Storebrand ASA

OSE:STB

Earnings Call Transcript 2017-Q4

[Operator]

Good afternoon, ladies and gentlemen, and welcome to the Storebrand Quarter 4 Conference Call. My name is Anna, and I will be your coordinator for today's conference. [Operator Instructions] I will now hand you over to Kjetil Krøkje to begin today's conference. Thank you.

[Kjetil Ramberg Krøkje, Head of Investor Relations]

Yes, good afternoon, ladies and gentlemen. Welcome...Good afternoon, ladies and gentlemen. Welcome to Storebrand's Fourth Quarter 2017 Conference Call. My name is Kjetil Ramberg Krøkje. I'm Head of Investor Relations at Storebrand. Together with me, I have group CEO, Odd Arild Grefstad; CFO, Lars Løddesøl; and Head of Economic Capital, Trond Finn Eriksen. In the presentation today, Odd Arild will give an update on the development in the year and introduce the new dividend policy. CFO Lars Løddesøl will give an overview of the financial development in the quarter and dig into some of the more technical elements in the quarter. The slides will be similar to the analyst presentation released this morning and are available on our web page. After the presentation, the operator will open up for questions. [Operator Instructions] I will now leave the word to Storebrand's CEO, Odd Arild Grefstad, who will start the presentation on Slide 2.

[Odd Arild Grefstad, Chief Executive Officer and Managing Director]

Thanks, Kjetil. I'm pleased to present the group results before amortization and write-downs of NOK 2,940 million for the full year of 2017 and a quarterly result of NOK 618 million. The fourth quarter result is, however, negatively impacted by more than NOK 300 million, which will strengthen future earnings, capital buffers and also our Solvency position. Lars will revert to that later on.The underlying Solvency position has improved to 155% in 2017 before transitionals and 172% including transitionals. The board proposes a dividend of NOK 2.50 per share, and we are introducing a more explicit dividend policy for 2018. It is also pleasing to report strong growth in the non-guaranteed savings segment. 2017 saw 20% growth in Unit Linked and 25% growth in assets under management, resulting from good sales, good market returns and acquisition of SKAGEN. Assets acquired from Silver will be reported from the first quarter of 2018.Let's turn to Slide #3. This is a very familiar slide illustrating our twofold strategy, which we have been implementing consistently through the past 5 years. It is pleasing to see that we are really delivering on both sides of the strategy in the fourth quarter, with both Solvency improvements and increased dividends on the one side, combined with strong growth in assets as well as earnings within the Savings segment in the other side. If we then turn to Slide #4, and let me start with managing the balance sheet. Storebrand ends 2017 in a robust capital position. The Solvency ratio increased 15 percentage points before dividends. The strong Solvency improvements are mainly attributed to capital creation and buffer capital increases in the life insurance division. The Solvency improvement in 2017 is greater than we normally can expect. That indicates that we are well positioned for further increases in the Solvency ratio, combined with growing dividends.If we then turn to Slide #5. The board proposes a dividend of NOK 2.50 per share, comprising of an ordinary dividend of 2.10 per share and a special dividend of NOK 0.40 per share. This comes as a result of strong financial returns and a very positive return after tax. This is a cash dividend of 40% of profit after tax adjusted for amortization. And for the first time in many years, a dividend of NOK 1.3 billion will be paid from the life insurance business to the holding company. This will strengthen the group liquidity and dividend-paying capacity, while also contributing to reach our goal of a net debt ratio of 0 in the holding company. If we then move to Slide #6, the new dividend policy. Storebrand's objective is to create attractive and competitive returns for shareholders through dividends and value creation in the business. The board is, therefore, introducing a more explicit dividend policy. The goal is to pay out more than 50% of earnings after tax. The ambition is to pay ordinary dividends of at least the same nominal level as previous years. If the Solvency margin is above 180%, the board intends to propose special dividends or share buybacks. The new dividend policy intends to reflect the strong growth in fee-based earnings, the more volatile financial markets-related earnings and the future capital release from the guaranteed book.Slide #7. The strong growth within savings continues, and it's worth noting that assets under management have increased by 25% and is now NOK 721 billion. There's also a strong growth in Unit Linked, with 17% growth in Sweden and 23% growth in Norway. And the retail bank has grown by 19% in 2017. And as previously communicated, the reduced growth within Insurance in 2017 is due to changes in distribution as well as a new disability product with relatively lower premiums and coverage.Slide #8. With the acquisition of SKAGEN, the group is in excellent positions for a strong growth in the Norwegian individual savings market. If you look at the market for long-term savings, Storebrand has a strong position in the pension-related part on the left-hand side of the slide in gray, which represent the value chain of pensions. But we have had a modest position within pure mutual funds. With the purchase of SKAGEN, this is -- will change and we expect to have doubled our collective market share to above 20% in these combined markets. Slide #9. In the second half of 2017, 2 new private savings products was introduced to the markets. Both the Individual Pension Savings product, IPS, that is a pillar 3 pension savings product with real tax incentives; and the equity savings account, ASK, a tax buffer for equity mutual funds and equities. Preliminary reports show that Storebrand Group has taken a leading position within the IPS market: Storebrand, with a market share of 20%; and SKAGEN with a market share of 4%, and that of course combines to a market share of 24% all together.In the ASK market, SKAGEN's strong position within mutual funds savings is clearly visible. Combined, the Storebrand Group achieved a market share of roughly 22% with the brand names Storebrand, Delphi and SKAGEN, and ranked as a runner-up in these important products. Storebrand's strength within pension savings and SKAGEN's strength in the savings and investment segment is a further indication of how our businesses complement each other and strengthens our positions in the growing Savings segment. And then I give the words to Lars.

[Lars Aa Løddesøl, Group Chief Financial Officer]

Thank you, Odd Arild. Let me start on Page 10, with the heading, Key figures. The numbers we published today are distorted by the onboarding of SKAGEN and a few special items that I will refer to. Seeing through that, the quarter is quite normal, with continued growth in non-guaranteed savings and with the transition towards capital-light products. Let's start in the upper left-hand corner. The quarterly results came to NOK 618 million. The operating result includes NOK 590 million from Storebrand and NOK 202 million from SKAGEN. The SKAGEN numbers in this overview are adjusted downwards to reflect the fourth quarter results from SKAGEN. The operating result in Storebrand is strengthened by the formal switch from Delphi, but are negatively affected by a weak Insurance result and a higher operating cost in the quarter. The weaker Insurance results in the quarter stemmed from seasonal factors as well as certain large disability payments. The full year results, however, are satisfactory and the development in the fourth quarter does not change our view on future profitability. When it comes to operating costs, the fourth quarter was impacted by a number of special issues. These included: an extraordinary effort to develop and sell the new ASK and IPS products, as described by Mr. Grefstad a moment ago; an internal refurbishing project which will reduce our office rent going forward; and also a number of smaller expenses which are not expected to be repeated in 2018. Our objective of reducing costs in nominal terms from 2015 to 2018 stands firm, adjusted for the SKAGEN acquisition. The SKAGEN results are largely a consequence of performance fees booked at the end of the year. This means that the result impact from SKAGEN will be limited in the first 3 quarters every year. The performance fees should lift the fourth quarter results. Financial return in the quarter has been weak, first and foremost as a consequence of buffer building, which has reduced booked return in portfolios co-invested with the collective portfolio in the background. Special items consist primarily of an accounting charge of NOK 200 million for a reduced discount rate in Sweden. EIOPA, the insurance regulator in Europe, has proposed to the EU Commission to reduce the UFR, the ultimate forward rate, from 4.2% to 3.65% over the next 3 years. In Sweden, we used a Solvency II discount rate for accounting purposes. By reserving NOK 200 million now, we're taking a one-off charge that addresses the change in the next 3 years. It is important to note that this also reduces the hurdle rate for future returns, which means that results will improve by the same amount over time. Other special items include NOK 10 million in severance pay in Sweden due to a new core IT system and NOK 30 million in transaction costs related to the acquisitions of SKAGEN and Silver. On the positive side, we have included the SKAGEN results not attributed to -- attributable to the fourth quarter, approximate estimate.I mentioned how management decisions in the quarter have significantly strengthened buffers and solidity. This can be seen on the 2 lower graphs on the page. If we hadn't included the [ ordered ] values in the bonds [indiscernible] amortized cost, the customer buffers in Norway would actually exceed 12%. This allows us to manage booked return with a lot of buffers in the years ahead.Earnings per share adjusted for amortization of intangible assets came to NOK 1.56 for the quarter and NOK 6.47 for the full year. In summary, we have made allocations that haveweakened results by more than NOK 300 million in the quarter in order to strengthen future profitability and reduce risk.Moving over to Page 11. Storebrand's Solvency position has been strengthened by 5 percentage points in the quarter from 150% to 155%. Including transitionals, the improvement is 12 percentage points from 160% to 172%. Let's look at movements in the quarter, starting from the right-hand side.In November, we issued a subordinated loan of SEK 1 billion. This strengthened the Solvency by 3.7 percentage points. The acquisition of SKAGEN weakened the Solvency by just short of 2 percentage points, as previously announced. Net plus 2%. We had good returns at the buffers and made changes in our product portfolio and asset allocation that in total strengthened the Solvency by an additional 2 percentage points.The accounting results for the group after tax of approximately NOK 0.5 billion contributed an additional 2 percentage points. And while reduced rates and the lower volatility adjustment contributed a negative 2 percentage points.We continue to refine our modeling and our model assumption, and this increased the Solvency by 2 percentage points in the quarter.Also, the transitional grew significantly in the quarter. This is largely explained by the same factors I've already mentioned, reduced rates and VA royalties to address the decreases, the value of our liabilities.Furthermore, more precise [ NFSA ] assumptions also increased liabilities under Solvency II. As the transitionals exist to bridge the difference in liabilities under Solvency I and Solvency II, they increased with higher Solvency II liabilities.Moving over to the following Page 12. This picture shows the movement from the third quarter to the fourth quarter and the sensitivities to market movements going forward. The sensitivities increased somewhat compared to the third quarter. Interest sensitive [indiscernible] assumptions increase sensitivity, as profitable [indiscernible] move away if interest rates increase and they stay unprofitable if rates fall.Moving over to Page 13. Fee and administration income is significantly up in the quarter, including NOK 294 million from SKAGEN. Adjusted for this, the growth is 5% year-on-year, which is a combination of 13% growth in the front book and the actively sold products and a 5% decline in the guaranteed. The Insurance result is in line with last year. The operational cost line is up, but this includes both the operational cost in SKAGEN as well as a transaction cost from the acquisition of SKAGEN and Silver. In addition, remaining costs were high as explained a few minutes ago. Going forward, the total quarterly cost level of Storebrand, including SKAGEN, should be just below NOK 1 billion. I repeat that our cost ambition for 2018 is that cost will be nominally lower than '15, excluding SKAGEN.For those of you who follow us closely, you will have detected that historical figures have increased a little. This is caused by a coordinated use of elimination principles across the group and increased both cost and income by NOK 14 million for the quarter and NOK 58 million for the full year 2017. The change does not impact the results. This change is also further explained on our IR web pages.Financial items are negatively impacted by the NOK 200 million effect from the discount curve change in Sweden and the NOK 51 million earnout from SKAGEN. The fact that the fourth quarter results in SKAGEN initiated an earnout is very positive. It means that customers, employees and owners made good returns last year. Amortization increased to NOK 237 million in the quarter. The primary reason is that we have -- that we had to calculate an estimated result for SKAGEN as of the acquisition date, 13th November. This has now been amortized in the accounts. Going forward, amortizations at Storebrand will [indiscernible] at approximately NOK 100 million per quarter, including both remaining amortizations of intangibles from the acquisition of SPP in 2007 and the SKAGEN acquisition.The negative tax charge, or tax income, if you want, in the quarter is a result of the sale of 2 large properties as well as a reduction in the general corporate tax capital in Norway. On the negative side, we have reserved for a possible additional tax charge for the year 2015, and further explanation are in the notes.Then finally, I'm going to touch on Page 14, as it may not be intuitive how the SKAGEN acquisition affects the accounts in the quarter. Let me try to explain here. Fee and administration income increased by NOK 294 million. The amount is largely caused by performance fees booked at the end of the year. The operating cost from SKAGEN is NOK 41 million and reflect the cost only since the acquisition. The financial results is minus NOK 45 million, including positive contribution from SKAGEN of NOK 6 million and then the earnout cost of NOK 51 million. The amortization charge is, as explained, related to the purchase price analysis and reflects estimated results as per the date of acquisition.Finally, with the tax and minorities, and ends up with a contribution to Storebrand of NOK 33 million, more than enough to pay transaction expenses.The lower tax table shows SKAGEN results for the quarter in 2017. It documents my previous comments about negative results in the first 3 quarters and then the true effect of performance fees in the fourth quarter. The table also shows that there is some volatility in the numbers. The quarterly cost is driven by estimated bonus -- bonuses on performance fees, where the actual performance fees can only be booked in the official accounts at the end of the year. We will, of course, disclose further.And this concludes my comments, and we are -- we will open up for questions.

[Operator]

[Operator Instructions] The first one is from Jonny Urwin from UBS.

[Jonathan Peter Phillip Urwin, Director and Equity Research Insurance Analyst]

Just 2 for me, please. So firstly, the new dividend policy looks to be calibrated on the Solvency II ratio with transitional measures. However, I just note from the presentation you also mentioned that ordinary dividend is subject to a sustainable Solvency margin of above 150%. Now when we think of a sustainable basis, I would imagine that's sort of based on the ex transitional ratio, to be prudent. But if you could give some detail on what sustainability above 150% means. Is that based on the ex transitional or the with transitional, please? Secondly, I mean, the ordinary dividend -- so there's obviously a beat on the total dividends, including the special, but the ordinary component is a bit lower. Now I just wondered, does that signal a bit of caution from you guys around the outlook given you've introduced the ratchets on the ordinary dividend. Is that just a bit of prudence there? Any comment is much appreciated.

[Odd Arild Grefstad, Chief Executive Officer and Managing Director]

I can comment on the first one. When I look at that Solvency ratios, we are talking about the Solvency ratios including transitionals. But we also expect, of course, that the transitionals will -- may reduce over time. So our internal managing is very much without the transitionals. But the numbers you could look at, when you are looking at the dividend policy, it's including transitionals.

[Lars Aa Løddesøl, Group Chief Financial Officer]

On the second question with the special dividends and ordinary dividends, as stated, the dividend policy and our ambition is that -- I think as I mentioned earlier, the ordinary dividends reflect the capital-light growth and results from the front book. While we, this year, had very good financial results due to good financial markets as well as the very low tax charge, which made the results this year good. And we have, therefore, decided to pay out an additional dividend, reflecting the additional value creation after tax that was created in [ 2017 ].

[Operator]

The next question's coming from Peter Eliot from Kepler Cheuvreux.

[Peter Eliot, Head of Insurance Sector Research]

Yes, I guess the first one was a bit of an expansion on Jonny's question there. I mean, when I'm looking at the dividend that you've declared or you're proposing, it's transparent with both the policies. I guess if you look at it on the existing policy then it seems to be, on my numbers, quite a bit less than the 35%. So I'm just -- I guess you're already looking forward a little bit. But on the new policy, you talked about specials and buybacks applying when the Solvency ratio's over 180%. I guess now you've paid a special when it's not there, but to reflect the strong financial results. So I guess my question is, should we also expect sort of specials in the future when we have strong one-off results, even though we're below the 180%? And could you give us a little bit of thinking in terms of what you're thinking of specials? I mean, if the Solvency ratio did develop very strongly over the coming quarters and you're up 190%, would that signal a very large buyback? Or would you, I mean -- yes, can't we get a feel for the magnitude perhaps of any specials we might expect? Sorry, that was rather a long question. And then the second one was on the tax one-offs, which I guess is becoming quite a regular occurrence. Can you give us any guidance as to whether we should expect these on an ongoing basis? Whether you've got more potential properties or offices, any sort of guidance on underlying tax rate that you might expect would be very helpful.

[Odd Arild Grefstad, Chief Executive Officer and Managing Director]

I'll start with the dividend. I think, first of all, it's a very clear statement from the board that they will give additional capital back to the shareholders. So that is a really clear statement. Then if you look at 2017, we used this year to both bridge a strong increase in dividend, but also to meet the long-term target of a net debt ratio of 0 in the holding company. And that is both now accomplished with the dividend we did this year. That is also well above the dividend policy we had for 2017. Looking forward, of course, it's the new dividend policy that comes into action. And yes, you should expect that if there is especially good financial results in the markets or other positive special elements, that we will give a special dividend. Again, the board will return additional capital to the shareholders going forward. But what we tried to do here is to show that there is one capital stream from the fee-based business. There is one possible capital stream from financial elements and other elements that is normal, right, in the balance sheet. And of course, over time, there will be an important capital stream from the release of the capital from the guaranteed back book. So in that way, you can say it's more or less 2 elements in the extra dividends going forward.

[Trond Finn Eriksen]

Yes, the tax policy. We've said that we expect a tax rate of 19% to 23% for 2018, as we did for 2017. As you know, if we sell properties, that releases tax, increasing temporary differences from our balance sheet. That is -- it becomes a tax income on our P&L. And if that happens, that will reduce the tax cost. But there's no planned sale for properties or anything like that in the pipeline. But if that occurs, that will lower the expected tax cost.

[Odd Arild Grefstad, Chief Executive Officer and Managing Director]

And if we also bear in mind, of course, that this is all just -- it's not a very limited payable tax in our tax strategy.

[Operator]

The next question's coming from Blair Stewart from Bank of America.

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

I've got a few questions. Firstly, just looking at operational factors. The performance of SKAGEN funds themselves, can you maybe comment on how that has progressed and whether the degree of performance fees coming through in Q4 is something you would expect on a normalized basis? Also, just on the dividend policy, just intrigued slightly as to why you chose the earnings definition after the amortization, which is clearly a noncash item? It seems rather odd to me. And finally, just on the Solvency, the effect of Solvency range that you seem to have hemmed in, which I'd say was between 150% and 180%, just given some of the comments you've made, it doesn't seem a particularly wide range given some of the volatility that we've seen in the past. I wonder if you can just comment on that?

[Odd Arild Grefstad, Chief Executive Officer and Managing Director]

Blair, starting with SKAGEN. Of course, we have been seeing development in SKAGEN, where you have had some outflow in the past. That is also the case in 2017, and that is very much on the institutional side of the SKAGEN business. But when we look at the retail market, especially Norway, you've seen strong development during 2017 and an inflow in SKAGEN. When you look at -- it's a mixed picture when you look at performance fees in the different mutual funds in 2017. And I will say that we expect and, of course, planned for having even stronger performance fees going forward. But all together, I think the results we have seen in SKAGEN this year is quite strong results and the results that we are satisfied with and also the indications that Lars gave for going forward; while you will see, well, quite low result effects in the first 3 quarters, but then a positive effect from performance fees in the fourth quarter.

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

Can I just ask on that, Odd Arild, what's your expectation for net flows for SKAGEN over the next year or 2? Do you expect them to remain negative?

[Odd Arild Grefstad, Chief Executive Officer and Managing Director]

No. The ambition is to have a positive net flow for SKAGEN going forward. There's quite a limited level of institutional money left in SKAGEN as we speak. It's mostly on retail money. But we also have, of course, ambitions international both in SKAGEN and in Storebrand. And there is a very strong in synergy here coming from SKAGEN's setup internationally, while our own set of [ brand ] management is only in Norway and Sweden. And of course, we are planning to leverage on that or a lot of also Storebrand and Delphi accounts going forward. Should we then move to the dividend? I think it's just our way of making this easier to just look at the bottom line result after tax. We know that amortization is around NOK 400 million a year, and will be that going forward. So that is taken into account to give a clear number, an easy number and to give a dividend payout ratio based on that. Solvency, between 150% and 180%, this was very much the math we gave in our Capital Markets Day back in 2015. We, of course, have moved quite significant when it comes to Solvency position from that level off. And when we look at our structures and so on, we feel that this is a comfortable level to communicate through and also to communicate the dividends next month.

[Operator]

[Operator Instructions] The next question comes from Michele Ballatore from KBW.

[Michele Ballatore, Equity Research Analyst]

I have a question going back to the capital generation. So at your Capital Market Day in 2016, you showed this slide with expected capital generation, you expect between 5% and 10% of Solvency in terms of capital generation. And then dividends and other minus 1%, 3%. And the net capital generation, 6%. And then you mentioned also that the runoff of guarantee can increase this capital generation up to more than 10 percentage points. So in the context of 2017, did you have any impact from the runoff of guarantees? I mean, what is the capital generation? How can we split the capital generation between earnings and the runoff of the guarantees?

[Lars Aa Løddesøl, Group Chief Financial Officer]

Yes. If I may start on that last question. I think that the capital generation that Odd Arild showed on Page 4 is a simplification of the capital generation in 2017. As you can see there, from asset return and business mix and operating earnings, that consists of 18 percentage points all together. It's also had the strong financial markets in 2017 contributing positively on that. And it's actually more a return above what we could expect than a change in the business mix. Because the changes in business mix is still kind of developing in the wrong direction. We have reached the peak capital when it comes to the capital requirement from back of this year. And a substantial relief from that book is still some time ahead, a short time ahead. I'm going to [ refer you to ] Trond to touch on the Capital Markets Day with more precise information.

[Trond Finn Eriksen]

So I think on the -- when you look at the traction, Michele, it's more about creating own funds, and the SCR is quite stable in 2017 compared to 2016.

[Odd Arild Grefstad, Chief Executive Officer and Managing Director]

I think it's fair to say also that the capital generation and the Solvency generation, I believe, is in the upper scale of what we gave in our Capital Markets Day, and with the development we have seen in the business from that time on.

[Operator]

The next question comes from Paul De'Ath from RBC.

[Paul De'Ath, Analyst]

A couple of questions, please. Firstly, just following up on the answer to that last question and on this issue of peak capital and when a major capital release is coming through. Did I hear you correctly in saying that you're not at peak capital just yet? I thought we'd already got to that point. And is there any change to the expected timing of the capital releases? That's the first question. And then just second question, just looking again -- sorry, going back to the dividend and on the special -- or the potential for specials over 180 percentage points on the Solvency ratio. Is there any element within your decision-making process as to how you get above 180%? I'm just looking at the sensitivities on Page 12, and interest rates going down increases the Solvency ratio. And so if we have rates going down significantly and then that pushed the ratio above 180%, then presumably that, although you're above 180%, it's not a great result for the long-term business. So does that influence your thought? Or is it -- if you're above 180%, then you give some money back?

[Trond Finn Eriksen]

Yes. Paul, I will try to answer the first one. There's no change in the communication around peak capital. We are at that level now; I would say, at that level throughout the end of 2017. And as we've said, it will remain at that level for the back book for some time, and then start to trail off and release capital. We'll try to spend some time now going through our projections and hope for a [ scale ] review at the Capital Markets Day on the potential for capital release and also we'll be more clear on the estimated timing of that.

[Odd Arild Grefstad, Chief Executive Officer and Managing Director]

It's also, of course, clear that it's somewhat sensitive to a lot of elements, but -- and especially the interest rate level. Such increased interest rate levels will lead to a situation where the capital release from the back book will -- well, from a...

[Lars Aa Løddesøl, Group Chief Financial Officer]

Then on the estimated Solvency II position, I'm not sure that I...

[Trond Finn Eriksen]

[indiscernible] Yes, so in the situation where you have interest rates decline and in -- and capital [indiscernible] will have more transitional rules. So they approach the 180% level, which is the top threshold in the policy. In that situation, it will -- would be natural to take all factors into account, as the board always needs to do. And I think in general, lower interest rates is worse for our type of business. But higher interest rates in general are better.

[Lars Aa Løddesøl, Group Chief Financial Officer]

And also some of the transitional rules will already decline in the first quarter, so some of this will decline according to the rules and run off [ 1/16 ] every year.

[Odd Arild Grefstad, Chief Executive Officer and Managing Director]

But then, I think also it's fair to say that, of course, the 150% and 180% is guidance. But of course, the board needs to take a review on an annual basis on the mix of the business. But this is a good guidance of how we're likely to, in normal situations, perform based on our new policy.

[Operator]

The next question comes from Matti Ahokas from Danske Bank.

[Matti Ahokas, Head of Equity Research of Finland]

A couple of questions from me, please. Firstly, if you could elaborate a bit more on the disability payments, the large one-offs you mentioned in insurance, what exactly were they? And then regarding SKAGEN, if you look at the full year, profit before amortization, the illustrative IFRS figures you present, NOK 274 million. Is the comparison figure the NOK 204 million that you presented for 2016, so was the profit actually up by 30-something percent in 2017 pro forma?

[Odd Arild Grefstad, Chief Executive Officer and Managing Director]

Yes, on the latter, yes, you're completely right. It's much stronger results and performance in 2017 compared to 2016. Very, very glad to see that result.

[Lars Aa Løddesøl, Group Chief Financial Officer]

On the disability segments, we had -- we have 1 corporation with a quite large coverage. And we have a couple of people being taken, reserving core disability for those people in the quarter. So it's not something we see as a trend shift, but it does impact the quarterly result as such.

[Matti Ahokas, Head of Equity Research of Finland]

How much was this, Lars, all together in the fourth quarter.

[Lars Aa Løddesøl, Group Chief Financial Officer]

I don't have an exact number.

[Operator]

And the next question comes from Peter Eliot from Kepler Cheuvreux.

[Peter Eliot, Head of Insurance Sector Research]

Yes, just a couple of follow-ups. I think, first of all, on the sort of the high-capital requirement in the paid-up policies. I noticed that the paid-up policies declined by just over NOK 1 billion in the quarter this time, seemingly driven by the other, which the note says is transfers between DB and paid-up. I was just wondering if you could elaborate on what caused that? And whether that is a sort of reduction that might be repeated? Second question was, on the health insurance, I guess we had significant runoff gains in Q3 and then followed by a slightly worse combined ratio in Q4. Would you say sort of Q4 is a new normal? Or do you think there were some one-offs in there? And then finally, just on the Solvency sensitivities, I assume it's a typo on the right, actually, where it says that there's a 13 point gain from the transitionals, I assume that should be 16%, so 172%. Could you clarify the timing of the UFR impact that we're going to see come through?

[Trond Finn Eriksen]

Yes, I can start from the first one, the paid-up policies. If I look at the development in the quarter, it's settling down. This is reflected by the fact that there's more payouts and some conversions to paid-up policies, we didn't have much choice, versus the actual guaranteed return in the portfolio. So in that sense, it's good to see that the current book is starting to trade up. But of course, we still have some funds left in the defined benefit, which over time will transfer to the paid-up policy book.

[Lars Aa Løddesøl, Group Chief Financial Officer]

With respect to your second question on health insurance, you will see that this has classified health insurance and group life together. The health insurance is growing fast, it's profitable and it's good, and there is no significant volatility between the quarters. However, in group life, we had a very strong quarter in the third quarter and we had a weak quarter in the second quarter -- in the fourth quarter. If you take the group life and, for that matter, health insurance asset books together, look at the full year result and divide that in 4, that's the best estimate I can give on future performance in products.

[Trond Finn Eriksen]

When it comes to your third question, Peter, regarding the sensitivities in Solvency, yes, you're correct, it's a typo in that graph. And then the second part of that question, I missed it. Sorry, can you repeat, please?

[Peter Eliot, Head of Insurance Sector Research]

Just wanted to clarify how the UFR, the timing of -- how we would see the UFR impact in the Solvency ratio?

[Trond Finn Eriksen]

Yes, yes. The -- I'm actually relieved by the new interest rate curve, so 2 days ago, the changes on the UFR down to 4.05%. So we will include that from Q1 2018. And that line is the next, that one will be from Q1 2019.

[Peter Eliot, Head of Insurance Sector Research]

Okay, so on the with transitionals, that's a minus 1 percentage point impact that we'll see at Q1?

[Lars Aa Løddesøl, Group Chief Financial Officer]

Yes. I'm actually -- actually, including internal transitional on our profits, it's -- actually be coming back in the transitional because a lowered UFR will increase the taxable provision for the [indiscernible].

[Operator]

[Operator Instructions] There are no questions coming through, so I will hand the call back to you again. Thank you.

[Kjetil Ramberg Krøkje, Head of Investor Relations]

All right. Thank you all for joining the call. I would like to remind those of you in London that we are present at the Grange St. Paul Hotel at 14:00 GMT tomorrow, and we would like to take the opportunity to wish you all a good afternoon.

[Operator]

Thank you for joining today's conference. You may now replace your handsets to end this call. Thank you.