Summary of Annual Report SpareBank 1 Gruppen

Transcription

1 Summary of Annual Report 2014 SpareBank 1 Gruppen

2 Contents Board of Directors' Report 3 Income Statement 14 Statement of Comprehensive Income 15 Balance Sheet 16 Statement of Changes in Equity Auditor's Report 18 20

3 BOARD OF DIRECTORS' REPORT FOR 2014 SpareBank 1 Gruppen OPERATIONS IN 2014 Extraordinarily good result for SpareBank 1 Gruppen Record result for SpareBank 1 Skadeforsikring AS due to good underlying profitability and high profit prior years Good result for SpareBank 1 Forsikring AS, which also further strengthened its buffer capital in 2014 Improved result for ODIN Forvaltning AS due to higher management fees and lower operating costs Increased turnover and improved result in SpareBank 1 Gruppen Finans AS Significantly improved result for Conecto AS following loss in 2013 SpareBank 1 Gruppen AS is a holding company that produces, provides and distributes products within P&C insurance, life insurance, fund management, factoring, debt collection and long-term monitoring via its subsidiaries. SpareBank 1 Gruppen AS's office address is in Tromsø, and the Group's primary market is Norway. In this Board of Directors' Report, SpareBank 1 Gruppen AS refers to the holding company and SpareBank 1 Gruppen refers to the Group. SpareBank 1 Gruppen AS and the Group prepare their financial statements in accordance with the EU approved International Financial Reporting Standards (IFRS). SpareBank 1 Gruppen results and key figures: NOK million Share of result from subsidiaries before tax: - SpareBank 1 Forsikring AS SpareBank 1 Skadeforsikring Group 1, , ODIN Forvaltning Group SpareBank 1 Medlemskort AS SpareBank 1 Gruppen Finans AS Conecto AS Group adjustments Net result from subsidiaries before tax 2, ,848.9 Net operating costs and financial expenses in parent company Result before amortisation and write-downs 2, ,688.3 Amortisation of excess values PRE-TAX PROFIT FROM CONTINUED BUSINESS 2, ,659.0 Taxes from continued business RESULT FROM CONTINUED BUSINESS 1, ,247.4 Result from wound up business 1) NET PROFIT FOR THE YEAR 1, ,096.8 Majority interests' share of net profit 1, ,096.8 Minority interests' share of net profit 1.9-1) The amount in 2013 includes the net result for the first nine months in SpareBank 1 Markets AS and the write-down of shares in SpareBank 1 Markets AS due to its sale. SpareBank 1 Gruppen reported a pre-tax profit of NOK 2,406.2 million (NOK 1,659.0 million). The net profit for the year was NOK 1,850.1 million (NOK 1,096.8 million). The result represents an annualised return on equity of 27.8% (20.3%). SpareBank 1 Gruppen's total assets amounted to NOK 55.1 billion as of 31 December This represents growth of 8.9% since SpareBank 1 Gruppen's capital adequacy ratio as of 31 December 2014 was 20.9% (19.8%). Its core capital adequacy ratio at year-end 2014 was 19.6% (18.4%). CORPORATE GOVERNANCE SpareBank 1 Gruppen AS's shares are not publicly traded, but as of 31 December 2014 the company did have a bond issue listed on Oslo ABM. The company has a concentrated ownership structure. As of 31 December 2014, SpareBank 1 Gruppen AS was owned by SpareBank 1 Nord-Norge (19.5%), SpareBank 1 SMN (19.5%), SpareBank 1 SR-Bank ASA (19.5%), Samarbeidende Sparebanker AS (19.5%), Sparebanken Hedmark (11%), The Norwegian Confederation of Trade Unions (LO) (9.6%) and Bank 1 Oslo Akershus AS (1.4%). All shareholders and groupings of shareholders are represented on the Board, either directly or indirectly. There is continuous, good contact with all shareholders and groupings of shareholders in the company. The Board of SpareBank 1 Gruppen AS has discussed the "Norwegian Code of Practice for Corporate Governance" and has decided to comply with those sections that are relevant to a company whose shares are not listed on a stock exchange. The Board's overall report on the company's corporate governance has been incorporated into the 2014 annual report. ALLIANCE EXECUTIVE MANAGEMENT TEAM SpareBank 1 Gruppen AS, its subsidiaries and the business in SpareBank 1 Banksamarbeidet DA share common management, the alliance executive management team. The boards of SpareBank 1 Gruppen AS and SpareBank 1 Banksamarbeidet DA hold common board meetings. INFORMATION ABOUT REMUNERATION Information about the remuneration of the chief executive, alliance executive management team, the Board, the Supervisory Board and the Control Committee is provided in the financial statements' note 23, and information about the auditor's remuneration is provided in note 22.

4 4 SpareBank 1 Gruppen DIVIDEND POLICY SpareBank 1 Gruppen's goal is to pay out 30-50% of its profit, on a consolidated level, as dividends to its owners. When setting the dividend for SpareBank 1 Gruppen AS, weight must be give to ensuring there is a satisfactory core capital adequacy ratio based on the current capital adequacy regulations and a satisfactory solvency margin based on the coming Solvency II regulations, which will come into effect on 1 January Evaluations of the capital situation must take into account capital requirements in relation to future growth as well as the company's ORSA/ICAAP calculations and the Group's liquidity situation. The company's targets in relation to the current capital adequacy regulations are core capital of 11% and a total capital adequacy ratio of 13%. The capital target under the Solvency II regulations is a solvency margin of 135% (Pillar 1). The Board's dividend proposal for 2014 emphasises that the Group is deemed sufficiently capitalised based on both the current capital adequacy regulations and the coming Solvency II requirements. The size of the dividend is based on the net profit for the year in the parent company, SpareBank 1 Gruppen AS. SpareBank 1 Gruppen AS's net profit for the year amounted to NOK million in 2014 (NOK million). BUSINESS AREAS - RESULTS AND KEY FIGURES SPAREBANK 1 FORSIKRING AS SpareBank 1 Forsikring AS's focus areas are within defined contribution pensions, group life insurance and individual risk insurance. The company's products are primarily distributed via the banks in the SpareBank 1 Alliance, The Norwegian Confederation of Trade Unions (LO) and LO Forbund. Financial performance: NOK million Risk result after technical provisions Administration result Interest result Provisions Owner's contribution to provisions Remuneration for interest guarantee Total result for supplementary provisions Allocation to supplementary provisions Profit to customers Return on the company's funds Net profit to owner before tax Taxes Net profit to owner after tax including by increasing the securities adjustment reserve by NOK million. Prior to the increase in reserves the risk result amounted to NOK million (NOK million). The weaker risk result was primarily attributable to the weaker risk result within products with no rights to profits and association group life insurance. The administration result amounted to NOK million (NOK million). The year-on-year improvement in the administration result was primarily attributable to the financial statements for 2013 being charged NOK 55.0 million to strengthen administration provisions within paid-up policies. The company's interest result was NOK million (NOK million). The decrease is primarily attributable to lower realised gains. Gross premium income, excluding incoming transferred capital, was NOK 4,039 million (NOK 3,860 million). This corresponds to an increase of 4.6%. The company achieved a value-adjusted return on assets in the group portfolio of 7.2%, while the booked return on assets was 4.2%. The company's average yearly guaranteed interest rate is 2.92%. All new contracts are offered with guaranteed interest of 2.0% from 1 January The company's total insurance liabilities increased by NOK 3,596 million in 2014 to NOK 32,462 million as of 31 December 2014, an increased of 12.5%. The reserves for contracts in group defined benefit pensions were fully built up in accordance with the new mortality table as of 31 December The level of provisions for paid-up policies at the same point in time was assessed as 56% of the estimated need to build up reserves. SPAREBANK 1 SKADEFORSIKRING GROUP SpareBank 1 Skadeforsikring Group is the leading Norwegian seller of insurance via banks, but also sells directly to retail customers and via broker channels to corporate market customers. SpareBank 1 Forsikring AS reported a pre-tax profit of NOK million (NOK million). The company's tax cost was NOK 70.3 million (NOK million). SpareBank 1 Forsikring AS further strengthened its buffer capital throughout 2014,

5 5 Financial performance: NOK million Gross written premium 5, ,403.9 Net earned premium 5, ,779.9 Accrued claims for own account -2, ,980.5 Insurance-related operating expenses for own account -1, Other insurance-related income/costs Other technical provisions Insurance result 1, Net financial income Other costs Operating result 1, ,332.6 Change in security reserves Pre-tax profit 1, ,243.5 Taxes Net profit for the year 1, SpareBank 1 Skadeforsikring Group achieved a record high pretax profit of NOK 1,829.0 million for 2014, compared to NOK 1,243.5 million for The improvement in the result was primarily attributable to the reduction in compensation costs due to greater technical profitability. This is a consequence of implemented process improvement projects such as 'project claims cost', fewer major claims and natural perils claims, as well the recognition of profit prior years as income. Greater profitability through process improvement projects has contributed to cost savings totalling NOK million. SpareBank 1 Skadeforsikring Group's net income from investments amounted to NOK million (NOK million). The decrease was primarily attributable to the reduced return on equities. The financial return was 3.7% as of 31 December 2014 (4.5%). At year-end 2014, SpareBank 1 Skadeforsikring Group had an investment portfolio of NOK 12.0 billion. Insurance-related operating expenses for own account amounted to NOK 1,010.0 million (NOK million). The increase in relation to last year was primarily attributable to received commissions linked to reinsurance being reduced by NOK 94.3 million due to the reduced reinsurance programme. NOK 7.0 million in provisions for strengthening security reserves were recognised as costs in SpareBank 1 Skadeforsikring Group's combined ratio for own account was 70.1% (80.5%). Development of combined ratio for own account (%): A total of NOK million in profit prior years was recognised as income in 2014 (NOK million). The recognition of profit prior years as income is a result of the further development of the Group's provisions models, especially for long tailed industries, and the fact that changes in compensation were lower than forecast by actuaries as of 31 December The effect from changes to provisions models amounted to NOK million. Profit prior years totalling NOK million was linked to group home schemes and claims years with reinsurance that does not affect the insurance result. The gross claims ratio in the Group amounted to 48.1% in This is 12.9 percentage points lower than the year before. The decrease in gross claims ratio was due to a reduction in the year's compensation, primarily in the retail market, an improved natural perils result, and an increase in profit prior years of NOK million. There was just one major claim in 2014, for NOK 19.5 million, compared with five major claims in 2013 totalling NOK million. There were also fewer major natural disaster events in 2014 than in This produced a natural perils profit of NOK 37.6 million for 2014, compared with a loss of NOK million in The Group's premium income for own account amounted to NOK 5,102.2 million in 2014, compared with NOK 4,779.9 million in The increase in premium income was due to the company having had a less extensive reinsurance programme in 2014 than in 2013, with a significant decrease in reinsurance ceded. SpareBank 1 Skadeforsikring Group's premium increased by NOK 55 million in 2014 to NOK 5.3 billion at year-end The retail market saw an increase of NOK 95 million in premiums, while the corporate market saw a decrease of NOK 40 million. ODIN FORVALTNING GROUP ODIN Forvaltning invests in companies with capable management, good operations and a strong competitive

6 6 SpareBank 1 Gruppen position when the market offers an attractive price. The funds are managed actively and with a long-term perspective. Thorough company analyses are key to the work and only those companies that ODIN Forvaltning regards as the best investments are included in the funds. Financial performance: NOK million Management fees Total operating income Payroll costs Amortisation Other operating costs Total operating costs Operating result Net financial income Pre-tax profit Taxes Net profit for the year ODIN Forvaltning Group reported a pre-tax profit of NOK 89.2 million (NOK 51.5 million). The net profit for the year was NOK 65.2 million, which was NOK 27.7 million higher than the year before. The improvement in the result was due to a combination of higher average total assets during the year and cost reductions. At year-end 2014, ODIN Forvaltning Group was managing a total of NOK 33.9 billion (NOK 32.8 billion), NOK 29.9 billion of which was in equity funds. Equity fund market share fell by 0.9 percentage points to 7.4% in 2014, while the combination fund market share remained unchanged at 4.8% in SPAREBANK 1 GRUPPEN FINANS AS SpareBank 1 Gruppen Finans AS produces, delivers and distributes services within factoring, portfolio acquisition and portfolio management. Financial performance: NOK million Management Factoring Portfolio Pre-tax profit Taxes Net profit for the year SpareBank 1 Gruppen Finans AS can point to a good improvement in the result in both business areas. The improvement in factoring's result was due in part to 26.2% higher client turnover and a 28.5% higher lending volume. In addition to this, losses on lending were reduced by NOK 6.2 million. Growth in the portfolio volume of 25.1% and high receivables resulted in an improved result for the portfolio business as well. The portfolio volume was NOK 2,503 million as of 31 December CONECTO AS Conecto AS provides collection services to companies, organisations, banks and financial institutions, and investors who buy portfolios of overdue claims. Conecto AS's business concept is to recover as much of the customers' claims as possible, while prudently preserving their reputation. Financial performance: NOK million Operating income Operating costs Operating result Net financial income Pre-tax profit Taxes Net profit for the year The company's case load has grown by 7%, which helped to increase operating income to NOK million (NOK million). Operating costs amounted to NOK million, which is NOK 40.9 million lower than in The decrease was primarily attributable to the financial statements for 2013 being charged a NOK 38.4 million write-down in intangible assets. SPAREBANK 1 MEDLEMSKORT AS SpareBank 1 Medlemskort AS is tasked with operating the joint membership database of the unions affiliated to The Norwegian Confederation of Trade Unions (LO) that is used to administer membership card deliveries, collect premiums for group insurance, and run and administer the LOfavør advantage card scheme for more than 900,000 members. The company works closely with LO and the unions. SpareBank 1 Gruppen AS owns 51% of the shares in the company. The other 49% is owned by LO. Financial performance: NOK million Operating income Operating costs Operating result Net financial income Pre-tax profit Taxes Net profit for the year The result before tax was NOK 4.7 million (NOK 9.6 million). The net profit for the year was NOK 3.8 million, which is NOK 3.0 million lower than the year before. The membership base in LO provides an important basis for SpareBank 1 Medlemskort AS's operations. The number of members grew slightly in 2014.

7 7 SPAREBANK 1 GRUPPEN AS In addition to shares in subsidiaries, SpareBank 1 Gruppen AS's assets consist of bank deposits, lending to customers and deposits with financial institutions, and other minor assets. Bank deposits were NOK million as of 31 December 2014, compared with NOK 24.3 million as of 31 December The equity consists of share capital, a share premium reserve and retained earnings. The share capital in SpareBank 1 Gruppen AS amounted to NOK 1,956 million as of 31 December 2014, while total equity amounted to NOK 4,175 million. The capital adequacy ratio was 46.2% in 2014 (46.5%). The company's core capital adequacy ratio was 42.6% (42.9%). SPAREBANK 1 GRUPPEN The Group's cash and cash equivalents decreased by NOK million in 2014 to NOK million. The decrease was due to net cash flows from financing activities and investing activities of NOK million and NOK million, respectively, and cash flow from operating activities of NOK million. The biggest changes between the operating result and cash flow from operating activities for 2014 are attributable to the increase in technical provisions of NOK 2,610 million, negative cash flows from securities at fair value of NOK 1,637.8 million and securities at fair value held to maturity of NOK 1,217.8 million, as well as the NOK 1,586.0 million increase in value of securities at fair value. The dividend paid to owners amounted to NOK million in SpareBank 1 Gruppen's total equity at year-end 2014 amounted to NOK 7,504 million, compared with NOK 5,800 million at yearend Recognised goodwill in the Group totalled NOK million as of 31 December 2014, unchanged from the year before. The annual financial statements have been prepared on the assumption that the Group is a going concern. The Board finds that the prerequisites for such a going concern assumption are met by the financial statements for 2014 and the earnings forecast for Beyond matters mentioned in this report, no circumstances have arisen after the end of the accounting year that would be of material significance to the company's position and results. DIVIDEND The Board proposes that SpareBank 1 Gruppen AS distribute a dividend of NOK million for RISK FACTORS The operations of SpareBank 1 Gruppen are organised into different business areas through subsidiaries. There are major differences in the individual subsidiaries' risk profile. The most important risks to which the Group is exposed are market risk, insurance risk, counterparty risk, credit risk, ownership risk, operational risk, liquidity risk, concentration risk, strategic and commercial risk. Please see note 6 on financial risk management for a more detailed description of the overall risk management and follow up of various types of risk in SpareBank 1 Gruppen. RESPONSIBILITY FOR RISK MANAGEMENT, COMPLIANCE AND CONTROL The Group's Board is responsible for the Group's risk management and compliance. The company boards are responsible for their own company's risk management and compliance. Responsibility for the overall risk management within the Group lies with the alliance director for risk management and compliance. This position reports directly to the chief executive of SpareBank 1 Gruppen AS. Risk management in SpareBank 1 Gruppen should support the Group's strategic development and achievement of its objectives, and ensure the fulfilment of statutory capital requirements. The Group's risk management is organised as a matrix with significant cooperation between the parent and subsidiary companies. Risk management shall ensure financial stability and prudent asset management. This should be achieved by: A moderate risk profile. A strong risk culture characterised by a high level of risk management awareness Striving for an optimum application of capital within the adopted business strategy Making the most of all synergy and diversification effects Adequate core capital and solvency margin based on the chosen risk profile Ensuring the Group complies with all regulatory capital and solvency margin requirements. The risk management function in SpareBank 1 Gruppen AS estimates the Group's risk profile each year. A more comprehensive self-assessment of the Group's total capital requirements is carried out at least once a year. The purpose of the risk calculations is to monitor the Group's risk exposures and assess the Group's future capital requirements in light of the owners' tolerance of risk. The risk calculations are also tied to the established liquidity and contingency plans.

8 8 SpareBank 1 Gruppen Internal control in the Group is regulated by key mandatory guidelines and is primarily defined as a line management responsibility. In accordance with the "Regulations on Risk Management and Internal Control" and the Group's own guidelines, risk factors in the operations are reviewed annually. As part of this process, all units prepare action plans that are reported to the respective company boards. Information from this company-by-company reporting is aggregated and reported to the Group's board. In addition, the Group also conducts surveys across the Group with regard to IT, the Personal Data Act, and security matters. SpareBank 1 Gruppen has outsourced internal auditing to EY AS. This has supplied added expertise to the Group. The internal auditing operations also encompass the subsidiaries. DEVELOPMENT OF RISK MANAGEMENT IN 2014 A great deal of work was done in 2014 on facilitating the Group's risk management in relation to the Solvency II regulations, which will apply from 1 January This work will be reinforced in 2015 and the Group has a clear goal of being compliant with Solvency II by year-end SpareBank 1 Gruppen further facilitated corporate risk management in The intention is to fulfil the expressed goal of bringing together the Group's risk management resources and strengthening its expertise within risk management. A number of policy documents have been established that are intended to ensure consistent risk management between the companies in the Group. In 2014, SpareBank 1 Gruppen conducted an ORSA reporting process with SpareBank 1 Forsikring AS, SpareBank 1 Skadeforsikring AS and SpareBank 1 Gruppen AS. A corresponding ICAAP reporting process was conducted simultaneously with SpareBank 1 Gruppen Finans AS and ODIN Forvaltning AS. The lessons learned from this work will be applied in the implementation of a similar process in SpareBank 1 Gruppen strengthened its compliance function in A dedicated compliance officer position has been established in the parent company. The responsibility of this person is to ensure the consistency of the work and follow up subsidiaries. SpareBank 1 Gruppen is on schedule to comply with the Solvency II regulations. The regulations contain a completely new way of calculating capital requirements. Activities that will further improve the quality of Pillar 1 and Pillar 2 calculations are planned for Meanwhile, SpareBank 1 Forsikring AS, SpareBank 1 Skadeforsikring AS and SpareBank 1 Gruppen AS will implement comprehensive and demanding Pillar 3 reporting in The introduction of the Solvency II regulations will entail changed the capital targets. Target figures will be established in 2015 for the solvency margin under both Pillar 1 and Pillar 2. Provisional calculations show that SpareBank 1 Gruppen will satisfy the expected Solvency II requirements upon the introduction of the Solvency II regulations on 1 January ORGANISATION AND WORKING ENVIRONMENT AT SPAREBANK 1 GRUPPEN AS ORGANISATION As of 31 December 2014, SpareBank 1 Gruppen and its subsidiaries had 1,206 (1,177) employees representing 1,181 (1,148) full time equivalents. SpareBank 1 Gruppen AS had 322 (287) employees representing 315 (282) full time equivalents. A total of 70 employees left in The total turnover in 2014 was 5.8% (9.8%). Corrected for statutory early retirement pensions, retirement pensions and disability pensions, the Group's turnover was 4.6% in 2014 (8.5 %). HR STRATEGY SpareBank 1 Gruppen AS described and started reinforcing a performance-oriented culture of cooperation in This will help ensure that Group can deliver well with respect to current and future targets. The description "Our way - how we do things in the alliance" provides details of the Group's 'Dynamic Management' management and leadership philosophy, as well as a description of what is required of managers and employees. The work on a performance-oriented culture of cooperation has started with communication and participation dialogue tools being made available to the Group's employees. The Group has established managerial training intended to help managers develop within the Group's management and leadership philosophy. Important areas of the Group's HR strategy include: training, career opportunities, remuneration and rewards, a life phase policy, fitness programme (HSE), equal opportunities, and a trainee scheme. The HR strategy contains guidelines intended to help SpareBank 1 Gruppen remain an attractive and inclusive workplace without any form of discrimination. WORKING ENVIRONMENT AND SICK LEAVE The Group's working environment is considered good. This is confirmed by the annual survey of the Group. The survey is followed up systematic activities in the organisation to remedy any weaknesses identified in the survey. Collaboration with the employee organisations has been constructive and had a positive impact on the operations and results for The company has employees who are organised in LO Finans and the Finance Sector Union of Norway. Each company has its own working environment committee to keep the distance between any challenges in the working environment and the authority to resolve them short. SpareBank 1 Gruppen's AKAN (workplace committee against alcoholism and drug addiction) work is addressed by the individual subsidiary's working environment committee.

9 9 SpareBank 1 Gruppen again focused on following up sick leave and prevention work in The target for average sick leave was 3.5 %. The result was 3.8%, respectively 3.0% submitted a medical certificate and 0.8% self-certified. SpareBank 1 Gruppen's code of conduct specifies notification rules for employees and representatives should they become aware of matters that are in violation of laws, regulations or the Group's internal rules. A separate notification routine has also been established. No such cases were reported in LIFE PHASE AND EQUAL OPPORTUNITIES A life phase policy has been adopted for the Group in which one of the goals is to increase the actual retirement age in the Group from just over 62 to closer to 67, which is the company's retirement age. Attention is paid to promoting equality and preventing discrimination on the basis of gender, disability, ethnicity, national origin, descent, skin colour, sexual orientation, religion and creed in all recruitment processes. There is a focus on ensuring that the ratio of genders among managers reflects the general gender composition of the companies. Of the Group's employees, 49% were women and 51% were men. 5% of all female and 1% of all male employees worked part-time. 38% of the alliance executive management team were women. 25% of the members of the key management teams in the subsidiaries were women. 39% of all managers are women. 13% of the board members were women. 45% of the subsidiaries' board members are women. SpareBank 1 Gruppen applies a method of assessing roles and positions in order to ensure it fixes pay levels objectively. Equal pay in relation to work of equal worth was also a topic in annual salary reviews. The main reason that the pay level of men was slightly higher than for women in the Group is that there were more men in both senior positions and highly technical positions. ATTRACTIVE EMPLOYER SpareBank 1 Gruppen is experiencing increasing interest from young employees. The Group regards this as a result of SpareBank 1's strong branding combined with the targeted marketing of SpareBank 1 Gruppen as an attractive employer at universities and university colleges. SpareBank 1 Gruppen recruited 122 new employees in The majority of those who were recruited had completed at least three years' education after upper secondary school. Most of the new employees were in the age group, but the Group also recruited employees in all age groups in The average age of employees in SpareBank 1 Gruppen was 43.3 as of 31 December Efforts to promote the Group as an attractive employer offering exciting career opportunities and competitive terms will continue in CORPORATE RESPONSIBILITY SpareBank 1 Gruppen undertakes to take into consideration how the Group's behaviour impacts people, society and the environment. This responsibility entails setting targets that exceed those in the legislation to which the financial markets are subject. CRITERIA FOR SUPPLIERS SpareBank 1 Gruppen's purchasing policy requires all purchasing agreements to include an appendix on corporate responsibility. The standard appendix on corporate responsibility imposes a duty to report on the supplier and states that SpareBank 1 Gruppen can conduct inspections and audits at the supplier. It also states that the supplier has a duty to monitor subcontractors. Breaches of the corporate responsibility provisions are deemed breaches of contract and may provide grounds for terminating a contract. As a minimum suppliers must satisfy and comply with local, national and international laws, regulations and principles, including provisions concerning wages, working hours, HSE (health, safety and the environment), the environment and anticorruption measures. Suppliers are obliged to act ethically in all circumstances in connection with production and deliveries for SpareBank 1 Gruppen. Suppliers must undertake to not use employees younger than 14. The same applies to the supplier's subcontractors and partners in connection with deliveries for SpareBank 1 Gruppen. HUMAN RIGHTS SpareBank 1 Gruppen has not drawn up special guidelines for human rights. This area is regarded as being covered by the Group's code of conduct, which describe general principles for how employees and representatives of the Group should conduct themselves and the principles on which decisions should be based in given situations. EMPLOYEE RIGHTS AND SOCIAL CONDITIONS SpareBank 1 Gruppen has ensured that employees experience a good balance between work and time off, personal development and various lifestyle activities. The Group has also signed an inclusive workplace agreement with the aim of further enhancing its reputation as a serious, attractive employer.

10 10 SpareBank 1 Gruppen THE EXTERNAL ENVIRONMENT SpareBank 1 Gruppen has a limited impact on the external environment. The impact it has stems from waste, energy use, travel, transport, material choices, purchasing and water consumption. SpareBank 1 Gruppen prepares climate accounts every year based on the total energy consumed by the Group's daily operations. The climate accounts are published on: SpareBank 1 Gruppen is Eco-Lighthouse certified and thus satisfies all the criteria stipulated by the Eco-Lighthouse Foundation for this type of industry. COMBATING CORRUPTION SpareBank 1 Gruppen has not drawn up special guidelines for combating corruption. The Group's code of conduct, which form part of employment contracts, stipulate a number of rules for how employees should act in relation to gifts, customers and hospitality. A special e-course on ethics has been developed. This is compulsory for all new employees. The Group also has routines for reporting unacceptable situations and breaches of security. ETHICAL MANAGEMENT SpareBank 1 Gruppen wants to help promote good, ethical attitudes. Within the area of asset management, this is expressed by complying with internationally recognised principles for ethical management. Weight is given to ethical considerations when choosing external asset managers and analysing companies in its own funds. Weight is also given both to exercising good ownership and excluding companies that do not satisfy the Group's ethical standards. Exercising ownership means that the company's managers seek to encourage companies to promote good, ethical attitudes. As far as the exclusion of companies is concerned, the Group follows the same approach as the Government Pension Fund - Global when it comes to which companies and industries should be excluded. CHANGES TO THE BOARD AND THE ALLIANCE EXECUTIVE MANAGEMENT TEAM Richard Heiberg, chief executive of Sparebanken Hedmark, was elected Chairman of the Board in April He succeeded Per Halvorsen, chief executive of SpareBank 1 Telemark. There were no changes in the alliance executive management team in The alliance executive management team consists of Kirsten Idebøen (chief executive), Turid Grotmoll, Rune Selmar (product companies), Eivind Gjemdal (IT), Tore Haarberg (Market), Iren Rutle (Product and Service Development), Jarle Haug (Corporate Governance) and Torbjørn Martinsen (Risk Management and Compliance). OUTLOOK At the start of 2015 the outlook for the Norwegian economy is complex. The heavy drop in oil prices in 2014 is resulting in a fall in oil investments with direct consequences for the oil industry and indirect effects for the entire supplier chain. At the same time, the weakening of the Norwegian kroner is improving the competitiveness of Norwegian companies with foreign competitors. Low and falling interest rates are increasing purchasing power in the household sector and could also help to reduce the negative effects of the drop in oil prices. Uncertainty in both the Norwegian and global economy could cause instability in the financial markets. This in turn could affect SpareBank 1 Gruppen's financial results, which account for a substantial proportion of the Group's value creation. Despite some growing uncertainty about macroeconomic developments, there is reason to believe that 2015 will also provide a basis for profitable growth for SpareBank 1 Gruppen, which has a diversified product portfolio. The SpareBank 1 Alliance is stronger than ever. Both the owner banks and product areas are doing well against the competition and SpareBank 1 Gruppen achieved an extraordinarily good result in SpareBank 1 Gruppen will, in close cooperation with the alliance banks, continue its work on strengthening the alliance's position in the market. The Board expects the closer integration of SpareBank 1 Gruppen and the services provider SpareBank 1 Banksamarbeidet DA will help enable SpareBank 1 to meet customer and market challenges even faster and more efficiently in the future. The general public's increased focus on pensions indicates longterm growth in the market for security products and pension savings. The life insurance business's product breadth combined with its collaboration with The Norwegian Confederation of Trade Unions (LO) and affiliated unions, and the SpareBank 1 banks' distribution network provide a good starting point for growing business volumes. The life insurance company built up solid buffers in 2014 through significantly building up the securities adjustment reserve, among other things, and is therefore well equipped to meet any instability in the financial markets in Close collaboration between SpareBank 1 Forsikring AS and SpareBank 1 Skadeforsikring AS, under common management, will help increase competitiveness by providing opportunities for more cross-sales and an even more comprehensive service for customers. The collaboration will also help make processes more efficient and provide a basis for further cost effectiveness. The customers' use of digital solutions is growing strongly. SpareBank 1 Skadeforsikring continued to further develop its digital sales and service solutions in 2014 and now has fully

11 11 automated sales solutions for its main products. The company is very market oriented and is in the process of launching a number of different sales initiates to improve its portfolio growth. The future strategy will focus on profitable growth within the companies' main products. SpareBank 1 is a leader in the sale of individual risk insurance products and the Board expects continued growth in 2015 within this product area. Profitability in the debt collection industry and in Conecto AS is being squeezed. The company will determinedly work to gain new customers, while the transfer to the new administrative system during 2015 will help improve cost-effectiveness. Factoring enjoyed another year of good growth and captured further market shares in The focus going forward will be on continued profitable growth. ODIN Forvaltning AS's future development depends on developments in the equities markets, the funds' returns, and net new equity fund, combination fund and bond fund subscriptions. Low interest rates could help to strengthen net new equity fund subscriptions in the equity funds going forward. ODIN Forvaltning AS has brought the management in bond funds home and, together with the established of its own discretionary asset management service, it is in the process of becoming a full-scale asset management company. SpareBank 1 Gruppen is exposed to the securities market through its various subsidiaries, and the development of equity prices and interest rates has a major effect on the Group's earnings. Given a normal return in the securities market, the Board expects a good result in 2015 as well.

12 12 SpareBank 1 Gruppen A word of thanks Our colleagues made good contributions in 2014 and our partnership with the unions was close and fruitful. The Board would like to thank all of SpareBank 1 Gruppen's employees for their contribution to the good result in Oslo, 10 March 2015 Richard Heiberg Arne Austreid Knut Bekkevold Chairman of the Board Per Halvorsen Finn Haugan Jan-Frode Janson Sally Lund-Andersen Tor-Arne Solbakken Kirsten Idebøen NOTE: This translation from Norwegian has been prepared for information purposes only. CEO

13 Income statement, statement of comprehensive income, consolidated balance sheet and changes in equity

14 14 SpareBank 1 Gruppen SPAREBANK 1 GRUPPEN INCOME STATEMENT Parent company Group NOK 1, ) - - Premium income - P&C insurance 5,102,158 4,779, Premium income - life insurance 4,347,601 4,191, Net insurance premium income 9,449,759 8,970,990 26,812 17,822 Interest income 187, , , ,896 Interest costs -130, ,180-74,417-87,073 Net interest income 57,073 19, Commissions 718, , Commission costs -1,160,468-1,069, Net commissions -442, ,098-1,370 Net income from financial instruments at fair value 2,002 through profit or loss 2,664,593 3,180, Net income from securities available for sale Net income from bonds at amortised cost 90,989 48, Net income from bonds held to maturity 217, , Net income from investment properties 327, ,274 1,170,212 1,013,024 Share of profit and group contribution from subsidiaries 7,069 4,769 6,140 - Other operating income 251, ,927 1,100, ,953 Total net income 12,623,193 12,662, Insurance benefits and claims - P&C insurance 2,567,707 2,980,476 - Change in other technical and in security reserves, etc. - - P&C insurance 68, , Insurance benefits and claims - life insurance 2,482,661 2,736, Changes in provisions - life insurance 3,386,706 3,335, Net loan loss provisions ,969 43,121 34,261 Operating costs 1,489,048 1,450,811 44, ,964 Depreciation and amortisation 159, , Other costs 62,138 51,459 88, ,285 Total costs 10,215,735 11,003,439 1,012, ,668 Operating result 2,407,458 1,659,030 - Share of profit from associated companies and joint - ventures recognised using the equity method -1, ,012, ,668 Pre-tax profit from ordinary operations 2,406,161 1,658,971 43, ,143 Taxes 556, , , ,525 Profit for the year from continued business 1,850,132 1,247, ,178 Pre-tax loss from wound up business , Taxes from wound up business - 25, ,178 Loss for the year from wound up business , , ,347 Net profit for the year 1,850,132 1,096,759 Result allocated to: Majority interests 1,848,262 1,096,759 Minority interests 1,870-1) For the purposes of comparison, the income statement for 2013 has been revised to show comparable figures.

15 15 SPAREBANK 1 GRUPPEN - STATEMENT OF COMPREHENSIVE INCOME Consolidated income statement, costs and value changes Parent company Group NOK 1,000 Note , ,347 Profit for the year 1,850,132 1,096,759 Statement of other operating income and costs Items that will not be reclassified to the income statement: -21,742-12,572 New measurement of net defined benefit pensions -139,922 57, Revaluation of properties 79,134 33, Revaluation allocated to insurance customers -66,061-28,263 5,870 3,520 Taxes 34,249-17,269-15,871-9,052 Total -92,600 45,607 Items that will later be reclassified to the income statement: 25,032 31,470 Change in securities available for sale 25,052 31, Currency differences 814 1, Taxes ,032 31,470 Total 25,866 32,909 9,161 22,419 Other operating income and costs (after taxes) -66,734 78, , ,766 Total comprehensive income for the year 1,783,398 1,175,274

16 16 SpareBank 1 Gruppen SPAREBANK 1 GRUPPEN CONSOLIDATED BALANCE SHEET Parent company Group NOK 1, ) ASSETS 102, ,398 Deferred tax asset Goodwill 772, , Other intangible assets 286, ,794 6,059,270 5,870,454 Investments in subsidiaries ,147 10,147 Investments in associated companies 9,190 10, , ,902 Property, plant and equipment 1,059, , Reinsurance receivables 1,221,502 1,656, , ,088 Other assets 579, , Investment properties 4,286,610 3,971, Bonds held to maturity 4,536,978 4,607, Bonds at amortised cost 3,184,087 2,316,208 94,259 60,553 Securities available for sale 103,216 63, ,058 Lending to customers and deposits with 710,514 financial institutions 1,433,268 1,064, Securities at fair value 35,081,796 31,791,431-2,097 Financial derivatives - 4, Insurance receivables from policyholders 1,600,263 1,596, ,074 24,285 Cash and cash equivalents 941,104 1,203,902 7,797,095 7,318,438 TOTAL ASSETS 55,095,760 50,753,037 EQUITY AND LIABILITIES 2,400,277 2,400,277 Shareholders' equity 2,400,277 2,400,277 1,774, ,331 Retained earnings 5,099,300 3,399, Other equity Minority interests 4,696-4,174,856 3,366,609 Total equity 7,504,273 5,799, , ,533 Subordinated loan capital and hybrid tier 1 483, , Insurance provisions in life insurance 32,462,377 28,865,986 - Premium and claims provisions in P&C - insurance 8,683,855 9,603, ,614 87,285 Net pension liabilities 360, , Deferred tax liability 893, , Payable tax 361, , , ,712 Securities issued 285, , Liabilities related to reinsurance 42, , Financial derivatives 191, , , ,987 Other liabilities 1,180, ,443 2,734,890 Deposits from and liabilities to customers and 2,678,312 financial institutions 2,646,230 2,837,086 7,797,095 7,318,438 TOTAL EQUITY AND LIABILITIES 55,095,760 50,753,037 1) The balance sheet as of 31 December 2013 has been revised to show comparable figures.

17 17 Oslo, 10 March 2015 Richard Heiberg Chairman of the Board Arne Austreid Knut Bekkevold Per Halvorsen Finn Haugan Jan-Frode Janson Sally Lund-Andersen Tor-Arne Solbakken Kirsten Idebøen CEO NOTE: This translation from Norwegian has been prepared for information purposes only.

18 18 SpareBank 1 Gruppen CHANGES IN EQUITY Parent company NOK 1,000 Share capital Share premium Retained earnings Total equity Equity as of 1 Jan ,956, ,877 1,460,265 3,860,542 Profit for the year , ,347 Year's comprehensive income ,419 22,419 Year's total comprehensive income , ,766 Dividend paid , ,696 Transactions with shareholders , ,696 Other items booked directly against equity Other items booked directly against equity Equity as of 31 Dec ,956, , ,331 3,366,609 Profit for the year , ,293 Year's comprehensive income - - 9,161 9,161 Year's total comprehensive income , ,454 Dividend paid , ,207 Total transactions with shareholders , ,207 Other items booked directly against equity Equity as of 31 Dec ,956, ,877 1,774,579 4,174,856

19 19 Group NOK 1,000 Share capital Share premium Retained earnings Minority interests Total equity Equity as of 1 Jan ,956, ,877 2,906,097-2,704 5,303,671 Profit for the year - - 1,096,759-1,096,759 Year's comprehensive income ,515-78,515 Year's total comprehensive income - - 1,175,274-1,175,274 Dividend paid , ,696 Disposals minority interests ,704 2,704 - Transactions with shareholders ,401 2, ,696 Other items booked directly against equity , ,724 Corrections from previous years ,305-14,305 Other items booked directly against equity - - 7,581-7,581 Equity as of 31 Dec ,956, ,877 3,399,553-5,799,830 Profit for the year - - 1,848,262 1,870 1,850,132 Year's comprehensive income , ,734 Year's total comprehensive income - - 1,781,916 1,482 1,783,398 Sale of business ,555 6,555 Dividend paid , ,207 Received group contributions - - 2,365-2,365 - Transactions with minority interests Total transactions with shareholders ,536 4, ,347 Other items booked directly against equity - - 3,056-3,056 Corrections from previous years 1) , ,336 Other items booked directly against equity , ,392 Equity as of 31 Dec ,956, ,877 5,099,300 4,696 7,504,273 1) Corrections from previous years are due to errors linked to deferred tax liability on insurance funds classified as equity amounting to NOK 83.3 million.

20 KPMG AS Telephone P.O. Box 7000 Majorstuen Fax Sørkedalsveien 6 Internet N-0306 Oslo Enterprise MVA To the Annual Shareholders Meeting of Sparebank 1 Gruppen AS INDEPENDENT AUDITOR S REPORT Report on the Financial Statements We have audited the accompanying financial statements of Sparebank 1 Gruppen AS, which comprise the financial statements of the parent company Sparebank 1 Gruppen AS and the consolidated financial statements of Sparebank 1 Gruppen AS and its subsidiaries. The parent company s and the consolidated financial statements comprise the balance sheet as at 31 December 2014, and the income statement and the statement of other comprehensive income, statement of changes in equity and cash flow statement for the year then ended, and a summary of significant accounting policies and other explanatory information. The Board of Directors and the Managing Director s Responsibility for the Financial Statements The Board of Directors and the Managing Director are responsible for the preparation and fair presentation of the financial statements in accordance with International Financial Reporting Standards as adopted by the EU, and for such internal control as the Board of Directors and the Managing Director determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. Auditor s Responsibility Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with laws, regulations, and auditing standards and practices generally accepted in Norway, including International Standards on Auditing. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Offices in: KPMG AS, a Norwegian member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative ( KPMG International ), a Swiss entity. Statsautoriserte revisorer - medlemmer av Den norske Revisorforening. Oslo Alta Arendal Bergen Bodø Elverum Finnsnes Grimstad Hamar Haugesund Knarvik Kristiansand Larvik Mo i Rana Molde Narvik Sandefjord Sandnessjøen Stavanger Stord Straume Tromsø Trondheim Tynset Tønsberg Ålesund