Alecta Group, January-June 2001

8/30/2001 5:40 AM EST

In the first half of 2001, premium income rose 18 per cent compared with
the first half of 2000 and amounted to SEK 7.9 bn (6.7). (Figures in
parentheses show the result for first half of 2000 recalculated
according to the present group structure). Invoiced premiums increased
by 25 per cent to SEK 5.0 bn (4.0) and other reversionary bonus amounted
to SEK 2.9 bn (2.7).
At 30 June 2001, the market value of investments amounted to SEK 343.4
bn (369.8). At year-end 2000, the market value was SEK 353.3 bn. The
decrease in 2001 is mainly due to the negative trend on the Swedish
stock market.
A total of SEK 14.6 bn was utilised from client company funds, of which
SEK 11.8 bn was paid out in cash and SEK 2.8 bn used for premium
payments in Alecta.
The total return on investments amounted to -0.4 per cent (5.0). During
the year net purchases were made of Swedish equities while net sales
were carried out of Swedish and foreign fixed-income investments.
The collective reserve amounted to SEK 73.6 bn (79.9) at 30 June, an
increase of SEK 1.7 bn since 31 December 2000. The collective solvency
margin was 129 per cent (129), 2 percentage points higher than at year-
end 2000.
Operating expenses for the insurance business amounted to SEK 266 m
(156). Operating expenses for 2000 were reported net taking into account
Alecta's own SEK 98 m share from client company funds. The expense ratio
amounted to 3.4 per cent (3.8) and the management expense ratio to 0.22
per cent (0.18).
The sale of SPP Liv, SPP Fonder and the SPP brand was completed on 7
March when Svenska Handelsbanken paid the purchase price of SEK 7.1 bn.
Celexa Fastighetskapital, which manages most of the properties in
Alecta's real estate portfolio, was sold to Aberdeen Asset Management in
June. The sale also included Celexa's operations outside Sweden. The
purchase price totalled SEK 254 m. The net capital gain on these sales
was approximately SEK 6.9 bn and is reported as other income.
An agreement on the sale of Björnbo, which provides sheltered housing
for the elderly, was signed in June with the care services company
Actica who will take over in October. The property housing these
operations will be sold separately.
Profit after tax amounted to SEK 0.2 bn (10.8). This decline in earnings
was mainly due to lower investment income. The reduction of the premium
reserve interest rate in 1999 meant that the premium reserve had to be
raised. According to interim rules applying at the time, this has
resulted in a planned charge against earnings of SEK 3.1 bn. Since the
interim rules cease to apply on 1 January 2002, the remaining reserve
strengthening of SEK 15.0 bn will be recognised as income on that date
at the latest.

President's comments
Successful changes at a fast pace

When they read our six-month report, the 27,000 companies who have their
employees' collectively agreed occupational pension with Alecta will be
able to see that return on capital was negative. Losses are never good.
However, Alecta's portfolio outperformed the industry average in a
period of falling asset values on the capital markets. For this and many
other reasons there is justification for continued optimism about the
future.
In the past six months, Alecta strengthened its ability to offer
customers efficient service at low costs, and successful, long term
asset management. At the same time, the sale of the subsidiaries SPP Liv
and SPP Fonder in the first quarter allows Alecta to focus its strengths
around our core business, the ITP Plan.
Following further divestments in the second quarter, of the property
management company Celexa and of Björnbo with its sheltered housing for
the elderly, the entire organisation is concentrated on a single task,
providing Swedish business with the most cost efficient collective
pension plans.
Excluding non-recurring expenses, our cost base is today at the 1999
level and we are now implementing an extensive savings programme
designed to reduce costs by at least a further 5 per cent in the current
year. We want to continuously defend and sharpen our image as a pure
play supplier of the best solutions for a large number of companies and
employees.
On 1 January 2002 we are reducing current premiums for our customers by
15 per cent. Already this year we are enhancing the efficiency of our
service and making it easier for companies to handle pension matters,
among other things through improved web-based solutions.
Our investment management is still characterised by a distinct long-term
approach, where the balance between fixed-income investments, equities
and real estate provides security. We are not looking to outperform
managers whose customers accept high risk in exchange for fast
appreciation. Nevertheless, our size, experience and competence enable
us to consistently provide a return that outperforms the index, as is
shown in this and previous reports.
Alecta's surplus funds, which fell towards the end of 2000 and early
this year, were at 30 June back at the same level as one year ago. The
fact that we can carry out the planned premium reductions and that we
now have a consolidation policy that better satisfies customer wishes,
makes me feel comfortable about the size of our surplus. Alecta
pensionsförsäkring, ömsesidigt, will continue to be able to provide
pension supplements, make adjustments to paid-up values and reduce
premiums.
The labour market parties, the Confederation of Swedish Enterprise and
PTK, are currently negotiating a new ITP agreement. The results of these
negotiations can have a powerful impact on Alecta's future.

Lars Otterbeck,
President of Alecta
For further information, please contact
Lars Otterbeck, President and CEO, +46 8 441 66 60
Kerstin Stenberg, Senior Vice President, Corporate
Accounting, Control and Administration +46 8 441 61 40
Cecilia Schön Jansson, Senior Vice President,
Corporate Communications, +46 8 441 69 75