Solvency calculations

The Storebrand Group aims to be adequately and effectively capitalised, taking into account the risk in the business. The composition of business areas and their growth are important drivers for the capital requirement. The goal of capital management is to ensure an efficient capital structure and to balance cost of capital considerations and the goal of a competitive return on equity with the need for adequate capitalisation based on regulatory and rating requirements.

The group's long-term target is a solvency margin of at least 150% and a capitalisation level supporting an 'A' level rating for the life insurance business.

Life insurance in Norway is subject to two regulatory capital requirement tests, the EU requirement (Solvency I) and the banking requirement (Basel I), both of which must be satisfied.

Life insurance in Sweden is subject to the EU solvency requirement test. The solvency capital at SPP Group comprise of shareholders equity which may differ from the financial accounts due to differences in valuation method for insurance liabilities. Under the solvency requirement test the insurance liabilities are valued using discount rates based on the average of government bonds interest rates and covered bonds interest rates, whereas in the financial accounts the discount rates are based on the model described in the section on key terms in SPP's profit sharing.

Solvency and Capital Adequacy