Länsförsäkringar Alliance profit Länsförsäkringar Alliance · Operating profit for the Länsförsäkringar Alliance’s non-life insurance operations amounted to SEK 1, 414

Länsförsäkringar AllianceInterim Review January–June 2016

STEN DUNÉR, PRESIDENT OF LÄNSFÖRSÄKRINGAR AB, THE ALLIANCE’S JOINTLY OWNED COMPANY.

Operating profit for the Länsförsäkringar Alliance’s non-life insurance operations amounted to SEK 1,414 M (3,752). Premiums earned after ceded reinsurance amounted to SEK 11,777 M (11,113).

The technical result in Länsförsäkringar Alliance´s non-life insurance operations amounted to SEK 828 M (1,185). The combined ratio amounted to 96 (92).

Investment income in Länsförsäkringar Alliance amounted to SEK 1,426 M (3,135).

Operating profit for the Bank Group amounted to SEK 697 M (559). Net interest income strengthened to SEK 1,615 M (1,411).

Operating profit for Länsförsäkringar Fondliv amounted to SEK 249 M (266). Premium income amounted to SEK 4,394 M (4,635). Commission income amounted to SEK 673 M (697).

Operating profit for Länsförsäkringar Liv amounted to SEK 401 M (3,038).

Operating loss for Länsförsäkringar Alliance´s non-life insurance operations amounted to SEK 1,691 M (loss: 277). Premiums earned after ceded reinsurance amounted to SEK 5,906 M (5,871).

The technical result in Länsförsäkringar Alliance´s non-life insurance operations amounted to SEK 472 M (356). The combined ratio amounted to 94 (97).

Investment income in Länsförsäkringar Alliance amounted to SEK 1,576 M (loss: 150). Solvency capi-tal increased SEK 1,918 M to SEK 53,525 M.

Operating profit for the Bank Group amounted to SEK 356 M (341). Net interest income amounted to SEK 826 M (789).


Operating profit for Länsförsäkringar Liv amounted to SEK 1,483 M (loss: 1,082).

Business volumes for the Länsförsäkringar Allian-ce continued to perform positively. Premium volu-mes in non-life insurance business increased 6% to

SEK 11.8 billion and we noted healthy growth in most areas, particularly in accident insurance and household and homeow-ner insurance. Agria continued to make a strong contribution to earnings. However, higher claims costs, primarily in fire and water-damage claims, and lower investment income meant that earnings were weaker year-on-year.

The strong growth and customer inflow continued in the banking operations and the earnings trend was also favourable resulting in the best ever quarterly earnings. We secured market growth of 10% in household lending during the period. Market unease, Brexit and continued low interest rates impacted the

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JANUARY–JUNE 2016 COMPARED WITH JANUARY–JUNE 2015

SECOND QUARTER OF 2016 COMPARED WITH FIRST QUARTER OF 2016

operations in several ways. This market unrest adversely affected the value growth of insurance capital for unit-linked insurance.

In May, the Swedish Financial Supervisory Authority appro-ved our application to use a partial internal model to calculate capital requirements in the joint operations in the Länsförsäk-ringar AB Group and Länsförsäkringar Liv. I am delighted that we are the first company in Scandinavia to have our model approved – a model that reflects our business logic and our ac-tual risk profile. Other gratifying achievements in the first half of the year include high rankings in reputation and customer satisfaction surveys. For our digital services, we also won the award of “Mobile Bank of the Year” at Mobilgalan and the Web Service Award for “Best Mobile Site and App.”

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The Länsförsäkringar Alliance consists of 23 local and customer-owned regional in-surance companies and the jointly owned Länsförsäkringar AB. Customers are pro-vided with a complete offering of banking, insurance and real-estate brokerage servi-ces through each regional insurance com-pany. The starting point is the local pre-sence and decision-making. Experience shows that local decision-making authori-ty combined with joint strength creates substantial added value for customers. Long-term respect for customers’ money is fundamental. There are no external sha-reholders; it is the customers’ money that is being managed. This approach charac-terises the entire business. The Länsför-säkringar Alliance has almost 3.7 million customers and about 5,900 employees.

The Länsförsäkringar Alliance is not a

Both the markets and the real economy appeared to stabilise during the quarter following a shaky start to the year. Howe-ver, the calm was broken by the result of the UK’s referendum on whether to leave the EU. The equities, interest and curren-cy markets were initially highly volatile due to the heightened uncertainty regar-ding the economic climate, mainly in the UK and the eurozone. Expectations regar-ding imminent interest-rate rises, parti-cularly on the part of the Federal Reserve, were lowered again due to the market tur-bulence in the wake of the Brexit result.

The effect of Brexit on the US econo-my will almost exclusively be dependent on the performance of the financial mar-

1) Pertains to the company’s covered bonds

Group in the legal sense of the term. Most of the non-life insurance business within the Länsförsäkringar Alliance is under-written in the 23 customer-owned regional insurance companies. The business conducted by Länsförsäkringar AB’s non-life insu-rance group comprises health insurances, animal insurance as well as cargo insuran-ce and some liability, property and motor hull insurance. The Länsförsäkringar AB Group also manages the Länsförsäkringar Alliance s joint reinsurance cover and as-sumed international reinsurance.

LÄNSFÖRSÄKRINGAR ALLIANCE

RATING

MARKET COMMENTARY

The earnings from the Länsförsäkringar Alliance’s non-life insurance operations consist of the total earnings of the 23 regi-onal insurance companies and the Länsför-säkringar AB Group, excluding Länsförsäk-ringar Fondliv and Länsförsäkringar Bank Group. Länsförsäkringar Liv Försäkrings AB is operated in accordance with mutual prin-ciples and is not consolidated in Länsför-säkringar AB. Transactions between the regional insurance companies and the Läns-försäkringar AB Group have been eliminated.

3.7 million customers

23 local regional insurance companies

Länsförsäkringar AB

Länsförsäkringar Bank AB

Länsförsäkringar Sak Försäkrings AB

Länsförsäkringar Fondliv

Försäkrings AB

Länsförsäkringar Liv Försäkrings AB*

* The company is operated in accordance with mutual principles and is not consolidated in Länsförsäkringar AB.

Company Agency Long-term rating Short-term rating

Länsförsäkringar AB Standard & Poor’s A–/Stable –

Länsförsäkringar AB Moody’s A3/Stable –

Länsförsäkringar Bank Standard & Poor’s A/Stable A–1(K–1)

Länsförsäkringar Bank Moody’s A1/Stable P–1

Länsförsäkringar Hypotek1) Standard & Poor’s AAA/Stable –

Länsförsäkringar Hypotek1) Moody’s Aaa –

Länsförsäkringar Sak Standard & Poor’s A/Stable –

Länsförsäkringar Sak Moody’s A2/Stable –

kets. The direct impact should be limited since US exports to the UK and the euro-zone account for 0.4% and 1.6%, respecti-vely, of US GDP. The eurozone continued to recover on a broad front with both pri-vate and public consumption driving growth. However, uncertainty following the Brexit result is expected to hamper the rate of growth in the immediate future. In-flation remained low and future measures from the ECB are likely if market unrest persists.

The Swedish economy was largely un-changed compared with the first quarter. The economy continued to be driven mainly by domestic factors, including a strong construction sector. Turmoil in the financial markets relating to the UK refe-rendum on EU membership contributed to

a weakening of the SEK and reduced the risk of the Riksbank further expanding its stimulus measures. After a continued in-crease in the first months of the year, hou-singprice figures indicated a slightly sub-dued housing market and an expectant price trend, which may partly be the effect of the new laws on mortgage repayment requirements.

Global stock markets were essentially unchanged compared with the end of the first quarter. Long-term interest rates con-tinued to fall and, unlike the stock market, did not recover after the initial turmoil fol-lowing the Brexit results. Credit spreads for Swedish covered bonds declined during the second quarter and were lower than before the Brexit referendum.

2 LÄNSFÖRSÄKRINGAR ALLIANCE | INTERIM REVIEW JANUARY–JUNE 2016








RATING

MARKET COMMENTARY








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2 LÄNSFÖRSÄKRINGAR ALLIANCE | INTERIM REVIEW JANUARY–JUNE 2016 3 LÄNSFÖRSÄKRINGAR ALLIANCE | INTERIM REVIEW JANUARY–JUNE 2016

Financial overview

LÄNSFÖRSÄKRINGAR ALLIANCEQ 2

2016Q 1

2016Q 2

2015Jan-Jun

2016Jan-Jun

2015Full-year

2015

Total capital, SEK M 58,226 55,952 53,913 58,226 53,913 55,562

Non-life insurance

Solvency capital, SEK M 53,525 51,607 50,546 53,525 50,546 51,628

Solvency margin, % 223 217 222 223 222 222

Return on equity, % 5 –2 14 5 15 8

Premiums earned after ceded reinsurance, SEK M 5,906 5,871 5,642 11,777 11,113 22,705

Technical result, SEK M 472 356 787 828 1,185 2,700

Operating profit, SEK M 1,691 –277 118 1,414 3,752 4,365

Combined ratio 94 97 89 96 92 91

LÄNSFÖRSÄKRINGAR AB, GROUP1)

Q 2 2016

Q 1 2016

Q 2 2015

Jan-Jun 2016

Jan-Jun 2015

Full-year 2015

Operating profit, SEK M 578 537 358 1,115 845 2,155

Total assets, SEK M 406,036 392,523 383,287 406,036 383,287 384,595

Return on equity, % 11 9 6 10 8 11

Capital base for the financial conglomerate2) 3) – 36,222 – – – –

Necessary capital requirement for the financial conglomerate2) 3) – 27,551 – – – –

1) Excluding Länsförsäkringar Liv Försäkrings AB. The company is operated in accordance with mutual principles.

2) The finanicial conglomerate comprises Länsförsäkringar AB, all insurance companies in the Group, Länsförsäkringar Bank AB with subsidiaries and Länsförsäkringar Liv Försäkrings AB.

LÄNSFÖRSÄKRINGAR SAK, GROUP

Q 2 2016

Q 1 2016

Q 2 2015

Jan-Jun 2016

Jan-Jun 2015

Full-year 2015

Premiums earned after ceded reinsurance, SEK M 1,333 1,297 1,247 2,630 2,474 5,074

Technical result, SEK M 59 150 119 209 243 821

Operating profit, SEK M 146 172 155 318 326 908

LÄNSFÖRSÄKRINGAR BANK, GROUPQ 2

2016Q 1

2016Q 2

2015Jan-Jun

2016Jan-Jun

2015Full-year

2015

Deposits from the public, SEK M 87,602 84,494 78,258 87,602 78,258 83,925

Loans to the public, SEK M 213,029 205,977 191,225 213,029 191,225 201,964

Operating profit, SEK M 356 341 280 697 559 1,175


Tier 1 ratio Bank Group, % 26.4 26.2 25.9 26.4 25.9 26.6

Total capital ratio Bank Group, % 32.3 31.4 31.5 32.3 31.5 32.0

LÄNSFÖRSÄKRINGAR FONDLIV Q 2

2016Q 1

2016Q 2

2015Jan-Jun

2016Jan-Jun

2015Full-year

2015

Premium income (rolling 12-months), SEK M 8,404 8,488 8,593 8,404 8,593 8,645

Operating profit, SEK M 131 118 134 249 266 516

Managed assets, SEK M 102,972 100,410 102,251 102,972 102,251 102,807

Solvency ratio 3) – 1.44 – – – 1.414)

LÄNSFÖRSÄKRINGAR LIV, GROUPQ 2

2016Q 1

2016Q 2

2015Jan-Jun

2016Jan-Jun

2015Full-year

2015

Premium income after ceded reinsurance, SEK M 440 420 473 860 1,006 1,919

Profit, SEK M 1,483 –1,082 1,234 401 3,038 5,104

Managed assets, SEK M 116,244 115,026 117,286 116,244 117,286 114,952

Solvency ratio 3) – 1.79 – – – 1.824)

3) Calculations of capital requirements and own funds under new legislation for insurance companies, Solvency II, had not been completed on the date of publication of this interim review.

4) Opening balance 1 January 2016 under Solvency II.

Report commented on the development January-June 2016 compared to the same period in 2015, unless otherwise stated.


The technical result from the Länsförsäkringar Alliance’s non-life insurance operations strengthened during the second quarter to SEK 828 M (1,185) and the combined ratio amounted to 96 (92).

Investment income strengthened in the second quarter to SEK 1,426 M (3,135).

Solvency capital has risen SEK 1,897 M since year-end and amounted to SEK 53,525 M.

Non-life insurance

NON-LIFE INSURANCE, LÄNSFÖRSÄKRINGAR ALLIANCE

KEY FIGURES, SEK M Q 2

2016Q 1

2016Q 2

2015Jan-Jun

2016Jan-Jun

2015Full-year

2015

Premiums earned after ceded reinsurance 5,906 5,871 5,642 11,777 11,112 22,705

Technical result 472 356 787 828 1,185 2,700

Bonuses and discounts –64 –72 –58 –137 –117 –1,263

Operating profit

1,576 –150 –637 1,426 3,135 3,794Investment income

1,691 –277 118 1,414 3,752 4,365

Solvency capital 53,525 51,607 50,546 53,525 50,546 51,628

Solvency margin, % 223 217 222 223 222 222

Expense ratio 20 19 20 19 19, 19

Claims ratio 75 79 70 77 73 72


EarningsOperating profit for the Länsförsäkringar Alliance’s non-life insurance operations strengthened during the quarter compared with the first quarter to SEK 1,414 M (3,752). Operating profit was adversely af-fected by the annuities operations due to falling real interest rates, which had a ne-gative effect of SEK 370 M during the year. Operating profit strengthened during the second quarter, mainly due to stronger investment income. The technical result amounted to SEK 828 M (1,185) and strengthened during the second quarter due to lower claims payments. Claims payments were lower in the second quarter than in the first, primarily due to water and engine-damage claims. The combined ratio for the first half of the year amounted to 96 (92). The increased combined ratio was the result of higher claims costs com-pared with the preceding year. The claims ratio was 77 (73). The expense ratio was unchanged at 19. Solvency capital strengthened SEK 1,897 M since year-end and amounted to SEK 53,525 M. The sol-vency margin amounted to 223% (222).

Business volumesPremiums earned rose 6% to SEK 11,777 M (11,113), attributable to both premium increases and portfolio increases. Volume increases in motor hull insurance amoun-ted to 6% and were primarily due to port-folio increases. Private insurance in-creased 7%, mainly in accident insurance and household and homeowner insurance. Agria reported a robust volume increase due to portfolio increases and previous premium increases. Extensive internal work on the Alliance’s health care busi-ness led to a solid volume increase and the business has balanced earnings. The com-mercial segment grew 4% driven by com-mercial property insurance and combined commercial insurance. The agriculture segment grew 5%.

Claims trendClaims payments after ceded reinsurance rose to SEK 8,921 M (8,029). Engine, fire and water-damage claims increased the most compared with the first six months of 2015. The rate of increase in claims costs in motor hull insurance was lower year-on-year, despite a strong increase in the portfolio.

Investment incomeAfter the financial markets had stabilised during the second quarter compared with the shaky start to the year, Brexit created turbulence in the financial markets again with sharply falling share prices and con-tinued falling long-term interest rates. De-spite market turbulence in the wake of Brexit, the Länsförsäkringar Alliance re-ported investment income of SEK 1,426 M (3,135) for the first six months of the year. Investment income was weak in the first quarter and strengthened during the se-cond quarter. Primarily property invest-ments generated high returns, as did fixed-income investments due to falling long-term interest rates, although equities reported a weaker performance.

ALLOCATION OF INVESTMENT ASSETS

Other20.3%

Equities37.0%

Property8.4%

Interest-bearing34.2%

Total investment assets amounted to SEK 88.8 billion on 30 June 2016.

%

80

90

100

110

Q 22016

Q 12016

Q 42015

Q 32015

Q 22015

COMBINED RATIO Rolling 12-months figures





Non-life insurance



2016Q 1

2016Q 2

2015Jan-Jun

2016Jan-Jun

2015Full-year

2015




Operating profit


1,691 –277 118 1,414 3,752 4,365


Solvency margin, % 223 217 222 223 222 222

Expense ratio 20 19 20 19 19, 19

Claims ratio 75 79 70 77 73 72







Other20.3%

Equities37.0%

Property8.4%



%

80

90

100

110

Q 22016

Q 12016

Q 42015

Q 32015

Q 22015






Non-life insurance



2016Q 1

2016Q 2

2015Jan-Jun

2016Jan-Jun

2015Full-year

2015




Operating profit


1,691 –277 118 1,414 3,752 4,365


Solvency margin, % 223 217 222 223 222 222

Expense ratio 20 19 20 19 19, 19

Claims ratio 75 79 70 77 73 72







Other20.3%

Equities37.0%

Property8.4%



%

80

90

100

110

Q 22016

Q 12016

Q 42015

Q 32015

Q 22015



Operating profit rose to SEK 697 M (559) and the return on equity strengthened to 10% (9). Net interest income rose to SEK 1,615 M (1,411).

Business volumes rose to SEK 422 billion (378). Deposits increased to SEK 88 billion (78) and lending increased to SEK 213 billion (191). The number of customers with Länsförsäkringar as their primary bank increased to 398,000 (365,000).

Länsförsäkringar won the awards of “Mobile Bank of the Year” and “Best Mobile Site and App” for its digital services.

Bank

LÄNSFÖRSÄKRINGAR BANK, GROUP KEY FIGURES, SEK M

Q 2 2016

Q 1 2016

Q 2 2015

Jan-Jun 2016

Jan-Jun 2015

Full-year 2015

Deposits from the public 87,602 84,494 78,258 87,602 78,258 83,925

Loans to the public 213,029 205,977 191,225 213,029 191,225 201,964

Operating profit 356 341 280 697 559 1,175


Cost/income ratio before loan losses 0.52 0.51 0.59 0.52 0.58 0.57

EarningsOperating profit rose 25% to SEK 697 M (559), due to higher net interest income and improved net gains from financial transactions. Return on equity strengthe-ned to 9.8% (8.8). Net interest income in-creased 14% to SEK 1,615 M (1,411), mainly attributable to higher volumes and improved margins.

Net gains from financial items amounted to SEK 81 M (62), as a result of unrealised changes in value of financial instruments with accompanying hedge accounting. Commission income declined 5% to SEK 731 M (767) due to lower income from the fund business. Net commission amounted

to an expense of SEK –241 M (–200). Operating expenses amounted to SEK 780 M (763), up 2%. The cost/income ratio be-fore loan losses improved to 0.52 (0.58). Loan losses amounted to SEK –32 M (0), net, corresponding to loan losses of 0.03% (0.00). The increase was attributable to the comparative period including the dissolu-tion of reserves of SEK 40 M. Impaired loans, gross, amounted to SEK 264 M (286), corresponding to a percentage of impaired loans, gross, of 0.12% (0.14).

Business volumes increased 12% to SEK 422 billion (378). Lending increased 11% to SEK 213 billion (191). Retail mort-gages in Länsförsäkringar Hypotek in-

creased 15% to SEK 158 billion (137). De-posits rose 12% to SEK 88 billion (78). Fund volumes increased to SEK 122 billion (121).

Funding and liquidityThe Bank Group has a low refinancing risk and the maturity structure is highly diversified. Debt securities in issue in-creased to a nominal SEK 146 billion (132), of which covered bonds amounted to SEK 115 billion (98), senior long-term funding to SEK 29 billion (29) and short-term funding to SEK 2 billion (2). The av-erage remaining term for the long-term funding was 3.5 years (3.4) on 30 June 2016. In April, Länsförsäkringar Bank is-sued a subordinated loan (LT2) in SEK for a nominal amount of SEK 1.5 billion, and Länsförsäkringar Hypotek issued a seven-year Euro benchmark covered bond for a nominal amount of EUR 500 M.

Covered bonds were issued during the period at a volume corresponding to a nomi-nal SEK 19 billion (17), repurchased cove-red bonds to a nominal SEK 3 billion (2) and matured covered bonds to a nominal SEK 8 billion (15). Länsförsäkringar Bank issued senior unsecured bonds in the no-minal amount of SEK 4 billion (11) during the period.

The liquidity reserve totalled SEK 45 billion (38), according to the Swedish Bankers’ Association’s definition. The li-quidity reserve is invested in securities with very high credit quality that are eli-gible for transactions with the Riksbank and, where appropriate, with the ECB. By utilising the liquidity reserve, contractual undertakings for more than two years can be met without needing to secure new fun-ding in the capital market.

The Group’s Liquidity Coverage Ratio (LCR), according to the Swedish Financial Supervisory Authority’s definition, amounted to 198% (191) at 30 June 2016.

Capital Adequacy, Banking operationsThe Common Equity Tier 1 capital ratio for consolidated situation*, the group en-compassed by the group rules for banking operations, was 20.3% (20.3). During the quarter, Länsförsäkringar Bank issued SEK 1.5 billion in subordinated loans and repurchased SEK 1.2 billion in a previous-ly outstanding subordinated loan. For further information see Länsförsäkringar Banks Interim Report.

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700

800

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June2015

June2014

June2013

June2012

SEK M %

4

5

6

7

8

9

10

11

12

Operating pro�t Return on equity

BANK OPERATING PROFIT AND RETURN ON EQUITY

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200

300

400

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June2015

June2014

June2013

June2012

SEK bn

Funds Other loans, bank and Wasa Kredit

Customer depositsAgricultural loans

Retail mortgages

BUSINESS VOLUMES


EarningsEarnings for Länsförsäkringar Fondliv strengthened during the second quarter but were slightly lower compared with the preceding year. Operating profit amounted to SEK 249 M (266) and the lower result was due to both a weaker trend in insuran-ce capital, and thus lower income, and hig-her operating expenses. Insurance capital increased to SEK 103 billion (102). The weaker trend in insurance capital was mainly the result of the weaker stock-mar-ket performance. Total premium income declined, based on lower volumes of capi-tal transferred, and amounted to SEK 4,394 M (4,635). Capital transferred amounted to SEK 552 M (755). The wea-ker trend in insurance capital contributed to income from the financial component of agreements declining 3% and amounting

to SEK 322 M (332). Premiums for insu-rance risk increased to SEK 83 M (74). Operating expenses increased year-on-year and amounted to SEK 483 M (443), primarily as a result of higher IT expenses due to increased investments in the deve-lopment of digital services.

One of Länsförsäkringar’s focus areas in sustainability is to combat global clima-te change. A decision was made to sell in-vestments in coal mining and energy com-panies that generate more than 50% of their sales from coal. Another positive fac-tor was that Länsförsäkringar became one of five Swedish unit-linked insurance companies to receive a green light in Sö-derberg & Partners’ evaluation of the sus-tainability work of 13 unit-linked insuran-ce companies.

Operating profit for Länsförsäkringar

Life-assurance and pension insuranceLänsförsäkringar offers life-assurance and pension solutions to corporate customers and private individuals. Fund management, Guarantee Management and risk insurance are offered through the subsidiary Länsförsäkringar Fondliv. No new policies are underwritten in Länsförsäkringar Liv, but the company manages traditional life assurance that was taken out before it was closed in 2011.

UNIT-LINKED INSURANCE AND TRADITIONAL LIFE ASSURANCE

0

25

50

75

100

125

June2016

June2015

June2014

June2013

June2012

SEK billion

MANAGED ASSETS UNIT-LINKED INSURANCE

LÄNSFÖRSÄKRINGAR FONDLIV AND LÄNSFÖRSÄKRINGAR LIV KEY FIGURES, SEK M

Q 2 2016

Q 1 2016

Q 2 2015

Jan-Jun 2016

Jan-Jun 2015

Full-year 2015


Premium income, net (rolling 12 months) 8,404 8,488 8,593 8,404 8,593 8,645

Operating profit 131 118 134 249 266 516

Managed assets 102,972 100,410 102,251 102,972 102,251 102,807

Solvency ratio 1) – 1.44 – – – 1.412)

Länsförsäkringar Liv

Operating profit 1,483 –1,082 1,234 401 3,038 5,104

Managed assets 116,244 115,026 117,286 116,244 117,286 114,952

Collective consolidation, New Trad, % 111 111 120 111 120 114

Collective consolidation, Old Trad, % 126 122 119 126 119 120

Solvency ratio 1) – 1.79 – – – 1.822)



Operating profit for Länsförsäkringar Fondliv amounted to SEK 249 M (266).

Länsförsäkringar was one of five Swedish unit-linked insurance companies to receive a green light in Söderberg & Partners’ evaluation of the sustainability work of 13 unit-linked insurance companies.

Operating profit for Länsförsäkringar Liv amounted to SEK 401 M (3,038), with the decline attributable to falling interest rates. The Swedish ten-year interest rate fell 1 percentage point during the period.

Liv amounted to SEK 401 M (3,038). The-se earnings were negatively affected by falling long-term market interest rates, which led to an increase in liabilities to policyholders. However, overall positive investment income offset this increase in liabilities. Changing conditions to New Trad had a positive effect of SEK 0.3 bil-lion on earnings. Operating expenses to-talled SEK 215 M (181). Claims paid amounted to SEK 3.0 billion (3.1). Invest-ment assets increased to SEK 118.8 billion (117.5).

Collective consolidation is calculated as the ratio between total capital and insu-rance capital. Collective consolidation was 111% (120) for New Trad and 126% (119) for Old Trad.

New legislation for insurance compa-nies, Solvency II, came into effect on 1 Ja-nuary 2016. The calculations of capital re-quirements and own funds on 30 June 2016 had not been completed on the date of publication of this interim review. In-formation on capital requirements and own funds will be provided on Länsför-säkringar’s website as soon as the calcula-tions have been completed.

In May, the Swedish Financial Super-visory Authority approved the application from Länsförsäkringar AB and its insu-rance subsidiaries to calculate the capital








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Q 2 2016

Q 1 2016

Q 2 2015

Jan-Jun 2016

Jan-Jun 2015

Full-year 2015




Managed assets 102,972 100,410 102,251 102,972 102,251 102,807

Solvency ratio 1) – 1.44 – – – 1.412)



Managed assets 116,244 115,026 117,286 116,244 117,286 114,952



Solvency ratio 1) – 1.79 – – – 1.822)

















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125

June2016

June2015

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SEK billion



Q 2 2016

Q 1 2016

Q 2 2015

Jan-Jun 2016

Jan-Jun 2015

Full-year 2015




Managed assets 102,972 100,410 102,251 102,972 102,251 102,807

Solvency ratio 1) – 1.44 – – – 1.412)



Managed assets 116,244 115,026 117,286 116,244 117,286 114,952



Solvency ratio 1) – 1.79 – – – 1.822)











requirement for insurance operations using a partial internal model. Capital re-quirements for other types of risk are cal-culated by applying the standard formula under the Solvency II regulations.

Länsförsäkringar Fondliv and Läns-försäkringar Liv’s capital situation is ex-pressed in accordance with Solvency II and is measured as a ratio of own funds in relation to risk-based capital requirement. The opening balance for Länsförsäkringar Fondliv’s solvency ratio as per 1 January 2016 amounted to 1.41. Länsförsäkringar Fondliv’s solvency ratio remained stable during the first quarter at 1.44 on 31 March 2016. The opening balance for Länsförsäkringar Liv’s solvency ratio as per 1 January 2016 amounted to 1.82. The solvency ratio on 31 March amounted to 1.79. Own funds strengthened by slightly more than SEK 1 billion during the second quarter of 2016, which will have a positive effect on the solvency ratio.

Fund and guarantee managementUnit-linked insuranceSome 42% of the 86 funds in the recom-mended fund range performed positively during the period and 58% negatively. Se-ven of the funds increased by more than 10%, while four funds declined more than 10%. Funds in commodities and certain emerging markets generated the highest returns. Emerging market funds focusing on Russia, Eastern Europe and Latin America recovered after a weak perfor-mance in 2015 and the higher price of oil. The commodities funds with the highest returns include BlackRock World Mining, East Capital Rysslandsfonden and Black-Rock Latin America.

Guarantee products Länsförsäkringar Fondliv conducts tradi-tional insurance through guarantee mana-gement.

Länsförsäkringar Liv conducts tradi-tional life assurance divided into four portfolios: New Trad, Old Trad, New World and Insured Pension.

Guarantee ManagementPremium income for guarantee manage-ment amounted to SEK 174 M (228), due to the SEK 63 M decline in capital transfe-rred. Managed assets amounted to SEK 2.4 billion (2.2). The total return was 0.39% (1.89). The lower return was attributable in its entirety to shareholdings. The portfolio has been relatively defensively exposed in 2016 and the equities portion of the portfo-lio was reduced by an additional approx-imately 1.5 percentage points in connec-tion with the UK referendum on EU membership.

New Trad New Trad offers customers the opportuni-ty to change the conditions of their exis-ting traditional insurance policies.

Managed assets in New Trad amoun-ted to SEK 16 billion (13). The return was a negative 0.1% (pos: 2.3), due to the weak trend in equities. The bonus rate amoun-ted to 6% (10). The bonus rate was lowe-red from 10% on 1 February 2016.

Old Trad The primary aim of investments in Old Trad is to ensure that the guaranteed bonus can be realised also in the event of a negative market trend. This is ensured by making most investments in long-term interest-bea-ring investments. The percentage of inte-rest-bearing assets amounted to 87%. The total return was 4.8% (neg: 0.7). Falling in-terest rates had a positive impact on inte-rest-bearing investments. The bonus rate for the quarter was unchanged at 2%.

New WorldNew World is a traditional insurance form in which capital is largely invested in equi-ties. Managed assets amounted to SEK 11 billion (13) and the return was a negative 1.6% (pos: 3.8).


Real-estate brokerageThrough Länsförsäkringar Fastighetsför-medling, Länsförsäkringar offers a total solution for reliable mortgage transactions: real-estate brokerage, banking and insurance services all in one company. Real-estate brokerage is also a key customer meeting for sales of mortgages and insurance.

Länsförsäkringar Fastighetsförmedling has 160 branches throughout Sweden. Strong growth has advanced Länsförsäk-ringar Fastighetsförmedling to the position of third largest brokerage in Sweden. The real-estate brokerage is an integrated part of the local regional insurance companies’ full-service offering. The aim is to offer more than just the brokerage and sale of residential properties. The operations are conducted in franchise form, whereby the regional insurance company acts as the franchiser for the local branch. This means that Länsförsäkringar Fastighetsförmed-ling differs from national estate-agent chains by always being locally based.

A total of 8,069 (5,954) single-family homes, 10,563 (9,513) tenant-owned apart-ments, 729 (1,331) vacation homes and 473 (396) agricultural properties were brokered in the period from July 2015 to June 2016. The value of these sales amounted to SEK 38.7 billion (29.9). During the period, sales of single-family homes and vacation ho-mes resulted in SEK 3.2 billion (2.5) in first-lien mortgages in Länsförsäkringar’s mortgage institution, divided between 1,755 (1,481) transactions.

NUMBER OF SINGLE-FAMILY HOMES AND VACATION HOMES SOLD

SkandiaMäklarna3,528

Husman & Hagberg 2,484

Bjurfors 2,204

Mäklarringen 1,349

ERA1,124

LänsförsäkringarFastighets-

förmedling 8,798

Other brokersand private 26,090

Mäklarhuset4,316

Fastighetsbyrån21,904

Svensk Fastighets-förmedling

12,720

0 5 10 15 20 25 30 35 40 45

ERA

Mäklarringen

Husman & Hagberg

Bjurfors

Mäklarhuset

SkandiaMäklarna

Länsförsäkringar Fastighetsförmedling

Svensk Fastighetsförmedling

Fastighetsbyrån

SEK bn

VALUE OF SALES OF SINGLE-FAMILY HOMES AND VACATION HOMES

MARKET SHARES 30 JUNE 2016

SkandiaMäklarna 4.2%

Husman & Hagberg 2.9%

Bjurfors 2.6%

Mäklarringen 1.6%

ERA1.3%


förmedling 10.4%

Other brokersand private 30.9%

Mäklarhuset5.1%

Fastighetsbyrån25.9%


15.1%

0

5

10

15

20

25

30

35

40

jul 2015–jun 2016

jul 2014–jun 2015

jul 2013–jun 2014

jul 2012–jun 2013

0

3

6

9

12

15

18

21

24

Total value, SEK bn

SEK bn 000s

Number of residential properties sold

NUMBER OF SINGLE-FAMILY HOMES, VACATION HOMES AND TENANT-OWNED APARTMENTS SOLD BY LÄNSFÖRSÄKRINGAR FASTIGHETSFÖRMEDLING

0

500

1,000

1,500

2,000

2,500

3,000

3,500

Jul 15–Jun 16

Jul 14–Jun 15

Jul 13–Jun 14

Jul 12–Jun 13

0

300

600

900

1,200

1,500

1,800

Loan total, SEK M Number of loans

Number of loansSEK M

SINGLE-FAMILY HOMES AND VACATION HOMES, SOLD BY LÄNSFÖRSÄKRINGAR FASTIGHETS - FÖRMEDLING WHERE LOANS WERE INVESTED IN LÄNSFÖRSÄKRINGAR HYPOTEK

Source: Värderingsdata








Bjurfors 2,204

Mäklarringen 1,349

ERA1,124


förmedling 8,798


Mäklarhuset4,316



12,720

0 5 10 15 20 25 30 35 40 45

ERA

Mäklarringen

Husman & Hagberg

Bjurfors

Mäklarhuset

SkandiaMäklarna



Fastighetsbyrån

SEK bn





Bjurfors 2.6%

Mäklarringen 1.6%

ERA1.3%


förmedling 10.4%


Mäklarhuset5.1%



15.1%

0

5

10

15

20

25

30

35

40

jul 2015–jun 2016

jul 2014–jun 2015

jul 2013–jun 2014

jul 2012–jun 2013

0

3

6

9

12

15

18

21

24

Total value, SEK bn

SEK bn 000s



0

500

1,000

1,500

2,000

2,500

3,000

3,500

Jul 15–Jun 16

Jul 14–Jun 15

Jul 13–Jun 14

Jul 12–Jun 13

0

300

600

900

1,200

1,500

1,800












Bjurfors 2,204

Mäklarringen 1,349

ERA1,124


förmedling 8,798


Mäklarhuset4,316



12,720

0 5 10 15 20 25 30 35 40 45

ERA

Mäklarringen

Husman & Hagberg

Bjurfors

Mäklarhuset

SkandiaMäklarna



Fastighetsbyrån

SEK bn





Bjurfors 2.6%

Mäklarringen 1.6%

ERA1.3%


förmedling 10.4%


Mäklarhuset5.1%



15.1%

0

5

10

15

20

25

30

35

40

jul 2015–jun 2016

jul 2014–jun 2015

jul 2013–jun 2014

jul 2012–jun 2013

0

3

6

9

12

15

18

21

24

Total value, SEK bn

SEK bn 000s



0

500

1,000

1,500

2,000

2,500

3,000

3,500

Jul 15–Jun 16

Jul 14–Jun 15

Jul 13–Jun 14

Jul 12–Jun 13

0

300

600

900

1,200

1,500

1,800






Financial statements

INCOME STATEMENT

SEK M Q 2

2016Q 1

2016Q 2

2015Jan-Jun

2016Jan-Jun

2015Full-year

2015


Investment income transferred from financial operations 102 144 143 245 247 507

Claims payments after ceded reinsurance –4,358 –4,563 –3,899 –8,921 –8,029 –16,192

Operating expenses –1,157 –1,079 –1,093 –2,236 –2,126 –4,281

Other technical revenue/expenses –20 –17 –6 –37 –18 –39

Technical result from non-life insurance operations before partner discounts 472 356 787 828 1,185 2,700


Technical result from non-life insurance operations after partner discounts 408 283 729 692 1,068 1,437

Total investment income 1,576 –150 –637 1,426 3,135 3,794

Investment income transferred to insurance operations –215 –337 168 –552 –247 –531

Other non-technical expenses –78 –73 –142 –151 –204 –334

OPERATING PROFIT 1,691 –277 118 1,414 3,752 4,365

On 30 December 2014, the annuity reserve was transferred from Länsförsäkringar Sak to the regional insurance companies. In conjunction with the portfolio transfer, real return bonds used for hedging the annuity portfolio, were transferred to the regional insurance companies. Part of the annuity reserve remains with Länsförsäkringar Sak. In this report, the discount effect is recognised in the same manner as it was previously recognised in Länsförsäkringar Sak, meaning as a claims payment. In the individual regional insurance companies, the discount effect was recognised as investment income transferred from financial operations.

BALANCE SHEET SEK M 30 Jun 2016 31 Dec 2015

ASSETS

Shares and participations 32,890 31,646

Bonds and other interest-bearing securities 30,397 29,596

Other investment assets 25,491 24,487

Total investment assets 88,778 85,729

Reinsurers’ portion of technical provisions 11,464 10,829

Receivables and other assets 10,994 10,617

Cash and bank balances 5,560 5,799

Prepaid expenses and accrued income 1,286 1,249

TOTAL ASSETS 118,082 114,224

EQUITY, PROVISIONS AND LIABILITIES

Equity 44,467 42,679

Technical provisions (before ceded reinsurance) 56,227 53,296

Other provisions and liabilities 14,734 15,630

Accrued expenses and deferred income 2,654 2,619

TOTAL EQUITY, PROVISIONS AND LIABILITIES 118,082 114,224

LÄNSFÖRSÄKRINGAR ALLIANCE NON-LIFE INSURANCE


LÄNSFÖRSÄKRINGAR AB, GROUP

INCOME STATEMENT

SEK MQ 2

2016Q 1

2016Q 2

2015Jan-Jun

2016Jan-Jun

2015Full-year

2015

Premiums earned before ceded reinsurance 1,630 1,788 1,562 3,419 3,303 6,775

Reinsurers’ portion of premiums earned –296 –351 –318 –647 –689 –1,583


Interest income 984 970 1,329 1,954 2,431 4,130

Interest expense –157 –181 –602 –337 –1,010 –1,124

Net interest income 827 789 727 1,617 1,421 3,006

Change in unit-linked insurance assets – policyholder bears the risk 1,345 –2,999 –3,614 –1,654 6,549 5,365

Dividends in unit-linked insurance assets – policyholder bears the risk – – – – – 8

Investment income, net 154 2 –33 156 83 –6

Commission income 634 617 663 1,251 1,302 2,595

Other operating income 565 517 577 1,082 1,049 2,104

Total operating income 4,859 364 –436 5,223 13,018 18,263

Claims payments before ceded reinsurance –1,201 –1,110 –947 –2,311 –2,016 –3,968

Reinsurers’ portion of claims payments 280 257 119 537 380 930

Claims payments after ceded reinsurance –921 –853 –828 –1,774 –1,636 –3,038

Change in life-assurance reserve 35 –115 36 –80 –80 –5

Change in unit-linked insurance liabilities – policyholder bears the risk –1,376 3,022 3,657 1,646 –6,574 –5,349

Commission expense –677 –640 –667 –1,317 –1,309 –2,663

Staff costs –535 –485 –498 –1,020 –968 –1,826

Other administration expenses –794 –737 –906 –1,531 –1,607 –3,220

Loan losses –12 –20 –0 –32 –0 –6

Total expenses –4,280 173 794 –4,107 –12,174 –16,108

Operating profit 578 537 358 1,115 845 2,155

Tax –49 –110 –94 –159 –187 –389

NET PROFIT FOR THE PERIOD 530 427 263 957 658 1,765

Earnings per share before and after dilution, SEK 51 41 25 93 64 171

STATEMENT OF COMPREHENSIVE INCOME

SEK MQ 2

2016Q 1

2016Q 2

2015Jan-Jun

2016Jan-Jun

2015Full-year

2015

Net profit for the period 530 427 263 957 658 1,765

Other comprehensive income

Items that have been transferred or can be transferred to profit for the period

Translation differences attributable to foreign operations –8 –20 6 –28 23 3

Cash-flow hedges –61 79 64 18 85 41

Change in fair value of available-for-sale financial assets 41 23 –125 65 –161 –195

Tax attributable to items that have been transferred or can be transferred to profit for the period 4 -23 13 –18 17 34

Total –23 60 –41 37 –36 –117

Items that cannot be transferred to profit for the period

Revaluation of owner-occupied property 115 5 187 119 200 330

Revaluation of defined-benefit pension plans – – – – – 2

Tax attributable to items that cannot be reversed to profit for the period –25 –1 –41 –26 –44 –73

Total 89 4 146 93 156 259

Total other comprehensive income for the period, net after tax 66 64 105 130 120 142

COMPREHENSIVE INCOME FOR THE PERIOD 596 491 368 1,087 778 1,907



INCOME STATEMENT

SEK MQ 2

2016Q 1

2016Q 2

2015Jan-Jun

2016Jan-Jun

2015Full-year

2015




Interest income 984 970 1,329 1,954 2,431 4,130















Staff costs –535 –485 –498 –1,020 –968 –1,826


Loan losses –12 –20 –0 –32 –0 –6

Total expenses –4,280 173 794 –4,107 –12,174 –16,108


Tax –49 –110 –94 –159 –187 –389




SEK MQ 2

2016Q 1

2016Q 2

2015Jan-Jun

2016Jan-Jun

2015Full-year

2015








Total –23 60 –41 37 –36 –117





Total 89 4 146 93 156 259





INCOME STATEMENT

SEK MQ 2

2016Q 1

2016Q 2

2015Jan-Jun

2016Jan-Jun

2015Full-year

2015




Interest income 984 970 1,329 1,954 2,431 4,130















Staff costs –535 –485 –498 –1,020 –968 –1,826


Loan losses –12 –20 –0 –32 –0 –6

Total expenses –4,280 173 794 –4,107 –12,174 –16,108


Tax –49 –110 –94 –159 –187 –389




SEK MQ 2

2016Q 1

2016Q 2

2015Jan-Jun

2016Jan-Jun

2015Full-year

2015








Total –23 60 –41 37 –36 –117





Total 89 4 146 93 156 259





STATEMENT OF FINANCIAL POSITION

SEK M 30 Jun 2016 31 Dec 2015

ASSETS

Goodwill 722 738

Other intangible assets 3,816 3,672

Deferred tax assets 30 29

Property and equipment 42 53

Owner-occupied property 2,648 2,545

Shares in Länsförsäkringar Liv Försäkrings AB 8 8

Shares and participations in associated companies 70 74

Reinsurers’ portion of technical reserves 11,480 10,845

Loans to the public 213,024 201,959

Unit-linked insurance assets– policyholder bears the risk 100,583 100,497

Shares and participations 1,646 1,832

Bonds and other interest-bearing securities 45,701 40,061

Treasury bills and other eligible bills 7,580 8,824

Derivatives 6,619 4,479

Change in value of hedge portfolios 1,051 815

Other receivables 6,638 3,678

Prepaid expenses and accrued income 2,766 3,111

Cash and cash equivalents 1,612 1,374

TOTAL ASSETS 406,036 384,595

SEK M 30 Jun 2016 31 Dec 2015

EQUITY AND LIABILITIES

Equity

Share capital 1,042 1,042

Other capital contributed 10,272 10,272

Additional tier 1 instruments 1,200 1,200

Reserves 783 653

Retained earnings including profit for the period 8,309 7,370

Total equity 21,607 20,538

Subordinated liabilities 2,593 2,300

Technical reserves 20,017 18,376

Provisions for life assurance – policyholder bears the risk 100,890 101,002

Deferred tax liabilities 1,112 1,139

Other provisions 196 257

Debt securities in issue 150,506 141,269

Deposits from the public 86,941 82,702

Due to credit institutions 7,535 2,954

Derivatives 2,402 2,455

Change in value of hedge portfolios 4,768 2,899

Other liabilities 2,963 3,955

Accrued expenses and deferred income 4,506 4,749

TOTAL EQUITY AND LIABILITIES 406,036 384,595


INCOME STATEMENT

SEK M Q 2

2016Q 1

2016Q 2

2015Jan-Jun

2016Jan-Jun

2015Full-year

2015

Premium income after ceded reinsurance 440 420 473 860 1,006 1,919

Investment income, net 2,596 1,115 –4,254 3,711 26 373

Claims payments –1,503 –1,459 –1,434 -2,962 –3,129 –5,959

Change in technical provisions 37 –975 6,574 -938 5,458 9,497

Operating expenses –103 –112 –70 -215 –181 –442

Technical result, life insurance operations 1,467 –1,011 1,289 456 3,180 5,388

Non-technical expenses 16 –71 –55 –55 –142 –284

Profit before tax 1,483 –1,082 1,234 401 3,038 5,104

Tax -18 0 3 -18 –3 –15

PROFIT FOR THE PERIOD 1,465 –1,082 1,237 383 3,035 5,089

Items that cannot be transferred to profit for the period – – – – – –2

COMPREHENSIVE INCOME FOR THE PERIOD 1,465 –1,082 1,237 383 3,035 5,087


ASSETS

Investment assets 118,792 115,356

Reinsurers’ portion of technical provisions 481 481

Receivables 2,522 1,378

Other assets 3,599 3,945

Prepaid expenses and accrued income 1,381 957

TOTAL ASSETS 126,775 122,117


Equity 21,262 21,402

Technical provisions 94,442 93,498

Provisions for other risks and expenses 327 137

Deposits from reinsurers 481 481

Liabilities 10,074 6,407

Accrued expenses and deferred income 189 192


LÄNSFÖRSÄKRINGAR LIV, GROUP


INCOME STATEMENT

SEK M Q 2

2016Q 1

2016Q 2

2015Jan-Jun

2016Jan-Jun

2015Full-year

2015



Claims payments –1,503 –1,459 –1,434 -2,962 –3,129 –5,959






Tax -18 0 3 -18 –3 –15





ASSETS






TOTAL ASSETS 126,775 122,117


Equity 21,262 21,402









INCOME STATEMENT

SEK M Q 2

2016Q 1

2016Q 2

2015Jan-Jun

2016Jan-Jun

2015Full-year

2015



Claims payments –1,503 –1,459 –1,434 -2,962 –3,129 –5,959






Tax -18 0 3 -18 –3 –15





ASSETS






TOTAL ASSETS 126,775 122,117


Equity 21,262 21,402








LF 0

66

82

utg

26

EN

G S

itru

s 2

07

38

1 2

01

6-0

7

FOR FURTHER INFORMATION, PLEASE CONTACT:

Sten Dunér, President, Länsförsäkringar AB

+46 (0)8-588 411 15, +46 (0)73-964 11 15,

[email protected]

Malin Rylander Leijon, CFO, Länsförsäkringar AB

+46 (0)8-588 408 64, +46 (0)73-964 08 64,

[email protected]

Fanny Wallér, Director of Corporate Communications, Länsförsäkringar AB

+46 (0)8-588 414 69, +46 (0)70-692 77 79,

[email protected]

Länsförsäkringar AB (publ),

Corporate Registration Number 556549-7020

Street address: Tegeluddsvägen 11-13,

Postal address: SE-106 50 Stockholm

Telephone: +46 (0)8-588 400 00

THIRD QUARTER:

Interim review, Länsförsäkringar Alliance ................................................25 October

Interim report, Länsförsäkringar AB .........................................................25 October

Interim report, Länsförsäkringar Bank ....................................................25 October

Interim report, Länsförsäkringar Hypotek ..............................................25 October

Financial calendar 2016

Documents

Länsförsäkringar Alliance profit Länsförsäkringar Alliance · Operating profit for the Länsförsäkringar Alliance’s non-life insurance operations amounted to SEK 1, 414