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Press release, 17/2005
24.05.2005 Print page

Weaker result for life insurance companies

First quarter 2005:

  • Life insurers’ financial income compared with the same period of 2004
  • Buffer capital somewhat lower than at end-2004
  • Equity proportion in balance sheets remain low, mainly foreign equities
  • Substantial growth in premium income at non-life insurers
  • Continuing improvement in the non-life insurance technical account

– Low interest rates and a weak trend in international equity markets in the first quarter brought lower financial incomes for life insurers and therefore weaker results than in the same period last year. Continued low interest rates in relation to the guarantees given represent the companies’ biggest challenge ahead, comments Kredittilsynet’s Director General, Bjørn Skogstad Aamo.

Life insurers’ results largely depend on the trend in the securities markets. At quarter-end the companies still had a low proportion of equities in their balance sheets, mainly comprising foreign equities. The recovery in the Norwegian equity market consequently had little impact on life insurers’ results, and persistent low interest rates yielded low returns on fixed income securities. Adjusted return on capital was 5.3% (annualised) in the first quarter of 2005 compared with 7.0% for the full year 2004. The adjusted result was NOK 2.7 billion compared with NOK 5.9 billion in the same period last year.

At NOK 31.5 billion, buffer capital was NOK 1.0 billion lower than at end-2004. Buffer capital measured 6.0% of total assets. Equities accounted for 15.9% of total assets at quarter-end, 0.2 percentage points higher than at end-2004, while short-term money market instruments and bonds held as current assets accounted for 31.7%. Bonds held to maturity came to 32.0%, somewhat less than at year-end.

Non-life insurers (numbering 43) posted a result of NOK 2.7 billion on ordinary operations in the first quarter of 2005 compared with NOK 0.9 billion in the same period last year. The advance is due to a substantial improvement in the technical account, but also to high financial income due to Gjensidige NOR’s realisation of a gain of NOK 1.3 billion on disposals of DnB NOR shares. Disregarding this one-time gain, financial incomes were about NOK 150 million lower than in last year’s first quarter. Thanks to substantial growth in premium income, the combined ratio was 7.2 percentage points down on last year’s first quarter, and came to 87.3% at quarter-end. The three dominant non-life groups (Gjensidige NOR Forsikringsgruppen, Vesta Skadekonsern and SpareBank 1 Skadeforsikring konsern) recorded a result of NOK 2.2 billion on ordinary operations, an increase of NOK 1.8 billion over the first quarter of 2004. The improvement would have come to NOK 0.5 billion in the absence of Gjensidige NOR’s gain on its sale of DnB NOR shares.

 

Preliminary key figures and ratios reported to Kredittilsynet after the first quarter 2005 (xls)


Contact persons:
Mr Bjørn Skogstad Aamo, Director General, Kredittilsynet, tel. +47 229 39 929
Ms Anne Stine Aakvaag, Special Adviser, tel. +47 229 39 874