Gjensidige to Pay Special Dividend as Profit Beats Estimates

Gjensidige Forsikring ASA (GJF), Norway’s largest insurer, will pay an extraordinary dividend of 6 kroner a share and increase payouts to shareholders after building up cash reserves to meet new capital requirements.

Gjensidige, based in Lysaker, will distribute 3 billion kroner ($506.2 million) to shareholders in May in the form of an extraordinary dividend while adopting a new policy from 2014 which targets a pay-out ratio of at least 70 percent of profit after tax, it said in a statement today. That compares with the company’s previous policy target of paying out 50 percent to 80 percent of profit after tax, according to its website.

The insurer, which is seeking to cut costs and boost earnings as it tries to increase market share in the Nordic region, reported third-quarter pretax profit of 1.67 billion kroner, up from 1.61 billion kroner a year earlier, it said in a separate statement. That compares with the 1.44 billion-krone average of 11 analyst estimates compiled by Bloomberg.

Shares in Gjensidige gained as much as 10 percent to 111.80 kroner, the highest intraday level since the insurer sold shares in Oslo on Dec. 10, 2010. The stock traded 7.4 percent higher at 108.80 kroner as of 10 a.m., extending its gain to 32 percent during the last 12 months and giving Gjensidige a market value of 54.3 billion kroner.

Technical Buffer

“We consider the report very positive,” boosted by “lower large claims and higher run-off gains than expected,” Pareto Securities AS said in an e-mailed note. “We expect to make positive underlying estimate revisions post this report, due to the higher-than-anticipated growth.”

From next year the insurer will pay out any excess capital over and above its targeted capitalization in the form of extraordinary dividends, it said. The insurer’s targeted capitalisation is based on “the most binding capital requirement plus a technical buffer and a buffer to ensure financial flexibility,” it said.

At the moment, the most binding capital requirement is the A-rating requirement from Standard & Poor’s, the insurer said. In addition to that, the company will maintain a technical buffer in excess of this requirement of five percent, it said.

Gjensidige also changed its return on equity target from a minimum of 15 percent pretax to a minimum of 15 percent after tax starting in 2015, it said.

To contact the reporter on this story: Stephen Treloar in Oslo at streloar1@bloomberg.net

To contact the editor responsible for this story: Christian Wienberg at cwienberg@bloomberg.net

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