SCANDINAVIA – Nordea says a change to its life and pensions model - which ended guaranteed returns - has helped to reduce the volatility of its earnings.

“Volatility has been reduced primarily through divestment of general insurance and a changed business model for Life & Pensions,” said chief executive Lars Nordström, writing in the bank’s 2003 annual report.

Under the new model, new life products are based on guarantees that apply to the principal capital of a policy. This is a change from the former model, which also offered guaranteed returns.

“These new products represent a reduced risk to the life company,” the report added. “A fee-based profit sharing model with policy holders furthermore reduces Nordea’s dependence on investment returns.”

A change in investment policy also boosted stability, it added. “A further reason for the reduced earnings volatility in 2003 was the change of investment policy and portfolio management in Nordea’s pension foundations,” the report states, without providing details.

Nordea’s net profit in 2003 increased by 68% to 1.49 billion euros. The company said this reflected an improvement in operating profit, a positive tax contribution in the third quarter and last year’s 281 million-euro allocation to pension foundations.

Asset Management posted an operating profit of 95 million euros, up from 80 million euros in 2002.

It also said that the new IAS 19 accounting standard for pension commitments would have leave its net result “more or less unchanged compared to the current situation”.