STOREBRAND
Time is on your side
We forecast Q2 operating profit around normalised
levels, but a solid adj. EPS of NOK1.6 thanks to
narrowing credit spreads and strong equity markets.
While hopes of near-term extraordinary dividends have
faded, we expect Storebrand’s Solvency II ratio to
again prove rather robust, declining only 3%-points
QOQ. We have raised our EPS estimates due to AUM
tailwinds, but trimmed our 2021e adj. EPS by ~2% to
reflect the earlier implementation of pension accounts
in Norway than previously factored in. We reiterate our
BUY and NOK70 target price.
Above normalised EPS, and Solvency weakening neutralised. We forecast Q2
operating profit around normalised levels with support from AUM tailwinds during the
quarter, while narrowing credit spreads and strong equity markets should lead to
strong adj. EPS of NOK1.6. Based on a further decline in interest rates, increased
equity capital charges and reduced Volatility Adjustment (VA reduced by 42bp in
Norway), we forecast a mere 3%-point drop in the Solvency II ratio to 152% following
compensating elements from positive equity markets, earnings generation, model
improvements and its subordinated bond issuance. The Q2 results are due at 07:30
CET on 15 July.
Estimates raised on capital market tailwinds. To reflect the rebound in financial
markets and tailwinds to Storebrand’s asset base, we have raised our underlying adj.
EPS for 2020–2022e by ~2%. However, as we now factor in the implementation of
pension accounts in Norway from 2021, our adj. EPS for 2021e is ~2% lower due to a
negative earnings impact from lower margins.
Increasingly attractive yield of 6%; BUY and NOK70 target price reiterated.
Despite hopes of near-term extraordinary dividends fading, we still expect the eventual
release of back-book capital. Until then, we see room for the distribution of ordinary
dividends, offering an attractive 2020e dividend yield of 6%. We reiterate our BUY and
SOTP-based NOK70 target price.