Storebrand ASA dropped the most in more than seven months in Oslo after Norway’s second-largest insurer posted profit that missed estimates and increased its guidance for the reserves it needs to cover longer life-spans.
Storebrand fell as much as 10 percent, the most since June 25, and was down 8.7 percent at 27.15 kroner as of 2:32 p.m. in the Norwegian capital, the largest decline on the Oslo stock exchange’s OBX index. More than 12 million shares have traded today, more than six-times the three-month daily average volume.
The insurer needs to boost its premium reserves by about 7 percent to meet new rules in Norway as people live longer, Oslo-based Storebrand said in a statement today. That compares with previous guidance for a strengthening of 3 percent to 7 percent.
“This amounts to a reserve strengthening of 10 billion kroner” ($1.8 billion) and is higher than the 6.5 percent figure that Pareto Securities AS was expecting, the broker said in an e-mailed note to clients. “We consider the report to be on the negative side.”
Storebrand is building up its balance sheet to adapt to longer life expectancy in Norway as the Norwegian Financial Supervisory Authority reviews mortality guidelines for insurers. The company has set aside 4.3 billion kroner, it said today.
“This really takes into account quite a strong increase in life length as we see it,” Chief Executive Officer Odd Arild Grefstad said in an interview today.
Based on the expected guidelines, Storebrand doesn’t expect to need to raise its reserves beyond the 10 billion krone-level, Grefstad said.
Storebrand is also preparing for planned changes to rules on occupational pension products for the industry to ensure insurers can adjust to stricter common capital standards. The rules, known as Solvency II, aren’t expected to be fully implemented before Jan. 1, 2015, Norway’s FSA said in a letter published on its website on Feb. 4. It doesn’t rule out further delays, it said at the time.
Storebrand today reported net income of 68 million kroner for the fourth quarter, up from 16 million kroner a year earlier and below the 332.2 million kroner average of nine analyst estimates compiled by Bloomberg. Net premium income rose 35 percent to 6.5 billion kroner, it said.
Gjensidige Forsikring ASA, Norway’s largest insurer, owns 24 percent of Storebrand.