Länsförsäkringar Alliance

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1 2 JULY Länsförsäkringar Alliance Interim Review January JANUARY JUNE COMPARED WITH JANUARY JUNE Operating loss for the Länsförsäkringar Alliance s nonlife 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 41 M (3,38). SECOND QUARTER OF COMPARED WITH FIRST QUARTER OF 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 5,96 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: 15). Solvency capital 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 Fondliv amounted to SEK 131 M (118). Premium income amounted to SEK 2,96 M (2,297). Commission income amounted to SEK 337 M (336). Operating profit for Länsförsäkringar Liv amounted to SEK 1,483 M (loss: 1,82). STEN DUNÉR, PRESIDENT OF LÄNSFÖRSÄKRINGAR AB, THE ALLIANCE S JOINTLY OWNED COMPANY. Business volumes for the Länsförsäkringar Alliance continued to perform positively. Premium volumes 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 homeowner 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 1% in household lending during the period. Market unease, Brexit and continued low interest rates impacted the 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 approved our application to use a partial internal model to calculate capital requirements in the joint operations in the Länsförsäkringar 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 actual 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. lansforsakringar.se

2 LÄNSFÖRSÄKRINGAR ALLIANCE The Länsförsäkringar Alliance consists of 23 local and customer-owned regional insurance companies and the jointly owned Länsförsäkringar AB. Customers are provided with a complete offering of banking, insurance and real-estate brokerage services through each regional insurance company. The starting point is the local presence and decision-making. Experience shows that local decision-making authority combined with joint strength creates substantial added value for customers. Long-term respect for customers money is fundamental. There are no external shareholders; it is the customers money that is being managed. This approach characterises the entire business. The Länsförsäkringar Alliance has almost 3.7 million customers and about 5,9 employees. The Länsförsäkringar Alliance is not a Group in the legal sense of the term. Most of the non-life insurance business within the Länsförsäkringar Alliance is underwritten in the 23 customer-owned regional insurance companies. The business conducted by Länsförsäkringar AB s non-life insurance group comprises health insurances, animal insurance as well as cargo insurance and some liability, property and motor hull insurance. The Länsförsäkringar AB Group also manages the Länsförsäkringar Alliance s joint reinsurance cover and assumed international reinsurance. Länsförsäkringar Bank AB 3.7 million customers 23 local regional insurance companies Länsförsäkringar Sak Försäkrings AB Länsförsäkringar AB The earnings from the Länsförsäkringar Alliance s non-life insurance operations consist of the total earnings of the 23 regional insurance companies and the Länsförsäkringar AB Group, excluding Länsförsäkringar Fondliv and Länsförsäkringar Bank Group. Länsförsäkringar Liv Försäkrings AB is operated in accordance with mutual principles and is not consolidated in Länsförsäkringar AB. Transactions between the regional insurance companies and the Länsförsäkringar AB Group have been eliminated. Länsförsäkringar Fondliv Försäkrings AB Länsförsäkringar Liv Försäkrings AB* * The company is operated in accordance with mutual principles and is not consolidated in Länsförsäkringar AB. RATING 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 Hypotek 1) Standard & Poor s AAA/Stable Länsförsäkringar Hypotek 1) Moody s Aaa Länsförsäkringar Sak Standard & Poor s A/Stable Länsförsäkringar Sak Moody s A2/Stable 1) Pertains to the company s covered bonds MARKET COMMENTARY Both the markets and the real economy appeared to stabilise during the quarter following a shaky start to the year. However, the calm was broken by the result of the UK s referendum on whether to leave the EU. The equities, interest and currency markets were initially highly volatile due to the heightened uncertainty regarding the economic climate, mainly in the UK and the eurozone. Expectations regarding imminent interest-rate rises, particularly on the part of the Federal Reserve, were lowered again due to the market turbulence in the wake of the Brexit result. The effect of Brexit on the US economy will almost exclusively be dependent on the performance of the financial mar- kets. The direct impact should be limited since US exports to the UK and the eurozone account for.4% and 1.6%, respectively, of US GDP. The eurozone continued to recover on a broad front with both private and public consumption driving growth. However, uncertainty following the Brexit result is expected to hamper the rate of growth in the immediate future. Inflation remained low and future measures from the ECB are likely if market unrest persists. The Swedish economy was largely unchanged 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 referendum 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 increase in the first months of the year, housingprice figures indicated a slightly subdued 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 continued to fall and, unlike the stock market, did not recover after the initial turmoil following 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

3 Financial overview Report commented on the development January- compared to the same period in, unless otherwise stated. LÄNSFÖRSÄKRINGAR ALLIANCE 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 51,67 5,546 53,525 5,546 51,628 Solvency margin, % Return on equity, % Premiums earned after ceded reinsurance, SEK M 5,96 5,871 5,642 11,777 11,113 22,75 Technical result, SEK M ,185 2,7 Operating profit, SEK M 1, ,414 3,752 4,365 Combined ratio LÄNSFÖRSÄKRINGAR AB, GROUP 1) Operating profit, SEK M , ,155 Total assets, SEK M 46,36 392, ,287 46,36 383, ,595 Return on equity, % Capital base for the financial conglomerate 2) 3) 36,222 Necessary capital requirement for the financial conglomerate 2) 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 Premiums earned after ceded reinsurance, SEK M 1,333 1,297 1,247 2,63 2,474 5,74 Technical result, SEK M Operating profit, SEK M LÄNSFÖRSÄKRINGAR BANK, GROUP Deposits from the public, SEK M 87,62 84,494 78,258 87,62 78,258 83,925 Loans to the public, SEK M 213,29 25, , ,29 191,225 21,964 Operating profit, SEK M ,175 Return on equity, % Tier 1 ratio Bank Group, % Total capital ratio Bank Group, % LÄNSFÖRSÄKRINGAR FONDLIV Premium income (rolling 12-months), SEK M 8,44 8,488 8,593 8,44 8,593 8,645 Operating profit, SEK M Managed assets, SEK M 12,972 1,41 12,251 12,972 12,251 12,87 Solvency ratio 3) ) LÄNSFÖRSÄKRINGAR LIV, GROUP Premium income after ceded reinsurance, SEK M ,6 1,919 Profit, SEK M 1,483 1,82 1, ,38 5,14 Managed assets, SEK M 116, ,26 117, , , ,952 Solvency ratio 3) ) 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 under Solvency II. 3 LÄNSFÖRSÄKRINGAR ALLIANCE INTERIM REVIEW JANUARY JUNE

4 Non-life insurance 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). COMBINED RATIO Rolling 12-months figures % Solvency capital has risen SEK 1,897 M since year-end and amounted to SEK 53,525 M. 8 Q 3 Q 4 NON-LIFE INSURANCE, LÄNSFÖRSÄKRINGAR ALLIANCE KEY FIGURES, SEK M Premiums earned after ceded reinsurance 5,96 5,871 5,642 11,777 11,112 22,75 Technical result ,185 2,7 Bonuses and discounts ,263 Operating profit 1, ,426 3,135 3,794 Investment income 1, ,414 3,752 4,365 Solvency capital 53,525 51,67 5,546 53,525 5,546 51,628 Solvency margin, % Expense ratio , 19 Claims ratio Combined ratio ALLOCATION OF INVESTMENT ASSETS Other 2.3% Property 8.4% Equities 37.% Interest-bearing 34.2% Total investment assets amounted to SEK 88.8 billion on 3. Earnings Operating 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 affected by the annuities operations due to falling real interest rates, which had a negative effect of SEK 37 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 compared 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 solvency margin amounted to 223% (222). Business volumes Premiums earned rose 6% to SEK 11,777 M (11,113), attributable to both premium increases and portfolio increases. Volume increases in motor hull insurance amounted to 6% and were primarily due to portfolio increases. Private insurance increased 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 business led to a solid volume increase and the business has balanced earnings. The commercial segment grew 4% driven by commercial property insurance and combined commercial insurance. The agriculture segment grew 5%. Claims trend Claims payments after ceded reinsurance rose to SEK 8,921 M (8,29). Engine, fire and water-damage claims increased the most compared with the first six months of. The rate of increase in claims costs in motor hull insurance was lower yearon-year, despite a strong increase in the portfolio. Investment income After 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 continued falling long-term interest rates. Despite market turbulence in the wake of Brexit, the Länsförsäkringar Alliance reported 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 second quarter. Primarily property investments generated high returns, as did fixedincome investments due to falling long-term interest rates, although equities reported a weaker performance. 4 LÄNSFÖRSÄKRINGAR ALLIANCE INTERIM REVIEW JANUARY JUNE

5 Bank Operating profit rose to SEK 697 M (559) and the return on equity strengthened to 1% (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, (365,). Länsförsäkringar won the awards of Mobile Bank of the Year and Best Mobile Site and App for its digital services. LÄNSFÖRSÄKRINGAR BANK, GROUP KEY FIGURES, SEK M Deposits from the public 87,62 84,494 78,258 87,62 78,258 83,925 Loans to the public 213,29 25, , ,29 191,225 21,964 Operating profit ,175 Return on equity, % Cost/income ratio before loan losses Earnings Operating profit rose 25% to SEK 697 M (559), due to higher net interest income and improved net gains from financial transactions. Return on equity strengthened to 9.8% (8.8). Net interest income increased 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 BANK OPERATING PROFIT AND RETURN ON EQUITY SEK M % Operating profit Return on equity BUSINESS VOLUMES SEK bn Funds Agricultural loans Retail mortgages 214 Other loans, bank and Wasa Kredit Customer deposits to an expense of SEK 241 M ( 2). Operating expenses amounted to SEK 78 M (763), up 2%. The cost/income ratio before loan losses improved to.52 (.58). Loan losses amounted to SEK 32 M (), net, corresponding to loan losses of.3% (.). The increase was attributable to the comparative period including the dissolution of reserves of SEK 4 M. Impaired loans, gross, amounted to SEK 264 M (286), corresponding to a percentage of impaired loans, gross, of.12% (.14). Business volumes increased 12% to SEK 422 billion (378). Lending increased 11% to SEK 213 billion (191). Retail mortgages in Länsförsäkringar Hypotek increased 15% to SEK 158 billion (137). Deposits rose 12% to SEK 88 billion (78). Fund volumes increased to SEK 122 billion (121). Funding and liquidity The Bank Group has a low refinancing risk and the maturity structure is highly diversified. Debt securities in issue increased 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 shortterm funding to SEK 2 billion (2). The average remaining term for the long-term funding was 3.5 years (3.4) on 3. In April, Länsförsäkringar Bank issued a subordinated loan (LT2) in SEK for a nominal amount of SEK 1.5 billion, and Länsförsäkringar Hypotek issued a sevenyear Euro benchmark covered bond for a nominal amount of EUR 5 M. Covered bonds were issued during the period at a volume corresponding to a nominal SEK 19 billion (17), repurchased covered 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 nominal 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 liquidity reserve is invested in securities with very high credit quality that are eligible 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 funding 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 3. Capital Adequacy, Banking operations The Common Equity Tier 1 capital ratio for consolidated situation*, the group encompassed by the group rules for banking operations, was 2.3% (2.3). During the quarter, Länsförsäkringar Bank issued SEK 1.5 billion in subordinated loans and repurchased SEK 1.2 billion in a previously outstanding subordinated loan. For further information see Länsförsäkringar Banks Interim Report. 5 LÄNSFÖRSÄKRINGAR ALLIANCE INTERIM REVIEW JANUARY JUNE

6 Life-assurance and pension insurance Länsförsäkringar 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 211. UNIT-LINKED INSURANCE AND TRADITIONAL LIFE ASSURANCE 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 41 M (3,38), with the decline attributable to falling interest rates. The Swedish ten-year interest rate fell 1 percentage point during the period. LÄNSFÖRSÄKRINGAR FONDLIV AND LÄNSFÖRSÄKRINGAR LIV KEY FIGURES, SEK M Länsförsäkringar Fondliv Earnings Earnings 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 insurance capital, and thus lower income, and higher operating expenses. Insurance capital increased to SEK 13 billion (12). The weaker trend in insurance capital was mainly the result of the weaker stock-market performance. Total premium income declined, based on lower volumes of capital transferred, and amounted to SEK 4,394 M (4,635). Capital transferred amounted to SEK 552 M (755). The weaker trend in insurance capital contributed to income from the financial component of agreements declining 3% and amounting Premium income, net (rolling 12 months) 8,44 8,488 8,593 8,44 8,593 8,645 Operating profit Managed assets 12,972 1,41 12,251 12,972 12,251 12,87 Solvency ratio 1) ) Länsförsäkringar Liv Operating profit 1,483 1,82 1, ,38 5,14 Managed assets 116, ,26 117, , , ,952 Collective consolidation, New Trad, % Collective consolidation, Old Trad, % Solvency ratio 1) ) 1) 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. 2) Opening balance 1 January under Solvency II. to SEK 322 M (332). Premiums for insurance risk increased to SEK 83 M (74). Operating expenses increased year-onyear and amounted to SEK 483 M (443), primarily as a result of higher IT expenses due to increased investments in the development of digital services. One of Länsförsäkringar s focus areas in sustainability is to combat global climate change. A decision was made to sell investments in coal mining and energy companies that generate more than 5% of their sales from coal. Another positive factor was that Länsförsäkringar became 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 41 M (3,38). These 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.3 billion on earnings. Operating expenses totalled SEK 215 M (181). Claims paid amounted to SEK 3. billion (3.1). Investment assets increased to SEK billion (117.5). Collective consolidation is calculated as the ratio between total capital and insurance capital. Collective consolidation was 111% (12) for New Trad and 126% (119) for Old Trad. New legislation for insurance companies, Solvency II, came into effect on 1 January. The calculations of capital requirements and own funds on 3 had not been completed on the date of publication of this interim review. Information on capital requirements and own funds will be provided on Länsförsäkringar s website as soon as the calculations have been completed. In May, the Swedish Financial Supervisory Authority approved the application from Länsförsäkringar AB and its insurance subsidiaries to calculate the capital MANAGED ASSETS UNIT-LINKED INSURANCE SEK billion LÄNSFÖRSÄKRINGAR ALLIANCE INTERIM REVIEW JANUARY JUNE

7 requirement for insurance operations using a partial internal model. Capital requirements for other types of risk are calculated by applying the standard formula under the Solvency II regulations. Länsförsäkringar Fondliv and Länsförsäkringar Liv s capital situation is expressed 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 amounted to Länsförsäkringar Fondliv s solvency ratio remained stable during the first quarter at 1.44 on 31 March. The opening balance for Länsförsäkringar Liv s solvency ratio as per 1 January amounted to The solvency ratio on 31 March amounted to Own funds strengthened by slightly more than SEK 1 billion during the second quarter of, which will have a positive effect on the solvency ratio. Fund and guarantee management Unit-linked insurance Some 42% of the 86 funds in the recommended fund range performed positively during the period and 58% negatively. Seven of the funds increased by more than 1%, while four funds declined more than 1%. 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 performance in 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 traditional insurance through guarantee management. Länsförsäkringar Liv conducts traditional life assurance divided into four portfolios: New Trad, Old Trad, New World and Insured Pension. Guarantee Management Premium income for guarantee management amounted to SEK 174 M (228), due to the SEK 63 M decline in capital transferred. Managed assets amounted to SEK 2.4 billion (2.2). The total return was.39% (1.89). The lower return was attributable in its entirety to shareholdings. The portfolio has been relatively defensively exposed in and the equities portion of the portfolio was reduced by an additional approximately 1.5 percentage points in connection with the UK referendum on EU membership. New Trad New Trad offers customers the opportunity to change the conditions of their existing traditional insurance policies. Managed assets in New Trad amounted to SEK 16 billion (13). The return was a negative.1% (pos: 2.3), due to the weak trend in equities. The bonus rate amounted to 6% (1). The bonus rate was lowered from 1% on 1 February. 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-bearing investments. The percentage of interest-bearing assets amounted to 87%. The total return was 4.8% (neg:.7). Falling interest rates had a positive impact on interest-bearing investments. The bonus rate for the quarter was unchanged at 2%. New World New World is a traditional insurance form in which capital is largely invested in equities. Managed assets amounted to SEK 11 billion (13) and the return was a negative 1.6% (pos: 3.8). 7 LÄNSFÖRSÄKRINGAR ALLIANCE INTERIM REVIEW JANUARY JUNE

8 Real-estate brokerage Through Länsförsäkringar Fastighetsförmedling, 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 16 branches throughout Sweden. Strong growth has advanced Länsförsäkringar 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 Fastighetsförmedling differs from national estate-agent chains by always being locally based. A total of 8,69 (5,954) single-family homes, 1,563 (9,513) tenant-owned apartments, 729 (1,331) vacation homes and 473 (396) agricultural properties were brokered in the period from July to. The value of these sales amounted to SEK 38.7 billion (29.9). During the period, sales of single-family homes and vacation homes 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, VACATION HOMES AND TENANT-OWNED APARTMENTS SOLD BY LÄNSFÖRSÄKRINGAR FASTIGHETSFÖRMEDLING SEK bn jul 212 jun 213 NUMBER OF SINGLE-FAMILY HOMES AND VACATION HOMES SOLD Other brokers and private 26,9 ERA 1,124 Mäklarringen 1,349 Bjurfors 2,24 Husman & Hagberg 2,484 SkandiaMäklarna 3,528 jul 213 jun 214 Total value, SEK bn jul 214 jun jul jun s Number of residential properties sold Fastighetsbyrån 21,94 Svensk Fastighetsförmedling 12,72 Länsförsäkringar Fastighetsförmedling 8,798 Mäklarhuset 4,316 SINGLE-FAMILY HOMES AND VACATION HOMES, SOLD BY LÄNSFÖRSÄKRINGAR FASTIGHETS - FÖRMEDLING WHERE LOANS WERE INVESTED IN LÄNSFÖRSÄKRINGAR HYPOTEK SEK M 3,5 3, 2,5 2, 1,5 1, 5 Jul 12 Jun 13 MARKET SHARES 3 JUNE Other brokers and private 3.9% ERA 1.3% Mäklarringen 1.6% Bjurfors 2.6% Husman & Hagberg 2.9% SkandiaMäklarna 4.2% Jul 13 Jun 14 Loan total, SEK M Jul 14 Jun 15 Number of loans 1,8 Jul 15 Jun 16 Number of loans Fastighetsbyrån 25.9% Svensk Fastighetsförmedling 15.1% Länsförsäkringar Fastighetsförmedling 1.4% Mäklarhuset 5.1% VALUE OF SALES OF SINGLE-FAMILY HOMES AND VACATION HOMES 1,5 1,2 Fastighetsbyrån Svensk Fastighetsförmedling Länsförsäkringar Fastighetsförmedling SkandiaMäklarna Mäklarhuset Bjurfors Husman & Hagberg Mäklarringen ERA SEK bn Source: Värderingsdata 8 LÄNSFÖRSÄKRINGAR ALLIANCE INTERIM REVIEW JANUARY JUNE

9 Financial statements LÄNSFÖRSÄKRINGAR ALLIANCE NON-LIFE INSURANCE INCOME STATEMENT SEK M Premiums earned after ceded reinsurance 5,96 5,871 5,642 11,777 11,112 22,75 Investment income transferred from financial operations Claims payments after ceded reinsurance 4,358 4,563 3,899 8,921 8,29 16,192 Operating expenses 1,157 1,79 1,93 2,236 2,126 4,281 Other technical revenue/expenses Technical result from non-life insurance operations before partner discounts ,185 2,7 Bonuses and discounts ,263 Technical result from non-life insurance operations after partner discounts ,68 1,437 Total investment income 1, ,426 3,135 3,794 Investment income transferred to insurance operations Other non-technical expenses OPERATING PROFIT 1, ,414 3,752 4,365 On 3 December 214, 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 3 Jun 31 Dec ASSETS Shares and participations 32,89 31,646 Bonds and other interest-bearing securities 3,397 29,596 Other investment assets 25,491 24,487 Total investment assets 88,778 85,729 Reinsurers portion of technical provisions 11,464 1,829 Receivables and other assets 1,994 1,617 Cash and bank balances 5,56 5,799 Prepaid expenses and accrued income 1,286 1,249 TOTAL ASSETS 118,82 114,224 EQUITY, PROVISIONS AND LIABILITIES Equity 44,467 42,679 Technical provisions (before ceded reinsurance) 56,227 53,296 Other provisions and liabilities 14,734 15,63 Accrued expenses and deferred income 2,654 2,619 TOTAL EQUITY, PROVISIONS AND LIABILITIES 118,82 114,224 9 LÄNSFÖRSÄKRINGAR ALLIANCE INTERIM REVIEW JANUARY JUNE

10 LÄNSFÖRSÄKRINGAR AB, GROUP INCOME STATEMENT SEK M Premiums earned before ceded reinsurance 1,63 1,788 1,562 3,419 3,33 6,775 Reinsurers portion of premiums earned ,583 Premiums earned after ceded reinsurance 1,334 1,438 1,244 2,772 2,614 5,192 Interest income ,329 1,954 2,431 4,13 Interest expense ,1 1,124 Net interest income ,617 1,421 3,6 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 Commission income ,251 1,32 2,595 Other operating income ,82 1,49 2,14 Total operating income 4, ,223 13,18 18,263 Claims payments before ceded reinsurance 1,21 1, ,311 2,16 3,968 Reinsurers portion of claims payments Claims payments after ceded reinsurance ,774 1,636 3,38 Change in life-assurance reserve Change in unit-linked insurance liabilities policyholder bears the risk 1,376 3,22 3,657 1,646 6,574 5,349 Commission expense ,317 1,39 2,663 Staff costs , ,826 Other administration expenses ,531 1,67 3,22 Loan losses Total expenses 4, ,17 12,174 16,18 Operating profit , ,155 Tax NET PROFIT FOR THE PERIOD ,765 Earnings per share before and after dilution, SEK STATEMENT OF COMPREHENSIVE INCOME SEK M Net profit for the period ,765 Other comprehensive income Items that have been transferred or can be transferred to profit for the period Translation differences attributable to foreign operations Cash-flow hedges Change in fair value of available-for-sale financial assets Tax attributable to items that have been transferred or can be transferred to profit for the period Total Items that cannot be transferred to profit for the period Revaluation of owner-occupied property Revaluation of defined-benefit pension plans 2 Tax attributable to items that cannot be reversed to profit for the period Total Total other comprehensive income for the period, net after tax COMPREHENSIVE INCOME FOR THE PERIOD , ,97 1 LÄNSFÖRSÄKRINGAR ALLIANCE INTERIM REVIEW JANUARY JUNE

11 LÄNSFÖRSÄKRINGAR AB, GROUP STATEMENT OF FINANCIAL POSITION SEK M 3 Jun 31 Dec ASSETS Goodwill Other intangible assets 3,816 3,672 Deferred tax assets 3 29 Property and equipment Owner-occupied property 2,648 2,545 Shares in Länsförsäkringar Liv Försäkrings AB 8 8 Shares and participations in associated companies 7 74 Reinsurers portion of technical reserves 11,48 1,845 Loans to the public 213,24 21,959 Unit-linked insurance assets policyholder bears the risk 1,583 1,497 Shares and participations 1,646 1,832 Bonds and other interest-bearing securities 45,71 4,61 Treasury bills and other eligible bills 7,58 8,824 Derivatives 6,619 4,479 Change in value of hedge portfolios 1, 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 46,36 384,595 SEK M 3 Jun 31 Dec EQUITY AND LIABILITIES Equity Share capital 1,42 1,42 Other capital contributed 1,272 1,272 Additional tier 1 instruments 1,2 1,2 Reserves Retained earnings including profit for the period 8,39 7,37 Total equity 21,67 2,538 Subordinated liabilities 2,593 2,3 Technical reserves 2,17 18,376 Provisions for life assurance policyholder bears the risk 1,89 11,2 Deferred tax liabilities 1,112 1,139 Other provisions Debt securities in issue 15,56 141,269 Deposits from the public 86,941 82,72 Due to credit institutions 7,535 2,954 Derivatives 2,42 2,455 Change in value of hedge portfolios 4,768 2,899 Other liabilities 2,963 3,955 Accrued expenses and deferred income 4,56 4,749 TOTAL EQUITY AND LIABILITIES 46,36 384, LÄNSFÖRSÄKRINGAR ALLIANCE INTERIM REVIEW JANUARY JUNE

12 LÄNSFÖRSÄKRINGAR LIV, GROUP INCOME STATEMENT SEK M Premium income after ceded reinsurance ,6 1,919 Investment income, net 2,596 1,115 4,254 3, Claims payments 1,53 1,459 1,434-2,962 3,129 5,959 Change in technical provisions , ,458 9,497 Operating expenses Technical result, life insurance operations 1,467 1,11 1, ,18 5,388 Non-technical expenses Profit before tax 1,483 1,82 1, ,38 5,14 Tax PROFIT FOR THE PERIOD 1,465 1,82 1, ,35 5,89 Items that cannot be transferred to profit for the period 2 COMPREHENSIVE INCOME FOR THE PERIOD 1,465 1,82 1, ,35 5,87 BALANCE SHEET SEK M 3 Jun 31 Dec ASSETS Investment assets 118, ,356 Reinsurers portion of technical provisions Receivables 2,522 1,378 Other assets 3,599 3,945 Prepaid expenses and accrued income 1, TOTAL ASSETS 126, ,117 EQUITY, PROVISIONS AND LIABILITIES Equity 21,262 21,42 Technical provisions 94,442 93,498 Provisions for other risks and expenses Deposits from reinsurers Liabilities 1,74 6,47 Accrued expenses and deferred income TOTAL EQUITY, PROVISIONS AND LIABILITIES 126, , LÄNSFÖRSÄKRINGAR ALLIANCE INTERIM REVIEW JANUARY JUNE

13 LF 6682 utg 26 ENG Sitrus Financial calendar 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 FOR FURTHER INFORMATION, PLEASE CONTACT: Sten Dunér, President, Länsförsäkringar AB +46 () , +46 () , Malin Rylander Leijon, CFO, Länsförsäkringar AB +46 () , +46 () , malin.rylander-leijon@lansforsakringar.se Fanny Wallér, Director of Corporate Communications, Länsförsäkringar AB +46 () , +46 () , fanny.waller@lansforsakringar.se Länsförsäkringar AB (publ), Corporate Registration Number Street address: Tegeluddsvägen 11-13, Postal address: SE-16 5 Stockholm Telephone: +46 ()