The Savings Market

Opportunities and Challenges

Idar Kreutzer

CEO - Storebrand ASA

2

Overview

The savings market will see continued and strong growth

This positive trend is challenged by the bear market in the short term and by intensified competition in the longer term

Storebrand is positioning itself to take advantage of the opportunities and to meet the challenges of the future savings market

3

Continued and strong growth

� The demographics are changing dramatically

� People are adapting to a new set of life

� Less money can be expected to come from social welfare

� Long term investment yields are decreasing

� Current savings levels are relatively low

� The municipal market is opening up

4

Changing demographics

The shift in the age composition will trigger significant changes in the demand patterns for financial services

Changes in demographics from 1980 to 2030 (estimate) in Europe and the US

Percentage of total population

32 %

20 % 20 %

24 % 25 %

30 %

20 - 39 years 40 - 59 years over 60 years

1980

2030

Source: OECD

5

Changing values and lifestyles

Today’s working generations have become adapt to very different lifestyles than previous generations

Savings will be a prerequisite for lifestyle maintenance after the retirement age

Group-oriented

Careful

Traditional

Family

Goods

Social security

Individualistic

Ambitious

Innovative

Friends

Services

Self-realisation

Illustration of changes

6

A decline in the oil income

Source: The Norwegian Pension Commission

Pensions

% o

f G

DP

Net cash flowfrom petroleum operations

Changes in oil income and pensions expenditures

Reduced oil income means that the government’s ability to maintain today’s social welfare levels will be reduced

7

The Norwegian pensions reform

Basic pension broadly in line with minimum pension today(abt. NOK97,000)

Everything above basic pensionfrom occupational pensionsObligatory or voluntaryFundedJointly – employer and employee Social security contributionsadjusted accordingly

Continue with additional pensionas public responsibilityObligatory funded schemeSocial security contributionabout the same as today

Additional pension under one of two models:

Flexible retirement age from age 62 to 70 Late retirement rewarded, early retirement discouragedCloser connection between contribution and paymentsPhase out AFP and special age limits Phase out gross guarantee of 66% in public sector

Commonfeatures

Two models

… with the result being an increased market for pension fund management

8

Declining investment yields

Historic yield Future yield

Many academics, managers and others are now discussing the phenomenon of declining equity premiums

With falling investment yields people will have to save more to get the same amounts at their retirement age

IllustrativeA decline of 100 to 200bps?

9

Opening of municipal market

KLP is seeking to transform to a limited liability company

The current size of this market is 120 bNOK

Employees in the municipal sector

Source: Statistics Norway

400

450

500

550

6001992

1993

1994

1995

1996

1997

1998

1999

2000

2001

10

Untapped potential in corporate pensions

There are currently 900.000 employees without corporate pension schemes in Norway

Corporate pension is an important topic for workers, unions and industry organisations

2020

Volume(bNOK)

4 bNOK in premiums*80 bNOK in funds*

* Assuming that 30 % of the 900.000 employees have a scheme in place in 20 years

(in 2002 numbers)

2002

Rough estimates

11

Overview

The savings market will see continued and strong growth

This positive trend is challenged by the bear market in the short term and by intensified competition in the longer term

Storebrand is positioning itself to take advantage of the opportunities and to meet the challenges of the future savings market

12

Challenges

The positive impact of continued and strong growth is challenged by the bear market in the short term as…

� The life company return is less than the guaranteed rate of return

� Sales of mutual funds to private customers continue to be low

…and by intensified competition in the longer term as…

� Technology enables lower cost levels

� Entry barriers are coming down for many products (not life)

� Price and product information becomes more transparent

� Product barriers are coming down (more substitute products)

13

400

500

600

700

800

900

1000

1100

1200

Dec.99

Mar.00

Jun.00

Sep.00

Dec.00

Mar.01

Jun.01

Sep.01

Dec.01

Mar.02

Jun.02

Sep.02

The current bear market

2000: -11 % 2001: -15 % 2002: -25 %

Note: As of September 30, 2002

MSCI World in local currency

14

Booked return generates results

Normal Case Storebrand Life - illustrative

(1,000)

(500)

0

500

1,000

1,500

-1% 1% 3% 5% 7% 9% 11% 13%

Booked return

Prof

it to

sha

reho

lder

s

Profit sharing model

35% limitis effective

Ownersrisk

Usage ofASR

Note: A ”normal” year implies no extraordinary reserve strengtheningand no buffer capital allocations

15

700

750

800

850

900

950

1000

1050

1100

1150

1200

des.97 sep.98 jun.99 mar.00 des.00 sep.01 jun.02-4 000

-2 000

0

2 000

4 000

6 000

8 000MSCI.WRLD.PI (left axis)

Quarterly net subscription mutual funds (right axis)

MNOK

Banks and insurers expanded AM-activities

...and reaped the benefits of the bull markets

...hoping that thedownturn was temporary

Mutual fund savings and industry expansion driven by bull markets

16

Increased competition

Over the past decade intensified competition has forced financial institutions to improve their product and service offerings and at the same time cut costs.

Developments in technology and legislation as well as constant pressures from shareholders and customers will continue to shape the industry.

Tomorrow’s competitive area will be characterised by…

� A wider, but increasingly commoditised product and service range

� Distribution through multiple channels

� Increased standardisation, integration and automation of operations

� Decreased customer loyalty

� Increased consolidation

� An increased number of new and specialised players

17

Overview

The savings market will see continued and strong growth

This positive trend is challenged by the bear market in the short term and by intensified competition in the longer term

Storebrand is positioning itself to take advantage of the opportunities and to meet the challenges of the future savings market

18

Areas under our control

“Now is no time to think of what you do not have. Think of what you can do with what there is.”

Ernest Hemingway

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Storebrand’s positioning

Storebrand is positioning itself to take advantage of the opportunities and to meet the challenges of the future savings market

� Satisfactory financial position in life and exploitation of our risk management practices

� Continuous effectiveness and efficiency improvements of operations

� Commitment to developing attractive and profitable products and services

20

Sound financial position –highlights 3Q

In the perspective of weak market conditions:

� Life capital ratio: 16,0%

� Risk capital in life: 3.2bn

� Equity market fall absorption*: 40%

� Equity allocation*: < 10%

and…

� Comforting liquidity and credit facilities

� Improvement programmes developing according to plan

* In the Life Company

21

Prudent risk management

� Dynamic risk management model

� Rapid adaptation to market fluctuations (equity share down to <10% from 16 % at 2nd quarter)

� Low risk in bond portfolio

� Currency positions hedged

� Significant reserve strengthening in Finansbanken

� Strict credit allocation guidelines

22

Positive cost development

� Significant cost reductions developing as planned

- Group: 150m (2002)*

- Banking: 75m (2003)

- Investments: 20% (2003-2005)

� Focus areas

- Co-ordination of banking units

- Distribution efficiency

- Specialisation and automation in asset management

� Life company with competitive cost ratio

* Compared with costs base of NOK 1.350m in 1st half 2001 (annualised). Excludes life business and sales provisions in Storebrand Bank.

�

�

�

23

Focus areas for the businesses

� Growth in funds and premiums through a strong product range, good service and focused marketing

� Increased results through higher investment returns, strong risk control and operating performance

� Asset growth through more effective distribution and strong investment performance

� Increased effectiveness and efficiency through specialisation and cost reductions

� Increased exploitation of cross-selling opportunities

� Reduced operating costs through co-ordination of bank resources

� Minimised losses through strong credit and risk management practices

Life andpensions

Asset management

Banking

24

Attractive and profitable products and services

Storebrand will continue to provide our customers with the best solutions through focused innovation and individual service

� Understanding different segments

� Creating strong value proposition to meet customer needs

� Focusing on solutions that are sustainable in the long term

� Training and motivating staff

Storebrand will ensure that operations are effective and efficient in order to deliver value for our shareholders

� Understanding product, customer and channel profitability and sustainability as well as the underlying value drivers

� Delivering continuous improvements

25

Summary: Solid, alive and kicking

Storebrand is well positioned for value creation:

� Satisfactory solidity

� Competent organisation

� Positive local market macro trends