Nordea Life & Pensions and Solvency II. Snorre Storset Head of Nordea Life & Pensions

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1 Nordea Life & Pensions and Solvency II Snorre Storset Head of Nordea Life & Pensions

2 Largest Life & Pension provider in the Nordic countries - a business within Wealth Management MAIN FOCUS AREAS Finland & Sweden: Individual life savings and risk-related products. Nordea Bank distribution Denmark & Norway: Corporate & individual pensions and risk-related products. NLP s sales force, Nordea Bank & external distribution Pension Funds: Poland, Estonia & Latvia FINANCIALS, H115 VS H114 Total income EUR 291m, up 13% Operating expenses EUR 99m, down 4% AuM EUR 61bn, up 9% GWP EUR 4.8bn, up 23% 90% of GWP in Market Return Products Dividend of EUR 220m in 2014 SHARE OF NORDEA GROUP, FY % 8% 5 % Total income Operating profit Equity 2

3 Responding to market development Trends Strategic response Profitability (RoE) over volume (GWP) Cost efficiency Regulatory transformation Capital efficiency Low yield environment Product portfolio optimised Demographics and customer behaviour Bancassurance 3

4 Delivered a turnaround Strong starting point GWP DEVELOPMENT, EURbn COST DEVELOPMENT, EURm % 90% 82% 72% 56% Q2 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% % 43% 43% 37% < F 60% 50% 40% 30% 20% 10% 0% Total GWP R12m MRP share of GWP Total costs C/I AUM DEVELOPMENT, EURbn 57% 70 50% 52% 60 42% 32% % 50% 40% 30% 20% 10% RoE DEVELOPMENT, EURm % 12.0% 30% 25% 20% 15% 10% Q2 Total AUM MRP share of AUM 0% 400 Q Q Q Q Equity Q Q Q Q YTD ROE Q Q % 4

5 Low cost growth through bancassurance BANK SOLD MARKET RETURN PROUCTS, GWP, EURbn COMMENTS % H1-15 R12 Simplified product options Automated processes Deep integration with the Bank Looking around the corner 5

6 Attractiveness of endowment products plays to our strengths PREMIUM DEVELOPMENT ENDOWMENTS, GWP, EURbn COMMENTS +314% H1-15 R12m Tax advantages reduced on private pension savings Tax effective savings need from increased longevity Low yield environment New product generation Well-suited for bancassurance Advisory and content 6

7 Market Return Company also in terms of AuM AuM SPLIT BY PRODUCT CATEGORY, EURbn NET INFLOW SPLIT BY PRODUCT CATEGORY, EURbn % % -15% H H1-15 R12m MRP Trad 7

8 Strong growth in market return and risk profits PRODUCT PROFITS, MARKET RETURN AND RISK, EURm +62% Risk MRP H1-15 R12m 8

9 Market position: Clear market leader in market return products LIFE & PENSIONS MRP MARKET SHARE 12 MONTHS ROLLING EST, Q1/15 25% Finland Sweden Norway Denmark % 9% 6% 5% 4% 16% 4% -5% -3% 16% 24% Nordea Peer1 Peer2 Peer3 Peer4 Peer5 Nordea estimates based on local insurance association statistics Growth in GWP vs Q1/14 9

10 Significantly improved cost efficiency COST DEVELOPMENT, EURm COST/AuM, BPS % 60% % 43% 37% <200 50% 40% 30% 20% 10% H F 0% Total costs C/I COST/GWP, % H1 R12 10

11 Solvency II considerations Business driven Regulatory driven Attractive new market return and risk business Volatility adjustment in DK, NO Disciplined risk management of legacy traditional business Liability Driven Investments Cost efficiency Further optimisation of investment strategy/hedging No use of matching adjustment Transitional on technical provisions in NO Equity transitionals in DK, FI, SE Partial internal model longevity in DK IORP* exception in SE not included *Institutions for Occupational Retirement Provision 11

12 Meet Solvency II requirements without equity capital injection EXPECTED CAPITAL POSITION ENTERING SOLVENCY II KEY SENSITIVITIES* Planned business actions Transitional measures Volatility adjustment Base incl target level of sub-debt +7% IR ±50 bps EQ - 25% Q Low Q Medium Q High -10% -11% Projection of the Solvency II position to the end of 2015 under high, medium and low assumptions on the development of swap rates during 2015 Low represents a scenario where interest rates during 2015 falls similar to 2014 Medium represents an interest flat scenario from December 2014 onwards High is based on internal ICAAP scenario with slight rise in interest rates Similar asset return assumptions applied across all three scenarios for equity, property and credit spread over swap rates *Base position end Q2 2015, i.e. excluding transitional rules 12

13 Room to optimise investment strategy further CURRENT SCR COMPOSITION COMMENTS 1% 1% 2% ~3/4 of SCR comes from market risks 22% Gives room to optimize further through re-allocation and hedging 74% ~15% improvement by year-end possible with current plans Reduces balance sheet volatility Market Risks Health Underwriting Risks Operational Risk Life Underwriting Risks Default Risk 13

14 Business model supporting future dividend capacity CAPITAL REQUIREMENT VS CONTRIBUTION, EURm COMMENTS Dividends paid: EUR 300m in 2013, EUR 220m 2014 Self-financing growth in market return and risk products Trad MRP Solvency capital requirement Reconciliation reserve Capital release from run-off traditional book Balance sheet volatility management 14

15 Continue to improve quality of Life Strong platform RoE 18% in 2018 by Market return company Next generation product offering fuel growth Low cost growth through bancassurance Life business platform efficiency improve further Competitive product offering Solvency II optimised business model/strategy Leading market position Strong risk culture 15

16 Nordea Life & Pensions and Solvency II Snorre Storset Head of Nordea Life & Pensions