AS refers to the frost, water and snow damages.holding company and SpareBank 1 Gruppen refers to the Groupconsisting of SpareBank 1 Gruppen AS and its subsidiaries. SpareBank 1 Livsforsikring AS built further reserves in 2010. A total of NOK 125.3 million was allocated to additional provisions withinSpareBank 1 Gruppen reported a pre-tax profit of NOK 985.1 pension and paid-up policies. The securities adjustment reservemillion for 2010, compared to NOK 1,193.7 (995.51) million in in the Group portfolio increased with NOK 289.8 million in 20102009. The profit resulted in a return on equity after tax of 18.7%, and amounted to NOK 616.9 million as of December 31, 2010.compared to a return of 17.5 (18.11)% in 2009. The result is pri-marily attributable to strong financial markets, the profitability SpareBank 1 Livsforsikring AS transferred its defined benefitimprovement programme, Delta, and certain significant one-time pension portfolio to Gabler Wassum AS during 2010. Gabler Wassumeffects. The phasing-out of SpareBank 1 Gruppen`s child and AS is now responsible the management and administration of thespouse insurance together with ending the old contractual pension portfolio.plan resulted in a total of NOK 84.3 million being entered asincome in 2010. SpareBank 1 Gruppen AS also entered as income ODIN Forvaltning AS’s total assets under management were NOKa repayment of NOK 43 million related to payroll tax which were 32.3 billion as of December 31, 2010, which is an increase ofearlier covered by the company on behalf of First Securities AS. NOK 4.3 billion compared to 2009.1 Figure exclusive Bank 1 Oslo Group2 The capital adequacy ratio and the core capital adequacy ratio for 2009, including Bank 1 Oslo Group
    • 4 SpareBank 1 GruppenSpareBank 1 Gruppen Finans Group, which in 2009 was esta- SpareBank 1 Gruppen’s main functions in the SpareBank 1-blished as a new subgroup of SpareBank 1 Gruppen AS, produces, alliance are two-folded:delivers and distributes services within factoring, portfolio acqui- Manage and develop the financial group with respect to thesition, investment management and debt collection. SpareBank 1 production and delivery of competitive products and servicesGruppen Finans AS acquired the debt collection company for distribution through the alliance banks and other banks thatConecto AS in third quarter 2010. Actor Fordringsforvaltning AS have a distribution agreement with companies in SpareBank 1and Conecto AS were merged to one integrated company with Gruppen and LO. This work is organised in the companyeffect from January 1, 2011. SpareBank 1 Gruppen AS. Manage and develop the alliance cooperation with respect toSpareBank 1 Gruppen AS owned, as at December 31, 2010, common management, development and execution of activities76.75 % of the shares in Argo Securities AS, which operates that provide economies of scale and competitive advantages.within securities brokerage. This work is organised in the company Alliansesamarbeidet SpareBank 1 DA.The shares that SpareBank 1 Gruppen AS had in Bank 1 Oslo ASwere sold with effect from January 1, 2010. Consequently, Bank 1 Alliansesamarbeidet SpareBank 1 DA provides the administrativeOslo AS became directly owned by the SpareBank 1 - banks (90%) framework for the alliance and manages financing and ownershipand the Norwegian Confederation of Trade Unions and affiliated of applications, concepts, contracts and brands on behalf of thetrade unions, LO, (10%). An important factor in the transfer of alliance partners. The company is owned by SpareBank 1 SR-Bankownership of Bank 1 Oslo AS was the strategy to establish a clear (17.74 %), SpareBank 1 SMN (17.74 %), SpareBank 1 Nord-Norgeboundary between production and distribution in the SpareBank 1- (17.74 %), Samarbeidende Sparebanker Utvikling DA (17.74 %),alliance. Bank 1 Oslo AS will continue to be a part of the Sparebanken Hedmark (11.3 %), SpareBank 1 Gruppen AS (10.0 %)SpareBank 1-alliance. and Bank 1 Oslo AS (7.74 %).SpareBank 1 Gruppen ended the profitability improvementprogram, Delta, in 2010. The program identified many actions to CORPORATE GOVERNANCEimprove the profitability in the Group. SpareBank 1 Gruppen AS is owned by SpareBank 1 Nord-Norge (19.5 %), SpareBank 1 SMN (19.5 %), SpareBank 1 SR-Bank (19.5 %), Samarbeidende Sparebanker AS (19.5 %), SparebankenSPAREBANK 1-ALLIANCE Hedmark (12 %) and the Norwegian Confederation of Trade UnionsThe SpareBank 1-alliance consists of 18 savings banks, two com- and affiliated trade unions, LO, (10 %). SpareBank 1 Gruppenmercial banks and SpareBank 1 Gruppen AS with subsidiaries. The AS has its business address in Tromsø. SpareBank 1 Gruppen’salliance is the second largest provider of financial products and main market is Norway.services in the Norwegian market. The banks in the SpareBank 1-alliance distribute SpareBank 1 Gruppen’s products and colla- The shares in SpareBank 1 Gruppen AS are not publicly traded,borate in key areas such as developing brands, work processes, but as of December 31, 2010 the company had bonds and subor-development of skills and know-how, IT operations, system develop- dinated loans listed on the Oslo ABM. The company has a con-ment and purchasing. centrated shareholder structure, with all shareholder groups either directly or indirectly represented in the Board. There is ongoingThe product companies established under SpareBank 1 Gruppen AS communication within all the owner groups. The Board ofand the alliance-banks have developed a common technology SpareBank 1 Gruppen AS has discussed the «Norwegian Code ofplatform. The sharing of experience and transfer of knowledge within Practice for Corporate Governance» and adopted this wherever thethe alliance, based on best practice, are key elements of the further guidelines are applicable and of relevance for a company that doesdevelopment of the alliance. As a result of these efforts, knowledge not have shares listed on a stock exchange. The Corporate Gover-centres have been established for Credit Management in Stavanger, nance statement from the Board of Directors is included in thePayments in Trondheim, and Training in Tromsø. Norwegian version of Annual Report for 2010.The SpareBank 1-alliance had total assets of approximately NOK 665 Group Managementbillion at the end of 2010, compared to approximately NOK 616 The Group Management is responsible for managing and developingbillion at the end of 2009. The SpareBank 1-banks have 352 offices. the financial group, and focuses on results and production inThe products of SpareBank 1 Gruppen`s subsidiaries are distributed relation to the subsidiaries of SpareBank 1 Gruppen.through 378 distribution offices across the entire country.
    • 5Remuneration Result from subsidiaries:Information on the remuneration of the Chief Executive Officer, NOK million 2010 2009group management, Board of Directors, supervisory board, controlcommittee, and the auditor is provided in note 47. Part of result from subsidiaries before tax: SpareBank 1 Livsforsikring AS 350,4 392,2 SpareBank 1 Skadeforsikring Group* 641,1 621,1 Bank 1 Oslo Group** - 198,1Dividend policy ODIN Forvaltning AS 64,6 42,1SpareBank 1 Gruppen AS has a long term goal of paying a dividend Argo Securities AS -57,6 -48,9 SpareBank 1 Medlemskort AS 11,1 12,1of 30-50 % of the surplus on the consolidated level. In determining SpareBank 1 Gruppen Finans Group*** 8,6 22,5the dividend for SpareBank 1 Gruppen AS, importance is placed Correction Group 17,6 4,8 Net result before tax from subsidiaries 1 036,0 1 244,1on maintaining a satisfactory capital and core capital adequacy * Unison Forsikring AS was acquired by SpareBank 1 Skadeforsikring withratio in relation to the planned growth and risk associated with the effect from July 1, 2010.company’s operation. The financial situation must also be deemed ** Bank 1 Oslo Group was sold out from SpareBank 1 Gruppen AS with effect from January 1, 2010.satisfactory with respect to internal ICAAP calculations and the *** Conecto AS is 100 % owned by SpareBank 1 Gruppen Finans AS with effectGroup’s liquidity. The goal is that the core capital inclusive from September 10, 2010. The result before this date has been registered directly against equity.perpetual bonds shall amount to at least 11% and capital adequacyto at least 13 %. SpareBank 1 Gruppen AS shall maintain the The pre-tax profit from subsidiaries was NOK 1,036.0 million ingoals related to capital coverage that will be established in the 2010, compared with NOK 1,244.1 (1,046.01) million in 2009.Solvency II regulations with a good margin.SPAREBANK 1 GRUPPEN – RESULTS AND KEY FIGURESSpareBank 1 Gruppen AS and SpareBank 1 Gruppen report theannual accounts in accordance with IFRS, International FinancialReporting Standards, which are recognised by the EU.Profit – SpareBank 1 Gruppen:NOK million 2010* 2009*Net result before tax from subsidiaries 1 036,0 1 244,1Total operating costs (parent company) -7,6 -54,1Net investment charges (parent company) -43,2 -36,3Gains from sale of companies - 29,2Share of associated company - 10,8Pre-tax result 985,1 1 193,7Taxes -153,6 -294,0Net result for the period 831,6 899,6Majority interest 841,0 909,1Minority interest -9,5 -9,5* Bank 1 Oslo Group was sold out from SpareBank 1 Gruppen AS with effect fromJanuary 1, 2010.SpareBank 1 Gruppen reported a profit after tax of NOK 831.6million, compared with NOK 899.6 (735.11) million the previousyear. This equals a decline in profit of NOK 68.9 million. The pre-tax profit was NOK 985.1 million, compared with NOK 1,193.7(995.51) million in 2009. The Group’s total tax expense was NOK153.6 million, compared with NOK 294.0 (260.51) million in 2009.Good financial markets, the profitability program Delta, andseveral other significant factors with a one-off impact contributedto a good result in 2010.1 Figure exclusive Bank 1 Oslo Group
    • 6 SpareBank 1 GruppenSPAREBANK 1 LIVSFORSIKRING AS The company’s total assets under management were NOK 26.5Profit SpareBank 1 Livsforsikring AS: billion as of December 31, 2010. This equals an increase of 9.0 % from 2009. The capital adequacy ratio was 19.3% at the end of 2010,NOK million 2010 2009 compared with 19.0 % at the end of 2009. Core capital ratio con-Risk result after tecnical allocations 325,4 352,3 stituted 17.7% at the end of 2010, compared with 16.1 % the yearAdministration result -186,9 -193,1Investment result 317,3 557,4 before. In 2010, NOK 358.7 million was contributed to the compa-Reserves -45,3 -74,5 ny’s equity through group contributions. The solvency margin as ofCompensation guaranteed interest 29,9 14,6Result before additional provisions 440,4 656,7 December 31, 2010 was 290.1 %, compared with 279.2 % the yearAllocation to additional provisions -125,3 -127,9Transferred to policyholders -36,3 -209,5 before. The minimum requirement is a solvency margin of 100 %.Return on companys assets 71,6 73,0 At the end of 2010, the solvency margin requirement amount toNet profit to owner before tax 350,4 392,2Taxes -60,2 - NOK 859.0 million, compared to NOK 797.9 million in 2009.Net profit/loss for the period 290,2 392,2 The allocation to additional provisions was enhanced by NOKSpareBank 1 Livsforsikring AS reported a pre-tax profit and other 125.3 million at the end of 2010, resulting in total additional pro-P&L components of NOK 350.4 million in 2010, compared with visions of NOK 379.3 million as of December 31, 2010. The secu-NOK 392.2 million in 2009. The tax expense in 2010 was NOK 60.2 rities adjustment reserve was NOK 616.9 million at year end. Aftermillion. In 2009 the tax expense of the company was zero, as the suggested disposal of the 2010 surplus, the buffer capital in total con-deferred tax asset was not included, in accordance with IAS 12. stituted NOK 2.3 billion, equal to 14.6 % of the insurance provisi- ons at the end of 2010. In comparison, the buffer capital the previousNet risk result was NOK 325.4 million in 2010, compared with NOK year amounted to NOK 1.8 billion, corresponding to 11.7% of the352.3 million the year before. The main reason for the reduction insurance provisions.concerned changes in outstanding claims provisions within indi-vidual endowment insurances compared to the previous year. At the Value-adjusted return on the Group portfolio was 7.1 % in 2010. Thesame time, there was a significant improvement in the risk result booked return was 5.2 %. In 2009, similar return was 9.5 % andwithin individual annuity insurances and group life insurances. 7.1 % respectively.The company reported a net administration result of minus NOK Allocation of assets by portfolio as of 31.12.2010:186.9 million, compared with minus NOK 193.1 million in 2009. Group portfolioThe majority of the administration loss arises from the operation of 2010 2009group pension insurance. Stocks 14,8 % 14,5 % Other 7,1 % 5,2 % Real estate 21,5 % 21,7 % Bonds held to maturity 21,8 % 24,3 %Net investment result (financial income in customer portfolios Bonds 34,8 % 34,2 %reduced with guaranteed returns) was NOK 317.3 million compared Total value (NOK million) 16 030 15 488with NOK 557.4 million in 2009. At the beginning of 2009, the value Company portfolioof the financial assets recorded at fair value was NOK 152.0 million 2010 2009 Stocks 0,1 % 0,1 %lower than the acquisition cost. The reversal of this lesser value, Other 17,0 % 19,4 % Real estate 21,7 % 17,0 %before a rebuilding of the securities adjustment reserve could Bonds held to maturity 11,1 % 14,7 %commence, contributed to the good investment income result in Bonds 50,1 % 48,7 % Total value (NOK million) 2 844 2 4792009. Within individual annuity insurance, NOK 45.3 million of theinvestment income result was utilised to enhance the premium Investment choice portfolio 2010 2009reserve due to adjustments made to life expectancy ratios. Corres- Stocks 61,0 % 61,4 % Other 0,0 % 7,1 %ponding amounts in 2009 were NOK 74.5 million. Bonds 39,0 % 31,5 % Total value (NOK million) 6 701 4 041 Group portfolio Company portfolio Investment choice portfolio Total value: NOK 16 billion Total value: NOK 2.8 billion Total value: NOK 6.7 billion 14,8% Bonds 17,0% Bonds Stocks 34,8% 7,1% Bonds held to maturity Real estate 39,0% Bonds 50,1% 21,7% 21,5% Real estate Other 61,0% 21,8% Stocks Bonds held to maturity 11,1% Other Stocks
    • 7The company decided to invest in a model for asset-liability In 2010, the financial income of the SpareBank 1 Skadeforsikringmanagement at the beginning of 2010. The model was used for the Group was NOK 432.7 million, compared with NOK 532.6 milliontest calculations in relation to the introduction of the Solvency II in 2009. This includes a gain of NOK 20.9 million on sold propertyrequirements (QIS-5). The board considers the company’s com- in the fourth quarter. The financial return on the Group’s portfoliomercial exposure to be well adapted to its risk capabilities. was 4.9%. The company had positive returns in all asset classes in 2010.SPAREBANK 1 SKADEFORSIKRING GROUP SpareBank 1 Skadeforsikring Group had total assets of NOK 12.1Profit SpareBank 1 Skadeforsikring Group: billion as of December 31, 2010. This represents an increase of 15.7 % from 2009. The capital adequacy ratio at the end of 2010NOK million 2010 2009 was 32.5 %. This equals a reduction of 1.7 percentage pointsGross written premium 4 731,8 4 271,2 through the year.Net earned premium 4 184,4 3 814,3Net incurred claims -3 208,5 -2 813,1Net insurance operating costs -880,6 -858,0 Net combined ratio per year:Other insurance income/costs 132,0 0,8Changes in other technical reserves 39,6 -27,5 87,2% 89,9% 94,6% 94,0% 96,2% 97,7%Operating result before finance 266,9 116,6 100Net financial income 432,7 532,6Other costs -2,7 -5,8Result before changes in security reserve 696,9 643,3 80 22,5% 21,0% 20,7% 21,9%Changes in security reserve -55,8 -22,2 20,6% 20,5% 76,7%Pre-tax profit 641,1 621,1 73,9% 72,1% 73,7%Taxes -60,1 -118,1 69,3% 60 66,7%Net profit/loss for the period 581,1 503,0 40SpareBank 1 Skadeforsikring Group reported a result in 2010 ofNOK 641.1 million before tax, compared with NOK 621.1 million 20in 2009. The Group achieved a significant growth in the premiumincome, both through the traditional sales channels, such as 0banks and LO (The Norwegian Confederation of Trade Unions), as 2005 2006 2007 2008 2009 2010well as though new strategic activities such as the acquisition of Claims ratio, net Cost ratio, netUnion Forsikring AS and Skandia Lifeline Norge’s portfolio withintreatment and child insurance. The net combined ratio was 97.7% in 2010, an increase of 1.5 per-SpareBank 1 Skadeforsikring AS bought 100% of the shares in centage points from 2009.Unison Forsikring AS for NOK 56.4 million, with effect fromJuly 19, 2010. At the same time it contributed with NOK 150 The gross combined ratio was 98.1% as of December 31, 2010. Themillion to the company’s equity through a private placing towards gross claims ratio constituted 77.3% in 2010, which was an in-Unison Forsikring AS. Unison Forsikring AS was consolidated crease of 2.4 percentage points compared with 2009. The increasewith effect from July 1, 2010. Unison’s business concept is to in the claims ratio is attributable to the cold winter, causing a highprovide tailored business solutions to defined groups of end users frequency of frost and water related damage. Gross cost ratio in– either through organisations or other relevant intermediary con- 2010 was 20.8%, compared with 22.1% in 2009. One-off impactsnections such as agents and brokers. of NOK 42.5 million related to pensions, as well as zero in profit- ability commission to the distributors have contributed to a reduc-After receiving approval from Norwegian and Swedish authorities, tion in the cost ratio.SpareBank 1 Skadeforsikring AS has acquired Skandia LifelineNorge’s portfolio within treatment and child insurance with effect SpareBank 1 Skadeforsikring Group had a total portfolio growthfrom November 1, 2010. The portfolio consists of 1,200 customers of NOK 629 million. The company’s total portfolio was NOK 4.7and insures a total of 16,000, with a stock of approximateley billion at the end of 2010.NOK 30 million in premiums. SpareBank 1 Skadeforsikring Group has ambitions of profitableThe acquisition of Unison Forsikring AS resulted in a negative growth through both traditional channels, such as banks and LO, asgoodwill of NOK 117.9 million being entered as income, while the well as new channels for direct distribution. The goal is to increaseselling of the insurance office in Bergen to SpareBank 1 SR-Bank revenue by strengthening the Group’s distribution platform.resulted in a gain of NOK 14.2 million.
    • 8 SpareBank 1 GruppenODIN FORVALTNING AS 76.75% of the shares in Argo Securities AS at the end of 2010. TheProfit ODIN Forvaltning AS: remaining shares were owned by the employees.NOK million 2010 2009 The company has continued to build up its operations throughManagement fees 317,9 244,8 2010. This has affected the result, which amounted to a loss beforeSubscription and redemption fees - 25,9Total operating income 317,9 270,7 tax of NOK 57.6 million in 2010. There has been an increase inTotal operating costs -256,8 -228,3 revenue in all business segments compared to 2009. Total revenueOperating profit 61,1 42,4Net financial income 3,6 -0,3 in 2010 was NOK 83.3 million, compared to NOK 47.0 million inPre-tax profit 64,6 42,1Taxes -19,3 -13,5 2009. Out of the 2010 revenue, NOK 37.4 million are related toNet profit for the period 45,3 28,6 commission income on stocks and derivatives, NOK 18.4 million in remunerations from corporate finance, NOK 16.6 million from debtODIN Forvaltning AS reported a pre-tax profit of NOK 64.6 million capital markets and NOK 10.9 million from other revenue. Alongin 2010, compared with NOK 42.1 million in 2009. The increase with the building of the operations, the company’s cost base has alsoin profit can mainly be attributed to higher average assets under increased, and there were a total of 77 employees at the end of the year.management throughout the year. There is significant potential for the company through its connectionAll funds yielded good absolute returns in 2010, although eight out to the alliance and gaining access to the distributional power that itof twelve self-managed mutual funds had returns that were weaker represents. The work to realise this potential was started in 2010, andthan the market they invested in. This is mainly caused by a weaker will continue throughout 2011. The company has added additionaldevelopment for investment companies than growth companies in top competence and market power through recruitment of new2010. ODIN Forvaltning AS is an investment manager. employees. It is expected that the efforts over time will yield significant increases in market shares and that this will be reflected in the results.At the end of 2010 ODIN Forvaltning AS managed a total of NOK32.3 billion, of which NOK 31.3 billion were managed in mutualfunds. This makes ODIN Forvaltning AS the third largest fund SPAREBANK 1 GRUPPEN FINANS GROUPmanager in Norway. ODIN Forvaltning AS had in 2010 a net Profit/loss in SpareBank 1 Gruppen Finans Group:redemption in mutual funds of NOK 1.4 billion, caused by redemp- NOK million 2010 2009tion from foreign customers. SpareBank 1 Gruppen Finans AS -5,7 3,3 Overhead costs -9,3 -1,2Good historical returns, a broad offering of self-managed mutual Business area Factoring 2,0 6,6 Business area Portefølje 1,7 -2,1funds, introduction of combined funds, the SpareBank 1 banks’ Business area Debt collection 19,5 24,6broad distribution network, distribution through other banks and Actor Fordringsforvaltning AS 23,3 24,6 Conecto AS* -3,8 -distributors in Norway, Sweden, Finland and the Netherlands, Net result before tax from subsidiaries 13,9 27,8together with good technological solutions, and an effective and Amortisation -5,3 -5,3 Pre-tax profit 8,6 22,5competent organisation, provide a strong starting point for Taxes -4,3 -6,7 Net profit for the period 4,3 15,92011. * Conecto AS was acquired with effect from September 10, 2010.ARGO SECURITIES AS SpareBank 1 Gruppen Finans Group produces, delivers andProfit/loss Argo Securities AS: distributes services within factoring, portfolio acquisitions, port- folio management and debt collection. SpareBank 1 GruppenNOK million 2010 2009 Finans Group consists of SpareBank 1 Gruppen Finans AS, and itsTotal operating income and other income 83,3 47,0 business areas Factoring and Portfolio, as well as its subsidiariesSalaries and other ordinary personnel expenses -89,7 -66,5Depreciation and amortisation -6,9 -9,2 Actor Fordringsforvaltning AS and Conecto AS. Conecto AS wasOther operating expenses -43,2 -27,2 acquired with effect from September 10, 2010. Actor Fordrings-Operating result -56,5 -55,9Net financial income -1,0 7,0 forvaltning AS and Conecto AS were merged with effect fromPre-tax loss -57,6 -48,9Taxes 16,8 13,5 January 1, 2011. These companies operate within extrajudicial andNet result for the period -40,8 -35,4 legal debt collection.Argo Securities AS operates within corporate finance, stock broke- SpareBank 1 Gruppen Finans Group achieved a pre-tax profit in 2010rage and debt capital markets. SpareBank 1 Gruppen AS owned of NOK 8.6 million, which was NOK 13.9 million lower than in 2009.
    • 9SpareBank 1 Gruppen Finans AS of 26%, but has still increased revenue with 11% from 2009. TheBusiness area Factoring increase is mainly due to an increased portfolio, as well as renego-The business area Factoring operates within financing in the areas tiated agreements. The market is characterised by a competitivefactoring and collateral. Pre-tax profit in 2010 was NOK 2.0 million, environment. Conecto AS not only has a good market position, butcompared with NOK 6.6 million in 2009. good prospects for increased growth in the time to come.The Factoring business area had total net revenues of NOK 52.4million in 2010, compared with NOK 50.1 million in 2009. The SPAREBANK 1 MEDLEMSKORT ASclient revenue was NOK 11.0 billion in 2010, equal to an increase Profit in SpareBank 1 Medlemskort AS:of 30.6 % compared with 2009. In connection with a bankruptcy NOK million 2010 2009engagement, provisions for losses amounted to NOK 10.4 millionin 2010. This loss provision was the main cause for the decline of Total operating income 62,2 59,4 Salaries and wages -6,1 -7,0the result in 2010. Other operating expenses -45,7 -41,2 Operating result 10,4 11,2 Net financial income 0,8 0,9Business area Portfolio Pre-tax profit 11,1 12,1 Taxes -3,3 -3,5The Portfolio business area operates within acquisition of portfolio Net profit for the period 7,8 8,6of non-performing loans and which are recovered in the Group’sdebt collection companies. The pre-tax profit in 2010 was NOK 1.7 SpareBank 1 Medlemskort AS reported a pre-tax profit of NOKmillion, compared with a loss in 2009 of NOK 2.1 million. In total 11.1 million, and a result after tax of NOK 7.8 million.this represents an improvement in the result of NOK 3.8 million.Additional positive development in the profit is expected in SpareBank 1 Medlemskort AS operates LO’s affiliated trade unions’2011. Net interest and other financial income was NOK 9.3 million common membership database for delivering membership cardsin 2010. The business area Portfolio had a total portfolio volume and collects the insurance premiums for group insurance. Theof NOK 620 million at the end of 2010. company also runs and administrates the benefits-program LOfavør for about 870,000 members. The company cooperates closelyActor Fordringsforvaltning AS with LO and the affiliated trade unions, and is the operationalThe company operates within the debt recovery business and supplier of the benefits-program LOfavør on behalf of LO and theprovides services related to receivables management, litigated affiliated trade unions. The company also cooperates with the otherdebt prosecution, and juridical advice. The company reported a companies in the SpareBank 1-alliance, particularly the banks andprofit before tax in 2010 of NOK 23.3 million, compared to NOK insurance companies.24.6 million in 2009. In total, the company’s revenue amountedto NOK 84.9 million, an increase of NOK 6.2 million from 2009. The LO congress’ decision that LOfavør shall be the best knownThe reduction in the pre-tax profit was mainly caused by reduced benefits-concept by 2013 has lead to increased activity in thefee income as a consequence of reductions in fee income rates company. Six larger activities/campaigns have been performed,decreed by law. The company has calculated the effect of the and other marketing operations have increased in scope. Thechanges made to the debt collection regulation as of September company has experienced yet another year of increased use of the2009 to be an approximately 20 % reduction of revenue. Parts of membership benefits. The company has also experienced increasedthe 2010 revenue were generated from demands that were due demand for its services from the alliance-banks.January 1, 2010, which was before changes were made to theregulations. Consequently the changes have not had its full impactin 2010. SPAREBANK 1 GRUPPEN AS SpareBank 1 Gruppen AS’ assets, in addition to shares in its sub-Conecto AS sidiaries, consist of cash deposits and less material assets. The hol-SpareBank 1 Gruppen Finans AS bought the debt collection ding company had liquidity reserves as of December 31, 2010 ofcompany Conecto AS on September 10, 2010. The company NOK 292 million, of which unutilised drawing rights accountedreported a loss before tax of NOK 3.8 million, which was the for NOK 200 million. The liquidity reserve decreased with NOKresult from the day of the acquisition, September 10, until the year 210 million compared to 2009.end. The company generated revenue of NOK 86.6 million in2010, which was NOK 9.5 million more than in 2009. Conecto AS The equity consists of share capital, share premium account, andhas calculated the impact of the changes in the debt collection other equity. Share capital in the holding company was NOKregulation as of September 2009 to cause a reduction in revenue 1,782 million as of December 31, 2010, while total equity was NOK
    • 10 SpareBank 1 Gruppen2.758 million. The holding company had free equity of NOK 728 DIVIDENDmillion at the end of 2010. The Board proposes that a dividend of NOK 440 million be distri- buted from SpareBank 1 Gruppen AS for 2010. At the same time itThe capital adequacy ratio in the SpareBank 1 Gruppen AS was will be carried out a share issue of NOK 440 million to the owners53.7 % as of December 31, 2010, compared with 57.7% in 2009. so that the companys financial strength is maintained.SpareBank 1 Gruppen AS core capital adequacy ratio as of December31, 2010 was 44.9 %, compared with 47.6 % the previous year. RISK FACTORS The operations of SpareBank 1 Gruppen are organised into diffe-SPAREBANK 1 GRUPPEN rent business areas through the Group’s subsidiaries. There areCash and cash equivalents reserve were reduced by NOK 309.3 major differences in the risk structure between each subsidiary.million during 2010. Reason for the reduction is that net cash flow The most important risk categories that impact the Group arefrom operational activities and investment activities, amounting related to market risk, insurance risk, ownership risk operationalto NOK 6,575 and 789.7 million respectively, did not exceed the risk, credit risk, liquidity risk, concentration risk, as well ascash flow of NOK 7,674 million from financing activities. strategic and business risk.Lending to customers and claims towards credit institutions had Bank 1 Oslo AS was demerged out from SpareBank 1 Gruppena reduction of NOK 20,622 (increased of 210.91) million. Deposits effective January 1, 2010. This has led to changed risk exposureand debt to customers and credit institutions were reduced by compared to last year. 1NOK 16,835 million (294.4 ). The holding of securities increasedwith a net of NOK 883.3 million. The property portfolio was Responsibility for risk management and control 1reduced with NOK 596.1 (488.5 ) million. Debt established by The Group’s board of directors is responsible for risk managementissuing securities had a net reduction of NOK 5,504 (increased of and compliance in the Group. The board of each subsidiary is 1876.9 ) million. In 2010, dividends of NOK 120 million were responsible for managing risk and compliance in their ownpaid to the owners. company.The SpareBank 1 Gruppen Group, had a total equity of NOK The responsibility for the overall risk management within the4,809 million at year end, compared to NOK 5,293 million the year Group lies with the Director for Strategy, Analysis and Riskbefore. Capitalised goodwill in the Group as of December 31, 2010 Management in the holding company. The Director reports to theamounted to NOK 851 million. Chief Executive Officer of SpareBank 1 Gruppen AS.The capital adequacy ratio in the Group was 16.1% as of The purpose of risk management in SpareBank 1 Gruppen is toDecember 31, 2010, compared with 16.31 % in 2009. The Group’s support the Group’s strategic development and achievement ofcore capital adequacy ratio as of December 31, 2010 was 12.5%, goals as well as fulfilment of statutory capital requirements. The 1compared with 11.8 % the previous year. risk management shall ensure financial stability and proper Asset Management. This shall be achieved through:The transfer of the shares in Bank 1 Oslo AS January 1, 2010, tothe SpareBank 1-banks and LO involved a capital reduction in a moderate risk profileSpareBank 1 Gruppen of NOK 1.130 million as of January 1, a strong risk culture with a high level of risk management2010. Of this reduction, share premium account and other equity was awarenessreduced with NOK 579 and 551 million respectively. striving towards an optimal capital allocation within the adopted business strategyThe annual accounts are presented under the assumption that the exploitation of synergy and diversification effects, andcompany will continue as a going concern. The board finds that an adequate core capital in accordance with the chosen riskthe prerequisites for the going concern assumption have been profile.met by the annual accounts for 2010 and the result forecasts for2011. Beyond matters mentioned in this report, no circumstances Internal control within the Group is regulated in Group Policieshave arisen after the end of the financial year that would be of but defined as a line responsibility. In accordance with thematerial significance to the company’s financial position and «Regulations relating to Risk Management and Internal Control»results. and the Group’s own guidelines, risk factors in the operations are reviewed annually and action plans are prepared in all units,1 Figure exclusive Bank 1 Oslo Group
    • 11which are reported to the respective subsidiary’s board of directors.In addition, surveys are conducted across the Group with regard Market riskto internal control, Personal Data Act, and security matters. The Group’s consolidated market risk is measured and reportedSpareBank 1 Gruppen has outsourced the internal auditing quarterly to the board of directors in SpareBank 1 Gruppen AS.function to Ernst & Young AS. The Group has benefited with The calculations are based on a Value at Risk (VAR) model. Aincreased expertise as a result of this. Internal auditing operations corresponding model is used for the follow-up of each subsidiary.also encompass the subsidiaries. The subsidiaries manage and monitor risk exposure in accordance with their own models and routines.Developments in risk management in 2010SpareBank 1 Gruppen is, as a financial group, subject to an 2010 has been a very good year financially for SpareBank 1 Gruppen.extensive set of regulations which are constantly under development. Except from Argo Securities AS all companies in SpareBank 1Within insurance, a new set of rules is being developed for Gruppen improved its financial position through the year. Riskcalculating capital requirement, Solvency II. management and internal control are considered satisfactory and have been improved in all companies during 2010.Solvency II is expected to come in force from 2013. Similar to theeffect Basel II had on the development of risk management in The value adjusted return in the customer portfolio of SpareBank 1banks, Solvency II is expected to have at least the same effect on the Livsforsikring AS was 7.1 % and the booked return was 5.2 %.calculation of capital requirements as well as the need for developing SpareBank 1 Livsforsikring AS’ securities adjustment reservesnew models for risk management in insurance companies. Extensive increased from NOK 327.1 million to NOK 616.9 million duringwork is being performed to prepare for the new rules, including the year. The additional provisions were increased with NOKparticipation in regulatory trial projects. 125.3 million and amounted to NOK 379.3 million at year end. The capital and solvency margin were satisfying at the beginning of theThe Group will also be subject to the new regulations. SpareBank 1 year, and have significantly improved during the year.Gruppen went through considerable changes in 2010 withconsequences for risk management within the Group. Among the Despite the fact that SpareBank 1 Skadeforsikring AS has a con-most important events in 2010 with short term impact, is that from servative investment profile in its investment portfolio, the shareJanuary 1, 2010 Bank 1 Oslo AS is no longer owned by SpareBank invested in equities was 9.1% at the end of 2010 compared to1 Gruppen AS. This separation has led to a significant reduction in 7.1% in 2009. The company has very short term maturity on itsthe exposure to credit risk. Credit risk as a share of total risk exposure interest placements. At the end of the year, 14.1% of the company’swas reduced from 9.2% as of December 31, 2009 to 1.7% as of investment portfolio was placed in real estate, compared to 14.4%December 31, 2010. The separation of Bank 1 Oslo AS will not have in 2009. Despite the increase in the equity share on the company’sany short term effect on the work related to risk management other financial investments, the market risk in the company is stillthan reducing risk exposure for SpareBank 1 Gruppen. considered medium-high. The company had a financial return of 4.9% in 2010 compared to 6.8 % in 2009.At the same time, acquisition, restructuring and development ofthe companies in SpareBank 1 Gruppen Finans Group and Argo Ownership riskSecurities AS will in the future become an important part of value Given the present risk exposure, the holding company’s financialadded in SpareBank 1 Gruppen. They will also constitute a more position is regarded satisfactory. The development of the resultssignificant part of risk elements in SpareBank 1 Gruppen. From in 2010 has entailed a significantly better financial situation than2009, the companies were included in the overall risk calculation at the beginning of the year.and were also a part of the calculation of diversification effects. Credit riskThe Group’s risk management review program has continued The demerger of Bank 1 Oslo AS has resulted in a significantlythrough 2010. lower exposure against credit risk for the Group.Risk categories The credit risk in SpareBank 1 Livsforsikring AS and SpareBankThe Group’s risk exposure is related primarily to market risk, 1 Skadeforsikring AS is related to investments in commercialinsurance risk, ownership risk, credit risk, concentration risk, as paper and bonds. SpareBank 1 Livsforsikring AS is exposed towell as operational risk (included compliance risk), liquidity risk Collateralized Debt Obligations (CDOs) in its portfolios, recognisedand strategic and commercial risk. For an explanation of each risk at NOK 212 million. This amounts to approximately 0.8 % ofcategory, see Note 3 - Financial risk management. total financial assets.
    • 12 SpareBank 1 GruppenThe risk associated with the remaining interest investments is limited In connection with the new «Regulations relating to Risk Manage-to companies with high credit worthiness. The credit risk in this part ment and Internal Control», including paragraph § 6 (last section)of the portfolio is considered low to moderate. The insurance of these regulations, which clarifies the overlap with the «Capitalcompanies have in addition credit risk attached to different Adequacy Regulations», all the framework and managementreinsures. The ratings are monitored closely and the risk is documents in the Group was updated in 2009 and further adjustmentsconsidered very low. In the real estate portfolio risk associated were made in 2010 to clarify the boundaries between the riskwith operating the signed leases exists. This risk is also considered processes that are encompassed by the internal control work andlimited. those that are encompassed by the ICAAP work. In addition, it is established a separate compliance function within the Group,Concentration risk which conducts continuous ongoing work related to compliance,Concentration risk for SpareBank 1 Livsforsikring AS and industry standards etc, but also through follow up of internalSpareBank 1 Skadeforsikring AS is expected to be related to guidelines. This function ensures the fulfillment of risk prosessesinvestment, especially in connection with investment in bonds required by law and effective implementation internally. Complianceissued by financial institutions. Capital requirements for this risk with statutory risk processes and an efficient implementation ofhave not been calculated as of December 31, 2010. SpareBank 1 these are ensured through this work. Compliance risk on Group levelSkadeforsikring AS has a certain concentration risk attached with is monitored through qualitative analyses as well as continuously inreinsurers. the daily operations. At company level compliance reports are prepared in connection with the administration of the investmentInsurance risk portfolio.Insurance risk is a central part of the operations in both SpareBank1 Livsforsikring AS and SpareBank 1 Skadeforsikring AS. Losses Liquidity riskin SpareBank 1 Skadeforsikring AS can arise as a consequence of Financing structure is based on an overall liquidity strategy whichfluctuations in the current year’s claims ratio and changes in is reviewed and approved by the board at least once a year. Theclaims reserves. For SpareBank 1 Livsforsikring AS the insurance risk liquidity risk is reduced through diversification of the depositscomes mainly from risk products without profit sharing. across different markets, deposit sources, instruments and maturity terms. In 2010, the liquidity risk in SpareBank 1 Gruppen wasSpareBank 1 Livsforsikring AS and SpareBank 1 Skadeforsikring mainly associated with the parent company and it is consideredAS relieve risk through reinsurance. The companies either cede to be low.a significant level of risk within individual business areas orcede a share of the claims from the overall insurance business to Strategic and commercial riskreinsurers. Reinsurance also covers cumulative claims and disasters. SpareBank 1 Gruppen has established a contingency plan forThe risk associated with the reinsurers’ creditworthiness is placed handling reputation-sensitive issues. The contingency plan’sunder credit risk. agenda will be reviewed and updated every quarter. Work on specific matters will be initiated and managed by the Director ofThe control of the insurance risk in both SpareBank 1 Skadeforsikring Communication.AS and SpareBank 1 Livsforsikring AS is considered to be satisfactory. Together with the Alliance’s Risk Management Forum, the GroupOperational risk will continue to focus on the establishment of quantitative modelsThe operational risk in the subsidiaries is currently documented in with the purpose of estimating the capital needs for the strategic andconnection with the work done to meet the «Regulations relating to commercial risks in the Group.Risk Management and Internal Control». This work normally requi-res the management group of each subsidiary and staff area in the Changes in the regulationsholding company to identify the main category of operational risk After the separation of Bank 1 Oslo AS, SpareBank 1 Gruppen isbefore and after the implementation of measures. This effort did not no longer required to prepare ICAAP calculations in accordanceidentify any serious risk factors in the Group in 2010. with the Basel II regulations. Some subsidiaries in SpareBank 1 Gruppen are still required to prepare ICAAP calculations.In connection with the implementation of the Group’s ICAAP SpareBank 1 Gruppen will continue to prepare ICAAP calculationscalculations, models were put in place for calculating necessary in accordance with current Basel II regulations in 2011 as they didcapital needs for operational risk. Reference is made to the Pillar 3- in 2010. The consequence of this will be that the requirements forreport for a more detailed description of these calculations. similar reporting in certain subsidiaries will cease, and that complete
    • 13ICAAP calculations will be prepared at Group level only.After the separation of Bank 1 Oslo AS, SpareBank 1 Gruppen isnow considered to be an insurance dominated mixed financialgroup. The Group will therefore be encompassed by the Solven-cy II regulations. During 2010 the Group has on a consolidatedlevel taken part in the quantitative calculations associated with QIS5. The results show that the Group is well prepared to meet theexpected requirements in the new regulation.Pillar 3Reference is made to a separate Pillar 3-report prepared inaccordance with the requirements stipulated in Part IX, Chapters45 and 46, of the Capital Adequacy Regulations. The report hasalso been prepared to meet the market’s increased demand fortransparency and openness with regard to risk in general and amore detailed review of the company’s capital and risk situation.For the Pillar 3-report we reference to http://investor.sparebank1.no.ORGANISATION AND WORKING ENVIRONMENTAT SPAREBANK 1 GRUPPEN ASOrganisationIn SpareBank 1 Gruppen there were a total of 1,196 employees and1,162 full-time equivalents in 2010. The corresponding figures for2009 were 1,441 and 1,409 respectively. The decrease in the workforceis related primarily to the demerger of Bank 1 Oslo AS fromJanuary 1, 2010, and restructuring processes in parts of the Group.SpareBank 1 Gruppen AS had 220 employees and 213 full-timeequivalents as of December 31, 2010.The total turnover in 2010 was 9.9%. The corresponding figure for2009 was 7.1%. Adjusted for early retirement pensions (AFP), oldage pensions and disability pensions, the Group’s turnover was7.6% compared to 4.9% in 2009.All business areas are organised in subsidiaries. The Chief ExecutiveOfficers in the subsidiaries, together with the directors for Finance,Communication and Strategy & Business development, partake inthe corporate management group of SpareBank 1 Gruppen.HR StrategySpareBank 1 Gruppen’s HR strategy is based on the Group’svision, values, goals and success factors. The main goal is toensure that SpareBank 1 Gruppen: Attracts the right employees by focusing on the values «to be an expert and close to you». Retains the best employees by giving them responsibilities, communicating with them and rewarding them for good performance.
    • 14 SpareBank 1 Gruppen Develops employees through involvement, establishment of 3.0 % in 2010. Training in various HSE disciplines was provided clear goals and follow-up. for managers and safety coordinators in 2010. This was carried out in consultation with the individual working environmentThe HR strategy follows the employment cycle of an employee and committees.contains frameworks and guidelines for how the company as anemployer should manage and develop its employees. The HR SpareBank 1 Gruppen’s ethical guidelines specify rules for howstrategy includes guidelines that will develop SpareBank 1 Gruppen the employees and representatives shall give notice if they becomeas an attractive and including working place without any form for aware of matters that are in violation of laws, regulations or thediscrimination. Group’s internal rules. A separate notification routine has also been established.Central areas in our HR Strategy are: SpareBank 1 Gruppen started the project «the Workplace of theThe trainee programme Future» with a rebuilding of the headquarters in HammersborggataSince the trainee programme was introduced in 2006 a total of 15 2 in 2010. During 2011 most of the employees in the Group willtrainees have completed their trainee period. All of them have make use of modern and contemporary facilities that contributescentral positions within the Group. SpareBank 1 Gruppen has to increased interaction and knowledge sharing.currently nine trainees and will recruit a new group of trainees in2011. The purpose of the trainee programme is to recruit future Development of expertisemanagers and technical specialists who, during a two-year period, Work related to human resources and expertise development in thewill acquire wide-ranging expertise in the Group’s various busi- alliance is organised in a HR-Committee. The HR-Committee isness areas. mandated to develop a common overarching HR strategy including a focus on attracting the right, keep the best and develop theThe remuneration policy employees.Regular analyses are conducted to ensure that the Group offerscompetitive terms. The incentive scheme and profit sharing at the SpareBank 1 Gruppen has a collective strategy of expertise. TheGroup level and bonus scheme at the company level was continued subsidiaries initiate vocational training and other skills upgradingin 2010.The incentive scheme is adapted to the principles of initiatives if required. The Group has joint programmes fordynamic management, where relative performance is rewarded. leadership development. SpareBank 1 Skadeforsikring AS hasThe Group’s bonus scheme will be adapted to the new regulations and joined the accreditation scheme for insurance-claims advisors. Atguidelines from the FSA on compensation in financial institutions. the end of 2010, 468 insurance advisors had approved the accreditation tests.Working environment and sickness leaveAnnual work climate surveys are conducted. From 2010 the Life Phase and equal opportunitiesorganisation uses a new survey which gives better estimates of the The Group’s Life Phase Committee ensures that the Groupperformance culture and dynamic management to underpin the complies with the Norwegian Gender Equality Act. The committeeculture the Group wants to develop. The working environment in also focuses on how SpareBank 1 Gruppen can be an attractivethe Group is considered to be good, but there are variations in the employer for employees in various life phases.different departments. The survey makes it possible to be targetedon the basis of the different departments` needs. The survey will In connection with the Group’s life phase policy it was decidedbe conducted regularly so that we can follow the development to change the policy in 2008 in order to fulfil the goal offrom year to year. increasing the real pension age in the Group. The intention of the new policy is to reduce the need for recruitment and take advantageEach subsidiary in SpareBank 1 Gruppen has its own working- of useful expertise.environment committee. The assigned safety personnel in eachsubsidiary make an active contribution as well, and a central Of the Group’s employees, 47% are women and 53% are men.Workplace Anti-Alcoholism and Drug Addiction Dependency 5.2% of all female employees work on a part-time basis, comparedCommittee have been appointed. with 1.5% of the male employees. In the Group Management, two out of nine members are women, and in the Alliance Management,SpareBank 1 Gruppen continued the agreement on an Inclusive two out of eight members are women. The central managementWorkplace. Absence due to sickness was 3.7% in 2010. These rates groups in the parent company and subsidiaries have 23% femaleare among the lowest in the industry. Physician reported absence was representation overall. There were two women among the eight
    • 15members of the Executive Board at the end of the year, while female social progress andrepresentation on the subsidiary boards was 34% overall. positive influence in societySpareBank 1 Gruppen uses a method for reviewing roles and Our goal is to make money, but value creation has to be in line withpositions to ensure objective wage setting. The placing in wage sustainable development. Our social commitment is thus aboutcategories is done with sex neutral tool for position evaluations. how value is created.In connection with the annual evaluations of salary, equal payassociated with work of equal value is a topic. The main cause why We are committed to take into account how our behaviour affectsthe wage level is somewhat higher for men than women in the people, the environment and the society. This responsibilityGroup is that there are more men than women in management and makes demands beyond the laws, which the financial markets arespecialist positions. Analysis related to equal opportunities and subject to. Social Responsibility covers everything from investmentpay is conducted in the HR reporting of the Group and deviations management to labour rights.are reported to Group Management. Social Responsibility is also about fraud and injury preventionAs a member of the Norwegian Financial Services Association, measures, protection of life, health and values, good products toSpareBank 1 Gruppen AS has participated in the FUTURA customers, business ethics, environmental impact, credit policies,programme. This is a development programme that aims to attitudes and local involvement.increase the share of women in the recruitment basis for leadingpositions. An active community involvement consists of a long-term perspective on all aspects and consequences of business inAttractive employer society.SpareBank 1 Gruppen experiences an increased interest by youngemployees. This is a result of the fact that the Group has a strong Environment and climate accountingbrand in the SpareBank 1-name and the activities that are carried out Although SpareBank 1 Gruppen does not pollute in the sameto market the Group as an attractive employer at universities and way as traditional industry, we have an impact on the environmentcolleges. SpareBank 1 Gruppen recruited 153 new employees in - both directly and indirectly. This includes waste, energy use, travel,2010. The majority of those employed had at least three years of transportation, materials, procurement and water consumption.education beyond high school. Most new employees were aged 26to 35 years, but the Group has recruited employees of all ages in SpareBank 1 Gruppen will, for the third consecutive year, prepare2010. The average age of employees in SpareBank 1 Gruppen a climate accounting based on the total energy consumption relatedwas 42.1 years at the end of 2010. to daily operations.SpareBank 1 Gruppen AS was selected as the twelfth most attractive The climate accounting will be presented at:employer among people having worked 2-5 years. This is an http://investor.sparebank1.noimprovement from the thirtieth place in 2009, and SpareBank 1Gruppen was this year’s climber. Community involvement SpareBank 1 Gruppen is involved in the micro credit companyEfforts to emerge as an attractive employer with exciting career Kolibri Kapital. Micro credit consists of small loans to the under-opportunities and competitive terms will continue in 2011. privileged and enterprising individuals in developing countries, for the development of business activity or improvement of housing conditions. Kolibri Capital collects money in Norway throughSOCIAL RESPONSIBILITY an ongoing expansion of its share capital. This is in its entiretySpareBank 1 Gruppen has the following definition of community loaned out to micro-banks in South Africa, Asia and Southinvolvement: America. SpareBank 1 Gruppen contributes with share capital.«We are committed to contribute to sustainable economic develop-ment together with our employees, their families, the communityand society in general to improve the quality of life for most CHANGES TO THE BOARD AND EXECUTIVE MANAGEMENTpeople». This work is based on four principles: Hans Olav Karde, CEO of SpareBank 1 Nord-Norge, was elected Chairman of the Board in April 2010. He succeeded Harry economic growth, Konterud who had been Chairman of the Board since April 2009. environmental balance, Harry Konterud resigned from the Board in April 2010, and
    • 16 SpareBank 1 GruppenRichard Heiberg, who took over as CEO of Sparebanken Hedmark Livsforsikring AS. It is the opinion of the Board that SpareBank 1after Harry Konterud, was elected. On January 26, 2011 Tor-Arne Gruppen is well capitalised to meet anticipated requirements inSolbakken, Vice Chairman of the LO, replaced Bente N. Halvorsen, connection with the Solvency II framework.as a member of the Board. At the same time Terje Varebergresigned from the Board. Arne Austereid, who took over as CEO Argo Securities AS, the Groups investment and brokerage house,of SpareBank 1 SR-Bank on January 1, 2011 after Terje Vareberg, has not yet achieved satisfactory profitability. Actions have beenwas elected as Vice Chairman of the Board. taken to address this area and are expected to yield results in 2011. Significant investment costs in the company imply thatWithin Group Management there were two changes during 2010. profitability will be achieved in the medium to long run.Jarle Haug was appointed CEO of SpareBank 1 Gruppen Finans ASfrom January 2010 and became a member of Group Management. SpareBank 1 Gruppen is exposed to the securities market throughØyvind Aass, head of the alliance partnership, joined the Group its various subsidiaries and thus the development in stock pricesManagement from May 2010. He has led the alliance partnership and interest rates affect the earnings of the Group to a large extent.since December 2007. The outlook for the Norwegian economy in 2011 is good. Growth in the mainland economy is expected to be 3%, driven by increased private consumption and rising investment. For households, thereOUTLOOKS is increasing optimism grounded in low unemployment, low2010 was a profitable year for SpareBank 1 Gruppen. Return on interest rates and low inflation that is already contributing toequity was in the top league of financial service companies in the increased purchasing power of households. Norges Bank willNordic countries due to good earnings in the major product probably increase interest rates gradually and in small steps backcompanies, aided by favourable investment markets, the to a more normal level over the next 2-3 years. Favourable macro-profitability program, Delta, and one-off effects. The profitability economic conditions and expected good performance in theprogram has also helped improve the underlying operations. securities market will provide Sparebank 1 Gruppen basis for continued growth, and the board expects a good result in 2011.The pension reform will increase focus on the need for ownretirement savings. It is the opinion of the Board, thatSpareBank 1 Gruppen is well positioned to increase business A WORD OF GRATITUDEvolume in this area. The employees have shown a strong willingness to «go the extra mile» in 2010. Collaboration with the employee organizationsDuring 2010, the Groups capacity to bear risk further improved, was close and productive. The Board is highly satisfied with thedue to a number of factors such as the strengthening of the securities results for 2010 and would like to extend thanks to all the employeesadjustment reserves and additional provisions in SpareBank 1 of SpareBank 1 Gruppen for their excellent efforts. Oslo, 31. March 2011 Hans Olav Karde Arne Austereid Bjørn Engaas CHAIRMAN OF THE BOARD Finn Haugan Knut Bekkevold Richard Heiberg Tor-Arne Solbakken Venche Johnsen Kirsten Idebøen CHIEF EXECUTIVE OFFICER NOTE: This translation from Norwegian has been prepared for information purposes only.
    • Financial statements 2010SpareBank 1 Gruppen
    • 18 SpareBank 1 Gruppen SPAREBANK 1 GRUPPEN – INCOME STATEMENT Parent company Group 2010 2009 NOK 1,000 Note 2010 2009 - - Gross Insurance premium revenue 8 213 841 7 556 607 - - - reinsurers share 535 217 488 185 - - Net insurance premium revenue 7 7 678 624 7 068 422 15 920 31 437 Interest income 98 447 1 066 328 61 422 63 318 Interest expense 85 196 798 280 -45 502 -31 881 Net interest income 9 13 251 268 049 - - Fee and commission income 715 505 855 270 - - Fee and commission expense 846 205 752 100 - - Net fee and commission income 8 -130 700 103 170 -1 310 - Net gains in financial assets designated at fair value 9 1 547 267 2 443 931 3 641 18 245 Net gains in financial instruments classified as avalable-for-sale 9 30 596 48 046 - - Net income from bonds at amortised cost 9 75 049 3 362 - - Net income from bonds held-to-maturity 9 259 255 271 779 - - Net income from investment properties 10 399 410 306 848 606 274 203 442 Share of profit and group contribution from subsidiaries - - 4 - Other operating income 11 384 321 324 887 563 107 189 807 Total income 10 257 073 10 838 494 - - Insurance benefits and claims 7 496 694 7 013 788 - - Insurance claims recovered from reinsurers -488 154 -331 006 - - Securities adjustment reserve for life insurance 289 732 327 145 - - Transferred to policyholders - life insurance 142 363 170 766 - - Allocation to additional provisions - 127 918 - - Net loan loss provisions 29 10 405 123 168 -25 957 21 850 Operating expenses 12 1 674 173 2 077 123 33 325 31 718 Depreciations and amortisation expenses 14, 15, 18 91 300 124 317 276 3 261 Other operating expenses 55 427 11 226 7 644 56 829 Total operating Expenses 9 271 940 9 644 445 555 463 132 978 Operating Profit 985 133 1 194 049 Share of profit of associates and jointly controlled entities accounted - - for by the equity method 17 - -386 555 463 132 978 Profit before tax 985 133 1 193 663 109 008 115 731 Income tax expense 50 153 586 294 020 446 455 17 247 Profit after tax 831 547 899 643 Profit attributable to: Shareholders of the parent company 841 025 909 115 Minority interests -9 478 -9 472 Earnings per share (expressed in NOK) 467 505 Diluted earnings per share (expressed in NOK) 472 510
    • 19SPAREBANK 1 GRUPPEN – STATEMENT OF COMPREHENSIVE INCOMEConsolidated statement of income, expenses and value changeGroupNOK 1,000 2010 2009Profit for the year 831 547 899 643Actuarial gains and losses in pension -76 215 -9 477Revaluation of property -12 656 1 595Adjustment of insurance liabilities 3 228 -819Change in available-for-sale financial assets -814 -594Income tax 23 980 2 436Total complrehensive income for the year 769 070 892 784Shareholders of the parent company 778 548 902 256Minority interests -9 478 -9 472Parent companyNOK 1,000 2010 2009Profit for the year 446 455 17 247Actuarial gains and losses in pension -1 057 -12 567Income tax 296 3 519Total comprehensive income for the year 445 694 8 199
    • 20 SpareBank 1 Gruppen SPAREBANK 1 GRUPPEN – CONSOLIDATET BALANCE SHEET Parent company Group 31.12.10 31.12.09 NOK 1,000 Note 31.12.10 31.12.09 ASSETS 93 664 101 933 Deferred income tax asset 50 - - - - Goodwill 5, 14, 52 850 819 760 486 - - Other intangible assets 15 142 933 63 880 4 469 691 5 042 709 Investment in subsidiaries 16 - - 10 147 18 000 Investment in associates and jointly controlled entities 17 9 010 120 553 127 501 76 955 Property, plant and equipment 18 1 340 389 526 991 - - Reinsurance receivables 40 1 494 338 1 150 842 - - Insurance receivables from policyholders 41 1 394 441 1 108 015 243 351 193 758 Other assets 19 616 077 482 731 - - Investment property 27 4 094 812 4 690 887 - - Bonds held to maturity 20, 25, 26, 31 4 679 131 5 020 382 - - Bonds at amortised cost 20, 25, 26, 31 1 249 291 764 626 17 583 15 335 Financial instruments - available for sale 20 ,21, 24, 31 20 216 42 944 122 580 250 000 Lending to customers and deposits with credit institutions 20, 21, 26, 28, 31, 33 658 452 21 280 928 - - Financial instruments designated at fair value 20, 21, 22, 31 23 024 332 23 938 155 692 - Derivative financial instruments 20, 21, 23 130 605 220 787 93 520 101 198 Cash and cash equivalents 20, 26 985 375 1 294 653 5 178 729 5 799 888 TOTAL ASSETS 40 690 221 61 466 859 EQUITY AND LIABILITIES 2 030 277 2 609 496 Shareholders equity 2 030 277 2 609 496 727 859 822 945 Retained earnings 2 691 636 2 588 291 - - Revaluation reserve 71 454 65 221 - - Minority interests 15 446 30 300 2 758 136 3 432 441 Total equity 4 808 813 5 293 308 433 846 683 892 Subordinated loan capital and perpetual subordinated loan capital securities 20, 32, 37 848 846 1 769 568 - - Securities adjustment reserve 616 870 327 145 - - Provisions in life insurance 42 22 315 681 20 843 433 - - Premium and claims provisions in P&C Insurance 43 8 067 303 6 821 960 74 966 103 318 Net retirement benefit obligations 48 325 355 460 453 - - Deferred income tax liability 50 253 417 155 643 - - Payable taxes 50 85 081 137 653 1 376 914 500 531 Securities issued 20, 21, 32, 38 1 376 914 6 880 478 - - Liabilities related to reinsurance 44 77 706 95 123 - - Derivative financial instruments 20, 21, 23 160 265 219 064 534 867 578 005 Other liabilities 51 1 129 898 1 004 101 - 501 700 Deposits from and liabilities to customers and credit institurions 20, 21, 32, 36 624 072 17 458 930 5 178 729 5 799 888 TOTAL EQUITY AND LIBILITIES 40 690 221 61 466 859 Oslo, 31. March 2011 Hans Olav Karde Arne Austereid Bjørn Engaas CHAIRMAN OF THE BOARD Finn Haugan Knut Bekkevold Richard Heiberg Tor Arne Solbakken Venche Johnsen Kirsten Idebøen CHIEF EXECUTIVE OFFICER NOTE: This translation from Norwegian has been prepared for information purposes only.
    • 21CONSOLIDATED STATEMENT OF CASH FLOW Parent company Group** 2010 2009 NOK 1,000 Note 2010 2009 CASH FLOWS FROM OPERATING ACTIVITIES 446 455 17 247 Profit after tax 831 547 899 643 - - Share of profit or loss from associates and jointly controlled entities accounted for by the equity method 17 - -386 33 325 31 718 Depreciation and amortisation 15, 18 91 300 124 317 - - Revision of investment property values 27 -148 187 18 077 - - Net loan loss provisions 29 10 388 123 168 - - Increase reinsurance receivables 40 -343 496 -50 880 - -50 000 Increase in lending to customers 28, 29 - -1 153 527 127 420 100 000 Reduction in lending to customers 28 20 612 088 - - - Change in insurance provisions 3 007 315 2 561 504 -566 029 -68 660 Change in accrued expenses and prepaid revenues -650 891 286 627 Increase in deposits from customers and loans and - - deposits from credit institutions - 454 978 Reduction in deposits from customers and loans and -501 700 -9 353 deposits from credit institutions 36 -16 834 858 - -460 529 20 952 Net cash flow generated from operating activities 6 575 207 3 263 521 CASH FLOWS FROM INVESTING ACTIVITIES -692 - Increase in financial instruments designated at fair value 22, 23 - -4 871 025 - - Reduction of financial instruments designated at fair value 22 1 004 005 - - - Increase in financial instruments held to maturity -143 414 - - - Reduction of financial instruments held to maturity 26 - 147 718 - - Increase in financial instruments available for sale 24 - -12 595 256 034 203 384 Reduction of financial instruments available for sale 24 22 728 - -258 282 -218 566 Payment of group contributions * - - - - Additions investment property 27 -24 942 -48 015 - - Disposals and gain Investment property 27 803 601 - -50 546 -32 949 Increse property, plant and equipment 18 -872 245 -67 128 -53 486 -48 131 Net cash flow used in investing activities 789 733 -4 851 045 CASH FLOWS FROM FINANCING ACTIVITIES - - Receipts on subordinated loan capital 37 - 535 100 -250 046 - Payments related to redemption of subordinated loan capital 37 -920 722 -100 000 - 176 000 Receipts on new equity - 176 000 - - Effect of demerged of Bank 1 Oslo AS 53 -1 129 932 - -120 000 -800 000 Dividends -120 000 -800 000 876 383 - Increase of securities issued 38 - - - - Reduction of securities issued 38 -5 503 564 919 230 506 337 -624 000 Net cash flow from financing activities -7 674 218 730 330 -7 678 -651 179 Net receipts/payments of cash -309 278 -857 194 101 198 752 377 Cash and cash equivalents as at January 1 1 294 653 2 151 847 93 520 101 198 Cash and cash equivalents as at December 31 20, 26 985 375 1 294 653* The group contribution payment is registrered as an increase in subsidiary investment. Other granted and received group contribution is recognised through profit and loss, and is not presented here.** Group consolidated exclusive Bank 1 Oslo AS per December 31, 2010, is showed in note 54.
    • 22 SpareBank 1 Gruppen STATEMENT OF CHANGES IN EQUITY Parent company Share premium Retained Total NOK 1,000 Note Share capital reserve earnings equity Equity as at 31 December 2008 1 747 200 986 296 1 375 944 4 109 440 Profit for the year - - 17 247 17 247 Actuarial gains and losses on pension - - -9 048 -9 048 Capital increase 35 200 140 800 - 176 000 Capital reduction - -300 000 300 000 - Dividends - - -800 000 -800 000 Other postings through equity - - -61 199 -61 199 Equity as at 31 December 2009 1 782 400 827 096 822 945 3 432 441 Profit for the year - - 446 455 446 455 Actuarial gains and losses on pension - - -761 -761 Capital increase - - - - Capital reduction/demerger of Bank 1 Oslo AS - -579 219 -420 781 -1 000 000 Dividends - - -120 000 -120 000 Other postings through equity - - - - Equity as at 31 December 2010 1 782 400 247 877 727 859 2 758 136 Group Non- Share premium Retained Revaluation controlling Total NOK 1,000 Note Share capital reserve earnings reserve interests equity Equity as at 31 December 2008 1 747 200 986 296 2 211 791 66 048 42 825 5 054 160 Profit for the year - - 909 115 - -9 472 899 643 Actuarial gains and losses in pension - - -6 853 - - -6 853 Revaluation property - - - -827 - -827 Financial assets available for sale - - -594 - - -594 Capital increase 35 200 140 800 - - - 176 000 Capital reduction - -300 000 300 000 - - - Dividends - - -800 000 - - -800 000 Disposal minority interest - - - - -3 054 -3 054 Other postings thorugh equity - - -25 167 - - -25 167 Equity as at 31 December 2009 1 782 400 827 096 2 588 291 65 221 30 300 5 293 308 Profit for the year - - 841 025 - -9 478 831 547 Actuarial gains and losses in pension - - -54 875 - - -54 875 Revaluation property - - - -9 112 - -9 112 Financial assets available for sale - - -814 - - -814 Capital increaes - - - - - - Capital reduction/demerger of Bank 1 Oslo AS - -579 219 -550 713 - - -1 129 932 Dividends - - -120 000 - - -120 000 Disposal minority interst - - - - -5 377 -5 377 Correction previous year - - -15 345 15 345 - - Other postings through equity - - 4 068 - - 4 068 Equity as at 31 December 2010 1 782 400 247 877 2 691 636 71 454 15 446 4 808 813
    • 23NotesNOTE 1 – GENERAL INFORMATION which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after January 1, 2010.As of December 31, 2010, SpareBank 1 Gruppen Group consisited ofthe parent company SpareBank 1 Gruppen AS and the wholly-owned The revised standard continues to apply the acquisition method tosubsidiaries; ODIN Forvaltning AS, SpareBank 1 Livsforsikring AS, business combinations but with some significant changes. The revisedSpareBank 1 Skadeforsikring AS, SpareBank 1 Medlemskort AS, standard requires that the effects of all transactions with non-Sparebankutvikling AS and SpareBank 1 Gruppen Finans AS, as well controlling shareholders be recorded in equity when there is noas Argo Securities AS with an owner share of 76,75%. change in control. Such transactions will no longer result in goodwill or gains or losses. When control ceases, remaining ownership interestSpareBank 1 Gruppen AS ownershare in Bank 1 Oslo AS was is measured at fair value and gains or losses are recognised through thedistributed to the SpareBank 1 banks (90%) and LO (10%) with effect income statement.from January 1, 2010. The revised standard requires goodwill to be determined only at theAlliansesamarbeidet SpareBank 1 DA is recognised through using acquisition date rather than at each step of the acquisition. Thethe equity method, and the Groups owner share is 10%. determination of goodwill includes the previously held equity interest to be adjusted to fair value, with any gain or loss recorded in theSpareBank 1 Gruppen AS has its office address in Tromsø, Norway. income statement. A contingent consideration will be recognised at fair value at the acquisition date. After the previous rules, the contingentSpareBank 1 Gruppen AS is a holding company that, through its consideration would have been recognized at the date when thesubsidiaries, provides and distributes products in the fields of life and probability requirement is not met. Transaction costs are expensed.P&C insurance, fund management, securities brokering, factoring, Previously these would have been included in the purchase price.receivables management and debt collection of old claims. The Groupsprimary market is Norway. IAS 24 ‘Related party disclosures’ (revised) supersedes IAS 24 issued in 2003. The standard is mandatory for accounting periods beginning onThe Groups consolidated financial statements have been authorised or after January 1, 2011. As permitted, the Group has opted for anfor issue by the supervisory board and the shareholders committee on earlier application of this standard. The revised standard clarifiesApril 27, 2011. The General Meeting is the Groups upper body. and simplifies the definition of related party, and removes the require- ment for government-related entities to disclose details of all trans- actions with the government and other government-related entities.NOTE 2 – SUMMARY OF SIGNIFICANTACCOUNTING POLICIES IAS 27 ‘Consolidated and separate financial statements’ (revised) requires the effects of all transactions with non-controlling interests toBasis of preparation for the consolidated financial statements be recorded in equity if there is no change in control. Such transactionsThe consolidated financial statement for SpareBank 1 Gruppen and the will no longer result in goodwill or gains and losses. The standard alsofinancial statement for the parent company for the fiscal year 2010 have specifies the accounting when control is lost. Any remaining interest inbeen prepared in accordance with International Financial Reporting the entity is re-measured to fair value, and a gain or loss is recognised inStandards (IFRS), which are approved by the EU, as well as in accordance profit or loss. IAS 27 (revised) has no impact on the current period, aswith existing additional Norwegian regulations. This also includes none of the non-controlling interests have a deficit balance; thereIFRIC (The International Financial Reporting Interpretations Committee) have not been transactions whereby an interest in the entity is retainedinterpretations and those of its predecessor SIC (The Standing Inter- after the loss of control of that entity, and there have not been trans-pretations Committee). action with non-controlling interests.The consolidated financial statements have been prepared under the New and amended standards, and interpretations adopted byhistorical cost principle, except for financial derivatives, financial the Group but not currently relevant (although they may affectassets and financial liabilities held at fair value through profit or loss the accounting for future transactions and events)and financial assets available-for-sale. Properties owned for the pur- IFRIC 9 ‘Reassessment of embedded derivatives’ (amended) andpose of gathering rent income or an increase in value are measured at IAS 39, ‘Financial Instruments: Recognition and measurement’. Thefair value according to IAS 40. amendment to IFRIC 9 requires an entity to assess whether an embedded derivative should be separated from a host contract whenThe preparation of financial statements in conformity with IFRS the entity reclassifies a hybrid financial asset out of the ‘fair valuerequires the use of certain critical accounting estimates. It also requires through profit and loss’ category. This assessment is to be made basedmanagement to exercise it judgement in the process of applying the on circumstances that existed on the later of: a) the date the entity firstGroup’s accounting policies. The areas involving a greater degree of became a party to the contract and b) the date of any contractjudgement or complexity, or areas where assumptions and estimates amendments that significantly change the cash flows of the contract.are significant to the consolidated financial statements are disclosed If a reliable measurement is not possible, the reclassification shouldin Note 4. not be made.The financial statements are presented based on IFRS standards and IFRIC 16 ‘Hedges of a net investment in a foreign operation’ (amended).interpretations mandatory for financial statements as of December The amendment states that, in a hedge of a net investment in a foreign31, 2010. operation, qualifying hedging instruments may be held by any entity or entities within the Group, including the foreign operation itself,New and amended Standards adopted by the Group as long as the designation, documentation and effectivenessThe Group has in 2010 adopted the following new standards and requirements of IAS 39 that relate to a net investment are satisfied. Inamendments: particular, the Group should clearly document its hedging strategy due to the possibility of different designations at different levels of theIFRS 3 ‘Business Combinations’ (revised) and consequential amend- Group.ments to IAS 27 ‘Consolidated and separate financial statements’,IAS 28 ‘Investments in associates’, and IAS 31 ‘Interests in joint IAS 38 ‘Intangible Assets’ (amended) clarifies the requirements for fairVentures’ are effective prospectively to business combinations for value measurement of intangible assets acquired through business
    • 24 SpareBank 1 Gruppen combinations. In particular cases, intangible assets with similar economic permitted to recognise as an asset some voluntary prepayments for lives can be treated as a single asset. minimum funding contributions. The amendments are effective for annual periods beginning January 1, 2011. Earlier application is IAS 1 ‘Presentation of Financial Statements’ (revised). The revised permitted. The amendments should be applied retrospectively to the standard requires that income and expense items previously recognized earliest comparative period presented. The Group will apply these directly in equity should be presented in the statement of compre- amendments for the financial reporting period commencing on hensive income. In the equity statement, transactions with owners and January 1, 2011. income and expense items are presented separately and as previously, categorized according to type of equity. Comparative figures have The annual improvements for 2010 have resulted in a number of been modified for consistency with the revised standard. The change minor changes to the following standards and interpretations that affects only the presentation and not earnings per share. can be of relevance for the entity: IFRS 1, IFRS 3, IFRS 7, IAS 1, IAS 27, IAS 34 and IFRIC 13. The improvements in IFRS 3 and IAS 27 apply IAS 36 ‘Impairment’. The amendment clarifies that the largest cash- to annual periods beginning July 1, 2010. The remaining changes are generating unit (or Group of units) to which goodwill should be allo- effective for annual periods beginning January 1, 2011. The changes cated for the purposes of impairment testing is an operating segment, have not yet been endorsed by the EU. as defined by paragraph 5 of IFRS 8, ‘Operating Segments’ (that is, be- fore the aggregation of segments with similar economic characteristics IFRS 7 ‘Financial instruments’ (amendment). The amendment as the referenced to IFRS 8, paragraph 12). introduces new disclosure requirements related to continued exposure to assets that are removed from the balance sheet and the transfer of IFRS 2 (amended) ‘Group cash-settled share-based payment’. In addition assets that remain completely or partially capitalized. The amendments to incorporating IFRIC 8, Scope of IFRIC 2 and IFRIC 11 IFRS 2 – are effective for annual periods beginning July 1, 2011. An entity will Group and Treasury share Transactions, the amendment involves an not be required to revise additional information related to the expansion in the guidance in IFRIC 11 regarding the accounting of providing of comparative disclosure. The amendment has not yet equity transactions in the consolidation. been endorsed by the EU. New standards, amendments and interpretations issued but not Presentation currency effective for the financial year and not early adopted Items included in the financial statements of each of the Group’s entities The impact of these changes is expected to be: are measured using the currency of the primary economic environment in which the entity operates («the functional currency»). Foreign IFRS 9 ‘Financial Instruments’ (new) is the first step in the process of currency transactions are translated into the functional currency using replacing IAS 39. IFRS 9 introduces new requirements for classifying the exchange rates prevailing at the dates of the transactions. The and measuring financial assets and liabilities, and is likely to affect the consolidated financial statements are presented in Norwegian kroner Group`s accounting of its financial assets. The standard is mandatory (NOK), which is the parent company’s functional currency and the from January 1, 2013, but can be adopted early. The standard has not Group’s presentation currency. Foreign companies in the Group having yet been endorsed by the EU. another functional currency are converted to NOK by converting income and expenses at average exchange rates for the year, while the The Group has not yet assessed the full effect of IFRS 9. However, assets and liabilities are converted at the exchange rate at the closing initial indications are that it may affect the Group’s accounting for its date. All resulting exchange differences are recognised in other debt available-for-sale financial assets, as IFRS 9 only permits the comprehensive income and are separately specified in the equity recognition of fair value gains and losses in other comprehensive statement. All amounts are presented in NOK thousands unless income if they relate to equity investments that are not held for trading. otherwise stated. Fair value gains and losses on available-for-sale debt investments, for example, will therefore have to be recognised directly in profit or loss. Consolidation a) Subsidiaries IAS 32 ‘Classification of rights issues’ (amendment). The amendment The consolidated financial statements include SpareBank 1 Gruppen applies to annual periods beginning on or after February 1, 2010. AS and all subsidiaries. Subsidiaries are all entities over which Earlier application is permitted. The amendment addresses the SpareBank 1 Gruppen has the power to govern the financial and accounting for rights issues that are denominated in a currency other operational policies generally accompanying a shareholding of more than the functional currency of the issuer. Provided certain conditions than one half of the voting rights. Subsidiaries are fully consolidated are met, such rights issues are now classified as equity regardless of from the date on which control is transferred to the Group. They are the currency in which the exercise price is denominated. Previously, de-consolidated from the date on which control ceases. these issues had to be accounted for as derivative liabilities. The amendment applies retrospectively in accordance with IAS 8 The Group uses the acquisition method of accounting to account for ‘Accounting policies, changes in accounting estimates and errors’. business combinations. The consideration transferred for the acquisition The Group will apply the amended standard from January 1, 2011. of a subsidiary is the fair values of the assets transferred. Identifiable assets acquired and liabilities and contingent liabilities incurred or IFRIC 19, ‘Extinguishing financial liabilities with equity instrument’ assumed are measured initially at their fair values at the acquisition becomes effective July 1, 2010. The interpretation clarifies the accoun- date, irrespective of the extent of the minority interests. The excess of ting by an entity when the terms of a financial liability are renegotiated the cost of acquisition over the fair value of the Group’s share of the and result in the entity issuing equity instruments to a creditor of the identifiable net assets acquired is recorded as goodwill. If the cost of entity to extinguish all or part of the financial liability (debt for equity acquisition is less than the fair value of the net assets of the subsidiary swap). It requires a gain or loss to be recognised in profit or loss, which acquired, the difference is recognised directly in the income statement. is measured as the difference between the carrying amount of the Significant inter-company transactions and balances are eliminated. financial liability and the fair value of the equity instruments issued. If the fair value of the equity instruments issued cannot be reliably The effects of all transactions with minority interests are recorded to measured, the equity instruments should be measured to reflect the fair equity when there is not a change in control. Such transactions will value of the financial liability extinguished. The Group will apply the no longer result in goodwill or gains or losses. When control cedes, the interpretation from January 1, 2011, subject to endorsement by the EU. remaining ownership interest shall be measured to fair value, and gains It is not expected to have any impact on the Group or the parent and losses recorded to income or loss. entity’s financial statements. b) Associates IFRIC 14 ‘Prepayment of a minimum funding requirement’ (amendment). Associates are all entities over which the Group has significant The amendments correct an unintended consequence of IFRIC 14, ‘IAS influence but not control, generally accompanying a shareholding of 19 - The limit on a defined benefit asset, minimum funding require- between 20% and 50% of the voting rights. Investments in associates are ments and their interaction’. Without the amendments, entities are not accounted for by the equity method of accounting and are initially
    • 25recognised at cost. The Group’s investment in associates includes The Group has financial assets held for trading, voluntarily designatedgoodwill identified on acquisition, net of any accumulated impairment at fair value through income, loans and receivables, investments heldloss. to maturity and securities available for sale. The main rule is to classify investments at fair value through income, either through held forThe Group’s share of its associates’ post-acquisition profits or losses trading or optional designation. This is consistent with the way theis recognised in the income statement and assigned a recognised investments are treated. Certain investments in bonds/commercialvalue of the investments together with share of comprehensive income papers are still designated in the categories loans and receivables orin the associate, and impacts of possible errors or amendments of held to maturity. This is done in connection with the transaction.principles. When the Group’s share of losses in an associate equals orexceeds its interest in the associate the Group does not recognise Ordinary purchases and sales of financial assets are recognised on thefurther losses. trade-date, the date on which the Group commits to purchase or sell the asset. Financial assets that are not carried at fair value through incomec) Jointly controlled entities are initially measured at fair value plus transaction costs that areJointly controlled activity can consist of jointly controlled operations, directly attributable to their acquisition. Financial assets carried at fairjointly controlled assets and jointly controlled entities. Joint control value through income are initially recognised at fair value, and trans-means that SpareBank 1 Gruppen through contract exercises control action costs are expensed in the income statement. Financial assets arein cooperation with other participants. Jointly controlled entities are derecognised when the rights to receive cash flows from them haveaccounted for by the equity method. expired or where they have been transferred and the Group has also transferred substantially all risks and rewards of ownership. FinancialInvestments in subsidiaries and associated accounted for in the assets available-for-sale and financial assets designated at fair valueparent company’s financial statements through income are subsequently carried at fair value. Financial assetsInvestments in subsidiaries and associates are stated at historical held-to-maturity are carried at amortised cost using the effective interestcost. If there is permanent decrease in value, an impairment of the method.shares will be done. Executed impairments will be reversed if the basisfor impairment is no longer present. Financial instruments and derivatives designated at fair value through incomeSegment reporting This category has two sub-categories: financial assets held for trading andOperating segments are reported in a manner consistent with the financial assets designated by the management at fair value throughinternal reporting provided to the chief operating decision-maker. income. A financial asset is classified into the ‘financial assets at fairThe chief operating decision-maker, who is responsible for allocating value through income’ category if acquired principally for the purposeresources to and assessing performance of the operating segments, has of selling in the short term, or designated as such by management.been identified as the Group Management. The Group`s operating Derivatives are also classified as held for trading unless they aresegments are divided into life insurance, P&C insurance, funds designated as hedges.management, brokering business, debt collection of old claims,factoring and other operations. The Group has no secondary segment Gains or losses from changes in fair value of assets classified asreporting. ‘financial assets at fair value through income’, including dividends, are included in the income statement under ‘Net income from financialLoans and receivables investments at fair value’ in the transaction period.Acquired PortfoliosAcquired Portfolios are non-derivative financial assets with payments Financial instruments available-for-salethat are fixed or determinable, and not quoted in an active market. Available-for-sale investments are non-derivative financial assetsThese are carried at amortized cost using the effective interest method. which are chosen to this designation or which are not classified in any another category. Financial assets classified in this category areReceivables related to Factoring measured at fair value, while the change in value from the openingAccounts receivable factoring is assessed in two ways. In cases where balance is recognised in the statement of comprehensive income.the factor has not taken over credit risk (risk of debtors insolvency) only Shares classified as available-for-sale in the Group are not activelythe part of the asset paid in advance on transferred receivables is traded in the market.capitalised as «Lending to customers and deposits with creditinstitutions». In cases where the factor receives the credit risk, the Held-to-maturity investmentsreceivable is not capitalised at a higher amount than the received Held-to-maturity investments are non-derivative financial assets listedcredit risk as «Lending to customers and deposits with credit on an active market with fixed or determinable payments and fixedinstitutions». Practically, it is difficult to book such receivables to the maturities that the Group’s management has the positive intention andcredit risk taken, when such a guarantee is an off-balance sheet ability to hold to maturity. These certificates and bonds areliability that is reported on a separate line under the liabilities side of carried at amortised cost using the effective interest rate method.balance. We have brought claims for which credit is taken over by thegross amount as the item «Lending to customers and deposits with Impairment testingcredit institutions». The part of these accounts receivable that are not The Group assesses at the end of each reporting period whether therefinanced is listed under item «Margin payments and other accounts exists objective evidence that a financial asset or group of financialarrangements with customers», in the balance post «Other liabilities». assets has been impaired. For shares classified as available for sale, a significant or prolonged decline in the fair value of the security belowProvisions for loss its cost gives objective evidence of impairment. If any such quantitativeProvisions for loss on loans and collateral (debtors) are listed under the evidence exists for financial assets available-for-sale, the total loss –item «write-downs/loan loss provisions». measured as the difference between the acquisition cost and the current fair value, less any impairment loss on that financial assetLoans and receivables previously recognised in profit or loss – is removed from equity andLoans and receivables are non-derivative financial assets with pay- recognised in the consolidated income statement. Impairment lossesments that are fixed or determinable, and that are not quoted in an on equity instruments and similar instruments, recognised in theactive market. Loans and receivables are carried at amortized cost consolidated income statement are not reversed.using the effective interest method. If in a subsequent period the fair value of a debt instrument held toOther receivables maturity classified as available for sale increases and the increasementOther receivables are stated at nominal value less provisions for can be objectively related to an event occurring after the impairmentexpected losses in the balance sheet. Provisions for losses are made on loss was recognised in profit or loss, the impairment loss is reversedthe basis of individual assessment of each receivable. through the consolidated income statement.Securities and derivatives The recoverable amount for investments in bonds held to maturity is
    • 26 SpareBank 1 Gruppen calculated at the present value of future expected cash flows discounted directly attributable to the design and testing of identifiable and unique at the latest fixed effective interest rate (i.e. the effective interest rate software products controlled by the Group are recognised as intangible calculated at initial recognition of these financial assets). assets when the following criteria are met: • It is technically feasible to complete the software product so that it When financial assets classified as available-for-sale are sold or will be available for use; impaired, total value regulation in the equity statement is recognised • Management intends to complete the software product and use or sell it; in the income statement as gain or loss from investments in financial • There is an ability to use or sell the software products; assets. Dividends from shares classified as available-for-sale are • It can be demonstrated how the software product will generate recognised through profit and loss when the Group’s entitlement to the probable future economic benefits; dividends is determined. • Adequate technical, financial and other resources to complete the development and to use or sell the software product are available; and The fair value of listed investments is based on current purchase • The expenditure attributable to the software product during its price. If the market for the financial assets is inactive (or non-listed development can be reliably measured. financial asset), valuation methods are used to determine the fair value. These methods refer to recently completed transactions at Directly attributable costs that are capitalised as part of the software market terms, other similar comparable instruments, use of discounted product include costs related to software development employees cash flow analysis or option pricing models. These techniques place and an appropriate portion of relevant overhead. Other development greatest emphasis on market information and least importance on expenditures that do not meet these criteria are recognised as an company specific information. expense as incurred. Development costs previously recognised as an expense are not recognised as an asset in a subsequent period. Computer Bonds that the Group intends to hold to maturity, but that do not fulfil software development costs recognised as assets are amortised over the requirements for hold-to-maturity portfolios in IAS 39 for being their estimated useful lives. listed on an active market etc, are classified separately in the balance sheet as, «Bonds at amortised cost». Other intangible assets In connection with acquisition of entities, excess value analysis is per- Derivatives formed and identifiable intangible assets are recognised in the con- Derivatives consist of currency and interest instruments, and structured solidated balance sheet. The Group identified excess values linked to instrument products. Derivatives are recognised at fair value through earn-out contracts, trademarks and contractual customer relation- income at the transaction date. Subsequent changes in the fair value ships. The excess values are calculated based on projected historical are recognised through profit or loss. data, and adjusted for uncertainty before being discounted. These values are amortised over the related contracts’ average useful lives. Intangible assets Goodwill Subsequent expenses Goodwill represents the excess of the cost of an acquisition over the fair Subsequent expenses regarding capitalised intangible assets are only value of the Group’s share of the net identifiable assets of the acquired capitalised when they increase the future financial benefit related to this subsidiary or associate at the acquisition date. Goodwill as a result of the asset. All other costs are expensed as incurred. acquisition of subsidiaries is classified as an intangible asset. Goodwill is tested annually for impairment and carried at cost less accumulated Depreciations impairment losses. Impairment of goodwill is not reversible. Gains and Depreciation of intangible assets is calculated using the straight-line losses on the disposal of an entity include the carrying amount of good- method to allocate their cost over their estimated useful life, unless will relating to the entity sold. Goodwill is allocated to cash-generating their useful life is indefinite. Intangible assets are depreciated from the units or Group of cash-generating units for the purpose of impairment date they are available for use. testing. The cash-generating units or Group of cash-generating units are expected to benefit from the acquisition that generated goodwill. Intangible assets except for goodwill and time indefinite intangible assets have an estimated useful life of between 2 and 10 years. Research and development Research expenses carried out with an expectation of gaining new Intangible assets except for goodwill and indefinite life intangible scientific or technical knowledge and understanding are recognised as assets are subject to impairment testing in accordance with IAS 36 expenses in the consolidated income statement the period the expenses when indications of impairment are present. accrue. Expenses related to development activities, where the research results are used in a plan or model for production of new or significantly Property, plant and equipment improved products or in processes, are capitalised if the product or The Groups’ property, plant and equipment consist of machines, process is technical and commercially plausible. Capitalised furniture, means of transport and buildings occupied by the Group for expenses include material costs, direct labour costs and a share of the its own operations. Buildings are shown at fair value, based on annual joint expenses. Other development expenses are recognised in the valuations by an internal valuation model described under the section consolidated income statement the period the expenses accrue. ‘Investment property’. The valuation is compared to external valuation Capitalised development expenses are recognised in the balance appraisals on a regular basis. Buildings are depreciated subsequent of the sheet at acquisition cost less accumulated depreciations and impairment valuation. All other property, plant and equipment are stated at historical costs. cost less depreciation. Historical cost includes expenditure that is directly attributable to the acquisition of the items. Licences Licences have a finite useful life and are carried at cost less accumulated Subsequent costs are included in the asset’s carrying amount or recog- amortisation and impairment. Amortisation is calculated using the nised as a separate asset, as appropriate, only when it is probable that straight-line method to allocate the cost of licences over its expected future economic benefits associated with the item will flow to the Group useful life. and the cost of the item can be measured reliably. All other repairs and maintenance are charged to the income statement as incurred. Computer software Standard computer software fulfilling capitalisation criteria are carried at Increases in the carrying amount arising on the revaluation of buildings acquisition cost (including implementation expenses), and depreciated are credited to the revaluation surplus in shareholders’ equity. using the straight-line method such that the cost is allocated over Decreases that offset previous increases of the same asset are charged expected useful life. The policies for computer software development against fair value provisions accordingly. Each year, the difference largely follow those as described for Research and Development. between depreciation based on the revaluated carrying amount of the asset charged to the income statement and depreciation based on the Costs associated with maintaining computer software programmes are asset’s original cost, net of any related deferred income tax, is trans- recognised as an expense as incurred. Development costs that are ferred from the revaluation surplus to retained earnings.
    • 27Depreciation is calculated using the straight-line method to allocate In assessing the probability of historical earnings and expected earnings,their cost or revaluated amounts to their residual values over their future margins will be assumed.estimated useful lives, as follows: Deferred income tax is provided on temporary differences arising onBuildings: 50 years investments in subsidiaries and associates, except where the GroupMachines, furniture and means of transportation: 3-10 years controls the timing of the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeableProperty, plant and equipment under depreciation are considered for future.impairment when there exists indication that future cash flows can-not recover the asset’s carrying amount. An impairment loss is recog- Deferred tax arising on changes in value of properties owned by Specialnised for the amount by which the asset’s carrying amount exceeds its Purpose Entities (SPE) is not calculated. Realisation of the properties willrecoverable amount. The recoverable amount is the higher of an asset’s in practice be through the disposals of stocks or shares. Potential gainsfair value less costs to sell and value in use. The possibility of or losses at realisation of shares will not be taxable under «the taxationreversing previous write-downs of non-financial assets is considered exemption principle» in the Norwegian tax regime. Therefore it is, in theat each reporting date. Group’s opinion that the deferred tax should not be recognised on such value fluctuations.Investment propertyProperty held for long-term rental yields that are not occupied by the Deferred income tax assets and liabilities are offset when there is acompanies within the Group are classified as investment property. legally enforceable right to offset current tax assets against current taxInvestment property is carried at fair value. Changes in fair value are liabilities and when the deferred income taxes assets and liabilitiesrecognised in the consolidated income statement. The properties are relate to income taxes levied by the same taxation authority on eitherassessed individually based on the projected discounted future cash flow. the taxable entity or different taxable entities where there is an intentionThe rate of return considers the interest rate, the overall risk in the real to settle the balances on a net basis.estate market and the property specific risk. To support the internal valu-ations they are compared to external valuations of the properties. The Long term fundingfair value calculation is updated every six months. Rental income, Funding is initially recognised at the fair value of the received com-operating expenses and the effect of changes in investment property pensation less transaction costs. Funding at fixed-rate is measured atvalue are separately disclosed in note 10 and 27. fair value through the consolidated income statement, while funding with floating rate is measured at amortised cost. Any difference bet-Impairment of non-financial assets ween initial recognition and the settlement amount at maturity willGoodwill and assets that have an indefinite useful life are not subject thus be accrued over maturity by means of the funding’s effective interestto amortisation but are tested annually for impairment. Assets that are rate.subject to amortisation are reviewed for impairment whenever eventsor changes in circumstances indicate that the carrying amount may not Pensionsbe recoverable. An impairment loss is recognised for the amount by The Group has both defined contribution schemes and definedwhich the asset’s carrying amount exceeds its recoverable amount. The benefit schemes. The pension schemes are financed via payments torecoverable amount is the higher of an asset’s fair value less costs to SpareBank 1 Livsforsikring AS.sell and value in use. For the purposes of assessing impairment, assetsare grouped at the lowest levels for which there are separately In the defined contribution scheme, the Group pays fixed contributionsidentifiable cash flows (cash-generating units). The possibility of to the insurance company. The Group has no legal or other liabilitiesreversing previous write-downs of non-financial assets (except good- to pay further contributions if the insurance company does not havewill) is considered at each reporting date. enough means to pay all employees benefits related to earning in current and previous periods. The contributions are accounted for asCash and cash equivalents employee benefit expenses as they fall due.Cash and cash equivalents includes cash in hand, deposits held at call withbanks, other short-term highly liquid investments with original A defined benefit scheme is a pension scheme defining a pensionmaturities of three months or less, and bank overdrafts. Bank overdrafts benefit that an employee will receive upon retirement. The Group’sare presented on the line «Deposits from and liabilities to customers and benefit based scheme guarantees the members a retirement benefit ofcredit institutions». 70% of their salary up to a limit of 12 G (National Insurance Scheme’s basic amount). Salary exceeding 12 G is secured through a contributionCurrent and deferred income tax based scheme. Entrance to the defined benefit scheme was no longerThe tax expense for the period comprises current and deferred tax. Tax available for new employees from May 1, 2005.is recognised in the income statement, except to the extent that itrelates to items recognised in other comprehensive income or directly Additionally, there exist liabilities relating to «Contractual Earlyin equity. In this case, the tax is also recognised in other comprehensive Retirement» (AFP) and certain exceptional agreements on earlyincome or directly in equity, respectively. retirements and additional pensions.The current income tax charge is calculated on the basis of the tax The liability in the balance sheet related to benefit schemes is thelaws enacted or substantively enacted at the end of the reporting period. present value of the defined benefits on the balance sheet-date less fairDeferred income tax is recognised, using the liability method, on value of the pension liabilities, adjusted for differences on estimatestemporary differences arising between the tax basis of assets and liabi- not recognised through the income statement and costs on pensionlities and their carrying amounts in the consolidated financial statements. benefits earned in earlier periods. The pension liability is calculatedHowever, if the deferred income tax arises from initial recognition of an annually by an independent actuary using a linear earnings method.asset or liability in a transaction other than a business combination that The present value of the defined pension benefits is determined by dis-at the time of the transaction affects neither accounting nor taxable counting estimated future payments at Norwegian 10 year governmentprofit or loss, it is not accounted for. Deferred income tax is determined bond interest rate including a margin to consider relevant maturity onusing tax rates and laws that have been enacted or substantively the liabilities as of the balance sheet date.enacted by the end of the reporting period and are expected to applywhen the related deferred income tax asset is realised or the deferred Actuarial gains and losses due to new information or changes in theincome tax liability is settled. actuarial assumptions are recognised in the comprehensive income statement in the period they arise.Deferred income tax assets are recognised to the extent that it is probablethat future taxable profit will be available against which the temporary Changes in the pension scheme’s benefits are recognised through thedifferences can be utilised. income statement on an ongoing basis, unless the rights under the new pension scheme are conditional on continued service of the employee
    • 28 SpareBank 1 Gruppen in their current post for a specified period of time (the contribution The insurance provisions within life insurance consist of legal pro- period). In this case, the cost related to the benefit change is amortised vision and contingency provision. The legal provision includes the linearly over the contribution period. premium provision, additional provision, premium and pension regulation fund, claims provisions and other technical provisions. Law on state subsidies to workers who take out contractual early retire- ment in the private sector (AFP grants Act) came into force on February Important assumptions and changes in technical insurance terms: 19, 2010. Workers who take early retirement effective date in 2011 or The basic interest rate is continuously assessed based on the interest later, will be given benefits under the new scheme. The new pension rate on long term government bonds, according to the guidelines on scheme represents a lifelong premium on the National Insurance premium and insurance funds in life insurance. For life insurance poli- scheme and can be taken out from the age of 62. Employees annually cies taken out from January 1, 2006, the basic interest rate is 2.75 %. earn the right to early retirement with 0.314% of pension qualifying The basic interest rate for new group pension contracts sold from income up to 7.1 G up to 62 years. Accrual in the new scheme is cal- January 1, 2006 is 2.70%. The base interest rate for new contracts will culated on the basis of the workers lifetime income, so that all earlier be 2.5%, with effect from January 1, 2011, while the base interest rate working years are included in the accrual basis. The new scheme for new accrual for group pension contracts will be 2.5 % from will be financed by the state covering 1/3 of pension expenditure January 1, 2012. Else, the maximum allowed base interest rate that was and the employers covering 2/3 of pension expenditure. Employers applicable at the vesting date will be applicable for new accrual and premiums will be determined as a percentage of salaries between 1 G accrued rights. and 7.1 G. The mortality assumptions are principally based on common The new contractual early retirement scheme for accounting purposes research from the Norwegian Financial Services Association (FNH), is considered to be a defined benefit-based multi-employer scheme. while assumptions on disability are principally based on the This means that each enterprise will account for its proportionate share company’s own knowledge. Mortality assumptions take into account of the schemes pension liabilities, retirement funds and pension the correlation between disability and mortality. As of 2008, group costs. If no available calculations of the individual components of the defined benefit pension and paid-up policies from group defined scheme and a consistent and reliable basis for allocation exists, the new pensions, follow the new industry tariff K2005 with security pension scheme is recognized as a defined contribution scheme. margins that take into account increased life expectancy. Termination benefits The allocation of provisions and the premiums are determined Termination benefits are payable when employment is terminated by from the principle of security margins. The security margins are not the Group before the normal retirement date, or in situations where an quantified, but assessed by taking in contingent and long term employee accepts voluntary redundancy in exchange for these bene- liabilities into consideration. fits. The Group recognises termination benefits when it has demon- strably committed to either: terminate the employment of current The ordinary premium provision of the company is calculated employees according to a detailed formal plan without possibility of using prospective principles on the same tariff terms as the premium withdrawal; or provide termination benefits as a result of an offer made tariff. Provisions for IBNR and RBNS are allocated using statistical to encourage voluntary redundancy. Benefits falling more than 12 methods based on the company’s own knowledge. months after the date of the consolidated statement of financial posi- tion are discounted to present value. Securities adjustment reserve Allocations to the securities adjustment reserves is equal to net un- Subordinated loan capital and perpetual subordinated loan capital realised excess value on financial assets, except for property invest- Subordinated loan capital has last priority after other liabilities. Time ments, measured at fair value and is entered into the securities adjust- limited subordinated loan capital can account for 50 per cent of the core ment reserves of SpareBank1 Livsforsikring AS. Net unrealised value capital in the capital adequacy ratio, while perpetual subordinated loan is determined by a collective assessment of the portfolio. capital can account for up to 100 percent of the core capital adequacy ratio. Subordinated loan capital is classified as a liability in the balance sheet Insurance provisions P&C insurance and is measured at amortised cost. Insurance contracts are assessed in accordance with IFRS 4. The standard does not contain specific valuation principles beyond certain A perpetual subordinated loan capital security consist of capital limited conditions. Use of accounting principles employed by the securities with floating interest rates, where SpareBank 1 Gruppen is accounting unit in earlier financial statements is allowed conditional not obligated to pay interest in a period when one cannot pay upon that the insurance provisions are sufficient by Norwegian dividends. The investor has no subsequent liabilities on unpaid regulation, and are not used to cover future claims without contracts. interest, i.e. the interest does not accrue. Perpetual subordinated loan This indicates that previously employed principles related to insurance capital securities are approved as an element in the core capital wit- provisions for P&C insurance can be used. hin a limit of 15 per cent of total core capital. The Financial Super- visory Authority of Norway can require that the perpetual subordinated The Financial Supervisory Authority of Norway has developed mini- loan capital securities are impaired proportionally with the equity if mum requirements for the various provisions. Provisions are made to the core capital adequacy of SpareBank 1 Gruppen falls below 5 per unearned premium, claims provisions, security provisions, reinsurance cent or total capital adequacy falls below 6 per cent. Impaired amounts provisions and administration provisions. The minimum require- on the perpetual subordinated loan capital securities are to be written ments within premium and claims provision are also fulfilled per up before one can achieve payable dividends to the shareholders or industry and for the security provisions by industry group. before the equity can be written up. Perpetual subordinated loan capital securities are measured as long term liabilities at amortised cost. The guarantee provision is not considered as an insurance provision according to IFRS 4. This has been the Group’s policy since the imple- Insurance provisions life insurance mentation of IFRS in 2005. The guarantee scheme is meant to ensure All the lifeinsurance product groups are classified as insurance that insured under direct non-life insurance contracts in Norway contracts. Insurance contracts are assessed in accordance with IFRS 4. receive fulfilment of insurance claims according to the insurance The standard does not contain specific valuation principles beyond agreements. certain limited conditions. Use of accounting principles employed by the accounting unit in earlier financial statements is allowed condi- Based on new regulations on financial statements for insurance, the tional upon that the insurance provisions are sufficient by Norwegian Group has reclassified the natural catastrophe provision and the rules. To document this, the company must complete an adequacy test, administration provision. These provisions do not fulfil the liability which SpareBank 1 Livsforsikring AS completes annually. This definition according to IFRS and are thus transferred to equity indicates that previously employed principles related to insurance effective from January 1, 2007. provisions for life insurance can be used.
    • 29Reinsurance share of insurance technical provisions is disclosed as a The financial statements are presented under the assumption of goingreceivable in the IFRS consolidated accounts. concern. This assumption was in the board of director’s opinion present at the time of endorsement of the issuance.ProvisionsThe Group recognises provisions when there is a legal or self-imposed Share capital and share premiumliability due to previous events, and it is more likely than not that the Ordinary shares are classified as equity. Expenses directly related toliability will be at settlement through transfer of financial goods and issuance of new shares or deductible share options, are recognised asthe liability can be estimated at adequate degree of reliability. Provisions received compensation in the equity statement.are assessed at every balance-sheet date and are adjusted to reflect theupdated best estimate. Dividend distribution The board of director’s proposal of dividend distribution is specifiedWhen there are several liabilities with similar characteristics, the in the Board of Directors’ Report and statement of changes in equity.likelihood of settlement is determined by assessing the liabilities of this The proposed dividend for the shareholders of the parent company iskind as a whole. There is therefore made a provision even though the classified as equity until final acceptance at the Annual Generallikelihood of settlement related to each individual case can be low. Meeting. From the time of final acceptance the dividend is classified as a liability.Provisions are measured at the present value of expected future pay-ments required to meet the liability. An estimated risk fee interest rateis used as discount rate before tax reflecting current market situation NOTE 3 – FINANCIAL RISK MANAGEMENTand liability specific risk. Financial risk factorsAccounts payable and other short term commitments Note 3 – Financial risk management gives a description of the riskAccounts payable are recognised initially at fair value and subse- management processes in SpareBank 1 Gruppen. We present the over-quently measured at amortised cost determined by using the effective all organisation, responsibilities and purpose of risk managing, asinterest method. Accounts payable and other short term commit- well as the different risk categories, models in use and ongoing workments where the effect of amortisation is small, can be recognised at in connection with risk management in general. We refer directly to thecost. notes where quantitative presentations of each risk category as well as related sensitivity analysis are given. References to the specific notesDeposits from and liabilities to customers and credit institutions are commented where relevant.Deposits from and liabilities to customers and credit institutions areat large measured at amortised cost. Some smaller fixed-rate deposits A report has been written with the aim to cover part IX, chapter 45 andand lending are measured at fair value. 46 of the Norwegian Minimum Standards of Capital Adequacy (Pillar 3) and to cover the market’s request for higher transparency and open-Interest income and interest costs ness towards risk matters in general. A more detailed study of theInterest income and interest costs related to assets and liabilities mea- Group’s capital and risk matters is included in this report along withsured at amortised cost are recognised through the income statement a more in depth description of the models and guidelines for riskusing the effective interest rate method. For loans to customers mea- management in SpareBank 1 Gruppen AS, risk exposure in the diffe-sured at fair value the interest element is recognised as interest income, rent risk classes, the development in risk exposure over time. It alsowhile remaining value changes are classified as income from financial gives a detailed overview of the Group’s regulatory capital andinstruments. All fees related to interest bearing funding and lending economic capital.are included in the calculation of effective interest and are amortisedsuch over expected maturity. Organisation, responsibility and purpose The Group’s board of directors is responsible for risk management andCommission income and expenses compliance in the Group. The board of each subsidiary is responsibleFees and commissions are generally recognised on an accrual basis for managing risk and compliance in their own company. The respon-when the service has been provided. Commission related to interest sibility for the overall risk management within the Group lies with thebearing instruments is not recognised as commission, but is included Director for Strategy, Analysis and Risk Management in the holdingin the calculation of effective interest rate and is recognised through company. The Director reports to the Chief Executive Officer ofthe income statement correspondingly. Commission arising from SpareBank 1 Gruppen AS.advisory services are recognised according to the entered contract,generally over the period in which the service is provided. The same SpareBank 1 Gruppen’s risk management aims to ensure solidity andprinciple is applied for asset management commissions. Remuneration fulfilment of regulatory capital requirements and safeguard capitaland fees related to trade or promotion of financial instruments, property management. This involves keeping a medium risk profile by focusing on:or other investment objects not generating balance sheet items inSpareBank 1 Gruppen’s financial statements are recognised on the A moderate risk profilecompletion of the underlying transaction. A strong risk culture with high focus on risk management Optimal capital allocation within the banks agreed on strategiesDividend income Exploration of synergies and diversificationDividend income is recognised when the right to receive payment is Sufficient core capital representing the chosen risk profileestablished. Financial risk factorsEvents after the balance sheet date The Group’s exposure to different kinds of financial risk is allocated une-The financial statements are considered as approved for issuing when venly to each subsidiary. Financial risks involves market risk (interest ratethe board of directors has considered the financial statements. The risk, risk related to share prices, currency risk, risk related to fair valueAnnual General Meeting, the shareholders board and regulating changes on investment property included), ownership risk, credit risk,authorities can refuse to approve the financial statements, but cannot concentration risk, insurance risk, reinsurance risk, operational risk,change them. business risk and liquidity risk. The definitions of the different risk factors are as follows:Subsequent events up until issuance of the financial statements con-cerning situations known on the balance-sheet date, will be includedin the information basis used to determine accounting estimates andwill thus be fully reflected in the financial statements. Subsequentevents not known on the balance-sheet date will be disclosed ifsignificant.
    • 30 SpareBank 1 Gruppen Market risk Risk weighted capital Market risk is defined as the losses in association with changes in SpareBank 1 Gruppen calculates capital requirements for each risk cate- observable market parameters such as interest rates, exchange rates, gory. Risk weighted capital is calculated for each subsidiary as well as prices or property. for the overall group. The calculations are based on statistical methods, professional judgement and some estimates. The probability that all Ownership risk loss events happen at once is low. Therefore diversification effects Ownership risk is defined as the risk arising from being the owner of an arise when all risk categories are evaluated at the same time. Risk entity -for example, the risk the subsidiaries are exposed to on a day-to-day weighted capital is supposed to cover the unexpected losses and shall basis and the risk of need for more capital in one or more of these for all risk categories equal 99.5 % of possible losses using a one year time companies. horizon. Credit risk Capital requirement Credit risk is defined as the risk that the company’s borrowers, SpareBank 1 Gruppen needs sufficient capital to cover unexpected suppliers and reinsurers cannot fulfil their obligations towards losses. The Group is within jurisdiction for minimum capital requirement SpareBank 1 Gruppen. Credit risk also includes the risk of changes in and solidity. In addition, The Norwegian Regulation on Minimum spread risk and reinsurance risk in the insurance companies. standards for Capital Adequacy requires that the need for capital is to be measured against both risk profile and the quality of risk management Concentration risk and control systems. The capital management policy is updated and Risk connected to large commitments, industry concentration and endorsed by the board of directors annually. The latest update and geographical concentration in loan or investment portfolios. endorsement took effect May 2011. The capital management policy is endorsed to ensure that SpareBank 1 Gruppen’s equity level has an Underwriting risk optimal definition of risk tolerance, risk profile and the size of the Risk connected to uncertainty towards future number and size of business. insurance claims and the risk for extreme incidents (catastrophes). SpareBank 1 Gruppen uses risk adjusted rate of return as an important Operational risk governance tool. The risk adjusted rate of return is reported in the Risk related to insufficient or failing internal processes, human errors quarterly risk reports for the Group as a whole, for each subsidiary, and and system failures or external factors. Legal risk is also included in for each subsidiary’s retail and commercial business line. the definition. Risk factor follow-up and managing Liquidity risk Market risk Liquidity risk is the risk of not being able to refinance the liabilities and The Group’s consolidated market risk is measured and reported to the to increase the need of finance without extra costs. board of directors in SpareBank 1 Gruppen AS on a quarterly basis. The calculation is based on a VaR-model. In addition to each subsidiary’s Strategic and business risk monitoring of risk exposure through the use of own models and policies, Strategic and business risk is the risk of losses as a consequence of a similar model to that of the VaR is used follow-up each subsidiary. changes in the external environment. For example a change in the The VaR-model is described below and includes the definitions for regulatory environment, a decrease in profit or access to capital as a calculation of the overall risk in the Group and real exposure as of end result of lack of confidence and reputation among the market partici- of end. pants, i.e. among customers, opponents, shareholders and authorities (reputation risk). Assumptions for the VaR-model The board of directors has decided that risk reporting shall use a Strategy related to the use of financial instruments 99.5 % confidence level. Ownership is 12 months. Correlation is The Group uses financial instruments to both take positions in the calculated using similar methods to last year. Value adjustment funds, market and to reduce risk. The use of financial instruments is limited supplementary reserves, returns on investments and guaranteed rate to instruments where risk and value is measurable and where it is of returns are not included in the model. possible to monitor it within the Group’s systems for risk management and profitability measurement. Instruments not traded in an active Market risk is calculated with the help of the following formula: market are only used for hedging purposes or for conversion of a VaR = Value * σ * √T * nc. derivative’s underlying asset or liability. σ = Standard deviation, asset T = Duration/ownership Capital management nc = Standard deviation given confidence level A common risk management policy is approved by the board of (99.5 % single tailed standard deviation = 2.58) directors in SpareBank 1 Gruppen AS. The policy is subject to annual review. Strategy, policy and limits are developed for each risk factor in Interest rate risk each legal entity. In addition strategic decisions are made for each The interest rate risk is the risk of losses from changes in the interest entity’s allocation of assets. For more information see note 39, Capital rate level. The risk arises mainly due to investments in commercial Adequacy. paper, granted loans with fixed interest rates, use of fixed interest instruments for funding and the use of derivatives. The table below shows the market risk based on VaR model (the figures for 2009 are pro forma, excluding Bank 1 Oslo): Market risk 99.5% SpareBank 1 Gruppen Group Amount in NOK million 2010 2009 Interest rate risk* 1 656 847 Equity risk 1 432 1 286 Currency risk 65 55 Risk associated with property 995 892 Diversification -570 -443 Total market risk 3 578 2 637 Diversification (%) 13,7% 14,4% * The calculation of interest rate risk has changed in the period. Spread risk in life insurance and P&C insurance is now calculated in accordance with the Norwegian Financial Supervisory Authoritys Risk-based Supervision (RBT).
    • 31Value at Risk equals asset value multiplied by the asset’s sensitivity for For more information regarding market risk in SpareBank 1 Gruppen AS,changes in the interest rate multiplied by maximum interest rate we refer to note 34 to 35.decrease given duration and confidence level. Ownership riskThe bond portfolio is divided into duration classes of 1–3 months, 3–12 Ownership risk is related to the owning of a company. SpareBank 1months, 1-3 years, 3-5 years and greater than 5 years. The duration Gruppen AS’ ownership risk in subsidiaries is connected to the riskdescribes each class’s price sensitivity to a change in interest rates. each subsidiary undertakes on a day-to-day basis, and the risk for theBased on time series containing monthly historical data back to 1994 need of an influx of capital to one or more of these companies.the standard deviation for the absolute development in interest ratesis calculated. An average monthly interest rate is calculated to match Credit riskthe duration classes. The Groups credit risk is primarily related to SpareBank 1 Livs- forsikring AS and SpareBank 1 Skadeforsikring AS, as well as some riskVaR for each time interval is calculated based on duration weighted within the factoring business in the Groupexposure, historical changes in interest rate, period of ownership andconfidence level before it is summarised to total VaR on interest rate Credit risk in SpareBank 1 Skadeforsikring AS and SpareBank 1 Livs-instruments. forsikring AS is related to investments in bonds and commercial papers, real-estate and reinsurance. The company’s board of directorsSpread risk has endorsed limits for each investment firm. In addition they have setSpread risk is the risk for changes in bonds and holdings market limits on minimum credit rating for each investment group. Detailedvalue resulting from general changes in credit spreads. The spread risk guidelines for accepted risk level for each investment are endorsed andfor 2010 is included in SpareBank 1 Gruppen’s VaR model. We refer functions as the fund managers’ authorization.to the Pillar 3 report for more information on spread risk. For more information about the credit risk in SpareBank 1 Gruppen AS,Equity risk please refer to note 30 and 31.Risk related to equity instruments is the risk of losses from changes inthe value of the Group’s shares and other equity instruments. The Concentration riskinstruments are divided into Norwegian and international shares for Concentration risk for the Group is considered low. The Insurancerisk measurement purposes. Portfolio in SpareBank 1 Skadeforsikring AS is considered relatively well-diversified for the following reasons: a large number of customers,Based on an Oslo Børs Bechmark Index (OSEBX) and MSCI World, subscriptions in different geographical areas and variety in the productshistoric return for Norwegian and foreign shares are calculated provided. Exposure to natural disaster constitutes the major concen-separately back to year 1994. The standard deviation is calculated based tration risk in insurance. In Norway however, this risk is very limitedon the return rates, adjusted for time of ownership and confidence due to participation in the Norwegian Natural Perils Pool.level, thereafter multiplied by the different exposure of equity classes.Exposure equals the portfolio’s fair value on the balance sheet day. Insurance stocks in SpareBank 1 Livsforsikring AS are well diversified as that they mainly consist of individual insurance and group insuranceWe assume a diversified equity instrument portfolio in between the policies where insurance risk is not highly concentrated. There isequity classes for being able to take advantage of the volatility in the however some risk related to the life companys investment portfolio,respective indexes, that is . We believe that the portfolios in SpareBank mainly in the financial sector.1 Livsforsikring AS and SpareBank 1 Skadeforsikring AS are welldiversified. From a group perspective the other companies are only moderately exposed to concentration risk.Currency riskVCurrency risk is the risk for losses arising from changes in exchange Liquidity and settlement riskrates. The Group measures currency risk by using net positions in the The management of the Group’s financial structure is based on an over-different currencies. all liquidity strategy annually reviewed and endorsed by the board of directors. Each subsidiary has their own liquidity strategy requiring una-Volatility for each relevant currency is measured based on historic nimous endorsement of the board. Liquidity risk is reduced by diversifyingexchange rates, which forms a basis for calculating risk bundled to the funding in different markets, sources, instruments and duration.exposure given a fixed confidence level. SpareBank 1 Gruppen’s liquidity risk is mainly connected to theRisk associated to property parent company and is assumed to be low-moderate.The Group’s properties are exposed to risk regarding changes in thereal-estate market. The real-estate portfolio’s value is influenced by The emergency plan for capital adequacy and liquidity managementmany factors such as local economic development, property location, is annually reviewed and endorsed by the board of directors – mostmaintenance and competition in the local real-estate market. recently in May 2011. The emergency plan seeks to visualize the overall liquidity management in the Group, as well as identify andReal-estate volatility is calculated based on historic development in explain possible events and solutions to should they materialise. Thereal-estate prices given by price indexes published by Statistics emergency plan gives a clear description of the segregation of duties.Norway for office and corporate buildings. The following incidents can affect liquidity:Hedgefond Capital injections in subsidiaries with lossesRisk associated to hedge funds is calculated with basis in volatility as Liquidity buffers below agreed levelspublished in an international hedge fund index. The risk is calculated Withdrawal of uncommitted lines of creditin accordance to the same method as for shares. SpareBank 1 Gruppen’s emergency plan states that the liquidityCorrelation – Portfolio risk market risk buffers are to cover:Based on the time series, a correlations matrix is made showing the One year’s operation expenses and interests; anddifferent market risk asset classes. Correlation is calculated by a 12 Capital injections equal to 10 % of the subsidiary’s recorded equity.month rolling average based on information since 1994 or as far backas data exists. To ensure relevant calculations, an average of average The day-to-day liquidity management requires that the parent companycorrelations and the highest correlation measured during the period, has a NOK 400 million liquidity buffer at all time. The liquidityis used. The correlation matrix is used to arrive at a covariance matrix buffer is to consist of deposits and frequently traded securities (cashas the first step in calculating Value at Risk (standard deviation) for the equivalents). In addition, the liquidity buffer can consist of committedwhole portfolio. credit lines with minimum 12 month duration. The management of
    • 32 SpareBank 1 Gruppen loan instalments, as well as loans payable, are not included in the liqui- Operational risk dity buffer. It is presupposed that the refinance of a loan is planned Operational risk is defined as the risk of loss due to insufficient or f minimum 6 months before maturity. ailing internal processes, human and system failures, or other exter- nal factors, including legal risk. All group companies are exposed to The CFO is responsible for monitoring that the liquidity buffer is operational risk. within its limits. The CEO is to be informed should the buffer fall below the 20 % prescribed limit. The recovery of the liquidity buffer is to be Operational risk at the subsidiary level is documented in accordance planned. The plan is to be presented to Group Management. The with the process required in the regulations on Responsibility for emergency plans requirements have been complied with during the Internal Control and on Documentation and Confirmation of Internal whole period and the liquidity situation in the parent company is Control (“Internkontrollforskriften”). Risk reporting occurs in the considered as good. form of an annual ICAAP-report, as well a published internal control report with supplementary title management verification. Databases Please refer to Note 32 for further information on liquidity and settle- have been implemented for the governance and follow-up of actions ment risk in Sparebank 1 Gruppen AS. in connection with reports from The Norwegian Financial Supervisory Authority, internal audit and internal control. Insurance risk (underwriting) Insurance risk in SpareBank 1 Skadeforsikring AS A compliance department has been established in the parent company The risk related to each insurance contract consists of both the pro- and a compliance forum for the Group. The head of compliance bability of an accident occurring and the uncertainty of the claims size. within each subsidiary form the members of the compliance forum. The The uncertainty in the insurance risk of a portfolio is influenced by focus on compliance is to ensure that SpareBank 1 Gruppen acts in many different factors such as regulatory changes and court decisions accordance with relevant laws and regulations, industry standards and -which are of specific significance for personal injuries. Group internal policies. This includes the duties of monitoring changes in business areas, as well as the possible consequences of ignoring The characteristics of the policy holders that the company accepts as changes in the business areas. Compliance risk is of receiving govern- customers are described in the company’s risk manual. In addition, mental sanctions, financial losses or reputation damages as a conse- there exist automatic controls in the insurance system regarding new quence of not acting in accordance with relevant laws and regulation, additions to the portfolio. An automatic system for monitoring the industry standards and Group internal policies. Compliance risk is part insurance risk concentration is in progress. This also concerns the of operational risk. Compliance is reported on a quarterly basis to the concentration of real-estate risk and consequential losses in regard to board of directors in SpareBank 1 Gruppen in accordance with the fire and other accidents. Concentration control and follow-up is also Group’s compliance policy. conducted for personal injury risk and for other customer relations. Adjustments to reinsurance coverage are made to represent the risk Strategic and business risk exposure in the insurance portfolio. The capital adequacy calculations estimate strategic and business risk. No processes have yet been established for measuring strategic and Insurance risk in SpareBank 1 Livsforsikring AS business risk. SpareBank 1 Gruppen is in the progress of creating SpareBank 1 Livsforsikring AS offers savings, pension and insurance parameters for calculating strategic and business risk quantitatively. products. The life insurance company has through its products established liabilities to its customers, resulting in different types of Together with the Alliances forum for risk management, SpareBank 1 risk for the company. The savings products offered have long duration. Gruppen will continue to have a focus on establishing quantitative Life expectancy affects both future expected payments and provisions. models for estimating the Group’s capital requirement for strategic and The company offers coverage in case of mortality and disability. business risk. Changes in the Norwegian Insurance Scheme’s regulations for disability payment might highly influence the number of disabled persons and Correlation – portfolio risk the provisions for disability. It is assumed reasonable that not all incidents occur simultaneously and thus we take into account the effect of diversification between asset The insurance risk is managed through reinsurance, risk selection, classes. We implement a correlations matrix to calculate the correlation underwriting policies and tariff adjustments. Tariff adjustments also between market risk, credit risk, insurance risk, business risk and include reserve increases. risk associated to property between each class of assets. The company has endorsed policies and guidelines concerning the release of new products, changes in existing products and system NOTE 4 – CRITICAL ACCOUNTING ESTIMATES AND solutions. The company’s premiums are based on statistics and are JUDGEMENTS reported to The Financial Supervisory Authority of Norway. Changes in mortality and disability rates are closely monitored and provisions The Group arrives at estimates and assumptions concerning the future are frequently reconsidered. based on historical experience and a number of other factors such as future expectations believed reasonable under the current circum- Guidelines for risk considerations concerning health and underwriting stances. These estimates and judgements are continually re-evaluated. regulation, as well as risk classification for acquisition of new customers, Yet, as inherent in the term, these accounting estimates will seldom equal are described in the company’s risk policies. The risk policies also the actual results. Find addressed below the estimates and assumptions include when a health assessment or inability to work documentation is that represent a significant risk for essential adjustments to the carrying required. The result of this judgement is reflected through the risk amounts of assets and liabilities for the next financial year. premium level. Fair value of derivatives and other financial instruments Reinsurance is an important tool for the company’s insurance risk The fair values of financial instruments that are not traded in an active management. The reinsurance strategy describes goals and limits for market are determined using varying valuation techniques. The Group the company’s reinsurance program and follow-up of the programs. The considers, and chooses, techniques and assumptions reflecting market reinsurance strategy is annually revised by the Board of Directors. conditions on the balance sheet date as closely as possible. For a number of financial assets classified as available-for-sale yet not traded According to IFRS 4 a liability adequacy test is required. in an active market, the Group has used discounted future cash flows for valuation. The valuations require a high degree of judgement. When Please refer to note 45 for more information concerning insurance risk assessing whether fair value is lower than cost, the Group takes into within SpareBank 1 Gruppen AS. consideration, among other factors, the future prospects in the relevant industry, the company’s financial position and technological develop- ment.
    • 33Investment property and insurance funds in life insurance. Maximum accepted basic interestThe Group performs the valuation of its own investment property. The rate is reviewed by the authorities considering the interest on long termproperties are individually assessed based on expected future cash flow government bonds. Potential changes in the basic interest rate will affectdiscounted with the risk-adjusted required rate of return on the respec- the size of the liabilities.tive properties. The required rate of return depends is based on thelong-term risk-free interest rate and a risk premium that depends on Assumptions concerning the mortality rate are mainly based on collec-the property’s quality, location, property category, the rental contract’s tive surveys done by the Norwegian Financial Services Associationmaturity etc. A further description of the valuation of investment (FNH), while those concerning the disability rate are mainly based on theproperty is included in note 27. The internal valuations are bench- company’s own experiences.marked against independent external appraisals. There are claims provisions for all products including both reportedPension commitments (RBNS) and unreported damages (IBNR). IBNR provisions and RBNSThe net present value of pension commitments depends on several provisions are calculated using statistical methods based on thefactors as determined by actuarial assumptions. The assumptions used company’s own experience.in calculating net pension cost (income) include among other things, thediscount rate. Changes in these assumptions affect the value of the Estimates related to insurance provisions in P&C insurancepension commitments in the balance sheet. The use of estimates in the calculation of insurance provision for P&C insurance is primarily related to provisions for claims. Insurance productsThe Group determines a suitable discount rate at the end of each year. are classified in two main groups: short-tailed business and long-tailedThis discount rate is used to calculate the net present value of future business. The classification is based on the time span from when a lossestimated cash out-flows needed to settle the pension commitments. The or damage occurs until the loss or damage is reported and finally settled.suitable discount rate is determined in reference to 10-year Norwegian A long-tailed business often refers to insurance related to personalgovernment bonds adjusted for the average remaining period of service. injuries.Other pension assumptions are partly based on market conditions. More The basis for the claims provision in SpareBank 1 Skadeforsikring AS isdetailed information is given in note 48. the expected loss from claims incurred or future claims based on reported damages. In addition to ongoing follow-up related to currentPotential changes regarding expected annual increase in salaries, dis- claims, an assessment of all unsettled claims shall be performed annu-count rate and so on, can have a significant impact on the calculated ally. Provisions for IBNR and potential additional provisions related toemployee pension commitments. The guidance note issued by the Nor- long-tailed businesses are measured using models. Regression models arewegian Accounting Standards Board specifies that changes of +/- 1 % used as a starting point for vehicle or bodily injury, occupationalin the discount rate represent a change of 15 – 20 % in the total injury and safety. An assessment of potential issues related to changespension commitment. in the portfolio is also performed. For short-tailed businesses, the IBNR is determined based on reviews of the experience data pertaining to theEstimated impairment of goodwill lag in the risk group during previous years, in addition to changes in theThe Group performs annual impairment tests to identify a possible portfolio, the frequency of claims, major injuries and so on. Aimpairment of goodwill (as described in note 14). The recoverable retrospective measurement is also made to assess the estimates for theamount of cash generating units is determined by calculating claims provision against the development of the factors involved in thediscounted future cash flows. These calculations require estimates calculation: paid claims, individual provisions for reported claims andconsistent with the Group market valuation. IBNR.Estimates on insurance provisions in life insurance Provisions for losses related to a reinsurer’s bankruptcy are measured atInsurance provisions in life insurance are based on factors such as life net present value. The parameters in the basis of the calculation areexpectancy, expectations of mortality rate, disability rate, and interest future expected dividends, inflation and the payment status of the claim.rates. Changes in such assumptions affect the size of the insurance pro-visions. The premium provision is calculated as the cash value of the Sensitivity of propertiescompany’s liabilities less the cash value of future premiums. The basic Properties are especially sensitive to the discount rate. If everything isinterest rate used in the calculation that valid for the individual insurance hold as it, a raise of 0.25 % will reduce the values with NOK 175 million,contract, and the calculation is done according to the Act on premiums or about 3.6 %.
    • 34 SpareBank 1 Gruppen NOTE 5 – ACQUISITIONS 2010 Unison Forsikring AS SpareBank 1 Skadeforsikring AS acquired all the shares in Unison Forsikring AS in 2010. SpareBank 1 Skadeforsikring AS placed a bid for all shares in Unison Forsikring AS June 9, 2010 that was pre-accepted by more than 95% of the then current shareholders by the end of the month. In July 2010, a private placement from Unison Forsikring AS against SpareBank 1 Skadeforsikring AS of NOK 150 million was completed. For practical purposes, Unison Forsikring AS was consolidated from July 1, 2010, even though the transaction date was July 19, 2010. Unison Forsikring AS is a Norwegian insurance company offering insurance for individuals, organisations and businesses. The company deve- lops customised solutions for organisations, associations and their members. SpareBank 1 Skadeforsikring AS aims to strengthen its presence in new distribution channels. It therefore hopes that Unison will function as the companys extended arm into the market outside of the Group and the Norwegian Confederation of Trade Unions and affiliated trade unions, LO. Unison Forsikring AS enters as a subsidiary of SpareBank 1 Skadeforsikring AS and will operate as an independent entity in the market. The acquisition is an undertaking that is regulated by IFRS 3R. In the consolidated financial statements the purchase method is used for acqui- sition of subsidiaries. Cost comprises the fair value of the assets given as consideration. Identified assets and liabilities are carried at fair value at the acquisition date. The shares in Unison Forsikring AS cost NOK 56.4 million. The final acquisition analysis shows the following fair valu- es for identifiable assets and liabilities: Book value Fair value Fair value Figures in Million NOK 30.06.10 30.06.10 adjustments Customer relations - 14,0 14,0 Goodwill - -117,9 -117,9 Immaterial assets 8,6 8,6 - Financial assets 283,2 283,2 - Reinsures’ share of unearned gross premium 33,0 33,0 - Reinsurance share of gross claims reserves 366,6 366,6 - Receivables from policy holders 79,1 79,1 - Receivables in connection with reinsurance 44,7 44,7 - Other receivables 1,1 1,1 - Other assets 78,4 78,4 - Deferred tax assets 16,9 130,0 113,1 Total assets 911,6 920,8 9,2 Share capital 56,4 - - Administration provision 10,9 - - Provisions for natural disaster fund 5,6 - - Provisions for guarantee 8,2 - - Security provisions 40,3 - - Other retained earnings -53,8 - - Total equity 67,7 56,4 -11,3 Deferred tax 25,4 22,8 -2,6 Provision for unearned premiums 122,7 122,7 - Gross provision for claims 635,2 635,2 - Pension obligations 13,2 15,0 1,8 Liabilities in connection with reinsurance 30,8 30,8 - Administration provision Run-off portfolio - 6,3 6,3 Liability reinsurance contract (MYML) - 15,0 15 Other liabilities 16,6 16,6 - Total equity and liabilities 911,6 920,8 9,2
    • 35The negative goodwill is primarily a result of tax losses carried forward in Unison Forsikring AS at about NOK 400 million. According to IFRS 3.34Rnegative goodwill shall be recognised at the acquisition date. The final purchase price allocation was completed in November 2010 and a negativegoodwill of NOK 117.9 million was then recognised in the consolidated financial statements under Other insurance related income.In the consolidated financial statements for 2010, the following figures from Unison Forsikring AS after the acquisition July 1 are included:Figures in 1000 NOK 2010Gross premiums 116 765Premiums earned for own account 105 771Profit before tax -19 489Other comprehensive income -1 876Total profit -21 365Had the acquisition date been January 1, 2010 the figures for the fiscal year 2010 fiscal consolidated financial statements for SpareBank 1 Grup-pen would have been as follows:Figures in 1000 NOK 2010Gross premiums 4 899 795Premiums earned for own account 39 546Profit before tax 620 936Other comprehensive income -63 377Total profit 502 002It is recognised expenses related to the acquisition with a total of NOK 13.5 million in the Group in 2010, divided into NOK 6.2 million inSpareBank 1 Skadeforsikring AS and NOK 7.3 million in Unison Forsikring AS. Of the NOK 7.3 million in Unison Forsikring AS, 2.5 millionrelates to the private placement against SpareBank 1 Skadeforsikring AS that could not be activated cf IAS 39, due to negotiations on theamount.Skandia HelseforsikringSparebank 1 Skadeforsikring AS announced in January 2010 its complete purchase of the insurance business in Skandia Life Line Norway fromSkandia Insurance Company Ltd. The agreement was contingent upon necessary approvals from the Norwegian and Swedish authorities.Approval of the transaction was given in November 2010.The acquired health insurance business is integrated into SpareBank 1 Skadeforsikring AS’ portfolio at the end of 2010. No purchase priceallocation was completed as of December 31, 2010. Skandia is therefore included in SpareBank 1 Skadeforsikring AS with preliminary figures.The acquisition cost of the business was NOK 1 million.Conecto ASThe companies SpareBank 1 Factoring AS, Actor Portefølje AS and SpareBank 1 Gruppen Finans Holding AS merged with effect from January 1,2010. The new company carried the name SpareBank 1 Gruppen Finans AS.SpareBank 1 Gruppen Finans AS entered into an agreement to purchase the company Conecto AS in June 2010. The payment for the companyincluded a combination of cash and an earn-out agreement on with the sellers. Earn-outs are mainly related to the companys future earningsperformance. The acquisition aims to create an operator that is among the three largest in Norway’s debt market. Conecto AS was taken over onSeptember 9, 2010 with effective consolidation into Sparebank 1 Gruppen from that date.A preliminary acquisition analysis in accordance with IFRS 3R has been made as a basis for the annual accounts for December 31, 2010.A review will be conducted within 3 Q 2011, which is within the 12 month period after the acquisition date cf. IFRS3R. Identified assets andliabilities are carried at fair value at the acquisition date. The cost of the shares, with the assumptions concerning future earn out, is estimated tobe NOK 154.8 million. In addition to the identified value, the company also acquired human capital. A business organisation is a not identifiable asset under IAS 38and may therefore not be recorded as such. This is evident in the comments about the start-up cost in IAS 38 paragraph 69. There is alongstanding and unique practice that the values inherent in an established organisation are mainly regarded as goodwill in a businesscombination. Please refer to the identified value in the table below for our preliminary acquisition analysis.
    • 36 SpareBank 1 Gruppen Calculations based on real values: Currency NOK 1,000 2010 Acquisition cost 130 000 Correction based on uncertainty at acquisition date -7 391 Interest until payment date 690 Estimation on earn out 31 535 Estimated total acquisition cost per 31.12.2010 154 834 Equity on acquisition time 17 859 SpareBank 1 Gruppen Finans shares on 100% basis 17 859 Excess value: Brand 5 629 Customer relationships 32 096 Technology, processes and routines 4 808 42 533 Deferred taxes 11 808 Acquisition goodwill 106 611 -which «Assembled Workforce» 13 607 Identified Excess Value 42 173 Total Goodwill and Excess Value 148 784 The final acquisition analysis showed the following fair values of identifiable assets and liabilities: Oversikt over virkelig verdi justeringer Book Fair Fair Fair Value Value Value Deferred verdi incl. Currency NOK 1,000 09.09.10 09.09.10 adjustment tax Def. tax Research & Development 1) 8 264 - -8 264 - - Deferred tax asset 230 230 - - 230 Brand 1) - 5 269 5 269 - 5 269 Technology, process and routines 1) - 13 072 13 072 - 13 072 Customer relationships 1) - 32 096 32 096 - 32 096 Goodwill 2) - 81 196 81 196 11 808 93 004 Assembled workforce (part of goodwill) 2) - 13 607 13 607 - 13 607 Furniture and fixtures 2 395 2 395 - - 2 395 Account receivables 9 536 9 536 - - 9 536 Other receivables 2 493 2 493 - - 2 493 Cash part of working capital 13 444 13 444 - - 13 444 Excess cash 6 430 6 430 - - 6 430 Total Assets 42 792 179 768 136 976 11 808 191 576 Equity 3) 17 858 154 834 136 976 - 154 834 Debt to credit institutions 8 096 8 096 - - 8 096 Account payable 3 704 3 704 - - 3 704 Payable tax 4 292 4 292 - - 4 292 Public debt 5 514 5 514 - - 5 514 Deferred tax liability - - - 11 808 11808 Other short term liabilities 3 328 3 328 - - 3 328 Total shareholders equity and libabilities 42 792 179 768 136 976 11 808 191 576 1) Total Excess values er TNOK 42.173 2) Goodwill is TNOK 106.611 3) TNOK 154.834 under the Fair Value column is the acquisition cost for Conecto Sparebank 1 Gruppen has consolidated Conecto AS’ results from September 9, 2010. Profit from the period of September 9 to December 31 was NOK -3.7 million before tax. If the acquisition had occurred January 1, 2010 the following amounts would have been consolidated into our financial statements: Currency NOK 1,000 2010 Total income 86 636 Total expenses -78 156 Net operating income 8 481 Profit before tax 8 487 Tax -2 238 Profit after tax 6 249
    • NOTE 6 – SEGMENT INFORMATION Debt collections of old claims and factoring Banking 1) Life insurance P&C insurance Fund management Brokering business business Other operations Eliminations TotalNOK 1,000 2010 2009 2010 2009 2010 2009 2010 2009 2010 2009 2010 2009 2010 2009 2010 2009 2010 2009Total income 2) - 849 466 5 240 876 5 476 539 4 437 243 4 010 385 307 431 266 898 84 264 56 698 172 207 120 950 626 109 249 638 -611 057 -192 079 10 257 073 10 838 495Share of profit from associates - 2 381 - - - - - - - - - - - 0 - -2 767 - -386Segment result - 195 743 363 002 396 815 641 144 621 096 64 628 42 088 -57 562 -48 930 8 600 22 541 566 598 145 096 -601 277 -180 401 985 133 1 194 048Profit after income tax - 164 559 299 159 239 272 581 054 502 956 45 325 28 564 -40 765 -35 408 4 311 15 889 454 275 25 849 -511 813 -42 038 831 546 899 643Minority share of profit - - - - - - - - -9 478 -9 472 - - - - 9 478 - - -9 472Total assets - 25 627 540 26 482 903 24 366 120 12 096 732 10 471 321 299 213 311 514 301 923 220 919 1 000 829 658 306 5 315 966 5 840 725 -4 807 345 -6 029 586 40 690 221 61 466 859Total liabilities - 24 497 608 24 219 954 22 353 505 8 691 961 7 499 748 103 426 84 369 212 321 87 512 591 158 418 213 2 543 527 2 396 380 -480 939 -1 163 783 35 881 408 56 173 5521) Includes EiendomsMegler 12) Costs directly related to income are included SpareBank 1 Gruppen Group has no secondary reporting segment 37
    • 38 SpareBank 1 Gruppen NOTE 7 – NET INSURANCE PREMIUM REVENUE SpareBank 1 SpareBank 1 Livforsikring AS Skadeforsikring Group Group NOK 1,000 2010 2009 2010 2009 2010 2009 Gross premium revenue 3 646 233 3 411 765 4 567 608 4 144 842 8 213 841 7 556 607 - Reinsurers share 152 037 157 669 383 179 330 516 535 216 488 185 Net premium revenue 3 494 196 3 254 096 4 184 429 3 814 326 7 678 624 7 068 422 LIFE INSURANCE The following premium in SpareBank 1 Livsforsikring AS is related to new subscriptions for the past two years divided by industry: Ind. Annuity Individual Group Individual Group NOK 1,000 and pension endowment pension life life Total 2010 86 668 150 209 47 353 29 940 7 589 321 759 2009 92 082 196 483 64 903 29 675 7 729 390 872 P&C INSURANCE For SpareBank 1 Skadeforsikring Group, earned premium is divided into different classes: Personal Lines of which Total Onshore third party Travel Personal NOK 1,000 property Motor liability Yacht Accident insurance Other Lines Earned premium 2010 1 579 951 1 500 805 627 641 66 572 155 053 294 957 21 611 3 618 949 Earned premium 2009 1 482 648 1 353 136 561 941 61 789 151 953 272 905 15 774 3 338 205 Commercial Lines Onshore Onshore of which Workmens Total property property third party compen- Commercial NOK 1,000 insdustrial commercial Motor liability Liability sation Safety Other Lines Earned premium 2010 11 180 329 163 227 627 68 679 24 969 126 620 68 054 30 650 818 263 Earned premium 2009 10 854 280 931 194 577 62 434 10 571 95 230 74 387 4 784 671 334 Other Lines Total Total Energy/ Re- Natural Other NOK 1,000 Marine oil insurance perils tool Lines Earned premium 2010 1 068 -7 52 129 283 130 396 Earned premium 2009 - -114 60 135 357 135 303 NOTE 8 – NET FEE AND COMMISSION INCOME Group NOK 1,000 2010 2009 Fee and commission income Subscription fees (from customer) - 51 527 Redemption fees (from customer) - 5 870 Management fees 566 418 426 055 Guarantee commission 15 060 7 943 Payments system - 80 545 Other commissions 134 027 283 330 Total fee and commission income 715 505 855 270 Fee and commission expense Distributor commission paid 845 299 719 231 Payments system - 22 792 Other commissions expences 906 10 077 Total fee and commission expense 846 205 752 100 Net fee and commission income -130 700 103 170
    • 39NOTE 9 – GAINS AND LOSSES FROM FINANCIAL ASSETS AND LIABILITIES Parent company Group 2010 2009 NOK 1,000 2010 2009 Net gain on financial instruments designated at fair value Shareholdings - - Dividends from shareholdings 13 289 4 805 - - Net gains/losses from realisation of shareholdings 151 972 -152 493 - - Net unrealised gains/losses from shareholdings 909 494 1 697 255 - - Total net gains/losses on shareholdings 1 074 754 1 549 567 Bonds and commercial paper - - Interest received and earned 248 515 381 508 - - Net gains/losses from realisation of fixed income securities 217 949 364 892 - - Net unrealised gains/losses from fixed income securities 31 066 65 358 Total net income from bonds, commercial paper, interest funds - - and other securities with fixed income 497 530 811 757 Other financial instruments - - Interest income received and earned 1 348 9 349 -1 310 - Net gains/losses from realisation of derivatives and other financial assets -36 600 -19 920 - - Net unrealised gains/losses from derivatives and other financial assets 10 234 93 177 -1 310 - Total derivatives and other financial assets* -25 018 82 606 *Applied to hedging: - - Net change in value of hedged bonds and derivatives - 2 912 - - Net change in value of fixed rate loans and appurtenant derivatives - -2 238 - - Net change in value of remaining derivatives - 444 -1 310 - Net income and gains/losses from financial assets designated at fair value 1 547 267 2 443 931 Net income from bonds measured at amortised cost - - Interest income received and earned from bonds held to maturity 252 498 264 659 - - Net unrealised gains/losses from bonds held to maturity - - - - Net gains/losses from realisation of bonds held to maturity 6 757 7 120 - - Net income from bonds held-to-maturity 259 255 271 779 - - Interest income received and earned from other bonds at amortised cost 38 310 13 721 - - Net gains/losses from realisation of other bonds at amortised cost 1 412 -23 199 - - Net unrealised gains/losses from other bonds at amortised cost 35 327 12 840 - - Net income and gains/losses from bonds at amortised cost 75 049 3 362 Net income from securities available-for-sale 3 641 - Dividends from shareholdings 12 993 6 972 - 18 245 Net gains from realisation of shareholdings 17 603 41 074 3 641 18 245 Net gains/losses on financial instruments classified as available-for-sale 30 596 48 046 Income from loans and receivables 1 881 2 041 Interest income from lending to customers and deposits with credit institutions 58 408 1 014 288 4 709 8 264 Interest income from bank deposits 40 052 42 039 - 4 930 Interest income from other receivables -14 10 001 9 330 16 202 Interest income from internal loans - - 15 920 31 437 Total interest income from loans and receivables 98 447 1 066 328 Expense from financial liabilities -9 509 -2 448 Interest expense from deposits from customers and loans from credit institutions -17 748 -454 845 -24 624 -31 993 Interest expense from securities issued -24 624 -253 754 -27 289 -28 876 Interest expense from subordinated loan capital -37 864 -67 604 - -1 Interest expense from other financial liabilities -4 961 -22 077 -61 422 -63 318 Total interest expense from financial liabilities -85 196 -798 280 Changes in fair value related to fixed-rate loan are part of «Net income from financial assets designated at fair value». Changes in fair value related to funding from securities are part of «Net income from financial assets designated at fair value»
    • 40 SpareBank 1 Gruppen NOTE 10 – NET INCOME FROM INVESTMENT PROPERTIES Group NOK 1,000 2010 2009 Rental income from investment properties 320 724 353 827 Value changes in investment properties 148 283 -18 077 Expenses from investment properties -69 597 -28 902 Total net income from investment properties 399 410 306 848 Also see Note 27 Investment properties for further information. NOTE 11 – OTHER OPERATING INCOME Parent company Group 2010 2009 NOK 1,000 2010 2009 - - Management of LOfavør concept 62 227 59 389 - - Brokerage fee 37 384 26 441 - - Income from debt capital 16 644 16 954 - - Remuneration Corporate Finance 18 184 - - - Sundry income life insurance 24 405 19 417 - - Income from debt collectoin business 96 788 78 620 - - Compensation regarding IT-systems incl refund from VAT - 65 639 - - Actuarial calculations 4 3 193 - - Acquisition of Unison Forsikring AS resulted in negative goodwill 117 900 - - - Late payment charges 2 040 2 223 4 - Other 8 745 53 010 4 - Total other operating income 384 321 324 887 NOTE 12 – OPERATING EXPENSES Parent company Group 2010 2009 NOK 1,000 2010 2009 52 481 37 985 Personnel expenses 831 543 1 140 824 -429 1 677 IT expenses 286 132 255 674 640 434 Marketing 144 485 82 858 -78 649 -18 246 Other operating expenses* 412 013 597 767 -25 957 21 850 Total operating expenses 1 674 173 2 077 123 Remuneration to auditor 511 560 Statutory audit 3 791 4 856 28 - Other certification services 468 461 16 - Tax-related advice 276 61 346 343 Other services 863 1 544 Remuneration to auditor includes VAT Personnel expenses 166 980 148 154 Salaries 645 092 751 984 25 699 23 356 Employers national insurance contribution 122 160 148 146 -1 475 25 991 Pension costs -9 159 88 907 -151 588 -168 211 Refund salaries, pension subsidiary - - 2 805 633 Social expenses 46 467 39 242 10 060 8 062 Other personnel expenses 26 983 112 545 52 481 37 985 Total personnel expenses 831 543 1 140 824 Specification of pension costs 8 499 7 153 Defined contribution plans 31 365 29 278 -9 974 18 838 Defined benefit plans -40 524 59 628 -1 475 25 991 Total pension costs -9 159 88 907 * In 2010 SpareBank 1 Gruppen AS also entered as income a repayment of NOK 43 664 thousand related to payroll tax which were earlier covered by the company on behalf of First Securities AS.
    • 41NOTE 13 – SHAREHOLDER STRUCTUREShareholder structure in SpareBank 1 Gruppen AS as at December 31, 2010: Number Shareholder of shares shareSpareBank 1 Nord-Norge 347 568 19,50 %SpareBank 1 SMN 347 568 19,50 %SpareBank 1 SR-Bank 347 568 19,50 %Samarbeidende Sparebanker AS 347 568 19,50 %Sparebanken Hedmark 213 888 12,00 %Norwegian Confederation of Trade Unions (LO) and affiliated trade unions 178 240 10,00 %Total number of Shares 1 782 400 100 %Shareholder structure in SpareBank 1 Gruppen AS as at December 31, 2009: Number Shareholder of shares shareSpareBank 1 Nord-Norge 347 568 19,50 %SpareBank 1 SMN 347 568 19,50 %SpareBank 1 SR-Bank 347 568 19,50 %Samarbeidende Sparebanker AS 347 568 19,50 %Sparebanken Hedmark 213 888 12,00 %Norwegian Confederation of Trade Unions (LO) and affiliated trade unions 178 240 10,00 %Total number of shares 1 782 400 100 %NOTE 14 – GOODWILL 2010 2010 2010 2009NOK 1,000 Cost Additions Impairment Book Value Book valueGoodwill from acquisition of 78,2% ofSpareBank 1 Livsforsikring in 1994 87 579 - - 7 758 7 758Goodwill from acquisition of 21.8 % of DAVID AS in 1996 10 712 - - 2 950 2 950Goodwill from acquisition of VÅR Livsforsikring AS in 2000 280 365 - - 189 245 189 245Goodwill from acquisition of 49 % ofODIN Forvaltning AS in 2000 158 263 - - 79 131 79 131Goodwill ODIN from acquisition of Rahastotori/Fondex in 2008 50 060 - - 49 896 49 896Goodwill from acquisition of VÅR Skadeforsikring AS in 2000 553 616 - - 264 003 264 003Goodwill from acquisition of Actor Fordringsforvaltning AS 89 769 8 500 - 98 269 71 932Goodwill from acquisition of SpareBank 1 Factoring AS in 2009 10 245 - - 10 245 10 245Goodwill from acquisition of Actor Verdigjenvinning AS in 2009 - - - - 3 205Goodwill from acquisition ofEiendomsmegler 1 Oslo Akershus AS in 2009 - - - - 14 632Goodwill from acquisitoin of Areal Eiendomsmegling in 2009 58 020 - -21 736 - 21 736Goodwill from acquisition of Argo Securities AS in 2008 42 709 - - 42 709 42 709Goodwill from acquisition of NK Corporate AS in 2009 7 268 - -3 045 - 3 045Goodwill from acquisition of Conecto AS in 2010 - 106 611 - 106 611 -Total goodwill 1 348 606 115 111 -24 781 850 819 760 486During 2010, Actor Fordringsforvaltning AS and Actor Verdigjenvinning AS have merged. Conecto AS was acquired in September 2010. As ofJanuary 1, 2011, Conecto AS and Actor Fordringsforvalning AS have merged. The addition on Actor Fordringsforvaltning AS of NOK 8.5 millionin 2010 is related to earn out. SpareBank 1 Gruppen Finans Holding AS, SpareBank 1 Factoring AS, as well as Actor Portefølje AS were also mergedduring 2010. The new name is SpareBank 1 Gruppen Finans AS. NK Corporate AS and Argo Securities AS were merged in 2010. As of January 1,2010, Bank 1 Oslo AS was demerged from SpareBank 1 Gruppen.When acquiring control in a business (business merger) all identifiable assets and liabilities are recorded at fair value in accordance with IFRS3R. A positive difference between fair value of the purchase price and fair value of net identifiable assets and liabilites are recorded as goodwill,while a negative difference would be recorded as income at the time of the purchase. Goodwill is acquired when there is a difference betweenfair value of the purchase price when aquiring a business and fair value of net identifiable assets and liabilities. Goodwill is assumed to have anindefinite useful life. Acquisition of a company is among other factors based on strategic adaption and expected economic profitability over along time period. Goodwill is allocated to cash-generating units. Goodwill is not subject to amortisation, but is subject to annual impairment tes-ting with the purpose of identifying any indications that impairment may have occurred, in accordance with IAS 36.Determination of recoverable amount:It is used cash flow forecasts (before tax) based on 5 year projections. Recoverable amount on the balance sheet date is assessed annually for good-will with an indefinite useful life. The value of each of the cash-generating units is assed as of December 31, 2010. In determining the recove-rable amount of the cash-generating units, SpareBank 1 Gruppen takes into account the pricing of comparable financial institutions (taking intoconsideration companies that have performed better than market expectations for the past few years), dividend policies, ownership structure ofSpareBank 1 Gruppen and the distributors of insurance products.For SpareBank 1 Gruppen, there will be a considerable variation in the values depending on whether the value assessments are based on a «going con-cern» or as part of a transaction of structure. The value assessments results in 3 scenarioes; a pessimistic value, an expected value and an optimistic value.The calculated value is significantly higher than the book value, and the analysis indicates that there is no sign of impairment.For Argo Securities AS, a valuation has been performed based on expected cash flows for the company in the period 2011 - 2014, with a calculatedresidual value of the company at the end of the period. The calculation is sensitive in respect of the level of expected cash flows, and the hurdlerate. The calculation uses a hurdle rate of 15 %. Based on these assumptions, the calculated value of the company is NOK 193 million. Thesensitivity related to the given assumptions are as follows:+/- 10% change in cash flow = +/- 29 mill i verdi+/- 1% change in require rate of return = +/- 12 mill. i verdi
    • 42 SpareBank 1 Gruppen NOTE 15 – OTHER INTANGIBLE ASSETS Insurance Electronic Insurance systems archive not an systems under NOK 1,000 in use Licences asset group development Group* Total Cost at January 1, 2009 87 804 22 952 1 540 464 940 41 485 618 721 Additions 59 287 3 364 - - 1 500 64 151 Developed internally - - - - - - Bought separately - 3 364 - - - 3 364 From the acquisition of intangible assets - - - - 1 500 1 500 Disposals - -1 540 -464 940 - -466 480 Cost at December 31, 2009 147 091 26 316 - - 42 985 216 392 Accumulated depreciation as at January 1, 2009 59 513 10 102 1 540 414 940 18 807 504 902 Depreciation 11 272 5 230 - - 9 186 25 688 Amortisation 38 390 - - - - 38 390 Disposal depreciation and amortisation - - -1 540 -414 940 - -416 480 Accumulated depreciation and amortisation December 31, 2009 109 175 15 332 - - 27 993 152 500 Exchange differences - 12 - - - 12 Recorded value as at December 31, 2009 37 916 10 972 - - 14 992 63 880 Cost at January 1, 2010 147 091 26 316 - - 42 985 216 392 Additions 15 174 18 798 - 25 825 56 173 115 970 Developed internally - - - - - - Bought separately - - - - - - From the acquisition of intangible assets 8 600 - - - 14 000 22 600 Disposals -63 011 - - - -17 985 -80 996 Exchange differences - -13 - - - -13 Cost at December 31, 2010 99 254 45 101 - 25 825 81 173 251 353 Accumulated depreciation as at January 1, 2010 109 175 15 332 - - 27 993 152 500 Depreciation 9 143 5 855 - - 6 663 21 661 Amortisation 10 792 - - - - 10 792 Disposal depreciation and amortisation -63 011 - - - -13 520 -76 531 Exchange differences - -3 - - - -3 Accumulated depreciation and amortisation December 31, 2010 66 099 21 184 - - 21 136 108 419 Recorded value as at December 31, 2010 33 155 23 917 - 25 825 60 037 142 933 Useful life and linear method of depreciation 3-5 years 5-7 years 10 years 5 years * Is related to intangible assets in the Group from the acquisition of Actor Fordringsforvaltning AS and Conecto AS. NOTE 16 – INVESTMENTS IN SUBSIDIARIES – PARENT COMPANY 2010 NOK 1,000 Business Ownership Nominal value Book Companies office share (%) Share capital per share value SpareBank 1 Livsforsikring AS Oslo 100 348 400 200 2 637 396 SpareBank 1 Skadeforsikring AS Oslo 100 132 000 100 1 100 000 SpareBank 1 Medlemskort AS Oslo 100 150 50 1 600 Sparebankutvikling AS Oslo 100 100 1 000 100 Odin Forvaltning AS Oslo 100 9 238 1 000 176 045 SpareBank 1 Gruppen Finans AS Oslo 100 212 200 1 000 389 699 Argo Securities AS* Oslo 76,75 20 000 1 000 164 851 Total investments in subsidiaries 4 469 691 SpareBank 1 Gruppen Finans Holding AS was the parent company of SpareBank 1 Factoring AS, Actor Portefølje AS and Actor Fordringsforvaltning AS. Actor Portefølje AS owned Actor Verdigjenvinning AS. In 2010 SpareBank 1 Gruppen Finans Holding AS and Actor Portefølje AS have merged with SpareBank 1 Factoring AS, where SpareBank 1 Factoring AS was the acquiring company. The acquiring company has at the same time changed its name to SpareBank 1 Gruppen Finans AS. Actor Verdigjenvinning AS has merged with Actor Fordringsforvaltning AS by transferring all its assets, rights and obligations to the latter company.
    • 432009NOK 1,000 Business Ownership Nominal value BookCompanies office share (%) Share capital per share valueSpareBank 1 Livsforsikring AS Oslo 100 348 400 200 2 379 114SpareBank 1 Skadeforsikring AS Oslo 100 132 000 100 1 100 000SpareBank 1 Medlemskort AS Oslo 100 150 50 1 600Sparebankutvikling AS Oslo 100 100 1 000 100Odin Forvaltning AS Oslo 100 9 238 1 000 176 045Bank 1 Oslo AS Oslo 100 291 000 100 1 000 000SpareBank 1 Gruppen Finans Holding AS Oslo 100 179 200 400 000 224 699Argo Securities AS* Oslo 73,25 20 000 1 000 161 150Total investments in subsidiaries 5 042 709In 2009, Actor Fordringsforvaltning AS has become part of SpareBank 1 Gruppen Finans Holding Group.* There is a shareholders agreement between SpareBank 1 Gruppen AS and employee shareholders. The shareholders in the company have priority in connection with capital increaeses in line with the principles in the Norwegian Comapnies Act.NOTE 17 – INVESTMENTS IN ASSOCIATES AND JOINT VENTURES Allianse- samarbeidet SpareBank 1 Total owner2010 SpareBank 1 Boligkreditt share in DA AS associatedNOK 1,000 10,00 % 2,81 % companyAs at January 1 16 862 103 692 120 554Increased/decreased ownership share -7 853 -103 692 -111 545Adjustment as at January 1 1 137 - 1 137Share of profit/loss IFRS -1 137 - -1 137Share of tax - - -Disbursement of share dividend - - -As at December 31 9 010 - 9 010SpareBank 1 Boligkreditt AS is no longer a jointly controlled operation in SpareBak 1 Gruppen Group, as it now is Bank 1 Oslo AS thatholds ownerhip shares in the company. Allianse- First samarbeidet SpareBank 1 Total owner2009 Securities SpareBank 1 Boligkreditt share in AS DA AS associatedNOK 1,000 0,00 % 17,74 % 2,81 % companyAs at January 1 79 132 19 629 93 996 192 757Increased/decreased ownership share -79 132 - 8 963 -70 169Equity movements/ dilution of equity - - - -Share of profit/loss IFRS - -2 767 2 381 -386Share of tax - - - -Disbursement of share dividend - - -1 648 -1 648As at December 31 - 16 862 103 692 120 553Associates are not marketable securities, thus an objective fair value of the shares in the associates does not exist.Summarised financial information of the Groups associates is set out below Allianse-2010 samarbeidet SpareBank 1NOK 1,000 DAAssets 380 791Liabilities 276 825Income 418 517Profit after taxes 1 500Owner share 10,00 % Allianse-2009 samarbeidet SpareBank 1 SpareBank 1 BoligkredittNOK 1,000 DA ASAssets 315 855 84 235 761Liabilities 213 389 80 552 987Income 506 075 136 524Profit after taxes -15 948 84 744Owner share 17,74 % 2,81 %
    • 44 SpareBank 1 Gruppen The parent company has the following receivables and liabilities with the associates: Receivables Outstanding SpareBank 1 Utvikling DA 95 454 Investments in associates in the parent company SpareBank 1 Gruppen AS NOK 1,000 2010 2009 Shares in Alliansesamarbeidet SpareBank 1 DA 10 147 18 000 Total shares in associates 10 147 18 000 According to IFRS, shares in associates are recognised at cost in the parent companys financial statements and are tested for impairment. There is no basis for impairment by the end of 2010. NOTE 18 – PROPERTY, PLANT AND EQUIPMENT 2009 Parent company Group Machinery, Machinery, Buildings equipment equipment and other and vehicles NOK 1,000 and vehicles properties Total 225 576 Cost or valuation as at January 1, 2009 449 438 411 342 860 780 30 557 Additions 66 276 607 66 883 -3 676 Disposals -5 189 - -5 189 - Revision of property value - 2 518 2 518 - Exchange differences -407 - -407 252 457 Cost or valuation as at December 31, 2009 510 118 414 467 924 585 147 294 Accumulated depreciation and impairment as at January 1, 2009 330 666 9 724 340 390 31 622 Depreciation charge 53 957 7 141 61 098 -3 414 Disposals -3 414 - -3 414 - Impairment charge - - - - Exchange differences -479 - -479 175 502 Accumulated depreciation and impairment as at December 31, 2009 380 730 16 865 397 595 76 955 Net book value as at December 31, 2009 129 389 397 602 526 991 If buildings and other properties were stated at historical cost, the book values would be as follows: Historical cost 268 519 Value adjustment reserves as at December 31, 2009 99 016 Value adjustment funds 65 221 Collateral The company has not pledge any fixed assets as security or guarantee. Unoccupied buildings and other properties A total area of 400 649 (gross amount of capitalised buildings) is fully utilised.
    • 452010 Parent company Group Machinery, Machinery, Buildings equipment equipment and other and vehicles NOK 1,000 and vehicles properties Total 252 457 Cost or valuation as at January 1, 2010 510 118 414 467 924 585 87 001 Additions 113 652 808 144 921 796 -3 826 Disposals -137 176 -29 955 -167 131 - Revision of property value - -18 398 -18 398 - Exchange differences 358 - 358 335 632 Cost or valuation as at December 31, 2010 486 952 1 174 258 1 661 211 175 502 Accumulated depreciation and impairment as at January 1, 2010 380 730 16 865 397 595 33 325 Depreciation charge 54 466 4 381 58 847 -695 Disposals -131 545 -4 323 -135 868 - Impairment charge - - - - Exchange differences 248 - 248 208 132 Accumulated depreciation and impairment as at December 31, 2010 303 899 16 923 320 822 127 501 Net book value as at December 31, 2010 183 053 1 157 335 1 340 389If buildings and other properties were stated at historical cost, the book values would be as follows:Historical cost 1 046 708Value adjustment reserves as at December 31, 2010 80 618Value adjustment funds 71 454CollateralThe company has not pledged any fixed assets as security or guarantee.Unoccupied buildings and other propertiesOf the total gross amount of buildings recorded at NOK 1,132 million, 1 % was unoccupied.NOTE 19 – OTHER ASSETS Parent company Group 2010 2009 NOK 1 000 2010 2009 57 170 Accrued income 71 515 50 761 - 352 Prepaid expenses 21 866 30 208 - - Prepaid claims SOS travel 17 035 24 373 239 922 192 775 Receiveables 497 341 349 932 3 372 461 Other 8 320 27 457 243 351 193 758 Total other assets 616 077 482 731
    • 46 SpareBank 1 Gruppen NOTE 20 – CLASSIFICATION OF FINANCIAL ASSETS AND LIABILITIES Group 2010 Loans and Held to Fair value Fair value Available Amortised NOK 1,000 receivables maturity trading FVO for sale cost Total Financial assets Cash and cash equivalents 985 375 - - - - - 985 375 Shareholdings - - 3 055 697 4 277 018 20 216 - 7 352 931 Commercial paper and bonds 1 249 291 4 679 131 1 123 184 14 385 756 - - 21 437 362 Other financial assets - - 38 158 144 519 - - 182 677 Lending to and deposits with credit institutions 169 132 - - - - - 169 132 Lending to customers 489 320 - - - - - 489 320 Derivative financial instruments - - 130 605 - - - 130 605 Total financial assets 2 893 118 4 679 131 4 347 644 18 807 293 20 216 - 30 747 402 Financial liabilities Subordinated loan capital - - - - - 848 846 848 846 Loans and deposits from credit institutions - - - - - 275 316 275 316 Deposits from customers - - - - - 348 756 348 756 Securities issued - - - - - 1 376 914 1 376 914 Derivative financial instruments - - 160 265 - - - 160 265 Total financial liabilities - - 160 265 - - 2 849 832 3 010 097 Group 2009 Loans and Held to Fair value Fair value Available Amortised NOK 1,000 receivables maturity trading FVO for sale cost Total Financial assets Cash and cash equivalents 1 294 653 - - - - - 1 294 653 Shareholdings - - 3 960 676 2 430 071 42 944 - 6 433 691 Commercial paper and bonds 764 626 5 020 382 8 604 244 8 278 282 - - 22 667 534 Other financial assets - - 26 072 638 809 - - 664 881 Lending to and deposits with credit institutions 197 678 - - - - - 197 678 Lending to customers 20 415 125 - - 668 125 - - 21 083 250 Derivative financial instruments - - 220 787 - - - 220 787 Total financial assets 22 672 082 5 020 382 12 811 779 12 015 287 42 944 - 52 562 474 Financial liabilities Subordinated loan capital - - - - - 1 769 568 1 769 568 Loans and deposits from credit institutions - - - - - 2 597 373 2 597 373 Deposits from customers - - - 53 770 - 14 807 787 14 861 557 Securities issued - - - 2 711 834 - 4 168 644 6 880 478 Derivative financial instruments - - 213 581 5 483 - - 219 064 Total financial liabilities - - 213 581 2 771 087 - 23 343 372 26 328 040 Parent company 2010 Loans and Held to Fair value Fair value Available Amortised NOK 1,000 receivables maturity trading FVO for sale cost Total Financial assets Cash and cash equivalents 93 520 - - - - - 93 520 Shareholdings - - - - 17 583 - 17 583 Lending to and deposits with credit institutions 122 580 - - - - - 122 580 Derivative financial instruments - - 692 - - - 692 Total financial assets 216 100 - 692 - 17 583 - 234 375 Financial liabilities Subordinated loan capital - - - - - 433 846 433 846 Securities issued - - - - - 1 376 914 1 376 914 Derivative financial instruments - - - - - - - Total financial liabilities - - - - - 1 810 760 1 810 760
    • 47Parent company 2009 Loans and Held to Fair value Fair value Available AmortisedNOK 1,000 receivables maturity trading FVO for sale cost TotalFinancial assetsCash and cash equivalents 101 198 - - - - - 101 198Shareholdings - - - - 15 335 - 15 335Lending to and deposits with credit institutions 250 000 - - - - - 250 000Derivative financial instruments - - - - - - -Total financial assets 351 198 - - - 15 335 - 366 533Financial liabilitiesSubordinated loan capital - - - - - 683 892 683 892Securities issued - - - - - 500 531 500 531Loans and deposits from credit institution 501 700 501 700Derivative financial instruments - - - - - - -Total financial liabilities - - - - - 1 686 123 1 686 123NOTE 21 – VALUATION HIERARCHYGroup 2010 LEVEL 1 LEVEL 2 LEVEL 3 Quoted prices Valuation based Valuation in active on observable based on non- markets market observable marketNOK 1,000 information information TotalFinancial instruments available for sale - 394 19 822 20 216Lending to customers and deposits with credit institutions - - - -Financial assets held for trading 4 143 389 53 827 19 823 4 217 039Financial assets designated at fair value through profit or loss (FVO) 15 065 294 3 741 999 - 18 807 293Financial Derivatives 126 048 4 557 - 130 605Total assets 19 334 731 3 800 777 39 645 23 175 153Securities issued - - - -Deposits from customers - - - -Derivative financial instruments - 160 265 - 160 265Total liabilities - 160 265 - 160 265Reconciliation of Level 3Opening balance 141 081Gains and losses through profit and loss 43 064Gains and losses in other profit components -814Investments 2 248Sale -145 935Closing balance 39 645Group 2009 LEVEL 1 LEVEL 2 LEVEL 3 Quoted prices Valuation based Valuation in active on observable based on non- markets market observable marketNOK 1,000 information information TotalFinancial instruments available for sale - 341 42 603 42 944Lending to customers and deposits with credit institutions - 668 125 - 668 125Financial assets held for trading 9 245 473 3 343 825 1 694 12 590 992Financial assets designated at fair value through profit or loss (FVO) 10 611 569 638 809 96 784 11 347 162Financial Derivatives - 220 787 - 220 787Total assets 19 857 042 4 871 887 141 081 24 870 010Securities issued - 2 711 834 - 2 711 834Deposits from customers - 53 770 - 53 770Derivative financial instruments - 219 064 - 219 064Total liabilities - 2 984 668 - 2 984 668Reconciliation of Level 3Opening balance 90 928Gains and losses through profit and loss 37 698Gains and losses in other profit components -594Investments 17 254Sale -4 204Closing balance 141 081
    • 48 SpareBank 1 Gruppen Parent company 2010 LEVEL 1 LEVEL 2 LEVEL 3 Quoted prices Valuation based Valuation in active on observable based on non- markets market observable market NOK 1,000 information information Total Financial instruments available for sale - - 17 583 17 583 Financial Derivatives - 692 - 692 Total assets - 692 17 583 18 275 Derivative financial instruments - - - - Total liabilities - - - - Reconciliation of Level 3 Opening balance 15 335 Investments 2 248 Closing balance 17 583 Parent company 2009 LEVEL 1 LEVEL 2 LEVEL 3 Quoted prices Valuation based Valuation in active on observable based on non- markets market observable market NOK 1,000 information information Total Financial instruments available for sale - - 15 335 15 335 Financial Derivatives - - - - Total assets - - 15 335 15 335 Derivative financial instruments - - - - Total liabilities - - - - Reconciliation of Level 3 Opening balance 153 Investments 15 182 Closing balance 15 335 Definition of levels used for measuring financial instruments at fair value: Level 1 - Valuation is done by using quoted prices in an active market for identical assets/liabilities. A financial instrument is considered as quoted in an active market if the quotation is easily accessible from a stock exchange, trading agency, broker, industrial classification agency, valuation service or governmental institution and these quotiations shall further represent reliable and frequent market transactions by use of the arms length principle. The category includes listed shares, bonds and commercial papers, among others. Level 2 - Valuation is done on the basis of information for the asset/liability that can be directly or indirectly observable and that are not cove- red by level 1. Where there is not an accesible quoted price for active markets, the instruments are measured using valuation methods based on observable input and/or similar instruments/products. The pricing of commercial paper and bonds, including loans with fixed interest rate are based on interest rate curves published in active markets. Level 3 - Valuation on the basis of data that is not observable market information. If the valuation cannot be done according to level 1 and level 2, then the valuation method shall be based on non-observable market information. Financial assets available for sale (level 2 and 3) Financial assets available for sale consist of equity, and valuation is based on non-observable information. Expected future cash flow forms the basis for the valuation. Lending to customers and deposits with credit institutions (level 2) Lending to customers and deposits with credit institutions consist of loans with fixed interest rate. The valuation is based on interest rate curves published in active markets. Financial assets held for trading (level 2 and 3) This category encompasses equity, bonds and commercial papers. The financial instruments are primarily valued through valuation methods based on information that can be observable and/or similar instruments/products. The pricing of commercial paper and bonds is based on interest rate curves published in active markets. Instruments classified as level 3 consist of equity where the valuation is based on expected future cash-flow. Financial assets designated at fair value through profit or loss (fair value option) (level 2 and 3) Instruments classified in level 2 encompass mainly bonds. Valuation of commercial papers is based on interest rate curves published in active markets. Instruments classified as level 3 consist of equity where valuation is based on expected future cash-flow. Financial derivatives (level 2) The financial derivatives consist mainly of currency futures, interest rate swaps and currency swaps. The valutation is based on observable market data and/or prices on similar instruments/products. Securities issued (level 2) The valuation is based on interest rate curves published in active markets. Deposits from customers (level 2) The valuation is based on interest rate curves published in active markets.
    • 49NOTE 22 – FINANCIAL INSTRUMENTS DESIGNATED AT FAIR VALUEGroupSHAREHOLDINGS 2010 2009 Acquisition Book value/ Acquisition Book value/NOK 1,000 cost fair value cost fair valueNorwegian shares 361 130 381 750 96 729 159 674Norwegian mutual funds 1 095 987 1 659 472 1 194 696 1 567 789Foreign shares 456 804 470 987 45 243 33 863Foreign mutual funds 4 019 710 4 820 506 4 431 582 4 629 421Total shareholdings designated at fair value 5 933 631 7 332 715 5 768 249 6 390 748BONDS AND CERTIFICATES 2010 2009 Acquisition Book value/ Acquisition Book value/NOK 1,000 cost fair value cost fair valueNorwegianGovernment and government-guaranteed 0% 1 427 175 1 440 699 615 370 620 732State Bond Fund 0% - - 334 518 324 262Government enterprises 10 % 35 466 35 576 - -Credit institutions and banks 10 % - - 70 994 72 956Norwegian guaranteed bonds 20 % 1 171 482 1 178 296 - -Municipalities and provinces 20 % 433 740 438 684 561 923 565 971Mortgage institutions and banks 20 % 4 546 609 4 615 643 7 430 167 7 569 968Bond funds 20 % 2 756 536 2 765 382 1 277 333 1 284 596Money market funds 20 % 1 869 970 1 863 350 2 004 849 2 009 614Other bonds 20 % - - 3 390 3 410Mortgage institutions and banks 100 % - - 19 924 16 663Money market funds 100 % 426 333 427 498 240 525 242 075Corporate 100 % 622 457 645 577 366 524 378 488Total Norwegian bonds and certificates 13 289 768 13 410 705 12 925 517 13 088 735ForeignGovernment and government-guaranteed 0% 711 350 712 022 1 965 939 1 975 408AUR Credit Suisse - Unit Link 4% - - 3 104 2 555Foreign guaranteed bonds 20 % 545 274 556 834 - -Municipalities and provinces 20 % 2 391 2 344 - -Mortgage institutions and banks 20 % 512 510 497 087 989 155 987 672Bond funds 20 % 143 288 157 409 224 303 223 205Bond funds 50 % - - 483 305 477 751Corporate 100 % 167 963 172 538 125 200 127 200Total foreign bonds 2 082 776 2 098 234 3 791 006 3 793 791Total commercial paper and bonds designated at fair value 15 372 544 15 508 939 16 716 523 16 882 526OTHER FINANCIAL INSTRUMENTS 2010 2009 Acquisition Book value/ Acquisition Book value/NOK 1,000 cost fair value cost fair valueHedge funds 19 875 16 642 47 486 43 081Tax related receivables - - - 1 694Deposits and other receivables 146 718 146 213 - 221 665Bank fund Investment choice portfolio 20 100 19 823 - 397 379Foreign special deposits - - - 1 062Total other financial instruments at fair value 186 693 182 678 47 486 664 881TOTAL FINANCIAL ASSETS DESIGNATED AT FAIR VALUE 21 492 868 23 024 332 22 532 259 23 938 155Parent companyThe parent company has no financial intruments designated at fair value.
    • 50 SpareBank 1 Gruppen NOTE 23 – FINANCIAL DERIVATIVES General descriptions: Currency futures: Contracts to buy or sell a specific amount in foreign currency on a specified future date at a fixed price. Interest rate swaps: An agreement regarding the swapping of interest rate conditions over an agreed period and on a fixed amount. Options: Contracts where the seller gives the buyer the right, but not the obligation to buy (call option) or sell (put option) a financial instru- ment or currency before or on a specified date at a predetermined and fixed price. All derivates are designated at fair value through profit or loss. For all interest rate derivatives, gains are recorded as assets and losses are recorded as liabilities. Group 2010 Fair value Fair value NOK 1,000 Contract total Assets Liabilities Equity instruments Derivative underlying CDOs - - -157 600 Options - 3 865 -2 665 Total equity instruments - 3 865 -160 265 Foreign exchange instruments Forward contracts - 120 897 - Total foreign exchange instruments - 120 897 - Interest rate instruments Interest rate swaps, incl. cross-currency swaps 65 000 5 843 - Other interest rate contracts - - - Total interest rate instruments 65 000 5 843 - Total Financial Derivatives - 130 605 -160 265 Group 2009 Fair value Fair value NOK 1,000 Contract total Assets Liabilities Equity instruments Derivative underlying CDOs - - -159 000 Options - 11 -944 Total equity instruments - 11 -159 944 Foreign exchange instruments Forward contracts 306 077 22 636 -282 Total foreign exchange instruments 306 077 22 636 -282 Interest rate instruments Interest rate swaps, incl. cross-currency swaps 7 565 340 198 126 -58 838 Other interest rate contracts - 14 - Total interest rate instruments 7 565 340 198 140 -58 838 Total Financial Derivatives - 220 787 -219 064 Parent company 2010 Fair value Fair value NOK 1,000 Contract total Assets Liabilities Interest rate instruments Interest rate swaps, incl. cross-currency swaps 65 000 692 - Other interest rate contracts - - - Total interest rate instruments 65 000 692 - Total Financial Derivatives - 692 - Parent company 2009 The parent company had no financial derivatives in 2009.
    • 51NOTE 24 – FINANCIAL INSTRUMENTS CLASSIFIED AS AVAILABLE FOR SALE2010 Parent company Group Acquisition Book value/ Acquisition Book value/ cost fair value NOK 1,000 cost fair value - - Norsk Tillitsmann 919 1 210 - - Norsk Pensjon AS 1 600 945 16 530 16 530 Eiendomsverdi AS 16 530 16 530 1 053 1 053 Other 1 781 1 531 17 583 17 583 Total financal assets available for sale 20 830 20 2162009 - - Oslo Kongressenter Folkets Hus BA 7 009 7 009 - - Finansnæringens Hus 5 813 6 246 - - Norsk Tillitsmann 919 1 233 - - Norsk Pensjon AS 1 600 930 - - SpareBank 1 Eiendomsinvest I AS 5 000 3 475 - - SR Eiendomsinvest Tyskland I AS 4 889 4 889 15 182 15 182 Eiendomsverdi AS 15 182 15 182 153 153 Other 3 477 3 980 15 335 15 335 Total financal assets available for sale 43 889 42 944NOTE 25 – BONDS AT AMORTISED COSTGroup 2010 2009 Acquisition Book Fair Acquisition Book FairNOK 1,000 cost value value cost value valueBonds held-to-maturity 4 527 549 4 545 378 4 676 404 4 866 298 4 879 453 4 949 046Accrued interests on bonds held-to-maturity - 133 753 - - 140 929 -Total bonds held-to-maturity 4 527 549 4 679 131 4 676 404 4 866 298 5 020 382 4 949 046Other bonds at amortised cost 1 230 663 1 229 840 1 222 471 637 351 650 190 682 366Accrued interests on bonds at amortised cost - 19 451 - - 114 435 -Total other bonds at amortised cost 1 230 663 1 249 291 1 222 471 637 351 764 626 682 366Total bonds at amortised cost 5 758 212 5 928 422 5 898 875 5 503 649 5 785 008 5 631 412 2010 2009 Risk Acquisition Book Fair Acquisition Book FairNOK 1,000 weight cost value value cost value valueGoverment and goverment-guaranteed 0% 294 550 301 771 297 901 318 900 326 664 320 031Norwegian and foreign bonds with collateral 10 % 1 002 434 1 023 319 1 021 839 804 916 825 439 815 523Municipalities and provinces 20 % 374 972 383 761 383 898 342 865 350 151 345 515Mortgage institutions and banks 20 % 2 616 317 2 711 259 2 693 595 2 505 244 2 712 069 2 607 565Manufactoring loans 100 % 1 469 938 1 508 312 1 501 641 1 531 724 1 570 684 1 542 778Total commercial paper and bonds 5 758 212 5 928 422 5 898 875 5 503 649 5 785 008 5 631 412Of which listed instruments 3 991 154 4 122 124 4 096 992 3 852 242 3 975 898 3 927 326Changes in holdings during the year 2010 2009Opening balance as of January 1 5 785 006 5 932 725Additions 617 238 389 809Disposals -483 663 -539 020Accrued premium/discount for the year (redemptions) 9 841 1 493Closing balance as of December 31 5 928 422 5 785 008 2010 2010 2009 2009 P&C Life P&C Life Insurance Insurance Insurance Insurance business business business businessDuration 3,0 5,5 3,0 5,8Average effective interest rate 4,4 4,6 3,6 4,5Parent companyThe parent company had no bonds at amortised cost in 2010 as well as 2009.
    • 52 SpareBank 1 Gruppen NOTE 26 – FAIR VALUE ON FINANCIAL INSTRUMENTS MEASURED AT AMORTISED COST Parent company Group 2010 2009 2010 2009 Book Fair Book Fair Book Fair Book Fair value value value value NOK 1,000 value value value value Assets Lending to and deposits 122 580 122 580 250 000 250 000 with credit institutions 169 132 169 132 197 678 197 678 Lending to and deposits - - - - with customers 489 320 489 320 20 415 125 20 404 812 - - - - Bonds at amortised cost 5 928 422 5 898 875 5 785 008 5 631 412 93 520 93 520 101 198 101 198 Bank deposits 985 375 985 375 1 294 653 1 294 652 216 100 216 100 351 198 351 198 Total financial assets 7 572 249 7 542 702 27 692 464 27 528 554 Liabilities Loans and deposits from - - 501 700 501 700 credit institutions 275 316 275 316 2 741 507 3 241 507 - - - - Deposits from customers 348 756 348 756 14 717 423 14 217 423 1 376 914 1 365 507 500 531 500 531 Securities issued 1 376 914 1 365 507 4 168 644 4 176 458 Subordinated loan capital at 433 846 431 083 683 892 670 842 amortised cost 848 846 802 697 1 769 568 1 753 339 1 810 760 1 796 590 1 686 123 1 673 073 Total financial liabilities 2 849 832 2 792 276 23 397 142 23 388 727 Off balance sheet liabilities and 133 000 - guarantee commitments 451 318 - - - Undrawn guarantees - 1 877 538 200 000 - Loan commitments 623 928 475 000 - - Documentary credits - - - - Assets pledged as security 642 234 2 078 500 Amortised cost is the measurement of a financial asset or liability by cumulative amortisation of cash flows estimated at initial recognition adjusted for depreciation. These measurements are not always consistent with market participants measurements of the same instruments. Different views on macro economic development, market conditions, risk, expected rate of return as well as access to information might lead to such differences. The table above displays an overview over calculated fair value of line items designated at amortised cost. The value is calculated by using internal models that are calculated based on either a theoretical value in absence of an active market or on a comparison of the instruments last traded prices in the market against the value registered in the portfolio. An estimate based on judgement is made where no relevant price information is available. High uncertainty is connected to fair value measurements. Bonds at amortised cost Bonds at amortised cost consist mainly of CDOs. The CDOs are divided into a principal and a derivative. The principal is recognised as a bond designated at amortised cost, while the derivatives part is recognised as a financial asset designated at fair value. The CDOs fair value adjustments are based on probability of default published by established rating agencies. Loans and deposits from credit institutions and deposits from customers Loans from credit institutions and deposits from customers are measured at amortised cost. Minor deposits with index-linked returns (BMB) are designated at fair value. The fair value of currently priced deposits equals amortised cost. Securities issued and subordinated loan capital Securities issued with fixed interests rates are designated at fair value, while securities issued with a floating interest rate and subordinated loan capital are measured at amortised cost. The valuation of debt measured at amortised cost is either based on broker quotes or calculated on the basis of swap curves published by Reuters. Similar to loans, the value of assumed new issuance is used.
    • 53NOTE 27 – INVESTMENT PROPERTYGroupSpareBank 1 Gruppens real-estate portforilo consisted of 246 116 m2 divided across 21 buildings as at December 31, 2010. Of this,SpareBank 1 Gruppen uses 51 221 m2 in their own business. Total vacancy rate is 2,9 percent. Weighter remaining tenancy period for theentier portfolio is 6 years.NOK 1,000 2010 2009Additions/disposals and value adjustmentsAcquisition cost as of January 1 4 061 127 4 013 112Additions in year 24 942 48 015Disposals in year -769 199 -Acquisition cost as of December 31 3 316 870 4 061 127Accumulated depreciation January 1 - -Ordinary depreciation in year - -Accumulated depreciation December 31 - -Accumulated value adjustment January 1 629 755 647 836Value adjustment in year 148 187 -18 077Accumulated value adjustment December 31 777 942 629 759Book value as of December 31 4 094 812 4 690 8872010 Average end Historical Book Rental Area of leaseNOK 1,000 City/area cost price value income in m2 termType of buildingOffice building Oslo centre 645 818 846 516 85 365 32 672 2016Office building Skøyen 1 068 642 1 460 668 102 363 75 877 2015Office building Oslo other 397 528 472 570 33 600 18 013 2023Office building Tønsberg 12 233 25 427 2 389 2 503 2011Shopping center Oslo other 282 046 289 919 24 570 19 054 2016Office building/stores Oslo centre 482 676 731 812 48 163 31 090 2013Office building/stores Akershus 111 828 141 271 14 946 16 362 2015Other Oslo 124 658 126 628 9 328 60 2096Total 3 125 429 4 094 812 320 724 195 6312009 Average end Historical Book Rental Area of leaseNOK 1,000 City/area cost price value income in m2 termType of buildingOffice building Oslo centre 1 106 605 1 206 674 74 006 53 430 2013Office building Skøyen 1 068 642 1 453 358 121 856 75 877 2015Office building Oslo other 581 974 680 577 50 054 39 002 2020Shopping center Oslo other 297 632 291 520 24 058 18 196 2015Office building/stores Oslo centre 440 157 789 813 62 308 31 097 2011Office building/stores Akershus 100 550 130 111 13 457 13 535 2012Other Oslo 133 894 138 833 8 088 60 2096Total 3 729 454 4 690 887 353 827 231 197The company utilises an internal cash flow model to calculate fair valie for the properties. In the model, a 30-year cash flow is estimated onthe basis of expected future costs and income for each property. After the end of the 30th year of the cash flow, a terminal value is calculate.The cash flow and terminal value are then inflated to correct for expected increase in prices and discounted with a required rate of returnconsisting of risk free interest and a risk premium. The risk premium is set separately for each property.Parent companyThe parent company had no investmest property in 2010 as well in 2009.
    • 54 SpareBank 1 Gruppen NOTE 28 – LENDING TO AND DEPOSITS WITH CUSTOMERS AND CREDIT INSTITUTIONS Lending to and deposits with credit institutions NOK 1,000 2010 2009 Lending to and deposits with credit institutions without maturity date 169 133 197 678 Lending to and deposits with credit institutions with maturity date - - Total net lending and deposits with credit institutions 169 133 197 678 Lending and deposits specified by currency NOK 166 539 25 769 SEK 813 10 589 USD - 57 753 JPY - 11 375 GBP 1 011 15 984 EUR 40 64 758 CAD - 4 698 CHF - 4 371 Other currencies 730 2 381 Total 169 133 197 678 Loans to customers NOK 1,000 2010 2009 Loans specified Cash advances and bank overdrafts 468 570 2 690 072 Mortgage loans - 495 983 Term loans - 18 145 881 Other loans 98 - Portfolio of outstanding receivables 34 252 - Gross lending to and deposits with customers 502 920 21 331 936 Impairments -13 600 -248 687 Net lending to and deposits with customers 489 320 21 083 249 Total loans to customers and credit institutions 658 452 21 280 928 Loans divided by market NOK 1,000 2010 2009 Employees 34 252 14 492 094 Divided by business 468 667 6 839 842 Gross loans and deposits with customers 502 920 21 331 936 Impairments -13 600 -248 687 Net loans and deposits with customers 489 320 21 083 249 Of which, loans to employees 28 366 1 153 925 Interest rate offered to employees is 80 % of the lowest offered interest rate to customers. Gross loans divided by geographical area NOK 1,000 2010 2009 Oslo 7 021 12 188 946 Akershus 8 565 7 009 227 Other 487 334 2 133 763 Total gross loans divided by geographical area 502 920 21 331 936 Gross loans divided by sector and industry NOK 1,000 2010 2009 Without industry association 43 868 14 492 094 Agriculture 762 47 178 Fishing industry and fishery related businesses 1 365 7 Manufacturing 258 594 390 574 Construction and building, power and water suppliers 24 673 72 984 Commodity trade 40 533 452 623 Hotels and restaurants 925 213 183 Transport and storage 93 372 95 357 Business services 13 906 500 238 Property management 1 4 605 910 Information and technology 10 258 174 453 Finance 11 085 196 705 Other industries 3 579 90 630 Total gross loans divided by sector and industry 502 920 21 331 936
    • 55Individual write-downs divided by sector and industryNOK 1,000 2010 2009Employees - 23 192Manufacturing - 1Construction and building - 3 259Commodity trade - 875Hotels and restaurants - 8Transport and storage - 74Business services - 1 474Property management - 91 985Information and technology - 2 364Other industries - 26 975Specific provisions SpareBank 1 Gruppen Finans AS 13 600 -Total individual write-downs divided by sector and industry 13 600 150 207SpareBank 1 Gruppens lending portfolio lies in the subsidiary SpareBank 1 Gruppen Finans AS in 2010.Parent companyNOK 1,000 2010 2009Subordinated loan capital to First Securities AS 32 580 -Subordinated loan capital to SpareBank 1 Livsforsikring AS - 125 000Subordinated loan capital to SpareBank 1 Skadeforsikring AS - 75 000Credit line to Argo Securities AS 90 000 50 000Total granted loans 122 580 250 000Loans are measured and recognised at amortised cost.NOTE 29 – NET LOAN LOSS PROVISIONSGroupNOK 1,000 2010 2009Change in write-downs 10 650 88 167Incurred losses on loans with previous write-offs 505 34 407Incurred losses on loans without previous write-offs 16 1 852Income received on claims previously written-off -766 -1 258Total loss on loans and deposits 10 405 123 168Gross loan losses divided by sector and business lineNOK 1,000 2010 2009Manufacturing and mining -233 1Construction and building, power and water supply 100 3 261Commodity trade, hotels and restaurants 10 486 -184Transport and other services - 73Financing, property management and other trade services - 58 664Other countries - 20 474Retail - 19 852Group write-downs corporate - 32 808Group write-downs retail - -10 523Gross loan losses customers 10 353 124 426Non-performing and impaired loans 2010 2009 2008 2007 2006Non-performing loans (more than 90 days due) 34.242* 416 568 268 741 112 378 95 629Other impaired loans - 23 038 131 855 53 444 145 313Total impaired loans 34.242* 439 606 400 596 165 822 240 942Individual write-downs - 149 485 88 323 42 004 87 350Net impaired loans 34.242* 589 091 312 273 123 818 153 592* As a basis the portfolio consists of obtained loans where requirements have not been met (all demands over 90 days) in SpareBank 1 Gruppen Finans AS business area Portfolio in 2010. Fulfillment of the claims in the portfolios depend on the debtors ability to fulfill.Parent companyThe parent company has no net loan loss provisions.
    • 56 SpareBank 1 Gruppen NOTE 30 – CREDIT RISK EXPOSURE FOR EACH INTERNAL RISK CLASS The credit risk in the SpareBank 1 Gruppen is mainly related to the operatoins of the business area factoring. Work is being performed to prepare quantitative risk analyses for the business area factoring. The credit risk in the business area is related to financing / lending risk and risk related to domestic and foreign customer credit guarantees. In connection with ICAAP, SpareBank 1 Gruppen uses the standard method for calculating credit risk. The internal credit model is a combination of a risk model and effectiveness model (how well adapted is the business area factoring and how efficient can SpareBank 1 Gruppen run the agreement). Thus the model is not directly transferable to a risk model with two dimensions / axes; rating on client / customer and security coverage. Risk matrix With the business area factorings system for risk classification as a starting point, the following risk matrix is used as a basis for delegation of credit authorisations. Objective score from Lindorff Decision and SpareBank 1 Gruppen Finans AS internal rules of procedures, decides in which risk class limited companies, one-man businesses and personal business registered in the Register of Business Enterprises are placed. Kombinasjoner av risikoklasser og sikkerhetsklasser oppsummeres i følgende risikogrupper: Client rating /structure rating [4 - 5] [3,5 - 4> [3 - 3,5> [2 - 3> [1 - 2> 5 Low risk Low risk Low risk Medium risk High risk 4 Low risk Low risk Medium risk Medium risk High risk 3 Low risk Low risk Medium risk High risk High risk 2 Low risk Medium risk Medium risk High risk High risk 1 Medium risk High risk High risk High risk High risk Default High risk High risk High risk High risk High risk Default /impaired High risk High risk High risk High risk High risk Description of the model: On one axis the client rating based in the Lindorf Decision Score i used, where 1 is the worst and 5 is the best. On the other axis, it is the structure that is given a rating between 1 and 5, 5 being the best. Structure rating implies the factorability both in connection with the effects from operating the agreement and that SpareBank 1 Gruppen has good collateral in the receivable. It has therefore been developed a model where different parameters that say something about the factorability are considered and given a score. The parameters that are considered are: 1. Debtors credit worthiness 2. Repurchase rate 3. Credit note turnover rate 4. Age distribution 5. Business sector The client and structure rating model results in a matrix, that gives the conclusion low risk, medium risk or high risk, based on the combination between client rating and structure rating. Loans divided by risk classes: Business area factoring Client rating vs. Structure rating [4 - 5] [3,5 - 4> [3 - 3,5> [2 - 3> [1 - 2> Total Summarised 5 Low risk Loans 6,6 % 7,4 % 11,7 % 0,1 % 0,0 % 25,7 % 4 46,8 % Loans 4,5 % 4,9 % 22,9 % 0,8 % 0,0 % 33,1 % 3 Medium risk Loans 4,2 % 4,5 % 8,5 % 1,4 % 0,0 % 18,6 % 2 40,9 % Loans 3,0 % 2,2 % 6,4 % 2,7 % 0,0 % 14,4 % High risk 1 Loans 0,0 % 2,4 % 0,2 % 0,2 % 0,0 % 2,8 % 6,9 % Default / put off Default Loans 1,8 % 1,8 % Impairments Impaired Loans 3,6 % 3,6 % The model divides the portfolio into the risk classes low, medium and high risk, as well as default/put off and impairments in 2010.
    • 57NOTE 31 – MAXIMUM CREDIT RISK EXPOSURE, ASSETS PLEDGE AS SECURITY NOT TAKEN INTO ACCOUNTThe below table displays maximum credit risk exposure for the different balance sheet items, derivatives included.The exposure is before assets pledged as security and allowed offsetting. Parent company Group Gross exposure Gross exposure 2010 2009 NOK 1,000 2010 2009 ASSETS 93 520 101 198 Cash and cash equivalents 985 375 1 294 653 - - Lending to and deposits with credit institutions 169 132 197 678 - - Lendring to and deposits with customers 489 320 21 083 250 - - Financial instruments designated at fair valie through profit or loss (fair value option) 18 807 293 11 347 162 - - Financial instruments held for trading 4 217 039 12 590 992 - - Derivatives 130 605 220 787 - - Financial instruments held to maturity 4 679 131 5 020 382 - - Financial instruments held at amortised cost 1 249 291 764 626 17 583 15 335 Financial instruments - available for sale 20 216 42 944 243 351 193 758 Other assets 616 077 482 731 354 454 310 291 Total financial assets 31 363 479 53 045 205 LIABILITIES - - Financial guarantee contracts 111 953 611 386 - - Unutilised credit lines - 1 877 538 - - Commitments 206 360 475 000 - - Total financial guarantees 318 313 2 963 924 354 454 310 291 Total credit risk exposure 31 681 792 56 009 129NOTE 32 – CONTRACTUAL MATURITY OF FINANCIAL LIABILITIESGroup 2010 On Less than 3 3–12 More than WithoutNOK 1,000 demand months months 1–5 years 5 years maturity TotalDeposit from and liabilities tocustomers and credit 6 473 59 323 - - - - 65 796Securities issued 11 413 185 896 476 626 817 359 - - 1 491 294Derivatives 2 664 - - 131 200 26 400 - 160 264Other commitments - 21 578 5 616 - - - 27 194Subordinated loan capital and perpetualsubordinated loan capital securities 283 846 4 603 13 657 222 780 212 747 200 000 937 633Commitments 206 360 - - - - - 206 360Total debt 510 756 271 400 495 899 1 171 339 239 147 200 000 2 888 541Interest rate as of year end 2010 is used to calculate the cash flow for the subordinated loan capital.Cash flow for perpetual subordinated loan capital is calculated from one to five years. The total amount is added without maturity.Group 2009 On Less than 3 3–12 More than WithoutNOK 1,000 demand months months 1–5 years 5 years maturity TotalDeposit from and liabilities tocustomers and credit 14 412 414 1 378 612 328 203 1 617 320 - - 17 736 549Securities issued - 126 020 2 958 546 3 940 050 471 746 - 7 496 362Derivatives - 17 299 41 232 123 051 197 774 - 379 356Other commitments 2 424 332 274 114 - - - - 2 698 446Subordinated loan capital and perpetualsubordinated loan capital securities 283 570 10 223 281 003 793 095 350 000 200 000 1 917 891Commitments 475 000 - - - - - 475 000Total debt 17 595 316 1 806 268 3 608 984 6 473 516 1 019 520 200 000 30 703 604Interest rate as of year end 2009 is used to calculate the cash flow for the subordinated loan capital.Cash flow for perpetual subordinated loan capital is calculated from one to five years. The total amount is added without maturity.
    • 58 SpareBank 1 Gruppen Parent company 2010 On Less than 3 3–12 More than Without NOK 1,000 demand months months 1–5 years 5 years maturity Total Deposit from and liabilities to customers and credit - - - - - - - Securities issued 11 413 159 334 476 626 817 359 - - 1 464 732 Derivatives - - - - - - - Subordinated loan capital and perpetual subordinated loan capital securities 283 846 1 195 3 545 168 700 - - 457 286 Commitments - - - - - - - Total debt 295 259 160 529 480 172 986 059 - - 1 922 018 Interest rate as of year end 2010 is used to calculate the cash flow for the subordinated loan capital. Parent company 2009 On Less than 3 3–12 More than Without NOK 1,000 demand months months 1–5 years 5 years maturity Total Deposit from and liabilities to customers and credit 200 617 301 083 - - - - 501 700 Securities issued - 2 836 502 836 - - - 505 671 Derivatives - - - - - - - Subordinated loan capital and perpetual subordinated loan capital securities 283 570 2 654 257 876 153 876 - - 697 977 Commitments - - - - - - - Total debt 484 187 306 573 760 711 153 876 - - 1 705 347 Interest rate as of year end 2009 is used to calculate the cash flow for the subordinated loan capital. NOTE 33 – AGE DISTRIBUTION OF OVERDUE, BUT NOT IMPAIRED LOANS AND PREMIUM REVENUES The table below shows overdue amounts on loans, overdrafts on credits/deposits and premium revenues broken down on number of days after the due date that are not due to delays in payments transfers. 2010 NOK 1,000 Upon request* Up to 30 days 31–60 days 61–90 days Over 91 days Total Lending to and deposits from customers Retail 34 252 - - - - 34 252 Corporate - - - - - - Past due but not paid insurance premiums - 26 147 1 716 - - 27 863 Total 34 252 26 147 1 716 - - 62 115 * The portfolio consists of acquired non-fulfilled claims (all claims more than 90 days past due) in SpareBank 1 Gruppen Finans AS business area Portfolio. Payment depends on the debtors ability to redeem the claim. 2009 NOK 1,000 Upon request* Up to 30 days 31–60 days 61–90 days Over 91 days Total Lending to and deposits from customers Retail 24 474 2 630 4 053 1 627 27 111 59 895 Corporate - 13 772 44 7 16 691 30 514 Past due but not paid insurance premiums - 24 577 2 787 - - 27 364 Total 24 474 40 979 6 884 1 634 43 802 117 773 * The portfolio consists of acquired non-fulfilled claims (all claims more than 90 days past due) in SpareBank 1 Gruppen Finans AS business area Portfolio. Payment depends on the debtors ability to redeem the claim.
    • 59NOTE 34 – MARKET RISK RELATED TO CURRENCY EXCHANGE RISKIn the Group it is mainly SpareBank 1 Livsforsikring AS and SpareBank 1 Skadeforsikring Group that are exposed to currency risk. Both the lifeinsurance and damage insurance company’s exposure to foreign currency is mainly related to its investment portfolios. As part of the companies’risk management, efforts are made to neutralise the main part of the currency risk in underlying portfolios through foreign exchange contracts.The foreign exchange risk exposure is as follows: 2010 2009 Net Change in Net Change in currency result by a currency result by a positions 3 % change positions 3 % change in NOK in exposure NOK 1,000 in NOK in exposure Currency 72 222 2 167 EUR 266 8 139 648 4 189 USD 744 22 49 569 1 487 Other 1 933 58 261 439 7 843 Total 2 943 88NOTE 35 – MARKET RISK RELATED TO INTEREST RATE RISKThe Group is exposed to market risk related to interest rate risk. The main part of the interest rate risk in SpareBank 1 Gruppen is related to theinvestment portfolios in SpareBank 1 Livsforsikring and SpareBank 1 Skadeforsikring. Below we show a sensitivity analysis per companyrelated to interest rate risk. SpareBank 1 SpareBank 1 SpareBank 1 SpareBank 1 Skade- Livs- ODIN Argo Gruppen Gruppen forsikring forsikring Forvaltning Securities FinansParameter AS (parent) Group AS AS AS Group TotalChange in result in NOK million before tax1% increase in interest rate -15 35 -75 - -10 -2 -671% reduction in interest rate 15 -35 75 - 10 2 67* The table above is an estimate of expect profit and loss impact. The table is prepared in connection with monitoring of risk in SpareBank 1 Gruppen. The numbers are based on changes in value and changes in cash flow during the first year in certificates and bond portfolios in SpareBank 1 Livsforsikring AS, SpareBank 1 Skadeforsikring Group and Argo Securities AS in the case of a momentary change in interest rates. For SpareBank 1 Gruppen and SpareBank 1 Finans Group, the profit and loss impact is related to net interest bearing debt.
    • 60 SpareBank 1 Gruppen NOTE 36 – DEPOSITS FROM CUSTOMERS AND LOANS AND DEPOSITS FROM CREDIT INSTITUTIONS Parent company Group 2010 2009 NOK 1,000 2010 2009 - - Loans and deposits from credit institutions without matuiry date 239 236 268 377 - 501 700 Loans and deposits from credit institutions with maturity date 36 082 2 328 996 - - Deposits from and liabilities to customers without maturity date 115 289 9 458 072 - - Deposits from and liabilities to customers with maturity date - 5 220 287 - - Liabilities to policy holders 233 466 183 198 - 501 700 Total deposits from and liabilities to customers an institutions 624 072 17 458 930 2010 2009 2010 2009 Deposits Deposits NOK 1,000 Deposits Deposits - - Deposits from and liabilities to customers without maturity date 115 289 9 458 072 - - Deposits from and liabilities to customers with maturity date - 5 220 287 - - Total deposits from customers 115 289 14 678 359 - - Wage-earners 1 370 4 236 541 - - Agriculture - 162 - - Fishing industry and fishery related businesses 17 677 13 517 - - Oil related industry - 650 - - Manufacturing 60 763 135 891 - - Construction and building, power and water suppliers 6 094 158 439 - - Commodity trade 7 251 333 865 - - Hotels and restaurants 4 126 560 - - Transport and storage 643 70 913 - - Business services 4 041 6 787 682 - - Poroperty management - 978 518 - - Public sector - 13 157 - - Shipbuilding industry - 569 - - Information an technology 9 863 121 773 - - Finance industry 7 167 1 624 178 - - Other industries 416 75 944 - - Total deposits divided by industry and sector 115 289 14 678 359 2010 2009 Geographic allocation of deposits 2010 2009 - - Akershus 4 930 1 945 840 - - Oslo 2 080 12 173 336 - - Hedmark 725 - - - Oppland 428 - - - Østfold 8 159 - - - Vestfold 117 - - - Vest-Agder 487 - - - Rogaland 54 - - - Hordaland 7 199 - - - Sogn og Fjordane 28 261 - - - Møre og Romsdal 38 160 - - - Sør Trøndelag 5 012 - - - Nordland 1 269 - - - Troms 6 176 - - - Finnmark 11 703 - - - Other 529 559 183 - - Total deposits divided by geographic areas 115 289 14 678 359
    • 61NOTE 37 – SUBORDINATED LOAN CAPITAL Parent company Group 2010 2009 NOK 1,000 Interest rate Call date Maturity 2010 2009 Term subordinated loan capital: - 250 202 21.12.2005 - Norsk Tillitsmann AS NIBOR + 0,62% 21.12.10 21.12.15 - 250 202 150 145 150 120 21.12.2006 - Norsk Tillitsmann AS NIBOR + 0,53% 21.12.11 21.12.16 150 145 150 120 - - 30.06.2009 - LO NIBOR + 2,75% 30.03.14 30.06.19 - 500 136 - - 28.06.2006 - BN Bank ASA NIBOR + 0,60% 28.06.11 28.06.16 15 000 15 000 - - 30.11.2008 - SpareBank 1 NN NIBOR + 0,70% 30.11.13 30.11.18 - 20 000 - - 15.02.2006 - Norsk Tillitsmann ASA NIBOR + 0,45% 15.06.11 15.06.16 200 000 200 222 150 145 400 322 Total time subordinated loan capital 365 145 1 135 680 Perpetual subordinated loan capital: 83 197 83 152 Norwegian owner banks and Sparebanken Vest NIBOR + 2,25% perpetual 83 197 83 152 SpareBank 1 Gruppen AS owners, 200 504 200 418 Sparebanken Vest and Swedbank NIBOR + 3,00% perpetual 200 504 200 418 283 701 283 570 Total perpetual subordinated loan capital 283 701 283 570 Perpetual subordinated loan capital securities - - 30.12.2004 - LO / Affiliated trade unions NIBOR + 1,7% Call opsjon 2014* perpetual - 150 032 - - 15.06.2006 - Norsk Tillitsmann NIBOR + 1,17% perpetual 200 000 200 286 - - Total perpetual subordinated loan capital securities 200 000 350 318 433 846 683 892 Total subordinated loan capital 848 846 1 769 568* The mark-up is 1.0 % in case the perpetual subordinated loan capital securities are not paid back by 2014.NOTE 38 – SECURITIES ISSUED Parent company Group Average Average Average Average interest interest interest interest 2010 rate 2010 2009 rate 2009 NOK 1,000 2010 rate 2010 2009 rate 2009 Commercial papers and 605 000 3,08 % - - other short-term debt 605 000 3,08 % 1 000 000 4,14 % 760 500 3,60 % 500 000 3,09 % Bond debt 760 500 3,60 % 5 680 000 3,30 % 2 002 - - 0,00 % Fair value adjustments 2 002 - 105 873 - 9 412 - 531 - Accrued interst 9 412 - 94 605 - 1 376 914 - 500 531 - Total securities issued 1 376 914 - 6 880 478 - Bond debt broken down on maturity date - 500 000 2010 - 2 750 000 605 000 - 2011 605 000 1 200 000 350 000 - 2012 350 000 800 000 - - 2013 - 500 000 125 500 - 2014 125 500 1 020 000 285 000 - 2015 285 000 - - - 2017 - 410 000 2 002 - Fair value adjustments 2 002 105 873 9 412 531 Accrued interst 9 412 94 605 1 376 914 500 531 Bond debt and other debt 1 376 914 6 880 478
    • 62 SpareBank 1 Gruppen NOTE 39 – CAPITAL ADEQUACY SpareBank 1 Gruppen group is subject to the same capital requirements rules as insurance companies and other financial institutions. The requirement is 8 % liable equity compared with its risk weighted assets. In 2009, SpareBank 1 Gruppen group was subject to the Basel II regulatoins. After Bank 1 Oslo AS was demerged on January 1, 2010, the group is subject to the Basel I regulations. Parent company Group 2010 NOK 1,000 Vekt 2010 Risk wighted assets - Government, central banks, etc 0% 3 748 597 - - Securities 10 % 2 534 344 253 434 43 220 Financial institutions 20 % 11 929 733 2 385 947 - Secured loans, etc 50 % 629 035 314 518 4 869 048 Fixed assets 100 % 12 722 948 12 722 948 - Other assets 150 % 44 349 66 524 93 664 Goodwill and other intangible assets 993 752 - - Assets related to investment choices 20 % 6 700 517 1 340 103 Total recorded assets 39 303 275 5 005 932 Total risk weighted assets 17 083 473 -93 664 Excluding goodwill and other intangible assets -993 752 40 203 Positing outside the balance sheet 2 219 805 50 516 - Net basis for calculation for institutions reporting in accordance with Basel II 1 593 587 - Deduction for liable capital in other financial institutions -9 228 4 952 471 Total recorded assets and postings outside the balance sheet and weighted assets 40 529 328 18 718 348 2 758 135 Equity 3 701 048 - Bond funds 200 000 - - 50% deduciton for liable capital in other financial institutions -4 614 - - Minimum requirement for reassurance coverage -34 341 -440 000 - Suggested dividends -440 000 - - Unrealised gains on investment portperiy / fixed assets -71 454 -93 664 - Deferred tax asset - - - Intangible assets and goodwill -993 752 2 224 471 Total core capital 2 356 887 283 000 Perpetual secured loans 283 000 150 000 Time limited secured loans 350 845 - 45% of unrealised value of properties 32 154 - 45% of unrealised gain on shares - - - 50% deduction for liable capital in other financial institutions -4 614 433 000 Total additional capital 661 385 2 657 471 Net liable capital 3 018 272 53,7 % Capital coverage 16,1 % 2 261 273 Suprplus of liable capital 1 520 804 Parent company Group 2009 NOK 1,000 2009 1 782 400 Share capital 1 782 400 827 096 Share premium reserve 827 096 702 945 Other equity 1 472 320 120 000 Dividends 120 000 - Fund for unrealised gains 65 221 - Minority interests 30 299 3 432 441 Total equity, exclusive perils reserves 4 297 336 Core capital -101 933 Deferred tax, goodwill and other intangible assets -824 369 - Fund for unrealised gains available for sale -65 221 -120 000 Deduction for dividends, payable -120 000 - Deduction for reinsurance provisions -34 133 - 50 % deduction eligible primary capital in other financial institutions - - 50 % deduction in expected losses IRB less loan loss provisions -108 186 - 50 % capital adequacy reserve - - Portion of unrecognised actuarial gains/losses - - Perpetual subordinated loan capital securities 350 000 3 210 508 Total core (Tier 1) capital 3 495 427
    • 63 Tier 2 capital 283 000 Perpetual eligible primary capital 283 000 400 000 Term eligible primary capital 1 129 000 - 45 % unrealized gains on investment properties 29 349 - 50 % deduction eligible primary capital in other other financial institutions - - 50 % deduction in expected losses IRB less loan loss provisions -108 186 - 50 % capital adequacy reserve - 683 000 Total Tier 2 capital 1 333 163 3 893 508 Net liable capital 4 828 590 Minimum requirement eligible primary capital Basel II 449 294 Standarised approach 133 485 - Special lending 427 082 - Other corporates 163 747 - SMB 3 467 - Retail 164 091 - Other retail 26 543 - Equity positions - 449 294 Total IRB credit risk 918 415 - Credit risk 93 889 - Equity risk 3 - Foreign exchange risk - 90 793 Operational risk 155 453 - Transitional rules 20 008 - Commitments calculated after the Basel I requirements - - Capital requirements for insurance 1 194 688 - Deductions -11 013 540 087 Minimum requirement eligible primary capital 2 371 443 57,67 % Capital adequacy ratio as of December 31 16,29 % 47,56 % Tier 1 capital ratio 11,79 % 10,12 % Tier 2 capital ratio 4,50 %NOTE 40 – REINSURANCE RECEIVABLES GroupNOK 1,000 2010 2009Reinsurance receivables within P&C Insurance 294 855 249 366Reinsurers claims provisions life insurance 148 801 152 021Reinsurers share gross claims provisions 1 034 542 777 552Reinsurers share gross unearned premium 179 531 119 728Reclassified reinsurance provisions -163 391 -147 825Total reinsurance receivables 1 494 338 1 150 842NOTE 41 – INSURANCE RECEIVABLES FROM POLICYHOLDERS GroupNOK 1,000 2010 2009Due invoiced receivables P&C Insurance 370 607 253 675Due unbilled receivables P&C Insurance 902 205 776 727Accounts receivable life insurance 121 629 77 613Total insurance receivables from policyholders 1 394 441 1 108 015
    • 64 SpareBank 1 Gruppen NOTE 42 – INSURANCE LIABILTES IN LIFE INSURANCE Group 2010 Gross Premium and premium Additional pension Claims Security NOK 1,000 reserve provision adjustm.fund provisions provisions Total Individual annuity and pension 6 430 913 104 084 1 764 214 906 - 6 751 668 - Profit model according to the Insurance Act § 9-9 51 816 321 - - - - - Profit model according to previous rules from the Insurance Act of June 10, 1988 § 8-1 with guidelines 4 386 797 103 763 1 764 22 450 - - - Contracts without rights to share of profits 131 717 - - 192 456 - - - Investment choice 1 860 583 - - - - - Individual endowment 2 338 902 9 490 - 177 221 679 2 526 292 - Profit model according to the Insurance Act § 9-9 353 666 - - - - - - Profit model according to previous rules from the Insurance Act of June 10, 1988 § 8-1 with guidelines 621 726 9 490 - 72 164 679 - - Contracts without right to share of profits 68 - - 104 872 - - - Investment choice 1 363 442 - - 185 - - Group pension 10 625 774 265 680 416 373 344 617 - 11 652 445 - Defined benefit-based pension schemes without investment choice 3 548 018 192 602 268 975 107 567 - - - Paid-up policies 3 254 126 73 078 - 34 500 - - - Defined contribution-based pension schemes (including pension capital certificates without investment choice 344 175 - 14 484 10 422 - - - Defined contribution-based pension schemes (including - pension capital certificates) with investment choice 3 386 947 - 117 709 103 157 - - - Contracts without rights to share of profits 92 508 - 15 205 88 972 - - Group life 393 386 - - 695 561 - 1 088 947 Accident - - - 242 011 54 317 296 328 - Contracts without rights to share of profits - - - 242 011 54 317 Total all businesses 19 788 975 379 255 418 137 1 674 317 54 996 22 315 681
    • NOTE 43 – INSURANCE RESULT AND PROVISIONS IN P&C INSURANCEGroup2010 1 PERSONAL LINES 2 COMMERCIAL LINES Of which TOTAL Onshore Onshore Of which Workmens TOTAL 3 4 5 Natural Onshore third party Travel PERSONAL property property third party compen- COMMERCIAL Total Energy/ Reinsu- PerilsNOK 1,000 property Motor liability Yacht Accident insurance Others LINES industrial commercial Motor liability Liability sation Safety Other LINES Marine oil rance pool TOTALGross unearned premiumprovision as atJanuary 1, 2010 495 302 686 310 294 824 30 477 36 284 112 142 8 147 1 368 662 4 847 125 520 88 886 28 520 4 647 34 778 3 924 2 405 265 009 - - - 41 235 1 674 906Gross unearned premiumprovision as atDecember 31, 2010 556 389 793 219 325 971 32 802 37 279 120 582 12 854 1 553 126 4 818 156 545 118 597 32 448 7 398 62 762 4 553 14 728 369 402 - - - 39 293 1 961 821Gross claimsprovision as atJanuary 1, 2010 725 412 1 253 902 998 037 19 783 256 023 97 531 4 567 2 357 218 5 719 336 874 187 755 139 007 24 421 644 081 230 160 3 573 1 432 583 340 52 296 40 732 55 126 3 938 296Gross claimsprovision as atDecember 31, 2010 903 430 1 400 747 832 189 19 144 307 602 126 346 10 053 2 767 323 12 983 333 926 220 352 125 099 82 525 878 220 235 354 46 587 1 809 947 157 809 66 252 37 826 46 595 4 885 752Security provision asat January 1, 2010 - - - - - - - 469 225 - - - - - - - - 231 474 - - 10 721 - 711 421Statutory minimumrequirement January 1, 2010 - - - - - - - 469 225 - - - - - - - - 231 474 - - 10 721 - 711 421Security provisionas at December 31, 2010 - - - - - - - 500 480 - - - - - - - - 251 285 - - 15 432 - 767 198Statutory minimumrequirement as atDecember 31, 2010 - - - - - - - 500 480 - - - - - - - - 251 285 - - 15 432 - 767 198Other technicalprovision as atJanuary 1, 2010 - - - - - - - 497 337 - - - - - - - - - - - - - 497 337Other technicalprovision as atDecember 31, 2010 - - - - - - - 452 531 - - - - - - - - - - - - - 452 531Total as at January 1, 2010 6 821 960Total as at December 31, 2010 8 067 303 65
    • 66 SpareBank 1 Gruppen NOTE 44 – LIABILITIES RELATED TO REINSURANCE Group NOK 1,000 2010 2009 Reinsurance liabilities in life insurance 33 301 36 079 Reinsurance liabilities in P&C insurance 44 405 59 044 Total liabilities related to reinsurance 77 706 95 123 NOTE 45 – UNDERWRITING RISK SPAREBANK 1 LIVSFORSIKRING AS Important calculation assumptions and changes in the assumptions • The basic interest rate is in accordance with the Insurance Act and is assessed on an ongoing basis with the interest rate for long-term govern- ment bonds. The basic interest rate is currently 2.75 %for new life insurance contracts beginning on January 1, 2006. The basic interest rate for new goup pension contracts sold from January 1, 2006 is 2.70%. The basic interest rate for accrual of benefits on group pension is 3 %, with effect from renewals in 2004. The basic interest rate for new individual life insurance contracts sold in the period 1994 - 2005 is 3%. Otherwise the basic interest is 4 %. The basic interst will change in 2011 according to the Norwegian Financial Supervisory Boards decison to reduce the maximum basic interest. • The mortality rate assumptions are primarliy based on research done by the Norwegian Financial Services Association (FNH), while assumpti- ons on disability are based on the companys own experiences. The mortality rate assumptions for the disabled take into consideration the corre- lation between disability and mortality. As of 2008, group defined benefit pension and paid-up policies from group defined pensions, follow the new industry tariff K2005 with security margins that take into account increased life expectancy. • The allocation for reserves and premium provisions is determined based on the principle of security margins in the reserves and in the pre- miums. The safety margins in premiums and reserves are not quantified, but assessed by the level of uncertainty and longevity of the liabilities. • The ordinary premium reserve of the company is calculated based on the prospecitve principles on the same tariff basis as the premium tariff. IBNR and RBNS provisions are allocated using statistical methods based on the companys own experiences. • There has been an effort by Finance Norway (FNO) to develop new tariffs for individual annuity and pension taking increased life expectancy into account. As a result of this, there is a process for increasing the provisions for individual annuity and pension. Risk management for insurance contracts • Evaluation of insurance risk Risk manuals with guidelines on risk assessment including health rules and writing of potential customers have been prepared. When writing individual risk products, the policy holder is required to undergo a health check. The result of this health check is reflected in the level of the required premium. When arranging group contracts with risk coverage, the company must undergo a risk assessment. In the assessment the companys financial position, industry and health and disablement background will be examined. • Control and monitoring of insurance risk In the companys existing portfolio the insurance risk is monitored within each specific product group. The risk result in each product group is divided into the following elements: mortality rate, disability rate and probability of survival. The development of the risk results is monitored throughout the year. For every risk type the ordinary risk result for a period is the difference between the risk premiums undertaken during the period and the claims incurrend in the same period. Events that have not yet been reportet but which the company, on the basis of experience, assumes have occurred (IBNR) are taken into account. The company has developed a framework for control and monitoring of insurance risk in connection with risk based supervision. Risk result in 2010 Individual Individual annuity and endow- Group Group MNOK pension ment pension Accident life Total Risk of death (including accident risk) -17,94 149,22 -1,84 - 74,11 203,56 Disability 33,30 -20,24 14,05 - 82,28 109,39 Accident - - - 40,65 - 40,65 Risk result technical provisions 15,36 128,98 12,21 40,65 156,39 353,60 The table below shows the total risk result for 2010 after a reduction in mortality rate of 10 % and 20 %, respectively, or an increase in the disability rate of 10 % or 20 %, respectively. Individual Individual annuity and endow- Group Group MNOK pension ment pension Accident life Total 10 per cent reduction in mortality rate 15,26 141,95 10,74 40,65 178,32 386,92 20 per cent reduction in mortality rate 15,16 154,92 9,26 40,65 200,25 420,24 10 per cent increase in disability rate 2,36 121,83 -0,25 40,65 143,02 307,60 20 per cent increase in disability rate -10,65 114,68 -12,72 40,65 129,64 261,60 The effect that the risk result has on the result to the shareholders depends on which profit model is applied for the various products.
    • 67• Reinsurance The Board of Directors reviews the companys reinsurance strategy on an annual basis. The strategy comprises amongst other targets for the companys reinsurance program and how the reinsurance program is to be monitored. The company has the following types of reinsurance coverages:• Quota reinsurance Through quota reinsuance the risk is divided between two parties. Therefore parts of the risk are transferred to a reinsurer, where the part transferred is previously agreed on.• Surplus reinsurance Surplus reinsurance covers risk that exceeds the maximum risk amount for own account specified in the contracts. Excess reinsurance is, like quota reinsurance, a proportional arrangement, but differs because the percentage varies in the different contracts. Excess reinsurance is in particular used for individual contracts.• Excess of loss / Catastrophe reinsurance Through excess of loss, the reinsurer covers the amount that exceeds the companys risk amount, often limited to a specified maximum level. A claim can be defined per risk or per incident. An example of an excess of loss is a catastrophe reinsurance. In the case where the claim is defined per risk, excess of loss can be similar to the surplus reinsurance.• Sufficiency test IFRS 4 requires the company to carry out a sufficiency test of the companys reserves. This test has been performed using the same princi- ples since 2004. The calculations are based on forecasts from the companys finance model, where both assets and liabilities are included. This model is proceeded till 2015. The administration result and the risk result is assumed to be on the average level of the period 2010 - 2015, and the financial return is assumed to be 5.2 %. As life expectancy increases, the reserves for retirement pension is expected to be too low for individual pension. The calculations assu- me that 0.6 per cent of the reserve lacks and that this is divided over 2 years. The sufficiency test shows that the premium reserve is adequate using the specified assumptions.Conditions and terms in insurance contracts• Insurance risk The company offers cover for disability through most product groups, either through disability pension, waiver of premium or one-off payment. Individual contracts and goup life contracts also include life cover. Group pension includes widow or widowers cover with payments commencing on the policy holders time of death. Changes in the rules for payment from the national social security scheme for disability benefits etc. may have a significant impact on the number of claims for disability and disability reserves. In terms of changes in death benefits, the increasing life expectancy will have an effect om whether or not expected payment time will be as assumed. With a steady increase in life expectancy the companys future payments to retirement pension will be higher compared to previous years.• Interest rate risk The company has taken on a significant interest rate risk within annuity and pension insurance. The companys average annual guarante- ed rate of return is 3.18 %, calculated from average insurance fund. All new contracts in 2010 are offered with a basic interest rate of 2.75 % for individual insurance and 2.70 % for group defined benefit pension. A persistent low interest rate level will increase the risk related to the guaranteed rate of return. If the annual rate of return seems to be lower than the guaranteed rate of return, financial efforts are made to secure returns on the same level as the guaranteed rate of return. If this not is sufficient, allocations from additional provisions will be made to cover the guarantee. Potential negative rates of return must be covered from the comopanys equity. In good fiscal years funds from the profit are transferred to the additional provisions. This is regulated upward to 12 % of the contracts premuim reserve.Average interest rate guarantee 2010Individual endowment insurance 2,38 %Individual annuity/pension insurance 3,41 %Group pension insurance 3,15 %Group life insurance 0,00 %Accident insurance 0,00 %Total 3,18 %• Profit models The company has models with and without rights to profits according to the rules in the Insurance Act.• New profit model: Group pension, Defined contribution pension with return guarantee, Guarantee account, Individual saving products entered into from 2008 and Group life with profit fund.• Modified profit model: Paid-up policies terminated from group pension.• Profit sharing according to previous rules: Individual endowment and Individual pension with profit sharing entered into prior to 2008.• Without right to profits: Group life (without Group life with profit fund), Group risk pension insurance without paid-up policy, Individu- al annuity, Individual endowment and Accident insurance.• With investment choice: Defined contribution schemes with investment choice, Induvidual endowment and Individual annuity.• Profit allocation The allocation of profit to each customer is determined by which product group the contract belongs to. For individual endowment insurance, the profits will be accumulated on the different contracts and paid out with the amount insured. For individual annuity and pension insurance, the secured contribution is written up with the profit. Individual contracts terminated from group pension treated in the same way.
    • 68 SpareBank 1 Gruppen For group pension, the profits are allocated to the schemes premium reserve and the pensioners profit reserve in accordance with the regulations set in the Company Pension Scheme Act. For schemes without these regulations the profits are allocated to the premium fund. • For products without profit rights the compay will be exposed for the products cost risk and insurance risk. • The right to transfer insurance between companies, where the time limit for settlement is only two months after the delay of cancellation for contracts where the transaction value is above NOK 300 million, can represent a liquidity risk if one or more of the greater contracts are transferred within a short amount of time. The transaction fee has an upper limit of NOK 5 000. Bigger outward transactions than inward transactions over a defined time period will affect the future cash flow. • In general, changes in framework conditions for the industry can influence future cash flows. For instance, changes in the Pensions Act result in the termination of defined benefit-based pensionl or in transfers to the defined contribution-based pension. • Maturity analysis The best estimate for when the liabilites for savings products are due for payment. In the estimate disposals have been taken into account. 2010 Book MNOK value 0-5 years 5-10 years 10-15 years 15-20 years >20 years Payments (not discounted) 5 027 5 017 3 717 2 914 6 502 Total net premium reserves (discounted) 12 560 Insurance risk concentration • The insurance portfolio is well diversified with respect to insurance risk. The portfolio is composed primarily of individual policies and group policies where the insurance risk is not concentrated. NOTE 46 – UNDERWRITING RISK SPAREBANK 1 SKADEFORSIKRING Risk in P&C insurance The insurance risk in each contract entails the probability that the insured event occurs and the uncertainty surrounding the resulting claim. The nature of the insurance contract is such that the risk is random and therefore must be estimated. For insurance contracts portfolios utilizing probability theory to calculate price and technical provisions, the biggest risk facing the company is that the actual compensation exceed the amount set aside. Insurance events strike randomly and the observed number of events and degree of compensation will naturally vary from year to year compared to that estimated by statistical techniques. Empirically, a larger portfolio of standard insurance contracts will have expected results that vary less. A more diversified portfolio will have less chance of interference from changes in a sub-portfolio. The Groups subscription strategy is designed to reduce variability in the expected result by increasing the spread between different types of insurance risk through a sufficiently large insurance stock within each sector. Rein- surance is used to reduce the Groups risk to major damages. Sensitivity to insurance risk The table below shows the impact on earnings and equity (before tax) of a 1% change in gross premiums earned and 1 % change in the Combined Ratio for own account. Combined Ratio is the most widely used criterion for measuring profitability in general insurance. A change in the Combined Ratio can result of a change in the injury frequency, compensation level and / or administrative costs. Sensitivity analysis – general insurance Change in Change in profit (before tax) MNOK 1 % change in combined ratioRetail +/- 35,9 1 % change in combined ratioCorporate +/- 5,0 1 % change in insurance premium level +/- 40,9 Concentration of insurance risk The Group has prepared guidelines describing which insurance objects the companies can accept in their portfolios. Compliance with the guidelines will be controlled. In addition automatic controls for entry of new portfolio have been incorporated into the insurance system. The reinsurance cover is adapted to the risk exposure of the insurance portfolio. The Group has a reinsurance cover consisting of a quota program and large comprehensive reinsurance cover (XL reinsurance).
    • 69Gross premiums written per insurance productFigures in NOK 1,000Combined InsuranceFire 1 628 536 Onshore property industrial fire 11 152 Sea 908Motor vehicle 1 562 159 Onshore property commersial fire 352 660 Energy/oil 2Leisure boat 68 897 Motor vehicle industry 243 362 Total incoming reinsurance 52Accident insurance 155 019 Liabilty 24 854 Total sea, energy, reinsurance 962Travel insurance 303 396 Occupational injury 126 226Other private insurances 23 324 Assurance 68 683 Nature/pools 127 341 Other 35 242 Total gross premiumsTotal personal lines 3 741 331 Total commercial lines 862 179 written 4 731 813Claims provisionsClaims provisions are measured at an unbiased level, such that there is no security buffer included in the provision. The company must haveprovisions covering in full that corresponding to the minimum requirements on premium provisions and claims provision for own account(after ceded reinsurance) as determined by the Financial Supervisory Authority of Norway for each industry group. The companys actual claimsprovisions for own account shall at all times exceed the minimum requirements set by the Financial Supervisory Authority of Norway within allproduct lines. The fiscal year end premium provision shall cover not run-off risk on damages not yet incurred on agreements contracts.Provisions for claims have not been discounted, except for within marine insurance.The security provision shall cover extraordinary fluctuations and shall together with the outstanding claims provisions cover the company’sinsurance liabilities with a likelihood of 99 %.Analysis of claims developmentInsurance liabilities and reinsuranceThe table below shows the actual claims compared with previous estimates (ie claims development). The specification includes only portfoli-os which have a natural development, that is, without portfolio transfers.Gross claims developmentGross – shore based business ex. incoming reins./sea/pooler 2005MNOK and earlier 2006 2007 2008 2009 2010 TotalCLAIMS PROVISIONSYear end 2 976,8 1 299,7 1 436,5 1 436,6 1 553,6 1 598,0 10 301,2One year later 2 985,4 1 306,1 1 480,5 1 575,5 1 618,4 - 8 965,9Two years later 3 036,2 1 240,7 1 437,6 1 554,6 - - 7 269,1Three years later 3 030,8 1 210,7 1 437,4 - - - 5 678,9Four years later 3 031,5 1 206,2 - - - - 4 237,7Five years later 3 066,3 - - - - - 3 066,3PAID CLAIMSOne year later 901,0 569,8 648,3 711,1 666,3 3 496,5Two years later 500,6 124,0 125,0 143,2 - 892,8Three years later 367,6 70,0 87,0 - - 524,5Four years later 305,0 62,1 - - - 367,1Five years later 215,0 - - - - 215,0Total Unison 5,9 70,8 101,5 125,5 159,5 463,2Total unpaid 2 295,2 896,7 961,7 979,8 825,9 5 959,2Run-off results in 2010 – own business -36,2 1,8 -4,5 19,7 2,3 -16,8Run-off results in 2010 – energy/ incoming reinsurance 0,3Run-off results in 2010 – pools 5,6Total run-off results in 2010 -10,9Total gross claims provision closing balance 771,2 309,6 475,6 574,8 792,6 1 598,0 4 521,7Claims provisions – portfolios undertaken 52,7Gross claims provisions sea/incoming reinsurance 264,8Pools 46,6Total gross claims provision in the balance sheet 4 885,8
    • 70 SpareBank 1 Gruppen Development in claims for own account For own account before XOL - i.e. only for own account proportionally after ceded reinsurance. 2005 MNOK and earlier 2006 2007 2008 2009 2010 Total CLAIMS PROVISIONS Year end 1 677,5 1 112,9 1 199,6 1 206,5 1 269,1 1 396,4 7 861,8 One year later 1 688,3 1 127,3 1 198,6 1 293,6 1 301,1 - 6 608,7 Two years later 2 164,8 1 061,8 1 160,1 1 275,3 - - 5 662,0 Three years later 2 156,8 1 033,5 1 163,8 - - - 4 354,1 Four years later 2 155,6 1 029,9 - - - - 3 185,5 Five years later 2 187,4 - - - - - 2 187,4 CLAIMS PAID One year later 681,1 531,3 589,2 657,1 585,8 - 3 044,4 Two years later 361,6 115,8 115,0 114,8 - - 707,2 Three years later 248,5 46,8 42,3 - - - 337,6 Four years later 212,5 52,6 - - - - 265,0 Five years later 165,9 - - - - - 165,9 Total Unison 4,5 19,7 31,6 60,2 81,0 - 196,9 Total paid 1 674,1 766,0 778,1 832,2 666,7 - 4 717,1 Run-off results in 2010 -33,6 1,7 -5,5 19,4 -6,5 - -24,5 Run-off result`s part XOL - - - - - - 0,1 Run-off result - incoming reinsurance/energy - - - - - - 0,4 Ruf-off results in 2010 - pools - - - - - - 5,4 Total Run-off result for own account 2010 - - - - - - -18,6 For own account claims provisions closing balance 513,2 263,9 385,8 443,1 634,4 1 396,4 3 636,7 Claims provisions – portfolios undertaken - - - - - - 43,9 Deduction XOL-reinsurance - - - - - - -26,8 Claims provisions for own account sea/incoming reinsurance - - - - - - 151,3 Pools - - - - - - 45,8 Total claims provisions for own accounts in the balance sheet 3 850,9 NOTE 47 – WAGES AND OTHER REMUNERATION TO CEO AND KEY MANAGEMENT Other Accrued remuner- pension NOK 1,000 Salaries Bonus1) ation cost GROUP MANAGEMENT Kirsten Idebøen 2 900 594 443 359 Torbjørn Martinsen 2 473 493 385 356 Aud Lysenstøen 2 131 361 355 251 Tore Tenold 1 948 413 219 634 Leif Ola Rød 2 324 1 070 42 - Thoralf Granerød 1 768 295 285 301 Jarle Haug 1 647 - 293 131 Øyvind Aass 1 958 267 296 271 Sigurd Aune 1 831 350 306 402 Total 2010 18 980 3 843 2 622 2 704 Total 2009 25 640 4 136 2 234 4 774 BOARD OF DIRECTORS Terje Vareberg 100 - 19 - Finn Haugan 168 - 20 - Hans Olav Karde 184 - - - Harry Konterud 228 - 6 - Bjørn Engaas 153 - 18 - Bente N. Halvorsen 168 - - - Knut Bekkevold 184 - - - Venche Johnsen 153 - - - Steinar Karlsen 154 - 18 - Per Gunnar Gulseth 123 - - - Total 2010 1 615 - 82 - Total 2009 1 184 - - -
    • 71Control committeeDag Nafstad 150 - - -Knut Ro 110 - - -Ivar Listerud 110 - - -Odd Broshaug 110 - - -Rolf Røkke 110 - - -Total 2010 590 - - -Total 2009 783 - - -Shareholders committee 113 - - -Shareholders committee 159 - - -1) The bonus amount relates to paid out bonus in 2010.The CEO possess the right to a defined benefit pension amounting 70 % of annual salary from the year she turns 60. The right is earned on apro rata basis. The CEOs salary and bonus are based on an overall evaluation of a combination of the Groups profit, the Groups goalachievement compared to other comparable financial institutions, the CEOs own achievments and average salary for comparablemanagement positions. A possible bonus is decided by the Board of Directors and the bonus provision for one financial year is to be paidbefore the next financial year ends.The board is not committed to give the chairman of the board any benefits by resignation or change of the duty.Neither do any agreements on bonus, profit sharing, options and similar benificial to the chairman of the board exist.Loans to employees are granted by Bank 1 Oslo AS and collateral given is according to the Financial Institutions Act § 2-15.Employees are granted loans with a 20 % discount compared to other customers. The cost of the discount is allocated to the differentsubsidiaries based on each companys share. The employees in SpareBank 1 Gruppen Group have a total loan of NOK 813 780 thousand withdiscount.Employee discounts are granted on loans and some insurance services. Benefits given to management and members of the board do notdiverge from benefits given to other employees. All loans to employees and the board are endorsed by the Control Committee. The discountsgiven are about 25 % of the ordinary customer conditions. SpareBank 1 Livsforsikring AS does not offer any discounts to employees or boardmembers. All insurance contracts are based on ordinary customer conditions. Three memebers of the Group Management have signed pensionagreements that diverge from the pension schemes offered to other employees.SpareBank 1 Gruppen AS sole business is to administrate its investment in the subsidiaries. All related-party transactions are singed onbusiness conditions only. All inter group benefits not related to sale and portfolio management are priced at cost.DEPOSITS 2010 Jointly Other Group Board of Control controlled relatedNOK 1,000 management Directors committe entilities partiesDeposits as of January 1 1 470 1 379 5 - -Deposits received during the year 23 211 2 783 123 - -Withdrawals 23 172 2 405 119 - -Deposits as of December 31 1 509 1 757 9 - -Interest expense 32 28 - - -DEPOSITS 2009 Jointly Other Group Board of Control controlled relatedNOK 1,000 management Directors committe entilities partiesDeposits as of January 1 759 1 250 18 - -Deposits received during the year 21 421 2 465 141 - -Withdrawals 20 299 2 336 154 - -Deposits as of December 31 1 882 1 379 5 - -Interest expense 41 29 - - -Insurance premium SpareBank 1 Skadeforsikring AS 2009Insurance premium in year 136 197 45 - -Insurance claims 37 213 - - -SERVICES PURCHASED FROM RELATED PARTIES 2010 2009Services purchased from Alliansesamarbeidet SpareBank 1 DA 39 351 46 827Commission cost to controlling ownerbanks 679 169 640 760
    • 72 SpareBank 1 Gruppen NOTE 48 – PENSIONS General description of the companys pension liabilities: The employees are part of SpareBank 1 Gruppens Group pension scheme which is administrated by SpareBank 1 Livsforsikring AS. The defined benefit plan ensures most of the employees a pension payment that constitutes 70 % of the expected final salary until the age of 77 with a future decrease in payments. In addition, a defined contribution plan has been established for employees starting on January 1, 2005 and later. The defined benefit plan was closed for new employees as of the same date. For the parent company, the defined benefit plan includes 105 current employees and 74 pensioners. For the total group the defined benefit plan includes 526 current employees and 491 pensioners. Estimates are used for preparing the valuation of the pension retirement benefit and for the resulting excess or deficit. Adjustments to these values are made on a yearly basis and in accordance to statements of the transfer value from the life insurance company and actuarial valuations of the liabilitys size. The costs are calculated based on the assumptions made for the opening balance. The pension liabilities are revised and calculations updated as of December 31 according to the assumptions made by year end. Actuarial gaines and losses (changes in estimates) are presented in the statement of comprehensive income. The periods pension cost consists of the pension entitlement accrued in the period and interest cost on the pension liability less expected return and accrued employers national insurance contribution. Payments according to the defined contribution scheme are registered through profit and loss in the year of payment. If the company had used the assumptions given by the Norwegian accounting foundation as of December 31, 2010, the pension commitment would have been 15 and 66 million lower in the parent company and Groups annual accounts respectively. Equity would have been higher with equal amounts. A law on state subsidies to wokers who take early retirement in the private sector (AFP-tilskuddsloven) came into force on February 19, 2010. Workers who take early retirement from 2011 or later, will be given benefits under the new scheme. The new pension scheme contitutes a lifelong entitlement from the National Health Service (Folketrygden) and can be taken from age of 62. Annually the employees earn the right to early retirement with 0,314% of pensionable income up to 7,1 G at the age of 62. Vesting of the new scheme is calculated on the basis of the workers lifetime income, so that all earlier working years are included in the accrual basis. The new scheme will be financed by the state covering 1/3 of pension expenditure and 2/3 which shall be borne by the employers. Employers premiums will be determined as a percenta- ge of salaries between the 1G and 7,1G. The new pension scheme is for accounting purpose considered to be a defined benefit multiemployer scheme . This means that each entity should account for its proportionate share of the schemes pensions liabilities, pension funds and pensions costs. In the absence of estimates of the individual components and a consistent and reliable basis for allocation recorded, the new pension sheme shall be considered a defined contribution scheme. In connection with the implementation of new law the previous scheme for accounting purposes is considered as closed and under termination, and will be treated in accordance with curtailment and settlement. For employees born after December 31, 1948 , the effect of the new scheme is accounted for in the first half of 2010. For retired employees with previous scheme, the acounting remain unchanged. As a result the parent company entered an income of NOK 10 milion and the Group NOK 46 million at the end of first half of 2010. At the year end provisions have been made for the Groups new pension scheme accrued since February 2010.In the parent company the provision has been based on judgement. In 2010 the child and spouce insurance were closed. This has resulted in gain of NOK 13,3 and 45,7 million in parent company and the Group.
    • 73 Parent company Group 2010 2009 NOK 1,000 2010 2009 Pension liabilities related to Defined benefit pension238 365 219 947 Present value of pension liabilities as of January 1 1 003 251 1 265 002 - - Pension liabilities additions 29 021 5 462 12 169 16 203 Pension entitlements accrued in the period 41 499 50 941 7 846 8 489 Interest cost on pension liabilities 35 950 50 018 - - Terminated pension plans -11 --32 382 3 386 Actuarial losses/gains -48 747 -32 286-12 025 -9 660 Benefits paid -79 661 -67 099 - - Other changes -1 293 -213 972 238 365 Present value of pension liabilities as of December 31 980 009 1 272 038186 546 198 645 of which funded 856 728 1 124 929 27 426 39 720 of which unfunded 94 074 147 209 Pension assets147 651 140 477 Pension assets as of January 1 689 043 845 747 - - Pension assets additions 9 272 1 662 8 067 8 182 Expected return in the period 38 389 48 698 - - Terminated pension plans - --12 620 -7 628 Actuarial losses/gains -33 409 -40 416 10 097 10 333 Employers NI contributions 40 905 50 029 -5 089 -3 713 Benefits paid -50 059 -37 263 - - Other changes -1 217 -148 106 147 651 Pension assets as of December 31 692 924 868 457 Financial status as of December 31213 972 238 365 Present value of pension liabilities as of December 31 980 009 1 272 038148 106 147 651 Pension assets as of December 31 692 924 868 457 65 866 90 714 Net pension liabilities as of December 31 287 085 403 581 65 866 90 714 Net pension liabilities as of December 31, excluding employers NI contribution 287 085 403 581 12 604 11 023 Employers NI contribution January 1 44 458 59 088 - - Employers NI contribution additions 642 333,0 1 685 2 328 Costs related to employers NI contributions 5 508 7 368 - - Net employers contribution related to terminated contracts - - -2 786 1 553 Actuarial losses/gains -2 395 1 348 -2 402 -2 299 Benefits paid -9 941 -11 265 9 100 12 604 Employers NI contribution as of December 31 38 273 56 873 74 966 103 318 Net pension liabilities in the balance sheet 325 355 460 453 Pension costs for the period 12 169 16 203 Accrued defined benefit-based pension 44 843 50 941 7 846 8 489 Interest cost on pension liabilities 36 404 50 018 -8 067 -8 181 Expected return on pension assets -38 769 -48 699 11 947 16 510 Net defined benefit-based pension costs without employers NI contributions 42 478 52 260 1 685 2 328 Accrued employers NI contribution 5 970 7 367 13 631 18 838 Net defined benefit-based pension cost booked to profit and loss 48 449 59 628 - applied to secured defined benefit pension cost including 10 202 11 594 employers NI contribution 33 000 49 918 8 499 7 153 Defined contribution-based pension cost, including employers NI contribution 31 365 29 279 22 131 25 991 Pension costs in the period recognised in the income statement 79 814 88 907 Run-off gain due to cessation of salary increases, including-10 271 - employers NI contribution -44 988 --13 335 - Run-off gains upon termination and issuance of paid-up policies -43 985 - Total pension cost defined benefit and contribution -1 475 25 991 pension, including run-off gains -9 159 88 907 Estimated pension cost defined benefit and contribution 19 424 20 403 pension for 2011 including employers NI contribution 74 157 81 895 65 019 61 681 Pensionable salary 298 805 333 172 Actuarial gaines and losses 761 -9 048 Actuarial gains/(losses) for the period, recognised in equity after tax -48 622 -6 824-67 246 -68 007 Cumulative actuarial gains/(losses) for the period, recognised in equity after tax -395 720 -347 098
    • 74 SpareBank 1 Gruppen Composition of pension assets 20,40 % 21,20 % Property and real estate 20,40 % 21,20 % 18,40 % 27,10 % Investments Held to maturity 18,40 % 27,10 % 15,70 % 13,80 % Shareholdings 15,70 % 13,80 % 43,20 % 36,20 % Commercial paper and bonds 43,20 % 36,20 % 2,30 % 1,70 % Other assets 2,30 % 1,70 % 100,00 % 100,00 % Total pension assets 100,00 % 100,00 % 8 067 8 182 Actual return on pension assets 38 389 48 698 Assumptions 3,50 % 4,40 % Discount rate 3,50 % 4,40 % 4,60 % 5,80 % Anticipated return on pension assets 4,60 % 5,80 % 4,00 % 4,50 % Future salary growth rate 4,00 % 4,50 % 3,75 % 4,25 % Increase in basic amount (G) 3,75 % 4,25 % 1,30 % 2,50 % Rise in pensions 1,30 % 2,50 % 14,10 % 14,10 % Employers NI contribution 14,10 % 14,10 % 4% og 2% 4% og 2% Staff turnover 4% og 2% 4% og 2% 40,0 % 40,0 % Anticipated Early retirement plan acceptance from 62 years-old 40,0 % 40,0 % Demographic assumptions: K2005 K2005 Mortality rate K2005 K2005 IR2003 IR2003 Disability IR2003 IR2003 Development during the last five years for the Groups defined benefit-based pension plan 2010 2009 NOK 1,000 2010 2009 2008 2007 2006 Present value of pension 213 972 256 782 liabilities as of 31.12 980 009 1 272 038 1 272 038 1 105 713 1 077 832 148 106 154 824 Pension assets as of December 31 692 924 868 457 868 457 838 876 786 711 65 866 101 958 Deficit 287 085 403 581 403 581 266 837 291 121 Experienced adjustments on -32 382 3 389 pension liabilities -48 747 -32 286 98 632 -5 277 -287 402 Experienced adjustments on -12 620 -7 628 pension assets -33 409 -40 416 -92 357 7 738 -49 052 NOTE 49 – EMPLOYEES AND FULL-TIME EQUIVALENT Average nbr. Full-time Average nbr. fulltime Employees equivalent of employees equivalents 31.12.2010 31.12.2010 in 2010 in 2010 SpareBank 1 Gruppen AS 220 213 219 213 SpareBank 1 Livsforsikring AS 246 238 249 242 SpareBank 1 Skadeforsikring AS 392 382 389 380 ODIN Forvaltning AS 57 57 54 54 SpareBank 1 Medlemskort AS 9 8 9 9 Actor Fordringsforvaltning AS 65 63 62 59 SpareBank 1 Gruppen Finans AS 47 45 45 42 Conecto AS 84 81 84 81 Argo Securities AS 75 75 71 71 Total 1 195 1 162 1 181 1 150 Average nbr. Full-time Average nbr. fulltime Employees equivalent of employees equivalents 31.12.2009 31.12.2009 in 2009 in 2009 SpareBank 1 Gruppen AS 217 212 213 207 SpareBank 1 Livsforsikring AS 251 245 270 262 SpareBank 1 Skadeforsikring AS 386 378 394 384 Bank 1 Oslo AS* 272 266 273 268 ODIN Forvaltning AS 50 50 51 50 SpareBank 1 Medlemskort AS 9 9 9 9 EiendomsMegler 1 Oslo Akershus AS* 94 90 94 90 Actor Fordringsforvaltning AS 50 49 50 49 SpareBank 1 Gruppen Finans Holding AS - - - - Actor Portefølje AS 1 1 1 1 Actor Verdigjenvinning AS 8 7 8 6 SpareBank 1 Factoring AS 41 39 20 19 Argo Securities AS 66 66 53 53 Total 1 445 1 411 1 436 1 398 * Bank 1 Oslo AS including the subsidiaries Eiendomsmegler 1 Oslo Akershus AS was demerged as of January 1, 2010 and is no longer part of SpareBank 1 Gruppen Group.
    • 75NOTE 50 – TAXESConnection between profit before tax and tax base Parent company Group 2010 2009 NOK 1,000 2010 2009 555 463 132 978 Profit before tax 985 133 1 193 663 -11 742 29 346 Change in temporary differences -182 228 -61 024 -600 950 -235 181 Permanent differences -647 805 116 600 433 743 504 239 Received group contribution with tax effect - - -17 789 -16 243 Loss allowance carried forward 87 053 -757 620 - -2 044 Correction previous year(s) 61 707 -140 164 358 725 413 095 Basis for payable taxes in the income statement 303 860 351 455 -358 725 -413 095 Distributed group contribution with tax effect - - - - Basis for payable taxes in the balance sheet 303 860 351 455 - - Payable taxes 85 081 137 653 8 269 -3 669 Change in deferred tax asset 58 826 149 064 100 443 115 666 Taxable distributed group distribution - - - 215 Insufficient/excess tax provision previous years 3 484 17 677 296 3 519 Other tax effects (net) 6 195 -10 374 109 008 115 731 Total taxes 153 586 294 020 109 008 115 731 Tax before other income elements 153 586 294 020 -296 -3 519 Tax on other income elements -23 980 -2 436 Of which related to: -296 -3 519 Estimate variances in the pension agreement -21 340 -2 654 - - Revaluation of proverty -3 544 447 - - Adjustment of insurance commitments 904 -229 108 712 112 212 Total tax including other income elements 129 606 291 584 Temporary differences as of December 31 - - Fixed assets 71 602 150 779 32 - Financial instruments 59 715 171 651 - - Shares in associated companies 270 109 269 435 - - Profit and loss account - 2 918 - - Insurance provisions (equity) 1 659 015 1 487 403 - - Other changes * 704 941 8 659 32 - Total taxable temporary differences 2 765 382 2 090 845 -190 000 -160 942 Fixed assets -201 417 -169 337 - - Financial instruments -36 178 -265 105 - - Accounts receivables -62 -52 - - Provisions -43 158 -22 894 -87 383 -128 152 Retirement benefit contributions -340 380 -484 883 - - Other changes - -3 499 -277 383 -289 094 Total tax-deductable temporary differences -621 195 -945 770 -57 163 -74 953 Losses carried forward -1 256 822 -589 206 -334 546 -364 047 Basis for deferred tax liability / asset 887 364 555 869 -93 664 -101 933 Deferred tax asset - - - - Deferred tax liability 248 461 155 643 - - Deferred tax asset, not recorded 4 956 - -93 664 -101 933 Net deferred tax asset 253 417 155 643 Balancing tax charges: 155 530 37 234 28 % of profit before tax 276 884 294 597 -168 266 -65 851 Pemanent differences (28 %) -181 653 30 432 121 448 141 187 Tax on group contribution - - - -358 Correction previous year(s) 44 355 -5 557 296 3 519 Transactions directly to equity 2 872 5 314 - - Other differnces 2 708 2 077 - - Change in unutilised dividends carried forward 8 420 -32 843 109 008 115 731 Current income tax calculated 153 586 294 020The deferred tax benefit in the parent company is recognised in the balance sheet since our expectations for results in subsidiaries are suchthat we can realise the benefit within a 3-5 year perspective. Recorded taxes payable in the balance sheet will be settled through tax positionsin the Group during 2011. The actual payable tax in the Group is zero.* Tax relief has been claimed for provisions to the exchange equalisation fund in 2009 and 2010, of respectively NOK 327,1 and 289,7 milli- on in Sparebank 1 Livsforsikring AS. When calculating the tax cost, corrections have been made related to uncertainty related to approval for the tax relief of NOK 634,6 million. It is known that the tax authorities are working on the matter and that the current law is unclear.
    • 76 SpareBank 1 Gruppen NOTE 51 – OTHER LIABILITIES Parent company Group 2010 2009 NOK 1,000 2010 2009 111 616 96 164 Accounts payable 150 821 121 309 9 066 8 449 Advance tax deduction 56 367 59 939 7 342 1 172 Governmental fees 31 852 34 164 18 061 21 712 Owed salaries and holiday pay 113 492 133 419 25 177 25 885 Other accruals 204 541 146 375 - - Commision liabilities 73 486 83 322 - - Margin payments or other account arrangements with customers 70 273 79 160 358 725 413 095 Provision for group contribution - - - - Occupational injury insurance claim to RTV 56 796 56 264 - - Premium deposits 133 847 128 995 4 880 11 528 Other liabilities 238 423 161 154 534 867 578 005 Total other liabilities 1 129 898 1 004 101 NOTE 52 – EVENTS AFTER THE BALANCE SHEET DATE, LEGAL MATTERS Events after the balance sheet date No events have been registered after the balance sheet date that will affect the annual accounts of SpareBank 1 Gruppen Group. Legal disputes As of December 31, 2010, SpareBank 1 Gruppen Group was a party in 32 legal disputes. Each and all of these concern disputes with insurance holders and other insurance companies, and are related to claims settlements in insurance contracts. Provisions are made in the companies accounts for these disputes as they occur, and the outcome is not material for the Groups financial position.
    • 77NOTE 53 – GROUP CONSOLIDATED EXCLUSIVE BANK 1 OSLO GROUPIncome statementNOK 1,000 2009Gross insurance premium revenue 7 556 607 - Reinsurers share 488 185Net insurance premium revenue 7 068 422Interest income 804 104Interest expense 842 285Net interest income -38 181Net fee and commission income 600 373Net fee and commission expense 791 547Net fee and commission income -191 174Net gains on financial assets measured at fair value 2 209 864Net gains on financial instruments classified as available-for-sale 42 707Net income from bonds to amortised cost 3 362Net income from bonds held-to-maturity 271 779Net income from investment properties 299 681Share of profit and group contrifbution from subsidiaries -Other operating income 322 566Total income 9 989 026Insurance benefits and claims 7 013 788Insurance claims recovered from reinsurers -331 006Securities adjustment reserve for life insurance 327 145Transferred to policyholders - life insurance 170 766Allocation to additional provisions 127 918Net loan loss provisions -Operating Expenses 155 204Depreciation and amortisation 118 845Other operating expenses 11 226Total expenses 8 990 722Operating profit 998 304Share of profit of associates and jointly controlled entities accounted for using the equity method -2 767Profit before tax 995 537Income tax expense 260 455Profit after tax 735 082Profit attributable to:Shareholders of the parent company 744 554Minority interests -9 472Earnings per share (expressed in NOK) 412Diluted earnings per share (expressed in NOK) 418
    • 78 SpareBank 1 Gruppen Balance sheet NOK 1,000 2009 Assets Deferred income tax assets - Goodwill 738 750 Other intangible assets 59 415 Investments in subsidiaries - Investments in associates and jointly controlled entities 16 861 Property, plant and equipment 523 795 Reinsurance receivables 1 150 842 Insurance receivables from policyholders 1 108 015 Other assets 423 013 Investment property 4 583 273 Bonds held to maturity 5 020 382 Bonds at amortised cost 764 626 Financial instruments - available for sale 24 184 Lending to customers and deposits with credit institutions 457 940 Financial instruments designated at fair value 20 530 618 Derivative financial instruments 23 772 Cash and cash equivalentes 1 051 251 Total assets 36 476 737 Equity and liabilities Shareholders equity 2 268 496 Retained earnings 1 799 359 Revaluation reserve 65 221 Minority interests 30 300 Total equity 4 163 376 Subordinated loan capital and perpetual subordinated loan capital securities 1 118 000 Securities adjustment reserve 327 145 Provisions in life insurance 20 843 433 Premium and claims provisions in P&C Insurance 6 821 960 Net retirement benefit obligations 359 165 Deferred income tax liability 155 258 Payable taxes 139 476 Securities issued 500 000 Liabilities related to reinsurance 95 123 Derivative financial instruments 165 427 Other liabilities 869 889 Deposits from and liabilities to customers and credit institutions 918 485 Total equity and liabilities 36 476 737
    • 79NOTE 54 – CASH FLOW WITHOUT BANK 1 OSLO GROUP AS OF DECEMBER 31, 2010The cash Flow below shows Cash Flow without Bank 1 Oslo Group as of December 31, 2010 ProformaNOK 1,000 31.12.10Cash flows from operating activitiesProfit after tax 831 547Depreciation and amortisation 91 300Revision of investment property values -148 187Net loan loss provisions 10 388Increase reinsurance receivables -343 496Increase in lending to customers -210 900Change in insurance provisions 3 007 315Change in accrued expenses and prepaid revenues -611 654Reduction in deposits from customers and loans and deposits from credit institutions -294 413Net cash flow generated from operating activities 2 331 901Cash flows from investing activitiesIncrease in financial instruments designated at fair value and adjusted for value changes -2 600 547Reduction of financial instruments held to maturity -143 414Reduction of financial instruments available for sale 3 968Investment property additions -24 942Investment property disposals 661 590Investment property gains 34 402Increase property, plant and equipment -816 594Net cash flow used in investing activities -2 885 537Cash flows from financing activitiesPayments related to redemption of subordinated loan capital -269 154External dividends paid -120 000Increase in securities issued 876 914Net cash flow from financing activities 487 760Net receipts/payments of cash -65 876Cash and cash equivalents as of January 1 1 051 251Cash and cash equivalents as of December 31 985 375
    • 80 SpareBank 1 Gruppen Independent auditors report
    • 81