Storebrand's business model

Storebrand Asset Management

Storebrand's asset management activities include the companies Storebrand Investments, Storebrand Fondene, SPP Fonder and Storebrand Eiendom. Storebrand Asset Management manages intragroup assets, including for Storebrand Life Insurance and SPP.

Storebrand offers a wide range of mutual funds to retail customers and institutions under the Delphi and Storebrand Fondene brand names. Larger customers are also offered discretionary management. Storebrand Eiendom is one of Norway's largest real estate companies and manages real estate portfolios both in Norway and abroad.

Storebrand reports the development of assets under management every quarter categorised as (i) group internal customers, (ii) real estate (group internal), (iii) external discretionary assets, and (iv) mutual funds.

The income consists of management fees and return-based fees (performance fees). The management fees are primarily volume-based, i.e. they are charged as a percentage of the assets under management. Performance fees are normally included in actively managed discretionary portfolios and, to a lesser extent, in mutual funds. The performance fees are mainly recognised as income on an annual basis.

The costs side primarily consists of personnel costs, distribution costs and other costs (including IT). Good asset management results in the recognition of performance fees as income and thus generate increased costs due to the performance-based salaries paid to managers.

The asset management business usually expresses income and costs as basis points in relation to the capital under management. The figure below shows the development of margins:

Margin development - Storebrand Investments



The business model is easier to understand compared to life insurance: a profit is generated by ensuring the fees exceeds the operating costs. Storebrand Investments has built up a strong management platform so it can handle a wide range of customers and mutual funds, a large number of transactions and series of portfolios with different mandates. This strong, stable platform results in great scalability, i.e. the extra costs of handling further portfolios is limited. This was clearly confirmed upon the transfer of SPP's investment portfolios to Storebrand Investments at the start of 2009.

This means that good growth in the assets, combined with good asset management results and thus performance fees, provide a basis for strong, increasing profitability in the business. Management for retail customers is generally more profitable per NOK under management than management for institutional customers.

Storebrand Eiendom manages Storebrand Life Insurance's real estate portfolio and generates management income from this. Storebrand Eiendom's results are stated in a separate line in the result of the asset management business.