Sakset fra DNB.

STOREBRAND Closing in on 180% Solvency level Storebrand reported solid Q4 results with the main deviation being a 7%-points beat versus consensus estimates on the Solvency II ratio. We have cut our 2019e DPS from NOK5 to NOK4 as the company appears more focused on reaching the 180% Solvency II ratio level before starting extraordinary dividend payments than we had previously assumed. In 2020 we continue to forecast a NOK7 DPS, which leaves the Solvency II ratio at 186% after the distribution. We reiterate our BUY and keep our NOK95 target price.
Storebrands’s Q4 profits revealed a better than expected return on investments, while costs and fee income seemed to disappoint the market. However, the cost line, which tends to be rather volatile on a quarterly basis, contained cNOK65m in nonrecurring items relating to strategic projects, the write-down of IT investments (Storebrand’s ASK will be run on Skagen’s platform and will therefore be written off), and changes to remuneration policies. In addition, fee income was hurt by a NOK38m one-off stemming from too-high revenue bookings in previous quarters. Notably, Storebrand booked NOK12m in profit sharing from paid-up policies. Such revenues should gradually increase in the future in normalised market conditions.
EPS estimates raised 1%. 2019e DPS cut from NOK5 to NOK4. We have made only small changes to our EPS estimates on the report, with our 2019–2020e EPS up by ~1% for Cubera’s earnings. We have cut our 2019e dividend from NOK5 to NOK4 as the company seems more focused on reaching the 180% Solvency II ratio level before paying extraordinary. We have kept our NOK7 2020e DPS, as we forecast Storebrand will have a Solvency II ratio of 186% after having a 100%+dividend payout ratio.
BUY and NOK95 target price reiterated. We see significant upside potential, comprising the DPS value from the build-down 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 0–40% above consensus on our 2019–2020e DPS, on what appear to be our more optimistic solvency generation assumptions. Storebrand has generated around twice as much capital as it guided at its 2016 CMD.