La Reforma del Sistema de Salud en Brasil

Quarterly performance

Total Total Change

SEK m 2002:4 2002:3 2002:2 2002:1 2002 2001 %

Net interest income – 21 7 1 – 4 – 17 15

Commission, net 91 78 96 87 352 171 106

Net result on financial operations 35 – 24 – 76 9 – 56 – 18 – 211

Other income – 26 – 39 3 25 – 37 8

Total income 79 22 24 117 242 176 38

Net internal remuneration

deducted from income 51 54 65 66 236 259 – 9

Total expenses – 99 – 88 – 106 – 108 – 401 – 110 265

Profit/loss before loan losses – 20 – 66 – 82 9 – 159 66 Loan losses incl. change in value

of repossessed property

Operating profit/loss – 20 – 66 – 82 9 – 159 66

Return on equity, % — — — 3.5 — 15.6

Review of business areas – Handelsbanken Pension and Insurance

Balance sheet

31 December

Change

SEK m 2002 2001 %

Lending to credit institutions 4 016 — — Lending to the general public 0 177 – 100

Bonds 13 561 — —

Other assets 16 053 21 754 – 26

Total assets 33 630 21 931 53 Liabilities to credit institutions 0 1 – 100 Deposits and funding from

the general public — 1 148 – 100

Issued securities — — —

Other liabilities 32 880 20 450 61

Shareholders’ equity 750 332 126

Total liabilities and

shareholders’ equity 33 630 21 931 53

The foreign exchange risk was also removed. On 1 October, Handelsbanken Liv purchased Arla’s property located at Torsgatan 14 in Stockholm. At the same time, a ten-year rental contract was entered into with the seller.

In demutualised companies, there is no collective con- solidation. Instead, the company’s customers are allocated their part of the total return each month when calculating the insurance capital. If the insurance capital does not attain the guaranteed value of the insurance, Handels- banken Liv contributes the difference. The guaranteed rate for new insurance policies was 3%. The corresponding average rate for all insurance policies was 4.4%.

In connection with the demutualisation of the company, Handelsbanken injected new capital of SEK 1.1bn. Share- holders’ equity in Handelsbanken Liv was SEK 1 399m. This should be related to the required solvency margin of SEK 1 109m, which is mainly based on the technical provisions. The solvency ratio was thus 1.26.

Successful product development

In the late summer, Handelsbanken Liv launched its first new products as a demutualised company. Garanti- kapitalspar, which is endowment insurance, is packaged as three different product offerings which are specially adapted for different types of insurance needs. They are

Savings, Investments and Inheritance & Gift. This product was well received by the market. Garantikapitalspar is a secure type of savings with the opportunity for high yield.

In international endowment insurance, Handelsbanken Liv started co-operating with Euroben Life and Pension Ltd, an associated company of SPP. This resulted in a new product called Portfolio Bond, which is endowment insurance with an individually selected equity portfolio. Handelsbanken Liv also developed an insurance product aimed at private individuals with assets tied up in real estate. It is a combination of a loan and capital annuity which offers the customer increased security and liquidity, and also greater opportunities for high yield.

The benefits of demutualisation

The year 2002 was Handelsbanken Liv’s first year as a demutualised company. During the year, the media increasingly focused on the differences between mutual and demutualised companies. The mutual companies reported significantly declining consolidation levels. This means that during the time mutual companies are building up their collective reserves, it will be difficult for them to give policy-holders a bonus rate which is on a par with the total return. This is not a problem at Handelsbanken Liv. There, customers receive their part of the total return directly when the market recovers.

The benefits of demutualisation can be summarised as: security, freedom and fairness.

Security, because Handelsbanken Liv is responsible for the risk capital rather than the policy-holders, as in mutual companies.

Freedom, since private customers have the right to move their funds. They can either change the type of asset management within Handelsbanken Liv or move their funds to another company.

Fairness, since the insurance assets in Handelsbanken Liv are strictly individual.

SPP

Development

SPP Livförsäkring AB has been a wholly-owned subsidiary of Handelsbanken since March 2001. SPP is a mutual life insurance company, which implies that SPP’s results do not have an impact on the Handelsbanken Group’s results. The risk is borne by the policy-holders. The entire result goes back to the policy-holders in the form of bonuses and collective risk capital.

Premiums written fell by 6% and were SEK 11.9bn (12.6). This was mainly due to lower sales of insurance of a one-off nature for early retirement pensions. Tradi- tional life insurance represented SEK 8.8bn (9.6) and unit-linked insurance SEK 3.1bn (3.0). New policies measured in annual premiums were SEK 5.6bn (6.8).

Handelsbanken Liv, investment assets

31 Dec 30 June 31 Dec

Exposure % 2002 2002 2001

Equities 18 32 44

Fixed income assets 72 64 53

Property 7 3 3

Other 3 1 —

Total 100 100 100

Review of business areas – Handelsbanken Pension and Insurance

The total return on investments in the traditional life insurance operations was –10.4% (– 2.8). Insurance assets managed were SEK 80bn (87), of which SEK 73bn (81) was traditional life insurance and SEK 7bn (6) unit- linked. To counteract the effects of the declining stock market on the company’s position, the proportion of shares was reduced in the total investment assets. Exposure to the currency market was also removed.

SPP reinforced its available solvency margin in the third quarter when two perpetual subordinated loans totalling SEK 1.6bn were issued to Handelsbanken. SPP’s available solvency margin consisting of equity, subordinated loans, solvency reserves and surpluses in its subsidiary SPP Liv Fondförsäkring AB, was SEK 3 282m and exceeded the solvency requirement. The solvency ratio was also positively affected by changes in certain actuarial assump- tions. Overall, these measures mean that SPP’s available solvency margin exceeded the required solvency margin and that at the year-end, SPP’s solvency ratio was 1.13. SPP’s collective consolidation, i.e. the market value of the company’s assets in relation to guaranteed and non- guaranteed commitments to policy-holders, was 97% (108). On 1 July, SPP lowered its bonus rate from 3% to 1.5%.

New focus

In May, a new chief executive was appointed at SPP. Areas in focus at the company are customer satisfaction, profitability, integration and demutualisation. Within each of these areas, objectives have been set up with concrete action to be taken.

Demutualisation of SPP

The demutualisation of SPP is one of the most important tasks in the next few years. An organisation for this work was formed and the company started to pool experience and resources with Handelsbanken Liv. Demutualisation is planned for 2005.

Separation from Alecta

Alecta has previously administered several of SPP’s products but most of this ceased at the end of 2002.

The Internet portal called Benefit World was developed. This is intended for major companies’ pension manage- ment and is neutral from a competitive point of view.

Sales in the 50%-owned company Euroben Life and Pension, based in Ireland, accelerated during the year, partly because the company acquired customers such as Saab, Shell and Volvo and partly through the collaboration with Handelsbanken Liv.

Successes in occupational pensions

SPP retained its position on the occupational pension market. It was thus one of the leading companies in Sweden with the broadest range of products on the market. SPP’s Employer Plan can be adapted to the unique requirements of all companies. Companies which are customers of SPP can also offer their employees advantageous private pension solutions.

One of SPP’s most important customer groups is salaried employees of private companies. Their choice of company for their supplementary retirement pension (ITPK) is regarded as an important yardstick of a company’s strength in this customer group and it is also important for premium income. SPP continued to be the biggest life insurance company on the ITPK market, retaining its market share of 26% (26) and with approximately 29% (28) of premium volume.

CLOSER CO-OPERATION BETWEEN THE COMPANIES

Success in new pension selection

In 2002, state employees gained a new pension agreement called PA 03. For the first time, they could choose how to invest some of their pension. SPP’s market share for active selection was 8.5% and Handelsbanken Liv’s share was 9.7%. This gave the Group joint second place. The premiums for these selections will be paid to the companies in 2003.

A new integrated organisation

As a step towards the future integration, Handelsbanken Liv and SPP co-ordinated asset management by forming a joint organisation, whose task is to monitor and re- allocate the two companies’ investment assets. A board decision changed the investment strategy of the two companies to allow greater freedom of action in asset management. After the disappointments on stock markets during the spring, the companies evaluated their portfolios and decided to lower the financial risk. Starting in early summer, several measures were taken. The foreign fixed income portfolio was wound down, other foreign assets were hedged against Swedish kronor and overall equity exposure was substantially reduced.

The integration work will continue in 2003. On 1 March, Handelsbanken Liv and SPP are forming a joint organisation to reflect Handelsbanken’s decentralised organisation. The sales organisations are being merged and seven regional heads will be appointed. The regional heads will be responsible for all operations in their regions, which in geographic terms coincide with Handelsbanken’s regional banks. Two new units are being started with the purpose of supporting these regions: Business Support Private and Business Support Corporate. The companies’ development units and administrative functions will be merged. All central functions will be combined, except for Control and Accounting and the two companies’ actuaries.

SPP Liv, investment assets

31 Dec 30 June 31 Dec

Exposure % 2002 2002 2001

Equities 9 37 36

Fixed income assets 87 63 64

Property — — —

Other 4 0 0

Total 100 100 100

Card operations continued to develop well. The number of accounts increased by 14%, the number of purchases by 33% and purchase volume by 33%.