Fra DNB engelske analyser.
STOREBRAND Set for solvency tailwinds We expect Storebrand to report Q3 EPS adj. of NOK1.2 (results due 7:30 CET on 24 October) and a Solvency II ratio of 167%. The results should benefit from a 14bp increase in Norwegian interest rates, a 4% appreciation in global equities, and continued balance sheet adjustment measures, while investment grade credit spreads have seen only small movements this quarter. We have not made any large changes to our estimates and retain our BUY and NOK95 target price.
Set for Solvency II ratio tailwinds in Q3. We expect Storebrand to see an increase in its Solvency II ratio from 163% in Q2 to 167% in Q3. This is driven by a 14bp increase in the NOK 10-year swap (~1%-point effect), a 4% appreciation in the MSCI World index in local currencies (~1%-point effect), organic capital generation after assuming a 50% dividend payout ratio (~1%-point effect), and a benefit from further solvency adjustments and balance sheet optimisation (~1%-point effect).
We estimate NOK1.2 EPS adj. which represents a rather normalised level from an appreciation in global equities, smaller changes in credit spreads, and little movement in FX. We have not factored in any large fees or costs relating to Skagen, as the largest funds appear to have continued to have underperformed in the quarter. The insurance segment has experienced soft investment returns and strong combined ratios in recent quarters. We expect this to normalise in Q3 to an 89% combined ratio and an NOK77m ROI.
BUY recommendation and NOK95 target price reiterated. We see significant upside potential to our target price, comprising the value of the DPS from the builddown of the guaranteed book (NOK19/share) and the fast-growing non-guaranteed segment (2018e P/E of 14x). Near-term, we see a potential share price catalyst in the Solvency II ratio beating expectations, as Storebrand continues to generate capital and optimise its solvency through balance sheet adjustments. We are 30–40% above consensus on our 2018–2019 DPS estimates, on what appear to be our more optimistic solvency generation assumptions. Storebrand has generated close to twice as much capital as it guided for at its 2016 Capital Markets Day. With what we perceive to be relatively conservative solvency capital guidance at its previous CMD in May, we continue to expect Storebrand to beat expectations.
BUY