RNS Number:8911F
Skandinaviska Enskilda Banken
15 February 2000
PART TWO
Appendix
SEB Trygg Liv
SEB Trygg Liv focuses on the sale and administration of unit-linked insurance
products and their equivalent for account of the traditional mutual life
insurance business. From an accounting point of view, its activities are
separate from traditional banking activities. SEB Trygg Liv's accounts are
presented in this Appendix according to generally accepted accounting standards
for the insurance companies.
SEB Trygg Liv's sales, that is, new premiums and additional payments under
existing insurance contracts, increased by SEK 1,594 M, or 22.0 per cent, to SEK
8,847 M (SEK 7,253 M). The share of insurance contracts with current premiums
was 17.6 per cent (26.4 per cent), which is a consequence of the fact that the
growth of the life insurance market during the year primarily consisted of
single premium endowment assurance, mostly unit-linked. Premium income (premiums
paid) rose by 20.2 per cent, to SEK 15,100 M (SEK 12,563 M). In total, assets
under management increased by 21.3 per cent during the twelve-month period,
whereas the corresponding increase for unit-linked insurance was 56.1 per cent.
Income increased by 13.8 per cent, primarily as a result of a higher premium
volume and favourable growth in assets under management, particularly within
unit-linked insurance. Operating costs and other costs increased by 3.6 per cent
(21.5 per cent). However, due to lower direct sales costs the deduction for
deferred acquisition costs declined to SEK 248 M (SEK 278 M), which resulted in
a net cost increase of 6.9 per cent (13.7 per cent).
The operating result improved by 35 per cent, to SEK - 116 M (SEK - 177 M).
The total result, which includes the change in surplus values, increased
by 141 per cent, to SEK 1,386 M (SEK 575 M). This improvement was mainly due to
strongly increased sales combined with a positive development on the capital
market, compared with 1998, which resulted in favourable growth in managed
funds.
The surplus value in life insurance operations is the present value of
expected future gains from signed insurance contracts. The surplus values
comprise unit-linked operations as well as commissioning agreements with
traditional life insurance companies.
1999 1998
Volumes, SEK M
Sales volume
Traditional life insurance, current share 23 (31)% 1,450 1,326
Unit-linked insurance, current share 17 (25)% 7,397 5,927
8,847 7,253
Premium income
Traditional life insurance 5,323 5,145
Unit-linked insurance 9,777 7,418
15,100 12,563
Savings stock 31 Dec 31 Dec
Traditional life insurance 172,572 152,869
Unit-linked insurance 57,851 37,065
230,423 189,934
Profit and loss account, SEK M
1999 1998
Commissioning agreements,
traditional life insurance 338 341
Unit-linked insurance 762 577
Risk operations and other 84 122
TOTAL INCOME 1,184 1,040
Operating expenses -1,387 -1,279
Capitalisation of acquisition costs 248 278
Goodwill and other -161 -216
TOTAL COSTS 1,300 1,217
OPERATING RESULT -116 -177
Change in surplus values 1) 1,502 752
TOTAL RESULT 1,386 575
Return on allocated capital, per cent 2) 30.7% 12.7%
Expense ratio per cent 3) 9.2% 10.2%
1) After deduction for change in capitalised acquisition costs
2) After standard tax. SEK 3,250 M allocated for each year
3) Operating expenses expressed as percentage of premiums earned
Calculation of surplus values and changes in surplus values
Surplus values in life insurance operations are calculated on the basis of
assumptions regarding the future development of signed insurance contracts and a
risk-adjusted discount rate. The most important assumptions are the following:
Discount rate 11%
Return on capital, nominal assets 4%
Return on capital, real assets 8%
Cancellations of contracts 5%
Cancellations of current premiums 5%
Administrative expenses SEK 250/contract per year
Mortality rates According to trade experience
Surplus accounting
Deferred acquisition costs are capitalised in the accounts and depreciated
according to plan. The reported change in surplus values is therefore adjusted
by the net result of the capitalisation and depreciation during the period.
Change in surplus values 1,750
Deferred acquisition costs -450
Depreciation +211
-248
Reported change in surplus values 1,502
Balance
OPENING BALANCE, 1 January 1999 2,259
Current change in surplus values consists of present
value of new contracts 1) 902
Present value of new contracts
+ Return on existing contracts +349
- Realised surplus value in existing contracts -435
= Change in present value of contracts signed
before the current period -86
Actual outcome compared with operative
assumptions made 2) 186
Change in operative assumptions 0
Capital return in excess of undertakings 748
Total change in surplus values 3) 1,750
CLOSING BALANCE 31 December, 1999 4) 4,009
1) Sales defined as new contracts and extra premiums on existing contracts
2) The reported actual outcome of contracts signed can be put in relation to the
operative assumptions that were made. Thus, the value of the deviations can be
estimated. The most important components consist of growth in underlying assets,
increased sales, particularly in the form of extra premiums and extensions of
contracts as well as cancellations. However, the actual result of income and
administrative expenses is included in full in the operating result.
3) Before deduction for capitalised acquisition costs of SEK 248 M. See above.
4) Estimated surplus value according to the above is not included in the
published balance sheet.
The SEB Group Profit and loss accounts
Change
SEK M 1999 1998 per cent
INCOME
Interest receivable 26,155 31,470 -17
Interest payable -19,242 -24,763 -22
Net interest earnings 6,913 6,707 3
Dividends received 219 227 -4
Commission receivable 9,525 8,019 19
Commission payable -1,208 -1,400 -14
Net commission income 1) 8,317 6,619 26
Net result of financial
transactions 2) 2,269 1,757 29
Other operating income 2,040 2,218 -8
TOTAL OPERATING INCOME 19,758 17,528 13
COSTS
Staff costs -8,419 -6,816 24
Other administrative costs -4,092 -3,974 3
Depreciation and write-down of
tangible and intangible fixed
assets -1,182 -1,073 10
Other operating costs -1,405 -1,110 27
TOTAL COSTS -15,098 -12,973 16
RESULT BEFORE LENDING LOSSES 4,660 4,555 2
Lending losses and provisions, net 3) 207 -2,237 -109
Change in value of assets taken over 111 -10
Write-down of financial fixed asset -29 -4
Net result from associated companies 116
OPERATING RESULT, EXCL. NON-LIFE
OPERATIONS 5,065 2,304 120
Result, non-life operations 4) 57 2,497 -98
OPERATING RESULT 5,122 4,801 7
Pension provision 873 531 64
Taxes -1,355 -1,000 36
Minority interests -56 -6
RESULT FOR THE YEAR 4,584 4,326 6
OPERATING RESULT, EXCL. NON-LIFE
OPERATIONS 5,065 2,304 120
Change in surplus values in life
insurance operations 1,502 752 100
Pension provision 873 531 64
TOTAL RESULT, EXCL. NON-LIFE
OPERATIONS 7,440 3,587 107
Result, non-life operations 57 2,497 -98
TOTAL RESULT 7,497 6,084 23
Tax and minority interests -1,411 -1,006 40
Tax on change in surplus values -421 -211 100
TOTAL RESULT AFTER TAX 5,665 4,867 16
1) Net commission Income Change
1999 1998 per cent
Payment commissions 1,863 1,585 18
Securities commissions 5,066 3,654 39
Other commissions 1,388 1,380 1
TOTAL 8,317 6,619 26
2) Net result of financial transactions Change
1999 1998 per cent
Shares/participations 1,024 207
Interest-bearing securities -276 113
Other financial instruments 819 549 49
REALISED RESULT 1,567 869 80
Shares/participations 462 -63
Interest-bearing securities 142 -226 -163
Other financial instruments -1,039 200
UNREALISED VALUE CHANGES -435 -89
EXCHANGE RATE FLUCTUATIONS 1,142 984 16
REDEMPTION OF BONDS, SEB Bolan -5 -7 -29
TOTAL 2,269 1,757 29
3) Lending Losses and provisions, net
A.INDIVIDUALLY APPRAISED RECEIVABLES:
Reported write-down, incurred losses -448 -926 -52
Reversal of previous provisions for
possible losses, reported as incurred
losses in current period's accounts
339 544 -38
Reported provision for possible
losses -854 -904 -6
Recovered from losses incurred in
previous years 200 185 8
Reversal of previous provisions for
possible losses 483 227 113
REPORTED NET COST FOR INDIVIDUALLY
APPRAISED RECEIVABLES -280 -874 -68
B)RECEIVABLES APPRAISED BY CATEGORY:
Reported write-down, incurred losses -86 -98 -12
Reported provision for possible losses -31 -33 -6
Recovered from losses incurred in
previous years 35 52 -33
Withdrawal from reserve for lending
losses 31 49 -37
REPORTED NET COST FOR RECEIVABLES
APPRAISED BY CATEGORY -51 -30 70
C)Allocation to/withdrawal from
reserve for political risks abroad 440 -1,343 -133
D)Contingent liabilities 98 10
TOTAL 207 -2,237 -109
4) RESULT, NON-LIFE OPERATIONS
Net interest earnings 176 70 151
Dividends received 104 -100
Net result of financial transactions -548 1,710 -132
Other operating income, incl.
Net insurance income 647 1,685 -62
TOTAL INCOME 275 3,569 -92
Staff costs -34 -631 -95
Other administrative costs -6 -184 -97
Depreciation and write-down of
tangible and intangible fixed assets -96 -7
Other operating costs -82 -250 -67
TOTAL COSTS -218 -1,072 -80
TOTAL 57 2,497 -98
Result per main group and business area (SEK M)
MAIN GROUPS
Nordic Banking Asset Management Other companies
& Life & units
SEK M 1999 1998 1999 1998 1999 1998
Income 11,632 11,550 4,219 3,389 4,114 2,577
Costs -7,701 -7,207 -3,211 -2,583 -2,901 -1,962
Lending losses 254 -2,207 -1 -100 -54
Operating result 4,185 2,136 1,007 806 1,113 581
Pension provision 459 327 88 36 34 22
Change in surplus values 1,502 752
Total result 4,644 2,463 2,597 1,594 1,147 583
Nordic Banking
Retail Distribution Financial Services MerchantBanking
SEK M 1999 1998 1999 1998 1999 1998
Income 5,360 5,358 2,687 2,444 4,914 4,988
Costs -4,075 -3,902 -1,559 -1,418 -2,990 -2,758
Lending losses -142 -171 -100 -51 441 -2,010
Operating result 1,143 1,285 1,028 975 2,365 220
Pension provision 338 246 50 32 105 71
Change in surplus values
Total result 1,481 1,531 1,078 1,007 2,470 291
Allocated capital 7,100 7,100 1,300 1,300 9,500 10,400
Return, % 15.0 15.5 59.7 55.8 18.7 2.0
Asset Management and Life Insurance
Asset Management SEB Trygg Liv
SEK M 1999 1998 1999 1998
Income 3,035 2,349 1,184 1,040
Costs -1,911 -1,366 -1,300 -1,217
Lending losses -1
Operating result 1,123 983 -116 -177
Pension provision 88 36
Change in surplus values 1,502 752
Total result 1,211 1,019 1,386 575
Allocated capital 3,750 3,750 3,250 3,250
Return, % 23.3 19.6 30.7 12.7
Other companies and units
Enskilda Securities Baltic states Baltic states(2)
SEK M 1999 1998 1999 1998 1999 1998
Income 2,279 1,337 387 1,484
Costs -1,694 -1,091 -284 -1,007
Lending losses 7 -29 -52 -132
Net result from
associated companies 119
Majority -175
Operating result 592 217 170 170
Pension provision
Change in surplus values
Total result 592 217 170 170
Allocated capital 650 650 980
Return, % 65.6 24.0 12.5
Other(3) The SEB Group
SEK M 1999 1998 1999 1998
Income -88 12 19,758 17,528
Costs -1,285 -1,221 -15,098 -12,973
Lending losses 136 10 289 -2,251
Net result from
associated companies -3 116
Non-life operations 57 2,497 57 2,497
Operating result -1,183 1,298 5,122 4,801
Pension provision 292 146 873 531
Change in surplus values 1,502 752
Total result -891 1,444 7,497 6,084
(1) SEB Kort will become a new business area in 2000 and is therefore excluded.
(2) Pro forma, all three banks fully consolidated.
(3) Refers to income/costs that cannot be attributed to individual business
areas. Return on capital that cannot be attributed to individual business
areas, depreciation of goodwill in connection with the purchase of Trygg-Hansa
and central costs, are included as well.
KEY FIGURES FOR THE SEB GROUP 1999 1998
Return on equity, % 14.6 14.8
Return incl. change in surplus values, % 17.2 16.1
Earnings per share, SEK 7.77 7.35
Total result after tax per share, SEK 9.60 8.25
Income/cost ratio, before lending losses 1.31 1.35
Income/cost ratio, after lending losses 1.34 1.15
Lending loss level, % -0.09 0.65
Provision ratio for doubtful claims, % 59.6 52.0
Level of doubtful claims, % 0.82 1.08
Total capital ratio, % 14.61 10.85
Core capital ratio, % 10.79 8.12
CASH FLOW ANALYSIS
Change
SEK M 1999 1998 per cent
Cash flow, current operations 4,711 10,298 -54
Changes in assets, current operations -35,495 -38,256 -7
Changes in liabilities, current operations 37,385 6,392 0
Cash flow, current operations 6,601 -21,566 -131
Cash flow, Investment activities 8,161 -1,294 0
Cash flow, financing activities -10,326 20,905 -149
Cash flow 4,436 -1,955
Liquid funds at beginning of year 4,638 6,593 -30
Cash flow 4,436 -1,955 0
Liquid fund at end of year 9,074 4,638 96
BALANCE SHEET OF THE SEB GROUP (abbreviated)
31 December 31 December Change
SEK M 1999 1998 per cent
Lending to credit institutions 103,670 84,710 22
Lending to the general public 342,907 324,433 6
Interest-bearing securities 94,415 110,718 -15
- Financial fixed assets 3,396 14,564 -77
- Financial current assets 91,628 96,154 -5
Shares and participations 67,339 41,040 64
- For account of policyholders 57,852 37,454 54
- Other assets 9,487 3,586 165
Assets in non-life operations 4,870 35,900 -86
Other assets 97,054 92,856 5
Total assets 710,255 689,657 3
Liabilities to credit institutions 117,774 149,659 -21
Deposits and funding from the general public 229,534 187,901 22
Securities issued, etc. 122,143 133,052 -8
Provisions for account of policyholders 58,141 37,378 56
Liabilities in non-life operations 3,085 19,086 -84
Other liabilities and provisions 120,690 108,137 12
Subordinated liabilities 25,882 24,010 8
Shareholders' equity 33,006 30,434 8
Total liabilities and shareholders' equity 710,255 689,657 3
Derivatives contracts
31 Dec 1999 Contracts on the asset side Contracts on the liabilities side
SEK M Book value Market value Book value Market value
Interest-related 15,053 15,053 15,429 15,429
Currency-related 26,562 28,368 23,377 26,396
Equity-related 2,401 2,401 3,228 3,228
Other 19 19 16 16
Total 44,035 45,841 42,050 45,069
On 31 December 1999 the notional value of the Group's derivatives contracts
amounted to SEK 3,887 billion (SEK 4,412 billion on 31 December 1998).
The book value of derivatives instruments forming part of trading operations is
identical with the market value.
Those deviations between actual and book values which are reported in the above
table are matched by opposite deviations between market and book values in the
part of the Group's operations which is the object of hedge accounting.
The SEB Group's performance on a quarterly basis
SEK M 1999:4 1999:3 1999:2 1999:1 1998:4
Income
Interest receivable 6,675 6,092 6,421 6,967 7,923
Interest payable -4,899 -4,356 -4,718 -5,269 -6,182
Net interest earnings 1,776 1,736 1,703 1,698 1,741
Dividends received 6 10 192 11 15
Commissions receivable 2,925 2,217 2,320 2,063 2,077
Commissions payable -363 -277 -317 -251 -412
Net commission income 2,562 1,940 2,003 1,812 1,665
Net result of financial
transactions 897 163 359 850 498
Other operating income 216 570 498 756 233
Total Income 5,457 4,419 4,755 5,127 4,152
Costs
Staff costs -2,580 -1,975 -1,950 -1,914 -1,709
Other administrative
expenses -1,095 -994 -1,022 -981 -1,112
Depreciation
and write-downs -333 -290 -265 -294 -260
Other operating costs -350 -383 -349 -323 -325
Total costs -4,358 -3,642 -3,586 -3,512 -3,406
Result before lending
losses 1,099 777 1,169 1,615 746
Lending losses, net 35 -37 340 -131 -218
Change in value of assets
taken over 49 51 4 7 5
Write-down -26 -1 -2 -4
Net result from associated
companies 116
Operating result excl.
non-life operations 1,273 790 1,511 1,491 529
Operating result, non-life
operations 54 248 -397 152 633
Operating result 1,327 1,038 1,114 1,643 1,162
Pension provision 452 141 155 125 196
Taxes -259 -364 -247 -485 204
Minority interests -32 -19 -3 -2 1
Total result 1,488 796 1,019 1,281 1,563
Operating result excl. non-life
operations as per above 1,273 790 1,511 1,491 529
Change in surplus values in
life insurance operations 856 210 168 268 357
Pension provision 452 141 155 125 196
Total result excl.
non-life operations 2,581 1,141 1,834 1,884 1,082
Operating result, non-life
operations 54 248 -397 152 633
Total result before tax 2,635 1,389 1,437 2,036 1,715
Tax and minority interests -291 -383 -250 -487 205
Tax on change in surplus
values -240 -59 -47 -75 -100
Total result after tax 2,104 947 1,140 1,474 1,820
Problem loans and assets taken over for the protection of claims
31 December 31 December
SEK M 1999 1998
Doubtful claims 6,988 7,454
Provision for possible lending losses -4,164 -3,877
Doubtful claims, net 2,824 3,577
Claims subject to interest reduction 352 1,195
Total volume of problem loans 3,176 4,772
Level of doubtful claims 0.82 1.08
(Doubtful claims (net) in relation to
lending and leasing (net) at end of
period, per cent)
Provision ratio for doubtful claims 59.6 52.0
(Reserve for possible lending losses
in relation to doubtful claims (gross),
per cent)
Pledges taken over
Buildings and land 82 160
Shares and participations 544 871
Total volume of pledges 626 1,031
taken over
The soft loans of the Group are included among claims subject to interest
reduction.
The shortfall in income due to interest deferments was SEK 56 M (SEK 74
M), while unpaid interest on non-performing loans amounted to SEK 227 M
(SEK 327 M) - combined an improvement of 29 per cent compared with 1998.
On 31 December 1999, the Group had SEK 249 M (SEK 257 M) in non-performing
loans on which interest income was reported. These loans are not included
among the problem loans, since the corresponding collateral covers both
interest and principal.
Profit and Loss Account, Parent company
Change
SEK M 1999 1998 per cent
Income
Interest receivable 19,791 24,839 -20
Leasing income 254 64
Interest payable -15,016 -20,010 -25
Net interest earnings 1)
Dividends received 4,241 4,828 -12
Commission receivable 5,752 5,909 -3
Commission payable -987 -1,062 -7
Net commission income 2) 4,765 4,847 -2
Net result of financial
Transaction 3) 1,343 1,752 -23
Other operating income 1,541 363
Total Income 16,919 16,683 1
Costs
Staff costs -5,875 -5,488 7
Other administrative expenses -4,384 -3,524 24
Depreciation and write-downs of
tangible and intangible fixed
assets -266 -201 32
Other operating costs -1,487 -1,212 23
Total costs -12,012 -10,425 15
Result before lending losses 4,907 6,258 -22
Lending losses and provisions,
net 4) 415 -2,109 -120
Change in value of assets taken over-10 -23 -57
Write-downs of financial fixed
assets -3,057 -3,330 -8
Operating result 2,255 796 183
Pension provision 873 531 64
Other appropriations *) -1,863 -1,145 63
Tax on result for the year *) -68 819 -108
Result for the year 1,197 1,001 20
*) Group contributions reported directly against equity
1) Not Interest
Change
1999 1998 per cent
Interest receivable 19,791 24,839 -20
Leasing income 254 64
Interest payable -15,016 -20,010 -25
Leasing depreciation -94 -51 84
Total 4,935 4,842 2
2) Net commission income
Change
1999 1998 per cent
Payment commissions 1,332 1,163 15
Securities commissions 2,695 2,545 6
Other commissions 738 1,139 -35
Total 4,765 4,847 -2
3) Net result of financial transactions
Change
1999 1998 per cent
Shares/participations 4 201 -98
Interest-bearing securities -256 114
Other financial instruments 1,009 573 76
Realised result 757 888 -15
Shares/participations -23 -36 -36
Interest-bearing securities 105 -183 -157
Other financial instruments -539 188
Unrealised value changes -457 -31
Exchange rate fluctuations 1,043 895 17
Redemption of bonds
Total 1,343 1,752 -23
4) Lending losses and provisions, net
Change
1999 1998 per cent
A. Individually appraised receivables:
Reported write-down, incurred
losses -289 -767 -62
Reversal of previous provisions
for possible losses reported as
incurred losses in current period's
accounts 257 435 -41
Reported provision for possible
losses -577 -694 -17
Recovered from losses incurred in
previous years 116 141 -18
Reversal of previous provisions
for possible losses 394 198 99
Reported net cost for individually
appraised receivables -99 -687 -86
B. Receivables appraised by category:
Reported write-down, incurred losses-52 -47 11
Reported provision for possible
losses -12 -20 -40
Recovered from losses incurred in
previous years 26 35 -26
Withdrawal from provision for lending
losses 14 23 -39
Reported net cost for receivables
appraised by category -24 -9 167
C. Allocation to/withdrawal from
reserve for political risks
abroad 440 -1,423 -131
D. Contingent liabilities 98 10
Total 415 -2,109 -120
END
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