Storebrand ASA

OSE:STB

Earnings Call Transcript 2020-Q1

[Daniel Sundahl, IR Officer]

Good morning, ladies and gentlemen. Welcome to Storebrand's First Quarter Result Presentation. My name is Daniel Sundahl. I'm the Head of Investor Relations.In a slightly different format than usual, today's presentation will be held in English. As usual, CEO, Odd Arild Grefstad, will go through the most important developments in the quarter; followed by Lars Løddesøl, our CFO, who will dig deeper down into the numbers. The presentation can be followed either via webcast or, if you are preregistered, via phone. Let me remind you that at the end of the presentation, we will hold a Q&A session. [Operator Instructions]With that, I give the word to our CEO, Odd Arild Grefstad.

[Odd Arild Grefstad, Group Chief Executive Officer]

Thank you, Daniel, and good morning, everyone. First quarter 2020 is a very special quarter. We are all affected by the COVID-19 situation. And this also leads to a somewhat different presentation of Storebrand's first quarter results.Despite the economic turbulence, Storebrand reports very strong growth in the business. Premiums in Unit Linked grew 19% to above NOK 5 billion for the first time, due to a strong transfer balance both in Norway and Sweden as well as strong underlying growth in our business. Assets under management is quite flat in the first quarter but grew with 14% from last year. The group result is minus NOK 334 million, mainly due to credit spread widening in the company portfolios and strengthening of the disability reserves.And just to clarify some elements regarding the disability insurance coverage. In order to receive disability payments, you have to be declared permanent work disabled by a doctor and the Norwegian Labour and Welfare Administration, NAV. Disability payments provides a secure income for those who have permanently reduced earnings capacity due to illness or injury.Earlier experience from the financial crisis has shown increased unemployment rates, which in turn, has led to increased disability rates. Positive tax effects brings the result after tax up to a positive result of NOK 264 million. Lars will, of course, revert to both the reserve strengthening, the financial results and the tax effects later in the presentation.Finally, the regulatory solvency margin was 172% at the end of first quarter 2020. The ratio without transitional rules was calculated to 155%.The current situation caused by the COVID-19 disease is changing our society fundamentally. The common fight to slow down the spreading of the virus is putting our collective will, discipline and responsibility to the test. At Storebrand, our first priority has been to safeguard our employees and to do whatever we can to reduce the spread of the virus. Secondly, we have strengthened our dialogue with our customers and assured that we can help both our retail and corporate customers with all our resources. Storebrand has been fully operational with close-to-normal productivity during this crisis. This has been possible due to a very high level of digitalization in the business and the ability and agility of our employees in the group.Storebrand is financially solid. The liquidity is robust, and there is no refinancing needs in 2020. We are, of course, affected by the economic downturn, but it is satisfying to see that our risk management systems work very well also in this special situation.From a strong financial starting point, we are now facing increased uncertainty. We have continued working with our scenario-based forecasting for both business and capital. And I'm pleased to see that Storebrand's earnings and solvency position will be satisfying in all our scenarios. At the same time, we continue to grow our core operations in savings and insurance. And we actively look for new opportunities in form of partnerships and acquisitions.In the quarter, we have entered into a partnership with a fintech bank. We have also entered into an agreement with the largest houseowner association in Norway, Huseierenes Landsforening, for distribution of banking and insurance solutions for their members.Then let's move to capital allocation in the light of COVID-19. The Board of Storebrand ASA has decided to withdraw the proposed dividend for the financial year of 2019 for the Annual General Meeting. The Board has recognized the pronounced expectation from Norwegian FSA and EIOPA to suspend dividends until the great uncertainty about the economic development has been reduced. However, the Board maintains that the company's liquidity, solidity and reserve prognosis, stand-alone, support an ordinary dividend for 2019. The General -- Annual General Meeting will be held at 17th of June 2020. The Capital Markets Day, originally scheduled for 9th of June 2020 in London, will be postponed to the fourth quarter 2020.Just to remind you, we continue with our -- with full strength with our twofold strategy. We actively manage the balance sheet and risk in the guaranteed products that are in long-term runoff. In the quarter, solvency is 172%. We also maintain strong cost control and are committed to flat nominal costs. We have taken preventive measures to build a robust plan for various economic scenarios and have already implemented cost reductions. And I am confident that we will meet nominal flat costs adjusted for acquired new business, performance fees and currency effects in 2020.On the other side, we are well positioned for capital-light growth within savings through our leading position in occupational pension in Norway and Sweden as well as in the individual markets for savings and insurance and our asset management.We recognize strong growth within Unit Linked, both measured by premiums and reserves. We have underlying strong growth, both in Norway and Sweden, and I will revert to that shortly.Asset Management solidifies its position as a leading Norwegian asset manager. Despite the market turmoil, asset under management decreased only by NOK 2 billion to NOK 829 billion in the quarter and increased with 14% from the same quarter last year. Strong sales from Cubera, our private equity arm as well as currency effects explains the positive development.Overall growth in the insurance premiums is 13% on annual basis, well above the Storebrand's target of 5%. This is mainly due to increased sales of the P&C insurance as well as health insurance.The growth in our core pension premiums have been very strong in the quarter. I think this slide is a very good illustration of the stickiness of our corporate-defined benefit pension, both in Norway and Sweden, also in this turbulent quarter. It also illustrates the strong competitive position, both in Norway and Sweden, leading to a net inflow of more than NOK 3 billion for the quarter. The slide also reflects the strong underlying shift in the business mix with much higher premiums inflow compared to claims and pension payouts in the growing Unit Linked products. As you see, NOK 7 billion in the quarter in net flow positive for Unit Linked. It also shows that the guaranteed products are in long-term runoff, where claims typically is higher than premium income.And with that overview, I will like to give the word to our CFO, Lars Løddesøl.

[Lars Aasulv Løddesøl, Group Chief Financial Officer]

Thank you, Odd Arild, and good morning to you all. The group result before amortization and tax is minus NOK 334 million, more than NOK 1 billion below plan. Most of the deviation can be attributed to 2 factors: reserve strengthening in light of the macroeconomic situation in Norway; and weak financial returns in almost all portfolios following the financial turmoil in the end of the quarter.That said, underlying business progressed well, with new customers and growth in targeted areas. Around NOK 350 million of the result shortfall can be attributed to weak insurance results and reserve strengthening, and around NOK 700 million can be attributed to weaker-than-normalized financial returns. It is important to notice, however, that the weak financial results are primarily related to mark-to-market losses in the almost NOK 50 billion of different company portfolios. Almost all the investments are in high-quality credit bonds, and the mark-to-market losses lead to higher yields going forward. Furthermore, a significant part of the losses has already been recuperated so far in the second quarter. Due to strong tax gains of NOK 717 million in the quarter, earnings per share ended at NOK 0.82. I will revert to the tax issue shortly.Storebrand has one of the most stable regulatory solvency positions amongst our peers in Europe. Regulatory solvency remains strong at 172%. And solvency without transitional capital is 155%, even after the significant interest rate fall, equity market fall and credit spread widening since the beginning of the year. This confirms the robustness of the business even in turbulent financial markets; more on this shortly. The strong customer buffers built over the last several years are mostly intact despite the financial turmoil.We do not usually comment on our financing and cash liquidity position. In these challenging times, I would like to emphasize a couple of points. At the holding company level, we have NOK 3.95 billion in cash reserves to meet a total of NOK 800 million in maturities this year. All of our subsidiaries are fully financed with no material maturities this year or in the next 12 months, which means that we have a strong and liquid cash position and no refinancing needs in the group in 2020. More details on this is included in the appendix to this presentation.We show an expanded movement analysis this time as the market swings have led to significant movements up and down. The regulatory solvency of Storebrand is robust considering the large market swings we have seen. This is partly due to our risk management and partly due to the countercyclical measures in the Solvency II framework. The solvency drop of 19 percentage points on the left-hand side here, due to the falling interest rates, is countered by the 17 percentage points in transitionals on the right-hand side of this picture. The 20 percentage points fall caused by credit spread widening is matched by 19 percentage points in volatility adjustments, and the 13 percentage points fall from equity markets is partly offset by reduced equity stress. All these contracyclical factors are part of the standard model under the Solvency II framework.The other elements in the movement include a reduction in the UFR as of January 1, risk management in terms of reduced equity exposure and reduced capital requirements in the bank. The first quarter earnings are positive. And finally, we set aside capital for normal dividends for 2020.This is our standard picture on solvency margin and sensitivities. The regulatory solvency remains stable in all scenarios. We have included an additional sensitivity on rating migration this time. The sensitivity is based on 2 scenarios where 25% or 50%, respectively, of the bonds we hold are notched down 1 rating grade. The financial crisis in 2008, 2009 was somewhere in-between these 2 scenarios. And as you can see, the impact on the solvency of the group is limited even with such a big rating migration.Fee and administration income is up 11% over the first quarter 2019. Adjusted for currency movements, primarily the strengthening of the Swedish kronor, the growth is 7%. The insurance result, i.e., the premiums less claims, ended at minus NOK 71 million after significant reserve strengthening. The operational cost is impacted by a stronger Swedish kronor and acquired businesses but is on track to deliver on published cost ambitions.The tax gain of NOK 717 million is comprised by 3 main factors. The negative operating result gives a positive effect of NOK 113 million. Our Swedish loans and the SPP currency hedge gives a loss in the first quarter due to a 13% strengthening of the Swedish kronor to Norwegian kroner in the quarter. This mark-to-market loss is tax deductible under Norwegian tax rules, whilst the increase in the value of SPP is not taxed. As the Swedish-Norwegian kroner has moved the other way so far in the second quarter, we expect the effect to be partly reversed in the coming quarter. The effect was NOK 253 million in these results. Finally, we have booked a tax gain of NOK 356 million related to the tax receipt for 2018. As you may recall, the tax authorities and Storebrand have a difference of opinion on how to interpret the transition rules in 2018. The tax gain we now book is a result of new information and interpretation of the transition rules, and we have based the estimate on the tax authority interpretation. If we went forward with our interpretation, the possible tax gain for this -- from these changes will increase by approximately NOK 600 million.The box on the top here is the same as on the previous page. The bottom table shows the same numbers, split into our 4 business areas. Savings nonguaranteed shows a result of NOK 276 million in the quarter. Insurance shows a negative result of NOK 268 million, brought down by weak results and reserve strengthening to address expectations of the weaker economic environment and anticipated increase in disability. Guaranteed generates a result of NOK 95 million in the first quarter, hurt by financial returns and reserve strengthening. Other results primarily contain the return of some NOK 30 billion in company capital from Storebrand ASA, Storebrand Life and SPP. The credit spread widening in March hits the results hard and gives a result of minus NOK 437 million, of which most are unrealized losses in the company portfolios. The credit contraction in March has been partly reversed in April, and most of the losses have now been recovered.We have included this picture looking at value creation, including performance fees. In the IFRS results, we have included NOK 11 million in cost related to performance bonuses to portfolio managers. Excluding this cost would improve the result to NOK 265 million. Including NOK 59 million in earned but not booked performance fees, the result would have been NOK 313 million. Performance fees are booked at year-end. The absolute and relative returns from Skagen Global and Delphi Global are particularly good this quarter, achieving 4% to 5% above benchmark return.Moving over to Savings. Fee and administration income in savings is up 16% in the quarter, 11% when adjusted for the strengthening of the Swedish kronor. The top line in asset management and banking are both up by more than 20% compared to the first quarter last year. The operational cost -- sorry, the operational cost increase is a result of the transition in the overall business, with more resources focused on the savings growth area. The negative financial result comes from spread widening in the company portfolios in Storebrand Asset Management and Storebrand Bank as well as an increase of NOK 28 million in general, model-based loan loss provisions in the bank caused by a weaker macroeconomic environment. This picture includes the performance fees and how they would impact the results in savings if they were booked quarterly, as described on the group level a moment ago.Here is a visual representation of the most important drivers behind the results. Following the equity market fall, the reserves in Unit Linked are down by NOK 10 billion or 4% in the quarter. They are up by NOK 19 billion or 10% from last year. Premiums are sharply up after many quarters with lower growth. Our largest DB client has changed their plan to a hybrid-defined contribution plan. And we have won several new clients with Posten, the Norwegian postal system being the biggest one. Also, the Swedish business continues its strong growth.Total assets under management are up 13% from 12 months ago and almost intact in the quarter. This is explained by new sales and the weaker kroner. The bank lending volumes and margins are stable.The insurance results are weak. The P&C business is hit by travel insurance claims and some large fires. The group life and workers' comp business have weak underlying results in addition to significant reserve strengthening. The cost increase is largely due to sales provisions within the -- sorry, the sales provision within the growing P&C business. We do not have any deferred acquisition costs in our Norwegian business.Overall, around NOK 300 million in reserve strengthening can be attributed to the COVID situation and a forward-looking view on the impact for the Norwegian economy and an anticipated increase in disability claims.In our scenario-based approach, we have estimated an increase in disability across all products with disability covered. We plan price increases in all risk products that may be impacted by the evolving situation. With strengthened security reserves and planned repricing, we feel confident that the insurance results will return to normal in the coming quarters.This picture shows the significant jump in combined ratio. We manage the business for a long-term combined ratio of 90% to 92%. It is encouraging to see the very significant increase in portfolio premiums, where P&C and health insurance both have strong, profitable growth.In Guaranteed Pension, fee and administration income is down, in line with the long-term runoff of this business. Strengthened disability reserves hit this business with some NOK 50 million in the quarter, and the strengthening cuts across all the Norwegian product lines. There is interim negative profit split in certain product lines, but this may very well be neutralized later this year as the profit split is only finalized at year-end.Guaranteed reserves are up by NOK 9 billion in the quarter due to a 13% strengthening of the Swedish kronor to Norwegian kroner. There is also an increase in paid policies due to a conversion from defined benefit for our last large defined benefit client. Buffer capital has strengthened in the quarter. The improvement from bonds has been larger than the reduction caused by the fall in equity values. In normal quarters, the guaranteed reserves are, as a percentage of total pension reserves, decreased by 1 percentage point per quarter. With the effects from the equity market fall as well as strong currency movements in SEKNOK, there is a temporary setback this quarter.The Other segment holds the company portfolios of the life companies and the holding company. Some NOK 30 billion in company portfolios had a negative return in the quarter. The largest portfolio of Storebrand Life had a negative 1.25% return in the quarter, much of which has already been reversed so far in the second quarter.To sum up the quarter, strong underlying business operations with good growth in targeted areas. Significant reserve strengthening to protect insurance results in an economic downturn. Significant negative but unrealized financial results due to financial market turmoil. And finally, a strong balance sheet and a stable regulatory solvency.And with that, I leave the word back to you, Daniel.

[Daniel Sundahl, IR Officer]

Thank you, Lars. We will now take questions and answers. And as I don't see any questions in -- from the webcast yet, we will move to questions for people following us on phone. We will just wait -- we will now move to questions for people following us over the conference call.

[Operator]

[Operator Instructions] We already have a couple of questions coming through. And the first one is from Matti Ahokas from Danske Bank.

[Matti Ahokas, Head of Equity Research of Finland]

Yes. A couple of questions from my side, please. Firstly, on the dividend decision, I totally understand that these are very kind of turbulent times and very few financial companies are paying dividends. But is the reason that you dropped the 2019 dividend a consequence of your discussions with the regulator, that you don't believe that basically anyone will be allowed to pay it because, as you say, the solvency margin is extremely stable, a lot of the mark-to-market losses have, as you say, come back in Q2? So I'm a bit kind of puzzled that why drop the dividend decision altogether instead of maybe kind of giving it to the Board and paying it later.And as a follow-up on that, does this mean that the dividend for 2019 is kind of forgotten forever? Or will that be somehow taken into account potentially in the 2020 dividend proposal? That will be my first question.

[Odd Arild Grefstad, Group Chief Executive Officer]

Yes. Matti, I'll try to answer that. First of all, as I said in my presentation, the financials are strong. The Board has recognized both the financial position and also looking forward on the result generation going forward. And stand-alone, that calls for a normal dividend in 2019. But as we have seen also for the other players in the Norwegian market, that dividend has been postponed. And that is very much due to the fact that we have seen both strong messages from the Norwegian regulator and from EIOPA. And as an overall view from the Board on the situation, they have decided to postpone the dividend from -- for 2019. Of course, the Board likes to revert to normal dividend as soon as possible. And if there is opening to do some share buybacks or dividends, of course, they will look into that situation if a normalization happens.When we go to 2020, I think it's fair to say that we are back on a normal dividend path, as we have stated in our dividend policy, with normal dividends. And you can also see from the solvency calculation this quarter that we already have set aside for a normal dividend in 2020. And of course, additional dividends or share buyback, as we have stated, will then happen when we revert to a situation where we are above 180% in solvency.

[Matti Ahokas, Head of Equity Research of Finland]

Great. Then a question on the new insurance business. Obviously, now you've again strengthened the reserves quite significantly. How does it look now? Should we expect that we will see further reserve strengthenings if the kind of economy stays at these levels? Or what are the kind of assumptions behind the kind of current reserve strengthening that you've taken? Does that include that -- some kind of expectations that suddenly the employment situation or -- would improve in Norway or something like that? So what's the outlook for the Insurance group and the Life reserves going forward?

[Lars Aasulv Løddesøl, Group Chief Financial Officer]

Thank you, Matti. This is Lars. What we've done now with the reserve strengthening that we've done now, we've made an anticipation for the economic environment and development in the Norwegian economy for this year. And at the same time, we implement price increases for all of the relevant products. There is up to 1-year time lag on this. So with the -- as I said also, with the reserve strengthening and the security reserves that we've now set aside, combined with the price increases we do, we're confident that the insurance result will return to normalized over the next several quarters. So with this, we do not expect to take any further reserve strengthening after this very significant strengthening in the first quarter due to the changed economic environment that we see in Norway and in the world.

[Operator]

Next question comes from Musaddi, Ashik from JPMorgan.

[Ashik Musaddi, Executive Director and Co]

Just one question I have at the moment is, how should we think about the impact of falling interest rate on the spread you make in the Norwegian state of business? Now what I've noticed is if I look at your supplementary information, the spend on loss is expected to go down below 60 basis points at the end of 2019. And if I look at first quarter, it's still the same, 60 basis points, whereas interest rates have gone down by more than 100 basis points for Norwegian [indiscernible].So I mean -- does it mean that there is no duration mismatch impact, there is no falling into a certain point on this [ stated goal ]? I mean how should we think about that? That's the only question I have at this point.

[Odd Arild Grefstad, Group Chief Executive Officer]

It's quite difficult to hear what you were saying, Ashik. So I'm not sure -- Kjetil, did you catch it? I see that you're looking into some numbers. I'm not sure which product you were referring to, Ashik. Could you repeat which product you were looking into?

[Ashik Musaddi, Executive Director and Co]

[Technical Difficulty]

[Odd Arild Grefstad, Group Chief Executive Officer]

The line is really cracking up here. So is it -- could you do anything with the phone on your end to try and repeat the question? Okay. Let's try again.

[Ashik Musaddi, Executive Director and Co]

This is clearer by any chance?

[Kjetil Ramberg Krøkje, Head of Investor Relations]

This is better.

[Ashik Musaddi, Executive Director and Co]

Okay. So I mean my question is very simple. It's in Norway, you have a spread over the interest rate guarantee, right? The 3.9% is expected return, interest rate guarantee is 3.3% in the paid-up policy. Now that was the same number as the full year '19, and it's the same number now at first quarter of '20 as well. Given that interest rates have gone down by more than 100 basis points in Norway, I mean shouldn't this -- shouldn't expected return be coming down? Or are you fully duration covered or cash flows covered, that's the reason why it is not coming down? Any thoughts on that would be great.

[Kjetil Ramberg Krøkje, Head of Investor Relations]

Thank you, Ashik. This is Kjetil. I think the main reason here is that there's a very large allocation to [indiscernible] costs. So the expected return doesn't really change all that much since the return is based on the historical book values here.

[Lars Aasulv Løddesøl, Group Chief Financial Officer]

And if I may add also, Ashish (sic) [ Ashik ], that even though the interest rate level for the risk-free rate have gone down significantly, we've been able to generate reasonable good investments in this market with increased credit spread so that we've been able to continue to invest at above interest rate guaranteed levels even in this quarter or around 3% this quarter. And as you know, we have a very, very large hold to maturity bond portfolio yielding above the guarantee, which will keep us floating with a reasonable return in this portfolio for many years to come.

[Operator]

[Operator Instructions] The next question will come from Blair Stewart from BofA.

[Blair Thomson Stewart, Head of the UK and European Insurance]

A few questions. I think Matti asked the ones I really wanted to ask, and there were good answers. So just on the solvency and the NOK 180 million target level, would that still be applicable as a figure for excess of dividends or buybacks, even if you had the extent of transitionals that you have today? First question.Secondly, on the reserve strengthening, Lars, can you give some context as to what percentage of -- what's the percentage -- reserve strengthening as a percentage of the opening reserves themselves, just to get an idea of the context? And what percentage price increases have you implemented?And finally, just on your credit quality. I see that you've got very low exposure to oil and gas. Could you perhaps comment on exposure to sectors like airlines, leisure and retail?

[Odd Arild Grefstad, Group Chief Executive Officer]

Well, let's - let me start up here, it's Odd Arild, about the excess solvency situation of NOK 180 million. Of course, when you have a large discrepancy between the underlying solvency and the solvency in transitionals rules, we have to look closely into that situation and the Board have to make a view on the actual situation. We have stated that it is the regulatory solvency that is the basis for normal dividends. Of course, the view of being overcapitalized needs to take a more thorough review into both the underlying solvency and the solvency with transitionals before we start doing share buybacks based on that.

[Lars Aasulv Løddesøl, Group Chief Financial Officer]

Moving over to reserve strengthening. I don't have a percentage number. But you are very well aware that when you register, in this instant like a disability, you have to set aside for how much you expect to pay out for that. And that is based on salary, the insurance policy and how likely it is for that person to get well again and get back into the workforce. So you have to set aside for known cases, RBNS. And then you have incurred cases but that have not yet been registered that you set aside for, and then there's a security reserve.And when you see a downfall in the economic environment like we see now, we know historically that, that has led to disability increase over time. So you set aside for the existing contracts with an increased margin for the uncertainty on those contracts. Then for future contracts and future coverage, you increase prices to match your view on the economic situation going forward, which means that we are making price increases in the order from around 10% to, in some cases, up to 100% on different contracts in order to generate higher premiums to meet the expected higher payouts in the future.So I cannot give you an exact percentage term -- point in terms of the reserve strengthening over the existing reserves now. And the reserves are of different nature, as I said, RBNS, IBNS (sic) [ IBNR ] and security reserves. But we've done a very significant strengthening now, and we're confident that this will give us neutral profitability or positive profitability on existing contracts for this year, and the price increases should ensure profitability on contracts from next year onwards.

[Odd Arild Grefstad, Group Chief Executive Officer]

And all these contracts are priced annually.

[Lars Aasulv Løddesøl, Group Chief Financial Officer]

Yes.

[Kjetil Ramberg Krøkje, Head of Investor Relations]

If I could just jump into your third question, Blair. We don't really have -- our corporate bonds exposure, to start with that, most is, as you see in the financials, 31%. And then as you said, very little exposure to oil and gas in the portfolios with roughly 1%. And then when it comes to airlines, leisure and retail, I think it's fair to say very little in airlines and leisure, some exposure towards retail with some shopping malls and real estate portfolios and these kind of things. But no -- there's no unproportional exposure to any of these sectors; rather, the opposite.

[Blair Thomson Stewart, Head of the UK and European Insurance]

Okay. Just one last quick -- further question, if I may. Just the line item in the -- in Slide 20 for the DB fee-based segment, that was negative in the quarter. I think you addressed that, Lars, but I didn't quite hear what you said. Why was that negative, particularly in Q1?

[Lars Aasulv Løddesøl, Group Chief Financial Officer]

Odd?

[Odd Arild Grefstad, Group Chief Executive Officer]

This was mainly due to the reserve ranking for disability, which also hits the result in defined benefits.

[Operator]

The next question is from Peter Eliot from Kepler Cheuvreux.

[Peter Eliot, Head of Insurance Sector Research]

I wanted to ask actually also on the reinvestment opportunities. I mean -- but I guess I mean the one -- credit spreads have come back in a bit, but I guess that the Norwegian interest rates or at least the swap rate has not really recovered. So I'm just wondering if you can sort of comment on reinvestment conditions as they are today, what opportunities that gives you? And if the conditions were to stay as they were today, how easy is it for you to keep reinvesting to meet your guarantee business? That would be the first question.Second question, on the tax. At the end of 2019, you basically said that on the 2018 tax returns, you had sort of a possible upside of NOK 1 billion if your interpretation was accepted or won. And there was also a knock-on effect from 2015 of plus NOK 0.8 billion if you won; minus NOK 0.6 billion if you lost. So overall, you were looking at potentially NOK 1.8 billion upside, NOK 0.6 billion downside. I'm just interested in how that has changed now with this. I mean it sounded like there's possibly even additional upside, but I'm not clear whether the changes you recognized have eaten into that a little bit. So perhaps you could just clarify how those numbers have changed with this disclosure, that would be great.And then my final question was on the disability aspect. You mentioned that people had to be permanently work-disabled to claim. I'm just wondering if there's sort of any potential for clawback in the future if -- or recovering some of that reserve increase if people do sort of come back to work or if the permanent element of that is less than you're expecting at this point in time.

[Lars Aasulv Løddesøl, Group Chief Financial Officer]

Thanks, Peter. If we start with the reinvestments, we were quick when this crisis erupted to look for buying opportunities. And we've made a reasonable amount of purchases of good bonds from the middle of March and up until today. And you're quite right that currently, credit spreads have gone in and the swap rate has not gone up. So it's more challenging to find good investment opportunities as of now. But we did front-load our investments during this period. So we are on track to do the necessary investments for this year so far.

[Kjetil Ramberg Krøkje, Head of Investor Relations]

And also just to clarify that the reinvestments we do now is to cover up for the interest rate guarantee several years ahead in the future. And also very important to note that with the buffers we have today, we can have a 0% return for several years without impacting shareholders' results because of the buffer capital we have.

[Lars Aasulv Løddesøl, Group Chief Financial Officer]

And on your next question, if we win all of the disputes with the tax authorities, the maximum upside is NOK 2.8 billion and has increased by NOK 600 million with this last change. Whilst if we lose all -- or the 2 outstanding cases with the tax authorities, the maximum loss is NOK 1.8 billion, which has not changed with the latest tax -- the income that we booked now.

[Odd Arild Grefstad, Group Chief Executive Officer]

And if I comment on the recovery rate on the disability product, you are absolutely right, there is some recovery in these products. And -- but that is, of course, a part of the calculation. But that has also been impacted when we do the calculation now. We -- in negative economic situations, we see less recovery rate than we do in normal situation. So that is also taken into account when we have done this calculation of the reserving in the first quarter.

[Operator]

[Operator Instructions] Next comes from Thomas Svendsen from Nordea Markets.

[Thomas Svendsen, Director of Financials]

Two questions for the Savings area. First off, the asset management and software, it seems a bit higher than sort of the level you reported in Q1, Q2 and Q3. Can you comment on that? Is this sort of a new sustainable level?And also question #2, on the retail banking. It's sharply down Q-over-Q, and I guess this is due to loan loss increases. Do you expect it to return to normal results in the coming quarters? Or this is a new level, you think, in this year?

[Lars Aasulv Løddesøl, Group Chief Financial Officer]

Thank you, Thomas. On the asset management business, that is developing according to plan. They did have weaker returns on the company portfolio in the asset management business. So they were -- the company portfolio, they were also negatively hurt by short-term mark-to-market losses. So all else equal, it should have been a little higher. Also, we saw that some of the transaction fees that were expected in the first quarter have been postponed to the second quarter. So again, this level should be sustainable, and we would expect it to increase somewhat going forward.In terms of the retail bank, there are 2 main elements: the return on the company portfolios, which was negative also for the bank; and as I mentioned, a purely model-based loan loss provision of NOK 28 million in the quarter. We see no change in the credit quality of our portfolio. But due to the financial environment or the economic environment, there has been a model-based increase in loan loss provisions. So adjusted for those 2 elements, you will see that both the volumes and the margins are stable in the bank and should give improved results in the coming quarters.

[Operator]

We have another question from Blair Stewart from BofA.

[Blair Thomson Stewart, Head of the UK and European Insurance]

Just a general question really on your thoughts around the oil price and how that's impacting your view on the economy. Clearly, the COVID stuff hopefully is temporary. But I wonder if you're thinking and part of your caution here is linked to perhaps more permanent dislocation from the oil price. Or do you see the 2 things as linked?

[Odd Arild Grefstad, Group Chief Executive Officer]

Yes, Blair, you're absolutely right. Of course, we see a double hit in Norway these days, both due to the COVID-19 situation and the very low oil price. And it's the combination of these 2 scenarios unfolding we have looked into when we have done the reservation we have done.But I also want to say that, of course, Storebrand, when we look at our investments, really has been in forefront of this situation like we did when we announced our fourth quarter result by saying that all our investments in the Swedish business already was fossil-free. And due to our sustainability investments, we have a very strong portfolio towards also such a situation.

[Lars Aasulv Løddesøl, Group Chief Financial Officer]

And I guess I could add that the last significant oil price fall a few years ago, we saw a change in the work market on the Southwestern Coast of Norway and we saw layoffs, but we also saw new businesses growing up. So currently, we see some of the -- we've already been through one oil crisis, if you want, in terms of price fall and a change and reallocation of work resources, and particularly on the Southwestern Coast of Norway.

[Operator]

[Operator Instructions] The next question comes from Peter Eliot from Kepler Cheuvreux.

[Peter Eliot, Head of Insurance Sector Research]

Just one follow-up for me and just still on the insurance division. Obviously, you reported very strong premium growth. I'm just wondering if you could split that out actually into sort of volumes and price increases and -- just to give us an idea whether all those price increases are sticking. Yes, I just wonder if you can give us any more color on the -- let's just say that premium growth, that would be very helpful.

[Lars Aasulv Løddesøl, Group Chief Financial Officer]

It's mostly new sales, the price increases. There are some price increases on an ongoing basis, but most of the price increases that we talked about are going to come for -- in the next 6 to 9 months.

[Kjetil Ramberg Krøkje, Head of Investor Relations]

And in addition, Peter, if you look at the different lines of business, you will see that in P&C and individual life, the growth is coming mostly from new sales, whilst in the health and group pipeline, it's more of a mix where we did some price increases, as Lars has mentioned earlier, at the beginning of the year.

[Peter Eliot, Head of Insurance Sector Research]

Yes. I guess it's just -- I mean it's a very big increase in the health insurance line. And as you say, there wasn't that much time in the quarter to sort of get price increases through. So -- and I'm just wondering if there is a big increase in business...

[Kjetil Ramberg Krøkje, Head of Investor Relations]

Just a quick comment on that on -- we have strong growth in health insurance in isolation. That lines grows strongly. I think it's roughly 17% growth in premiums in that line for our own account. And then in the group life segment, we also talked about that on Q4, that we did implement price changes. And in that line, price changes is the majority of the growth, but we also flagged that, that might be necessary with further price changes, as Lars alluded to in his presentation.

[Operator]

There is no further questions coming through the phone. So I will hand the call over to you again. Thank you.

[Daniel Sundahl, IR Officer]

Ladies and gentlemen, as there are no questions from the webcast either, I'd like to take this opportunity to thank you very much for listening in. Stay well and healthy, and have a nice day.