Sakset fra DNB Engelske analyser

STOREBRAND Financial market tailwind in Q1 We expect Q1 adjusted EPS of NOK1.5 (the results are due on 8 May at 07:30 CET), which is above a normalised level, driven by strong equity appreciation and narrowing credit spreads in the quarter. We estimate the solvency II ratio will decline from 172% in Q4 to 170%, hampered by a 14bp reduction in Norwegian long-term interest rates, increased equity stress requirement, and a reduction in the ultimate forward rate. We believe Storebrand will pay out dividends representing a total yield of 10% from 2020 due to its improved solvency position. BUY recommendation and NOK95 target price reiterated.
Solvency II ratio likely to take a small step back. We estimate the solvency II ratio fell to 170% in Q1, from 172% at end-Q4. The main positives should be the generated earnings after setting aside 50% as dividends (+2%-points), and continued work on model and product improvements (+1%-point), which is likely to be offset by a 14bp reduction in Norwegian long-term interest rates (-3%-points), and a reduction in the ultimate forward rate from 4.05% to 3.9% (-2%-points). We believe the positive effect of appreciating equity markets and narrowing credit spreads is likely to be offset by an increase in the equity stress requirement from 32.7% to 37%, and a 5bp increase in the volatility adjustment, both of which contribute to an increase in the solvency capital requirement (net effect 0%-points). We forecast Q1 EPS adj. of NOK1.5. This is above a more normalised level as the appreciating equity markets and spread narrowing for Norwegian and international bonds should boost the gains in the Swedish guaranteed portfolio, as well as Storebrand’s company portfolio.
10% dividend yield supports our SOTP-based NOK95 target price. We have only made smaller estimate changes and retain our BUY. We believe the introduction of extraordinary dividends from 2020e will mark the start of more than a decade with dividend yields above10% vs the current share price. We believe this should make investors more aware of the NOK16bn we estimate will be paid out as dividends from the back book in the coming years.
BUY