SpareBank 1 Gruppen - Annual Report 2010

1

Annual Report 2010SpareBank 1 Gruppen

2 SpareBank 1 Gruppen

Board of Directors' Report for 2010 3Income statement 18Statement of comprehensive income 19Consolidated balance sheet 20Consolidated statement of cash flow 21Statement of changes in equity 22

Note 1 General information 23Note 2 Summary of significant accounting policies 23Note 3 Financial risk management 29Note 4 Critical accounting estimates and judgements 32Note 5 Changes in Group structure in 2010 34Note 6 Segment information 37Note 7 Net insurance premium revenue 38Note 8 Net fee and commission income 38Note 9 Gains and losses from financial assets and liabilities 39Note 10 Net income from investment properties 40Note 11 Other operating income 40Note 12 Operating expenses 40Note 13 Shareholder structure 41Note 14 Goodwill 41Note 15 Other intangible assets 42Note 16 Investments in subsidiaries - parent company 42Note 17 Investments in associates and joint ventures 43Note 18 Property, plant and equipment 44Note 19 Other assets 45Note 20 Classification of financial assets and liabilities 46Note 21 Valuation hierarchy 47Note 22 Financial instruments designated at fair value 49Note 23 Financial derivatives 50Note 24 Financial instruments classified as available for sale 51Note 25 Bonds at amortised cost 51Note 26 Fair value on financial instruments measured at

amortised cost 52Note 27 Investment property 53

Note 28 Lending to and deposits with customers and credit institutions 54

Note 29 Net loan loss provisions 55Note 30 Credit risk exposure for each internal risk class 56Note 31 Maximum credit risk exposure, assets pledge as

security not taken into account 57Note 32 Contractual maturity of financial liabilities 57Note 33 Age distribution of overdue, but not impaired loans

and premium revenues 58Note 34 Market risk related to currency exchange risk 59Note 35 Market risk related to interest rate risk 59

Note 36 Deposits from customers and loans and deposits fromcredit institutions 60

Note 37 Subordinated loan capital 61Note 38 Securities issued 61Note 39 Capital adequacy 62Note 40 Reinsurance receivables 63Note 41 Insurance receivables from policyholders 63Note 42 Insurance liabilites in life insurance 64Note 43 Incurance result and provisions in P&C insurance 65Note 44 Liabilities related to reinsurance 66Note 45 Underwriting risk SpareBank 1 Livsforsikring AS 66Note 46 Underwriting risk SpareBank 1 Skadeforsikring 68Note 47 Wages and other remuneration to CEO and key

management 70Note 48 Pensions 72Note 49 Employees and full-time equivalent 74Note 50 Taxes 75Note 51 Other liabilities 76Note 52 Events after the balance sheet date, legal matters 76Note 53 Group consolidated exclusive Bank 1 Oslo Group 77Note 54 Cash flow without Bank 1 Oslo Group as

of December 31, 2010 79Independent auditor's report 80

Content

3

Board of Directors’ Report for 2010SpareBank 1 Gruppen

OPERATIONS IN 2010

High return on equity due to good results in the largest

production companies

The Group is well capitalised

New strategic positions through acquisitions

SpareBank 1 Skadeforsikring AS acquired 100% of the shares

in Unison Forsikring AS, and took over Skandia Lifeline

Norges portfolio within treatment and child insurance

SpareBank 1 Gruppen Finans AS acquired the debt

collection company Conecto AS

Bank 1 Oslo AS was sold out with effect from January 1, 2010

The profitability improvement programme, Delta, was finished

successfully.

SpareBank 1 Gruppen AS is a holding company that, through its

subsidiaries, provides and distributes products in the fields of life and

P&C insurance, fund management, securities brokering, factoring,

receivables management and debt collection of old claims.

In this Directors’ Report, SpareBank 1 Gruppen AS refers to the

holding company and SpareBank 1 Gruppen refers to the Group

consisting of SpareBank 1 Gruppen AS and its subsidiaries.

SpareBank 1 Gruppen reported a pre-tax profit of NOK 985.1

million for 2010, compared to NOK 1,193.7 (995.51) million in

2009. The profit resulted in a return on equity after tax of 18.7%,

compared to a return of 17.5 (18.11)% in 2009. The result is pri-

marily attributable to strong financial markets, the profitability

improvement programme, Delta, and certain significant one-time

effects. The phasing-out of SpareBank 1 Gruppen`s child and

spouse insurance together with ending the old contractual pension

plan resulted in a total of NOK 84.3 million being entered as

income in 2010. SpareBank 1 Gruppen AS also entered as income

a repayment of NOK 43 million related to payroll tax which were

earlier covered by the company on behalf of First Securities AS.

SpareBank 1 Skadeforsikring AS’ acquisition of Unison Forsikring

AS resulted in negative goodwill of NOK 117.9 million being

entered as income. SpareBank 1 Gruppen’s total assets were NOK

40.7 billion as of December 31, 2010, compared to NOK 61.5

(36.51) billion as of December 31, 2009. This is a decrease of NOK

20.8 billion compared to 2009 and is mainly due to the separation

of the Bank 1 Oslo Group.

The capital adequacy ratio was 16.1% as of December 31, 2010,

compared to 16.3% in 2009. The core capital adequacy ratio was

12.5% compared to 11.82% in 2009. The capital position of

SpareBank 1 Gruppen is considered satisfactory, and it is the

opinion of the Board that the Group is well capitalized to meet the

expected requirements in the Solvency II regulations.

In SpareBank 1 Skadeforsikring AS the gross claims ratio was

77.3% in 2010 which is 2.4% higher than in 2009. The increase

in the claims ratio is due to the extreme weather conditions

during the winter season which resulted in a high frequency of

frost, water and snow damages.

SpareBank 1 Livsforsikring AS built further reserves in 2010. A total

of NOK 125.3 million was allocated to additional provisions within

pension and paid-up policies. The securities adjustment reserve

in the Group portfolio increased with NOK 289.8 million in 2010

and amounted to NOK 616.9 million as of December 31, 2010.

SpareBank 1 Livsforsikring AS transferred its defined benefit

pension portfolio to Gabler Wassum AS during 2010. Gabler Wassum

AS is now responsible the management and administration of the

portfolio.

ODIN Forvaltning AS’s total assets under management were NOK

32.3 billion as of December 31, 2010, which is an increase of

NOK 4.3 billion compared to 2009.

1 Figure exclusive Bank 1 Oslo Group2 The capital adequacy ratio and the core capital adequacy ratio for 2009, including Bank 1 Oslo Group


SpareBank 1 Gruppen Finans Group, which in 2009 was esta-

blished as a new subgroup of SpareBank 1 Gruppen AS, produces,

delivers and distributes services within factoring, portfolio acqui-

sition, investment management and debt collection. SpareBank 1

Gruppen Finans AS acquired the debt collection company

Conecto AS in third quarter 2010. Actor Fordringsforvaltning AS

and Conecto AS were merged to one integrated company with

effect from January 1, 2011.

SpareBank 1 Gruppen AS owned, as at December 31, 2010,

76.75% of the shares in Argo Securities AS, which operates

within securities brokerage.

The shares that SpareBank 1 Gruppen AS had in Bank 1 Oslo AS

were sold with effect from January 1, 2010. Consequently, Bank 1

Oslo AS became directly owned by the SpareBank 1 - banks (90%)

and the Norwegian Confederation of Trade Unions and affiliated

trade unions, LO, (10%). An important factor in the transfer of

ownership of Bank 1 Oslo AS was the strategy to establish a clear

boundary between production and distribution in the SpareBank 1-

alliance. Bank 1 Oslo AS will continue to be a part of the

SpareBank 1-alliance.

SpareBank 1 Gruppen ended the profitability improvement

program, Delta, in 2010. The program identified many actions to

improve the profitability in the Group.

SPAREBANK 1-ALLIANCE

The SpareBank 1-alliance consists of 18 savings banks, two com-

mercial banks and SpareBank 1 Gruppen AS with subsidiaries. The

alliance is the second largest provider of financial products and

services in the Norwegian market. The banks in the SpareBank 1-

alliance distribute SpareBank 1 Gruppen’s products and colla-

borate in key areas such as developing brands, work processes,

development of skills and know-how, IT operations, system develop-

ment and purchasing.

The product companies established under SpareBank 1 Gruppen AS

and the alliance-banks have developed a common technology

platform. The sharing of experience and transfer of knowledge within

the alliance, based on best practice, are key elements of the further

development of the alliance. As a result of these efforts, knowledge

centres have been established for Credit Management in Stavanger,

Payments in Trondheim, and Training in Tromsø.

The SpareBank 1-alliance had total assets of approximately NOK 665

billion at the end of 2010, compared to approximately NOK 616

billion at the end of 2009. The SpareBank 1-banks have 352 offices.

The products of SpareBank 1 Gruppen`s subsidiaries are distributed

through 378 distribution offices across the entire country.

SpareBank 1 Gruppen’s main functions in the SpareBank 1-

alliance are two-folded:

Manage and develop the financial group with respect to the

production and delivery of competitive products and services

for distribution through the alliance banks and other banks that

have a distribution agreement with companies in SpareBank 1

Gruppen and LO. This work is organised in the company

SpareBank 1 Gruppen AS.

Manage and develop the alliance cooperation with respect to

common management, development and execution of activities

that provide economies of scale and competitive advantages.

This work is organised in the company Alliansesamarbeidet

SpareBank 1 DA.

Alliansesamarbeidet SpareBank 1 DA provides the administrative

framework for the alliance and manages financing and ownership

of applications, concepts, contracts and brands on behalf of the

alliance partners. The company is owned by SpareBank 1 SR-Bank

(17.74%), SpareBank 1 SMN (17.74%), SpareBank 1 Nord-Norge

(17.74%), Samarbeidende Sparebanker Utvikling DA (17.74%),

Sparebanken Hedmark (11.3%), SpareBank 1 Gruppen AS (10.0%)

and Bank 1 Oslo AS (7.74%).

CORPORATE GOVERNANCE

SpareBank 1 Gruppen AS is owned by SpareBank 1 Nord-Norge

(19.5%), SpareBank 1 SMN (19.5%), SpareBank 1 SR-Bank

(19.5%), Samarbeidende Sparebanker AS (19.5%), Sparebanken

Hedmark (12%) and the Norwegian Confederation of Trade Unions

and affiliated trade unions, LO, (10%). SpareBank 1 Gruppen

AS has its business address in Tromsø. SpareBank 1 Gruppen’s

main market is Norway.

The shares in SpareBank 1 Gruppen AS are not publicly traded,

but as of December 31, 2010 the company had bonds and subor-

dinated loans listed on the Oslo ABM. The company has a con-

centrated shareholder structure, with all shareholder groups either

directly or indirectly represented in the Board. There is ongoing

communication within all the owner groups. The Board of

SpareBank 1 Gruppen AS has discussed the «Norwegian Code of

Practice for Corporate Governance» and adopted this wherever the

guidelines are applicable and of relevance for a company that does

not have shares listed on a stock exchange. The Corporate Gover-

nance statement from the Board of Directors is included in the

Norwegian version of Annual Report for 2010.

Group Management

The Group Management is responsible for managing and developing

the financial group, and focuses on results and production in

relation to the subsidiaries of SpareBank 1 Gruppen.

5

Remuneration

Information on the remuneration of the Chief Executive Officer,

group management, Board of Directors, supervisory board, control

committee, and the auditor is provided in note 47.

Dividend policy

SpareBank 1 Gruppen AS has a long term goal of paying a dividend

of 30-50% of the surplus on the consolidated level. In determining

the dividend for SpareBank 1 Gruppen AS, importance is placed

on maintaining a satisfactory capital and core capital adequacy

ratio in relation to the planned growth and risk associated with the

company’s operation. The financial situation must also be deemed

satisfactory with respect to internal ICAAP calculations and the

Group’s liquidity. The goal is that the core capital inclusive

perpetual bonds shall amount to at least 11% and capital adequacy

to at least 13%. SpareBank 1 Gruppen AS shall maintain the

goals related to capital coverage that will be established in the

Solvency II regulations with a good margin.

SPAREBANK 1 GRUPPEN – RESULTS AND KEY FIGURES

SpareBank 1 Gruppen AS and SpareBank 1 Gruppen report the

annual accounts in accordance with IFRS, International Financial

Reporting Standards, which are recognised by the EU.

Profit – SpareBank 1 Gruppen:

NOK million 2010* 2009*

Net result before tax from subsidiaries 1 036,0 1 244,1Total operating costs (parent company) -7,6 -54,1Net investment charges (parent company) -43,2 -36,3Gains from sale of companies - 29,2Share of associated company - 10,8Pre-tax result 985,1 1 193,7Taxes -153,6 -294,0Net result for the period 831,6 899,6Majority interest 841,0 909,1Minority interest -9,5 -9,5

* Bank 1 Oslo Group was sold out from SpareBank 1 Gruppen AS with effect fromJanuary 1, 2010.

SpareBank 1 Gruppen reported a profit after tax of NOK 831.6

million, compared with NOK 899.6 (735.11) million the previous

year. This equals a decline in profit of NOK 68.9 million. The pre-

tax profit was NOK 985.1 million, compared with NOK 1,193.7

(995.51) million in 2009. The Group’s total tax expense was NOK

153.6 million, compared with NOK 294.0 (260.51) million in 2009.

Good financial markets, the profitability program Delta, and

several other significant factors with a one-off impact contributed

to a good result in 2010.

Result from subsidiaries:

NOK million 2010 2009

Part of result from subsidiaries before tax:SpareBank 1 Livsforsikring AS 350,4 392,2SpareBank 1 Skadeforsikring Group* 641,1 621,1Bank 1 Oslo Group** - 198,1ODIN Forvaltning AS 64,6 42,1Argo Securities AS -57,6 -48,9SpareBank 1 Medlemskort AS 11,1 12,1SpareBank 1 Gruppen Finans Group*** 8,6 22,5Correction Group 17,6 4,8Net result before tax from subsidiaries 1 036,0 1 244,1

* Unison Forsikring AS was acquired by SpareBank 1 Skadeforsikring witheffect from July 1, 2010.

** Bank 1 Oslo Group was sold out from SpareBank 1 Gruppen AS with effectfrom January 1, 2010.

*** Conecto AS is 100 % owned by SpareBank 1 Gruppen Finans AS with effectfrom September 10, 2010. The result before this date has been registereddirectly against equity.

The pre-tax profit from subsidiaries was NOK 1,036.0 million in

2010, compared with NOK 1,244.1 (1,046.01) million in 2009.

1 Figure exclusive Bank 1 Oslo Group


SPAREBANK 1 LIVSFORSIKRING AS

Profit SpareBank 1 Livsforsikring AS:


Risk result after tecnical allocations 325,4 352,3Administration result -186,9 -193,1Investment result 317,3 557,4Reserves -45,3 -74,5Compensation guaranteed interest 29,9 14,6Result before additional provisions 440,4 656,7Allocation to additional provisions -125,3 -127,9Transferred to policyholders -36,3 -209,5Return on company's assets 71,6 73,0Net profit to owner before tax 350,4 392,2Taxes -60,2 -Net profit/loss for the period 290,2 392,2

SpareBank 1 Livsforsikring AS reported a pre-tax profit and other

P&L components of NOK 350.4 million in 2010, compared with

NOK 392.2 million in 2009. The tax expense in 2010 was NOK 60.2

million. In 2009 the tax expense of the company was zero, as the

deferred tax asset was not included, in accordance with IAS 12.

Net risk result was NOK 325.4 million in 2010, compared with NOK

352.3 million the year before. The main reason for the reduction

concerned changes in outstanding claims provisions within indi-

vidual endowment insurances compared to the previous year. At the

same time, there was a significant improvement in the risk result

within individual annuity insurances and group life insurances.

The company reported a net administration result of minus NOK

186.9 million, compared with minus NOK 193.1 million in 2009.

The majority of the administration loss arises from the operation of

group pension insurance.

Net investment result (financial income in customer portfolios

reduced with guaranteed returns) was NOK 317.3 million compared

with NOK 557.4 million in 2009. At the beginning of 2009, the value

of the financial assets recorded at fair value was NOK 152.0 million

lower than the acquisition cost. The reversal of this lesser value,

before a rebuilding of the securities adjustment reserve could

commence, contributed to the good investment income result in

2009. Within individual annuity insurance, NOK 45.3 million of the

investment income result was utilised to enhance the premium

reserve due to adjustments made to life expectancy ratios. Corres-

ponding amounts in 2009 were NOK 74.5 million.

The company’s total assets under management were NOK 26.5

billion as of December 31, 2010. This equals an increase of 9.0%

from 2009. The capital adequacy ratio was 19.3% at the end of 2010,

compared with 19.0% at the end of 2009. Core capital ratio con-

stituted 17.7% at the end of 2010, compared with 16.1% the year

before. In 2010, NOK 358.7 million was contributed to the compa-

ny’s equity through group contributions. The solvency margin as of

December 31, 2010 was 290.1%, compared with 279.2% the year

before. The minimum requirement is a solvency margin of 100%.

At the end of 2010, the solvency margin requirement amount to

NOK 859.0 million, compared to NOK 797.9 million in 2009.

The allocation to additional provisions was enhanced by NOK

125.3 million at the end of 2010, resulting in total additional pro-

visions of NOK 379.3 million as of December 31, 2010. The secu-

rities adjustment reserve was NOK 616.9 million at year end. After

suggested disposal of the 2010 surplus, the buffer capital in total con-

stituted NOK 2.3 billion, equal to 14.6% of the insurance provisi-

ons at the end of 2010. In comparison, the buffer capital the previous

year amounted to NOK 1.8 billion, corresponding to 11.7% of the

insurance provisions.

Value-adjusted return on the Group portfolio was 7.1% in 2010. The

booked return was 5.2%. In 2009, similar return was 9.5% and

7.1% respectively.

Allocation of assets by portfolio as of 31.12.2010:

Group portfolio2010 2009

Stocks 14,8 % 14,5 %Other 7,1 % 5,2 %Real estate 21,5 % 21,7 %Bonds held to maturity 21,8 % 24,3 %Bonds 34,8 % 34,2 %Total value (NOK million) 16 030 15 488

Company portfolio2010 2009

Stocks 0,1 % 0,1 %Other 17,0 % 19,4 %Real estate 21,7 % 17,0 %Bonds held to maturity 11,1 % 14,7 %Bonds 50,1 % 48,7 %Total value (NOK million) 2 844 2 479

Investment choice portfolio2010 2009

Stocks 61,0 % 61,4 %Other 0,0 % 7,1 %Bonds 39,0 % 31,5 %Total value (NOK million) 6 701 4 041

Bonds

Stocks

Investment choice portfolio

Total value: NOK 6.7 billionTotal value: NOK 16 billion Total value: NOK 2.8 billion

Group portfolio Company portfolio

Bonds

Bonds held to maturity

Real estate

Other

Stocks

Bonds

Bonds held to maturity

Real estate

Other

Stocks

Kollektivporteføljen

2009 2008Obligasjoner 34,2% 31,4%Hold til forfall 24,3% 30,3%Eiendom 21,7% 22,9%Annet 5,2% 3,0%Aksjer 14,5% 12,4%Verdi 15 488 14 686

Selskapsporteføljen

2009 2008Obligasjoner 48,7% 26,9%Hold til forfall 14,7% 32,6%Eiendom 17,0% 32,2%Annet 19,4% 1,0%Aksjer 0,1% 7,3%Verdi 2 479 1 343

Investeringsvalgporteføljen

2009 2008Obligasjoner 31,5% 28,9%Annet 7,1% 16,7%Aksjer 61,4% 54,4%Verdi 5 576 4 041

34,8%

21,8%

21,5%

7,1%

14,8%

50,1%

11,1%

21,7%

17,0%

39,0%

61,0%

7

The company decided to invest in a model for asset-liability

management at the beginning of 2010. The model was used for the

test calculations in relation to the introduction of the Solvency II

requirements (QIS-5). The board considers the company’s com-

mercial exposure to be well adapted to its risk capabilities.

SPAREBANK 1 SKADEFORSIKRING GROUP

Profit SpareBank 1 Skadeforsikring Group:


Gross written premium 4 731,8 4 271,2Net earned premium 4 184,4 3 814,3Net incurred claims -3 208,5 -2 813,1Net insurance operating costs -880,6 -858,0Other insurance income/costs 132,0 0,8Changes in other technical reserves 39,6 -27,5Operating result before finance 266,9 116,6Net financial income 432,7 532,6Other costs -2,7 -5,8Result before changes in security reserve 696,9 643,3Changes in security reserve -55,8 -22,2Pre-tax profit 641,1 621,1Taxes -60,1 -118,1Net profit/loss for the period 581,1 503,0

SpareBank 1 Skadeforsikring Group reported a result in 2010 of

NOK 641.1 million before tax, compared with NOK 621.1 million

in 2009. The Group achieved a significant growth in the premium

income, both through the traditional sales channels, such as

banks and LO (The Norwegian Confederation of Trade Unions), as

well as though new strategic activities such as the acquisition of

Union Forsikring AS and Skandia Lifeline Norge’s portfolio within

treatment and child insurance.

SpareBank 1 Skadeforsikring AS bought 100% of the shares in

Unison Forsikring AS for NOK 56.4 million, with effect from

July 19, 2010. At the same time it contributed with NOK 150

million to the company’s equity through a private placing towards

Unison Forsikring AS. Unison Forsikring AS was consolidated

with effect from July 1, 2010. Unison’s business concept is to

provide tailored business solutions to defined groups of end users

– either through organisations or other relevant intermediary con-

nections such as agents and brokers.

After receiving approval from Norwegian and Swedish authorities,

SpareBank 1 Skadeforsikring AS has acquired Skandia Lifeline

Norge’s portfolio within treatment and child insurance with effect

from November 1, 2010. The portfolio consists of 1,200 customers

and insures a total of 16,000, with a stock of approximateley

NOK 30 million in premiums.

The acquisition of Unison Forsikring AS resulted in a negative

goodwill of NOK 117.9 million being entered as income, while the

selling of the insurance office in Bergen to SpareBank 1 SR-Bank

resulted in a gain of NOK 14.2 million.

In 2010, the financial income of the SpareBank 1 Skadeforsikring

Group was NOK 432.7 million, compared with NOK 532.6 million

in 2009. This includes a gain of NOK 20.9 million on sold property

in the fourth quarter. The financial return on the Group’s portfolio

was 4.9%. The company had positive returns in all asset classes

in 2010.

SpareBank 1 Skadeforsikring Group had total assets of NOK 12.1

billion as of December 31, 2010. This represents an increase of

15.7% from 2009. The capital adequacy ratio at the end of 2010

was 32.5%. This equals a reduction of 1.7 percentage points

through the year.

Net combined ratio per year:

The net combined ratio was 97.7% in 2010, an increase of 1.5 per-

centage points from 2009.

The gross combined ratio was 98.1% as of December 31, 2010. The

gross claims ratio constituted 77.3% in 2010, which was an in-

crease of 2.4 percentage points compared with 2009. The increase

in the claims ratio is attributable to the cold winter, causing a high

frequency of frost and water related damage. Gross cost ratio in

2010 was 20.8%, compared with 22.1% in 2009. One-off impacts

of NOK 42.5 million related to pensions, as well as zero in profit-

ability commission to the distributors have contributed to a reduc-

tion in the cost ratio.

SpareBank 1 Skadeforsikring Group had a total portfolio growth

of NOK 629 million. The company’s total portfolio was NOK 4.7

billion at the end of 2010.

SpareBank 1 Skadeforsikring Group has ambitions of profitable

growth through both traditional channels, such as banks and LO, as

well as new channels for direct distribution. The goal is to increase

revenue by strengthening the Group’s distribution platform.

0

20

40

60

80

100

Cost ratio, netClaims ratio, net

201020092008200720062005

97,7%96,2%94,0%94,6%89,9%87,2%

20,5%

66,7%

20,6%

69,3%

20,7%

73,9%

21,9%

72,1%

22,5%

73,7%

21,0%

76,7%


ODIN FORVALTNING AS

Profit ODIN Forvaltning AS:


Management fees 317,9 244,8Subscription and redemption fees - 25,9Total operating income 317,9 270,7Total operating costs -256,8 -228,3Operating profit 61,1 42,4Net financial income 3,6 -0,3Pre-tax profit 64,6 42,1Taxes -19,3 -13,5Net profit for the period 45,3 28,6

ODIN Forvaltning AS reported a pre-tax profit of NOK 64.6 million

in 2010, compared with NOK 42.1 million in 2009. The increase

in profit can mainly be attributed to higher average assets under

management throughout the year.

All funds yielded good absolute returns in 2010, although eight out

of twelve self-managed mutual funds had returns that were weaker

than the market they invested in. This is mainly caused by a weaker

development for investment companies than growth companies in

2010. ODIN Forvaltning AS is an investment manager.

At the end of 2010 ODIN Forvaltning AS managed a total of NOK

32.3 billion, of which NOK 31.3 billion were managed in mutual

funds. This makes ODIN Forvaltning AS the third largest fund

manager in Norway. ODIN Forvaltning AS had in 2010 a net

redemption in mutual funds of NOK 1.4 billion, caused by redemp-

tion from foreign customers.

Good historical returns, a broad offering of self-managed mutual

funds, introduction of combined funds, the SpareBank 1 banks’

broad distribution network, distribution through other banks and

distributors in Norway, Sweden, Finland and the Netherlands,

together with good technological solutions, and an effective and

competent organisation, provide a strong starting point for

2011.

ARGO SECURITIES AS

Profit/loss Argo Securities AS:


Total operating income and other income 83,3 47,0Salaries and other ordinary personnel expenses -89,7 -66,5Depreciation and amortisation -6,9 -9,2Other operating expenses -43,2 -27,2Operating result -56,5 -55,9Net financial income -1,0 7,0Pre-tax loss -57,6 -48,9Taxes 16,8 13,5Net result for the period -40,8 -35,4

Argo Securities AS operates within corporate finance, stock broke-

rage and debt capital markets. SpareBank 1 Gruppen AS owned

76.75% of the shares in Argo Securities AS at the end of 2010. The

remaining shares were owned by the employees.

The company has continued to build up its operations through

2010. This has affected the result, which amounted to a loss before

tax of NOK 57.6 million in 2010. There has been an increase in

revenue in all business segments compared to 2009. Total revenue

in 2010 was NOK 83.3 million, compared to NOK 47.0 million in

2009. Out of the 2010 revenue, NOK 37.4 million are related to

commission income on stocks and derivatives, NOK 18.4 million in

remunerations from corporate finance, NOK 16.6 million from debt

capital markets and NOK 10.9 million from other revenue. Along

with the building of the operations, the company’s cost base has also

increased, and there were a total of 77 employees at the end of the year.

There is significant potential for the company through its connection

to the alliance and gaining access to the distributional power that it

represents. The work to realise this potential was started in 2010, and

will continue throughout 2011. The company has added additional

top competence and market power through recruitment of new

employees. It is expected that the efforts over time will yield significant

increases in market shares and that this will be reflected in the results.

SPAREBANK 1 GRUPPEN FINANS GROUP

Profit/loss in SpareBank 1 Gruppen Finans Group:


SpareBank 1 Gruppen Finans AS -5,7 3,3Overhead costs -9,3 -1,2Business area Factoring 2,0 6,6Business area Portefølje 1,7 -2,1

Business area Debt collection 19,5 24,6Actor Fordringsforvaltning AS 23,3 24,6Conecto AS* -3,8 -

Net result before tax from subsidiaries 13,9 27,8Amortisation -5,3 -5,3Pre-tax profit 8,6 22,5Taxes -4,3 -6,7Net profit for the period 4,3 15,9

* Conecto AS was acquired with effect from September 10, 2010.

SpareBank 1 Gruppen Finans Group produces, delivers and

distributes services within factoring, portfolio acquisitions, port-

folio management and debt collection. SpareBank 1 Gruppen

Finans Group consists of SpareBank 1 Gruppen Finans AS, and its

business areas Factoring and Portfolio, as well as its subsidiaries

Actor Fordringsforvaltning AS and Conecto AS. Conecto AS was

acquired with effect from September 10, 2010. Actor Fordrings-

forvaltning AS and Conecto AS were merged with effect from

January 1, 2011. These companies operate within extrajudicial and

legal debt collection.

SpareBank 1 Gruppen Finans Group achieved a pre-tax profit in 2010

of NOK 8.6 million, which was NOK 13.9 million lower than in 2009.

9

SpareBank 1 Gruppen Finans AS

Business area Factoring

The business area Factoring operates within financing in the areas

factoring and collateral. Pre-tax profit in 2010 was NOK 2.0 million,

compared with NOK 6.6 million in 2009.

The Factoring business area had total net revenues of NOK 52.4

million in 2010, compared with NOK 50.1 million in 2009. The

client revenue was NOK 11.0 billion in 2010, equal to an increase

of 30.6% compared with 2009. In connection with a bankruptcy

engagement, provisions for losses amounted to NOK 10.4 million

in 2010. This loss provision was the main cause for the decline of

the result in 2010.

Business area Portfolio

The Portfolio business area operates within acquisition of portfolio

of non-performing loans and which are recovered in the Group’s

debt collection companies. The pre-tax profit in 2010 was NOK 1.7

million, compared with a loss in 2009 of NOK 2.1 million. In total

this represents an improvement in the result of NOK 3.8 million.

Additional positive development in the profit is expected in

2011. Net interest and other financial income was NOK 9.3 million

in 2010. The business area Portfolio had a total portfolio volume

of NOK 620 million at the end of 2010.

Actor Fordringsforvaltning AS

The company operates within the debt recovery business and

provides services related to receivables management, litigated

debt prosecution, and juridical advice. The company reported a

profit before tax in 2010 of NOK 23.3 million, compared to NOK

24.6 million in 2009. In total, the company’s revenue amounted

to NOK 84.9 million, an increase of NOK 6.2 million from 2009.

The reduction in the pre-tax profit was mainly caused by reduced

fee income as a consequence of reductions in fee income rates

decreed by law. The company has calculated the effect of the

changes made to the debt collection regulation as of September

2009 to be an approximately 20 % reduction of revenue. Parts of

the 2010 revenue were generated from demands that were due

January 1, 2010, which was before changes were made to the

regulations. Consequently the changes have not had its full impact

in 2010.

Conecto AS

SpareBank 1 Gruppen Finans AS bought the debt collection

company Conecto AS on September 10, 2010. The company

reported a loss before tax of NOK 3.8 million, which was the

result from the day of the acquisition, September 10, until the year

end. The company generated revenue of NOK 86.6 million in

2010, which was NOK 9.5 million more than in 2009. Conecto AS

has calculated the impact of the changes in the debt collection

regulation as of September 2009 to cause a reduction in revenue

of 26%, but has still increased revenue with 11% from 2009. The

increase is mainly due to an increased portfolio, as well as renego-

tiated agreements. The market is characterised by a competitive

environment. Conecto AS not only has a good market position, but

good prospects for increased growth in the time to come.

SPAREBANK 1 MEDLEMSKORT AS

Profit in SpareBank 1 Medlemskort AS:


Total operating income 62,2 59,4Salaries and wages -6,1 -7,0Other operating expenses -45,7 -41,2Operating result 10,4 11,2Net financial income 0,8 0,9Pre-tax profit 11,1 12,1Taxes -3,3 -3,5Net profit for the period 7,8 8,6

SpareBank 1 Medlemskort AS reported a pre-tax profit of NOK

11.1 million, and a result after tax of NOK 7.8 million.

SpareBank 1 Medlemskort AS operates LO’s affiliated trade unions’

common membership database for delivering membership cards

and collects the insurance premiums for group insurance. The

company also runs and administrates the benefits-program LOfavør

for about 870,000 members. The company cooperates closely

with LO and the affiliated trade unions, and is the operational

supplier of the benefits-program LOfavør on behalf of LO and the

affiliated trade unions. The company also cooperates with the other

companies in the SpareBank 1-alliance, particularly the banks and

insurance companies.

The LO congress’ decision that LOfavør shall be the best known

benefits-concept by 2013 has lead to increased activity in the

company. Six larger activities/campaigns have been performed,

and other marketing operations have increased in scope. The

company has experienced yet another year of increased use of the

membership benefits. The company has also experienced increased

demand for its services from the alliance-banks.

SPAREBANK 1 GRUPPEN AS

SpareBank 1 Gruppen AS’ assets, in addition to shares in its sub-

sidiaries, consist of cash deposits and less material assets. The hol-

ding company had liquidity reserves as of December 31, 2010 of

NOK 292 million, of which unutilised drawing rights accounted

for NOK 200 million. The liquidity reserve decreased with NOK

210 million compared to 2009.

The equity consists of share capital, share premium account, and

other equity. Share capital in the holding company was NOK

1,782 million as of December 31, 2010, while total equity was NOK


2.758 million. The holding company had free equity of NOK 728

million at the end of 2010.

The capital adequacy ratio in the SpareBank 1 Gruppen AS was

53.7% as of December 31, 2010, compared with 57.7% in 2009.

SpareBank 1 Gruppen AS core capital adequacy ratio as of December

31, 2010 was 44.9%, compared with 47.6% the previous year.

SPAREBANK 1 GRUPPEN

Cash and cash equivalents reserve were reduced by NOK 309.3

million during 2010. Reason for the reduction is that net cash flow

from operational activities and investment activities, amounting

to NOK 6,575 and 789.7 million respectively, did not exceed the

cash flow of NOK 7,674 million from financing activities.

Lending to customers and claims towards credit institutions had

a reduction of NOK 20,622 (increased of 210.91) million. Deposits

and debt to customers and credit institutions were reduced by

NOK 16,835 million (294.41). The holding of securities increased

with a net of NOK 883.3 million. The property portfolio was

reduced with NOK 596.1 (488.51) million. Debt established by

issuing securities had a net reduction of NOK 5,504 (increased of

876.91) million. In 2010, dividends of NOK 120 million were

paid to the owners.

The SpareBank 1 Gruppen Group, had a total equity of NOK

4,809 million at year end, compared to NOK 5,293 million the year

before. Capitalised goodwill in the Group as of December 31, 2010

amounted to NOK 851 million.

The capital adequacy ratio in the Group was 16.1% as of

December 31, 2010, compared with 16.31% in 2009. The Group’s

core capital adequacy ratio as of December 31, 2010 was 12.5%,

compared with 11.81% the previous year.

The transfer of the shares in Bank 1 Oslo AS January 1, 2010, to

the SpareBank 1-banks and LO involved a capital reduction in

SpareBank 1 Gruppen of NOK 1.130 million as of January 1,

2010. Of this reduction, share premium account and other equity was

reduced with NOK 579 and 551 million respectively.

The annual accounts are presented under the assumption that the

company will continue as a going concern. The board finds that

the prerequisites for the going concern assumption have been

met by the annual accounts for 2010 and the result forecasts for

2011. Beyond matters mentioned in this report, no circumstances

have arisen after the end of the financial year that would be of

material significance to the company’s financial position and

results.

DIVIDEND

The Board proposes that a dividend of NOK 440 million be distri-

buted from SpareBank 1 Gruppen AS for 2010. At the same time it

will be carried out a share issue of NOK 440 million to the owners

so that the company's financial strength is maintained.

RISK FACTORS

The operations of SpareBank 1 Gruppen are organised into diffe-

rent business areas through the Group’s subsidiaries. There are

major differences in the risk structure between each subsidiary.

The most important risk categories that impact the Group are

related to market risk, insurance risk, ownership risk operational

risk, credit risk, liquidity risk, concentration risk, as well as

strategic and business risk.

Bank 1 Oslo AS was demerged out from SpareBank 1 Gruppen

effective January 1, 2010. This has led to changed risk exposure

compared to last year.

Responsibility for risk management and control

The Group’s board of directors is responsible for risk management

and compliance in the Group. The board of each subsidiary is

responsible for managing risk and compliance in their own

company.

The responsibility for the overall risk management within the

Group lies with the Director for Strategy, Analysis and Risk

Management in the holding company. The Director reports to the

Chief Executive Officer of SpareBank 1 Gruppen AS.

The purpose of risk management in SpareBank 1 Gruppen is to

support the Group’s strategic development and achievement of

goals as well as fulfilment of statutory capital requirements. The

risk management shall ensure financial stability and proper Asset

Management. This shall be achieved through:

a moderate risk profile

a strong risk culture with a high level of risk management

awareness

striving towards an optimal capital allocation within the

adopted business strategy

exploitation of synergy and diversification effects, and

an adequate core capital in accordance with the chosen risk

profile.

Internal control within the Group is regulated in Group Policies

but defined as a line responsibility. In accordance with the

«Regulations relating to Risk Management and Internal Control»

and the Group’s own guidelines, risk factors in the operations are

reviewed annually and action plans are prepared in all units,

1 Figure exclusive Bank 1 Oslo Group

11

which are reported to the respective subsidiary’s board of directors.

In addition, surveys are conducted across the Group with regard

to internal control, Personal Data Act, and security matters.

SpareBank 1 Gruppen has outsourced the internal auditing

function to Ernst & Young AS. The Group has benefited with

increased expertise as a result of this. Internal auditing operations

also encompass the subsidiaries.

Developments in risk management in 2010

SpareBank 1 Gruppen is, as a financial group, subject to an

extensive set of regulations which are constantly under development.

Within insurance, a new set of rules is being developed for

calculating capital requirement, Solvency II.

Solvency II is expected to come in force from 2013. Similar to the

effect Basel II had on the development of risk management in

banks, Solvency II is expected to have at least the same effect on the

calculation of capital requirements as well as the need for developing

new models for risk management in insurance companies. Extensive

work is being performed to prepare for the new rules, including

participation in regulatory trial projects.

The Group will also be subject to the new regulations. SpareBank 1

Gruppen went through considerable changes in 2010 with

consequences for risk management within the Group. Among the

most important events in 2010 with short term impact, is that from

January 1, 2010 Bank 1 Oslo AS is no longer owned by SpareBank

1 Gruppen AS. This separation has led to a significant reduction in

the exposure to credit risk. Credit risk as a share of total risk exposure

was reduced from 9.2% as of December 31, 2009 to 1.7% as of

December 31, 2010. The separation of Bank 1 Oslo AS will not have

any short term effect on the work related to risk management other

than reducing risk exposure for SpareBank 1 Gruppen.

At the same time, acquisition, restructuring and development of

the companies in SpareBank 1 Gruppen Finans Group and Argo

Securities AS will in the future become an important part of value

added in SpareBank 1 Gruppen. They will also constitute a more

significant part of risk elements in SpareBank 1 Gruppen. From

2009, the companies were included in the overall risk calculation

and were also a part of the calculation of diversification effects.

The Group’s risk management review program has continued

through 2010.

Risk categories

The Group’s risk exposure is related primarily to market risk,

insurance risk, ownership risk, credit risk, concentration risk, as

well as operational risk (included compliance risk), liquidity risk

and strategic and commercial risk. For an explanation of each risk

category, see Note 3 - Financial risk management.

Market risk

The Group’s consolidated market risk is measured and reported

quarterly to the board of directors in SpareBank 1 Gruppen AS.

The calculations are based on a Value at Risk (VAR) model. A

corresponding model is used for the follow-up of each subsidiary.

The subsidiaries manage and monitor risk exposure in accordance

with their own models and routines.

2010 has been a very good year financially for SpareBank 1 Gruppen.

Except from Argo Securities AS all companies in SpareBank 1

Gruppen improved its financial position through the year. Risk

management and internal control are considered satisfactory and

have been improved in all companies during 2010.

The value adjusted return in the customer portfolio of SpareBank 1

Livsforsikring AS was 7.1% and the booked return was 5.2%.

SpareBank 1 Livsforsikring AS’ securities adjustment reserves

increased from NOK 327.1 million to NOK 616.9 million during

the year. The additional provisions were increased with NOK

125.3 million and amounted to NOK 379.3 million at year end. The

capital and solvency margin were satisfying at the beginning of the

year, and have significantly improved during the year.

Despite the fact that SpareBank 1 Skadeforsikring AS has a con-

servative investment profile in its investment portfolio, the share

invested in equities was 9.1% at the end of 2010 compared to

7.1% in 2009. The company has very short term maturity on its

interest placements. At the end of the year, 14.1% of the company’s

investment portfolio was placed in real estate, compared to 14.4%

in 2009. Despite the increase in the equity share on the company’s

financial investments, the market risk in the company is still

considered medium-high. The company had a financial return of

4.9% in 2010 compared to 6.8% in 2009.

Ownership risk

Given the present risk exposure, the holding company’s financial

position is regarded satisfactory. The development of the results

in 2010 has entailed a significantly better financial situation than

at the beginning of the year.

Credit risk

The demerger of Bank 1 Oslo AS has resulted in a significantly

lower exposure against credit risk for the Group.

The credit risk in SpareBank 1 Livsforsikring AS and SpareBank

1 Skadeforsikring AS is related to investments in commercial

paper and bonds. SpareBank 1 Livsforsikring AS is exposed to

Collateralized Debt Obligations (CDOs) in its portfolios, recognised

at NOK 212 million. This amounts to approximately 0.8% of

total financial assets.


The risk associated with the remaining interest investments is limited

to companies with high credit worthiness. The credit risk in this part

of the portfolio is considered low to moderate. The insurance

companies have in addition credit risk attached to different

reinsures. The ratings are monitored closely and the risk is

considered very low. In the real estate portfolio risk associated

with operating the signed leases exists. This risk is also considered

limited.

Concentration risk

Concentration risk for SpareBank 1 Livsforsikring AS and

SpareBank 1 Skadeforsikring AS is expected to be related to

investment, especially in connection with investment in bonds

issued by financial institutions. Capital requirements for this risk

have not been calculated as of December 31, 2010. SpareBank 1

Skadeforsikring AS has a certain concentration risk attached with

reinsurers.

Insurance risk

Insurance risk is a central part of the operations in both SpareBank

1 Livsforsikring AS and SpareBank 1 Skadeforsikring AS. Losses

in SpareBank 1 Skadeforsikring AS can arise as a consequence of

fluctuations in the current year’s claims ratio and changes in

claims reserves. For SpareBank 1 Livsforsikring AS the insurance risk

comes mainly from risk products without profit sharing.

SpareBank 1 Livsforsikring AS and SpareBank 1 Skadeforsikring

AS relieve risk through reinsurance. The companies either cede

a significant level of risk within individual business areas or

cede a share of the claims from the overall insurance business to

reinsurers. Reinsurance also covers cumulative claims and disasters.

The risk associated with the reinsurers’ creditworthiness is placed

under credit risk.

The control of the insurance risk in both SpareBank 1 Skadeforsikring

AS and SpareBank 1 Livsforsikring AS is considered to be satisfactory.

Operational risk

The operational risk in the subsidiaries is currently documented in

connection with the work done to meet the «Regulations relating to

Risk Management and Internal Control». This work normally requi-

res the management group of each subsidiary and staff area in the

holding company to identify the main category of operational risk

before and after the implementation of measures. This effort did not

identify any serious risk factors in the Group in 2010.

In connection with the implementation of the Group’s ICAAP

calculations, models were put in place for calculating necessary

capital needs for operational risk. Reference is made to the Pillar 3-

report for a more detailed description of these calculations.

In connection with the new «Regulations relating to Risk Manage-

ment and Internal Control», including paragraph § 6 (last section)

of these regulations, which clarifies the overlap with the «Capital

Adequacy Regulations», all the framework and management

documents in the Group was updated in 2009 and further adjustments

were made in 2010 to clarify the boundaries between the risk

processes that are encompassed by the internal control work and

those that are encompassed by the ICAAP work. In addition, it is

established a separate compliance function within the Group,

which conducts continuous ongoing work related to compliance,

industry standards etc, but also through follow up of internal

guidelines. This function ensures the fulfillment of risk prosesses

required by law and effective implementation internally. Compliance

with statutory risk processes and an efficient implementation of

these are ensured through this work. Compliance risk on Group level

is monitored through qualitative analyses as well as continuously in

the daily operations. At company level compliance reports are

prepared in connection with the administration of the investment

portfolio.

Liquidity risk

Financing structure is based on an overall liquidity strategy which

is reviewed and approved by the board at least once a year. The

liquidity risk is reduced through diversification of the deposits

across different markets, deposit sources, instruments and maturity

terms. In 2010, the liquidity risk in SpareBank 1 Gruppen was

mainly associated with the parent company and it is considered

to be low.

Strategic and commercial risk

SpareBank 1 Gruppen has established a contingency plan for

handling reputation-sensitive issues. The contingency plan’s

agenda will be reviewed and updated every quarter. Work on

specific matters will be initiated and managed by the Director of

Communication.

Together with the Alliance’s Risk Management Forum, the Group

will continue to focus on the establishment of quantitative models

with the purpose of estimating the capital needs for the strategic and

commercial risks in the Group.

Changes in the regulations

After the separation of Bank 1 Oslo AS, SpareBank 1 Gruppen is

no longer required to prepare ICAAP calculations in accordance

with the Basel II regulations. Some subsidiaries in SpareBank 1

Gruppen are still required to prepare ICAAP calculations.

SpareBank 1 Gruppen will continue to prepare ICAAP calculations

in accordance with current Basel II regulations in 2011 as they did

in 2010. The consequence of this will be that the requirements for

similar reporting in certain subsidiaries will cease, and that complete

13

ICAAP calculations will be prepared at Group level only.

After the separation of Bank 1 Oslo AS, SpareBank 1 Gruppen is

now considered to be an insurance dominated mixed financial

group. The Group will therefore be encompassed by the Solven-

cy II regulations. During 2010 the Group has on a consolidated

level taken part in the quantitative calculations associated with QIS

5. The results show that the Group is well prepared to meet the

expected requirements in the new regulation.

Pillar 3

Reference is made to a separate Pillar 3-report prepared in

accordance with the requirements stipulated in Part IX, Chapters

45 and 46, of the Capital Adequacy Regulations. The report has

also been prepared to meet the market’s increased demand for

transparency and openness with regard to risk in general and a

more detailed review of the company’s capital and risk situation.

For the Pillar 3-report we reference to http://investor.sparebank1.no.

ORGANISATION AND WORKING ENVIRONMENT

AT SPAREBANK 1 GRUPPEN AS

Organisation

In SpareBank 1 Gruppen there were a total of 1,196 employees and

1,162 full-time equivalents in 2010. The corresponding figures for

2009 were 1,441 and 1,409 respectively. The decrease in the workforce

is related primarily to the demerger of Bank 1 Oslo AS from

January 1, 2010, and restructuring processes in parts of the Group.

SpareBank 1 Gruppen AS had 220 employees and 213 full-time

equivalents as of December 31, 2010.

The total turnover in 2010 was 9.9%. The corresponding figure for

2009 was 7.1%. Adjusted for early retirement pensions (AFP), old

age pensions and disability pensions, the Group’s turnover was

7.6% compared to 4.9% in 2009.

All business areas are organised in subsidiaries. The Chief Executive

Officers in the subsidiaries, together with the directors for Finance,

Communication and Strategy & Business development, partake in

the corporate management group of SpareBank 1 Gruppen.

HR Strategy

SpareBank 1 Gruppen’s HR strategy is based on the Group’s

vision, values, goals and success factors. The main goal is to

ensure that SpareBank 1 Gruppen:

Attracts the right employees by focusing on the values «to be

an expert and close to you».

Retains the best employees by giving them responsibilities,

communicating with them and rewarding them for good

performance.


Develops employees through involvement, establishment of

clear goals and follow-up.

The HR strategy follows the employment cycle of an employee and

contains frameworks and guidelines for how the company as an

employer should manage and develop its employees. The HR

strategy includes guidelines that will develop SpareBank 1 Gruppen

as an attractive and including working place without any form for

discrimination.

Central areas in our HR Strategy are:

The trainee programme

Since the trainee programme was introduced in 2006 a total of 15

trainees have completed their trainee period. All of them have

central positions within the Group. SpareBank 1 Gruppen has

currently nine trainees and will recruit a new group of trainees in

2011. The purpose of the trainee programme is to recruit future

managers and technical specialists who, during a two-year period,

will acquire wide-ranging expertise in the Group’s various busi-

ness areas.

The remuneration policy

Regular analyses are conducted to ensure that the Group offers

competitive terms. The incentive scheme and profit sharing at the

Group level and bonus scheme at the company level was continued

in 2010.The incentive scheme is adapted to the principles of

dynamic management, where relative performance is rewarded.

The Group’s bonus scheme will be adapted to the new regulations and

guidelines from the FSA on compensation in financial institutions.

Working environment and sickness leave

Annual work climate surveys are conducted. From 2010 the

organisation uses a new survey which gives better estimates of the

performance culture and dynamic management to underpin the

culture the Group wants to develop. The working environment in

the Group is considered to be good, but there are variations in the

different departments. The survey makes it possible to be targeted

on the basis of the different departments` needs. The survey will

be conducted regularly so that we can follow the development

from year to year.

Each subsidiary in SpareBank 1 Gruppen has its own working-

environment committee. The assigned safety personnel in each

subsidiary make an active contribution as well, and a central

Workplace Anti-Alcoholism and Drug Addiction Dependency

Committee have been appointed.

SpareBank 1 Gruppen continued the agreement on an Inclusive

Workplace. Absence due to sickness was 3.7% in 2010. These rates

are among the lowest in the industry. Physician reported absence was

3.0 % in 2010. Training in various HSE disciplines was provided

for managers and safety coordinators in 2010. This was carried out

in consultation with the individual working environment

committees.

SpareBank 1 Gruppen’s ethical guidelines specify rules for how

the employees and representatives shall give notice if they become

aware of matters that are in violation of laws, regulations or the

Group’s internal rules. A separate notification routine has also been

established.

SpareBank 1 Gruppen started the project «the Workplace of the

Future» with a rebuilding of the headquarters in Hammersborggata

2 in 2010. During 2011 most of the employees in the Group will

make use of modern and contemporary facilities that contributes

to increased interaction and knowledge sharing.

Development of expertise

Work related to human resources and expertise development in the

alliance is organised in a HR-Committee. The HR-Committee is

mandated to develop a common overarching HR strategy including

a focus on attracting the right, keep the best and develop the

employees.

SpareBank 1 Gruppen has a collective strategy of expertise. The

subsidiaries initiate vocational training and other skills upgrading

initiatives if required. The Group has joint programmes for

leadership development. SpareBank 1 Skadeforsikring AS has

joined the accreditation scheme for insurance-claims advisors. At

the end of 2010, 468 insurance advisors had approved the

accreditation tests.

Life Phase and equal opportunities

The Group’s Life Phase Committee ensures that the Group

complies with the Norwegian Gender Equality Act. The committee

also focuses on how SpareBank 1 Gruppen can be an attractive

employer for employees in various life phases.

In connection with the Group’s life phase policy it was decided

to change the policy in 2008 in order to fulfil the goal of

increasing the real pension age in the Group. The intention of the

new policy is to reduce the need for recruitment and take advantage

of useful expertise.

Of the Group’s employees, 47% are women and 53% are men.

5.2% of all female employees work on a part-time basis, compared

with 1.5% of the male employees. In the Group Management, two

out of nine members are women, and in the Alliance Management,

two out of eight members are women. The central management

groups in the parent company and subsidiaries have 23% female

representation overall. There were two women among the eight

15

members of the Executive Board at the end of the year, while female

representation on the subsidiary boards was 34% overall.

SpareBank 1 Gruppen uses a method for reviewing roles and

positions to ensure objective wage setting. The placing in wage

categories is done with sex neutral tool for position evaluations.

In connection with the annual evaluations of salary, equal pay

associated with work of equal value is a topic. The main cause why

the wage level is somewhat higher for men than women in the

Group is that there are more men than women in management and

specialist positions. Analysis related to equal opportunities and

pay is conducted in the HR reporting of the Group and deviations

are reported to Group Management.

As a member of the Norwegian Financial Services Association,

SpareBank 1 Gruppen AS has participated in the FUTURA

programme. This is a development programme that aims to

increase the share of women in the recruitment basis for leading

positions.

Attractive employer

SpareBank 1 Gruppen experiences an increased interest by young

employees. This is a result of the fact that the Group has a strong

brand in the SpareBank 1-name and the activities that are carried out

to market the Group as an attractive employer at universities and

colleges. SpareBank 1 Gruppen recruited 153 new employees in

2010. The majority of those employed had at least three years of

education beyond high school. Most new employees were aged 26

to 35 years, but the Group has recruited employees of all ages in

2010. The average age of employees in SpareBank 1 Gruppen

was 42.1 years at the end of 2010.

SpareBank 1 Gruppen AS was selected as the twelfth most attractive

employer among people having worked 2-5 years. This is an

improvement from the thirtieth place in 2009, and SpareBank 1

Gruppen was this year’s climber.

Efforts to emerge as an attractive employer with exciting career

opportunities and competitive terms will continue in 2011.

SOCIAL RESPONSIBILITY

SpareBank 1 Gruppen has the following definition of community

involvement:

«We are committed to contribute to sustainable economic develop-

ment together with our employees, their families, the community

and society in general to improve the quality of life for most

people». This work is based on four principles:

economic growth,

environmental balance,

social progress and

positive influence in society

Our goal is to make money, but value creation has to be in line with

sustainable development. Our social commitment is thus about

how value is created.

We are committed to take into account how our behaviour affects

people, the environment and the society. This responsibility

makes demands beyond the laws, which the financial markets are

subject to. Social Responsibility covers everything from investment

management to labour rights.

Social Responsibility is also about fraud and injury prevention

measures, protection of life, health and values, good products to

customers, business ethics, environmental impact, credit policies,

attitudes and local involvement.

An active community involvement consists of a long-term

perspective on all aspects and consequences of business in

society.

Environment and climate accounting

Although SpareBank 1 Gruppen does not pollute in the same

way as traditional industry, we have an impact on the environment

- both directly and indirectly. This includes waste, energy use, travel,

transportation, materials, procurement and water consumption.

SpareBank 1 Gruppen will, for the third consecutive year, prepare

a climate accounting based on the total energy consumption related

to daily operations.

The climate accounting will be presented at:

http://investor.sparebank1.no

Community involvement

SpareBank 1 Gruppen is involved in the micro credit company

Kolibri Kapital. Micro credit consists of small loans to the under-

privileged and enterprising individuals in developing countries,

for the development of business activity or improvement of housing

conditions. Kolibri Capital collects money in Norway through

an ongoing expansion of its share capital. This is in its entirety

loaned out to micro-banks in South Africa, Asia and South

America. SpareBank 1 Gruppen contributes with share capital.

CHANGES TO THE BOARD AND EXECUTIVE MANAGEMENT

Hans Olav Karde, CEO of SpareBank 1 Nord-Norge, was elected

Chairman of the Board in April 2010. He succeeded Harry

Konterud who had been Chairman of the Board since April 2009.

Harry Konterud resigned from the Board in April 2010, and


Richard Heiberg, who took over as CEO of Sparebanken Hedmark

after Harry Konterud, was elected. On January 26, 2011 Tor-Arne

Solbakken, Vice Chairman of the LO, replaced Bente N. Halvorsen,

as a member of the Board. At the same time Terje Vareberg

resigned from the Board. Arne Austereid, who took over as CEO

of SpareBank 1 SR-Bank on January 1, 2011 after Terje Vareberg,

was elected as Vice Chairman of the Board.

Within Group Management there were two changes during 2010.

Jarle Haug was appointed CEO of SpareBank 1 Gruppen Finans AS

from January 2010 and became a member of Group Management.

Øyvind Aass, head of the alliance partnership, joined the Group

Management from May 2010. He has led the alliance partnership

since December 2007.

OUTLOOKS

2010 was a profitable year for SpareBank 1 Gruppen. Return on

equity was in the top league of financial service companies in the

Nordic countries due to good earnings in the major product

companies, aided by favourable investment markets, the

profitability program, Delta, and one-off effects. The profitability

program has also helped improve the underlying operations.

The pension reform will increase focus on the need for own

retirement savings. It is the opinion of the Board, that

SpareBank 1 Gruppen is well positioned to increase business

volume in this area.

During 2010, the Group's capacity to bear risk further improved,

due to a number of factors such as the strengthening of the securities

adjustment reserves and additional provisions in SpareBank 1

Livsforsikring AS. It is the opinion of the Board that SpareBank 1

Gruppen is well capitalised to meet anticipated requirements in

connection with the Solvency II framework.

Argo Securities AS, the Group's investment and brokerage house,

has not yet achieved satisfactory profitability. Actions have been

taken to address this area and are expected to yield results in 2011.

Significant investment costs in the company imply that

profitability will be achieved in the medium to long run.

SpareBank 1 Gruppen is exposed to the securities market through

its various subsidiaries and thus the development in stock prices

and interest rates affect the earnings of the Group to a large extent.

The outlook for the Norwegian economy in 2011 is good. Growth in

the mainland economy is expected to be 3%, driven by increased

private consumption and rising investment. For households, there

is increasing optimism grounded in low unemployment, low

interest rates and low inflation that is already contributing to

increased purchasing power of households. Norges Bank will

probably increase interest rates gradually and in small steps back

to a more normal level over the next 2-3 years. Favourable macro-

economic conditions and expected good performance in the

securities market will provide Sparebank 1 Gruppen basis for

continued growth, and the board expects a good result in 2011.

A WORD OF GRATITUDE

The employees have shown a strong willingness to «go the extra

mile» in 2010. Collaboration with the employee organizations

was close and productive. The Board is highly satisfied with the

results for 2010 and would like to extend thanks to all the employees

of SpareBank 1 Gruppen for their excellent efforts.

Oslo, 31. March 2011

Hans Olav Karde Arne Austereid Bjørn Engaas CHAIRMAN OF THE BOARD

Finn Haugan Knut Bekkevold Richard Heiberg

Tor-Arne Solbakken Venche Johnsen Kirsten IdebøenCHIEF EXECUTIVE OFFICER

NOTE: This translation from Norwegian has been prepared for information purposes only.

Financial statements 2010SpareBank 1 Gruppen

SPAREBANK 1 GRUPPEN – INCOME STATEMENT

Parent company Group

2010 2009 NOK 1,000 Note 2010 2009

- - Gross Insurance premium revenue 8 213 841 7 556 607- - - reinsurers' share 535 217 488 185- - Net insurance premium revenue 7 7 678 624 7 068 422

15 920 31 437 Interest income 98 447 1 066 32861 422 63 318 Interest expense 85 196 798 280-45 502 -31 881 Net interest income 9 13 251 268 049

- - Fee and commission income 715 505 855 270- - Fee and commission expense 846 205 752 100- - Net fee and commission income 8 -130 700 103 170

-1 310 - Net gains in financial assets designated at fair value 9 1 547 267 2 443 9313 641 18 245 Net gains in financial instruments classified as avalable-for-sale 9 30 596 48 046

- - Net income from bonds at amortised cost 9 75 049 3 362- - Net income from bonds held-to-maturity 9 259 255 271 779- - Net income from investment properties 10 399 410 306 848

606 274 203 442 Share of profit and group contribution from subsidiaries - - 4 - Other operating income 11 384 321 324 887

563 107 189 807 Total income 10 257 073 10 838 494

- - Insurance benefits and claims 7 496 694 7 013 788- - Insurance claims recovered from reinsurers -488 154 -331 006- - Securities adjustment reserve for life insurance 289 732 327 145- - Transferred to policyholders - life insurance 142 363 170 766- - Allocation to additional provisions - 127 918- - Net loan loss provisions 29 10 405 123 168

-25 957 21 850 Operating expenses 12 1 674 173 2 077 12333 325 31 718 Depreciations and amortisation expenses 14, 15, 18 91 300 124 317276 3 261 Other operating expenses 55 427 11 226

7 644 56 829 Total operating Expenses 9 271 940 9 644 445555 463 132 978 Operating Profit 985 133 1 194 049

Share of profit of associates and jointly controlled entities accounted- - for by the equity method 17 - -386

555 463 132 978 Profit before tax 985 133 1 193 663109 008 115 731 Income tax expense 50 153 586 294 020446 455 17 247 Profit after tax 831 547 899 643

Profit attributable to:Shareholders of the parent company 841 025 909 115Minority interests -9 478 -9 472

Earnings per share (expressed in NOK) 467 505Diluted earnings per share (expressed in NOK) 472 510

SpareBank 1 Gruppen18

SPAREBANK 1 GRUPPEN – STATEMENT OF COMPREHENSIVE INCOME

Consolidated statement of income, expenses and value change

Group NOK 1,000 2010 2009

Profit for the year 831 547 899 643Actuarial gains and losses in pension -76 215 -9 477Revaluation of property -12 656 1 595Adjustment of insurance liabilities 3 228 -819Change in available-for-sale financial assets -814 -594Income tax 23 980 2 436Total complrehensive income for the year 769 070 892 784

Shareholders' of the parent company 778 548 902 256Minority interests -9 478 -9 472

Parent company

NOK 1,000 2010 2009

Profit for the year 446 455 17 247Actuarial gains and losses in pension -1 057 -12 567Income tax 296 3 519Total comprehensive income for the year 445 694 8 199

19

SPAREBANK 1 GRUPPEN – CONSOLIDATET BALANCE SHEET


31.12.10 31.12.09 NOK 1,000 Note 31.12.10 31.12.09

ASSETS 93 664 101 933 Deferred income tax asset 50 - -

- - Goodwill 5, 14, 52 850 819 760 486- - Other intangible assets 15 142 933 63 880

4 469 691 5 042 709 Investment in subsidiaries 16 - - 10 147 18 000 Investment in associates and jointly controlled entities 17 9 010 120 553127 501 76 955 Property, plant and equipment 18 1 340 389 526 991

- - Reinsurance receivables 40 1 494 338 1 150 842- - Insurance receivables from policyholders 41 1 394 441 1 108 015

243 351 193 758 Other assets 19 616 077 482 731- - Investment property 27 4 094 812 4 690 887- - Bonds held to maturity 20, 25, 26, 31 4 679 131 5 020 382- - Bonds at amortised cost 20, 25, 26, 31 1 249 291 764 626

17 583 15 335 Financial instruments - available for sale 20 ,21, 24, 31 20 216 42 944122 580 250 000 Lending to customers and deposits with credit institutions 20, 21, 26, 28, 31, 33 658 452 21 280 928

- - Financial instruments designated at fair value 20, 21, 22, 31 23 024 332 23 938 155692 - Derivative financial instruments 20, 21, 23 130 605 220 787

93 520 101 198 Cash and cash equivalents 20, 26 985 375 1 294 6535 178 729 5 799 888 TOTAL ASSETS 40 690 221 61 466 859

EQUITY AND LIABILITIES2 030 277 2 609 496 Shareholders equity 2 030 277 2 609 496727 859 822 945 Retained earnings 2 691 636 2 588 291

- - Revaluation reserve 71 454 65 221- - Minority interests 15 446 30 300

2 758 136 3 432 441 Total equity 4 808 813 5 293 308

433 846 683 892 Subordinated loan capital and perpetual subordinated loan capital securities 20, 32, 37 848 846 1 769 568

- - Securities adjustment reserve 616 870 327 145- - Provisions in life insurance 42 22 315 681 20 843 433- - Premium and claims provisions in P&C Insurance 43 8 067 303 6 821 960

74 966 103 318 Net retirement benefit obligations 48 325 355 460 453- - Deferred income tax liability 50 253 417 155 643- - Payable taxes 50 85 081 137 653

1 376 914 500 531 Securities issued 20, 21, 32, 38 1 376 914 6 880 478- - Liabilities related to reinsurance 44 77 706 95 123- - Derivative financial instruments 20, 21, 23 160 265 219 064

534 867 578 005 Other liabilities 51 1 129 898 1 004 101- 501 700 Deposits from and liabilities to customers and credit institurions 20, 21, 32, 36 624 072 17 458 930

5 178 729 5 799 888 TOTAL EQUITY AND LIBILITIES 40 690 221 61 466 859

Oslo, 31. March 2011

Hans Olav Karde Arne Austereid Bjørn Engaas CHAIRMAN OF THE BOARD

Finn Haugan Knut Bekkevold Richard Heiberg

Tor Arne Solbakken Venche Johnsen Kirsten IdebøenCHIEF EXECUTIVE OFFICER


NOTE: This translation from Norwegian has been prepared for information purposes only.

CONSOLIDATED STATEMENT OF CASH FLOW

Parent company Group**

2010 2009 NOK 1,000 Note 2010 2009

CASH FLOWS FROM OPERATING ACTIVITIES

446 455 17 247 Profit after tax 831 547 899 643- - Share of profit or loss from associates and jointly controlled

entities accounted for by the equity method 17 - -38633 325 31 718 Depreciation and amortisation 15, 18 91 300 124 317

- - Revision of investment property values 27 -148 187 18 077- - Net loan loss provisions 29 10 388 123 168- - Increase reinsurance receivables 40 -343 496 -50 880- -50 000 Increase in lending to customers 28, 29 - -1 153 527

127 420 100 000 Reduction in lending to customers 28 20 612 088 - - - Change in insurance provisions 3 007 315 2 561 504

-566 029 -68 660 Change in accrued expenses and prepaid revenues -650 891 286 627Increase in deposits from customers and loans and

- - deposits from credit institutions - 454 978Reduction in deposits from customers and loans and

-501 700 -9 353 deposits from credit institutions 36 -16 834 858 - -460 529 20 952 Net cash flow generated from operating activities 6 575 207 3 263 521

CASH FLOWS FROM INVESTING ACTIVITIES

-692 - Increase in financial instruments designated at fair value 22, 23 - -4 871 025- - Reduction of financial instruments designated at fair value 22 1 004 005 - - - Increase in financial instruments held to maturity -143 414 - - - Reduction of financial instruments held to maturity 26 - 147 718- - Increase in financial instruments available for sale 24 - -12 595

256 034 203 384 Reduction of financial instruments available for sale 24 22 728 - -258 282 -218 566 Payment of group contributions * - -

- - Additions investment property 27 -24 942 -48 015- - Disposals and gain Investment property 27 803 601 -

-50 546 -32 949 Increse property, plant and equipment 18 -872 245 -67 128-53 486 -48 131 Net cash flow used in investing activities 789 733 -4 851 045

CASH FLOWS FROM FINANCING ACTIVITIES

- - Receipts on subordinated loan capital 37 - 535 100-250 046 - Payments related to redemption of subordinated loan capital 37 -920 722 -100 000

- 176 000 Receipts on new equity - 176 000- - Effect of demerged of Bank 1 Oslo AS 53 -1 129 932 -

-120 000 -800 000 Dividends -120 000 -800 000876 383 - Increase of securities issued 38 - -

- - Reduction of securities issued 38 -5 503 564 919 230506 337 -624 000 Net cash flow from financing activities -7 674 218 730 330

-7 678 -651 179 Net receipts/payments of cash -309 278 -857 194

101 198 752 377 Cash and cash equivalents as at January 1 1 294 653 2 151 847

93 520 101 198 Cash and cash equivalents as at December 31 20, 26 985 375 1 294 653

* The group contribution payment is registrered as an increase in subsidiary investment. Other granted and received group contribution is recognised through profit and loss, and is not presented here.

** Group consolidated exclusive Bank 1 Oslo AS per December 31, 2010, is showed in note 54.

21

STATEMENT OF CHANGES IN EQUITY

Parent companyShare premium Retained Total

NOK 1,000 Note Share capital reserve earnings equity

Equity as at 31 December 2008 1 747 200 986 296 1 375 944 4 109 440

Profit for the year - - 17 247 17 247

Actuarial gains and losses on pension - - -9 048 -9 048

Capital increase 35 200 140 800 - 176 000

Capital reduction - -300 000 300 000 -

Dividends - - -800 000 -800 000

Other postings through equity - - -61 199 -61 199

Equity as at 31 December 2009 1 782 400 827 096 822 945 3 432 441

Profit for the year - - 446 455 446 455

Actuarial gains and losses on pension - - -761 -761

Capital increase - - - -

Capital reduction/demerger of Bank 1 Oslo AS - -579 219 -420 781 -1 000 000

Dividends - - -120 000 -120 000

Other postings through equity - - - -

Equity as at 31 December 2010 1 782 400 247 877 727 859 2 758 136

Group Non-Share premium Retained Revaluation controlling Total

NOK 1,000 Note Share capital reserve earnings reserve interests equity

Equity as at 31 December 2008 1 747 200 986 296 2 211 791 66 048 42 825 5 054 160

Profit for the year - - 909 115 - -9 472 899 643

Actuarial gains and losses in pension - - -6 853 - - -6 853

Revaluation property - - - -827 - -827

Financial assets available for sale - - -594 - - -594

Capital increase 35 200 140 800 - - - 176 000

Capital reduction - -300 000 300 000 - - -

Dividends - - -800 000 - - -800 000

Disposal minority interest - - - - -3 054 -3 054

Other postings thorugh equity - - -25 167 - - -25 167


Profit for the year - - 841 025 - -9 478 831 547

Actuarial gains and losses in pension - - -54 875 - - -54 875

Revaluation property - - - -9 112 - -9 112

Financial assets available for sale - - -814 - - -814

Capital increaes - - - - - -

Capital reduction/demerger of Bank 1 Oslo AS - -579 219 -550 713 - - -1 129 932

Dividends - - -120 000 - - -120 000

Disposal minority interst - - - - -5 377 -5 377

Correction previous year - - -15 345 15 345 - -

Other postings through equity - - 4 068 - - 4 068



NOTE 1 – GENERAL INFORMATION

As of December 31, 2010, SpareBank 1 Gruppen Group consisited ofthe parent company SpareBank 1 Gruppen AS and the wholly-ownedsubsidiaries; ODIN Forvaltning AS, SpareBank 1 Livsforsikring AS,SpareBank 1 Skadeforsikring AS, SpareBank 1 Medlemskort AS, Sparebankutvikling AS and SpareBank 1 Gruppen Finans AS, as wellas Argo Securities AS with an owner share of 76,75%.

SpareBank 1 Gruppen AS' ownershare in Bank 1 Oslo AS was distributed to the SpareBank 1 banks (90%) and LO (10%) with effectfrom January 1, 2010.

Alliansesamarbeidet SpareBank 1 DA is recognised through usingthe equity method, and the Group's owner share is 10%.

SpareBank 1 Gruppen AS has its office address in Tromsø, Norway.

SpareBank 1 Gruppen AS is a holding company that, through its subsidiaries, provides and distributes products in the fields of life andP&C insurance, fund management, securities brokering, factoring,receivables management and debt collection of old claims. The Group'sprimary market is Norway.

The Group's consolidated financial statements have been authorisedfor issue by the supervisory board and the shareholder's committee onApril 27, 2011. The General Meeting is the Group's upper body.

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of preparation for the consolidated financial statementsThe consolidated financial statement for SpareBank 1 Gruppen and thefinancial statement for the parent company for the fiscal year 2010 havebeen prepared in accordance with International Financial ReportingStandards (IFRS), which are approved by the EU, as well as in accordancewith existing additional Norwegian regulations. This also includesIFRIC (The International Financial Reporting Interpretations Committee)interpretations and those of its predecessor SIC (The Standing Inter-pretations Committee).

The consolidated financial statements have been prepared under thehistorical cost principle, except for financial derivatives, financialassets and financial liabilities held at fair value through profit or lossand financial assets available-for-sale. Properties owned for the pur-pose of gathering rent income or an increase in value are measured atfair value according to IAS 40.

The preparation of financial statements in conformity with IFRSrequires the use of certain critical accounting estimates. It also requiresmanagement to exercise it judgement in the process of applying theGroup’s accounting policies. The areas involving a greater degree of judgement or complexity, or areas where assumptions and estimatesare significant to the consolidated financial statements are disclosedin Note 4.

The financial statements are presented based on IFRS standards andinterpretations mandatory for financial statements as of December31, 2010.

New and amended Standards adopted by the GroupThe Group has in 2010 adopted the following new standards andamendments:

IFRS 3 ‘Business Combinations’ (revised) and consequential amend-ments to IAS 27 ‘Consolidated and separate financial statements’,IAS 28 ‘Investments in associates’, and IAS 31 ‘Interests in joint Ventures’ are effective prospectively to business combinations for

which the acquisition date is on or after the beginning of the firstannual reporting period beginning on or after January 1, 2010.

The revised standard continues to apply the acquisition method to business combinations but with some significant changes. The revisedstandard requires that the effects of all transactions with non-controlling shareholders be recorded in equity when there is nochange in control. Such transactions will no longer result in goodwillor gains or losses. When control ceases, remaining ownership interestis measured at fair value and gains or losses are recognised through theincome statement.

The revised standard requires goodwill to be determined only at theacquisition date rather than at each step of the acquisition. The determination of goodwill includes the previously held equity interestto be adjusted to fair value, with any gain or loss recorded in the income statement. A contingent consideration will be recognised at fairvalue at the acquisition date. After the previous rules, the contingentconsideration would have been recognized at the date when the probability requirement is not met. Transaction costs are expensed. Previously these would have been included in the purchase price.

IAS 24 ‘Related party disclosures’ (revised) supersedes IAS 24 issuedin 2003. The standard is mandatory for accounting periods beginning onor after January 1, 2011. As permitted, the Group has opted for an earlier application of this standard. The revised standard clarifiesand simplifies the definition of related party, and removes the require-ment for government-related entities to disclose details of all trans-actions with the government and other government-related entities.

IAS 27 ‘Consolidated and separate financial statements’ (revised)requires the effects of all transactions with non-controlling interests tobe recorded in equity if there is no change in control. Such transactionswill no longer result in goodwill or gains and losses. The standard alsospecifies the accounting when control is lost. Any remaining interest inthe entity is re-measured to fair value, and a gain or loss is recognised inprofit or loss. IAS 27 (revised) has no impact on the current period, asnone of the non-controlling interests have a deficit balance; therehave not been transactions whereby an interest in the entity is retainedafter the loss of control of that entity, and there have not been trans-action with non-controlling interests.

New and amended standards, and interpretations adopted bythe Group but not currently relevant (although they may affectthe accounting for future transactions and events)IFRIC 9 ‘Reassessment of embedded derivatives’ (amended) and IAS 39, ‘Financial Instruments: Recognition and measurement’. Theamendment to IFRIC 9 requires an entity to assess whether an embedded derivative should be separated from a host contract whenthe entity reclassifies a hybrid financial asset out of the ‘fair valuethrough profit and loss’ category. This assessment is to be made basedon circumstances that existed on the later of: a) the date the entity firstbecame a party to the contract and b) the date of any contract amendments that significantly change the cash flows of the contract.If a reliable measurement is not possible, the reclassification shouldnot be made.

IFRIC 16 ‘Hedges of a net investment in a foreign operation’ (amended).The amendment states that, in a hedge of a net investment in a foreignoperation, qualifying hedging instruments may be held by any entityor entities within the Group, including the foreign operation itself, as long as the designation, documentation and effectiveness requirements of IAS 39 that relate to a net investment are satisfied. Inparticular, the Group should clearly document its hedging strategy dueto the possibility of different designations at different levels of theGroup.

IAS 38 ‘Intangible Assets’ (amended) clarifies the requirements for fairvalue measurement of intangible assets acquired through business

Notes

23

combinations. In particular cases, intangible assets with similar economiclives can be treated as a single asset.

IAS 1 ‘Presentation of Financial Statements’ (revised). The revised standard requires that income and expense items previously recognizeddirectly in equity should be presented in the statement of compre-hensive income. In the equity statement, transactions with owners andincome and expense items are presented separately and as previously,categorized according to type of equity. Comparative figures havebeen modified for consistency with the revised standard. The changeaffects only the presentation and not earnings per share.

IAS 36 ‘Impairment’. The amendment clarifies that the largest cash-generating unit (or Group of units) to which goodwill should be allo-cated for the purposes of impairment testing is an operating segment,as defined by paragraph 5 of IFRS 8, ‘Operating Segments’ (that is, be-fore the aggregation of segments with similar economic characteristicsas the referenced to IFRS 8, paragraph 12).

IFRS 2 (amended) ‘Group cash-settled share-based payment’. In additionto incorporating IFRIC 8, 'Scope of IFRIC 2' and IFRIC 11 IFRS 2 –Group and Treasury share Transactions, the amendment involves anexpansion in the guidance in IFRIC 11 regarding the accounting of equity transactions in the consolidation.

New standards, amendments and interpretations issued but noteffective for the financial year and not early adopted The impact of these changes is expected to be:

IFRS 9 ‘Financial Instruments’ (new) is the first step in the process ofreplacing IAS 39. IFRS 9 introduces new requirements for classifyingand measuring financial assets and liabilities, and is likely to affect theGroup`s accounting of its financial assets. The standard is mandatoryfrom January 1, 2013, but can be adopted early. The standard has notyet been endorsed by the EU.

The Group has not yet assessed the full effect of IFRS 9. However, initial indications are that it may affect the Group’s accounting for itsdebt available-for-sale financial assets, as IFRS 9 only permits the recognition of fair value gains and losses in other comprehensive income if they relate to equity investments that are not held for trading.Fair value gains and losses on available-for-sale debt investments,for example, will therefore have to be recognised directly in profit or loss.

IAS 32 ‘Classification of rights issues’ (amendment). The amendmentapplies to annual periods beginning on or after February 1, 2010. Earlier application is permitted. The amendment addresses the accounting for rights issues that are denominated in a currency otherthan the functional currency of the issuer. Provided certain conditionsare met, such rights issues are now classified as equity regardless ofthe currency in which the exercise price is denominated. Previously, these issues had to be accounted for as derivative liabilities. The amendment applies retrospectively in accordance with IAS 8‘Accounting policies, changes in accounting estimates and errors’.The Group will apply the amended standard from January 1, 2011.

IFRIC 19, ‘Extinguishing financial liabilities with equity instrument’becomes effective July 1, 2010. The interpretation clarifies the accoun-ting by an entity when the terms of a financial liability are renegotiatedand result in the entity issuing equity instruments to a creditor of theentity to extinguish all or part of the financial liability (debt for equityswap). It requires a gain or loss to be recognised in profit or loss, whichis measured as the difference between the carrying amount of thefinancial liability and the fair value of the equity instruments issued.If the fair value of the equity instruments issued cannot be reliably measured, the equity instruments should be measured to reflect the fairvalue of the financial liability extinguished. The Group will apply theinterpretation from January 1, 2011, subject to endorsement by the EU.It is not expected to have any impact on the Group or the parent entity’s financial statements.

IFRIC 14 ‘Prepayment of a minimum funding requirement’ (amendment).The amendments correct an unintended consequence of IFRIC 14, ‘IAS19 - The limit on a defined benefit asset, minimum funding require-ments and their interaction’. Without the amendments, entities are not

permitted to recognise as an asset some voluntary prepayments forminimum funding contributions. The amendments are effective forannual periods beginning January 1, 2011. Earlier application is permitted. The amendments should be applied retrospectively to theearliest comparative period presented. The Group will apply theseamendments for the financial reporting period commencing on January 1, 2011.

The annual improvements for 2010 have resulted in a number ofminor changes to the following standards and interpretations thatcan be of relevance for the entity: IFRS 1, IFRS 3, IFRS 7, IAS 1, IAS27, IAS 34 and IFRIC 13. The improvements in IFRS 3 and IAS 27 applyto annual periods beginning July 1, 2010. The remaining changes areeffective for annual periods beginning January 1, 2011. The changeshave not yet been endorsed by the EU.

IFRS 7 ‘Financial instruments’ (amendment). The amendment introduces new disclosure requirements related to continued exposureto assets that are removed from the balance sheet and the transfer ofassets that remain completely or partially capitalized. The amendmentsare effective for annual periods beginning July 1, 2011. An entity willnot be required to revise additional information related to the providing of comparative disclosure. The amendment has not yetbeen endorsed by the EU.

Presentation currencyItems included in the financial statements of each of the Group’s entitiesare measured using the currency of the primary economic environmentin which the entity operates («the functional currency»). Foreign currency transactions are translated into the functional currency usingthe exchange rates prevailing at the dates of the transactions. Theconsolidated financial statements are presented in Norwegian kroner(NOK), which is the parent company’s functional currency and theGroup’s presentation currency. Foreign companies in the Group havinganother functional currency are converted to NOK by converting income and expenses at average exchange rates for the year, while theassets and liabilities are converted at the exchange rate at the closingdate. All resulting exchange differences are recognised in other comprehensive income and are separately specified in the equity statement. All amounts are presented in NOK thousands unless otherwise stated.

Consolidationa) Subsidiaries The consolidated financial statements include SpareBank 1 GruppenAS and all subsidiaries. Subsidiaries are all entities over which SpareBank 1 Gruppen has the power to govern the financial and operational policies generally accompanying a shareholding of morethan one half of the voting rights. Subsidiaries are fully consolidatedfrom the date on which control is transferred to the Group. They are de-consolidated from the date on which control ceases.

The Group uses the acquisition method of accounting to account forbusiness combinations. The consideration transferred for the acquisitionof a subsidiary is the fair values of the assets transferred. Identifiableassets acquired and liabilities and contingent liabilities incurred orassumed are measured initially at their fair values at the acquisitiondate, irrespective of the extent of the minority interests. The excess ofthe cost of acquisition over the fair value of the Group’s share of theidentifiable net assets acquired is recorded as goodwill. If the cost ofacquisition is less than the fair value of the net assets of the subsidiaryacquired, the difference is recognised directly in the income statement.Significant inter-company transactions and balances are eliminated.

The effects of all transactions with minority interests are recorded toequity when there is not a change in control. Such transactions willno longer result in goodwill or gains or losses. When control cedes, theremaining ownership interest shall be measured to fair value, and gainsand losses recorded to income or loss.

b) AssociatesAssociates are all entities over which the Group has significant influence but not control, generally accompanying a shareholding ofbetween 20% and 50% of the voting rights. Investments in associates areaccounted for by the equity method of accounting and are initially


recognised at cost. The Group’s investment in associates includesgoodwill identified on acquisition, net of any accumulated impairmentloss.

The Group’s share of its associates’ post-acquisition profits or lossesis recognised in the income statement and assigned a recognisedvalue of the investments together with share of comprehensive incomein the associate, and impacts of possible errors or amendments ofprinciples. When the Group’s share of losses in an associate equals orexceeds its interest in the associate the Group does not recognise further losses.

c) Jointly controlled entities Jointly controlled activity can consist of jointly controlled operations,jointly controlled assets and jointly controlled entities. Joint controlmeans that SpareBank 1 Gruppen through contract exercises controlin cooperation with other participants. Jointly controlled entities areaccounted for by the equity method.

Investments in subsidiaries and associated accounted for in theparent company’s financial statementsInvestments in subsidiaries and associates are stated at historicalcost. If there is permanent decrease in value, an impairment of the shares will be done. Executed impairments will be reversed if the basisfor impairment is no longer present.

Segment reporting Operating segments are reported in a manner consistent with theinternal reporting provided to the chief operating decision-maker.The chief operating decision-maker, who is responsible for allocatingresources to and assessing performance of the operating segments, hasbeen identified as the Group Management. The Group`s operatingsegments are divided into life insurance, P&C insurance, funds management, brokering business, debt collection of old claims, factoring and other operations. The Group has no secondary segmentreporting.

Loans and receivablesAcquired PortfoliosAcquired Portfolios are non-derivative financial assets with paymentsthat are fixed or determinable, and not quoted in an active market. These are carried at amortized cost using the effective interest method.

Receivables related to FactoringAccounts receivable factoring is assessed in two ways. In cases wherethe factor has not taken over credit risk (risk of debtor's insolvency) onlythe part of the asset paid in advance on transferred receivables iscapitalised as «Lending to customers and deposits with credit institutions». In cases where the factor receives the credit risk, the receivable is not capitalised at a higher amount than the receivedcredit risk as «Lending to customers and deposits with credit institutions». Practically, it is difficult to book such receivables to thecredit risk taken, when such a guarantee is an off-balance sheet liability that is reported on a separate line under the liabilities side ofbalance. We have brought claims for which credit is taken over by thegross amount as the item «Lending to customers and deposits withcredit institutions». The part of these accounts receivable that are notfinanced is listed under item «Margin payments and other accountsarrangements with customers», in the balance post «Other liabilities».

Provisions for lossProvisions for loss on loans and collateral (debtors) are listed under theitem «write-downs/loan loss provisions».

Loans and receivablesLoans and receivables are non-derivative financial assets with pay-ments that are fixed or determinable, and that are not quoted in an active market. Loans and receivables are carried at amortized costusing the effective interest method.

Other receivablesOther receivables are stated at nominal value less provisions forexpected losses in the balance sheet. Provisions for losses are made onthe basis of individual assessment of each receivable.Securities and derivatives

The Group has financial assets held for trading, voluntarily designatedat fair value through income, loans and receivables, investments heldto maturity and securities available for sale. The main rule is to classifyinvestments at fair value through income, either through held for trading or optional designation. This is consistent with the way theinvestments are treated. Certain investments in bonds/commercialpapers are still designated in the categories loans and receivables orheld to maturity. This is done in connection with the transaction.

Ordinary purchases and sales of financial assets are recognised on thetrade-date, the date on which the Group commits to purchase or sell theasset. Financial assets that are not carried at fair value through incomeare initially measured at fair value plus transaction costs that aredirectly attributable to their acquisition. Financial assets carried at fairvalue through income are initially recognised at fair value, and trans-action costs are expensed in the income statement. Financial assets arederecognised when the rights to receive cash flows from them haveexpired or where they have been transferred and the Group has alsotransferred substantially all risks and rewards of ownership. Financialassets available-for-sale and financial assets designated at fair valuethrough income are subsequently carried at fair value. Financial assetsheld-to-maturity are carried at amortised cost using the effective interestmethod.

Financial instruments and derivatives designated at fair value throughincomeThis category has two sub-categories: financial assets held for trading andfinancial assets designated by the management at fair value throughincome. A financial asset is classified into the ‘financial assets at fairvalue through income’ category if acquired principally for the purposeof selling in the short term, or designated as such by management. Derivatives are also classified as held for trading unless they aredesignated as hedges.

Gains or losses from changes in fair value of assets classified as ‘financial assets at fair value through income’, including dividends, areincluded in the income statement under ‘Net income from financialinvestments at fair value’ in the transaction period.

Financial instruments available-for-saleAvailable-for-sale investments are non-derivative financial assetswhich are chosen to this designation or which are not classified in anyanother category. Financial assets classified in this category are measured at fair value, while the change in value from the openingbalance is recognised in the statement of comprehensive income.Shares classified as available-for-sale in the Group are not actively traded in the market.

Held-to-maturity investmentsHeld-to-maturity investments are non-derivative financial assets listedon an active market with fixed or determinable payments and fixedmaturities that the Group’s management has the positive intention andability to hold to maturity. These certificates and bonds are carried at amortised cost using the effective interest rate method.

Impairment testingThe Group assesses at the end of each reporting period whether thereexists objective evidence that a financial asset or group of financialassets has been impaired. For shares classified as available for sale, asignificant or prolonged decline in the fair value of the security belowits cost gives objective evidence of impairment. If any such quantitativeevidence exists for financial assets available-for-sale, the total loss –measured as the difference between the acquisition cost and the current fair value, less any impairment loss on that financial asset previously recognised in profit or loss – is removed from equity andrecognised in the consolidated income statement. Impairment losseson equity instruments and similar instruments, recognised in theconsolidated income statement are not reversed.

If in a subsequent period the fair value of a debt instrument held tomaturity classified as available for sale increases and the increasementcan be objectively related to an event occurring after the impairmentloss was recognised in profit or loss, the impairment loss is reversedthrough the consolidated income statement.The recoverable amount for investments in bonds held to maturity is

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calculated at the present value of future expected cash flows discountedat the latest fixed effective interest rate (i.e. the effective interest ratecalculated at initial recognition of these financial assets).

When financial assets classified as available-for-sale are sold or impaired, total value regulation in the equity statement is recognisedin the income statement as gain or loss from investments in financialassets. Dividends from shares classified as available-for-sale are recognised through profit and loss when the Group’s entitlement to thedividends is determined.

The fair value of listed investments is based on current purchase price. If the market for the financial assets is inactive (or non-listedfinancial asset), valuation methods are used to determine the fairvalue. These methods refer to recently completed transactions at market terms, other similar comparable instruments, use of discountedcash flow analysis or option pricing models. These techniques placegreatest emphasis on market information and least importance oncompany specific information.

Bonds that the Group intends to hold to maturity, but that do not fulfilthe requirements for hold-to-maturity portfolios in IAS 39 for beinglisted on an active market etc, are classified separately in the balancesheet as, «Bonds at amortised cost».

Derivatives Derivatives consist of currency and interest instruments, and structuredinstrument products. Derivatives are recognised at fair value throughincome at the transaction date. Subsequent changes in the fair valueare recognised through profit or loss.

Intangible assetsGoodwillGoodwill represents the excess of the cost of an acquisition over the fairvalue of the Group’s share of the net identifiable assets of the acquired subsidiary or associate at the acquisition date. Goodwill as a result of theacquisition of subsidiaries is classified as an intangible asset. Goodwillis tested annually for impairment and carried at cost less accumulatedimpairment losses. Impairment of goodwill is not reversible. Gains andlosses on the disposal of an entity include the carrying amount of good-will relating to the entity sold. Goodwill is allocated to cash-generatingunits or Group of cash-generating units for the purpose of impairment testing. The cash-generating units or Group of cash-generating units areexpected to benefit from the acquisition that generated goodwill.

Research and development Research expenses carried out with an expectation of gaining new scientific or technical knowledge and understanding are recognised asexpenses in the consolidated income statement the period the expensesaccrue. Expenses related to development activities, where the researchresults are used in a plan or model for production of new or significantlyimproved products or in processes, are capitalised if the product or process is technical and commercially plausible. Capitalised expenses include material costs, direct labour costs and a share of thejoint expenses. Other development expenses are recognised in the consolidated income statement the period the expenses accrue. Capitalised development expenses are recognised in the balance sheet at acquisition cost less accumulated depreciations and impairmentcosts.

LicencesLicences have a finite useful life and are carried at cost less accumulatedamortisation and impairment. Amortisation is calculated using thestraight-line method to allocate the cost of licences over its expected useful life.

Computer softwareStandard computer software fulfilling capitalisation criteria are carried atacquisition cost (including implementation expenses), and depreciatedusing the straight-line method such that the cost is allocated overexpected useful life. The policies for computer software developmentlargely follow those as described for Research and Development.

Costs associated with maintaining computer software programmes arerecognised as an expense as incurred. Development costs that are

directly attributable to the design and testing of identifiable and uniquesoftware products controlled by the Group are recognised as intangibleassets when the following criteria are met:• It is technically feasible to complete the software product so that itwill be available for use;

• Management intends to complete the software product and use or sell it; • There is an ability to use or sell the software products; • It can be demonstrated how the software product will generate probable future economic benefits;

• Adequate technical, financial and other resources to complete thedevelopment and to use or sell the software product are available; and

• The expenditure attributable to the software product during itsdevelopment can be reliably measured.

Directly attributable costs that are capitalised as part of the softwareproduct include costs related to software development employeesand an appropriate portion of relevant overhead. Other developmentexpenditures that do not meet these criteria are recognised as anexpense as incurred. Development costs previously recognised as anexpense are not recognised as an asset in a subsequent period. Computersoftware development costs recognised as assets are amortised overtheir estimated useful lives.

Other intangible assetsIn connection with acquisition of entities, excess value analysis is per-formed and identifiable intangible assets are recognised in the con-solidated balance sheet. The Group identified excess values linked toearn-out contracts, trademarks and contractual customer relation-ships. The excess values are calculated based on projected historicaldata, and adjusted for uncertainty before being discounted. Thesevalues are amortised over the related contracts’ average useful lives.

Subsequent expensesSubsequent expenses regarding capitalised intangible assets are onlycapitalised when they increase the future financial benefit related to thisasset. All other costs are expensed as incurred.

Depreciations Depreciation of intangible assets is calculated using the straight-linemethod to allocate their cost over their estimated useful life, unlesstheir useful life is indefinite. Intangible assets are depreciated from thedate they are available for use.

Intangible assets except for goodwill and time indefinite intangibleassets have an estimated useful life of between 2 and 10 years.

Intangible assets except for goodwill and indefinite life intangibleassets are subject to impairment testing in accordance with IAS 36when indications of impairment are present.

Property, plant and equipment The Groups’ property, plant and equipment consist of machines,furniture, means of transport and buildings occupied by the Group forits own operations. Buildings are shown at fair value, based on annualvaluations by an internal valuation model described under the section‘Investment property’. The valuation is compared to external valuationappraisals on a regular basis. Buildings are depreciated subsequent of thevaluation. All other property, plant and equipment are stated at historicalcost less depreciation. Historical cost includes expenditure that is directly attributable to the acquisition of the items.

Subsequent costs are included in the asset’s carrying amount or recog-nised as a separate asset, as appropriate, only when it is probable thatfuture economic benefits associated with the item will flow to the Groupand the cost of the item can be measured reliably. All other repairs andmaintenance are charged to the income statement as incurred.

Increases in the carrying amount arising on the revaluation of buildingsare credited to the revaluation surplus in shareholders’ equity. Decreases that offset previous increases of the same asset are chargedagainst fair value provisions accordingly. Each year, the difference between depreciation based on the revaluated carrying amount of theasset charged to the income statement and depreciation based on the asset’s original cost, net of any related deferred income tax, is trans-ferred from the revaluation surplus to retained earnings.


Depreciation is calculated using the straight-line method to allocatetheir cost or revaluated amounts to their residual values over their estimated useful lives, as follows:

Buildings: 50 yearsMachines, furniture and means of transportation: 3-10 years

Property, plant and equipment under depreciation are considered forimpairment when there exists indication that future cash flows can-not recover the asset’s carrying amount. An impairment loss is recog-nised for the amount by which the asset’s carrying amount exceeds itsrecoverable amount. The recoverable amount is the higher of an asset’sfair value less costs to sell and value in use. The possibility of reversing previous write-downs of non-financial assets is consideredat each reporting date.

Investment propertyProperty held for long-term rental yields that are not occupied by thecompanies within the Group are classified as investment property.Investment property is carried at fair value. Changes in fair value arerecognised in the consolidated income statement. The properties areassessed individually based on the projected discounted future cash flow.The rate of return considers the interest rate, the overall risk in the realestate market and the property specific risk. To support the internal valu-ations they are compared to external valuations of the properties. Thefair value calculation is updated every six months. Rental income, operating expenses and the effect of changes in investment propertyvalue are separately disclosed in note 10 and 27.

Impairment of non-financial assetsGoodwill and assets that have an indefinite useful life are not subjectto amortisation but are tested annually for impairment. Assets that aresubject to amortisation are reviewed for impairment whenever eventsor changes in circumstances indicate that the carrying amount may notbe recoverable. An impairment loss is recognised for the amount bywhich the asset’s carrying amount exceeds its recoverable amount. Therecoverable amount is the higher of an asset’s fair value less costs tosell and value in use. For the purposes of assessing impairment, assetsare grouped at the lowest levels for which there are separately identifiable cash flows (cash-generating units). The possibility ofreversing previous write-downs of non-financial assets (except good-will) is considered at each reporting date.

Cash and cash equivalents Cash and cash equivalents includes cash in hand, deposits held at call withbanks, other short-term highly liquid investments with original maturities of three months or less, and bank overdrafts. Bank overdraftsare presented on the line «Deposits from and liabilities to customers andcredit institutions».

Current and deferred income taxThe tax expense for the period comprises current and deferred tax. Taxis recognised in the income statement, except to the extent that it relates to items recognised in other comprehensive income or directlyin equity. In this case, the tax is also recognised in other comprehensiveincome or directly in equity, respectively.

The current income tax charge is calculated on the basis of the taxlaws enacted or substantively enacted at the end of the reporting period. Deferred income tax is recognised, using the liability method, on temporary differences arising between the tax basis of assets and liabi-lities and their carrying amounts in the consolidated financial statements.However, if the deferred income tax arises from initial recognition of anasset or liability in a transaction other than a business combination thatat the time of the transaction affects neither accounting nor taxable profit or loss, it is not accounted for. Deferred income tax is determinedusing tax rates and laws that have been enacted or substantively enacted by the end of the reporting period and are expected to applywhen the related deferred income tax asset is realised or the deferredincome tax liability is settled.

Deferred income tax assets are recognised to the extent that it is probablethat future taxable profit will be available against which the temporarydifferences can be utilised.

In assessing the probability of historical earnings and expected earnings,future margins will be assumed.

Deferred income tax is provided on temporary differences arising oninvestments in subsidiaries and associates, except where the Group controls the timing of the reversal of the temporary difference and it isprobable that the temporary difference will not reverse in the foreseeablefuture.

Deferred tax arising on changes in value of properties owned by SpecialPurpose Entities (SPE) is not calculated. Realisation of the properties willin practice be through the disposals of stocks or shares. Potential gainsor losses at realisation of shares will not be taxable under «the taxationexemption principle» in the Norwegian tax regime. Therefore it is, in theGroup’s opinion that the deferred tax should not be recognised onsuch value fluctuations.

Deferred income tax assets and liabilities are offset when there is alegally enforceable right to offset current tax assets against current taxliabilities and when the deferred income taxes assets and liabilities relate to income taxes levied by the same taxation authority on eitherthe taxable entity or different taxable entities where there is an intentionto settle the balances on a net basis.

Long term funding Funding is initially recognised at the fair value of the received com-pensation less transaction costs. Funding at fixed-rate is measured atfair value through the consolidated income statement, while fundingwith floating rate is measured at amortised cost. Any difference bet-ween initial recognition and the settlement amount at maturity willthus be accrued over maturity by means of the funding’s effective interestrate.

PensionsThe Group has both defined contribution schemes and defined benefit schemes. The pension schemes are financed via payments toSpareBank 1 Livsforsikring AS.

In the defined contribution scheme, the Group pays fixed contributionsto the insurance company. The Group has no legal or other liabilitiesto pay further contributions if the insurance company does not haveenough means to pay all employees benefits related to earning in current and previous periods. The contributions are accounted for asemployee benefit expenses as they fall due.

A defined benefit scheme is a pension scheme defining a pension benefit that an employee will receive upon retirement. The Group’sbenefit based scheme guarantees the members a retirement benefit of70% of their salary up to a limit of 12 G (National Insurance Scheme’sbasic amount). Salary exceeding 12 G is secured through a contributionbased scheme. Entrance to the defined benefit scheme was no longeravailable for new employees from May 1, 2005.

Additionally, there exist liabilities relating to «Contractual Early Retirement» (AFP) and certain exceptional agreements on early retirements and additional pensions.

The liability in the balance sheet related to benefit schemes is the present value of the defined benefits on the balance sheet-date less fairvalue of the pension liabilities, adjusted for differences on estimatesnot recognised through the income statement and costs on pensionbenefits earned in earlier periods. The pension liability is calculatedannually by an independent actuary using a linear earnings method.The present value of the defined pension benefits is determined by dis-counting estimated future payments at Norwegian 10 year governmentbond interest rate including a margin to consider relevant maturity onthe liabilities as of the balance sheet date.

Actuarial gains and losses due to new information or changes in theactuarial assumptions are recognised in the comprehensive income statement in the period they arise.

Changes in the pension scheme’s benefits are recognised through theincome statement on an ongoing basis, unless the rights under the newpension scheme are conditional on continued service of the employee

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in their current post for a specified period of time (the contribution period). In this case, the cost related to the benefit change is amortisedlinearly over the contribution period.

Law on state subsidies to workers who take out contractual early retire-ment in the private sector (AFP grants Act) came into force on February19, 2010. Workers who take early retirement effective date in 2011 orlater, will be given benefits under the new scheme. The new pensionscheme represents a lifelong premium on the National Insurancescheme and can be taken out from the age of 62. Employees annuallyearn the right to early retirement with 0.314% of pension qualifyingincome up to 7.1 G up to 62 years. Accrual in the new scheme is cal-culated on the basis of the worker's lifetime income, so that all earlierworking years are included in the accrual basis. The new schemewill be financed by the state covering 1/3 of pension expenditureand the employers covering 2/3 of pension expenditure. Employers'premiums will be determined as a percentage of salaries between 1 Gand 7.1 G.

The new contractual early retirement scheme for accounting purposesis considered to be a defined benefit-based multi-employer scheme.This means that each enterprise will account for its proportionate shareof the scheme's pension liabilities, retirement funds and pensioncosts. If no available calculations of the individual components of thescheme and a consistent and reliable basis for allocation exists, the newpension scheme is recognized as a defined contribution scheme.

Termination benefitsTermination benefits are payable when employment is terminated bythe Group before the normal retirement date, or in situations where anemployee accepts voluntary redundancy in exchange for these bene-fits. The Group recognises termination benefits when it has demon-strably committed to either: terminate the employment of currentemployees according to a detailed formal plan without possibility ofwithdrawal; or provide termination benefits as a result of an offer madeto encourage voluntary redundancy. Benefits falling more than 12months after the date of the consolidated statement of financial posi-tion are discounted to present value.

Subordinated loan capital and perpetual subordinated loan capitalSubordinated loan capital has last priority after other liabilities. Time limited subordinated loan capital can account for 50 per cent of the corecapital in the capital adequacy ratio, while perpetual subordinated loancapital can account for up to 100 percent of the core capital adequacy ratio.Subordinated loan capital is classified as a liability in the balance sheetand is measured at amortised cost.

A perpetual subordinated loan capital security consist of capital securities with floating interest rates, where SpareBank 1 Gruppen isnot obligated to pay interest in a period when one cannot pay dividends. The investor has no subsequent liabilities on unpaid interest, i.e. the interest does not accrue. Perpetual subordinated loan capital securities are approved as an element in the core capital wit-hin a limit of 15 per cent of total core capital. The Financial Super-visory Authority of Norway can require that the perpetual subordinatedloan capital securities are impaired proportionally with the equity ifthe core capital adequacy of SpareBank 1 Gruppen falls below 5 percent or total capital adequacy falls below 6 per cent. Impaired amountson the perpetual subordinated loan capital securities are to be writtenup before one can achieve payable dividends to the shareholders orbefore the equity can be written up. Perpetual subordinated loan capital securities are measured as long term liabilities at amortised cost.

Insurance provisions life insuranceAll the lifeinsurance product groups are classified as insurance contracts. Insurance contracts are assessed in accordance with IFRS 4.The standard does not contain specific valuation principles beyond certain limited conditions. Use of accounting principles employed bythe accounting unit in earlier financial statements is allowed condi-tional upon that the insurance provisions are sufficient by Norwegianrules. To document this, the company must complete an adequacy test,which SpareBank 1 Livsforsikring AS completes annually. This indicates that previously employed principles related to insurance provisions for life insurance can be used.

The insurance provisions within life insurance consist of legal pro-vision and contingency provision. The legal provision includes the premium provision, additional provision, premium and pension regulation fund, claims provisions and other technical provisions.

Important assumptions and changes in technical insurance terms: The basic interest rate is continuously assessed based on the interestrate on long term government bonds, according to the guidelines onpremium and insurance funds in life insurance. For life insurance poli-cies taken out from January 1, 2006, the basic interest rate is 2.75%.The basic interest rate for new group pension contracts sold fromJanuary 1, 2006 is 2.70%. The base interest rate for new contracts willbe 2.5%, with effect from January 1, 2011, while the base interest ratefor new accrual for group pension contracts will be 2.5% from January 1, 2012. Else, the maximum allowed base interest rate that wasapplicable at the vesting date will be applicable for new accrual andaccrued rights.

The mortality assumptions are principally based on common research from the Norwegian Financial Services Association (FNH),while assumptions on disability are principally based on the company’s own knowledge. Mortality assumptions take into accountthe correlation between disability and mortality. As of 2008, groupdefined benefit pension and paid-up policies from group definedpensions, follow the new industry tariff K2005 with security margins that take into account increased life expectancy.

The allocation of provisions and the premiums are determinedfrom the principle of security margins. The security margins are notquantified, but assessed by taking in contingent and long term liabilities into consideration.

The ordinary premium provision of the company is calculatedusing prospective principles on the same tariff terms as the premiumtariff. Provisions for IBNR and RBNS are allocated using statisticalmethods based on the company’s own knowledge.

Securities adjustment reserve Allocations to the securities adjustment reserves is equal to net un-realised excess value on financial assets, except for property invest-ments, measured at fair value and is entered into the securities adjust-ment reserves of SpareBank1 Livsforsikring AS. Net unrealised valueis determined by a collective assessment of the portfolio.

Insurance provisions P&C insuranceInsurance contracts are assessed in accordance with IFRS 4. The standard does not contain specific valuation principles beyond certainlimited conditions. Use of accounting principles employed by theaccounting unit in earlier financial statements is allowed conditionalupon that the insurance provisions are sufficient by Norwegian regulation, and are not used to cover future claims without contracts.This indicates that previously employed principles related to insuranceprovisions for P&C insurance can be used.

The Financial Supervisory Authority of Norway has developed mini-mum requirements for the various provisions. Provisions are made tounearned premium, claims provisions, security provisions, reinsuranceprovisions and administration provisions. The minimum require-ments within premium and claims provision are also fulfilled perindustry and for the security provisions by industry group.

The guarantee provision is not considered as an insurance provisionaccording to IFRS 4. This has been the Group’s policy since the imple-mentation of IFRS in 2005. The guarantee scheme is meant to ensurethat insured under direct non-life insurance contracts in Norwayreceive fulfilment of insurance claims according to the insuranceagreements.

Based on new regulations on financial statements for insurance, theGroup has reclassified the natural catastrophe provision and the administration provision. These provisions do not fulfil the liabilitydefinition according to IFRS and are thus transferred to equity effective from January 1, 2007.


Reinsurance share of insurance technical provisions is disclosed as areceivable in the IFRS consolidated accounts.

ProvisionsThe Group recognises provisions when there is a legal or self-imposedliability due to previous events, and it is more likely than not that theliability will be at settlement through transfer of financial goods andthe liability can be estimated at adequate degree of reliability. Provisionsare assessed at every balance-sheet date and are adjusted to reflect theupdated best estimate.

When there are several liabilities with similar characteristics, thelikelihood of settlement is determined by assessing the liabilities of thiskind as a whole. There is therefore made a provision even though thelikelihood of settlement related to each individual case can be low.

Provisions are measured at the present value of expected future pay-ments required to meet the liability. An estimated risk fee interest rateis used as discount rate before tax reflecting current market situationand liability specific risk.

Accounts payable and other short term commitmentsAccounts payable are recognised initially at fair value and subse-quently measured at amortised cost determined by using the effectiveinterest method. Accounts payable and other short term commit-ments where the effect of amortisation is small, can be recognised atcost.

Deposits from and liabilities to customers and credit institutionsDeposits from and liabilities to customers and credit institutions areat large measured at amortised cost. Some smaller fixed-rate depositsand lending are measured at fair value.

Interest income and interest costsInterest income and interest costs related to assets and liabilities mea-sured at amortised cost are recognised through the income statementusing the effective interest rate method. For loans to customers mea-sured at fair value the interest element is recognised as interest income,while remaining value changes are classified as income from financialinstruments. All fees related to interest bearing funding and lendingare included in the calculation of effective interest and are amortisedsuch over expected maturity.

Commission income and expensesFees and commissions are generally recognised on an accrual basiswhen the service has been provided. Commission related to interestbearing instruments is not recognised as commission, but is includedin the calculation of effective interest rate and is recognised throughthe income statement correspondingly. Commission arising from advisory services are recognised according to the entered contract, generally over the period in which the service is provided. The sameprinciple is applied for asset management commissions. Remunerationand fees related to trade or promotion of financial instruments, propertyor other investment objects not generating balance sheet items inSpareBank 1 Gruppen’s financial statements are recognised on the completion of the underlying transaction.

Dividend incomeDividend income is recognised when the right to receive payment isestablished.

Events after the balance sheet dateThe financial statements are considered as approved for issuing whenthe board of directors has considered the financial statements. TheAnnual General Meeting, the shareholders board and regulating authorities can refuse to approve the financial statements, but cannotchange them.

Subsequent events up until issuance of the financial statements con-cerning situations known on the balance-sheet date, will be includedin the information basis used to determine accounting estimates andwill thus be fully reflected in the financial statements. Subsequentevents not known on the balance-sheet date will be disclosed if significant.

The financial statements are presented under the assumption of goingconcern. This assumption was in the board of director’s opinion present at the time of endorsement of the issuance.

Share capital and share premiumOrdinary shares are classified as equity. Expenses directly related toissuance of new shares or deductible share options, are recognised asreceived compensation in the equity statement.

Dividend distributionThe board of director’s proposal of dividend distribution is specifiedin the Board of Directors’ Report and statement of changes in equity.The proposed dividend for the shareholders of the parent company isclassified as equity until final acceptance at the Annual General Meeting. From the time of final acceptance the dividend is classifiedas a liability.

NOTE 3 – FINANCIAL RISK MANAGEMENT

Financial risk factorsNote 3 – Financial risk management gives a description of the riskmanagement processes in SpareBank 1 Gruppen. We present the over-all organisation, responsibilities and purpose of risk managing, aswell as the different risk categories, models in use and ongoing workin connection with risk management in general. We refer directly to thenotes where quantitative presentations of each risk category as well asrelated sensitivity analysis are given. References to the specific notesare commented where relevant.

A report has been written with the aim to cover part IX, chapter 45 and46 of the Norwegian Minimum Standards of Capital Adequacy (Pillar3) and to cover the market’s request for higher transparency and open-ness towards risk matters in general. A more detailed study of the Group’s capital and risk matters is included in this report along witha more in depth description of the models and guidelines for risk management in SpareBank 1 Gruppen AS, risk exposure in the diffe-rent risk classes, the development in risk exposure over time. It alsogives a detailed overview of the Group’s regulatory capital and economic capital.

Organisation, responsibility and purposeThe Group’s board of directors is responsible for risk management andcompliance in the Group. The board of each subsidiary is responsiblefor managing risk and compliance in their own company. The respon-sibility for the overall risk management within the Group lies with theDirector for Strategy, Analysis and Risk Management in the holdingcompany. The Director reports to the Chief Executive Officer of SpareBank 1 Gruppen AS.

SpareBank 1 Gruppen’s risk management aims to ensure solidity andfulfilment of regulatory capital requirements and safeguard capitalmanagement. This involves keeping a medium risk profile by focusing on:

A moderate risk profile A strong risk culture with high focus on risk managementOptimal capital allocation within the banks agreed on strategiesExploration of synergies and diversification Sufficient core capital representing the chosen risk profile

Financial risk factors The Group’s exposure to different kinds of financial risk is allocated une-venly to each subsidiary. Financial risks involves market risk (interest raterisk, risk related to share prices, currency risk, risk related to fair valuechanges on investment property included), ownership risk, credit risk, concentration risk, insurance risk, reinsurance risk, operational risk, business risk and liquidity risk. The definitions of the different risk factorsare as follows:

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Market riskMarket risk is defined as the losses in association with changes in observable market parameters such as interest rates, exchange rates, prices or property.

Ownership riskOwnership risk is defined as the risk arising from being the owner of anentity -for example, the risk the subsidiaries are exposed to on a day-to-daybasis and the risk of need for more capital in one or more of these companies.

Credit riskCredit risk is defined as the risk that the company’s borrowers, suppliers and reinsurers cannot fulfil their obligations towards SpareBank 1 Gruppen. Credit risk also includes the risk of changes inspread risk and reinsurance risk in the insurance companies.

Concentration riskRisk connected to large commitments, industry concentration andgeographical concentration in loan or investment portfolios.

Underwriting risk Risk connected to uncertainty towards future number and size ofinsurance claims and the risk for extreme incidents (catastrophes).

Operational riskRisk related to insufficient or failing internal processes, human errorsand system failures or external factors. Legal risk is also included inthe definition.

Liquidity risk Liquidity risk is the risk of not being able to refinance the liabilities andto increase the need of finance without extra costs.

Strategic and business risk Strategic and business risk is the risk of losses as a consequence ofchanges in the external environment. For example a change in the regulatory environment, a decrease in profit or access to capital as aresult of lack of confidence and reputation among the market partici-pants, i.e. among customers, opponents, shareholders and authorities(reputation risk).

Strategy related to the use of financial instrumentsThe Group uses financial instruments to both take positions in the market and to reduce risk. The use of financial instruments is limitedto instruments where risk and value is measurable and where it is possible to monitor it within the Group’s systems for risk managementand profitability measurement. Instruments not traded in an active market are only used for hedging purposes or for conversion of aderivative’s underlying asset or liability.

Capital managementA common risk management policy is approved by the board of directors in SpareBank 1 Gruppen AS. The policy is subject to annualreview. Strategy, policy and limits are developed for each risk factor ineach legal entity. In addition strategic decisions are made for each entity’s allocation of assets. For more information see note 39, Capital Adequacy.

Risk weighted capitalSpareBank 1 Gruppen calculates capital requirements for each risk cate-gory. Risk weighted capital is calculated for each subsidiary as well asfor the overall group. The calculations are based on statistical methods,professional judgement and some estimates. The probability that allloss events happen at once is low. Therefore diversification effects arise when all risk categories are evaluated at the same time. Risk weighted capital is supposed to cover the unexpected losses and shallfor all risk categories equal 99.5 % of possible losses using a one year timehorizon.

Capital requirementSpareBank 1 Gruppen needs sufficient capital to cover unexpected losses. The Group is within jurisdiction for minimum capital requirementand solidity. In addition, The Norwegian Regulation on Minimum standards for Capital Adequacy requires that the need for capital is to bemeasured against both risk profile and the quality of risk managementand control systems. The capital management policy is updated andendorsed by the board of directors annually. The latest update andendorsement took effect May 2011. The capital management policy isendorsed to ensure that SpareBank 1 Gruppen’s equity level has anoptimal definition of risk tolerance, risk profile and the size of the business.

SpareBank 1 Gruppen uses risk adjusted rate of return as an importantgovernance tool. The risk adjusted rate of return is reported in the quarterly risk reports for the Group as a whole, for each subsidiary, andfor each subsidiary’s retail and commercial business line.

Risk factor follow-up and managing Market riskThe Group’s consolidated market risk is measured and reported to theboard of directors in SpareBank 1 Gruppen AS on a quarterly basis. Thecalculation is based on a VaR-model. In addition to each subsidiary’smonitoring of risk exposure through the use of own models and policies,a similar model to that of the VaR is used follow-up each subsidiary.The VaR-model is described below and includes the definitions for calculation of the overall risk in the Group and real exposure as of endof end.

Assumptions for the VaR-model The board of directors has decided that risk reporting shall use a99.5% confidence level. Ownership is 12 months. Correlation is calculated using similar methods to last year. Value adjustment funds,supplementary reserves, returns on investments and guaranteed rateof returns are not included in the model.

Market risk is calculated with the help of the following formula:VaR = Value * σ * √T * nc.

σ = Standard deviation, assetT = Duration/ownership nc = Standard deviation given confidence level

(99.5 % single tailed standard deviation = 2.58)

Interest rate riskThe interest rate risk is the risk of losses from changes in the interestrate level. The risk arises mainly due to investments in commercialpaper, granted loans with fixed interest rates, use of fixed interestinstruments for funding and the use of derivatives.

The table below shows the market risk based on VaR model (the figures for 2009 are pro forma, excluding Bank 1 Oslo):Market risk 99.5% SpareBank 1 Gruppen Group

Amount in NOK million 2010 2009Interest rate risk* 1 656 847Equity risk 1 432 1 286Currency risk 65 55Risk associated with property 995 892Diversification -570 -443Total market risk 3 578 2 637Diversification (%) 13,7% 14,4%

* The calculation of interest rate risk has changed in the period. Spread risk in life insurance and P&C insurance is now calculated in accordance with the Norwegian Financial Supervisory Authority's Risk-based Supervision (RBT).


Value at Risk equals asset value multiplied by the asset’s sensitivity forchanges in the interest rate multiplied by maximum interest ratedecrease given duration and confidence level.

The bond portfolio is divided into duration classes of 1–3 months, 3–12months, 1-3 years, 3-5 years and greater than 5 years. The duration describes each class’s price sensitivity to a change in interest rates.Based on time series containing monthly historical data back to 1994the standard deviation for the absolute development in interest ratesis calculated. An average monthly interest rate is calculated to matchthe duration classes.

VaR for each time interval is calculated based on duration weightedexposure, historical changes in interest rate, period of ownership andconfidence level before it is summarised to total VaR on interest rateinstruments.

Spread riskSpread risk is the risk for changes in bonds and holdings marketvalue resulting from general changes in credit spreads. The spread riskfor 2010 is included in SpareBank 1 Gruppen’s VaR model. We referto the Pillar 3 report for more information on spread risk.

Equity risk Risk related to equity instruments is the risk of losses from changes inthe value of the Group’s shares and other equity instruments. Theinstruments are divided into Norwegian and international shares forrisk measurement purposes.

Based on an Oslo Børs Bechmark Index (OSEBX) and MSCI World, historic return for Norwegian and foreign shares are calculated separately back to year 1994. The standard deviation is calculated basedon the return rates, adjusted for time of ownership and confidencelevel, thereafter multiplied by the different exposure of equity classes.Exposure equals the portfolio’s fair value on the balance sheet day.

We assume a diversified equity instrument portfolio in between theequity classes for being able to take advantage of the volatility in therespective indexes, that is . We believe that the portfolios in SpareBank1 Livsforsikring AS and SpareBank 1 Skadeforsikring AS are welldiversified.

Currency riskVCurrency risk is the risk for losses arising from changes in exchangerates. The Group measures currency risk by using net positions in thedifferent currencies.

Volatility for each relevant currency is measured based on historicexchange rates, which forms a basis for calculating risk bundled toexposure given a fixed confidence level.

Risk associated to propertyThe Group’s properties are exposed to risk regarding changes in the real-estate market. The real-estate portfolio’s value is influenced bymany factors such as local economic development, property location,maintenance and competition in the local real-estate market.

Real-estate volatility is calculated based on historic development inreal-estate prices given by price indexes published by Statistics Norway for office and corporate buildings.

HedgefondRisk associated to hedge funds is calculated with basis in volatility aspublished in an international hedge fund index. The risk is calculatedin accordance to the same method as for shares.

Correlation – Portfolio risk market risk Based on the time series, a correlations matrix is made showing the different market risk asset classes. Correlation is calculated by a 12month rolling average based on information since 1994 or as far backas data exists. To ensure relevant calculations, an average of averagecorrelations and the highest correlation measured during the period,is used. The correlation matrix is used to arrive at a covariance matrixas the first step in calculating Value at Risk (standard deviation) for thewhole portfolio.

For more information regarding market risk in SpareBank 1 Gruppen AS,we refer to note 34 to 35.

Ownership risk Ownership risk is related to the owning of a company. SpareBank 1Gruppen AS’ ownership risk in subsidiaries is connected to the riskeach subsidiary undertakes on a day-to-day basis, and the risk for theneed of an influx of capital to one or more of these companies.

Credit riskThe Group's credit risk is primarily related to SpareBank 1 Livs-forsikring AS and SpareBank 1 Skadeforsikring AS, as well as some riskwithin the factoring business in the Group

Credit risk in SpareBank 1 Skadeforsikring AS and SpareBank 1 Livs-forsikring AS is related to investments in bonds and commercialpapers, real-estate and reinsurance. The company’s board of directorshas endorsed limits for each investment firm. In addition they have setlimits on minimum credit rating for each investment group. Detailedguidelines for accepted risk level for each investment are endorsed andfunctions as the fund managers’ authorization.

For more information about the credit risk in SpareBank 1 Gruppen AS,please refer to note 30 and 31.

Concentration riskConcentration risk for the Group is considered low. The Insurance Portfolio in SpareBank 1 Skadeforsikring AS is considered relativelywell-diversified for the following reasons: a large number of customers,subscriptions in different geographical areas and variety in the productsprovided. Exposure to natural disaster constitutes the major concen-tration risk in insurance. In Norway however, this risk is very limiteddue to participation in the Norwegian Natural Perils Pool.

Insurance stocks in SpareBank 1 Livsforsikring AS are well diversifiedas that they mainly consist of individual insurance and group insurancepolicies where insurance risk is not highly concentrated. There ishowever some risk related to the life company's investment portfolio,mainly in the financial sector.

From a group perspective the other companies are only moderatelyexposed to concentration risk.

Liquidity and settlement risk The management of the Group’s financial structure is based on an over-all liquidity strategy annually reviewed and endorsed by the board ofdirectors. Each subsidiary has their own liquidity strategy requiring una-nimous endorsement of the board. Liquidity risk is reduced by diversifyingthe funding in different markets, sources, instruments and duration.

SpareBank 1 Gruppen’s liquidity risk is mainly connected to theparent company and is assumed to be low-moderate.

The emergency plan for capital adequacy and liquidity managementis annually reviewed and endorsed by the board of directors – mostrecently in May 2011. The emergency plan seeks to visualize theoverall liquidity management in the Group, as well as identify andexplain possible events and solutions to should they materialise. Theemergency plan gives a clear description of the segregation of duties.

The following incidents can affect liquidity: Capital injections in subsidiaries with lossesLiquidity buffers below agreed levelsWithdrawal of uncommitted lines of credit

SpareBank 1 Gruppen’s emergency plan states that the liquidity buffers are to cover:One year’s operation expenses and interests; andCapital injections equal to 10 % of the subsidiary’s recorded equity.

The day-to-day liquidity management requires that the parent companyhas a NOK 400 million liquidity buffer at all time. The liquidity buffer is to consist of deposits and frequently traded securities (cashequivalents). In addition, the liquidity buffer can consist of committedcredit lines with minimum 12 month duration. The management of

31

loan instalments, as well as loans payable, are not included in the liqui-dity buffer. It is presupposed that the refinance of a loan is plannedminimum 6 months before maturity.

The CFO is responsible for monitoring that the liquidity buffer iswithin its limits. The CEO is to be informed should the buffer fall belowthe 20 % prescribed limit. The recovery of the liquidity buffer is to beplanned. The plan is to be presented to Group Management. Theemergency plans requirements have been complied with during the whole period and the liquidity situation in the parent company is considered as good.

Please refer to Note 32 for further information on liquidity and settle-ment risk in Sparebank 1 Gruppen AS.

Insurance risk (underwriting) Insurance risk in SpareBank 1 Skadeforsikring ASThe risk related to each insurance contract consists of both the pro-bability of an accident occurring and the uncertainty of the claims size.The uncertainty in the insurance risk of a portfolio is influenced bymany different factors such as regulatory changes and court decisions-which are of specific significance for personal injuries.

The characteristics of the policy holders that the company accepts ascustomers are described in the company’s risk manual. In addition,there exist automatic controls in the insurance system regarding newadditions to the portfolio. An automatic system for monitoring the insurance risk concentration is in progress. This also concerns the concentration of real-estate risk and consequential losses in regard tofire and other accidents. Concentration control and follow-up is alsoconducted for personal injury risk and for other customer relations.Adjustments to reinsurance coverage are made to represent the riskexposure in the insurance portfolio.

Insurance risk in SpareBank 1 Livsforsikring ASSpareBank 1 Livsforsikring AS offers savings, pension and insuranceproducts. The life insurance company has through its products established liabilities to its customers, resulting in different types ofrisk for the company. The savings products offered have long duration.Life expectancy affects both future expected payments and provisions.The company offers coverage in case of mortality and disability.Changes in the Norwegian Insurance Scheme’s regulations for disabilitypayment might highly influence the number of disabled persons andthe provisions for disability.

The insurance risk is managed through reinsurance, risk selection,underwriting policies and tariff adjustments. Tariff adjustments alsoinclude reserve increases.

The company has endorsed policies and guidelines concerning therelease of new products, changes in existing products and systemsolutions. The company’s premiums are based on statistics and arereported to The Financial Supervisory Authority of Norway. Changesin mortality and disability rates are closely monitored and provisionsare frequently reconsidered.

Guidelines for risk considerations concerning health and underwritingregulation, as well as risk classification for acquisition of new customers,are described in the company’s risk policies. The risk policies alsoinclude when a health assessment or inability to work documentation isrequired. The result of this judgement is reflected through the risk premium level.

Reinsurance is an important tool for the company’s insurance riskmanagement. The reinsurance strategy describes goals and limits forthe company’s reinsurance program and follow-up of the programs. Thereinsurance strategy is annually revised by the Board of Directors.

According to IFRS 4 a liability adequacy test is required.

Please refer to note 45 for more information concerning insurance riskwithin SpareBank 1 Gruppen AS.

Operational riskOperational risk is defined as the risk of loss due to insufficient or failing internal processes, human and system failures, or other exter-nal factors, including legal risk. All group companies are exposed tooperational risk.

Operational risk at the subsidiary level is documented in accordancewith the process required in the regulations on Responsibility forInternal Control and on Documentation and Confirmation of InternalControl (“Internkontrollforskriften”). Risk reporting occurs in theform of an annual ICAAP-report, as well a published internal controlreport with supplementary title management verification. Databaseshave been implemented for the governance and follow-up of actionsin connection with reports from The Norwegian Financial SupervisoryAuthority, internal audit and internal control.

A compliance department has been established in the parent companyand a compliance forum for the Group. The head of compliance within each subsidiary form the members of the compliance forum. Thefocus on compliance is to ensure that SpareBank 1 Gruppen acts inaccordance with relevant laws and regulations, industry standards andGroup internal policies. This includes the duties of monitoring changesin business areas, as well as the possible consequences of ignoringchanges in the business areas. Compliance risk is of receiving govern-mental sanctions, financial losses or reputation damages as a conse-quence of not acting in accordance with relevant laws and regulation,industry standards and Group internal policies. Compliance risk is partof operational risk. Compliance is reported on a quarterly basis to theboard of directors in SpareBank 1 Gruppen in accordance with theGroup’s compliance policy.

Strategic and business riskThe capital adequacy calculations estimate strategic and businessrisk. No processes have yet been established for measuring strategic andbusiness risk. SpareBank 1 Gruppen is in the progress of creatingparameters for calculating strategic and business risk quantitatively.

Together with the Alliances forum for risk management, SpareBank 1Gruppen will continue to have a focus on establishing quantitativemodels for estimating the Group’s capital requirement for strategic andbusiness risk.

Correlation – portfolio risk It is assumed reasonable that not all incidents occur simultaneouslyand thus we take into account the effect of diversification between assetclasses. We implement a correlations matrix to calculate the correlationbetween market risk, credit risk, insurance risk, business risk andrisk associated to property between each class of assets.

NOTE 4 – CRITICAL ACCOUNTING ESTIMATES ANDJUDGEMENTS

The Group arrives at estimates and assumptions concerning the futurebased on historical experience and a number of other factors such as future expectations believed reasonable under the current circum-stances. These estimates and judgements are continually re-evaluated.Yet, as inherent in the term, these accounting estimates will seldom equalthe actual results. Find addressed below the estimates and assumptionsthat represent a significant risk for essential adjustments to the carryingamounts of assets and liabilities for the next financial year.

Fair value of derivatives and other financial instrumentsThe fair values of financial instruments that are not traded in an activemarket are determined using varying valuation techniques. The Groupconsiders, and chooses, techniques and assumptions reflecting marketconditions on the balance sheet date as closely as possible. For anumber of financial assets classified as available-for-sale yet not tradedin an active market, the Group has used discounted future cash flows forvaluation. The valuations require a high degree of judgement. Whenassessing whether fair value is lower than cost, the Group takes into consideration, among other factors, the future prospects in the relevantindustry, the company’s financial position and technological develop-ment.


Investment propertyThe Group performs the valuation of its own investment property. Theproperties are individually assessed based on expected future cash flowdiscounted with the risk-adjusted required rate of return on the respec-tive properties. The required rate of return depends is based on thelong-term risk-free interest rate and a risk premium that depends onthe property’s quality, location, property category, the rental contract’smaturity etc. A further description of the valuation of investmentproperty is included in note 27. The internal valuations are bench-marked against independent external appraisals.

Pension commitmentsThe net present value of pension commitments depends on several factors as determined by actuarial assumptions. The assumptions usedin calculating net pension cost (income) include among other things, thediscount rate. Changes in these assumptions affect the value of the pension commitments in the balance sheet.

The Group determines a suitable discount rate at the end of each year.This discount rate is used to calculate the net present value of futureestimated cash out-flows needed to settle the pension commitments. Thesuitable discount rate is determined in reference to 10-year Norwegiangovernment bonds adjusted for the average remaining period of service.

Other pension assumptions are partly based on market conditions. Moredetailed information is given in note 48.

Potential changes regarding expected annual increase in salaries, dis-count rate and so on, can have a significant impact on the calculatedemployee pension commitments. The guidance note issued by the Nor-wegian Accounting Standards Board specifies that changes of +/- 1 %in the discount rate represent a change of 15 – 20 % in the total pension commitment.

Estimated impairment of goodwillThe Group performs annual impairment tests to identify a possibleimpairment of goodwill (as described in note 14). The recoverableamount of cash generating units is determined by calculating discounted future cash flows. These calculations require estimates consistent with the Group market valuation.

Estimates on insurance provisions in life insuranceInsurance provisions in life insurance are based on factors such as lifeexpectancy, expectations of mortality rate, disability rate, and interestrates. Changes in such assumptions affect the size of the insurance pro-visions. The premium provision is calculated as the cash value of thecompany’s liabilities less the cash value of future premiums. The basicinterest rate used in the calculation that valid for the individual insurancecontract, and the calculation is done according to the Act on premiums

and insurance funds in life insurance. Maximum accepted basic interestrate is reviewed by the authorities considering the interest on long termgovernment bonds. Potential changes in the basic interest rate will affectthe size of the liabilities.

Assumptions concerning the mortality rate are mainly based on collec-tive surveys done by the Norwegian Financial Services Association(FNH), while those concerning the disability rate are mainly based on thecompany’s own experiences.

There are claims provisions for all products including both reported(RBNS) and unreported damages (IBNR). IBNR provisions and RBNS provisions are calculated using statistical methods based on the company’s own experience.

Estimates related to insurance provisions in P&C insuranceThe use of estimates in the calculation of insurance provision for P&Cinsurance is primarily related to provisions for claims. Insurance productsare classified in two main groups: short-tailed business and long-tailedbusiness. The classification is based on the time span from when a lossor damage occurs until the loss or damage is reported and finally settled.A long-tailed business often refers to insurance related to personal injuries.

The basis for the claims provision in SpareBank 1 Skadeforsikring AS isthe expected loss from claims incurred or future claims based on reported damages. In addition to ongoing follow-up related to currentclaims, an assessment of all unsettled claims shall be performed annu-ally. Provisions for IBNR and potential additional provisions related tolong-tailed businesses are measured using models. Regression models areused as a starting point for vehicle or bodily injury, occupational injury and safety. An assessment of potential issues related to changesin the portfolio is also performed. For short-tailed businesses, the IBNRis determined based on reviews of the experience data pertaining to thelag in the risk group during previous years, in addition to changes in theportfolio, the frequency of claims, major injuries and so on. A retrospective measurement is also made to assess the estimates for theclaims provision against the development of the factors involved in thecalculation: paid claims, individual provisions for reported claims andIBNR.

Provisions for losses related to a reinsurer’s bankruptcy are measured atnet present value. The parameters in the basis of the calculation are future expected dividends, inflation and the payment status of the claim.

Sensitivity of propertiesProperties are especially sensitive to the discount rate. If everything ishold as it, a raise of 0.25% will reduce the values with NOK 175 million,or about 3.6%.

33


NOTE 5 – ACQUISITIONS 2010

Unison Forsikring ASSpareBank 1 Skadeforsikring AS acquired all the shares in Unison Forsikring AS in 2010. SpareBank 1 Skadeforsikring AS placed a bid for allshares in Unison Forsikring AS June 9, 2010 that was pre-accepted by more than 95% of the then current shareholders by the end of the month.In July 2010, a private placement from Unison Forsikring AS against SpareBank 1 Skadeforsikring AS of NOK 150 million was completed. Forpractical purposes, Unison Forsikring AS was consolidated from July 1, 2010, even though the transaction date was July 19, 2010.

Unison Forsikring AS is a Norwegian insurance company offering insurance for individuals, organisations and businesses. The company deve-lops customised solutions for organisations, associations and their members. SpareBank 1 Skadeforsikring AS aims to strengthen its presencein new distribution channels. It therefore hopes that Unison will function as the company's extended arm into the market outside of the Groupand the Norwegian Confederation of Trade Unions and affiliated trade unions, LO. Unison Forsikring AS enters as a subsidiary of SpareBank 1Skadeforsikring AS and will operate as an independent entity in the market.

The acquisition is an undertaking that is regulated by IFRS 3R. In the consolidated financial statements the purchase method is used for acqui-sition of subsidiaries. Cost comprises the fair value of the assets given as consideration. Identified assets and liabilities are carried at fair valueat the acquisition date. The shares in Unison Forsikring AS cost NOK 56.4 million. The final acquisition analysis shows the following fair valu-es for identifiable assets and liabilities:

Book value Fair value Fair valueFigures in Million NOK 30.06.10 30.06.10 adjustments

Customer relations - 14,0 14,0Goodwill - -117,9 -117,9Immaterial assets 8,6 8,6 -Financial assets 283,2 283,2 -Reinsures’' share of unearned gross premium 33,0 33,0 -Reinsurance share of gross claims reserves 366,6 366,6 -Receivables from policy holders 79,1 79,1 -Receivables in connection with reinsurance 44,7 44,7 -Other receivables 1,1 1,1 -Other assets 78,4 78,4 -Deferred tax assets 16,9 130,0 113,1Total assets 911,6 920,8 9,2

Share capital 56,4 - -Administration provision 10,9 - -Provisions for natural disaster fund 5,6 - -Provisions for guarantee 8,2 - -Security provisions 40,3 - -Other retained earnings -53,8 - -Total equity 67,7 56,4 -11,3Deferred tax 25,4 22,8 -2,6Provision for unearned premiums 122,7 122,7 -Gross provision for claims 635,2 635,2 -Pension obligations 13,2 15,0 1,8Liabilities in connection with reinsurance 30,8 30,8 -Administration provision Run-off portfolio - 6,3 6,3Liability reinsurance contract (MYML) - 15,0 15Other liabilities 16,6 16,6 -Total equity and liabilities 911,6 920,8 9,2

35

The negative goodwill is primarily a result of tax losses carried forward in Unison Forsikring AS at about NOK 400 million. According to IFRS 3.34Rnegative goodwill shall be recognised at the acquisition date. The final purchase price allocation was completed in November 2010 and a negativegoodwill of NOK 117.9 million was then recognised in the consolidated financial statements under Other insurance related income.

In the consolidated financial statements for 2010, the following figures from Unison Forsikring AS after the acquisition July 1 are included:

Figures in 1000 NOK 2010

Gross premiums 116 765Premiums earned for own account 105 771Profit before tax -19 489Other comprehensive income -1 876Total profit -21 365

Had the acquisition date been January 1, 2010 the figures for the fiscal year 2010 fiscal consolidated financial statements for SpareBank 1 Grup-pen would have been as follows:

Figures in 1000 NOK 2010

Gross premiums 4 899 795Premiums earned for own account 39 546Profit before tax 620 936Other comprehensive income -63 377Total profit 502 002

It is recognised expenses related to the acquisition with a total of NOK 13.5 million in the Group in 2010, divided into NOK 6.2 million in SpareBank 1 Skadeforsikring AS and NOK 7.3 million in Unison Forsikring AS. Of the NOK 7.3 million in Unison Forsikring AS, 2.5 millionrelates to the private placement against SpareBank 1 Skadeforsikring AS that could not be activated cf IAS 39, due to negotiations on theamount.

Skandia HelseforsikringSparebank 1 Skadeforsikring AS announced in January 2010 its complete purchase of the insurance business in Skandia Life Line Norway fromSkandia Insurance Company Ltd. The agreement was contingent upon necessary approvals from the Norwegian and Swedish authorities. Approval of the transaction was given in November 2010.

The acquired health insurance business is integrated into SpareBank 1 Skadeforsikring AS’ portfolio at the end of 2010. No purchase price allocation was completed as of December 31, 2010. Skandia is therefore included in SpareBank 1 Skadeforsikring AS with preliminary figures.The acquisition cost of the business was NOK 1 million.

Conecto ASThe companies SpareBank 1 Factoring AS, Actor Portefølje AS and SpareBank 1 Gruppen Finans Holding AS merged with effect from January 1,2010. The new company carried the name SpareBank 1 Gruppen Finans AS.

SpareBank 1 Gruppen Finans AS entered into an agreement to purchase the company Conecto AS in June 2010. The payment for the companyincluded a combination of cash and an earn-out agreement on with the sellers. Earn-outs are mainly related to the company's future earnings performance. The acquisition aims to create an operator that is among the three largest in Norway’s debt market. Conecto AS was taken over onSeptember 9, 2010 with effective consolidation into Sparebank 1 Gruppen from that date.

A preliminary acquisition analysis in accordance with IFRS 3R has been made as a basis for the annual accounts for December 31, 2010. A review will be conducted within 3 Q 2011, which is within the 12 month period after the acquisition date cf. IFRS3R. Identified assets and liabilities are carried at fair value at the acquisition date. The cost of the shares, with the assumptions concerning future earn out, is estimated tobe NOK 154.8 million.

In addition to the identified value, the company also acquired human capital. A business organisation is a not identifiable asset under IAS 38and may therefore not be recorded as such. This is evident in the comments about the start-up cost in IAS 38 paragraph 69. There is a longstanding and unique practice that the values inherent in an established organisation are mainly regarded as goodwill in a business combination. Please refer to the identified value in the table below for our preliminary acquisition analysis.


Calculations based on real values:

Currency NOK 1,000 2010

Acquisition cost 130 000Correction based on uncertainty at acquisition date -7 391Interest until payment date 690Estimation on earn out 31 535Estimated total acquisition cost per 31.12.2010 154 834

Equity on acquisition time 17 859SpareBank 1 Gruppen Finans shares on 100% basis 17 859Excess value:Brand 5 629Customer relationships 32 096Technology, processes and routines 4 808 42 533

Deferred taxes 11 808Acquisition goodwill 106 611-which «Assembled Workforce» 13 607

Identified Excess Value 42 173Total Goodwill and Excess Value 148 784

The final acquisition analysis showed the following fair values of identifiable assets and liabilities:

Oversikt over virkelig verdi justeringerBook Fair Fair Fair Value Value Value Deferred verdi incl.

Currency NOK 1,000 09.09.10 09.09.10 adjustment tax Def. tax

Research & Development 1) 8 264 - -8 264 - -Deferred tax asset 230 230 - - 230Brand 1) - 5 269 5 269 - 5 269Technology, process and routines 1) - 13 072 13 072 - 13 072Customer relationships 1) - 32 096 32 096 - 32 096Goodwill 2) - 81 196 81 196 11 808 93 004Assembled workforce (part of goodwill) 2) - 13 607 13 607 - 13 607Furniture and fixtures 2 395 2 395 - - 2 395Account receivables 9 536 9 536 - - 9 536Other receivables 2 493 2 493 - - 2 493Cash part of working capital 13 444 13 444 - - 13 444Excess cash 6 430 6 430 - - 6 430Total Assets 42 792 179 768 136 976 11 808 191 576

Equity 3) 17 858 154 834 136 976 - 154 834Debt to credit institutions 8 096 8 096 - - 8 096Account payable 3 704 3 704 - - 3 704Payable tax 4 292 4 292 - - 4 292Public debt 5 514 5 514 - - 5 514Deferred tax liability - - - 11 808 11808Other short term liabilities 3 328 3 328 - - 3 328Total shareholders equity and libabilities 42 792 179 768 136 976 11 808 191 576

1) Total Excess values er TNOK 42.1732) Goodwill is TNOK 106.6113) TNOK 154.834 under the Fair Value column is the acquisition cost for Conecto

Sparebank 1 Gruppen has consolidated Conecto AS’ results from September 9, 2010.Profit from the period of September 9 to December 31 was NOK -3.7 million before tax.

If the acquisition had occurred January 1, 2010 the following amounts would have been consolidated into our financial statements:

Currency NOK 1,000 2010

Total income 86 636Total expenses -78 156Net operating income 8 481Profit before tax 8 487Tax -2 238Profit after tax 6 249

37

NOTE 6–SEGMENT INFO

RMATION

Debt collections of old

claims and factoring

Banking 1)

Life insurance

P&C insurance

Fund management

Brokering business

business

Other operations

Eliminations

Total

NOK 1,000

2010

2009

2010

2009

2010

2009

2010

2009

2010

2009

2010

2009

2010

2009

2010

2009

2010

2009

Total income 2)

- 849 466

5 240 876

5 476 539

4 437 243

4 010 385

307 431

266 898

84 264

56 698

172 207

120 950

626 109

249 638

-611 057

-192 079

10 257 073

10 838 495

Share of profit from associates

- 2 381

- -

- -

- -

- -

- -

- 0

- -2 767

- -386

Segment result

- 195 743

363 002

396 815

641 144

621 096

64 628

42 088

-57 562

-48 930

8 600

22 541

566 598

145 096

-601 277

-180 401

985 133

1 194 048

Profit after income tax

- 164 559

299 159

239 272

581 054

502 956

45 325

28 564

-40 765

-35 408

4 311

15 889

454 275

25 849

-511 813

-42 038

831 546

899 643

Minority share of profit

- -

- -

- -

- -

-9 478

-9 472

- -

- -

9 478

- -

-9 472

Total assets

- 25 627 540

26 482 903

24 366 120

12 096 732

10 471 321

299 213

311 514

301 923

220 919

1 000 829

658 306

5 315 966

5 840 725

-4 807 345

-6 029 586

40 690 221

61 466 859

Total liabilities

- 24 497 608

24 219 954

22 353 505

8 691 961

7 499 748

103 426

84 369

212 321

87 512

591 158

418 213

2 543 527

2 396 380

-480 939

-1 163 783

35 881 408

56 173 552

1)Includes Eiendom

sMegler 1

2)Costs directly related to income are included

SpareBank 1 Gruppen Group has no secondary reporting segment


NOTE 7 – NET INSURANCE PREMIUM REVENUE

SpareBank 1 SpareBank 1 Livforsikring AS Skadeforsikring Group Group

NOK 1,000 2010 2009 2010 2009 2010 2009

Gross premium revenue 3 646 233 3 411 765 4 567 608 4 144 842 8 213 841 7 556 607- Reinsurers' share 152 037 157 669 383 179 330 516 535 216 488 185Net premium revenue 3 494 196 3 254 096 4 184 429 3 814 326 7 678 624 7 068 422

LIFE INSURANCE

The following premium in SpareBank 1 Livsforsikring AS is related to new subscriptions for the past two years divided by industry:

Ind. Annuity Individual Group Individual GroupNOK 1,000 and pension endowment pension life life Total

2010 86 668 150 209 47 353 29 940 7 589 321 7592009 92 082 196 483 64 903 29 675 7 729 390 872

P&C INSURANCE

For SpareBank 1 Skadeforsikring Group, earned premium is divided into different classes:

Personal Linesof which Total

Onshore third party Travel PersonalNOK 1,000 property Motor liability Yacht Accident insurance Other Lines

Earned premium 2010 1 579 951 1 500 805 627 641 66 572 155 053 294 957 21 611 3 618 949Earned premium 2009 1 482 648 1 353 136 561 941 61 789 151 953 272 905 15 774 3 338 205

Commercial LinesOnshore Onshore of which Workmen's Totalproperty property third party compen- Commercial

NOK 1,000 insdustrial commercial Motor liability Liability sation Safety Other Lines

Earned premium 2010 11 180 329 163 227 627 68 679 24 969 126 620 68 054 30 650 818 263Earned premium 2009 10 854 280 931 194 577 62 434 10 571 95 230 74 387 4 784 671 334

Other LinesTotal

Total Energy/ Re- Natural OtherNOK 1,000 Marine oil insurance perils tool Lines

Earned premium 2010 1 068 -7 52 129 283 130 396Earned premium 2009 - -114 60 135 357 135 303

NOTE 8 – NET FEE AND COMMISSION INCOMEGroup

NOK 1,000 2010 2009

Fee and commission incomeSubscription fees (from customer) - 51 527Redemption fees (from customer) - 5 870Management fees 566 418 426 055Guarantee commission 15 060 7 943Payments system - 80 545Other commissions 134 027 283 330Total fee and commission income 715 505 855 270

Fee and commission expenseDistributor commission paid 845 299 719 231Payments system - 22 792Other commissions expences 906 10 077Total fee and commission expense 846 205 752 100

Net fee and commission income -130 700 103 170

39

NOTE 9 – GAINS AND LOSSES FROM FINANCIAL ASSETS AND LIABILITIES


2010 2009 NOK 1,000 2010 2009

Net gain on financial instruments designated at fair value Shareholdings

- - Dividends from shareholdings 13 289 4 805- - Net gains/losses from realisation of shareholdings 151 972 -152 493- - Net unrealised gains/losses from shareholdings 909 494 1 697 255- - Total net gains/losses on shareholdings 1 074 754 1 549 567

Bonds and commercial paper- - Interest received and earned 248 515 381 508- - Net gains/losses from realisation of fixed income securities 217 949 364 892- - Net unrealised gains/losses from fixed income securities 31 066 65 358

Total net income from bonds, commercial paper, interest funds - - and other securities with fixed income 497 530 811 757

Other financial instruments- - Interest income received and earned 1 348 9 349

-1 310 - Net gains/losses from realisation of derivatives and other financial assets -36 600 -19 920- - Net unrealised gains/losses from derivatives and other financial assets 10 234 93 177

-1 310 - Total derivatives and other financial assets* -25 018 82 606*Applied to hedging:

- - Net change in value of hedged bonds and derivatives - 2 912- - Net change in value of fixed rate loans and appurtenant derivatives - -2 238- - Net change in value of remaining derivatives - 444

-1 310 - Net income and gains/losses from financial assets designated at fair value 1 547 267 2 443 931

Net income from bonds measured at amortised cost - - Interest income received and earned from bonds held to maturity 252 498 264 659- - Net unrealised gains/losses from bonds held to maturity - - - - Net gains/losses from realisation of bonds held to maturity 6 757 7 120- - Net income from bonds held-to-maturity 259 255 271 779

- - Interest income received and earned from other bonds at amortised cost 38 310 13 721- - Net gains/losses from realisation of other bonds at amortised cost 1 412 -23 199- - Net unrealised gains/losses from other bonds at amortised cost 35 327 12 840- - Net income and gains/losses from bonds at amortised cost 75 049 3 362

Net income from securities available-for-sale3 641 - Dividends from shareholdings 12 993 6 972

- 18 245 Net gains from realisation of shareholdings 17 603 41 0743 641 18 245 Net gains/losses on financial instruments classified as available-for-sale 30 596 48 046

Income from loans and receivables1 881 2 041 Interest income from lending to customers and deposits with credit institutions 58 408 1 014 2884 709 8 264 Interest income from bank deposits 40 052 42 039

- 4 930 Interest income from other receivables -14 10 0019 330 16 202 Interest income from internal loans - - 15 920 31 437 Total interest income from loans and receivables 98 447 1 066 328

Expense from financial liabilities-9 509 -2 448 Interest expense from deposits from customers and loans from credit institutions -17 748 -454 845-24 624 -31 993 Interest expense from securities issued -24 624 -253 754-27 289 -28 876 Interest expense from subordinated loan capital -37 864 -67 604

- -1 Interest expense from other financial liabilities -4 961 -22 077-61 422 -63 318 Total interest expense from financial liabilities -85 196 -798 280

Changes in fair value related to fixed-rate loan are part of «Net income from financial assets designated at fair value».

Changes in fair value related to funding from securities are part of «Net income from financial assets designated at fair value»


NOTE 10 – NET INCOME FROM INVESTMENT PROPERTIESGroup

NOK 1,000 2010 2009

Rental income from investment properties 320 724 353 827Value changes in investment properties 148 283 -18 077Expenses from investment properties -69 597 -28 902Total net income from investment properties 399 410 306 848

Also see Note 27 Investment properties for further information.

NOTE 11 – OTHER OPERATING INCOME


2010 2009 NOK 1,000 2010 2009

- - Management of LOfavør concept 62 227 59 389- - Brokerage fee 37 384 26 441- - Income from debt capital 16 644 16 954- - Remuneration Corporate Finance 18 184 - - - Sundry income life insurance 24 405 19 417- - Income from debt collectoin business 96 788 78 620- - Compensation regarding IT-systems incl refund from VAT - 65 639- - Actuarial calculations 4 3 193- - Acquisition of Unison Forsikring AS resulted in negative goodwill 117 900 - - - Late payment charges 2 040 2 2234 - Other 8 745 53 0104 - Total other operating income 384 321 324 887

NOTE 12 – OPERATING EXPENSES


2010 2009 NOK 1,000 2010 2009

52 481 37 985 Personnel expenses 831 543 1 140 824-429 1 677 IT expenses 286 132 255 674640 434 Marketing 144 485 82 858

-78 649 -18 246 Other operating expenses* 412 013 597 767-25 957 21 850 Total operating expenses 1 674 173 2 077 123

Remuneration to auditor511 560 Statutory audit 3 791 4 85628 - Other certification services 468 46116 - Tax-related advice 276 61346 343 Other services 863 1 544

Remuneration to auditor includes VAT

Personnel expenses166 980 148 154 Salaries 645 092 751 98425 699 23 356 Employer's national insurance contribution 122 160 148 146-1 475 25 991 Pension costs -9 159 88 907

-151 588 -168 211 Refund salaries, pension subsidiary - - 2 805 633 Social expenses 46 467 39 24210 060 8 062 Other personnel expenses 26 983 112 54552 481 37 985 Total personnel expenses 831 543 1 140 824

Specification of pension costs8 499 7 153 Defined contribution plans 31 365 29 278-9 974 18 838 Defined benefit plans -40 524 59 628-1 475 25 991 Total pension costs -9 159 88 907

* In 2010 SpareBank 1 Gruppen AS also entered as income a repayment of NOK 43 664 thousand related to payroll tax which were earliercovered by the company on behalf of First Securities AS.

41

NOTE 13 – SHAREHOLDER STRUCTURE

Shareholder structure in SpareBank 1 Gruppen AS as at December 31, 2010: Number Shareholder of shares share

SpareBank 1 Nord-Norge 347 568 19,50 %SpareBank 1 SMN 347 568 19,50 %SpareBank 1 SR-Bank 347 568 19,50 %Samarbeidende Sparebanker AS 347 568 19,50 %Sparebanken Hedmark 213 888 12,00 %Norwegian Confederation of Trade Unions (LO) and affiliated trade unions 178 240 10,00 %Total number of Shares 1 782 400 100 %

Shareholder structure in SpareBank 1 Gruppen AS as at December 31, 2009: Number Shareholder of shares share

SpareBank 1 Nord-Norge 347 568 19,50 %SpareBank 1 SMN 347 568 19,50 %SpareBank 1 SR-Bank 347 568 19,50 %Samarbeidende Sparebanker AS 347 568 19,50 %Sparebanken Hedmark 213 888 12,00 %Norwegian Confederation of Trade Unions (LO) and affiliated trade unions 178 240 10,00 %Total number of shares 1 782 400 100 %

NOTE 14 – GOODWILL2010 2010 2010 2009

NOK 1,000 Cost Additions Impairment Book Value Book value

Goodwill from acquisition of 78,2% of SpareBank 1 Livsforsikring in 1994 87 579 - - 7 758 7 758 Goodwill from acquisition of 21.8 % of DAVID AS in 1996 10 712 - - 2 950 2 950 Goodwill from acquisition of VÅR Livsforsikring AS in 2000 280 365 - - 189 245 189 245 Goodwill from acquisition of 49 % of ODIN Forvaltning AS in 2000 158 263 - - 79 131 79 131 Goodwill ODIN from acquisition of Rahastotori/Fondex in 2008 50 060 - - 49 896 49 896 Goodwill from acquisition of VÅR Skadeforsikring AS in 2000 553 616 - - 264 003 264 003 Goodwill from acquisition of Actor Fordringsforvaltning AS 89 769 8 500 - 98 269 71 932 Goodwill from acquisition of SpareBank 1 Factoring AS in 2009 10 245 - - 10 245 10 245 Goodwill from acquisition of Actor Verdigjenvinning AS in 2009 - - - - 3 205 Goodwill from acquisition of Eiendomsmegler 1 Oslo Akershus AS in 2009 - - - - 14 632 Goodwill from acquisitoin of Areal Eiendomsmegling in 2009 58 020 - -21 736 - 21 736 Goodwill from acquisition of Argo Securities AS in 2008 42 709 - - 42 709 42 709 Goodwill from acquisition of NK Corporate AS in 2009 7 268 - -3 045 - 3 045 Goodwill from acquisition of Conecto AS in 2010 - 106 611 - 106 611 - Total goodwill 1 348 606 115 111 -24 781 850 819 760 486

During 2010, Actor Fordringsforvaltning AS and Actor Verdigjenvinning AS have merged. Conecto AS was acquired in September 2010. As ofJanuary 1, 2011, Conecto AS and Actor Fordringsforvalning AS have merged. The addition on Actor Fordringsforvaltning AS of NOK 8.5 millionin 2010 is related to earn out. SpareBank 1 Gruppen Finans Holding AS, SpareBank 1 Factoring AS, as well as Actor Portefølje AS were also mergedduring 2010. The new name is SpareBank 1 Gruppen Finans AS. NK Corporate AS and Argo Securities AS were merged in 2010. As of January 1,2010, Bank 1 Oslo AS was demerged from SpareBank 1 Gruppen.When acquiring control in a business (business merger) all identifiable assets and liabilities are recorded at fair value in accordance with IFRS3R. A positive difference between fair value of the purchase price and fair value of net identifiable assets and liabilites are recorded as goodwill,while a negative difference would be recorded as income at the time of the purchase. Goodwill is acquired when there is a difference betweenfair value of the purchase price when aquiring a business and fair value of net identifiable assets and liabilities. Goodwill is assumed to have anindefinite useful life. Acquisition of a company is among other factors based on strategic adaption and expected economic profitability over along time period. Goodwill is allocated to cash-generating units. Goodwill is not subject to amortisation, but is subject to annual impairment tes-ting with the purpose of identifying any indications that impairment may have occurred, in accordance with IAS 36.

Determination of recoverable amount:It is used cash flow forecasts (before tax) based on 5 year projections. Recoverable amount on the balance sheet date is assessed annually for good-will with an indefinite useful life. The value of each of the cash-generating units is assed as of December 31, 2010. In determining the recove-rable amount of the cash-generating units, SpareBank 1 Gruppen takes into account the pricing of comparable financial institutions (taking intoconsideration companies that have performed better than market expectations for the past few years), dividend policies, ownership structure ofSpareBank 1 Gruppen and the distributors of insurance products.For SpareBank 1 Gruppen, there will be a considerable variation in the values depending on whether the value assessments are based on a «going con-cern» or as part of a transaction of structure. The value assessments results in 3 scenarioes; a pessimistic value, an expected value and an optimistic value. The calculated value is significantly higher than the book value, and the analysis indicates that there is no sign of impairment.For Argo Securities AS, a valuation has been performed based on expected cash flows for the company in the period 2011 - 2014, with a calculatedresidual value of the company at the end of the period. The calculation is sensitive in respect of the level of expected cash flows, and the hurdlerate. The calculation uses a hurdle rate of 15 %. Based on these assumptions, the calculated value of the company is NOK 193 million. The sensitivity related to the given assumptions are as follows:+/- 10% change in cash flow = +/- 29 mill i verdi+/- 1% change in require rate of return = +/- 12 mill. i verdi


NOTE 15 – OTHER INTANGIBLE ASSETS

Insurance Electronic Insurance systems archive not an systems under

NOK 1,000 in use Licences asset group development Group* Total

Cost at January 1, 2009 87 804 22 952 1 540 464 940 41 485 618 721Additions 59 287 3 364 - - 1 500 64 151Developed internally - - - - - - Bought separately - 3 364 - - - 3 364From the acquisition of intangible assets - - - - 1 500 1 500Disposals - -1 540 -464 940 - -466 480Cost at December 31, 2009 147 091 26 316 - - 42 985 216 392

Accumulated depreciation as at January 1, 2009 59 513 10 102 1 540 414 940 18 807 504 902Depreciation 11 272 5 230 - - 9 186 25 688Amortisation 38 390 - - - - 38 390Disposal depreciation and amortisation - - -1 540 -414 940 - -416 480Accumulated depreciation and amortisation December 31, 2009 109 175 15 332 - - 27 993 152 500

Exchange differences - 12 - - - 12Recorded value as at December 31, 2009 37 916 10 972 - - 14 992 63 880

Cost at January 1, 2010 147 091 26 316 - - 42 985 216 392Additions 15 174 18 798 - 25 825 56 173 115 970Developed internally - - - - - - Bought separately - - - - - - From the acquisition of intangible assets 8 600 - - - 14 000 22 600Disposals -63 011 - - - -17 985 -80 996Exchange differences - -13 - - - -13Cost at December 31, 2010 99 254 45 101 - 25 825 81 173 251 353

Accumulated depreciation as at January 1, 2010 109 175 15 332 - - 27 993 152 500Depreciation 9 143 5 855 - - 6 663 21 661Amortisation 10 792 - - - - 10 792Disposal depreciation and amortisation -63 011 - - - -13 520 -76 531Exchange differences - -3 - - - -3Accumulated depreciation and amortisation December 31, 2010 66 099 21 184 - - 21 136 108 419Recorded value as at December 31, 2010 33 155 23 917 - 25 825 60 037 142 933

Useful life and linear method of depreciation 3-5 years 5-7 years 10 years 5 years

* Is related to intangible assets in the Group from the acquisition of Actor Fordringsforvaltning AS and Conecto AS.

NOTE 16 – INVESTMENTS IN SUBSIDIARIES – PARENT COMPANY

2010

NOK 1,000 Business Ownership Nominal value Book Companies office share (%) Share capital per share value

SpareBank 1 Livsforsikring AS Oslo 100 348 400 200 2 637 396SpareBank 1 Skadeforsikring AS Oslo 100 132 000 100 1 100 000SpareBank 1 Medlemskort AS Oslo 100 150 50 1 600Sparebankutvikling AS Oslo 100 100 1 000 100Odin Forvaltning AS Oslo 100 9 238 1 000 176 045SpareBank 1 Gruppen Finans AS Oslo 100 212 200 1 000 389 699Argo Securities AS* Oslo 76,75 20 000 1 000 164 851Total investments in subsidiaries 4 469 691

SpareBank 1 Gruppen Finans Holding AS was the parent company of SpareBank 1 Factoring AS, Actor Portefølje AS and Actor FordringsforvaltningAS. Actor Portefølje AS owned Actor Verdigjenvinning AS. In 2010 SpareBank 1 Gruppen Finans Holding AS and Actor Portefølje AS have merged with SpareBank 1 Factoring AS, where SpareBank 1 Factoring AS was the acquiring company. The acquiring company has at the sametime changed its name to SpareBank 1 Gruppen Finans AS.

Actor Verdigjenvinning AS has merged with Actor Fordringsforvaltning AS by transferring all its assets, rights and obligations to thelatter company.

43

2009

NOK 1,000 Business Ownership Nominal value Book Companies office share (%) Share capital per share value

SpareBank 1 Livsforsikring AS Oslo 100 348 400 200 2 379 114SpareBank 1 Skadeforsikring AS Oslo 100 132 000 100 1 100 000SpareBank 1 Medlemskort AS Oslo 100 150 50 1 600Sparebankutvikling AS Oslo 100 100 1 000 100Odin Forvaltning AS Oslo 100 9 238 1 000 176 045Bank 1 Oslo AS Oslo 100 291 000 100 1 000 000SpareBank 1 Gruppen Finans Holding AS Oslo 100 179 200 400 000 224 699Argo Securities AS* Oslo 73,25 20 000 1 000 161 150Total investments in subsidiaries 5 042 709

In 2009, Actor Fordringsforvaltning AS has become part of SpareBank 1 Gruppen Finans Holding Group.

* There is a shareholders' agreement between SpareBank 1 Gruppen AS and employee shareholders. The shareholders in the company havepriority in connection with capital increaeses in line with the principles in the Norwegian Comapnies Act.

NOTE 17 – INVESTMENTS IN ASSOCIATES AND JOINT VENTURES Allianse-

samarbeidet SpareBank 1 Total owner 2010 SpareBank 1 Boligkreditt share in

DA AS associated NOK 1,000 10,00 % 2,81 % company

As at January 1 16 862 103 692 120 554Increased/decreased ownership share -7 853 -103 692 -111 545Adjustment as at January 1 1 137 - 1 137Share of profit/loss IFRS -1 137 - -1 137Share of tax - - - Disbursement of share dividend - - - As at December 31 9 010 - 9 010

SpareBank 1 Boligkreditt AS is no longer a jointly controlled operation in SpareBak 1 Gruppen Group, as it now is Bank 1 Oslo AS thatholds ownerhip shares in the company.

Allianse-First samarbeidet SpareBank 1 Total owner

2009 Securities SpareBank 1 Boligkreditt share inAS DA AS associated

NOK 1,000 0,00 % 17,74 % 2,81 % company

As at January 1 79 132 19 629 93 996 192 757Increased/decreased ownership share -79 132 - 8 963 -70 169Equity movements/ dilution of equity - - - - Share of profit/loss IFRS - -2 767 2 381 -386Share of tax - - - - Disbursement of share dividend - - -1 648 -1 648As at December 31 - 16 862 103 692 120 553

Associates are not marketable securities, thus an objective fair value of the shares in the associates does not exist.

Summarised financial information of the Group's associates is set out belowAllianse-

2010 samarbeidetSpareBank 1

NOK 1,000 DA

Assets 380 791Liabilities 276 825Income 418 517Profit after taxes 1 500Owner share 10,00 %

Allianse-2009 samarbeidet SpareBank 1

SpareBank 1 BoligkredittNOK 1,000 DA AS

Assets 315 855 84 235 761Liabilities 213 389 80 552 987Income 506 075 136 524Profit after taxes -15 948 84 744Owner share 17,74 % 2,81 %


The parent company has the following receivables and liabilities with the associates: Receivables

Outstanding SpareBank 1 Utvikling DA 95 454

Investments in associates in the parent company SpareBank 1 Gruppen AS

NOK 1,000 2010 2009

Shares in Alliansesamarbeidet SpareBank 1 DA 10 147 18 000 Total shares in associates 10 147 18 000

According to IFRS, shares in associates are recognised at cost in the parent company's financial statements and are tested for impairment. There is no basis for impairment by the end of 2010.

NOTE 18 – PROPERTY, PLANT AND EQUIPMENT

2009


Machinery, Machinery, Buildings equipment equipment and other

and vehicles NOK 1,000 and vehicles properties Total

225 576 Cost or valuation as at January 1, 2009 449 438 411 342 860 78030 557 Additions 66 276 607 66 883-3 676 Disposals -5 189 - -5 189

- Revision of property value - 2 518 2 518- Exchange differences -407 - -407

252 457 Cost or valuation as at December 31, 2009 510 118 414 467 924 585

147 294 Accumulated depreciation and impairment as at January 1, 2009 330 666 9 724 340 39031 622 Depreciation charge 53 957 7 141 61 098-3 414 Disposals -3 414 - -3 414

- Impairment charge - - - - Exchange differences -479 - -479

175 502 Accumulated depreciation and impairment as at December 31, 2009 380 730 16 865 397 595

76 955 Net book value as at December 31, 2009 129 389 397 602 526 991

If buildings and other properties were stated at historical cost, the book values would be as follows:

Historical cost 268 519Value adjustment reserves as at December 31, 2009 99 016Value adjustment funds 65 221

CollateralThe company has not pledge any fixed assets as security or guarantee.

Unoccupied buildings and other propertiesA total area of 400 649 (gross amount of capitalised buildings) is fully utilised.

45

2010


Machinery, Machinery, Buildings equipment equipment and other

and vehicles NOK 1,000 and vehicles properties Total

252 457 Cost or valuation as at January 1, 2010 510 118 414 467 924 58587 001 Additions 113 652 808 144 921 796-3 826 Disposals -137 176 -29 955 -167 131

- Revision of property value - -18 398 -18 398- Exchange differences 358 - 358

335 632 Cost or valuation as at December 31, 2010 486 952 1 174 258 1 661 211

175 502 Accumulated depreciation and impairment as at January 1, 2010 380 730 16 865 397 59533 325 Depreciation charge 54 466 4 381 58 847-695 Disposals -131 545 -4 323 -135 868

- Impairment charge - - - - Exchange differences 248 - 248

208 132 Accumulated depreciation and impairment as at December 31, 2010 303 899 16 923 320 822

127 501 Net book value as at December 31, 2010 183 053 1 157 335 1 340 389

If buildings and other properties were stated at historical cost, the book values would be as follows:

Historical cost 1 046 708Value adjustment reserves as at December 31, 2010 80 618Value adjustment funds 71 454

CollateralThe company has not pledged any fixed assets as security or guarantee.

Unoccupied buildings and other propertiesOf the total gross amount of buildings recorded at NOK 1,132 million, 1 % was unoccupied.

NOTE 19 – OTHER ASSETS


2010 2009 NOK 1 000 2010 2009

57 170 Accrued income 71 515 50 761- 352 Prepaid expenses 21 866 30 208- - Prepaid claims SOS travel 17 035 24 373

239 922 192 775 Receiveables 497 341 349 9323 372 461 Other 8 320 27 457

243 351 193 758 Total other assets 616 077 482 731


NOTE 20 – CLASSIFICATION OF FINANCIAL ASSETS AND LIABILITIES

Group 2010Loans and Held to Fair value Fair value Available Amortised

NOK 1,000 receivables maturity trading FVO for sale cost Total

Financial assetsCash and cash equivalents 985 375 - - - - - 985 375Shareholdings - - 3 055 697 4 277 018 20 216 - 7 352 931Commercial paper and bonds 1 249 291 4 679 131 1 123 184 14 385 756 - - 21 437 362Other financial assets - - 38 158 144 519 - - 182 677Lending to and deposits with credit institutions 169 132 - - - - - 169 132Lending to customers 489 320 - - - - - 489 320Derivative financial instruments - - 130 605 - - - 130 605Total financial assets 2 893 118 4 679 131 4 347 644 18 807 293 20 216 - 30 747 402

Financial liabilitiesSubordinated loan capital - - - - - 848 846 848 846Loans and deposits from credit institutions - - - - - 275 316 275 316Deposits from customers - - - - - 348 756 348 756Securities issued - - - - - 1 376 914 1 376 914Derivative financial instruments - - 160 265 - - - 160 265Total financial liabilities - - 160 265 - - 2 849 832 3 010 097

Group 2009Loans and Held to Fair value Fair value Available Amortised


Financial assetsCash and cash equivalents 1 294 653 - - - - - 1 294 653Shareholdings - - 3 960 676 2 430 071 42 944 - 6 433 691Commercial paper and bonds 764 626 5 020 382 8 604 244 8 278 282 - - 22 667 534Other financial assets - - 26 072 638 809 - - 664 881Lending to and deposits with credit institutions 197 678 - - - - - 197 678Lending to customers 20 415 125 - - 668 125 - - 21 083 250Derivative financial instruments - - 220 787 - - - 220 787Total financial assets 22 672 082 5 020 382 12 811 779 12 015 287 42 944 - 52 562 474

Financial liabilitiesSubordinated loan capital - - - - - 1 769 568 1 769 568Loans and deposits from credit institutions - - - - - 2 597 373 2 597 373Deposits from customers - - - 53 770 - 14 807 787 14 861 557Securities issued - - - 2 711 834 - 4 168 644 6 880 478Derivative financial instruments - - 213 581 5 483 - - 219 064Total financial liabilities - - 213 581 2 771 087 - 23 343 372 26 328 040

Parent company 2010Loans and Held to Fair value Fair value Available Amortised


Financial assetsCash and cash equivalents 93 520 - - - - - 93 520Shareholdings - - - - 17 583 - 17 583Lending to and deposits with credit institutions 122 580 - - - - - 122 580Derivative financial instruments - - 692 - - - 692Total financial assets 216 100 - 692 - 17 583 - 234 375

Financial liabilitiesSubordinated loan capital - - - - - 433 846 433 846Securities issued - - - - - 1 376 914 1 376 914Derivative financial instruments - - - - - - - Total financial liabilities - - - - - 1 810 760 1 810 760

47

Parent company 2009Loans and Held to Fair value Fair value Available Amortised


Financial assetsCash and cash equivalents 101 198 - - - - - 101 198Shareholdings - - - - 15 335 - 15 335Lending to and deposits with credit institutions 250 000 - - - - - 250 000Derivative financial instruments - - - - - - - Total financial assets 351 198 - - - 15 335 - 366 533

Financial liabilitiesSubordinated loan capital - - - - - 683 892 683 892Securities issued - - - - - 500 531 500 531Loans and deposits from credit institution 501 700 501 700Derivative financial instruments - - - - - - - Total financial liabilities - - - - - 1 686 123 1 686 123

NOTE 21 – VALUATION HIERARCHY Group 2010 LEVEL 1 LEVEL 2 LEVEL 3

Quoted prices Valuation based Valuation

in active on observable based on non-

markets market observable market

NOK 1,000 information information Total

Financial instruments available for sale - 394 19 822 20 216Lending to customers and deposits with credit institutions - - - - Financial assets held for trading 4 143 389 53 827 19 823 4 217 039Financial assets designated at fair value through profit or loss (FVO) 15 065 294 3 741 999 - 18 807 293Financial Derivatives 126 048 4 557 - 130 605Total assets 19 334 731 3 800 777 39 645 23 175 153

Securities issued - - - - Deposits from customers - - - - Derivative financial instruments - 160 265 - 160 265Total liabilities - 160 265 - 160 265

Reconciliation of Level 3Opening balance 141 081Gains and losses through profit and loss 43 064Gains and losses in other profit components -814Investments 2 248Sale -145 935Closing balance 39 645

Group 2009 LEVEL 1 LEVEL 2 LEVEL 3Quoted prices Valuation based Valuation




Financial instruments available for sale - 341 42 603 42 944Lending to customers and deposits with credit institutions - 668 125 - 668 125Financial assets held for trading 9 245 473 3 343 825 1 694 12 590 992Financial assets designated at fair value through profit or loss (FVO) 10 611 569 638 809 96 784 11 347 162Financial Derivatives - 220 787 - 220 787Total assets 19 857 042 4 871 887 141 081 24 870 010

Securities issued - 2 711 834 - 2 711 834Deposits from customers - 53 770 - 53 770Derivative financial instruments - 219 064 - 219 064Total liabilities - 2 984 668 - 2 984 668

Reconciliation of Level 3Opening balance 90 928Gains and losses through profit and loss 37 698Gains and losses in other profit components -594Investments 17 254Sale -4 204Closing balance 141 081


Parent company 2010 LEVEL 1 LEVEL 2 LEVEL 3Quoted prices Valuation based Valuation




Financial instruments available for sale - - 17 583 17 583Financial Derivatives - 692 - 692Total assets - 692 17 583 18 275

Derivative financial instruments - - - - Total liabilities - - - -

Reconciliation of Level 3Opening balance 15 335Investments 2 248Closing balance 17 583

Parent company 2009 LEVEL 1 LEVEL 2 LEVEL 3Quoted prices Valuation based Valuation




Financial instruments available for sale - - 15 335 15 335Financial Derivatives - - - - Total assets - - 15 335 15 335

Derivative financial instruments - - - - Total liabilities - - - -

Reconciliation of Level 3Opening balance 153Investments 15 182Closing balance 15 335

Definition of levels used for measuring financial instruments at fair value:Level 1 - Valuation is done by using quoted prices in an active market for identical assets/liabilities. A financial instrument is considered asquoted in an active market if the quotation is easily accessible from a stock exchange, trading agency, broker, industrial classification agency,valuation service or governmental institution and these quotiations shall further represent reliable and frequent market transactions by use ofthe arms length principle. The category includes listed shares, bonds and commercial papers, among others.

Level 2 - Valuation is done on the basis of information for the asset/liability that can be directly or indirectly observable and that are not cove-red by level 1. Where there is not an accesible quoted price for active markets, the instruments are measured using valuation methods basedon observable input and/or similar instruments/products. The pricing of commercial paper and bonds, including loans with fixed interestrate are based on interest rate curves published in active markets.

Level 3 - Valuation on the basis of data that is not observable market information. If the valuation cannot be done according to level 1 andlevel 2, then the valuation method shall be based on non-observable market information.

Financial assets available for sale (level 2 and 3)Financial assets available for sale consist of equity, and valuation is based on non-observable information. Expected future cash flow forms the basis for the valuation.

Lending to customers and deposits with credit institutions (level 2) Lending to customers and deposits with credit institutions consist of loans with fixed interest rate. The valuation is based on interest rate curvespublished in active markets.

Financial assets held for trading (level 2 and 3)This category encompasses equity, bonds and commercial papers. The financial instruments are primarily valued through valuation methods basedon information that can be observable and/or similar instruments/products. The pricing of commercial paper and bonds is based on interest rate curves published in active markets. Instruments classified as level 3 consist of equity where the valuation is based on expected future cash-flow.

Financial assets designated at fair value through profit or loss (fair value option) (level 2 and 3)Instruments classified in level 2 encompass mainly bonds. Valuation of commercial papers is based on interest rate curves published in activemarkets. Instruments classified as level 3 consist of equity where valuation is based on expected future cash-flow.

Financial derivatives (level 2)The financial derivatives consist mainly of currency futures, interest rate swaps and currency swaps. The valutation is based on observablemarket data and/or prices on similar instruments/products.

Securities issued (level 2)The valuation is based on interest rate curves published in active markets.

Deposits from customers (level 2)The valuation is based on interest rate curves published in active markets.

49

NOTE 22 – FINANCIAL INSTRUMENTS DESIGNATED AT FAIR VALUE

GroupSHAREHOLDINGS

2010 2009Acquisition Book value/ Acquisition Book value/

NOK 1,000 cost fair value cost fair value

Norwegian shares 361 130 381 750 96 729 159 674Norwegian mutual funds 1 095 987 1 659 472 1 194 696 1 567 789Foreign shares 456 804 470 987 45 243 33 863Foreign mutual funds 4 019 710 4 820 506 4 431 582 4 629 421Total shareholdings designated at fair value 5 933 631 7 332 715 5 768 249 6 390 748

BONDS AND CERTIFICATES2010 2009

Acquisition Book value/ Acquisition Book value/NOK 1,000 cost fair value cost fair value

Norwegian Government and government-guaranteed 0 % 1 427 175 1 440 699 615 370 620 732State Bond Fund 0 % - - 334 518 324 262Government enterprises 10 % 35 466 35 576 - - Credit institutions and banks 10 % - - 70 994 72 956Norwegian guaranteed bonds 20 % 1 171 482 1 178 296 - - Municipalities and provinces 20 % 433 740 438 684 561 923 565 971Mortgage institutions and banks 20 % 4 546 609 4 615 643 7 430 167 7 569 968Bond funds 20 % 2 756 536 2 765 382 1 277 333 1 284 596Money market funds 20 % 1 869 970 1 863 350 2 004 849 2 009 614Other bonds 20 % - - 3 390 3 410Mortgage institutions and banks 100 % - - 19 924 16 663Money market funds 100 % 426 333 427 498 240 525 242 075Corporate 100 % 622 457 645 577 366 524 378 488Total Norwegian bonds and certificates 13 289 768 13 410 705 12 925 517 13 088 735

ForeignGovernment and government-guaranteed 0 % 711 350 712 022 1 965 939 1 975 408AUR Credit Suisse - Unit Link 4 % - - 3 104 2 555Foreign guaranteed bonds 20 % 545 274 556 834 - - Municipalities and provinces 20 % 2 391 2 344 - - Mortgage institutions and banks 20 % 512 510 497 087 989 155 987 672Bond funds 20 % 143 288 157 409 224 303 223 205Bond funds 50 % - - 483 305 477 751Corporate 100 % 167 963 172 538 125 200 127 200Total foreign bonds 2 082 776 2 098 234 3 791 006 3 793 791

Total commercial paper and bonds designated at fair value 15 372 544 15 508 939 16 716 523 16 882 526

OTHER FINANCIAL INSTRUMENTS2010 2009

Acquisition Book value/ Acquisition Book value/NOK 1,000 cost fair value cost fair value

Hedge funds 19 875 16 642 47 486 43 081Tax related receivables - - - 1 694Deposits and other receivables 146 718 146 213 - 221 665Bank fund Investment choice portfolio 20 100 19 823 - 397 379Foreign special deposits - - - 1 062Total other financial instruments at fair value 186 693 182 678 47 486 664 881

TOTAL FINANCIAL ASSETS DESIGNATED AT FAIR VALUE 21 492 868 23 024 332 22 532 259 23 938 155

Parent companyThe parent company has no financial intruments designated at fair value.


NOTE 23 – FINANCIAL DERIVATIVES

General descriptions:Currency futures: Contracts to buy or sell a specific amount in foreign currency on a specified future date at a fixed price.Interest rate swaps: An agreement regarding the swapping of interest rate conditions over an agreed period and on a fixed amount.Options: Contracts where the seller gives the buyer the right, but not the obligation to buy (call option) or sell (put option) a financial instru-ment or currency before or on a specified date at a predetermined and fixed price.All derivates are designated at fair value through profit or loss. For all interest rate derivatives, gains are recorded as assets and losses arerecorded as liabilities.

Group 2010

Fair value Fair valueNOK 1,000 Contract total Assets Liabilities

Equity instrumentsDerivative underlying CDO's - - -157 600Options - 3 865 -2 665Total equity instruments - 3 865 -160 265

Foreign exchange instrumentsForward contracts - 120 897 - Total foreign exchange instruments - 120 897 -

Interest rate instrumentsInterest rate swaps, incl. cross-currency swaps 65 000 5 843 - Other interest rate contracts - - - Total interest rate instruments 65 000 5 843 -

Total Financial Derivatives - 130 605 -160 265

Group 2009Fair value Fair value

NOK 1,000 Contract total Assets Liabilities

Equity instrumentsDerivative underlying CDO's - - -159 000Options - 11 -944Total equity instruments - 11 -159 944

Foreign exchange instrumentsForward contracts 306 077 22 636 -282Total foreign exchange instruments 306 077 22 636 -282

Interest rate instrumentsInterest rate swaps, incl. cross-currency swaps 7 565 340 198 126 -58 838Other interest rate contracts - 14 - Total interest rate instruments 7 565 340 198 140 -58 838

Total Financial Derivatives - 220 787 -219 064

Parent company 2010Fair value Fair value

NOK 1,000 Contract total Assets Liabilities

Interest rate instrumentsInterest rate swaps, incl. cross-currency swaps 65 000 692 - Other interest rate contracts - - - Total interest rate instruments 65 000 692 -

Total Financial Derivatives - 692 -

Parent company 2009The parent company had no financial derivatives in 2009.

51

NOTE 24 – FINANCIAL INSTRUMENTS CLASSIFIED AS AVAILABLE FOR SALE

2010


Acquisition Book value/ Acquisition Book value/cost fair value NOK 1,000 cost fair value

- - Norsk Tillitsmann 919 1 210- - Norsk Pensjon AS 1 600 945

16 530 16 530 Eiendomsverdi AS 16 530 16 5301 053 1 053 Other 1 781 1 53117 583 17 583 Total financal assets available for sale 20 830 20 216

2009- - Oslo Kongressenter Folkets Hus BA 7 009 7 009- - Finansnæringens Hus 5 813 6 246- - Norsk Tillitsmann 919 1 233- - Norsk Pensjon AS 1 600 930- - SpareBank 1 Eiendomsinvest I AS 5 000 3 475- - SR Eiendomsinvest Tyskland I AS 4 889 4 889

15 182 15 182 Eiendomsverdi AS 15 182 15 182153 153 Other 3 477 3 980

15 335 15 335 Total financal assets available for sale 43 889 42 944

NOTE 25 – BONDS AT AMORTISED COSTGroup

2010 2009Acquisition Book Fair Acquisition Book Fair

NOK 1,000 cost value value cost value value

Bonds held-to-maturity 4 527 549 4 545 378 4 676 404 4 866 298 4 879 453 4 949 046Accrued interests on bonds held-to-maturity - 133 753 - - 140 929 - Total bonds held-to-maturity 4 527 549 4 679 131 4 676 404 4 866 298 5 020 382 4 949 046

Other bonds at amortised cost 1 230 663 1 229 840 1 222 471 637 351 650 190 682 366Accrued interests on bonds at amortised cost - 19 451 - - 114 435 - Total other bonds at amortised cost 1 230 663 1 249 291 1 222 471 637 351 764 626 682 366

Total bonds at amortised cost 5 758 212 5 928 422 5 898 875 5 503 649 5 785 008 5 631 412

2010 2009Risk Acquisition Book Fair Acquisition Book Fair

NOK 1,000 weight cost value value cost value value

Goverment and goverment-guaranteed 0 % 294 550 301 771 297 901 318 900 326 664 320 031Norwegian and foreign bonds with collateral 10 % 1 002 434 1 023 319 1 021 839 804 916 825 439 815 523Municipalities and provinces 20 % 374 972 383 761 383 898 342 865 350 151 345 515Mortgage institutions and banks 20 % 2 616 317 2 711 259 2 693 595 2 505 244 2 712 069 2 607 565Manufactoring loans 100 % 1 469 938 1 508 312 1 501 641 1 531 724 1 570 684 1 542 778Total commercial paper and bonds 5 758 212 5 928 422 5 898 875 5 503 649 5 785 008 5 631 412Of which listed instruments 3 991 154 4 122 124 4 096 992 3 852 242 3 975 898 3 927 326

Changes in holdings during the year 2010 2009

Opening balance as of January 1 5 785 006 5 932 725Additions 617 238 389 809Disposals -483 663 -539 020Accrued premium/discount for the year (redemptions) 9 841 1 493Closing balance as of December 31 5 928 422 5 785 008

2010 2010 2009 2009P&C Life P&C Life

Insurance Insurance Insurance Insurance business business business business

Duration 3,0 5,5 3,0 5,8Average effective interest rate 4,4 4,6 3,6 4,5

Parent companyThe parent company had no bonds at amortised cost in 2010 as well as 2009.


NOTE 26 – FAIR VALUE ON FINANCIAL INSTRUMENTS MEASURED AT AMORTISED COST


2010 2009 2010 2009Book Fair Book Fair Book Fair Book Fair value value value value NOK 1,000 value value value value

AssetsLending to and deposits

122 580 122 580 250 000 250 000 with credit institutions 169 132 169 132 197 678 197 678Lending to and deposits

- - - - with customers 489 320 489 320 20 415 125 20 404 812- - - - Bonds at amortised cost 5 928 422 5 898 875 5 785 008 5 631 412

93 520 93 520 101 198 101 198 Bank deposits 985 375 985 375 1 294 653 1 294 652216 100 216 100 351 198 351 198 Total financial assets 7 572 249 7 542 702 27 692 464 27 528 554

LiabilitiesLoans and deposits from

- - 501 700 501 700 credit institutions 275 316 275 316 2 741 507 3 241 507- - - - Deposits from customers 348 756 348 756 14 717 423 14 217 423

1 376 914 1 365 507 500 531 500 531 Securities issued 1 376 914 1 365 507 4 168 644 4 176 458Subordinated loan capital at

433 846 431 083 683 892 670 842 amortised cost 848 846 802 697 1 769 568 1 753 3391 810 760 1 796 590 1 686 123 1 673 073 Total financial liabilities 2 849 832 2 792 276 23 397 142 23 388 727

Off balance sheet liabilities and 133 000 - guarantee commitments 451 318 -

- - Undrawn guarantees - 1 877 538200 000 - Loan commitments 623 928 475 000

- - Documentary credits - - - - Assets pledged as security 642 234 2 078 500

Amortised cost is the measurement of a financial asset or liability by cumulative amortisation of cash flows estimated at initial recognitionadjusted for depreciation. These measurements are not always consistent with market participant's measurements of the same instruments.Different views on macro economic development, market conditions, risk, expected rate of return as well as access to information might leadto such differences.

The table above displays an overview over calculated fair value of line items designated at amortised cost. The value is calculated by usinginternal models that are calculated based on either a theoretical value in absence of an active market or on a comparison of the instrument'slast traded prices in the market against the value registered in the portfolio. An estimate based on judgement is made where no relevant priceinformation is available. High uncertainty is connected to fair value measurements.

Bonds at amortised costBonds at amortised cost consist mainly of CDO's. The CDO's are divided into a principal and a derivative. The principal is recognised as abond designated at amortised cost, while the derivatives part is recognised as a financial asset designated at fair value. The CDO's fair valueadjustments are based on probability of default published by established rating agencies.

Loans and deposits from credit institutions and deposits from customersLoans from credit institutions and deposits from customers are measured at amortised cost. Minor deposits with index-linked returns (BMB)are designated at fair value. The fair value of currently priced deposits equals amortised cost.

Securities issued and subordinated loan capitalSecurities issued with fixed interests rates are designated at fair value, while securities issued with a floating interest rate and subordinatedloan capital are measured at amortised cost. The valuation of debt measured at amortised cost is either based on broker quotes or calculatedon the basis of swap curves published by Reuters. Similar to loans, the value of assumed new issuance is used.

53

NOTE 27 – INVESTMENT PROPERTY

GroupSpareBank 1 Gruppen's real-estate portforilo consisted of 246 116 m2 divided across 21 buildings as at December 31, 2010. Of this, SpareBank 1 Gruppen uses 51 221 m2 in their own business. Total vacancy rate is 2,9 percent. Weighter remaining tenancy period for theentier portfolio is 6 years.

NOK 1,000 2010 2009

Additions/disposals and value adjustmentsAcquisition cost as of January 1 4 061 127 4 013 112Additions in year 24 942 48 015Disposals in year -769 199 - Acquisition cost as of December 31 3 316 870 4 061 127Accumulated depreciation January 1 - - Ordinary depreciation in year - - Accumulated depreciation December 31 - - Accumulated value adjustment January 1 629 755 647 836Value adjustment in year 148 187 -18 077Accumulated value adjustment December 31 777 942 629 759Book value as of December 31 4 094 812 4 690 887

2010 Average end Historical Book Rental Area of lease

NOK 1,000 City/area cost price value income in m2 term

Type of buildingOffice building Oslo centre 645 818 846 516 85 365 32 672 2016Office building Skøyen 1 068 642 1 460 668 102 363 75 877 2015Office building Oslo other 397 528 472 570 33 600 18 013 2023Office building Tønsberg 12 233 25 427 2 389 2 503 2011Shopping center Oslo other 282 046 289 919 24 570 19 054 2016Office building/stores Oslo centre 482 676 731 812 48 163 31 090 2013Office building/stores Akershus 111 828 141 271 14 946 16 362 2015Other Oslo 124 658 126 628 9 328 60 2096Total 3 125 429 4 094 812 320 724 195 631

2009 Average end Historical Book Rental Area of lease

NOK 1,000 City/area cost price value income in m2 term

Type of buildingOffice building Oslo centre 1 106 605 1 206 674 74 006 53 430 2013Office building Skøyen 1 068 642 1 453 358 121 856 75 877 2015Office building Oslo other 581 974 680 577 50 054 39 002 2020Shopping center Oslo other 297 632 291 520 24 058 18 196 2015Office building/stores Oslo centre 440 157 789 813 62 308 31 097 2011Office building/stores Akershus 100 550 130 111 13 457 13 535 2012Other Oslo 133 894 138 833 8 088 60 2096Total 3 729 454 4 690 887 353 827 231 197

The company utilises an internal cash flow model to calculate fair valie for the properties. In the model, a 30-year cash flow is estimated onthe basis of expected future costs and income for each property. After the end of the 30th year of the cash flow, a terminal value is calculate.The cash flow and terminal value are then inflated to correct for expected increase in prices and discounted with a required rate of returnconsisting of risk free interest and a risk premium. The risk premium is set separately for each property.

Parent companyThe parent company had no investmest property in 2010 as well in 2009.


NOTE 28 – LENDING TO AND DEPOSITS WITH CUSTOMERS AND CREDIT INSTITUTIONS

Lending to and deposits with credit institutions

NOK 1,000 2010 2009

Lending to and deposits with credit institutions without maturity date 169 133 197 678Lending to and deposits with credit institutions with maturity date - - Total net lending and deposits with credit institutions 169 133 197 678

Lending and deposits specified by currencyNOK 166 539 25 769SEK 813 10 589USD - 57 753JPY - 11 375GBP 1 011 15 984EUR 40 64 758CAD - 4 698CHF - 4 371Other currencies 730 2 381Total 169 133 197 678

Loans to customers

NOK 1,000 2010 2009

Loans specifiedCash advances and bank overdrafts 468 570 2 690 072Mortgage loans - 495 983Term loans - 18 145 881Other loans 98 - Portfolio of outstanding receivables 34 252 - Gross lending to and deposits with customers 502 920 21 331 936

Impairments -13 600 -248 687Net lending to and deposits with customers 489 320 21 083 249Total loans to customers and credit institutions 658 452 21 280 928

Loans divided by market

NOK 1,000 2010 2009

Employees 34 252 14 492 094Divided by business 468 667 6 839 842Gross loans and deposits with customers 502 920 21 331 936

Impairments -13 600 -248 687Net loans and deposits with customers 489 320 21 083 249Of which, loans to employees 28 366 1 153 925Interest rate offered to employees is 80 % of the lowest offered interest rate to customers.

Gross loans divided by geographical areaNOK 1,000 2010 2009

Oslo 7 021 12 188 946Akershus 8 565 7 009 227Other 487 334 2 133 763Total gross loans divided by geographical area 502 920 21 331 936

Gross loans divided by sector and industryNOK 1,000 2010 2009

Without industry association 43 868 14 492 094Agriculture 762 47 178Fishing industry and fishery related businesses 1 365 7Manufacturing 258 594 390 574Construction and building, power and water suppliers 24 673 72 984Commodity trade 40 533 452 623Hotels and restaurants 925 213 183Transport and storage 93 372 95 357Business services 13 906 500 238Property management 1 4 605 910Information and technology 10 258 174 453Finance 11 085 196 705Other industries 3 579 90 630Total gross loans divided by sector and industry 502 920 21 331 936

55

Individual write-downs divided by sector and industry

NOK 1,000 2010 2009

Employees - 23 192Manufacturing - 1Construction and building - 3 259Commodity trade - 875Hotels and restaurants - 8Transport and storage - 74Business services - 1 474Property management - 91 985Information and technology - 2 364Other industries - 26 975Specific provisions SpareBank 1 Gruppen Finans AS 13 600 - Total individual write-downs divided by sector and industry 13 600 150 207

SpareBank 1 Gruppen's lending portfolio lies in the subsidiary SpareBank 1 Gruppen Finans AS in 2010.

Parent company

NOK 1,000 2010 2009

Subordinated loan capital to First Securities AS 32 580 - Subordinated loan capital to SpareBank 1 Livsforsikring AS - 125 000Subordinated loan capital to SpareBank 1 Skadeforsikring AS - 75 000Credit line to Argo Securities AS 90 000 50 000Total granted loans 122 580 250 000

Loans are measured and recognised at amortised cost.

NOTE 29 – NET LOAN LOSS PROVISIONS

GroupNOK 1,000 2010 2009

Change in write-downs 10 650 88 167Incurred losses on loans with previous write-offs 505 34 407Incurred losses on loans without previous write-offs 16 1 852Income received on claims previously written-off -766 -1 258Total loss on loans and deposits 10 405 123 168

Gross loan losses divided by sector and business line NOK 1,000 2010 2009

Manufacturing and mining -233 1Construction and building, power and water supply 100 3 261Commodity trade, hotels and restaurants 10 486 -184Transport and other services - 73Financing, property management and other trade services - 58 664Other countries - 20 474Retail - 19 852Group write-downs corporate - 32 808Group write-downs retail - -10 523Gross loan losses customers 10 353 124 426

Non-performing and impaired loans2010 2009 2008 2007 2006

Non-performing loans (more than 90 days due) 34.242* 416 568 268 741 112 378 95 629Other impaired loans - 23 038 131 855 53 444 145 313Total impaired loans 34.242* 439 606 400 596 165 822 240 942Individual write-downs - 149 485 88 323 42 004 87 350Net impaired loans 34.242* 589 091 312 273 123 818 153 592

* As a basis the portfolio consists of obtained loans where requirements have not been met (all demands over 90 days) in SpareBank 1Gruppen Finans AS' business area Portfolio in 2010. Fulfillment of the claims in the portfolios depend on the debtors ability to fulfill.

Parent companyThe parent company has no net loan loss provisions.


NOTE 30 – CREDIT RISK EXPOSURE FOR EACH INTERNAL RISK CLASS

The credit risk in the SpareBank 1 Gruppen is mainly related to the operatoins of the business area factoring.Work is being performed to prepare quantitative risk analyses for the business area factoring. The credit risk in the business area is related tofinancing / lending risk and risk related to domestic and foreign customer credit guarantees.In connection with ICAAP, SpareBank 1 Gruppen uses the standard method for calculating credit risk.

The internal credit model is a combination of a risk model and effectiveness model (how well adapted is the business area factoring and howefficient can SpareBank 1 Gruppen run the agreement).Thus the model is not directly transferable to a risk model with two dimensions / axes; rating on client / customer and security coverage.

Risk matrixWith the business area factoring's system for risk classification as a starting point, the following risk matrix is used as a basis for delegationof credit authorisations. Objective score from Lindorff Decision and SpareBank 1 Gruppen Finans AS' internal rules of procedures, decides inwhich risk class limited companies, one-man businesses and personal business registered in the Register of Business Enterprises are placed.

Kombinasjoner av risikoklasser og sikkerhetsklasser oppsummeres i følgende risikogrupper:

Client rating /structure rating [4 - 5] [3,5 - 4> [3 - 3,5> [2 - 3> [1 - 2>

5 Low risk Low risk Low risk Medium risk High risk4 Low risk Low risk Medium risk Medium risk High risk3 Low risk Low risk Medium risk High risk High risk2 Low risk Medium risk Medium risk High risk High risk1 Medium risk High risk High risk High risk High riskDefault High risk High risk High risk High risk High riskDefault /impaired High risk High risk High risk High risk High risk

Description of the model:On one axis the client rating based in the Lindorf Decision Score i used, where 1 is the worst and 5 is the best.On the other axis, it is the structure that is given a rating between 1 and 5, 5 being the best. Structure rating implies the factorability both in connectionwith the effects from operating the agreement and that SpareBank 1 Gruppen has good collateral in the receivable. It has therefore been developed amodel where different parameters that say something about the factorability are considered and given a score.

The parameters that are considered are:1. Debtors credit worthiness2. Repurchase rate3. Credit note turnover rate4. Age distribution5. Business sector

The client and structure rating model results in a matrix, that gives the conclusion low risk, medium risk or high risk, based on the combination between client rating and structure rating.

Loans divided by risk classes:

Business area factoringClient rating vs. Structure rating [4 - 5] [3,5 - 4> [3 - 3,5> [2 - 3> [1 - 2> Total Summarised

5 Low riskLoans 6,6 % 7,4 % 11,7 % 0,1 % 0,0 % 25,7 %4 46,8 %Loans 4,5 % 4,9 % 22,9 % 0,8 % 0,0 % 33,1 %3 Medium riskLoans 4,2 % 4,5 % 8,5 % 1,4 % 0,0 % 18,6 %2 40,9 %Loans 3,0 % 2,2 % 6,4 % 2,7 % 0,0 % 14,4 % High risk1Loans 0,0 % 2,4 % 0,2 % 0,2 % 0,0 % 2,8 % 6,9 %Default / put off DefaultLoans 1,8 % 1,8 %Impairments ImpairedLoans 3,6 % 3,6 %

The model divides the portfolio into the risk classes low, medium and high risk, as well as default/put off and impairments in 2010.

57

NOTE 31 – MAXIMUM CREDIT RISK EXPOSURE, ASSETS PLEDGE AS SECURITY NOT TAKEN INTO ACCOUNT

The below table displays maximum credit risk exposure for the different balance sheet items, derivatives included.The exposure is before assets pledged as security and allowed offsetting.

Parent company GroupGross exposure Gross exposure

2010 2009 NOK 1,000 2010 2009

ASSETS

93 520 101 198 Cash and cash equivalents 985 375 1 294 653 - - Lending to and deposits with credit institutions 169 132 197 678 - - Lendring to and deposits with customers 489 320 21 083 250 - - Financial instruments designated at fair valie through

profit or loss (fair value option) 18 807 293 11 347 162 - - Financial instruments held for trading 4 217 039 12 590 992 - - Derivatives 130 605 220 787 - - Financial instruments held to maturity 4 679 131 5 020 382 - - Financial instruments held at amortised cost 1 249 291 764 626

17 583 15 335 Financial instruments - available for sale 20 216 42 944 243 351 193 758 Other assets 616 077 482 731 354 454 310 291 Total financial assets 31 363 479 53 045 205

LIABILITIES

- - Financial guarantee contracts 111 953 611 386 - - Unutilised credit lines - 1 877 538 - - Commitments 206 360 475 000 - - Total financial guarantees 318 313 2 963 924

354 454 310 291 Total credit risk exposure 31 681 792 56 009 129

NOTE 32 – CONTRACTUAL MATURITY OF FINANCIAL LIABILITIES

Group 2010On Less than 3 3–12 More than Without

NOK 1,000 demand months months 1–5 years 5 years maturity Total

Deposit from and liabilities tocustomers and credit 6 473 59 323 - - - - 65 796 Securities issued 11 413 185 896 476 626 817 359 - - 1 491 294 Derivatives 2 664 - - 131 200 26 400 - 160 264 Other commitments - 21 578 5 616 - - - 27 194 Subordinated loan capital and perpetual subordinated loan capital securities 283 846 4 603 13 657 222 780 212 747 200 000 937 633 Commitments 206 360 - - - - - 206 360 Total debt 510 756 271 400 495 899 1 171 339 239 147 200 000 2 888 541

Interest rate as of year end 2010 is used to calculate the cash flow for the subordinated loan capital.Cash flow for perpetual subordinated loan capital is calculated from one to five years. The total amount is added without maturity.

Group 2009On Less than 3 3–12 More than Without


Deposit from and liabilities to customers and credit 14 412 414 1 378 612 328 203 1 617 320 - - 17 736 549 Securities issued - 126 020 2 958 546 3 940 050 471 746 - 7 496 362 Derivatives - 17 299 41 232 123 051 197 774 - 379 356 Other commitments 2 424 332 274 114 - - - - 2 698 446 Subordinated loan capital and perpetual subordinated loan capital securities 283 570 10 223 281 003 793 095 350 000 200 000 1 917 891 Commitments 475 000 - - - - - 475 000 Total debt 17 595 316 1 806 268 3 608 984 6 473 516 1 019 520 200 000 30 703 604

Interest rate as of year end 2009 is used to calculate the cash flow for the subordinated loan capital.Cash flow for perpetual subordinated loan capital is calculated from one to five years. The total amount is added without maturity.


Parent company 2010On Less than 3 3–12 More than Without


Deposit from and liabilities tocustomers and credit - - - - - - -Securities issued 11 413 159 334 476 626 817 359 - - 1 464 732Derivatives - - - - - - -Subordinated loan capital and perpetual subordinated loan capital securities 283 846 1 195 3 545 168 700 - - 457 286Commitments - - - - - - - Total debt 295 259 160 529 480 172 986 059 - - 1 922 018

Interest rate as of year end 2010 is used to calculate the cash flow for the subordinated loan capital.

Parent company 2009On Less than 3 3–12 More than Without


Deposit from and liabilities tocustomers and credit 200 617 301 083 - - - - 501 700Securities issued - 2 836 502 836 - - - 505 671Derivatives - - - - - - -Subordinated loan capital and perpetual subordinated loan capital securities 283 570 2 654 257 876 153 876 - - 697 977Commitments - - - - - - - Total debt 484 187 306 573 760 711 153 876 - - 1 705 347

Interest rate as of year end 2009 is used to calculate the cash flow for the subordinated loan capital.

NOTE 33 – AGE DISTRIBUTION OF OVERDUE, BUT NOT IMPAIRED LOANS AND PREMIUM REVENUES

The table below shows overdue amounts on loans, overdrafts on credits/deposits and premium revenues broken down on number of days after the due date that are not due to delays in payments transfers.

2010

NOK 1,000 Upon request* Up to 30 days 31–60 days 61–90 days Over 91 days Total

Lending to and deposits from customersRetail 34 252 - - - - 34 252 Corporate - - - - - - Past due but not paid insurance premiums - 26 147 1 716 - - 27 863 Total 34 252 26 147 1 716 - - 62 115

* The portfolio consists of acquired non-fulfilled claims (all claims more than 90 days past due) in SpareBank 1 Gruppen Finans AS' business area Portfolio. Payment depends on the debtors ability to redeem the claim.

2009

NOK 1,000 Upon request* Up to 30 days 31–60 days 61–90 days Over 91 days Total

Lending to and deposits from customersRetail 24 474 2 630 4 053 1 627 27 111 59 895 Corporate - 13 772 44 7 16 691 30 514 Past due but not paid insurance premiums - 24 577 2 787 - - 27 364 Total 24 474 40 979 6 884 1 634 43 802 117 773

* The portfolio consists of acquired non-fulfilled claims (all claims more than 90 days past due) in SpareBank 1 Gruppen Finans AS' business area Portfolio. Payment depends on the debtors ability to redeem the claim.

59

NOTE 34 – MARKET RISK RELATED TO CURRENCY EXCHANGE RISK

In the Group it is mainly SpareBank 1 Livsforsikring AS and SpareBank 1 Skadeforsikring Group that are exposed to currency risk. Both the life insurance and damage insurance company’s exposure to foreign currency is mainly related to its investment portfolios. As part of the companies’risk management, efforts are made to neutralise the main part of the currency risk in underlying portfolios through foreign exchange contracts.

The foreign exchange risk exposure is as follows:

2010 2009Net Change in Net Change in

currency result by a currency result by apositions 3% change positions 3% changein NOK in exposure NOK 1,000 in NOK in exposure

Currency72 222 2 167 EUR 266 8139 648 4 189 USD 744 2249 569 1 487 Other 1 933 58261 439 7 843 Total 2 943 88

NOTE 35 – MARKET RISK RELATED TO INTEREST RATE RISK

The Group is exposed to market risk related to interest rate risk. The main part of the interest rate risk in SpareBank 1 Gruppen is related to theinvestment portfolios in SpareBank 1 Livsforsikring and SpareBank 1 Skadeforsikring. Below we show a sensitivity analysis per company related to interest rate risk.

SpareBank 1 SpareBank 1 SpareBank 1SpareBank 1 Skade- Livs- ODIN Argo Gruppen

Gruppen forsikring forsikring Forvaltning Securities FinansParameter AS (parent) Group AS AS AS Group Total

Change in result in NOK million before tax1% increase in interest rate -15 35 -75 - -10 -2 -671% reduction in interest rate 15 -35 75 - 10 2 67

* The table above is an estimate of expect profit and loss impact. The table is prepared in connection with monitoring of risk in SpareBank 1Gruppen. The numbers are based on changes in value and changes in cash flow during the first year in certificates and bond portfolios inSpareBank 1 Livsforsikring AS, SpareBank 1 Skadeforsikring Group and Argo Securities AS in the case of a momentary change in interestrates. For SpareBank 1 Gruppen and SpareBank 1 Finans Group, the profit and loss impact is related to net interest bearing debt.


NOTE 36 – DEPOSITS FROM CUSTOMERS AND LOANS AND DEPOSITS FROM CREDIT INSTITUTIONS


2010 2009 NOK 1,000 2010 2009

- - Loans and deposits from credit institutions without matuiry date 239 236 268 377- 501 700 Loans and deposits from credit institutions with maturity date 36 082 2 328 996- - Deposits from and liabilities to customers without maturity date 115 289 9 458 072- - Deposits from and liabilities to customers with maturity date - 5 220 287- - Liabilities to policy holders 233 466 183 198- 501 700 Total deposits from and liabilities to customers an institutions 624 072 17 458 930

2010 2009 2010 2009Deposits Deposits NOK 1,000 Deposits Deposits

- - Deposits from and liabilities to customers without maturity date 115 289 9 458 072 - - Deposits from and liabilities to customers with maturity date - 5 220 287 - - Total deposits from customers 115 289 14 678 359

- - Wage-earners 1 370 4 236 541 - - Agriculture - 162 - - Fishing industry and fishery related businesses 17 677 13 517 - - Oil related industry - 650 - - Manufacturing 60 763 135 891 - - Construction and building, power and water suppliers 6 094 158 439 - - Commodity trade 7 251 333 865 - - Hotels and restaurants 4 126 560 - - Transport and storage 643 70 913 - - Business services 4 041 6 787 682 - - Poroperty management - 978 518 - - Public sector - 13 157 - - Shipbuilding industry - 569 - - Information an technology 9 863 121 773 - - Finance industry 7 167 1 624 178 - - Other industries 416 75 944 - - Total deposits divided by industry and sector 115 289 14 678 359

2010 2009 Geographic allocation of deposits 2010 2009

- - Akershus 4 930 1 945 840 - - Oslo 2 080 12 173 336 - - Hedmark 725 - - - Oppland 428 - - - Østfold 8 159 - - - Vestfold 117 - - - Vest-Agder 487 - - - Rogaland 54 - - - Hordaland 7 199 - - - Sogn og Fjordane 28 261 - - - Møre og Romsdal 38 160 - - - Sør Trøndelag 5 012 - - - Nordland 1 269 - - - Troms 6 176 - - - Finnmark 11 703 - - - Other 529 559 183 - - Total deposits divided by geographic areas 115 289 14 678 359

61

NOTE 37 – SUBORDINATED LOAN CAPITAL


2010 2009 NOK 1,000 Interest rate Call date Maturity 2010 2009

Term subordinated loan capital:

- 250 202 21.12.2005 - Norsk Tillitsmann AS NIBOR + 0,62% 21.12.10 21.12.15 - 250 202

150 145 150 120 21.12.2006 - Norsk Tillitsmann AS NIBOR + 0,53% 21.12.11 21.12.16 150 145 150 120

- - 30.06.2009 - LO NIBOR + 2,75% 30.03.14 30.06.19 - 500 136

- - 28.06.2006 - BN Bank ASA NIBOR + 0,60% 28.06.11 28.06.16 15 000 15 000

- - 30.11.2008 - SpareBank 1 NN NIBOR + 0,70% 30.11.13 30.11.18 - 20 000

- - 15.02.2006 - Norsk Tillitsmann ASA NIBOR + 0,45% 15.06.11 15.06.16 200 000 200 222

150 145 400 322 Total time subordinated loan capital 365 145 1 135 680

Perpetual subordinated loan capital:

83 197 83 152 Norwegian owner banks and Sparebanken Vest NIBOR + 2,25% perpetual 83 197 83 152

SpareBank 1 Gruppen AS' owners,

200 504 200 418 Sparebanken Vest and Swedbank NIBOR + 3,00% perpetual 200 504 200 418

283 701 283 570 Total perpetual subordinated loan capital 283 701 283 570

Perpetual subordinated loan capital securities

- - 30.12.2004 - LO / Affiliated trade unions NIBOR + 1,7% Call opsjon 2014* perpetual - 150 032

- - 15.06.2006 - Norsk Tillitsmann NIBOR + 1,17% perpetual 200 000 200 286

- - Total perpetual subordinated loan capital securities 200 000 350 318

433 846 683 892 Total subordinated loan capital 848 846 1 769 568

* The mark-up is 1.0 % in case the perpetual subordinated loan capital securities are not paid back by 2014.

NOTE 38 – SECURITIES ISSUED

Parent company GroupAverage Average Average Averageinterest interest interest interest

2010 rate 2010 2009 rate 2009 NOK 1,000 2010 rate 2010 2009 rate 2009

Commercial papers and 605 000 3,08 % - - other short-term debt 605 000 3,08 % 1 000 000 4,14 %760 500 3,60 % 500 000 3,09 % Bond debt 760 500 3,60 % 5 680 000 3,30 %2 002 - - 0,00 % Fair value adjustments 2 002 - 105 873 - 9 412 - 531 - Accrued interst 9 412 - 94 605 -

1 376 914 - 500 531 - Total securities issued 1 376 914 - 6 880 478 -

Bond debt broken down on maturity date

- 500 000 2010 - 2 750 000605 000 - 2011 605 000 1 200 000350 000 - 2012 350 000 800 000

- - 2013 - 500 000125 500 - 2014 125 500 1 020 000285 000 - 2015 285 000 -

- - 2017 - 410 0002 002 - Fair value adjustments 2 002 105 8739 412 531 Accrued interst 9 412 94 605

1 376 914 500 531 Bond debt and other debt 1 376 914 6 880 478


NOTE 39 – CAPITAL ADEQUACY

SpareBank 1 Gruppen group is subject to the same capital requirements rules as insurance companies and other financial institutions. Therequirement is 8 % liable equity compared with its risk weighted assets. In 2009, SpareBank 1 Gruppen group was subject to the Basel II regulatoins. After Bank 1 Oslo AS was demerged on January 1, 2010, the group is subject to the Basel I regulations.

Parent company Group2010 NOK 1,000 Vekt 2010

Risk wighted assets- Government, central banks, etc 0 % 3 748 597 - - Securities 10 % 2 534 344 253 434

43 220 Financial institutions 20 % 11 929 733 2 385 947- Secured loans, etc 50 % 629 035 314 518

4 869 048 Fixed assets 100 % 12 722 948 12 722 948- Other assets 150 % 44 349 66 524

93 664 Goodwill and other intangible assets 993 752 - - Assets related to investment choices 20 % 6 700 517 1 340 103

Total recorded assets 39 303 2755 005 932 Total risk weighted assets 17 083 473-93 664 Excluding goodwill and other intangible assets -993 75240 203 Positing outside the balance sheet 2 219 805 50 516

- Net basis for calculation for institutions reporting in accordance with Basel II 1 593 587- Deduction for liable capital in other financial institutions -9 228

4 952 471 Total recorded assets and postings outside the balance sheet and weighted assets 40 529 328 18 718 348

2 758 135 Equity 3 701 048- Bond funds 200 000- - 50% deduciton for liable capital in other financial institutions -4 614- - Minimum requirement for reassurance coverage -34 341

-440 000 - Suggested dividends -440 000- - Unrealised gains on investment portperiy / fixed assets -71 454

-93 664 - Deferred tax asset - - - Intangible assets and goodwill -993 752

2 224 471 Total core capital 2 356 887

283 000 Perpetual secured loans 283 000150 000 Time limited secured loans 350 845

- 45% of unrealised value of properties 32 154- 45% of unrealised gain on shares - - - 50% deduction for liable capital in other financial institutions -4 614

433 000 Total additional capital 661 385

2 657 471 Net liable capital 3 018 272

53,7 % Capital coverage 16,1 %

2 261 273 Suprplus of liable capital 1 520 804

Parent company Group2009 NOK 1,000 2009

1 782 400 Share capital 1 782 400827 096 Share premium reserve 827 096702 945 Other equity 1 472 320120 000 Dividends 120 000

- Fund for unrealised gains 65 221- Minority interests 30 299

3 432 441 Total equity, exclusive perils reserves 4 297 336

Core capital-101 933 Deferred tax, goodwill and other intangible assets -824 369

- Fund for unrealised gains available for sale -65 221-120 000 Deduction for dividends, payable -120 000

- Deduction for reinsurance provisions -34 133- 50 % deduction eligible primary capital in other financial institutions - - 50 % deduction in expected losses IRB less loan loss provisions -108 186- 50 % capital adequacy reserve - - Portion of unrecognised actuarial gains/losses - - Perpetual subordinated loan capital securities 350 000

3 210 508 Total core (Tier 1) capital 3 495 427

63

Tier 2 capital283 000 Perpetual eligible primary capital 283 000400 000 Term eligible primary capital 1 129 000

- 45 % unrealized gains on investment properties 29 349- 50 % deduction eligible primary capital in other other financial institutions - - 50 % deduction in expected losses IRB less loan loss provisions -108 186- 50 % capital adequacy reserve -

683 000 Total Tier 2 capital 1 333 163

3 893 508 Net liable capital 4 828 590

Minimum requirement eligible primary capital Basel II449 294 Standarised approach 133 485

- Special lending 427 082- Other corporates 163 747- SMB 3 467- Retail 164 091- Other retail 26 543- Equity positions -

449 294 Total IRB credit risk 918 415

- Credit risk 93 889- Equity risk 3- Foreign exchange risk -

90 793 Operational risk 155 453- Transitional rules 20 008- Commitments calculated after the Basel I requirements - - Capital requirements for insurance 1 194 688- Deductions -11 013

540 087 Minimum requirement eligible primary capital 2 371 443

57,67 % Capital adequacy ratio as of December 31 16,29 %47,56 % Tier 1 capital ratio 11,79 %10,12 % Tier 2 capital ratio 4,50 %

NOTE 40 – REINSURANCE RECEIVABLESGroup

NOK 1,000 2010 2009

Reinsurance receivables within P&C Insurance 294 855 249 366Reinsurer's claims provisions life insurance 148 801 152 021Reinsurer's share gross claims provisions 1 034 542 777 552Reinsurer's share gross unearned premium 179 531 119 728Reclassified reinsurance provisions -163 391 -147 825Total reinsurance receivables 1 494 338 1 150 842

NOTE 41 – INSURANCE RECEIVABLES FROM POLICYHOLDERSGroup

NOK 1,000 2010 2009

Due invoiced receivables P&C Insurance 370 607 253 675Due unbilled receivables P&C Insurance 902 205 776 727Accounts receivable life insurance 121 629 77 613Total insurance receivables from policyholders 1 394 441 1 108 015


NOTE 42 – INSURANCE LIABILTES IN LIFE INSURANCE

Group2010 Gross Premium and

premium Additional pension Claims Security NOK 1,000 reserve provision adjustm.fund provisions provisions Total

Individual annuity and pension 6 430 913 104 084 1 764 214 906 - 6 751 668 - Profit model according to the Insurance Act § 9-9 51 816 321 - - - - - Profit model according to previous rules from theInsurance Act of June 10, 1988 § 8-1 with guidelines 4 386 797 103 763 1 764 22 450 - - - Contracts without rights to share of profits 131 717 - - 192 456 - - - Investment choice 1 860 583 - - - - -

Individual endowment 2 338 902 9 490 - 177 221 679 2 526 292- Profit model according to the Insurance Act § 9-9 353 666 - - - - - - Profit model according to previous rules from theInsurance Act of June 10, 1988 § 8-1 with guidelines 621 726 9 490 - 72 164 679 - - Contracts without right to share of profits 68 - - 104 872 - - - Investment choice 1 363 442 - - 185 - -

Group pension 10 625 774 265 680 416 373 344 617 - 11 652 445- Defined benefit-based pension schemes without investment choice 3 548 018 192 602 268 975 107 567 - - - Paid-up policies 3 254 126 73 078 - 34 500 - - - Defined contribution-based pension schemes (including pension capital certificates without investment choice 344 175 - 14 484 10 422 - - - Defined contribution-based pension schemes (including - pension capital certificates) with investment choice 3 386 947 - 117 709 103 157 - - - Contracts without rights to share of profits 92 508 - 15 205 88 972 - -

Group life 393 386 - - 695 561 - 1 088 947

Accident - - - 242 011 54 317 296 328- Contracts without rights to share of profits - - - 242 011 54 317

Total all businesses 19 788 975 379 255 418 137 1 674 317 54 996 22 315 681

65

NOTE 43 –INSURANCE RESULT AND PROVISIONS IN P&C INSURANCE

Group

2010

1 PERSON

AL LINES

2 CO

MMERCIAL LINES

Of which

TOTAL

Onshore

Onshore

Of which

Workm

en's

TOTAL

34

5Natural

Onshore

third party

Travel

PERSON

ALproperty

property

third party

compen-

COMMERCIAL

Total

Energy/

Reinsu-

Perils

NOK 1,000

property

Motor

liability

Yacht

Accident insurance

Others

LINES

industrialcom

mercial

Motor

liability

Liability

sation

Safety

Other

LINES

Marine

oil

rance

pool

TOTAL

Gross unearned premium

provision as at

January 1, 2010

495 302

686 310

294 824

30 477

36 284

112 142

8 147

1 368 662

4 847

125 520

88 886

28 520

4 647

34 778

3 924

2 405

265 009

--

-41 235

1 674 906

Gross unearned premium

provision as at

December 31, 2010

556 389

793 219

325 971

32 802

37 279

120 582

12 854

1 553 126

4 818

156 545

118 597

32 448

7 398

62 762

4 553

14 728

369 402

--

-39 293

1 961 821

Gross claims

provision as at

January 1, 2010

725 412

1 253 902

998 037

19 783

256 023

97 531

4 567

2 357 218

5 719

336 874

187 755

139 007

24 421

644 081

230 160

3 573

1 432 583

340

52 296

40 732

55 126

3 938 296

Gross claims

provision as at

December 31, 2010

903 430

1 400 747

832 189

19 144

307 602

126 346

10 053

2 767 323

12 983

333 926

220 352

125 099

82 525

878 220

235 354

46 587

1 809 947

157 809

66 252

37 826

46 595

4 885 752

Security provision as

at January 1, 2010

--

--

--

- 469 225

--

--

--

--

231 474

--

10 721

- 711 421

Statutory minimum

requirement January 1, 2010-

- -

- -

- -

469 225

- -

- -

- -

- -

231 474

--

10 721

- 711 421

Security provision

as at December 31, 2010

--

--

--

- 500 480

--

--

--

--

251 285

--

15 432

- 767 198

Statutory minimum

requirement as at

December 31, 2010

- -

- -

- -

- 500 480

- -

- -

- -

- -

251 285

--

15 432

- 767 198

Other technical

provision as at

January 1, 2010

--

--

--

- 497 337

--

--

--

--

--

- -

- 497 337

Other technical

provision as at

December 31, 2010

- -

- -

--

-452 531

- -

- -

- -

- -

--

--

- 452 531

Total as a

t January 1, 2010

6 821 960

Total as a

t Decem

ber 3

1, 2010

8 067 303


NOTE 44 – LIABILITIES RELATED TO REINSURANCE

Group

NOK 1,000 2010 2009

Reinsurance liabilities in life insurance 33 301 36 079Reinsurance liabilities in P&C insurance 44 405 59 044Total liabilities related to reinsurance 77 706 95 123

NOTE 45 – UNDERWRITING RISK SPAREBANK 1 LIVSFORSIKRING AS

Important calculation assumptions and changes in the assumptions

• The basic interest rate is in accordance with the Insurance Act and is assessed on an ongoing basis with the interest rate for long-term govern-ment bonds. The basic interest rate is currently 2.75 %for new life insurance contracts beginning on January 1, 2006. The basic interest rate fornew goup pension contracts sold from January 1, 2006 is 2.70%. The basic interest rate for accrual of benefits on group pension is 3 %, witheffect from renewals in 2004. The basic interest rate for new individual life insurance contracts sold in the period 1994 - 2005 is 3%. Otherwisethe basic interest is 4 %. The basic interst will change in 2011 according to the Norwegian Financial Supervisory Board's decison to reduce themaximum basic interest.

• The mortality rate assumptions are primarliy based on research done by the Norwegian Financial Services Association (FNH), while assumpti-ons on disability are based on the company's own experiences. The mortality rate assumptions for the disabled take into consideration the corre-lation between disability and mortality. As of 2008, group defined benefit pension and paid-up policies from group defined pensions, followthe new industry tariff K2005 with security margins that take into account increased life expectancy.

• The allocation for reserves and premium provisions is determined based on the principle of security margins in the reserves and in the pre-miums. The safety margins in premiums and reserves are not quantified, but assessed by the level of uncertainty and longevity of the liabilities.

• The ordinary premium reserve of the company is calculated based on the prospecitve principles on the same tariff basis as the premium tariff.IBNR and RBNS provisions are allocated using statistical methods based on the company's own experiences.

• There has been an effort by Finance Norway (FNO) to develop new tariffs for individual annuity and pension taking increased life expectancyinto account. As a result of this, there is a process for increasing the provisions for individual annuity and pension.

Risk management for insurance contracts

• Evaluation of insurance riskRisk manuals with guidelines on risk assessment including health rules and writing of potential customers have been prepared. When writingindividual risk products, the policy holder is required to undergo a health check. The result of this health check is reflected in the level of therequired premium. When arranging group contracts with risk coverage, the company must undergo a risk assessment. In the assessment thecompany's financial position, industry and health and disablement background will be examined.

• Control and monitoring of insurance riskIn the company's existing portfolio the insurance risk is monitored within each specific product group. The risk result in each product group isdivided into the following elements: mortality rate, disability rate and probability of survival. The development of the risk results is monitoredthroughout the year. For every risk type the ordinary risk result for a period is the difference between the risk premiums undertaken during theperiod and the claims incurrend in the same period. Events that have not yet been reportet but which the company, on the basis of experience,assumes have occurred (IBNR) are taken into account. The company has developed a framework for control and monitoring of insurance risk inconnection with risk based supervision.

Risk result in 2010

Individual Individualannuity and endow- Group Group

MNOK pension ment pension Accident life Total

Risk of death (including accident risk) -17,94 149,22 -1,84 - 74,11 203,56Disability 33,30 -20,24 14,05 - 82,28 109,39Accident - - - 40,65 - 40,65Risk result technical provisions 15,36 128,98 12,21 40,65 156,39 353,60

The table below shows the total risk result for 2010 after a reduction in mortality rate of 10 % and 20 %, respectively, or an increase in thedisability rate of 10 % or 20 %, respectively.

Individual Individualannuity and endow- Group Group

MNOK pension ment pension Accident life Total

10 per cent reduction in mortality rate 15,26 141,95 10,74 40,65 178,32 386,9220 per cent reduction in mortality rate 15,16 154,92 9,26 40,65 200,25 420,2410 per cent increase in disability rate 2,36 121,83 -0,25 40,65 143,02 307,6020 per cent increase in disability rate -10,65 114,68 -12,72 40,65 129,64 261,60

The effect that the risk result has on the result to the shareholders depends on which profit model is applied for the various products.

67

• ReinsuranceThe Board of Directors reviews the company's reinsurance strategy on an annual basis. The strategy comprises amongst other targets forthe company's reinsurance program and how the reinsurance program is to be monitored.

The company has the following types of reinsurance coverages:

• Quota reinsuranceThrough quota reinsuance the risk is divided between two parties. Therefore parts of the risk are transferred to a reinsurer, where the parttransferred is previously agreed on.

• Surplus reinsuranceSurplus reinsurance covers risk that exceeds the maximum risk amount for own account specified in the contracts. Excess reinsurance is,like quota reinsurance, a proportional arrangement, but differs because the percentage varies in the different contracts. Excess reinsuranceis in particular used for individual contracts.

• Excess of loss / Catastrophe reinsuranceThrough excess of loss, the reinsurer covers the amount that exceeds the company's risk amount, often limited to a specified maximumlevel. A claim can be defined per risk or per incident. An example of an excess of loss is a catastrophe reinsurance. In the case where theclaim is defined per risk, excess of loss can be similar to the surplus reinsurance.

• Sufficiency testIFRS 4 requires the company to carry out a sufficiency test of the company's reserves. This test has been performed using the same princi-ples since 2004. The calculations are based on forecasts from the company's finance model, where both assets and liabilities are included.This model is proceeded till 2015. The administration result and the risk result is assumed to be on the average level of the period 2010 -2015, and the financial return is assumed to be 5.2 %.

As life expectancy increases, the reserves for retirement pension is expected to be too low for individual pension. The calculations assu-me that 0.6 per cent of the reserve lacks and that this is divided over 2 years.

The sufficiency test shows that the premium reserve is adequate using the specified assumptions.

Conditions and terms in insurance contracts

• Insurance riskThe company offers cover for disability through most product groups, either through disability pension, waiver of premium or one-offpayment. Individual contracts and goup life contracts also include life cover. Group pension includes widow or widower's cover withpayments commencing on the policy holder's time of death.

Changes in the rules for payment from the national social security scheme for disability benefits etc. may have a significant impact on thenumber of claims for disability and disability reserves. In terms of changes in death benefits, the increasing life expectancy will have aneffect om whether or not expected payment time will be as assumed.

With a steady increase in life expectancy the company's future payments to retirement pension will be higher compared to previous years.

• Interest rate riskThe company has taken on a significant interest rate risk within annuity and pension insurance. The company's average annual guarante-ed rate of return is 3.18 %, calculated from average insurance fund. All new contracts in 2010 are offered with a basic interest rate of 2.75% for individual insurance and 2.70 % for group defined benefit pension. A persistent low interest rate level will increase the risk relatedto the guaranteed rate of return. If the annual rate of return seems to be lower than the guaranteed rate of return, financial efforts are madeto secure returns on the same level as the guaranteed rate of return. If this not is sufficient, allocations from additional provisions will bemade to cover the guarantee. Potential negative rates of return must be covered from the comopany's equity. In good fiscal years fundsfrom the profit are transferred to the additional provisions. This is regulated upward to 12 % of the contract's premuim reserve.

Average interest rate guarantee 2010

Individual endowment insurance 2,38 %Individual annuity/pension insurance 3,41 %Group pension insurance 3,15 %Group life insurance 0,00 %Accident insurance 0,00 %Total 3,18 %

• Profit modelsThe company has models with and without rights to profits according to the rules in the Insurance Act.

• New profit model: Group pension, Defined contribution pension with return guarantee, Guarantee account, Individual saving productsentered into from 2008 and Group life with profit fund.

• Modified profit model: Paid-up policies terminated from group pension. • Profit sharing according to previous rules: Individual endowment and Individual pension with profit sharing entered into prior to 2008.• Without right to profits: Group life (without Group life with profit fund), Group risk pension insurance without paid-up policy, Individu-

al annuity, Individual endowment and Accident insurance.• With investment choice: Defined contribution schemes with investment choice, Induvidual endowment and Individual annuity.• Profit allocation

The allocation of profit to each customer is determined by which product group the contract belongs to.For individual endowment insurance, the profits will be accumulated on the different contracts and paid out with the amount insured.For individual annuity and pension insurance, the secured contribution is written up with the profit. Individual contracts terminatedfrom group pension treated in the same way.


For group pension, the profits are allocated to the scheme's premium reserve and the pensioner's profit reserve in accordance with theregulations set in the Company Pension Scheme Act. For schemes without these regulations the profits are allocated to the premium fund.

• For products without profit rights the compay will be exposed for the product's cost risk and insurance risk.

• The right to transfer insurance between companies, where the time limit for settlement is only two months after the delay of cancellationfor contracts where the transaction value is above NOK 300 million, can represent a liquidity risk if one or more of the greater contractsare transferred within a short amount of time. The transaction fee has an upper limit of NOK 5 000. Bigger outward transactions thaninward transactions over a defined time period will affect the future cash flow.

• In general, changes in framework conditions for the industry can influence future cash flows. For instance, changes in the Pensions Actresult in the termination of defined benefit-based pensionl or in transfers to the defined contribution-based pension.

• Maturity analysisThe best estimate for when the liabilites for savings products are due for payment. In the estimate disposals have been taken into account.

2010Book

MNOK value 0-5 years 5-10 years 10-15 years 15-20 years >20 years

Payments (not discounted) 5 027 5 017 3 717 2 914 6 502Total net premium reserves (discounted) 12 560

Insurance risk concentration• The insurance portfolio is well diversified with respect to insurance risk. The portfolio is composed primarily of individual policies and

group policies where the insurance risk is not concentrated.

NOTE 46 – UNDERWRITING RISK SPAREBANK 1 SKADEFORSIKRING

Risk in P&C insuranceThe insurance risk in each contract entails the probability that the insured event occurs and the uncertainty surrounding the resulting claim.The nature of the insurance contract is such that the risk is random and therefore must be estimated.

For insurance contracts portfolios utilizing probability theory to calculate price and technical provisions, the biggest risk facing the companyis that the actual compensation exceed the amount set aside. Insurance events strike randomly and the observed number of events and degreeof compensation will naturally vary from year to year compared to that estimated by statistical techniques.

Empirically, a larger portfolio of standard insurance contracts will have expected results that vary less. A more diversified portfolio will haveless chance of interference from changes in a sub-portfolio. The Group's subscription strategy is designed to reduce variability in the expectedresult by increasing the spread between different types of insurance risk through a sufficiently large insurance stock within each sector. Rein-surance is used to reduce the Group's risk to major damages.

Sensitivity to insurance riskThe table below shows the impact on earnings and equity (before tax) of a 1% change in gross premiums earned and 1 % change in the Combined Ratio for own account. Combined Ratio is the most widely used criterion for measuring profitability in general insurance. A change in the Combined Ratio can result of a change in the injury frequency, compensation level and / or administrative costs.

Sensitivity analysis – general insurance

Change in Change in profit (before tax) MNOK1 % change in combined ratioRetail +/- 35,91 % change in combined ratioCorporate +/- 5,01 % change in insurance premium level +/- 40,9

Concentration of insurance riskThe Group has prepared guidelines describing which insurance objects the companies can accept in their portfolios. Compliance with theguidelines will be controlled. In addition automatic controls for entry of new portfolio have been incorporated into the insurance system. Thereinsurance cover is adapted to the risk exposure of the insurance portfolio. The Group has a reinsurance cover consisting of a quota programand large comprehensive reinsurance cover (XL reinsurance).

69

Gross premiums written per insurance product

Figures in NOK 1,000

Combined InsuranceFire 1 628 536 Onshore property industrial fire 11 152 Sea 908Motor vehicle 1 562 159 Onshore property commersial fire 352 660 Energy/oil 2Leisure boat 68 897 Motor vehicle industry 243 362 Total incoming reinsurance 52Accident insurance 155 019 Liabilty 24 854 Total sea, energy, reinsurance 962Travel insurance 303 396 Occupational injury 126 226Other private insurances 23 324 Assurance 68 683 Nature/pools 127 341

Other 35 242Total gross premiums

Total personal lines 3 741 331 Total commercial lines 862 179 written 4 731 813

Claims provisionsClaims provisions are measured at an unbiased level, such that there is no security buffer included in the provision. The company must haveprovisions covering in full that corresponding to the minimum requirements on premium provisions and claims provision for own account(after ceded reinsurance) as determined by the Financial Supervisory Authority of Norway for each industry group. The company's actual claimsprovisions for own account shall at all times exceed the minimum requirements set by the Financial Supervisory Authority of Norway within allproduct lines. The fiscal year end premium provision shall cover not run-off risk on damages not yet incurred on agreements contracts.

Provisions for claims have not been discounted, except for within marine insurance.

The security provision shall cover extraordinary fluctuations and shall together with the outstanding claims provisions cover the company’sinsurance liabilities with a likelihood of 99 %.

Analysis of claims developmentInsurance liabilities and reinsuranceThe table below shows the actual claims compared with previous estimates (ie claims development). The specification includes only portfoli-os which have a natural development, that is, without portfolio transfers.

Gross claims development

Gross – shore based business ex. incoming reins./sea/pooler2005

MNOK and earlier 2006 2007 2008 2009 2010 Total

CLAIMS PROVISIONS

Year end 2 976,8 1 299,7 1 436,5 1 436,6 1 553,6 1 598,0 10 301,2 One year later 2 985,4 1 306,1 1 480,5 1 575,5 1 618,4 - 8 965,9 Two years later 3 036,2 1 240,7 1 437,6 1 554,6 - - 7 269,1 Three years later 3 030,8 1 210,7 1 437,4 - - - 5 678,9 Four years later 3 031,5 1 206,2 - - - - 4 237,7 Five years later 3 066,3 - - - - - 3 066,3

PAID CLAIMS

One year later 901,0 569,8 648,3 711,1 666,3 3 496,5 Two years later 500,6 124,0 125,0 143,2 - 892,8 Three years later 367,6 70,0 87,0 - - 524,5 Four years later 305,0 62,1 - - - 367,1 Five years later 215,0 - - - - 215,0 Total Unison 5,9 70,8 101,5 125,5 159,5 463,2 Total unpaid 2 295,2 896,7 961,7 979,8 825,9 5 959,2

Run-off results in 2010 – own business -36,2 1,8 -4,5 19,7 2,3 -16,8Run-off results in 2010 – energy/ incoming reinsurance 0,3Run-off results in 2010 – pools 5,6Total run-off results in 2010 -10,9

Total gross claims provision closing balance 771,2 309,6 475,6 574,8 792,6 1 598,0 4 521,7

Claims provisions – portfolios undertaken 52,7 Gross claims provisions sea/incoming reinsurance 264,8 Pools 46,6 Total gross claims provision in the balance sheet 4 885,8


Development in claims for own account

For own account before XOL - i.e. only for own account proportionally after ceded reinsurance.2005

MNOK and earlier 2006 2007 2008 2009 2010 Total

CLAIMS PROVISIONS

Year end 1 677,5 1 112,9 1 199,6 1 206,5 1 269,1 1 396,4 7 861,8 One year later 1 688,3 1 127,3 1 198,6 1 293,6 1 301,1 - 6 608,7 Two years later 2 164,8 1 061,8 1 160,1 1 275,3 - - 5 662,0 Three years later 2 156,8 1 033,5 1 163,8 - - - 4 354,1 Four years later 2 155,6 1 029,9 - - - - 3 185,5 Five years later 2 187,4 - - - - - 2 187,4

CLAIMS PAID

One year later 681,1 531,3 589,2 657,1 585,8 - 3 044,4 Two years later 361,6 115,8 115,0 114,8 - - 707,2 Three years later 248,5 46,8 42,3 - - - 337,6 Four years later 212,5 52,6 - - - - 265,0 Five years later 165,9 - - - - - 165,9 Total Unison 4,5 19,7 31,6 60,2 81,0 - 196,9 Total paid 1 674,1 766,0 778,1 832,2 666,7 - 4 717,1

Run-off results in 2010 -33,6 1,7 -5,5 19,4 -6,5 - -24,5Run-off result`s part XOL - - - - - - 0,1 Run-off result - incoming reinsurance/energy - - - - - - 0,4 Ruf-off results in 2010 - pools - - - - - - 5,4 Total Run-off result for own account 2010 - - - - - - -18,6

For own account claims provisions closing balance 513,2 263,9 385,8 443,1 634,4 1 396,4 3 636,7 Claims provisions – portfolios undertaken - - - - - - 43,9 Deduction XOL-reinsurance - - - - - - -26,8Claims provisions for own account sea/incoming reinsurance - - - - - - 151,3 Pools - - - - - - 45,8 Total claims provisions for own accounts in the balance sheet 3 850,9

NOTE 47 – WAGES AND OTHER REMUNERATION TO CEO AND KEY MANAGEMENT

Other Accrued

remuner- pension

NOK 1,000 Salaries Bonus1) ation cost

GROUP MANAGEMENT

Kirsten Idebøen 2 900 594 443 359Torbjørn Martinsen 2 473 493 385 356Aud Lysenstøen 2 131 361 355 251Tore Tenold 1 948 413 219 634Leif Ola Rød 2 324 1 070 42 - Thoralf Granerød 1 768 295 285 301Jarle Haug 1 647 - 293 131Øyvind Aass 1 958 267 296 271Sigurd Aune 1 831 350 306 402Total 2010 18 980 3 843 2 622 2 704Total 2009 25 640 4 136 2 234 4 774

BOARD OF DIRECTORS

Terje Vareberg 100 - 19 -Finn Haugan 168 - 20 -Hans Olav Karde 184 - - -Harry Konterud 228 - 6 -Bjørn Engaas 153 - 18 -Bente N. Halvorsen 168 - - -Knut Bekkevold 184 - - -Venche Johnsen 153 - - -Steinar Karlsen 154 - 18 -Per Gunnar Gulseth 123 - - -Total 2010 1 615 - 82 -Total 2009 1 184 - - -

71

Control committeeDag Nafstad 150 - - - Knut Ro 110 - - -Ivar Listerud 110 - - -Odd Broshaug 110 - - -Rolf Røkke 110 - - -Total 2010 590 - - -Total 2009 783 - - -

Shareholders committee 113 - - -Shareholders committee 159 - - -

1) The bonus amount relates to paid out bonus in 2010.

The CEO possess the right to a defined benefit pension amounting 70 % of annual salary from the year she turns 60. The right is earned on apro rata basis. The CEO's salary and bonus are based on an overall evaluation of a combination of the Group's profit, the Groups goal achievement compared to other comparable financial institutions, the CEO's own achievments and average salary for comparable management positions. A possible bonus is decided by the Board of Directors and the bonus provision for one financial year is to be paidbefore the next financial year ends.

The board is not committed to give the chairman of the board any benefits by resignation or change of the duty.Neither do any agreements on bonus, profit sharing, options and similar benificial to the chairman of the board exist.

Loans to employees are granted by Bank 1 Oslo AS and collateral given is according to the Financial Institutions Act § 2-15. Employees are granted loans with a 20 % discount compared to other customers. The cost of the discount is allocated to the different subsidiaries based on each company's share. The employees in SpareBank 1 Gruppen Group have a total loan of NOK 813 780 thousand withdiscount.

Employee discounts are granted on loans and some insurance services. Benefits given to management and members of the board do not diverge from benefits given to other employees. All loans to employees and the board are endorsed by the Control Committee. The discountsgiven are about 25 % of the ordinary customer conditions. SpareBank 1 Livsforsikring AS does not offer any discounts to employees or boardmembers. All insurance contracts are based on ordinary customer conditions. Three memebers of the Group Management have signed pensionagreements that diverge from the pension schemes offered to other employees.

SpareBank 1 Gruppen AS sole business is to administrate its investment in the subsidiaries. All related-party transactions are singed on business conditions only. All inter group benefits not related to sale and portfolio management are priced at cost.

DEPOSITS 2010

Jointly OtherGroup Board of Control controlled related

NOK 1,000 management Directors committe entilities parties

Deposits as of January 1 1 470 1 379 5 - - Deposits received during the year 23 211 2 783 123 - - Withdrawals 23 172 2 405 119 - - Deposits as of December 31 1 509 1 757 9 - -

Interest expense 32 28 - - -

DEPOSITS 2009

Jointly OtherGroup Board of Control controlled related

NOK 1,000 management Directors committe entilities parties

Deposits as of January 1 759 1 250 18 - - Deposits received during the year 21 421 2 465 141 - - Withdrawals 20 299 2 336 154 - - Deposits as of December 31 1 882 1 379 5 - -

Interest expense 41 29 - - -

Insurance premium SpareBank 1 Skadeforsikring AS 2009

Insurance premium in year 136 197 45 - - Insurance claims 37 213 - - -

SERVICES PURCHASED FROM RELATED PARTIES

2010 2009

Services purchased from Alliansesamarbeidet SpareBank 1 DA 39 351 46 827Commission cost to controlling ownerbanks 679 169 640 760


NOTE 48 – PENSIONS

General description of the company's pension liabilities:The employees are part of SpareBank 1 Gruppen's Group pension scheme which is administrated by SpareBank 1 Livsforsikring AS. The defined benefit plan ensures most of the employees a pension payment that constitutes 70 % of the expected final salary until the age of 77with a future decrease in payments. In addition, a defined contribution plan has been established for employees starting on January 1, 2005and later. The defined benefit plan was closed for new employees as of the same date.

For the parent company, the defined benefit plan includes 105 current employees and 74 pensioners. For the total group the defined benefitplan includes 526 current employees and 491 pensioners.

Estimates are used for preparing the valuation of the pension retirement benefit and for the resulting excess or deficit. Adjustments to thesevalues are made on a yearly basis and in accordance to statements of the transfer value from the life insurance company and actuarial valuations of the liability's size.

The costs are calculated based on the assumptions made for the opening balance. The pension liabilities are revised and calculations updatedas of December 31 according to the assumptions made by year end. Actuarial gaines and losses (changes in estimates) are presented in thestatement of comprehensive income. The periods pension cost consists of the pension entitlement accrued in the period and interest cost onthe pension liability less expected return and accrued employers' national insurance contribution. Payments according to the defined contribution scheme are registered through profit and loss in the year of payment. If the company had used the assumptions given by the Norwegian accounting foundation as of December 31, 2010, the pension commitment would have been 15 and 66 million lower in the parentcompany and Group's annual accounts respectively. Equity would have been higher with equal amounts.

A law on state subsidies to wokers who take early retirement in the private sector (AFP-tilskuddsloven) came into force on February 19, 2010.Workers who take early retirement from 2011 or later, will be given benefits under the new scheme. The new pension scheme contitutes alifelong entitlement from the National Health Service (Folketrygden) and can be taken from age of 62. Annually the employees earn the rightto early retirement with 0,314% of pensionable income up to 7,1 G at the age of 62. Vesting of the new scheme is calculated on the basis of theworker's lifetime income, so that all earlier working years are included in the accrual basis. The new scheme will be financed by the statecovering 1/3 of pension expenditure and 2/3 which shall be borne by the employers. Employers' premiums will be determined as a percenta-ge of salaries between the 1G and 7,1G.

The new pension scheme is for accounting purpose considered to be a defined benefit multiemployer scheme . This means that each entityshould account for its proportionate share of the scheme's pensions liabilities, pension funds and pensions costs.

In the absence of estimates of the individual components and a consistent and reliable basis for allocation recorded, the new pension shemeshall be considered a defined contribution scheme.

In connection with the implementation of new law the previous scheme for accounting purposes is considered as closed and under termination, and will be treated in accordance with curtailment and settlement. For employees born after December 31, 1948 , the effect of thenew scheme is accounted for in the first half of 2010. For retired employees with previous scheme, the acounting remain unchanged.

As a result the parent company entered an income of NOK 10 milion and the Group NOK 46 million at the end of first half of 2010.

At the year end provisions have been made for the Groups new pension scheme accrued since February 2010.In the parent company the provision has been based on judgement. In 2010 the child and spouce insurance were closed. This has resulted in gain of NOK 13,3 and 45,7million in parent company and the Group.

73


2010 2009 NOK 1,000 2010 2009

Pension liabilities related to Defined benefit pension 238 365 219 947 Present value of pension liabilities as of January 1 1 003 251 1 265 002

- - Pension liabilities additions 29 021 5 46212 169 16 203 Pension entitlements accrued in the period 41 499 50 9417 846 8 489 Interest cost on pension liabilities 35 950 50 018

- - Terminated pension plans -11 - -32 382 3 386 Actuarial losses/gains -48 747 -32 286-12 025 -9 660 Benefits paid -79 661 -67 099

- - Other changes -1 293 - 213 972 238 365 Present value of pension liabilities as of December 31 980 009 1 272 038186 546 198 645 of which funded 856 728 1 124 92927 426 39 720 of which unfunded 94 074 147 209

Pension assets147 651 140 477 Pension assets as of January 1 689 043 845 747

- - Pension assets additions 9 272 1 6628 067 8 182 Expected return in the period 38 389 48 698

- - Terminated pension plans - - -12 620 -7 628 Actuarial losses/gains -33 409 -40 41610 097 10 333 Employers NI contributions 40 905 50 029-5 089 -3 713 Benefits paid -50 059 -37 263

- - Other changes -1 217 - 148 106 147 651 Pension assets as of December 31 692 924 868 457

Financial status as of December 31213 972 238 365 Present value of pension liabilities as of December 31 980 009 1 272 038148 106 147 651 Pension assets as of December 31 692 924 868 45765 866 90 714 Net pension liabilities as of December 31 287 085 403 581

65 866 90 714 Net pension liabilities as of December 31, excluding employers NI contribution 287 085 403 58112 604 11 023 Employers NI contribution January 1 44 458 59 088

- - Employers NI contribution additions 642 333,0 1 685 2 328 Costs related to employers NI contributions 5 508 7 368

- - Net employers contribution related to terminated contracts - - -2 786 1 553 Actuarial losses/gains -2 395 1 348-2 402 -2 299 Benefits paid -9 941 -11 2659 100 12 604 Employers NI contribution as of December 31 38 273 56 87374 966 103 318 Net pension liabilities in the balance sheet 325 355 460 453

Pension costs for the period12 169 16 203 Accrued defined benefit-based pension 44 843 50 9417 846 8 489 Interest cost on pension liabilities 36 404 50 018-8 067 -8 181 Expected return on pension assets -38 769 -48 69911 947 16 510 Net defined benefit-based pension costs without employers NI contributions 42 478 52 2601 685 2 328 Accrued employers NI contribution 5 970 7 36713 631 18 838 Net defined benefit-based pension cost booked to profit and loss 48 449 59 628

- applied to secured defined benefit pension cost including 10 202 11 594 employer's NI contribution 33 000 49 9188 499 7 153 Defined contribution-based pension cost, including employers NI contribution 31 365 29 27922 131 25 991 Pension costs in the period recognised in the income statement 79 814 88 907

Run-off gain due to cessation of salary increases, including -10 271 - employers NI contribution -44 988 - -13 335 - Run-off gains upon termination and issuance of paid-up policies -43 985 -

Total pension cost defined benefit and contribution -1 475 25 991 pension, including run-off gains -9 159 88 907

Estimated pension cost defined benefit and contribution 19 424 20 403 pension for 2011 including employers NI contribution 74 157 81 895

65 019 61 681 Pensionable salary 298 805 333 172

Actuarial gaines and losses761 -9 048 Actuarial gains/(losses) for the period, recognised in equity after tax -48 622 -6 824

-67 246 -68 007 Cumulative actuarial gains/(losses) for the period, recognised in equity after tax -395 720 -347 098


NOTE 49 – EMPLOYEES AND FULL-TIME EQUIVALENT Average nbr.

Full-time Average nbr. fulltimeEmployees equivalent of employees equivalents31.12.2010 31.12.2010 in 2010 in 2010

SpareBank 1 Gruppen AS 220 213 219 213SpareBank 1 Livsforsikring AS 246 238 249 242SpareBank 1 Skadeforsikring AS 392 382 389 380ODIN Forvaltning AS 57 57 54 54SpareBank 1 Medlemskort AS 9 8 9 9Actor Fordringsforvaltning AS 65 63 62 59SpareBank 1 Gruppen Finans AS 47 45 45 42Conecto AS 84 81 84 81Argo Securities AS 75 75 71 71Total 1 195 1 162 1 181 1 150

Average nbr.Full-time Average nbr. fulltime

Employees equivalent of employees equivalents31.12.2009 31.12.2009 in 2009 in 2009

SpareBank 1 Gruppen AS 217 212 213 207SpareBank 1 Livsforsikring AS 251 245 270 262SpareBank 1 Skadeforsikring AS 386 378 394 384Bank 1 Oslo AS* 272 266 273 268ODIN Forvaltning AS 50 50 51 50SpareBank 1 Medlemskort AS 9 9 9 9EiendomsMegler 1 Oslo Akershus AS* 94 90 94 90Actor Fordringsforvaltning AS 50 49 50 49SpareBank 1 Gruppen Finans Holding AS - - - -Actor Portefølje AS 1 1 1 1Actor Verdigjenvinning AS 8 7 8 6SpareBank 1 Factoring AS 41 39 20 19Argo Securities AS 66 66 53 53Total 1 445 1 411 1 436 1 398

* Bank 1 Oslo AS including the subsidiaries Eiendomsmegler 1 Oslo Akershus AS was demerged as of January 1, 2010 and is no longer partof SpareBank 1 Gruppen Group.

Composition of pension assets20,40 % 21,20 % Property and real estate 20,40 % 21,20 %18,40 % 27,10 % Investments Held to maturity 18,40 % 27,10 %15,70 % 13,80 % Shareholdings 15,70 % 13,80 %43,20 % 36,20 % Commercial paper and bonds 43,20 % 36,20 %2,30 % 1,70 % Other assets 2,30 % 1,70 %

100,00 % 100,00 % Total pension assets 100,00 % 100,00 %

8 067 8 182 Actual return on pension assets 38 389 48 698

Assumptions3,50 % 4,40 % Discount rate 3,50 % 4,40 %4,60 % 5,80 % Anticipated return on pension assets 4,60 % 5,80 %4,00 % 4,50 % Future salary growth rate 4,00 % 4,50 %3,75 % 4,25 % Increase in basic amount (G) 3,75 % 4,25 %1,30 % 2,50 % Rise in pensions 1,30 % 2,50 %14,10 % 14,10 % Employers NI contribution 14,10 % 14,10 %

4% og 2% 4% og 2% Staff turnover 4% og 2% 4% og 2%40,0 % 40,0 % Anticipated Early retirement plan acceptance from 62 years-old 40,0 % 40,0 %

Demographic assumptions:K2005 K2005 Mortality rate K2005 K2005IR2003 IR2003 Disability IR2003 IR2003

Development during the last five years for the Groups defined benefit-based pension plan

2010 2009 NOK 1,000 2010 2009 2008 2007 2006

Present value of pension 213 972 256 782 liabilities as of 31.12 980 009 1 272 038 1 272 038 1 105 713 1 077 832148 106 154 824 Pension assets as of December 31 692 924 868 457 868 457 838 876 786 71165 866 101 958 Deficit 287 085 403 581 403 581 266 837 291 121

Experienced adjustments on -32 382 3 389 pension liabilities -48 747 -32 286 98 632 -5 277 -287 402

Experienced adjustments on -12 620 -7 628 pension assets -33 409 -40 416 -92 357 7 738 -49 052

75

NOTE 50 – TAXES

Connection between profit before tax and tax base


2010 2009 NOK 1,000 2010 2009

555 463 132 978 Profit before tax 985 133 1 193 663-11 742 29 346 Change in temporary differences -182 228 -61 024-600 950 -235 181 Permanent differences -647 805 116 600433 743 504 239 Received group contribution with tax effect - - -17 789 -16 243 Loss allowance carried forward 87 053 -757 620

- -2 044 Correction previous year(s) 61 707 -140 164358 725 413 095 Basis for payable taxes in the income statement 303 860 351 455-358 725 -413 095 Distributed group contribution with tax effect - -

- - Basis for payable taxes in the balance sheet 303 860 351 455

- - Payable taxes 85 081 137 6538 269 -3 669 Change in deferred tax asset 58 826 149 064

100 443 115 666 Taxable distributed group distribution - - - 215 Insufficient/excess tax provision previous years 3 484 17 677

296 3 519 Other tax effects (net) 6 195 -10 374109 008 115 731 Total taxes 153 586 294 020

109 008 115 731 Tax before other income elements 153 586 294 020-296 -3 519 Tax on other income elements -23 980 -2 436

Of which related to: -296 -3 519 Estimate variances in the pension agreement -21 340 -2 654

- - Revaluation of proverty -3 544 447- - Adjustment of insurance commitments 904 -229

108 712 112 212 Total tax including other income elements 129 606 291 584

Temporary differences as of December 31 - - Fixed assets 71 602 150 779

32 - Financial instruments 59 715 171 651- - Shares in associated companies 270 109 269 435- - Profit and loss account - 2 918- - Insurance provisions (equity) 1 659 015 1 487 403- - Other changes * 704 941 8 659

32 - Total taxable temporary differences 2 765 382 2 090 845

-190 000 -160 942 Fixed assets -201 417 -169 337- - Financial instruments -36 178 -265 105- - Accounts receivables -62 -52- - Provisions -43 158 -22 894

-87 383 -128 152 Retirement benefit contributions -340 380 -484 883- - Other changes - -3 499

-277 383 -289 094 Total tax-deductable temporary differences -621 195 -945 770

-57 163 -74 953 Losses carried forward -1 256 822 -589 206-334 546 -364 047 Basis for deferred tax liability / asset 887 364 555 869

-93 664 -101 933 Deferred tax asset - - - - Deferred tax liability 248 461 155 643- - Deferred tax asset, not recorded 4 956 -

-93 664 -101 933 Net deferred tax asset 253 417 155 643

Balancing tax charges: 155 530 37 234 28% of profit before tax 276 884 294 597-168 266 -65 851 Pemanent differences (28%) -181 653 30 432121 448 141 187 Tax on group contribution - -

- -358 Correction previous year(s) 44 355 -5 557296 3 519 Transactions directly to equity 2 872 5 314- - Other differnces 2 708 2 077 - - Change in unutilised dividends carried forward 8 420 -32 843

109 008 115 731 Current income tax calculated 153 586 294 020

The deferred tax benefit in the parent company is recognised in the balance sheet since our expectations for results in subsidiaries are such that we can realise the benefit within a 3-5 year perspective. Recorded taxes payable in the balance sheet will be settled through tax positions in the Group during 2011. The actual payable tax in the Group is zero.

* Tax relief has been claimed for provisions to the exchange equalisation fund in 2009 and 2010, of respectively NOK 327,1 and 289,7 milli-on in Sparebank 1 Livsforsikring AS. When calculating the tax cost, corrections have been made related to uncertainty related to approvalfor the tax relief of NOK 634,6 million. It is known that the tax authorities are working on the matter and that the current law is unclear.


NOTE 51 – OTHER LIABILITIES


2010 2009 NOK 1,000 2010 2009

111 616 96 164 Accounts payable 150 821 121 3099 066 8 449 Advance tax deduction 56 367 59 9397 342 1 172 Governmental fees 31 852 34 16418 061 21 712 Owed salaries and holiday pay 113 492 133 41925 177 25 885 Other accruals 204 541 146 375

- - Commision liabilities 73 486 83 322- - Margin payments or other account arrangements with customers 70 273 79 160

358 725 413 095 Provision for group contribution - - - - Occupational injury insurance claim to RTV 56 796 56 264- - Premium deposits 133 847 128 995

4 880 11 528 Other liabilities 238 423 161 154534 867 578 005 Total other liabilities 1 129 898 1 004 101

NOTE 52 – EVENTS AFTER THE BALANCE SHEET DATE, LEGAL MATTERS

Events after the balance sheet dateNo events have been registered after the balance sheet date that will affect the annual accounts of SpareBank 1 Gruppen Group.

Legal disputesAs of December 31, 2010, SpareBank 1 Gruppen Group was a party in 32 legal disputes. Each and all of these concern disputes with insurance holders and other insurance companies, and are related to claims settlements in insurance contracts. Provisions are made in the companies' accounts for these disputes as they occur, and the outcome is not material for the Group's financial position.

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NOTE 53 – GROUP CONSOLIDATED EXCLUSIVE BANK 1 OSLO GROUP

Income statement

NOK 1,000 2009

Gross insurance premium revenue 7 556 607- Reinsurers' share 488 185Net insurance premium revenue 7 068 422Interest income 804 104Interest expense 842 285Net interest income -38 181Net fee and commission income 600 373Net fee and commission expense 791 547Net fee and commission income -191 174Net gains on financial assets measured at fair value 2 209 864Net gains on financial instruments classified as available-for-sale 42 707Net income from bonds to amortised cost 3 362Net income from bonds held-to-maturity 271 779Net income from investment properties 299 681Share of profit and group contrifbution from subsidiaries - Other operating income 322 566Total income 9 989 026

Insurance benefits and claims 7 013 788Insurance claims recovered from reinsurers -331 006Securities adjustment reserve for life insurance 327 145Transferred to policyholders - life insurance 170 766Allocation to additional provisions 127 918Net loan loss provisions - Operating Expenses 155 204Depreciation and amortisation 118 845Other operating expenses 11 226Total expenses 8 990 722Operating profit 998 304

Share of profit of associates and jointly controlled entities accounted for using the equity method -2 767Profit before tax 995 537Income tax expense 260 455Profit after tax 735 082

Profit attributable to:Shareholders of the parent company 744 554Minority interests -9 472

Earnings per share (expressed in NOK) 412Diluted earnings per share (expressed in NOK) 418


Balance sheet

NOK 1,000 2009

AssetsDeferred income tax assets - Goodwill 738 750Other intangible assets 59 415Investments in subsidiaries - Investments in associates and jointly controlled entities 16 861Property, plant and equipment 523 795Reinsurance receivables 1 150 842Insurance receivables from policyholders 1 108 015Other assets 423 013Investment property 4 583 273Bonds held to maturity 5 020 382Bonds at amortised cost 764 626Financial instruments - available for sale 24 184Lending to customers and deposits with credit institutions 457 940Financial instruments designated at fair value 20 530 618Derivative financial instruments 23 772Cash and cash equivalentes 1 051 251Total assets 36 476 737

Equity and liabilitiesShareholders equity 2 268 496Retained earnings 1 799 359Revaluation reserve 65 221Minority interests 30 300Total equity 4 163 376

Subordinated loan capital and perpetual subordinated loan capital securities 1 118 000Securities adjustment reserve 327 145Provisions in life insurance 20 843 433Premium and claims provisions in P&C Insurance 6 821 960Net retirement benefit obligations 359 165Deferred income tax liability 155 258Payable taxes 139 476Securities issued 500 000Liabilities related to reinsurance 95 123Derivative financial instruments 165 427Other liabilities 869 889Deposits from and liabilities to customers and credit institutions 918 485Total equity and liabilities 36 476 737

79

NOTE 54 – CASH FLOW WITHOUT BANK 1 OSLO GROUP AS OF DECEMBER 31, 2010

The cash Flow below shows Cash Flow without Bank 1 Oslo Group as of December 31, 2010

Proforma NOK 1,000 31.12.10

Cash flows from operating activitiesProfit after tax 831 547Depreciation and amortisation 91 300Revision of investment property values -148 187Net loan loss provisions 10 388Increase reinsurance receivables -343 496Increase in lending to customers -210 900Change in insurance provisions 3 007 315Change in accrued expenses and prepaid revenues -611 654Reduction in deposits from customers and loans and deposits from credit institutions -294 413Net cash flow generated from operating activities 2 331 901

Cash flows from investing activitiesIncrease in financial instruments designated at fair value and adjusted for value changes -2 600 547Reduction of financial instruments held to maturity -143 414Reduction of financial instruments available for sale 3 968Investment property additions -24 942Investment property disposals 661 590Investment property gains 34 402Increase property, plant and equipment -816 594Net cash flow used in investing activities -2 885 537

Cash flows from financing activitiesPayments related to redemption of subordinated loan capital -269 154External dividends paid -120 000Increase in securities issued 876 914Net cash flow from financing activities 487 760

Net receipts/payments of cash -65 876

Cash and cash equivalents as of January 1 1 051 251

Cash and cash equivalents as of December 31 985 375


Independent auditor's report

81

Investor Relations

SpareBank 1 Gruppen - Annual Report 2010