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2010Annual report
1HANDELSBANKEN LIV ANNUAL REPORT 2010
ContentsPage
THE CHIEF EXECUTIVE’S COMMENTS 2
ADMINISTRATION REPORT 3
FIVE-YEAR OVERVIEW 7
ALTERNATIVE INCOME STATEMENT 8
INCOME STATEMENT 9
ANALYSIS OF RESULTS 10
BALANCE SHEET – ASSETS 11
BALANCE SHEET – LIABILITIES 12
STATEMENTS OF CHANGES IN EQUITY 13
CASH FLOW STATEMENT 15
NOTES 16
RECOMMENDED APPROPRIATION OF PROFITS 34
AUDIT REPORT 35
BOARD AND MANAGEMENT 36
GLOSSARY 37
HANDELSBANKEN LIV ANNUAL REPORT 20102
The chief executive’s comments
THE CHIEF EXECUTIVE’S COMMENTS
Handelsbanken Liv had the most satisfied private customers among life insurance and insurance companies for the third consecutive year. In the latest survey conducted by SKI (Swedish Quality Index) we received top grades in all categories. I am delighted to see that our customers appreciate our products and services. Irrespective of whether they meet us at branches, online or on the phone, we live up to their expectations.
OUR CUSTOMERS SELECT UNIT-LINKED MANAGEMENT
In 2010, we worked actively on contacting our customers who have policies invested in guaranteed interest solutions. Increas-ingly strict regulations make it difficult to create a return that lives up to our customers’ expectations. There are now different management options available that can generate better return – and in the future a better pension. Many of our customers chose to switch to unit-linked insurance during the year. There is an extensive range of funds to choose from. Generation funds were one popular alternative for those who do not wish to choose funds themselves.
The return for customers with unit-linked and portfolio bond insurance remained good, reaching an average of 12 per cent and 17 per cent, respectively. Both premiums written and the net flow to unit-linked insurance more than doubled in 2010. Portfolio bond insurance, premiums written and net flow were on a par with previous years. Combined with the year’s good return, this means that assets under management rose by 29 per cent in unit-linked insurance and by 41 per cent in port-folio bond insurance.
PENSION SAVINGS EVER MORE IMPORTANT
As the national state pension system accounts for a constantly decreasing proportion of future pensions, it is now more impor-tant than ever to have both private and occupational pension savings. We cater for this need by offering our customers savings in a broad spectrum of both pension insurance and endowment insurance. We are currently also strengthening our offering for occupational pensions.
In July, Handelsbanken Liv became one of five life insurance companies available for selection in unit-linked insurance for ITP collective agreement pensions. During the first six months alone, we transferred SEK 649 million in unit-linked assets, more than any other competitor.
We have also seen that our customers wish to obtain a better overview of their insurance savings. Many people currently have
their life insurance and endowment insurance spread out with different companies, despite the many advantages of grouping your savings in one place. We are now helping our customers to transfer their various policies to us. A good overview makes it easier for us to give our customers a qualified advisory service. The time it takes to obtain an overview of private or occupa-tional pension savings is guaranteed to be time well spent.
We are continuing to review and develop our products and services to always deliver the best solutions for each customer in each transaction. Our aim is that Handelsbanken Liv will continue to have the most satisfied life insurance customers in the market.
Göran Holgerson Chief executive
3HANDELSBANKEN LIV ANNUAL REPORT 2010
Administration report
ADMINISTRATION REPORT
Introduction
Handelsbanken Liv Försäkringsaktiebolag (Handelsbanken Liv), corporate identity number 516401-8284, is domiciled in Stock-holm. The company is a wholly-owned subsidiary of Svenska Handelsbanken AB (publ), corporate identity number 502007-7862 (Handelsbanken). Since 2002, Handelsbanken Liv has conducted both life insurance business with traditional insurance and unit-linked insurance in the same company. The company has been demutualised and run as a profit-distributing company since 2002.
Operations
Handelsbanken Liv offers customers a broad range of savings products in the life insurance area. This takes place within the framework of Handelsbanken’s universal bank concept, where life insurance is a natural part of the customer offering with re-gard to long-term savings.
Significant events during the year
As of 1 July 2010, Handelsbanken Liv has been one of five selectable companies for unit-linked insurance within ITP col-lective agreement pensions. Since then, SEK 649 million in unit-linked insurance capital has been transferred to Handelsbanken Liv – more than to any other company.
In 2009, Handelsbanken Liv in Norway signed an agreement with Gjensidige Pensionsforsikring AS concerning a transfer of the occupational pension portfolio that is sold via Handelsbanken in Norway. In 2010, Handelsbanken Liv’s Norwegian operation also phased out its portion of the occupational pension business that was taken out via brokers and other parties. Handelsbanken Liv in Norway continues to offer savings and risk products for private individuals via Handelsbanken’s branches.
During 2010, Handelsbanken Liv started work on adapting the company to the coming solvency regulations and took part in QIS5 during the autumn.
In this annual report, a transition has been made to full IFRS. The transition has not led to any material impact on the Group’s financial results and position. For further information, see notes 1 and 3.
Financial performance
Assets under management at year-end were SEK 75 billion (67). Assets in unit-linked and portfolio bond insurance have contin-ued to grown significantly. At year-end, assets in unit-linked in-surance totalled SEK 40 billion (31) and assets in portfolio bond insurance were SEK 16 billion (11). The capital in insurance with guaranteed interest fell from SEK 25 billion at the start of the year to SEK 19 billion at year-end.
Profit before tax was SEK 263 million (16). The rise in profit is primarily from an improved financial result, in which the capital contribution to policyholders fell from SEK 253 million in 2009 to SEK 70 million in 2010.
The result for unit-linked and portfolio bond insurance was good and is increasing with growing volumes.
INSURANCE OPERATIONSMarket
Handelsbanken Liv’s business concept is to provide solutions that offer financial security through insurance to Handelsbank-en’s customers – via long-term savings and cover in the event of death, accident and sickness. Insurance is sold through the Bank’s branches, by telephone and online.
The company is continually developing its insurance savings offerings and making the products more accessible and under-standable to customers. In 2010, the company worked actively on contacting customers who have policies invested in guaran-teed interest solutions. This was done since we still believe that it will be difficult in the future to deliver a return which exceeds the guaranteed level. Many of our customers would be well-advised to switch to a form of savings that offers a greater chance of higher returns. During the year, many of our customers changed from policies invested in a guaranteed rate solution to, above all, unit-linked insurance. There is a wide range of funds to choose from and various levels of risk and investment strategy.
In November we were delighted to learn that Handelsbanken Liv had been ranked number one among all life insurance companies for the third consecutive year in the SKI (Swedish Quality Index) survey of satisfaction among private customers. Handelsbanken Liv was awarded the highest score of all the life insurance companies in all categories – customer satisfaction also increased for all aspects assessed compared to our score the previous year.
The company has continued to be very active in endowment insurance and offers one of the market’s widest ranges of endow-ment insurance policies. As in 2008 and 2009, Kapitalspar Depå, an endowment insurance product allowing investments in securities, was the product that attracted the most new business during the year. Since last autumn, a simple procedure has ena-bled customers to sign up for Kapitalspar Depå online.
Handelsbanken Liv intends to continue developing its company-paid insurance business that started in 2010. The Han-delsbanken Group is a large player among corporate customers, but has limited presence in the field of occupational pensions.
ASSET MANAGEMENT
Since 2009, the company has split its insurance portfolio for policies invested in guaranteed interest solutions into sub-port-folios based on the guarantee level, the policyholder’s age and tax bracket. Each sub-portfolio is managed in an asset portfolio linked to it. The assets are managed in such a way that, based on the conditions for each sub-portfolio, secures fulfilment of the company’s insurance commitments to customers. The sub-portfolios are allocated the yield rate generated by the respective portfolio, meaning that customers have different yield rates.
The assets continue to be managed in diversified portfolios consisting of fixed income securities, listed equities, proper-ties and alternative investments. The Handelsbanken Liv board establishes the company’s investment guidelines that define the overall frameworks for asset allocation. All the portfolios are
HANDELSBANKEN LIV ANNUAL REPORT 20104
ADMINISTRATION REPORT
based on interest-bearing bonds, which are complemented by smaller investments in other higher-risk assets. The proportion of interest-bearing/other assets varies, both over time and from one sub-portfolio to another.
The management portfolios are divided into three main categories:
• Insuranceproductswithaguaranteedannualrateof3percent• Insuranceproductswithafinalguaranteedrateof3percent• Insuranceproductswithaguaranteedannualrateof5percent
In the category with a guaranteed annual rate of 3 per cent, the average return for 2010 was +2.9 per cent, for insurance prod-ucts with a guaranteed final rate of 3 per cent, +3.2 per cent and for insurance products with a guaranteed annual rate of 5 per cent, it was +2.6 per cent.
For savings in unit-linked and portfolio bond insurance, Handelsbanken Liv provides no guarantees in terms of value growth. For their investments, unit-linked insurance customers are primarily offered mutual funds managed by Handelsbanken Asset Management. Portfolio bond customers may invest their premiums in mutual funds, equities, equity-linked bonds, bonds, certificates, warrants and options. In 2010, the value of Handelsbanken Liv’s unit-linked and portfolio bond insurance displayed positive growth. The average value growth was 12 per cent in our unit-linked insurance products and 17 per cent in portfolio bond insurance.
Solvency
Solvency is a measure of an insurance company’s financial posi-tion and strength. The purpose of the solvency measure is to demonstrate how big a margin, in other words the available solvency margin, the company has in order to meet its commit-ments under the terms and guarantees in the insurance con-tracts. The solvency margin for the Handelsbanken Liv Group was SEK 3,581 million (3,274) as at 31 December 2010. This should be placed in relation to the required solvency margin, which amounted to SEK 1,183 million (1,446). The solvency ratio was thus 3.03 (2.26).
The current solvency calculation is regulated in the Swedish Insurance Business Act and in regulations issued by the Swedish Financial Supervisory Authority. A new directive for solvency regulations, called Solvency II, was passed by the European Par-liament in 2009. The regulations will be introduced on 31 De-cember 2012, and the legislator’s aim is to strengthen protection for policyholders by linking the solvency requirement more clear-ly to how insurance companies identify, measure and manage all risks that occur in the company – insurance, market, credit and operational risks. During the year, Handelsbanken Liv stepped up its work to adapt the company to Solvency II, for example, by participating in QIS5 during the autumn. The company also applied for and was granted permission by the Swedish Financial Supervisory Authority to take part in a preliminary assessment of
a partial internal model. During the autumn, the board decided, however, that Handelsbanken Liv will not develop a partial in-ternal model. In 2011, an increasing number of employees from various functions in the company will be involved in implement-ing Solvency II.
PERSONNEL
At the end of 2010, Handelsbanken Liv had 204 employees, with around 87 per cent of them employed in Sweden. Principles and processes for remuneration to senior management are pre-sented in note 14, Operating expenses.
CAREER DEVELOPMENT
At Handelsbanken, the employees are the Bank, not the products. The Bank takes a long-term view of its employees. In order to retain staff, they must have the right conditions for development in their work, different career opportunities must exist and con-sideration must be taken of the employee’s stage of life.
At Handelsbanken Liv, employees are responsible for their own competence development, and for sharing their competence with others in the Handelsbanken Group. The knowledge ac-quired by employees in their daily work is the most important source of increased professionalism. For Handelsbanken Liv, competence refers to the ability to solve the tasks employees meet at work.
All employees take part in their unit’s business planning proc-ess to create a sense of involvement and commitment to reach set targets. Guided by the business plan, employees meet their im-mediate superior for a personal development dialogue. This in-volves a discussion of the employee’s contribution to operational goals and the conditions required to deal with specific tasks. The discussion results in an individual action plan which is continu-ously followed up.
GENDER EQUALITY
Handelsbanken Liv complies with the Handelsbanken Group’s equal opportunity policy which states that equal conditions must apply to men and women regarding career development within the Group. The goal is for the proportion of female and male managers to correspond to the overall gender distribution at Handelsbanken Liv. 61 per cent of employees are women and 48 per cent of managers are women. The work of promoting equal-ity aims to make it easier for both men and women to combine employment with parenthood. Employees who take parental leave have the same right to salary development as other staff.
WORK ENVIRONMENT AND HEALTH
Handelsbanken Liv complies with the Handelsbanken Group’s working environment policy. The overall objective for the work-ing environment is a focus on health. The aim is to have a work-ing environment where the employees enjoy good health, devel-op on a personal level and function in an optimal way. This is a long-term goal that includes factors such as balance in life, clear
5HANDELSBANKEN LIV ANNUAL REPORT 2010
and honest communication, having the skills and competence needed to perform tasks and deal with work-related situations, pride in one’s work, and trust and respect. Health promotion activities are an important factor in staff care and health care. The aim is to make employees more active. The company subsi-dises all forms of exercise approved by the Swedish Tax Agency.
ETHICAL STANDARDS
Handelsbanken Liv complies with Handelsbanken’s ethical guidelines that state that operations must observe high ethical standards. Employees must conduct themselves in a manner that upholds confidence in the company. Handelsbanken’s board annually ratifies the ethical guidelines. A basic premise is that operations and employees comply with the laws and regulations that govern the operations in various ways. General recommen-dations and statements from the Swedish Financial Supervisory Authority and other authorities must be observed when drafting procedures and instructions.
All employees have a clear responsibility for their actions, professionally and in social and ethical issues. The success of the company depends on the trust of the public and authorities.
ENVIRONMENTAL RESPONSIBILITY
Handelsbanken Liv follows the decisions taken by its parent company, Handelsbanken, regarding environmental issues. Handelsbanken aims to promote a long-term environmentally sustainable development. As in other areas at Handelsbanken, responsibility for practical environmental issues is decentralised. All managers in the Handelsbanken Group have primary respon-sibility for environmental issues at their units, and all employees have a responsibility for the environment as part of their duties.
Environmental issues are a vital element in the Handelsbanken Group’s operations, in terms of the direct environmental impact of the Bank’s operations and any indirect impact. Action is taken to cause as little negative impact on the environment as possible, by minimising energy use, choosing environment-friendly mate-rials and products and minimising residual products. One exam-ple of this is the increasing use of video conferencing to reduce the need to travel.
Handelsbanken has signed and complies with a number of vol-untary agreements that are at the heart of our environmental ac-tivities. These include the ICC Business Charter for Sustainable Development and the United Nations Environmental Program Finance Initiative (UNEP FI), “Banks and the Environment”. UNEP FI states that economic development must be compatible with social welfare and a sound environment.
Environmental considerations are included in all decisions on investments and purchases. To facilitate the drafting of specifica-tions for suppliers, a template for supplier agreements has been produced, which also deals with how to specify environmental requirements. Paper consumption can be reduced by a greater degree of communication via the customer’s online e-mailbox.
ENVIRONMENTAL IMPACT
Carbon dioxide emissions are an area where Handelsbanken Liv’s operations have a direct impact on the environment. For several years, Handelsbanken Liv has measured the carbon dioxide emissions generated by its own operations. The direct impact mainly derives from business travel and the use of heating and electricity. Sweden is one of the few countries in the world where an increasing GDP is accompanied by diminished emissions of greenhouse gases. Handelsbanken Liv is part of that trend.
Waste separation at source was introduced in 2006 and has been fully implemented since 2007. We try and co-ordinate our customer information to reduce the number of letters being sent. When rebuilding, we reuse building materials as much as possible.
RESPONSIBILITY IN INVESTMENT ACTIVITIES
Through active ownership, Handelsbanken Liv aims to help create sustainable development in economic, ecological and social terms, and considers that a responsible attitude is essential to long-term value creation in a company. Responsible investments are therefore a vital prerequisite for achieving the company’s goal of generating good long-term returns. Handelsbanken Liv also regards responsible investments as a prerequisite for meeting cus-tomer demands.
For its insurance capital relating to management at a guar-anteed rate of return, Handelsbanken Liv engages the services of Handelsbanken Asset Management, a unit within Svenska Handelsbanken AB (publ). In Handelsbanken Liv’s unit-linked insurance products, the majority of funds on offer are Han-delsbanken Fonder’s funds.
Handelsbanken Liv’s guidelines for responsible investments are based on international standards for the environment, hu-man rights and working conditions, corruption and controversial weapons. These standards have been expressed in the UN’s conventions and agreements and can be applied to a company’s environmental and social responsibility. The UN Principles of Responsible Investment (UNPRI ) also provide guidance in matters of responsible investment. The guidelines are reviewed annually and can be revised to take into account changes in the market or in customer requirements.
The guidelines cover direct investments made by funds and portfolios in Swedish and foreign equities and corporate bonds. For indirect investments, for example holdings in funds, struc-tured products and derivatives, the guidelines should be applied to as many of the investments as possible. For fund-of-fund management, the guidelines are applied to that part of the port-folio comprising funds managed internally. Index funds man-aged passively are not covered by the guidelines, but their hold-ings are used to exert influence on those companies with whom Handelsbanken Liv, through its fund manager, has chosen to maintain a dialogue as an active owner. The company also offers ethical index funds which have the express objective of comply-ing with customers’ specific requirements to exclude companies operating in certain industries.
ADMINISTRATION REPORT
HANDELSBANKEN LIV ANNUAL REPORT 20106
CORPORATE GOVERNANCEGroup structure
In addition to the parent company Handelsbanken Liv, the Handelsbanken Liv Group comprises the wholly-owned subsidi-aries SHB Liv Forsikringsaktieselskab and Handelsbanken Life and Pension Ltd. SHB Liv Forsikringsaktieselskab provides life insurance products through branches in Norway and Finland. Risk insurance in Norway and Finland is sold through branches of the parent company Handelsbanken Liv. Handelsbanken Life and Pension Ltd provides Handelsbanken Liv’s portfolio bond products. Policyholders’ savings in unit-linked insurance are mainly invested in Handelsbanken’s mutual funds.
Handelsbanken Liv purchases IT services and asset manage-ment from its parent company Handelsbanken. Internal prices within the Handelsbanken Liv Group comply with the rules and guidelines applied within the Handelsbanken Group. Prices are set at cost, although never higher than market prices.
Annual general meeting 2010
The annual general meeting was held on 26 April 2010.
Board
The composition of the board was changed during the year. On 9 December 2010, Lennart Söderberg temporarily succeeded Snorre Storset as chief executive. Göran Holgersson was appoint-ed chief executive on 1 March 2011. On the same date, Yonnie Bergqvist left the board and Håkan Sandberg was appointed as the new chairman. Mats Arvidsson was simultaneously elected as a new member.
The board’s activities
The board has convened at nine ordinary board meetings and no extraordinary board meetings. The board regularly discusses the financial situation of the company and the company’s strat-egy for the short term and the longer term. During the year the board decided that Handelsbanken Liv, in its adaptation of the company to the coming Solvency II regulations, will not partici-pate in the Swedish Financial Supervisory Authority’s prelimi-nary assessment of internal models.
Senior management
The new chief executive is Göran Holgerson. During the year, Anette Mors-Dahlström was appointed Chief Actuary and Ylva Dahlqvist Head of Personnel. On 1 March 2011, Lise-Lotte Jakobsson was appointed Head of Administration.
ADMINISTRATION REPORT
Auditors
Peter Zell is principal auditor for KPMG AB.
Compensation
The company complies with the compensation policy adopted by the Handelsbanken Liv board.
Internal control and risk management
The Handelsbanken Liv Group’s operations include insur-ance risks, operational risks and financial risks. The financial risks include market risks, liquidity risks and credit risks. Han-delsbanken Liv works continually with measuring, following up and limiting these risks for the entire Group, including the sub-sidiaries. There is a department for independent risk control and a compliance function. Together with the business operations, these are responsible for identifying risks, and for independently and regularly checking and reporting to the company’s chief executive and board.
A review of the company’s risks and their significance for operations is presented in note 2, Risks and risk management.
Independent risk control
The department for independent risk control has the overall responsibility for ensuring that Handelsbanken Liv maintains good management and control of the various risks. The aim is to ensure via internal controls that company operations are car-ried out in line with established goals and requirements. This department has an independent position in relation to business operations, and it reports directly to the chief executive and the board. The work complies with the general guidelines of the Swedish Financial Supervisory Authority on governance and control of financial companies and general guidelines on report-ing significant events.
Compliance
The company’s compliance function has the task of independ-ently examining issues relating to compliance. Compliance refers to the observance of laws, regulations and internal rules as well as accepted business practices or norms related to the operations.
Internal Audit
The Internal Audit department performs an independent and impartial audit of the operations and financial reporting of Han-delsbanken Liv. The emphasis is on assessing and verifying inter-nal control in the company due to the large number of transac-tions processed by the business operations.
7HANDELSBANKEN LIV ANNUAL REPORT 2010
FIVE-YEAR OVERVIEW
Five-year overviewSEK m 2010 2009 2008 2007 2006
GROUP
Profit/loss according to the alternative income statement
Administration result 101 101 165 178 124
Risk result 205 146 177 155 217
Financial result -51 -260 -19 28 213
Other result 8 29 32 61 104
Profit/loss before tax 263 16 355 422 658
Profit/loss according to the statutory income statement
Premiums written 584 619 826 821 774
Net investment income in insurance business 1,011 600 291 713 2,448
Claims incurred -275 -272 -486 -567 -422
Operating expenses -440 -369 -312 -413 -385
Balance on the technical account, life insurance business 255 -13 323 261 374
Profit/loss for the year 214 -61 307 -1,191 442
Financial position
Property 1,260 1,150 1,185 1,300 1,570
Shares and participating interests 2,101 2,866 3,855 10,608 9,919
Bonds and other interest-bearing securities 16,444 22,129 22,306 20,260 20,294
Derivatives 44 40 544 19 196
Other investment assets 0 0 0 301 3,883
Total investment assets 19,849 26,185 27,890 32,488 35,862
Investments for which the policyholder bears the risk 55,605 41,922 26,908 34,904 31,604
Unit-linked commitments 55,606 41,942 26,909 34,907 31,609
Provisions for life insurance and conditional bonuses 19,497 25,486 26,277 27,019 27,892
Equity 3,786 3,571 3,637 2,856 4,485
Deferred tax - - - - 595
Subordinated loans 1,129 1,129 1,129 1,129 1,129
Total solvency capital 4,915 4,700 4,766 3,985 6,209
Available solvency margin for the insurance group 3,581 3,274 1,985 2,911 3,239
Required solvency margin for the insurance group 1,183 1,446 1,493 1,738 1,674
Solvency ratio 3.03 2.26 1.33 1.68 1.93
Key figures
Management expense ratio, % 0.59 0.58 0.50 0.61 0.54
Total yield, savings insurance with guaranteed rate of interest, % * - - -1.22 1.18 8.24
Total return, savings insurance with a guaranteed annual rate of 3 per cent, average for the category 2.9 -2.1 - - -
Total return, savings insurance with a guaranteed final rate of 3 per cent, average for the category 3.2 3.8 - - -
Total return, savings insurance with a guaranteed annual rate of 5 per cent, average for the category 2.6 1.7 - - -
Premiums paid
Guaranteed interest and risk insurance 1,752 2,069 2,531 3,090 4,064
Unit-linked insurance 9,312 4,111 3,328 3,256 5,031
Portfolio bond insurance 3,630 3,934 - - -
Total 14,694 10,114 5,859 6,346 9,095
Assets under management
Guaranteed interest and risk insurance 19,316 25,238 27,134 27,730 27,516
Unit-linked insurance 39,562 30,580 21,240 29,711 27,814
Portfolio bond insurance 16,044 11,362 5,668 5,193 3,790
Total 74,922 67,180 54,042 62,634 59,120
PARENT COMPANY
Capital base 3,463 3,237 1,970 2,923 3,238
Required solvency margin 1,172 1,432 1,480 1,694 1,563
Solvency ratio 2.96 2.26 1.33 1.73 2.07
* During 2009, Handelsbanken Liv changed its investment strategy for savings insur-ance with a guaranteed rate of return; instead of a common asset portfolio it adapted its investments to take into account the age of the policyholder and the level of the guaranteed rate. As a result, the insurance capital is now managed in several separate sub-groups, each with a separate investment strategy so that the returns yielded are allocated to the policyholders in each of the respective sub-groups. Any yield split for the company is also calculated separately for each portfolio.
Unit-linked insurance premiums paid in for 2006 include premiums relating to portfolio bond insurance in Euroben Life & Pension Ltd.
Total premiums written including portfolio bond insurance were SEK 8,170 million in 2007 and SEK 8,251 million in 2008.
Collective consolidation ratio is not stated since it is not a relevant indicator for a profit-distributing life insurance company.
Yield (direct yield) is not stated since it does not provide a fair picture. Instead total yield is stated which includes both yield and changes in value.
The accounting date for 2009 and 2010 is presented in accordance with full IFRS. For 2006–2008 restatement to full IFRS has not been done since the restatement effects are not assessed to be material.
HANDELSBANKEN LIV ANNUAL REPORT 20108
Alternative income statement
ALTERNATIVE INCOME STATEMENT
SEK m 2010 2009
Administration result 1 101 101
Risk result 2 205 146
Financial result 3 -51 -260
Other result 4 8 29
Profit/loss before tax 263 16
The profit/loss is based on the Handelsbanken Liv Group’s profit/loss before tax.
Link to statutory income statement 2010 2009
Profit/loss before tax 263 9
Tax -49 -77
Profit/loss for the year 214 -68
The traditional income statement in a life insurance company is difficult to comprehend and offers the reader little opportunity to understand how the result was reached. Internally, Handels banken Liv has worked with an alternative income statement which provides a better basis for understanding how the results arise.
1 Administration result
2010 2009
Fee income 548 529
Net fee and commission income -5 -51
Operating expenses -442 -377
Total 101 101
The administration result is the difference between the fees charged on the insurance contracts and the company’s costs.
2 Risk result
2010 2009
Premiums written 656 718
Change of claims outstanding -10 -10
Insurance claims paid -541 -509
Result of reinsurance -47 -22
Other 147 -31
Total 205 146
The risk result is the difference between the fees which the company charges to cover the insurance risks (mortality, longevity, morbidity and accident) and the actual cost of these.
4 Other result
2010 2009
Return on equity 32 59
Interest expense on subordinated loans -24 -30
Total 8 29
3 Financial result
2010 2009
Received yield split 18 3
Capital contribution -70 -253
Other 1 -10
Total -51 -260
The insurance capital is managed in several separate sub-groups, each with a separate investment strategy so that the returns yielded are allocated to the policy-holders in each of the respective sub-groups. Any yield split for the company is also calculated separately for each portfolio.
9HANDELSBANKEN LIV ANNUAL REPORT 2010
Income statement
INCOME STATEMENT
Group Parent company
SEK m 2010 2009 2010 2009
Technical account, life insurance business
Premiums written (net of reinsurance) Note 8 584 619 584 619
Investment income Note 9 1,516 1,892 1,501 1,808
Unrealised gains on investment assets Note 10 112 1,436 112 1,442
Increase in value of investment assets for which the policyholder bears the investment risk, unit-linked insurance assets 5,437 8,601 3,269 5,833
Other technical income Note 11 482 458 389 378
Claims incurred (net of reinsurance) Note 12 -275 -272 -275 -271
Changes in other technical provisions Note 13 -6,544 -9,650 -4,360 -6,848
Operating expenses Note 14 -440 -369 -403 -331
Investment charges Note 15 -90 -1,496 -90 -1,471
Unrealised losses on investment assets Note 16 -518 -1,229 -518 -1,219
Other technical expenses Note 17 - - - -
Investment income transferred to financial operations -9 -3 -9 -3
Balance on the technical account, life insurance business 255 -13 200 -63
Non-technical account
Balance on the technical account, life insurance business 255 -13 200 -63
Investment income Note 18 67 56 47 43
Unrealised gains on investment assets Note 19 7 29 7 28
Investment income transferred from insurance operations 9 3 9 3
Investment charges Note 20 -41 -51 -41 -48
Unrealised losses on investment assets Note 21 -34 -8 -17 -
Profit/loss before tax 263 16 205 -37
Tax Note 37 -49 -77 -42 -78
Profit/loss for the year 214 -61 163 -115
Comprehensive income
Group Parent company
SEK m 2010 2009 2010 2009
Profit/loss for the year 214 -61 163 -115
Other comprehensive income
Translation differences for the year -13 2 -6 6
Total comprehensive income for the year 201 -59 157 -109
HANDELSBANKEN LIV ANNUAL REPORT 201010
Analysis of results
ANALYSIS OF RESULTS
Parent company
Direct insurance of Swedish risks
Direct insurance of foreign
risks
Received re-
insurance
Occupational pension insurance Other life insurance
Technical account, life insurance business SEK m Total 2010
Defined contribution
traditional insurance
Unit-linked insurance
Occupa-tional linked
disa bility insurance
and premium waiver
insurance
Individual tradi-
tional life insurance
Unit-linked insurance
Non-cancellable
disability and accident
insurance and premium
waiver insurance
Group life and oc-
cupational group life insurance
Premiums written (net of reinsurance) 584 10 2 58 174 1 34 220 85 -
Investment income 1,501 590 118 - 575 218 - - - -
Unrealised gains on investment assets 112 57 - - 55 - - - - -
Increase in value of investment assets for which the policyholder bears the investment risk 3,269 - 1,353 - - 1,916 - - - -
Other technical income 389 74 109 1 87 116 2 - - -
Claims incurred (net of reinsurance) -275 0 1 4 -82 0 -8 -196 6 -
Change in other technical provisions -4,360 -369 -1,476 0 -383 -2,136 0 -1 5 -
Operating expenses -403 -53 -87 -8 -78 -103 -5 -29 -40 -
Investment charges -90 -46 - - -44 - - - - -
Unrealised losses on investment assets -518 -262 - - -256 - - - - -
Investment income transferred to financial operations -9 -5 - - -4 - - - - -
Balance on the technical account, life insurance business 200 -4 20 55 44 12 23 -6 56 0
PREMIUMS WRITTEN
Premiums written (gross) 693 13 2 58 242 1 34 221 122 -
Premiums ceded -109 -3 - - -68 - - -1 -37 -
Total premiums written (net of reinsurance) 584 10 2 58 174 1 34 220 85 0
CLAIMS INCURRED
Insurance claims paid
Gross of reinsurance -489 -3 1 -38 -139 0 -15 -199 -96 -
Reinsurers’ share 62 1 - 0 41 - - 1 19 -
-427 -2 1 -38 -98 0 -15 -198 -77 0
Change in provision for claims outstanding
Gross of reinsurance 151 2 - 37 16 - 7 2 87 -
Reinsurers’ share 1 - - 5 - - - - -4 -
152 2 0 42 16 0 7 2 83 0
Total claims incurred (net of reinsurance) -275 0 1 4 -82 0 -8 -196 6 0
Technical provisions 31 Dec 2010
Provisions for life insurance 17,158 9,537 0 2 7,583 - 2 - 34 -
Provisions for claims outstanding 539 13 -1 149 135 -30 52 44 177 -
17,697 9,550 -1 151 7,718 -30 54 44 211 0
Technical provisions for which the policyholder bears the risk 31 Dec 2010
Conditional bonus 2,339 747 - - 1,592 - - - - -
Unit-linked commitments 36,944 - 16,908 - - 20,036 - - - -
39,283 747 16,908 0 1,592 20,036 0 0 0 0
11HANDELSBANKEN LIV ANNUAL REPORT 2010
Balance sheet – assets
BALANCE SHEET – ASSETS
Group Parent company
SEK m 2010 2009 2008 2010 2009
ASSETS
Intangible assets
Intangible assets Note 22 5 2 2 5 2
Investment assets
Property Note 23 1,260 1,150 1,185 1,260 445
Shares and participating interests in Group companies Note 24 - - - 520 1,445
Shares and participating interests Note 25 2,101 2,866 3,855 2,098 2,863
Bonds and other interest-bearing securities Note 26 16,444 22,129 22,306 15,930 21,605
Other loans 0 0 0 0 0
Derivatives Note 27 44 40 544 39 38
19,849 26,185 27,890 19,847 26,396
Investment assets for which the policyholder bears the investment risk
Unit-linked insurance assets 55,605 41,922 26,908 36,944 27,221
Reinsurers’ share of technical provisions
Claims outstanding 12 12 13 12 12
Receivables
Receivables referring to direct insurance operations Note 28 0 8 10 0 7
Receivables referring to reinsurance 11 4 9 11 4
Tax claims Note 37 2 69 - 3 69
Other receivables Note 29 216 335 71 186 311
229 416 90 200 391
Other assets
Property, plant and equipment Note 30 3 3 42 3 2
Liquid funds Note 31 5,049 4,410 4,741 4,949 4,313
5,052 4,413 4,783 4,952 4,315
Prepaid expenses and accrued income
Accrued interest income 283 437 344 275 427
Deferred commission expenses Note 32 0 0 0 0 0
Other prepaid expenses and accrued income 23 26 2 6 8
306 463 346 281 435
Total assets 81,058 73,413 60,032 62,241 58,772
In accordance with IFRS1 and the transition to full IFRS, the balance sheet for the year is presented together with two restated years of comparison. The items Intangible assets and Property and equipment have a longer life than one year. Other items expire within one year.
HANDELSBANKEN LIV ANNUAL REPORT 201012
Balance sheet – liabilities
BALANCE SHEET – LIABILITIES
Group Parent company
SEK m 2010 2009 2008 2010 2009
EQUITY, PROVISIONS AND LIABILITIES
Equity
Share capital (100,000 shares) 100 100 100 100 100
Statutory reserve - - - 20 20
Translation reserve 5 18 16 4 10
Retained earnings 3,467 3,528 3,214 3,360 3,475
Profit/loss for the year 214 -61 314 163 -115
Total equity 3,786 3,585 3,644 3,647 3,490
Subordinated liabilities
Perpetual subordinated loans 1,129 1,129 1,129 1,129 1,129
Actuarial provisions (gross of reinsurance)
Provisions for life insurance Note 33 17,158 22,888 22,740 17,158 22,887
Provisions for claims outstanding Note 34 539 733 839 539 733
17,697 23,621 23,579 17,697 23,620
Life insurance provisions for which the policyholder bears the risk
Conditional bonus Note 35 2,339 2,598 3,537 2,339 2,598
Unit-linked commitments Note 36 55,606 41,942 26,909 36,944 27,242
57,945 44,540 30,446 39,283 29,840
Provisions for other risks and charges
Provisions for taxes Note 37 - - 11 - -
Deposits from reinsurers 11 6 12 11 6
Liabilities
Liabilities referring to reinsurance 61 22 5 61 22
Derivatives Note 38 3 11 588 3 11
Other liabilities Note 39 317 435 539 304 593
381 468 1,132 368 626
Accrued expenses and deferred income
Other accrued expenses and deferred income Note 40 109 64 79 106 61
Total equity, provisions and liabilities 81,058 73,413 60,032 62,241 58,772
Collateral pledged, contingent liabilities and commitments
Pledges and comparable collateral for own liabilities and for reported commitments for provisions 78,912 72,518 58,726 60,224 57,772
Investment commitments for alternative investments 593 870 1,207 593 870
In accordance with IFRS1 and the transition to full IFRS, the balance sheet for the year is presented together with two restated years of comparison. Perpetual subordinated loans, Provisions for life insurance, Conditional bonus, and Unit-linked commitments have a longer life than one year. Other items expire within one year.
13HANDELSBANKEN LIV ANNUAL REPORT 2010
Statements of changes in equity
STATEMENTS OF CHANGES IN EQUITY
Group SEK m Share capital
Statutory reserve
Translation reserve
Retained earnings Total
Opening balance 1 Jan 2009 100 20 16 3,501 3,637
Adjustment according to IFRS -20 27 7
Opening balance 1 Jan 2009 according to IFRS 100 16 3,528 3,644
Profit/loss for the year -61 -61
Other comprehensive income 2 2
Total change before transactions with the owners 2 -61 -59
Dividend -
Group contribution received -
Shareholder contribution received -
Total transactions with the owners -
Closing balance 31 Dec 2009 100 18 3,467 3,585
Opening balance 1 Jan 2010 100 18 3,467 3,585
Profit for the year 214 214
Other comprehensive income -13 -13
Total change before transactions with the owners -13 214 201
Dividend -
Group contribution received -
Shareholder contribution received -
Total transactions with the owners -
Closing balance 31 Dec 2010 100 5 3,681 3,786
The translation reserve is entirely composed of the effects of changed exchange rates when translating foreign operations’ financial reports to the currency of the consolidated accounts.
HANDELSBANKEN LIV ANNUAL REPORT 201014
STATEMENTS OF CHANGES IN EQUITY
Parent company SEK m Share capital
Statutory reserve
Translation reserve
Retained earnings Total
Opening balance 1 Jan 2009 100 20 4 3,476 3,600
Adjusted profit/loss -1 -1
Profit/loss for the year -115 -115
Other comprehensive income 6 6
Total change before transactions with the owners 6 -116 -110
Dividend -
Group contribution received -
Shareholder contribution received -
Total transactions with the owners -
Closing balance 31 Dec 2009 100 20 10 3,360 3,490
Opening balance 1 Jan 2010 100 20 10 3,360 3,490
Profit for the year 163 163
Other comprehensive income -6 -6
Total change before transactions with the owners -6 163 157
Dividend -
Group contribution received -
Shareholder contribution received -
Total transactions with the owners -
Closing balance 31 Dec 2010 100 20 4 3,523 3,647
The translation reserve is entirely composed of the effects of changed exchange rates when translating foreign operations’ financial reports to the currency of the parent company’s accounts.
Statements of changes in equity, cont.
15HANDELSBANKEN LIV ANNUAL REPORT 2010
Cash flow statement
CASH FLOW STATEMENT
Group SEK m 2010 2009
OPERATING ACTIVITIES
Profit/loss before tax 263 16
Adjustment for non-cash items in profit/loss:
Depreciation, amortisation and impairments 1 47
Unrealised gains/losses on investment assets 433 -228
Paid income tax -50 -71
Change in the assets and liabilities of operating activities:
Net investment assets 1 6,336 1,705
Conditional bonus -259 -939
Provisions for life insurance -5,730 148
Unit-linked insurance assets -13,683 -15,014
Unit-linked commitments 13,664 15,033
Other -409 -1,010
Cash flow from operating activities 566 -313
INVESTING ACTIVITIES
Divestment of subsidiaries - -
Investment in tangible non-current assets 76 -10
Investment in intangible non-current assets -3 -1
Cash flow from investing activities 73 -11
FINANCING ACTIVITIES
Shareholders’ contribution - -
Dividend paid - -
Group contribution - -
Net pension assets, restatement effect according to IFRS - -7
Cash flow from financing activities 0 -7
Cash flow for the period 639 -331
Liquid funds at beginning of period Note 30 4,410 4,741
Cash flow from operating activities 566 -313
Cash flow from investing activities 73 -11
Cash flow from financing activities 0 -7
Liquid funds at end of period 5,049 4,410
1 Investment assets
Group 2010 2009
Property Note 23 1,260 1,150
Shares and participating interests Note 25 2,101 2,866
Bonds and other interest-bearing securities Note 26 16,444 22,129
Derivatives Note 27 44 40
Other financial assets 0 0
Net investment assets 19,849 26,185
Information concerning interest paid and received
Interest received during the period 46 47
Interest paid during the period -26 -35
Total 20 12
In addition to paid income tax of SEK 50 million (71), SEK 290 million (313) has been paid in and out for yield tax. See note 37 Taxes.
HANDELSBANKEN LIV ANNUAL REPORT 201016
Notes
NOTE 1 Accounting policies
LEGISLATION AND REGULATIONS
The annual report was issued as at 31 December 2010 and covers the period from 1 January 2010 to 31 December 2010. Handelsbanken Liv conforms with the stipulations of the Swedish Annual Accounts Act for Insurance Companies and the regulations and general guidelines regarding the annual accounts of insurance companies issued by the Swedish Financial Super-visory Authority (FFFS 2008:26). This means that the consoli-dated accounts are prepared according to International Financial Reporting Standards (IFRSs) and that Recommendation RFR 2 Accounting for legal entities, issued by the Swedish Financial Reporting Board, is applied in the parent company.
The annual accounts and the consolidated accounts were au-thorised for publication by the board on 22 March 2011. The Group’s income statement and balance sheet and the parent company’s income statement and balance sheet will be presented for adoption at the annual general meeting on 27 April 2011.
The accounting policies presented were applied consistently for all periods presented in the financial reports unless otherwise stated.
CHANGE IN ACCOUNTING POLICIES
Until 2009 inclusive, Handelsbanken Liv applied statutory IFRS in its consolidated annual accounts, but as of 2010 IFRS has been fully applied.
The transition means that IAS 19 regarding the measurement of defined benefit pensions is applied in the consolidated annual accounts.
The pension cost pursuant to IAS 19 consists of interest on pension provision, accrued pension rights during the year less expected return on plan assets as well as accrual accounting of actuarial gains and losses. The cost is recognised in the income statement and the closing net liability/asset is entered in the balance sheet.
In conjunction with the transition, IFRS 1 was also applied with reporting of the adjusted opening balance sheet as at 1 January 2009 and adjusted reconciliation of equity in order to illustrate the effects of the transition to IFRS (see note 3).
In all other respects, the accounting policies are the same as those applied in the 2009 annual report.
BASIS FOR VALUATION OF ASSETS AND LIABILITIES
The functional currency is Swedish kronor and the financial reports are presented in Swedish kronor. Unless otherwise stated, all amounts are rounded off to the nearest million.
Financial assets and liabilities, property and financial liabilities in unit-linked insurance are measured at fair value. Other assets and liabilities are measured at amortised cost.
Assets and liabilities in foreign currency are valued at the closing day rate.
IMPORTANT ESTIMATES AND ASSUMPTIONS
The assumptions used when calculating the technical provisions have the most significant effect on the amounts presented in
the financial statements. When calculating technical provisions, assumptions are made concerning interest rates, mortality, mor-bidity, taxes, charges and other measurements of risk that affect the valuation. Changes in these assumptions may affect existing provisions and the company’s reported profit. A more detailed description of the Group’s risks is given in note 2 Risks and risk management.
CONSOLIDATED ACCOUNTS
The consolidated accounts include all companies in which Handelsbanken Liv directly or indirectly has a controlling influence. A controlling influence normally exists when the holding amounts to more than 50 per cent of the voting rights.
The consolidated accounts were prepared in accordance with the acquisition accounting method. When acquiring subsidiaries, identifiable assets, liabilities and contingent liabilities are recog-nised at fair value on the acquisition date. The part of the acqui-sition cost that exceeds the fair value of identifiable net assets is recognised as goodwill. If the acquisition cost is lower than the fair value of identifiable net assets, the difference is recognised as income in the income statement.
All foreign operations have activities that could cause their functional currency to deviate from the currency used by the Group. Salary payments and purchases are normally made in local currency. The current method was used in translating the foreign operations’ balance sheets and income statements. This means that assets and liabilities are translated at the closing day rate. Equity is translated at the exchange rate on the date of investment or earning respectively.
The income statement has been translated at the average annual rate. Exchange differences are recognised as a component of comprehensive income and are included in the translation reserve in equity.
ACCOUNTING FOR INSURANCE CONTRACTS AND FINANCIAL CONTRACTS
Contracts with significant insurance risk are classified in the con-solidated accounts and in the parent company as insurance con-tracts. Insurance risk is viewed as significant if the event insured, in any scenario of commercial substance for the Group, entails an obligation to pay compensation that is significant in com-parison with the compensation that would have been paid if the insured event had not taken place. Contracts that do not transfer significant insurance risk are classified as investment contracts.
All insurance products are constructed so that it is simple to distinguish between the insurance and savings components. The financial components of the contracts are disclosed separately from the insurance components. Handelsbanken Liv carries pay-ments in and out referring to customers’ savings assets directly in the balance sheet. The risk component is normally valued using the risk-taking in the premium calculation and is therefore zero. If there is reason to use assumptions which deviate from the assumptions used in the premium calculation, a special provision is made for the risk component.
NOTES
17HANDELSBANKEN LIV ANNUAL REPORT 2010
FINANCIAL INSTRUMENTS
At the time of initial recognition, financial assets and liabilities were classified on the basis of the purpose for which the instru-ment was acquired.
Financial assets and liabilities at fair value through the income statement
This category comprises two sub-categories: held-for-trading financial assets and liabilities and other financial assets and li-abilities that the company has initially decided to place in this category (according to what is known as the fair value option). Both categories are measured on a regular basis at fair value with value changes recognised in the income statement.
The first sub-group contains derivatives with positive/negative fair values. The second sub-group contains all other investment assets and unit-linked insurance commitments.
Handelsbanken Liv’s principle is to value financial assets and liabilities at fair value in the income statement. This is be-cause the company regularly evaluates the asset management operations on the basis of fair values and also because, where interest-bearing assets are concerned, this reduces some of the inconsistency and volatility in accounting terms that would otherwise arise when life insurance technical provisions are regularly revalued.
Loans and receivables
Other financial assets, such as loans and other receivables, which have payments that have been or can be established and that are not listed on an active market, are measured at amortised cost at the amounts expected to be received.
Other financial liabilities
Borrowing and other financial liabilities, such as accounts payable and other liabilities, are included in this category. The liabilities are measured at amortised cost.
RECOGNITION AND MEASUREMENT OF INVESTMENT ASSETSFinancial investment assets measured at fair value
Purchases and sales of money market and capital market instru-ments on the spot market are subject to trade date accounting. Listed market prices are used wherever possible. Secondarily, the mark-to-model method is used, based on observable market data. In the third place, valuation is partly made on the basis of non-observable market data. Unlisted shares are valued accord-ing to the principles of EVCA (the European Private Equity and Venture Capital Association).
Changes in value, both realised and unrealised, are recognised in the income statement under the headings Investment income (realised gains and losses) and Unrealised gains/losses on invest-ment assets. Derivative transactions with a positive fair value on the closing date are recognised under Investment assets, and transactions with a negative fair value are recognised under Liabilities.
Shares and participating interests in Group companies
Shares and interests in Group companies are measured at the cost of acquisition (taking into account impairment testing).
Property
All Handelsbanken Liv’s properties are part of policyholders’ investment assets. The properties are recognised at fair value and value changes are recognised in the income statement. Income and expense from properties are reported under investment in-come in the income statement.
Fair value for properties is assessed annually by external property valuers taking into account cash flows.
INCOME
Income is recognised in the income statement when it is prob-able that future economic benefits will be gained and these ben-efits can be reliably measured.
PROVISIONS
Provisions are reported as a consequence of past events when it is probable that an outflow of resources will be required to settle the obligation. The provision is valued at the amount estimated to be most probable, taking into account the time of settlement. Technical provisions are described in a separate section.
LEASES
Handelsbanken Liv is a lessee in a number of leasing transactions which are all classed as operating leases. This means that lease payments made are recognised as operating expenses.
PENSION COSTS
In the consolidated accounts, the pension cost is recognised pursuant to IAS 19, which involves recognition of these compo-nents: interest on pension provision, accrued pension rights dur-ing the year less expected return on plan assets as well as accrual accounting of actuarial gains and losses. The cost is recognised in the income statement and the closing net liability/asset is entered in the balance sheet.
In the parent company, pension premiums paid are expensed on a current basis in the income statement.
COSTS FOR DEVELOPING SOFTWARE AND INTANGIBLE ASSETS
Investments in software developed in-house are recognised as an expense on a current basis where the expenditure refers to main-tenance of existing business operations or an existing intangible asset. In the case of development of new intangible assets, or new business operations for existing intangible assets, the direct expenditure accrued is capitalised from the time when it is prob-able that economic benefit will arise.
DEPRECIATION AND AMORTISATION
All assets classified as property and equipment are depreciated on a straight-line basis over an estimated useful life. The property and equipment that consists of various components with differ-ent estimated periods of useful life are divided into different cat-egories with separate depreciation plans. Personal computers are depreciated over three years and other equipment over five years.
Intangible assets are divided into two categories. The first category applies to assets for which it is possible to establish an estimated useful life. These are amortised on a straight-line ba-sis over the useful life of the asset. The other category involves intangible assets for which it is not possible to establish a definite useful life. These are not amortised but are instead subject to annual impairment testing.
The amortisation period is tested on an individual basis at the time of new acquisition and also continually if there are indica-tions that the useful life may have changed. The intangible assets carried by Handelsbanken Liv are amortised according to an estimated useful life of five years.
IMPAIRMENT TESTING
For shares in subsidiaries and for property and equipment and intangible assets, the value of the asset is tested individually
NOTES
HANDELSBANKEN LIV ANNUAL REPORT 201018
when there are indications of a change in value or at least annually. Impairment losses are recognised when the recover-able amount is less than the carrying amount. The recoverable amount is calculated as the higher of an asset’s value in use or net realisable value.
TECHNICAL ACCOUNTPremiums written
Premiums and premium fees for contracts that are classified as insurance contracts according to IFRS 4 are recognised as pre-miums written.
Investment income and unrealised gains and losses
Investment income and unrealised gains and losses from the return on assets managed on behalf of policyholders are recog-nised in the technical account.
Other technical income
Other types of income in the insurance operations are reported here. Capital fees and other fees (not tax) are included as other income. Fees charged to customers for investment contracts are recognised as income at the rate the company provides the serv-ice with even distribution over the life of the contracts.
CLAIMS INCURRED
Risk costs regarding contracts that are classified as insurance according to IFRS 4 are reported as claims incurred.
Change in other technical provisions
This item reports distributed yield referring to insurance with a guaranteed rate of interest and unit-linked insurance as well as the change in provisions for surplus premiums.
Operating expenses
Operating expenses consist mainly of administration, asset man-agement and acquisition costs. The latter comprises commission paid to bank branches for acquiring and selling new insurance policies. No acquisition costs are capitalised.
Other technical expenses
Amortisation of intangible assets is reported here.
NON-TECHNICAL ACCOUNT
Investment income and unrealised gains and losses that do not refer to return on assets managed on behalf of policyholders are recognised in the non-technical account.
PROVISIONS FOR LIFE INSURANCE
Liabilities related to insurance with a guaranteed rate of inter-est are calculated for each policy as the higher of the insurance capital and amortised cost. The amortised cost is calculated at the contracted, guaranteed rate of interest. In addition, the amortised cost is affected by assumptions on yield tax, charges, mortality and other risk measurements. The guaranteed rate and
all assumptions are agreed on when the policy is taken out. The company has different guaranteed interest rates in its portfolio, three per cent and five per cent being the predominant rates.
The assumption on charges depends on the product and is generally in line with the percentage charges applied. The assumption concerning tax varies depending when the insurance policies were taken out and the tax levy applicable at the time. The assumption on tax and charges reduces the guaranteed rate of interest applied.
Provision for life annuities
Assumptions concerning future mortality are adapted to an in-dustry standard (DUS06). The provision for life annuities, which is part of the life insurance provision, consists of the calculated extra cost for life annuities taking into account the new forecasts made in relation to the initial pricing of traditional life insurance that was based on older mortality forecasts.
PROVISIONS FOR CLAIMS OUTSTANDING
Provisions for claims outstanding consists of provisions for sickness annuities, established claims, non-established claims and a claims handling reserve. When valuing provisions for sickness annuities, a risk-free market rate is used, taking into account future indexa-tion of disbursements. Provision for established claims refers to reported and approved claims that have not yet been paid. Non-established claims are claims that have not yet been reported but which, using statistical methods, are calculated as having occurred. The claims handling reserve comprises estimated operat-ing expenses the company has for settling outstanding claims.
CONDITIONAL BONUS
The part of the insurance capital that is not guaranteed is ac-counted for as conditional bonus.
UNIT-LINKED INSURANCE COMMITMENTS
This item includes liabilities for investment contracts in unit-linked insurance and portfolio bond insurance. Unit-linked com-mitments are measured at fair value. The fair value is established using current fund values for the mutual funds which the poli-cyholders have in their unit-linked insurance. Value changes are recognised in the income statement.
TAXES
The company conducts life insurance operations and is taxed according to the Act on Yield Tax on Pension Funds and the Income Tax Act.
Yield tax is calculated on the assets managed on behalf of the policyholders and which belong to the insurance categories that are subject to yield tax. The tax paid by the company is based on a standard amount on current assets at the start of the taxation year and is charged to each policy that is liable for yield tax.
The return on equity and result from the insurance categories, mainly risk insurance, that are not subject to yield tax are taxed at a rate of 26.3 per cent.
NOTES
19HANDELSBANKEN LIV ANNUAL REPORT 2010
NOTE 2 Risks and risk management
The main risks that arise in the operations of the Handelsbanken Liv Group are financial risks, insurance risks and operational risks.
FINANCIAL RISKSDescription of guarantee undertaking
In traditional insurance with a guaranteed rate of interest, Han-delsbanken Liv bears the risk of the financial guarantees entailed by the insurance terms not being fulfilled.
For insurance contracts with a guaranteed rate, a guaranteed value is calculated that earns interest at an agreed rate (guaran-teed rate interest). Most of the insurance contracts run with an-nual guarantees of between three and five per cent.
In parallel with the guaranteed value, the value of the insur-ance contract is calculated; this is allocated yield depending on how successfully the asset portfolio that the contract is linked to is managed. The value of the insurance contract is allocated the same yield as that achieved in the asset portfolio, if the yield is less than the contracted interest rate. Otherwise, the larger of 90 per cent of the yield and the contracted interest rate is paid. The difference between the yield on the asset portfolios and the allocated yield goes to Handelsbanken Liv.
The financial guarantee means that a capital contribution is made to the value of the insurance contract at specific points in time when the value is less than the guaranteed value of the insurance. Any capital contributions are realised at each year-end or when there is an insurance event. In periods when the allo-cated yield exceeds the guaranteed interest, a risk buffer, called conditional bonus, is built up. No capital contribution can be applied until all the conditional bonus has been used up. The conditional bonus is distributed per insurance contract and can-not be used to cover the deficit on other insurance contracts.
In addition to the risk of not achieving a yield such that a capital contribution is avoided at the next year-end, there is the risk that the company will not be able to meet its commitments in the long term. If the company does not have assets managed on behalf of the policyholders which at least correspond to the present value of future guaranteed disbursements, the company’s capital base will be undermined. To a large extent, the present value is dependent on current market interest rates.
The erosion of the capital base may be regarded as a capital contribution at company level. Unlike the capital contributions described above at insurance contract level, a capital contribution of this type can be recovered if the market conditions improve at a later stage, through rising interest rates, for example.
The risk management model used by Handelsbanken Liv weights the risk of a capital contribution at insurance contract level together with the risk of a capital contribution at com-pany level due to the high present value of future guaranteed amounts. Market risk is measured in terms of the overall sensitiv-ity of the capital contributions to market disruptions.
For savings in unit-linked or portfolio bond insurance, the policyholder bears the entire financial risk.
Sensitivity analysis, equity in the Group 2010 2009
Price fall shares 10% 0 0
Increase in market rates 1% -1
Exchange rate fall 10% 0 0
Expiry analysis
Parent companySEK m 31 Dec 2010
0– 5 yrs
5–10 yrs
10–15 yrs
15–20 yrs
20–25 yrs
Over 25 yrs Total
Provisions for life insurance and conditional bonuses 5,108 4,282 3,455 2,367 1,788 2,497 19,497
The above allocation shows the remaining contract time until expiry. The majority of other assets and liabilities are expected to expire within one year.
Market risk
Market risk is the risk that price changes in financial markets – such as interest rates, currencies, equities and commodities – result in changes in the value of the company’s investment assets or its commitments. Market risk is the company’s main risk.
Handelsbanken Liv’s board establishes the investment guide-lines for the company, and this is the ultimate controlling docu-ment for allocation of the company’s investment assets.
The purpose of the investment guidelines is to provide in-structions on how the assets are to be invested, given the under-takings to the policyholders and the statutory requirements of the Swedish Insurance Business Act and the applicable directives of the Swedish Financial Supervisory Authority. The guidelines establish how investments are to be managed and controlled, and how the total risk level for the company’s total assets and the commitments towards policyholders are to be managed.
Net exposure, interest rate adjustment periodsGroup SEK m
Assets1 Liabilities2 Net exposure3
2010 2009 2010 2009 2010 2009
0–3 mths 1,062 2,816 -260 -254 802 2,562
3 mths–1 yr 662 311 -780 -764 -117 -453
1–5 yrs 10,731 295 -3,331 -4,363 7,400 -4,068
5–10 yrs 2,518 12,788 -3,096 -3,925 -579 8,863
More than 10 yrs 1,471 5,919 -12,030 -16,180 -10,559 -10,261
Total 16,444 22,129 -19,497 -25,486 -3,053 -3,357
1 Bonds and other interest-bearing securities.2 Life insurance provisions and conditional bonuses.3 Net exposure is managed using derivatives.
Credit riskRating on holdings in the parent company (Standard & Poor’s rating classes)SEK m 31 Dec 2010 AAA AA+ AA A+ A A- AA- BBB+ BBB No rating Total
Public sector 6,664 150 100 0 0 0 0 0 0 0 6,914
Financial institutions 4,973 111 101 100 350 438 0 25 0 889 6,987
Other issuers 584 0 148 0 119 267 685 0 27 199 2,029
Total 12,221 261 349 100 469 705 685 25 27 1,088 15,930
NOTES
HANDELSBANKEN LIV ANNUAL REPORT 201020
Value at Risk 2010
%
40
50
60
70
80
90
100
DecNovOctSepAugJulJunMayAprMarFebJan
Average risk utilisation amounted to 75 per cent of the maxi-mum permitted risk on a weekly basis. Risk utilisation as a per-centage of maximum permitted risk was 65 per cent at its lowest and 87 per cent at its highest. The limit on VaR was lowered by just over 10 percentage points during the year.
INSURANCE RISKS
Insurance companies set their premiums based on assumptions regarding the size of costs for future insurance events. Insurance risk is the risk that the actual and assumed risk costs will differ. Insurance risk at Handelsbanken Liv is related to the following insurance events:Mortality – payment to beneficiaries in the event of the death of
the insured personLongevity – payment that is dependent on the insured person
living, e.g. pension disbursementsMorbidity – payment in the event of illness or work incapacityAccident – payment in the event of accident.
Limiting insurance risks
In order to be able to offer insurance at reasonable premiums, both profitably and in the long term, Handelsbanken Liv con-ducts a medical risk assessment of the party to be insured before risk insurance can be taken out, where the insurance risks are mortality or morbidity. The purpose is to assess whether and on what terms the insured party can be granted insurance on the basis of his or her state of health. The insurance applied for must meet the policyholder’s insurance needs and ability to pay.
Risk concentration
Small companies and private individuals represent a significant portion of Handelsbanken Liv’s policyholders. Another signifi-cant share of the risks consists of Handelsbanken’s loan protec-tion insurance with Handelsbanken’s borrowers as the insured.
Both categories of insured parties are mainly spread through-out Sweden, and to a lesser extent in Norway, Finland and Den-mark. No risk concentration in terms of insurance risks has been identified other than that the risks are located mainly in Sweden.
Future risks
Mortality in Sweden is gradually falling, which is positive with regards to death benefit insurance. But for life insurance (pen-sion insurance), this could become an economic burden for the company, as it means that average life expectancy is rising and that pension disbursements must be made over a longer period.
Försäkringstekniska Forskningsnämnden (FTN – an industry organisation for the Swedish insurance industry) conducted an analysis of mortality in 2006 among policyholders in Sweden and how this mortality could change in the future. FTN’s
Credit risk
Credit risk is the risk that a counterparty will not be able to fulfil its commitments to the company, for example that the issuer of a bond or derivative instrument will default. The creditworthiness of issuers and counterparties is determined via both internal and external credit assessments. The company’s investment guide-lines, the Swedish Insurance Business Act and the directives of the Swedish Financial Supervisory Authority regulate the size of the company’s exposure to individual issuers and limit the expo-sures to issuers with a poor credit rating.
Liquidity risk
Liquidity risk is the risk that the company will not be able to meet its payment obligations when they fall due, or that the company will not be able to sell securities at acceptable prices. Liquidity risks are managed by daily monitoring of future dis-bursements and by investing a large part of the company’s in-vestment assets in listed securities with good liquidity.
Allocation, financial assets in % 31 Dec 2010 31 Dec 2009
Equities 3 8 market-listed shares
Interest 83 81 interest-bearing instruments
Property 7 5 direct-owned property
Alternative assets 7 6 private equity, infrastructure funds, hedge funds and property funds
Total 100 100
The ten largest holdings in fair value, SEK as at 31 Dec 2010
Issuer/company Asset type CountryFair value,
SEK million
1. Swedish Government Bonds Sweden 6,183
2. Nordea Hyp Cov Bonds Sweden 1,519
3. Swedbank Hyp Co Bonds Sweden 1,434
4. SCBC Bonds Sweden 917
5. SEB Bolån Cov Bonds Sweden 762
6. HB Funds Shares and participating interests
Sweden 796
7. Kominvest Sweden Bonds Sweden 718
8. Nordic Capital Shares and participating interests
Sweden 647
9. LF Covered Bonds Sweden 405
10. SBAB Bonds Sweden 354
Reporting and monitoring of financial risks
The independent risk control function is responsible for regularly identifying, measuring, analysing and reporting financial risks.
The guarantee commitments in the insurance conditions mean that the company assumes part of the financial risk. The company performs daily checks of these risks to measure the financial effect of price variations on the financial markets.
Handelsbanken Liv measures and monitors its financial risks using Value at Risk (VaR). With a given probability and time horizon, VaR is intended to measure the size of the maximum possible loss. The calculations are based on a large number of relative changes in relevant market variables. Examples of these are equity indexes, interest rates and exchange rates. Risk is then calculated by applying these changes to the relevant asset alloca-tion and liability valuation with a time horizon of one quarter. The VaR emerges as the penultimate worst result at a 99.5 per cent confidence level. Risk utilisation is mainly dependent on as-set allocation, interest rate level, achieved yield and the current risk buffer/conditional bonus.
NOTES
21HANDELSBANKEN LIV ANNUAL REPORT 2010
mortality study (DUS06) and its forecast of future mortality provide Handelsbanken Liv with a good basis for pricing both death benefit insurance and pension insurance.
A reliable mortality forecast is a fundamental factor in all pric-ing of insurance with longevity risk, since the products are often designed so that the mortality, on which the premium calculation is based, applies throughout the insurance period. This applies especially to the pension and occupational pension insurance that is included in the company’s contracts.
Most of Handelsbanken Liv’s insurance policies with mortality risk are priced annually. This means that the company can unilat-erally change the premium from year to year. Thus, an incorrect mortality assumption for these policies can be corrected with a quick impact on the result. This does not in general apply to traditional life insurance with savings. The mortality assumption applied when calculating the premium provides the basis for pric-ing mortality and longevity risk during the period the financial guarantees apply. The mortality assumptions used in these cases are almost entirely variants of M90, the mortality survey carried out by the insurance industry at the end of the 1980s.
The investigations carried out within the company clearly show that the fixed pricing will lead to losses in the future. In the an-nual accounts for 2009 the company therefore adapted its techni-cal provisions to DUS06. The present value of the future losses up to and including 2050 were estimated at SEK 146 million in the 2010 annual accounts, and technical provisions were made totalling the corresponding amount.
The future is not as predictable when it comes to sickness/dis-ability (morbidity) insurance. Changes in morbidity occur much more rapidly than changes in mortality. This is partly due to the difficulties in determining the underlying reason and degree of morbidity. The rapidly rising cases of sickness in the early years of the 2000s led to major premium increases in the sector. Several insurance companies doubted whether they would be able to of-fer voluntary sickness/disability insurance in the future. The sick-ness/disability insurance operations subsequently entered a more balanced phase, and morbidity has fallen and periods of sick leave have become shorter in recent years. Sickness/disability insurance products are generally designed in such a way that the premium can be changed annually. This gives the company considerable opportunity to efficiently compensate for rapid changes in mor-bidity relatively.
Risk exposure for insurance risks
To ensure that insurance companies have sufficient capital to fulfil their obligations, the Swedish Financial Supervisory Authority requires insurance companies to perform stress tests on their entire insurance operations using the traffic light model. The test analyses the company’s power of resistance in the case of certain, very negative, events. This includes changes in market interest rates and share prices, as well as possible changes in mortality and morbidity. The levels are selected to reflect the risk that the com-pany less frequently than once in 200 years would be unable to completely meet its commitments.
Handelsbanken Liv reported the traffic light test as at 31 December 2010, when the mortality risk was calculated at SEK 273 million and the morbidity risk at SEK 102 million. The mortality risk corresponds to the present value of the economic consequences if the insured parties live longer than we currently expect. The stress test entails a 20-per cent reduction in applied mortality. The morbidity risk is calculated using a changed assumption regarding recovery, a 20-per cent reduction in the number on sick leave, and an assumption of a 50-per cent increase in new cases of sickness. The traffic light model also measures the cancellation risk, that is, the risk of lower income due to
cancellations. According to the test’s computational model, the contribution of the cancellation risk to the total capital require-ment was SEK 85 million.
Risk result for 2010
The risk result can be divided into longevity result, mortality re-sult, morbidity result, accident result, and other.
SEK million
Longevity result -12
Mortality result 41
Morbidity result 165
Accident result 2
Other 9
Total 205
The mortality result is determined by risk premiums paid, the cost of cases of death occurring and changes in provisions for unknown claims. If the company receives an equal amount in risk premiums paid as its expenses for deaths occurred, then the company will have a zero result. If there are more deaths than expected, the result will be negative and vice versa.
The income item in the longevity result is the capital that the company receives when the insured person dies without a survi-vor’s pension. The expense item is contributed risk compensation, which is the compensation for the risk that the capital is lost when the insured person dies. If the contributed risk compensa-tion and the capital returned to the company in the case of death are equal, then the longevity result is zero. If more people die than in the assumptions, there will be a positive contribution to the result, while a lower number of deaths means a negative con-tribution to the result.
The morbidity result is determined by risk premiums paid in, the estimated costs of cases of sickness and changes in provisions for known (ongoing with periodic disbursements) and unknown claims. The calculation of the provisions is partly due to assump-tions about the probability of the sickness case ceasing. This may occur due to either recovery or death. The result therefore depends both on how many insured persons fall ill (and the amount of their compensation) and how many recover in relation to the assumptions applied.
Reporting and monitoring of insurance risks
The chief actuary is responsible for monitoring the financial outcome of insurance risk in conjunction with each month-end financial report, when the risk result is divided per product and into sub-results per insurance event, as described above. The chief actuary also makes an annual technical report to the board.
OPERATIONAL RISKS
Operational risks are defined as the risk of losses caused by inad-equate or erroneous internal processes and system solutions, as well as mistakes made by the company’s own employees. They may also be caused by external events and legal risks. Operational risks may lead to financial losses and a drop in confidence among customers and in the market.
Reporting and monitoring operational risks
Responsibility for managing operational risks is part of manage-rial responsibility at all levels. This includes identifying, assessing, reporting, acting upon and controlling operational risks.
The department for independent risk control has the overall responsibility for the methods used to identify and quantify op-erational risks, as well as for monitoring these and assisting the units in their work on operational risks.
NOTES
HANDELSBANKEN LIV ANNUAL REPORT 201022
A high level of expertise and appropriate work methods are crucial for keeping the company’s operational losses at a low level. Every year, each unit carries out a survey of the operational risks at the unit. The survey shows the unit’s operational risks, their possible consequences and action planned to eliminate or reduce them. Implementation and monitoring of action taken is subse-quently performed in the daily operations. Sound management of operational risks is a means of assuring internal control in the company. A key starting point is that division of responsibility and work duties must be defined on the basis of control aspects. For example, the same person must not handle a transaction throughout the entire processing chain.
The company also has routines for managing operational in-cidents and operational losses and uses the same systems as the rest of the Handelsbanken Group. Twice a year, an overall review of the company’s operational risks and incidents occurred is per-formed. The findings of the review are reported to Handelsbank-en Liv’s board and the central board of Handelsbanken.
In addition to responsibility for operational risks, the company has specially appointed employees with responsibility for informa-tion security and physical safety.
OTHER RISKS
The insurance market and its future development are largely de-termined by legislation and regulations that in turn are depend-ent on political decisions. This applies especially to tax legislation.
The current tax regulations means that yield on endowment insurance is taxed with a special yield tax and not as yield on capital. An important consequence of this is that for an insur-ance policy it is possible to change the investments without any tax effects. If the legislator were to put investment and savings in endowment insurance on par with investment and savings in general, there is a risk that some of the market for endowment insurance would disappear. The market for endowment insur-ance would also be affected if the legislator were to propose and resolve to implement other types of savings with yield tax of the same type as applies today for endowment insurance. For savings in private pensions, savings volumes are traditionally affected by annual restrictions in the tax deduction entitlement for premiums paid to this type of pension savings.
Handelsbanken Liv regularly follows developments in the insur-ance market and, through its membership of the Swedish Insur-ance Federation, can participate in and influence matters and pro-posals from legislators concerning changes in the insurance market.
NOTE 3 Transition to full IFRSA description of the changes to the accounting policies in provided in note 1, Accounting policies.
Restatement of balance sheet as at 31 December 2009 under IFRS
Group
SEK m
Statutory balance sheet as at 31 Dec
2009 under previous accounting policies
Restated in accordance
with IFRS
Statutory balance sheet as at 31 Dec
2009 restated according to IFRS
Assets
Intangible assets
Intangible assets Note 22 2 2
Investment assets
Property Note 23 1,150 1,150
Shares and participating interests in Group companies Note 24 - -
Shares and participating interests Note 25 2,866 2,866
Bonds and other interest-bearing securities Note 26 22,129 22,129
Other loans 0 0
Derivatives Note 27 40 40
26,185 26,185
Investment assets for which the policyholder bears the investment risk
Unit-linked insurance assets 41,922 41,922
Reinsurers’ share of technical provisions
Claims outstanding 12 12
Receivables
Receivables referring to direct insurance operations Note 28 8 8
Receivables referring to reinsurance 4 4
Tax claims Note 37 69 69
Other receivables Note 29 321 14 335
402 14 416
Other assets
Tangible assets Note 30 3 3
Liquid funds Note 31 4,410 4,410
4,413 4,413
Prepaid expenses and accrued income
Accrued interest income 437 437
Deferred commission expenses Note 32 0 0
Other prepaid expenses and accrued income 26 26
463 463
Total assets 73,399 73,413
NOTES
23HANDELSBANKEN LIV ANNUAL REPORT 2010
Restatement of balance sheet as at 31 December 2009 under IFRS
Group
SEK m
Statutory balance sheet as at 31 Dec
2009 under previous accounting policies
Restated in accordance
with IFRS
Statutory balance sheet as at 31 Dec
2009 restated according to IFRS
Equity, provisions and liabilitiesEquityShare capital (100,000 shares) 100 100Statutory reserve 20 -20 -Translation reserve 18 18Retained earnings 3,501 27 3,528Profit for the year -68 7 -61
Total equity 3,571 14 3,585
Subordinated liabilitiesPerpetual subordinated loans 1,129 1,129
Actuarial provisions (gross of reinsurance)Provision for life insurance Note 33 22,888 22,888Provision for claims outstanding Note 34 733 733
23,621 23,621
Life insurance provisions for which the policyholder bears the risk Conditional bonus Note 35 2,598 2,598Unit-linked commitments Note 36 41,942 41,942
44,540 44,540
Provisions for other risks and chargesProvisions for taxes Note 37 - -
Deposits from reinsurers 6 6
LiabilitiesLiabilities referring to reinsurance 22 22Derivatives Note 38 11 11Other liabilities Note 39 435 435
468 468
Accrued expenses and deferred incomeOther accrued expenses and deferred income Note 40 64 64
Total equity, provisions and liabilities 73,399 14 73,413
Restatement of income statement as at 31 December 2009 under IFRS
Group
SEK m
Statutory income statement for 2009
under previous accounting policies
Restated in accordance
with IFRS
Statutory income statement for 2009 restated according
to IFRS
Technical account, life insurance businessPremiums written (net of reinsurance) Note 8 619 619Investment income Note 9 1,892 1,892Unrealised gains on investment assets Note 10 1,436 1,436Increase in value of investment assets for which the policyholder bears the investment risk, unit-linked insurance assets 8,601 8,601Other technical income Note 11 458 458Claims incurred (net of reinsurance) Note 12 -272 -272Changes in other technical provisions Note 13 -9,650 -9,650Operating expenses Note 14 -376 7 -369Investment charges Note 15 -1,496 -1,496Unrealised losses on investment assets Note 16 -1,229 -1,229Other technical expenses Note 17 - -Investment income transferred to financial operations -3 -3Balance on the technical account, life insurance business -20 7 -13
Non-technical accountBalance on the technical account, life insurance business -20 7 -13Investment income Note 18 56 56Unrealised gains on investment assets Note 19 29 29Investment income transferred from insurance operations 3 3Investment charges Note 20 -51 -51Unrealised losses on investment assets Note 21 -8 -8Profit/loss before tax 9 7 16Tax Note 37 -77 -77Profit/loss for the year -68 7 -61
Comprehensive incomeProfit/loss for the year - -61 -61Other comprehensive incomeTranslation differences for the year - 2 2Total comprehensive income for the year - -59 -59
NOTE 3 Cont.
NOTES
HANDELSBANKEN LIV ANNUAL REPORT 201024
Restatement of cash flow statement as at 31 December 2009 under IFRS
Group
SEK m
Statutory cash flow statement for 2009
under previous accounting policies
Restated in accordance
with IFRS
Statutory cash flow statement for
2009 restated according to IFRSS
OPERATING ACTIVITIES
Profit/loss before tax 9 7 16
Adjustment for non-cash items in profit/loss
Depreciation, amortisation and impairments 47 47
Unrealised gains/losses on investment assets -228 -228
Paid income tax -71 -71
Change in the assets and liabilities of operating activities:
Net investment assets 1,705 1,705
Conditional bonus -939 -939
Provisions for life insurance 148 148
Unit-linked insurance assets -15,014 -15,014
Unit-linked commitments 15,033 15,033
Other -1,010 -1,010
Cash flow from operating activities -320 7 -313
INVESTING ACTIVITIES
Divestment of subsidiaries - -
Investment in tangible non-current assets -10 -10
Investment in intangible non-current assets -1 -1
Cash flow from investing activities -11 -11
FINANCING ACTIVITIES
Shareholders’ contribution - -
Dividend paid - -
Group contribution - -
Net pension assets, effect of restatement according to IFRS - -7 -7
Cash flow from financing activities 0 -7 -7
Cash flow for the period -331 0 -331
Liquid funds at beginning of period 4,741 4,741
Cash flow from operating activities -320 7 -313
Cash flow from investing activities -11 -11
Cash flow from financing activities 0 -7 -7
Liquid funds at end of period 4,410 0 4,410
NOTE 4 Net gain/net loss per category of financial instrument
Group
Financial assets
Financial assets identified at fair value in income
statementHeld for trading
Loan re-ceivables
Available-for-sale financial
instruments Total
Shares and participating interests 222 222
Bonds and other interest-bearing securities 241 241
Loans to credit institutions 4 4
Investment assets for which the policyholder bears the investment risk 5,437 5,437
Derivatives 2 2
Other receivables -
Other financial assets 616 616
Impairment losses on available-for-sale financial assets -
Reversal of impairment losses on available-for-sale interest-bearing financial assets -
Total 6,516 2 4 - 6,522
Financial liabilitiesHeld for trading
Other liabilities Total
Unit-linked commitments -
Due to credit institutions -
Bonds -
Derivatives -
Other liabilities -
Total - - -
2010 2009
Net gain or loss on available-for-sale financial assets recognised directly in equity (fair value fund) - -
The amounts in the above tables are a specification of the amounts for financial instru-ments recognised in the income statement as (i) investment income, (ii) unrealised gains on investment assets, (iii) investment charges, (iv) unrealised losses on investment assets except for (a) any depreciation/impairment losses and (b) asset management charges.
NOTE 3 Cont.
NOTES
25HANDELSBANKEN LIV ANNUAL REPORT 2010
NOTE 5 Classification of financial assets and liabilities
2010 2009
At fair value in the income statement divided into
At fair value in the income statement divided into
Group TradingFair value
option*
Loans and customer
receivables Total TradingFair value
option*
Loans and customer
receivables Total
Assets
Liquid funds 5,049 5,049 4,410 4,410
Properties 1,260 1,260 1,150 1,150
Shares and participating interests 2,101 2,101 2,866 2,866
Bonds and other interest-bearing securities 16,444 16,444 22,129 22,129
Derivatives 44 44 40 40
Unit-linked insurance assets 55,605 55,605 41,922 41,922
Other assets 264 264 454 454
Accrued interest income 283 283 437 437
Total financial assets 44 75,693 5,313 81,050 40 68,504 4,864 73,408
TradingFair value
option*
Other financial liabilities Total Trading
Fair value option*
Other financial liabilities Total
Liabilities
Subordinated liabilities 1,129 1,129 1,129 1,129
Derivatives 3 3 11 11
Unit-linked commitments 55,606 55,606 41,942 41,942
Other liabilities 498 498 527 527
Total financial liabilities 3 55,606 1,627 57,236 11 41,942 1,656 43,609
* Classified to be measured at fair value in the income statement.
NOTE 6 Fair value measurement of financial instruments
Group
2010 Level 1
Listed market price
Level 2
Valuation based on observable
market data
Level 3
Valuation partly based on
non-observable market data Total
2009 Level 1
Listed market price
Level 2
Valuation based on observable
market data
Level 3
Valuation partly based on
non-observable market data Total
Assets
Shares and participating interests 823 1,278 2,101 1,620 1,246 2,866
Bonds and other interest-bearing securities 13,857 2,587 16,444 18,095 4,034 22,129
Derivatives 1 43 44 10 30 40
Liabilities
Derivatives 3 3 6 5 11
Instruments whose values are partially based on non-observable market data. Level 3
Group
2010 Shares and participating
interests Total
2009 Shares and participating
interests Total
Carrying amount at beginning of year 1,246 1,246 1,152 1,152
Changes in value recognised in the income statement -99 -99 -104 -104
New acquisition 177 177 246 246
Sold during the year -46 -46 -48 -48
Issued during the year - - - -
Matured during the year - - - -
Transfer from valuation category 1 or 2 - - - -
Transfer to valuation category 1 or 2 - - - -
Transfer between positive and negative market values - - - -
Carrying amount at end of year 1,278 1,278 1,246 1,246
Realised and unrealised profit/loss from level 3 holdings are reported in the technical income statement on the lines for investment income and unrealised gains and losses respectively.
NOTES
HANDELSBANKEN LIV ANNUAL REPORT 201026
NOTE 7 Related-party transactions
Handelsbanken Liv purchases a large amount of IT services and other services from the parent company Handelsbanken. Internal prices within insurance operations comply with the rules and guidelines applied within the Handelsbanken Group. Prices are set at cost, although never higher than market prices. The charge for asset management is based on market prices.
Summary of related-party transactions 2010
Group
Sales of goods/services to
related parties
Purchases of goods/
services from related parties
Other (e.g. interest,
dividends)
Handelsbanken and other subsidiaries 43 -414 -2
Parent company
SHB Liv A/S 21 -6 0
Handelsbanken and other subsidiaries 43 -414 -2
Total 64 -420 -2
Summary of related-party transactions 2009
Group
Sales of goods/services to
related parties
Purchases of goods/
services from related parties
Other (e.g. interest,
dividends)
Handelsbanken and other subsidiaries 44 -370 -4
Parent company
SHB Liv A/S 29 -7 -4
Handelsbanken and other subsidiaries 33 -370 -4
Total 62 -377 -8
NOTE 8 Premiums written (net of reinsurance)
Group Parent company
2010 2009 2010 2009
Premiums paid or recognised 693 750 693 750
Total premiums written (gross of reinsurance)
693 750 693 750
Premiums ceded -109 -131 -109 -131
Total premiums written (net of reinsurance)
584 619 584 619
(of which premiums written from Group companies)
(218) (215) (218) (215)
All premiums refer to risk insurance and are periodic premiums. Of total premiums written (net of reinsurance), SEK 85 million (149) refers to other EEA countries.
Information about premiums paid reported in the balance sheet 2010 2009 2010 2009
Premiums paid or recognised 14,110 9,495 10,030 4,959
Total 14,110 9,495 10,030 4,959
Premiums written for direct insurance 2010 2009
Periodic premi-
ums
One-off premi-
ums
Periodic premi-
ums
One-off premi-
ums
Contracts for which the policyholder bears the investment risk 11,755 1,187 7,067 973
Contracts for insurance with guaranteed rate of interest 947 221 1,185 270
Total 12,702 1,408 8,252 1,243
NOTE 9 Investment income
Group Parent company
2010 2009 2010 2009
Rental revenue from properties 92 82 92 30
Dividends received 391 706 375 671
Interest income
Bonds and other interest-bearing securities 468 701 468 701
Other interest income 4 10 4 10
Total interest income 472 711 472 711
(Of which interest income from Group companies) (4) (10) (4) (10)
Foreign exchange gains, net 48 - 48 -
Capital gains, net
Shares and participating interests 270 - 270 -
Bonds and other interest-bearing securities 243 393 243 396
Total capital gains, net 513 393 513 396
Total investment income 1,516 1,892 1,501 1,808
NOTE 10 Unrealised gains on investment assets
Group Parent company
2010 2009 2010 2009
Property 110 - 110 -
Shares and participating interests - 1 436 - 1,442
Bonds and other interest-bearing securities - - - -
Derivatives 2 - 2 -
Total 112 1,436 112 1,442
NOTE 11 Other technical income
Group Parent company
2010 2009 2010 2009
Premium fees 30 39 22 25
Capital fees 397 323 317 259
Other fees 22 55 18 53
Risk income 33 41 32 41
Total 482 458 389 378
NOTE 12 Claims incurred (net of reinsurance)
Group Parent company
2010 2009 2010 2009
Claims paid (gross of reinsurance) -481 -450 -481 -449Operating expenses for claims management -8 -9 -8 -9Reinsurers’ share 62 70 62 70Total claims paid (net of reinsurance) -427 -389 -427 -388
Changes in provision for claims outstanding (gross) 151 129 151 129Reinsurers’ share 1 -12 1 -12Total change in provisions for claims outstanding (net of reinsurance)
152 117 152 117
Total claims incurred (net of reinsurance) -275 -272 -275 -271
Information about claims paid reported in the balance sheet
Insurance claims paid -2,974 -2,601 -2,758 -2,447Cancellations and surrenders -8,922 -1,811 -7,228 -1,328Total -11,896 -4,412 -9,986 -3,775
NOTES
27HANDELSBANKEN LIV ANNUAL REPORT 2010
NOTE 13 Change in other technical provisions
Group Parent company
2010 2009 2010 2009
Allocated yields for unit-linked insurance -5,867 -9,201 -3,605 -6,397Allocated yields for insurance with guaran-teed rate of interest -639 -11 -639 -11Other changes -38 -438 -116 -440Total -6,544 -9,650 -4,360 -6,848
The Other changes item, in the case of life insurance provisions and conditional bonus calculated for statutory purposes which are based on the market value defined by the Swedish Financial Supervisory Authority, would be SEK -881 million (-1,406) for the parent company and SEK -802 million (-1,404) for the Group.
NOTE 14 Operating expenses
Group Parent company
2010 2009 2010 2009
Acquisition costs -147 -162 -138 -144Administrative expenses -291 -258 -263 -238Reinsurance commissions and profit participating interests -2 51 -2 51Total operating expenses -440 -369 -403 -331
Operating expenses for claims manage-ment -8 -9 -8 -9Asset management charges -65 -68 -65 -68Property management charges -25 -29 -25 -10Total operating expenses -538 -475 -501 -418
Operating expenses for claims management are reported under the heading Claims incurred and operating expenses related to treasury management are reported under Investment charges.
Minimum lease feesTotal amount for future minimum lease fees for operating leases.
Group/Parent company 2010 2009
Lease payments recognised in the income statement 0.6 0.5
Maturity within 1 year
Maturity
1 to 5 yearsFuture minimum lease fees 0.5 0.5
Lease agreements refer to leases for passenger cars. The normal lease period for pas-senger cars is 36 months.
Staff costs
Group Parent company
2010 2009 2010 2009
Salaries and fees -99 -99 -91 -89
Social security costs -31 -28 -29 -27
Pension costs -10 -24 -21 -24
Provision to profit-sharing foundation -26 - -25 -
Other staff costs -11 -14 -9 -14
Total -177 -165 -175 -154
Pension costs relate to paid pension premiums. There are no additional pension obli-gations. The pension plan for employees follows the plan for bank employees.
Of which salaries and fees to the board and chief executive
Salaries and fees -6 -6 -3 -3
Pension costs -1 -1 0 0
Total -7 -7 -3 -3
Of which salaries and fees to the board and chief executive in Ireland are SEK 1 million (1) and in Denmark SEK 1 million (1). In addition, pension costs for Ireland are SEK 465 thousand (459) and for Denmark SEK 62 thousand (155).
Principles and decision-making process for compensation for senior management
The compensation level for senior management is revised an-nually according to the decision-making process that applies throughout the Handelsbanken Group. One main principle in the process is that compensation may only be issued in the form of fixed salary and customary employee benefits. Variable com-pensation benefits such as bonus and percentage of profits are not paid. The board of Handelsbanken Liv determines the terms and conditions for the chief executive.
Terms and compensation for senior management
The current chief executive’s pension is paid according to the same pension plan as other employees as described below. The company is charged annually for the cost at the same rate as the pension is accrued. Accrued pension obligations are insured with SPP Livförsäkring AB. In the event of retirement before the stipulated retirement age, a paid-up policy is issued for the pen-sion accrued.
Snorre Storset was chief executive in 2010. Snorre Storset was paid a total salary of SEK 3.4 million (3.3), which included other benefits amounting to SEK 0.3 million (0.2). Pension costs were SEK 0.4 million (0.4). Seven other senior managers received re-muneration and other benefits of SEK 6.6 million (5.8), includ-ing other benefits amounting to SEK 0.4 million (0.4). Pension costs are SEK 2.3 million (2.4). The group of other senior man-agers comprises the management team of Handelsbanken Liv. No fees were paid to the chairman of the board. No fees were paid to employee representatives on the board or their deputies.
The chief executive and other senior managers, in common with other employees in the Handelsbanken Group, are entitled to compensation in the form of units in Handelsbanken’s profit-sharing system Oktogonen. Allocations are subject to the Handelsbanken Group achieving its goal of higher return on equity than the average return of other listed Nordic and British banks. For more detailed information, please refer to Handelsbanken’s annual report.
Number of employees (average during the year)
Group Parent company
2010 2009 2010 2009
Sweden 161 150 161 150
Norway 25 36 25 36
Denmark 2 3 - -
Finland 7 6 - -
Ireland 5 5 - -
Total 200 200 186 186
Gender distributionGroup
2010 2009
Men Women Men Women
Sweden 63 98 55 95
Norway 6 19 10 26
Denmark 1 1 1 2
Finland 4 3 3 3
Ireland 2 3 2 3
Total 76 124 71 129
Gender distributionParent company
2010 2009
Men Women Men Women
Sweden 63 98 55 95
Norway 6 19 10 26
Total 69 117 65 121
NOTES
HANDELSBANKEN LIV ANNUAL REPORT 201028
NOTE 14 Cont.
Staff costs by country
Group Parent company
2010 2009 2010 2009
Sweden -140 -124 -151 -124
Norway -24 -30 -24 -30
Denmark -3 -3 - -
Finland -6 -4 - -
Ireland -4 -4 - -
Total -177 -165 -175 -154
Sickness absence rate in the Swedish operations, %
2010 2009
Age Men Women Total Men Women Total
–29 3.8 1.9 2.6 0 0 0
30–49 3.1 2.7 2.8 2.4 3.7 3.2
50– 3.5 5.7 4.8 5.1 9.1 7.6
Total 3.3 4 3.7 3.5 6 5
Of whom on long-term sick leave, percentage points of total sickness absence
–29 0 0 0 0 0 0
30–49 0 0.3 0.2 0 0 0
50– 0.7 1.4 1.1 0 0 0
Total 0.4 0.8 0.6 0 0 2
Gender breakdown, senior management
Parent company 2010
Parent company 2009
Men Women Men Women
Senior management 4 4 5 3
Board 3 1 3 1
Fees to auditors
Group Parent company
2010 2009 2010 2009
KPMG AB, Audit -1.3 -0.8 -0.4 -0.5
KPMG AB, Tax consultations -0.2 - - -
KPMG AB, Other assignments -0.6 -0.2 -0.4 -0.2
Internal audit Handelsbanken -2.6 -2.3 -2.4 -2.1
Total -4.7 -3.3 -3.2 -2.8
Audit assignments refer to audits of annual accounts and accounting records, the administration of the board of directors and the chief executive and also other duties that according to the law are the responsibility of the company’s external auditor. Everything else is deemed to be supplementary assignments in the form of tax consultations or other assignments.
Pensions
From the age of 65, a retirement pension is paid in accordance with the pension agreement between the Employer’s Association of the Swedish Banking Institutions (BAO) and the Financial Sector Union and between BAO and SACO (the Swedish Con-federation of Professional Associations). The amount is 10 per cent of the annual salary up to 7.5 income base amounts. The re-tirement pension is 65 per cent of the annual salary on the por-tion of the salary in the interval 7.5–20 income base amounts, and 32.5 per cent of the annual salary in the interval 20–30 income base amounts. No retirement pension is paid on the por-tion of the salary in excess of 30 income base amounts.
The following provisions for pension obligations have been made in the balance sheet:
Net pension assets 31 Dec 2010 31 Dec 2009
Pension obligations 267 158
Fair value of plan assets 178 155
Pension obligations minus plan assets 89 3
Retained income in accordance with transitional rules -115 -17
Allocated for pensions -26 -14
The fact that the total of Allocated for pensions is a negative amount means that a pension asset is reported in the balance sheet.
Pension costs 31 Dec 2010 31 Dec 2009
Pensions accrued during the year 2 4
Interest on pension provision 6 6
Expected return on plan assets -8 -5
Write-off of retained actuarial gains (+) / losses (-) 0 -
Pension costs, defined benefit plans 0 5
Total pension costs 0 5
The actuarial calculation of pension obligations and pension costs is based on the following main assumptions:
31 Dec 2010 31 Dec 2009
Discount rate % 3.50% 3.75%
Expected salary increase % 3.50% 3.50%
Expected rate of return on plan assets % 5.00% 5.00%
Pension indexing % 2.00% 2.00%
Income base amount % 3.00% 3.00%
Staff turnover % 3.00% 3.00%
Expected remaining years of employment 17 14
Pension obligations, plan assets and provisions for pensions and net actuarial gains/losses for the defined-benefit plans have developed as follows. Funds paid to the employer refer to funds paid for the employer’s pension costs.
Pension obligations 31 Dec 2010 31 Dec 2009
Opening balance 158 157
Pensions accrued during the year 2 4
Interest expense 6 6
Paid benefits -1 -1
Actuarial gains(-)/losses(+) 102 -8
Closing balance 267 158
Plan assets 31 Dec 2010 31 Dec 2009
Opening balance 155 151
Expected return on plan assets 8 5
Funds contributed by the employer 11 12
Funds paid directly to employees -1 -1
Actuarial gains (+) / losses (-) 5 -12
Closing balance 178 155
Return on plan assets 31 Dec 2010 31 Dec 2009
Expected return on plan assets 8 5
Actuarial gains (+) / losses (-) 5 -12
Real return 13 -7
The plan assets mainly comprise shares and interest-bearing securities.
Provision for pension obligations 31 Dec 2010 31 Dec 2009
Opening balance -14 -7
Pension costs, defined benefit plans 0 5
Paid benefits - 0
Funds contributed by the employer -11 -12
Closing balance -26 -14
Net actuarial gains /losses 31 Dec 2010 31 Dec 2009
Opening balance, actuarial gains (+) / losses (-) -17 -13
Actuarial gains (-) / losses (+) to be recognised 0 -
Actuarial gains (+) / losses (-), pension obligations -102 8
Actuarial gains (+) / losses (-), plan assets 5 -12
Closing balance, actuarial gains (+) / losses (-) -115 -17
NOTES
29HANDELSBANKEN LIV ANNUAL REPORT 2010
NOTE 18 Investment income
Group Parent company
2010 2009 2010 2009
Dividends received 0 1 0 1
Interest income
Bonds and other interest-bearing securities 24 24 19 18
Other interest income 8 23 7 21
Total interest income 32 47 26 39
(of which interest receivable from Group companies) (21) (22) (21) (21)
Foreign exchange gains, net 13 6 -1 0
Capital gains, net
Shares and participating interests - 2 - 3
Interest-bearing securities 23 - 23 -
Total capital gains, net 23 2 23 3
Total investment income 67 56 47 43
NOTE 19 Unrealised gains on investment assets
Group Parent company
2010 2009 2010 2009
Shares and participating interests 7 3 7 2
Derivatives - - - 0
Interest-bearing securities - 26 - 26
Total unrealised gains on investments 7 29 7 28
NOTE 20 Investment charges
Group Parent company
2010 2009 2010 2009
Asset management charges -9 -8 -9 -8
Interest expense
Other interest expense -26 -35 -26 -33
Total interest expense -26 -35 -26 -33
(of which costs to Group companies) (-24) (-29) (-24) (-29)
Capital losses, net
Shares and participating interests -6 - -6 -
Interest-bearing securities - -8 - -7
Total capital losses, net -6 -8 -6 -7
Total investment charges -41 -51 -41 -48
NOTE 15 Investment charges
Group Parent company
2010 2009 2010 2009
Operating costs for buildings and land -25 -29 -25 -10
Asset management chargesr -65 -68 -65 -68
Interest expense
Other interest expense 0 -2 0 -2
Total interest expense 0 -2 0 -2
(of which costs to Group companies) 0 (-1) 0 (-1)
Exchange losses, net - -388 - -388
Capital losses, net
Shares and participating interests - -1,009 - -1,003
Bonds and other interest-bearing securities - - - -
Total capital losses, net 0 -1,009 0 -1,003
Total investment charges -90 -1,496 -90 -1,471
NOTE 16 Unrealised losses on investment assets
Group Parent company
2010 2009 2010 2009
Property - -35 - -25
Shares and participating interests -48 - -48 -
Bonds and other interest-bearing securi-ties -470 -1 020 -470 -1 020
Derivatives - -174 - -174
Total -518 -1 229 -518 -1 219
NOTE 17 Other technical charges
Group Parent company
2010 2009 2010 2009
Amortisation of intangible assets - - - -
Total - - - -
NOTES
HANDELSBANKEN LIV ANNUAL REPORT 201030
NOTE 22 Intangible assets
Group Parent company
2010 2009 2010 2009
Cost of acquisition at beginning of year 3 2 3 2
Cost of acquisition of additional intangible assets 5 1 5 1
Cost of acquisition of sold intangible assets -2 - -2 -
Total cost 6 3 6 3
Accumulated amortisation at beginning of year -1 0 -1 0
Accumulated amortisation of sold intan-gible assets 1 - 1 -
Depreciation for the year -1 -1 -1 -1
Total depreciation -1 -1 -1 -1
Book value 5 2 5 2
Since 2007, development costs have been reported as an intangible asset.
NOTE 21 Unrealised losses on investment assets
Group Parent company
2010 2009 2010 2009
Shares and participating interests - - - -
Derivatives -15 -8 0 -
Interest-bearing securities -19 - -17 -
Total unrealised losses on investment assets -34 -8 -17 -
NOTE 23 Property
Fair valueCost of
acquisition
Cost of acquisition minus depreciation and amortisations
Tax assess-ment value
Book value, SEK ‘000/m2 Direct yield
Vacancy rate space
Group 2010
Office and commercial properties 1,260 1,183 1,045 838 35 5.36% 6%
Group 2009
Office and commercial properties 1,150 1,183 1,057 839 32 4.61% 4%
Direct yield as a percentage is calculated as the operating surplus in 2010 in relation to the market value as at 31 December 2010. The direct yield increased to 5.36 per cent (4.61). The property portfolio is situated in central Stockholm. Of the office and commercial properties totalling just over 35,000 m2, some 16 per cent of the space is used by Handelsbanken Liv. The remainder is used by other companies in the Handelsbanken Group (32 per cent) and by external tenants (52 per cent). Proper-ties in the insurance operations are valued annually at fair value with the assistance of external professional valuers. The valuation is performed by discounting the expected cash flows relating to the properties. The forecasts concerning expected cash flows are based on assumptions such as future rents, vacancy levels, operating and maintenance costs, yield requirement and interest. The assumptions are based on local analyses of comparable property purchases. All assumptions are in line with the assessments that
the market can be expected to make under the prevailing market situation. All proper-ties have been classified as operating properties. The property portfolio did not change during the year. Rental income is reported in note 9, Investment income, and operating expenses are reported in note 15, Investment charges.
In 2010, one of the properties was sold on an intragroup basis from the previously wholly-owned subsidiary Fastigheten Läkaren 9 KB to Handelsbanken Liv. The sale of the property was made at the subsidiary’s book value. However, the consolidated value of the property was not affected since the difference between book value and fair value was booked as a surplus value in the consolidated accounts. At the end of 2010, the parent company owned all the Group’s properties and the book value of the properties is the same in the parent company as in the consolidated accounts.
NOTES
31HANDELSBANKEN LIV ANNUAL REPORT 2010
NOTE 24 Shares and participating interests in Group companies
Specification of the parent company’s direct holdings of participating interests in subsidiaries
Company
Corporate identity number Domicile Number
Share of capital
2010 Cost of
acquisition
2009 Cost of
acquisition2010
Book value2009
Book value
Handelsbanken Life & Pension Ltd 453703 Dublin 45,000,000 100% 465 465 465 465
Svenska RKA International Insurance Services AB 556324-2964 Stockholm 500 100% 0 0 1 1
Kvarteret Läkaren Fastighetsförvaltning AB 556579-4418 Stockholm - 100% - 165 - 100
Fastighets AB Malmarna 556115-8162 Stockholm - 100% - 46 - 21
Fastigheten Läkaren 9 KB 969687-5500 Stockholm - 100% - 804 - 804
Fastigheten Rännilen 15 KB 969687-1038 Stockholm - 100% - 0 - 0
SHB Liv Forsikringsaktieselskab 20 59 49 42 Copenhagen 251 100% 101 101 54 54
566 1 581 520 1 445
Opening book value 1 Jan 2010 1,445
Disposal of shares in Kvarteret Läkaren Fastighetsförvaltning AB -100
Disposal of shares in Fastighets AB Malmarna -21
Disposal of shares in Fastigheten Läkaren 9 KB -804
Disposal of shares in Fastigheten Rännilen 15 KB 0
Closing book value 31 Dec 2010 520
The fair value of the parent company’s direct holdings of shares in subsidiaries corresponds to the book value.
NOTE 25 Shares and participating interests
Group Parent company
Fair value 2010 2009 2010 2009
Swedish shares and participating interests 961 1,303 961 1,303
Foreign shares and participating interests 1,140 1,563 1,137 1,560
Total 2,101 2,866 2,098 2,863
Of which unlisted shares and participating interests 1,278 1,246 1,278 1,246
Group Parent company
Cost of acquisition 2010 2009 2010 2009
Swedish shares and participating interests 830 1,062 830 1,062
Foreign shares and participating interests 1,203 1,539 1,201 1,536
Total 2,033 2,601 2,031 2,598
Of which unlisted shares and participating interests 1,251 1121 1,251 1121
NOTE 26 Bonds and other interest-bearing securities
Group Parent company
Fair value 2010 2009 2010 2009
Swedish government 7,023 8,236 6,853 8,067
Swedish mortgage institutions 5,272 8,296 5,272 8,296
Other Swedish issuers 2,500 3,512 2,319 3,332
Foreign governments 489 216 350 83
Other foreign issuers 1,160 1,869 1,136 1,827
Total 16,444 22,129 15,930 21,605
Of which unlisted - - - -
Group Parent company
Amortised cost 2010 2009 2010 2009
Swedish government 7,095 8,224 6,926 8,056
Swedish mortgage institutions 5,339 8,142 5,339 8,142
Other Swedish issuers 2,556 3,501 2,373 3,320
Foreign governments 481 220 337 83
Other foreign issuers 1,193 1,842 1,169 1,800
Total 16,664 21,929 16,144 21,401
Of which unlisted - - - -
Group Parent company
Book value 2010 2009 2010 2009
Book value exceeding nominal amount 674 1,156 666 1,145
Book value below nominal amount143 123 143 122
Interest rate adjustment periods as at 31 December
Group Parent company
Fair value 2010 2009 2010 2009
0–3 mths 1,062 2,816 572 2,559
3 mths–1 yr 662 311 638 227
1–5 yrs 10,731 295 10,731 112
5–10 yrs 2,518 12,788 2,518 12,788
More than 10 yrs 1,471 5,919 1,471 5,919
Total 16,444 22,129 15,930 21,605
NOTES
HANDELSBANKEN LIV ANNUAL REPORT 201032
NOTE 31 Liquid funds
Group Parent company
2010 2009 2010 2009
Funds in accounts with Group companies 5,028 4,367 4,929 4,301
Other liquid funds 21 43 20 12
Total 5,049 4,410 4,949 4,313
NOTE 32 Prepaid commissions
Group Parent company
2010 2009 2010 2009
Opening balance 0 0 0 0
Change due to sale of subsidiary - - - -
Capitalisation for the year 0 0 0 0
Depreciation for the year - - - -
Closing balance 0 0 0 0
NOTE 33 Provision for life insurance
Group Parent company
2010 2009 2010 2009
Opening balance 22,888 22,740 22,887 22,740
Incoming payments 2,285 2,480 2,285 2,480
Outgoing payments -7,584 -2,331 -7,584 -2,331
Allocated yield 639 11 639 11
Other changes -1,329 -951 -1,328 -952
Change in conditional bonus 259 939 259 939
Closing balance 17,158 22,888 17,158 22,887
Liabilities related to insurance with a guaranteed rate of interest are calculated for each policy as the higher of the insurance capital and amortised cost.
Provisions for life insurance for statutory purposes, which are based on the market value defined by the Swedish Financial Supervisory Authority, were SEK 18,568 million (24,616) in the parent company and in the Group.
NOTE 34 Provision for claims outstanding
Group and Parent company
Notified
claims
Non-established
claims
Provi-sion for
damage, life and
sickness annuities
Total 2010
Total 2009
Opening balance 105 337 291 733 839
Year’s change -14 -123 -57 -194 -106
Closing balance 91 214 234 539 733
NOTE 30 Property, plant and equipment
Group Parent company
2010 2009 2010 2009
Opening cost of acquisition 102 92 100 91
Cost of acquisition of new assets 2 4 2 3
Cost of acquisition of assets sold during the year -78 -2 -76 -2
Exchange rate differences 0 8 0 8
Total cost 26 102 26 100
Depreciation for the year -1 -47 -1 -47
Accumulated depreciation according to plan -99 -50 -98 -49
Accumulated depreciation of assets sold during the year 77 2 76 2
Exchange rate differences 0 -4 0 -4
Total depreciation -23 -99 -23 -98
Book value 3 3 3 2
NOTE 28 Receivables referring to direct insurance operations
Group Parent company
2010 2009 2010 2009
Receivables from policyholders 0 8 0 7
Total 0 8 0 7
NOTE 29 Other receivables
Group Parent company
2010 2009 2010 2009
Claim on Group companies 2 1 2 7
Other receivables 214 334 184 304
Total 216 335 186 311
NOTE 27 Derivative instruments with positive values
Group Parent company
Fair value 2010 2009 2010 2009
Equity index options 0 - 0 -
Equity index futures 0 - 0 -
Interest rate swaps - 17 - 17
Interest swaptions - 0 - 0
Interest rate futures 0 10 0 10
Currency forwards 44 13 39 11
Total 44 40 39 38
Of which cleared 1 10 1 10
Group Parent company
Nominal value 2010 2009 2010 2009
Equity index options 5 - 5 -
Equity index futures 8 - 8 -
Interest rate swaps - 1,000 - 1,000
Interest swaptions - 6,320 - 6,320
Interest rate futures 190 892 190 892
Currency forwards 1,548 1,011 1,403 874
Total 1,751 9,223 1,606 9,086
Of which cleared 203 892 203 892
NOTES
33HANDELSBANKEN LIV ANNUAL REPORT 2010
NOTE 38 Derivative instruments with negative values
Group Parent company
Fair value 2010 2009 2010 2009
Equity index options 0 - 0 -
Equity index futures 0 - 0 -
Interest rate swaps - 5 - 5
Interest rate futures 0 6 0 6
Currency forwards 3 - 3 -
Total 3 11 3 11
Of which cleared 0 6 0 6
Group Parent company
Nominal value 2010 2009 2010 2009
Equity index options 2 - 2 -
Equity index futures 10 - 10 -
Interest rate swaps - 200 - 200
Interest rate futures 48 1,146 48 1,146
Currency forwards 249 - 249 -
Total 309 1,346 309 1,346
Of which cleared 60 1,146 60 1,146
NOTE 35 Conditional bonus
Group Parent company
2010 2009 2010 2009
Opening balance 2,598 3,537 2,598 3,537
Year’s change -259 -939 -259 -939
Closing balance 2,339 2,598 2,339 2,598
Conditional bonus for statutory purposes, which is based on the market value defined by the Swedish Financial Supervisory Authority, was SEK 1,552 million (1,643) in the parent company and in the Group.
NOTE 36 Unit-linked commitments
Group Parent company
2010 2009 2010 2009
Opening balance 41,942 26,909 27,242 19,077
Commitments sold during the year - - - -
Incoming payments 12,942 8,038 8,862 3,502
Outgoing payments -4,312 -2,082 -2,402 -1,444
Change in value including dividends 5,867 9,201 3,605 6,397
Other changes -833 -124 -363 -290
Closing balance 55,606 41,942 36,944 27,242
Of which maturing within twelve months 5,717 3,245 3,257 2,062
NOTE 37 Taxes
Group Parent company
2010 2009 2010 2009
Tax claims 2 69 3 69
Total 2 69 3 69
Provision for income tax - - - -
Total - - - -
Tax expenses recognised in income statement
Group Parent company
2010 2009 2010 2009
Tax expense for the year -50 -71 -44 -68
Adjustment of tax relating to previous years 1 -6 2 -10
Deferred tax, change in temporary differences - - - -
Total -49 -77 -42 -78
Group Parent company
Disclosure concerning yield tax 2010 2009 2010 2009
Yield tax -290 -313 -290 -313
Yield tax levied 290 313 290 313
Total 0 0 0 0
Handelsbanken Liv (parent company) is mainly taxed according to the Act on yield tax on pension funds. The tax base is the market value of the assets at the beginning of the tax year.
NOTE 40 Other accrued expenses and deferred income
Group Parent company
2010 2009 2010 2009
Accrued operating expenses 24 9 23 8
Accrued commission expenses 2 2 0 0
Accrued interest expenses 6 4 6 4
Other accrued expenses and deferred income 77 49 77 49
Total 109 64 106 61
NOTE 39 Other liabilities
Group Parent company
2010 2009 2010 2009
Received unsettled premiums 4 13 5 13
Liability to Group companies 151 141 151 448
Other liabilities 162 281 148 132
Total 317 435 304 593
NOTES
HANDELSBANKEN LIV ANNUAL REPORT 201034
RECOMMENDED APPROPRIATION OF PROFITS
Recommended appropriation of profits
The following amount is available in the parent company for distribution by the annual general meeting:
Retained earnings SEK 3,359,863,889Profit for the year SEK +163,165,186
SEK 3,523,029,075
The board and chief executive propose that the entire amount at the disposal of the annual general meeting – SEK 3,523,029,075 – be carried forward to the next year.
STOCKHOLM, 22 March 2011
Håkan SandbergChairman
Mats Arvidsson
Göran HolgersonChief executive
Anna HjelmbergEmployee representative
Our audit report was submitted on 22 March 2011.KPMG AB
Peter ZellAuthorised public accountant
35HANDELSBANKEN LIV ANNUAL REPORT 2010
AUDIT REPORT
Audit reportTo the Annual General Meeting of Handelsbanken Liv Försäkrings AB, corporate identity number 516401-8284
STOCKHOLM, 22 MARCH 2011KPMG AB
Peter ZellAuthorised public accountant
We have audited the annual accounts, the accounting records and the administration of the board of directors and the chief executive of Handelsbanken Liv Försäkrings AB for the year 2010. These accounts and the administration of the company and the application of the Swedish Annual Accounts Act for Insurance Companies when preparing the annual accounts and the consolidated accounts are the responsibility of the board of directors and the chief executive. Our responsibility is to express an opinion on the annual accounts, the consolidated accounts and the administration based on our audit.
We conducted our audit in accordance with generally accepted auditing standards in Sweden. Those standards require that we plan and perform the audit to obtain reasonable assurance that the annual accounts and the consolidated accounts are free of mate-rial misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the accounts. An audit also includes assessing the accounting principles used and their application by the board of directors and the chief executive and assessing significant estimates made by the board of directors and the chief executive when preparing the annual accounts and con-solidated accounts as well as evaluating the overall presentation of information in the annual accounts and the consolidated accounts. As a basis for our opinion concerning discharge from liability, we examined significant decisions, actions taken and circumstances of the company in order to be able to determine the liability, if any, to the company of any board member or the chief executive. We also examined whether any board member or the chief executive has, in any other way, acted in contravention of the Swedish Insurance Business Act, the Swedish Annual Accounts Act for Insurance Companies or the Articles of Association. We believe that our audit provides a reasonable basis for our opinions set out below.
The annual accounts and the consolidated accounts have been prepared in accordance with the Swedish Annual Accounts Act for Insurance Companies and thereby give a true and fair view of the company’s and the Group’s financial position and results of opera-tions in accordance with generally accepted auditing standards in Sweden. The statutory administration report is consistent with the other parts of the annual accounts and the consolidated accounts.
We recommend to the general meeting of shareholders that the income statement and balance sheet of the parent company and the Group be adopted, that the profit of the parent company be dealt with in accordance with the proposal in the administration report and that the members of the board of directors and the chief executive be discharged from liability for the financial year.
HANDELSBANKEN LIV ANNUAL REPORT 201036
BOARD AND MANAGEMENT
Management
Board
HÅKAN SANDBERG, year of birth 1948ChairmanExecutive vice president of HandelsbankenMember since 2006
MATS ARVIDSSON, year of birth 1948Group actuary at HandelsbankenMember since 2011
GÖRAN HOLGERSON, year of birth 1960Chief executive of Handelsbanken LivMember since 2011
ANNA HJELMBERG, year of birth 1969Employee representativeMember since 2007
CHIEF ACTUARY
ANETTE MORS-DAHLSTRÖM, year of birth 1967 Chief actuary
GÖRAN HOLGERSON, year of birth 1960Chief executive of Handelsbanken Liv
YLVA DAHLQUIST, year of birth 1955Head of Personnel
INGEMAR TEDHAMRE, year of birth 1959Chief Legal Counsel
JAN LARSSON, year of birth 1960 Head of Regional Banking OperationsExecutive vice president of Handelsbanken Liv
HELENA WESTIN, year of birth 1965Head of Accounting and Control
LISE-LOTTE JAKOBSSON, year of birth 1963Head of Administration
ANETTE MORS-DAHLSTRÖM, year of birth 1967Chief actuary
GUNNAR LUNDGREN, year of birth 1961Bank vice president
37HANDELSBANKEN LIV ANNUAL REPORT 2010
GLOSSARY
Glossary
AVAILABLE SOLVENCY MARGIN
Consists of shareholders’ equity, untaxed reserves and subordi-nated debentures. When calculating the available solvency mar-gin, the provision for deferred tax is reversed.
GUARANTEED CAPITAL
Guaranteed capital is part of the insurance assets in insurance policies with a guaranteed rate of interest. This capital grows by the guaranteed rate of interest and with premium payments. Fees and taxes and claims incurred are deducted from this.
GUARANTEED RATE OF INTEREST
The interest rate (before deduction for fees and taxes) used for calculating the increase in the guaranteed capital in an insurance policy with a guaranteed rate of interest.
MANAGEMENT EXPENSE RATIO
Operating expenses for administration, purchases and claims management in relation to the average value of assets under management.
PROFIT-DISTRIBUTING
In a profit-distributing company, the shareholders bear the re-sponsibility for the risk capital and it is permitted to distribute profits. In a mutually operated life insurance company, the poli-cyholders are responsible for most of the risk capital and profit distribution is not permitted.
PROVISIONS FOR CLAIMS OUTSTANDING
The estimated value of incurred insurance claims that have not yet been paid.
PROVISIONS FOR LIFE INSURANCE
The value of future guaranteed insurance benefits (pension amounts and other guaranteed disbursements) minus the value of future agreed premium payments.
SOLVENCY RATIO
The solvency ratio is a measure of the company’s equity in relation to the current statutory requirements regarding sol-vency capital. A solvency ratio of 1 means that the company meets these requirements. The ratio for a demutualised, profit- distributing life insurance company cannot be compared with the ratio for a mutual life insurance company. The solvency ratio is the available solvency margin divided by the required solvency margin. The available solvency margin is mainly shareholders’ equity in the company and any subordinated debentures. The required solvency margin is primarily the sum of 4 per cent of the value of guaranteed commitments plus 1 per cent of the conditional bonus plus 0.1–0.3 per cent of mortality risks. The solvency ratio must be at least 1.
TOTAL YIELD
The sum of changes in value and return on investments managed for savers with a guaranteed rate of interest. The yield is calcu-lated after deduction of fees related to the asset management.
www.handelsbanken.se/forsakring +46 (0)8-701 71 00 Box 1325 SE-111 83 Stockholm
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